This document summarizes and analyzes a legal challenge brought by mining lessees in India to notices issued by the state government under Rule 12(10) of the Mining Rules, 2016. The lessees challenged the notices on 8 broad grounds, arguing that compensation amounts under section 21(5) of the mining law are not covered by Rule 12(10). However, the document argues that the lessees' challenges were narrow, hyper-technical and self-defeating, and that the litigation could have been avoided by addressing the core issues regarding the compensation demands. The mining tribunal ultimately dismissed the challenges and upheld the state's right to recover the amounts, but its decision drew the process into additional adverse consequences beyond the

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MINING INDUSTRY: A critical analysis through application of Rule
12(10) of MC Rules, 2016; Where it is heading?
By:
Shri BISWAJIT DAS, Advocate, Supreme Court of India,
Managing Partner, Juris & Juris
Biswajit@jurisnjuris.con, Mobile No.-9911226607
B-4/115, Safdarjung Enclave, New Delhi-110029
As part of my series of writings on mining sector problems, I wish to confine this
writing to the application of Rule 12(10) of MC Rules, 2016 to highlight my
consistent view/finding that these problems are the Mining Industry’s making.
The biggest problem, the mining sector grapples with, is excessive, unpredictable &
blind-spot mining regulation governance. Such a situation has arisen over a period
of time because the only regulated entity, Mining Industry (the “Governed”), under the
law has failed to secure the just navigation expected from the Governing Entities
such as the Governments, Regulators, Statutory Bodies & Courts (the “Governor”).
These assessments have been succinctly demonstrated by me in many of my writings
with pointed examples, facts & figures. I have chosen Rule 12(10) of MC rules, 2016 &
its current application this time to prove the aforesaid assessment.
There may be multiple routes available for achieving one objective/goal, some of them are
constructive and some are destructive. Without doubt & without debate, the GOVERNED
should note that it carries the sole responsibility to secure their just GOVERNANCE in sync
with the objective of law. Thus beckoning, enlightening & securing the constructive route of
governance is its responsibility. Not only it has the onus to discover that constructive route
but also it has to traverse the same & assert for it. Having acted itself, it also has the onus
to secure that the GOVERNOR stays on the course.
Rule 12(10) came into being w.e.f. 2016 as part of the introduction of MC Rules, 2016.
This provision is an exact extraction of Clause 2 of Part IX of Form K (Mining Lease
Deed) appended to MC Rules, 1960. State of Odisha on 06.02.2018 took a decision to
invoke Rule 12(10) of MC rules, 2016 to Demand/Recover amounts claimed by it under
Section 21(5) of MMDR Act, 1957 & remaining unpaid by then. Accordingly, State Of
Odisha issued notices under Rule 12(10) of MC Rules, 2016 to various lessees for
recovery of the outstanding demanded amount qua alleged illegal (read “irregular”)
mining.
It is pertinent to note that State of Odisha has earlier demanded the said amount under
Section 21(5) of MMDR Act, 1957 alleging illegal mining for alleged violation of
conditions of clearances, provisions of laws, etc. Majority of these demands were set
aside by Courts/Forums on different grounds. On citing different cause of actions, State
Govt. revived those demands particularly after the interpretation of Section 21(5) of
MMDR Act, 1957 vide one Supreme Court judgment dated 02.08.2017 in one PIL.
Some of the Mining Lessees challenged the very Show Cause Notice under Rule 12(10)
of MC rules, 2016 before the Revisional Authority/Mining Tribunal on the following 8
broad grounds:
1. Notice issued under Rule 12(10) is Illegal owing to the following reasons:
a. Notice under Rule-12(10) of MC Rules, 2016 is without jurisdiction since the decision to initiate
proceeding under Rule-12(10) of MC Rules, 2016 for Non-Mining Dues, Environmental Compensation &
others does not fall within the meaning of “Dues” as provided in Rule 12(10).
b. Notice is contrary to the express terms of Rule 12(10) of MC Rules, 2016.

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c. Rule-12(10) can only be invoked if State Govt. concludes that the Lessee has defaulted in payment
under Section-9, 9A, 9B, 9C of MMDR Act, 1957 or Rule-13 of Mineral (Auction) Rule, 2015 or breached
any conditions in Rule-12(1), (2), (3), (4) of MC Rule, 2016.
d. There is no dispute that “Dues” in Notice not covered under Section-9, 9A, 9B, 9C of MMDR Act or Rule-
13 of Mineral (Auction) Rules, 2015.
e. Rule-12(10) of MC Rules, 2016 not applicable qua compensation. {“Compensation” is not (a) “Royalty”
or “Dead Rent” or “Monies” under Section-9B, 9C or Rule-13 & (b) related to “breach” of condition under
Rule-12(1), (2), (3), (4).}
f. Notice qua Default of compensation under Section-21(5) of MMDR Act outside purview of Rule-12(10)
MC Rules, 2016. {Rule-12 to be read in 2 parts: (a) Default (b) Breach of condition. Impugned Order
doesn’t involve any “Default” or “Breach”.}
g. Notices not as per law {since Default in payment of compensation under Section-21(5) of MMDR Act is
not part of Rule-12(10) of MC Rules, 2016}
2. For recovery of Section 21(5) compensatory amount, as stated herein below, only
Section 25(1) & OPDR Act, 1962 is invokable & not Rule 12(10):
a. State Govt. in the meantime has already invoked provisions of OPDR Act, 1962 in complete compliance
of SC Order.
3. Invoking Rule 12(10) requires, as stated herein below, compliance of Principle of
Natural Justice:
a. Nature of Power under Rule 12(10) of MC Rules, 2016 requires determination of Default of law & Breach
of conditions, which warrants compliance of Principle of Natural Justice.
4. Threat of termination of Mining Lease (ML), as stated herein below, is contrary to
Supreme Court Order dated 24.10.2017:
a. Referred to Common Cause’s IA-90729/2017 seeking 3 direction/clarification on Order dated 02.08.2017
qua (a) Section-6 of MMDR Act, 1957 i.r.t. M/s. Bonai Industrial Co. & M/s Freegrade part of Rungta
Cos. (b) Ceasing of operation in failure to deposit demands by 31.12.2017 (c) Cancellation/termination
of ML on failure to deposit.
b. IA-90729/2017 came for hearing on 24.10.2017 in Supreme Court, which issued notice only for prayer
(a) & (b) & not for prayer (c). This amounts to rejecting the Prayer (c), which is binding on State Govt.
5. Termination of ML, as stated herein below, is separately dealt under Section 4A &
not under Rule 12(10):
a. State Govt. may take action of Termination of ML as per Section-4A of MMDR Act, 1957 after
discharging the Principle Natural Justice enshrined under Section-4A(3).
b. Supreme Court’s order for recovery of compensation @ of 24% interest beyond 60 days is its intention,
which will be frustrated after termination.
6. Demand amount, as stated herein below, has several Anomalies:
a. Oral direction of Hon’ble Supreme Court was placed before CEC, which is yet to take final decision on
Lessee’s Representation.
7. Rule 12(10), as stated herein below, cannot be retrospectively applied:
a. State Govt. can’t initiate action under Rule 12(10) against Lessees for their any act of omission relating
to period when MC Rules, 2016 were not in force.
8. Revisional Authority, as stated herein below, has Jurisdiction to entertain the
challenge:
a. The limited challenge pertains to State Govt.’s decision to initiate proceeding under Rule-12(10).
Countering the aforesaid grounds of challenge before the Mining Tribunal, Govt. of
Odisha in its reply submitted the following:
1. Notices were issued under Rule 12(10) to all the lessees, defaulted under Section
21(5), in compliance of the Hon’ble Supreme Court after the issue is settled by it’s
Order dated 02.08.2017.
2. Notice is an instrument to implement SC Order & Mining Tribunal has no power to
review Supreme Court order.
3. Central Empowered Committee (CEC) has already decided the issue qua anomaly
vide its Report dated 17.01.2018 after giving opportunity to lessees.
4. State Govt. is competent to invoke Rule-12(10) of MC Rules, 2016 to recover the
“compensation” demand under Section 21(5) of MMDR Act, 1957.
5. Supreme Court already settled applicability of Section 21(5) of MMDR Act, 1957.
6. State Govt. empowered to take action on premature termination under Section
4A of MMDR Act, 1957.
Taking note of the aforesaid submissions of the parties before it, Mining Tribunal vide
its Final Order dated 09.05.2019 rendered in Mala Roy & 14 Ors Vs. State Govt. of
Odisha opined the following while dismissing all the challenges of Lessees through this

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common order heralding a new litigation era for the maiden application of Rule 12(10) of
ML Rules, 2016:
1. Lessees are liable to pay amount specified in Impugned Notices as liability amount
not been questioned.
2. State is obliged to take all possible measures to recover amount, payable by
lessees along with interest without delay.
3. State is also free to take appropriate action under Section 4A MMDR Act, 1957.
4. Lease holders can’t continue mining till entire dues are paid.
5. Impugned Notices, asking lease holders to pay amount which is admittedly “Due”
appears to be in order & has to be held as “Justified”.
6. If payment is still not made, State may proceed to terminate ML after giving
opportunity of being heard.
CRITICAL ANALYSIS:
From the bare perusal of the Lessee’s above 8 broad grounds, the following is clearly
inferred:
1. The only argument on legality, “Compensation Amount” under Section 21(5) of
MMDR Act, 1957 is not specifically covered in the terms (Royalty, Dead Rent,
Monies, Dues) mentioned in Rule 12(10) & therefore, for the said amount of
compensation, Rule 12(10) cannot be invoked, was raised through hair-splitting
exercise.
2. A hyper-technical distinction between Rule 12(10) & Section 25(1) proceeding is
raised & impliedly justified Section 25(1) & OPDR proceedings.
3. Giving jurisdiction to the Mining Tribunal at the stage of State Govt.’s decision to
initiate Rule 12(10) proceeding & raising plea of Principle of Natural Justice is
premature.
4. Threat of termination is questioned by showing a distinction between Rule 12(10) &
Section 4A besides by referring to Supreme Court order dated 24.10.2017, which is
preposterous.
5. Demanded amount is not settled as pending finalisation before CEC.
6. Argument on retrospectivity ignores subsistence of the said identical provision under
Clause 2 Part XI of Form K (Lease Deed) appended to MC Rules, 1960.
7. Petitions admitted to have invoked the limited jurisdiction of Mining Tribunal only
qua State Govt.’s decision to initiate Rule 12(10) process in order to avoid plea of
prematurity of challenge to Show Cause Notice.
From the above, it can be seen that the Clause No. 1 (above) is the only legal
argument raised in the challenge of Show Cause Notice by the Lessees. This is too
narrow & hyper-technical, clearly oblivion of the prevailing judicial trend in Revenue
Law & in particular the Mining Law witnessed closely & indirectly by none other than
these players. All other grounds are self-defeating. These grounds, instead, is & has
been a perfect recipe for disaster sustained none other than the Mining Sector. State
Govt. even countered the Lessee’s allegation of anomaly by referring to CEC Report
dated 17.01.2018, defeating the only genuine ground of challenge of Lessees.
Mining Tribunal, at the very outset, rightly nailed it unambiguously by holding that since
liability amount remained unchallenged, Lessees are liable to pay the demanded
amount. It further rightly held that State Govt. is obliged to take all possible measures
to recover the unchallenged amount along with interest without delay though
erroneously drawn into holding that “Amount” under Section21(5) is a “Due” under Rule
12(10). Under these circumstances, Mining Tribunal undesirably was drawn into giving 2
additional directions against the lessees that (a) they cannot continue mining without
payment of dues & (b) State Govt. may proceed to terminate ML under Section 4A of
MMDR Act, 1957.
It is interesting to note that the entire process (challenge to Show Cause Notice)
triggered to bring some respite ended up inviting 2 adverse consequences (supra)

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beyond the scope of the Show Cause Notice. It has been witnessed on many occasions,
at least in the Mining Sector litigation, that lack of clarity has consistently begeted chaos
& perhaps this Rule 12(10) litigation is also in course to mount one more unwarranted
consequence.
This is one more futile & undeserving round of litigation on trivial & self-defeating
grounds, which could have been avoided. Instead, all energies & efforts could have
been directed to address the core issue of demand under Section 21(5), which, on
substantial questions of law, mathematics, logic, economics, commerce, science, etc yet
to be pondered, discussed, debated, decided & adjudicated till date, remained res-
integra.
Every of these challenges & their consequence brings chaos to the already disturbed
regulatory environment of the sector while creates doubt in the mind of the Regulators,
Administrators & Courts etc. Peculiarly, this sector has witnessed that “one man’s
wisdom leading to its consequences notwithstanding has become the barometer for
others”. Hence, a wrong move & application of law in the front impedes & forecloses
the fate of mining litigant later-in-time with unprecedented consequences, not only for
that Lessee but also for the sector &, in turn, for the economy as a whole.
Since this sector has drawn an envious attention of the onlookers for the very nature of
economy involved in it, propensity to correct the institutional errors from the litigant’s
first-in-time action is negligible/minuscule. Thus, here comes the responsibility to
act with clarity & assert for it through demonstrable facts & figures.
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