New Delhi: In a partial relief for Odisha government, the Supreme Court has held that the state’s power to step in and undertake mining operations when a lessee fails to extract minerals as stipulated under a lease agreement is purely discretionary and not mandatory.
Clarifying the statutory framework, a Bench comprising Chief Justice of India Surya Kant and Justices Joymalya Bagchi and V Mohana ruled on November 4, that Rule 12(1)(ee) of the Minerals (Other than Atomic and Hydro Carbons Energy Minerals) Concession Rules, 2016, confers an enabling choice on the state government rather than imposing an obligatory command.
The signed order, uploaded to the Supreme Court’s website on November 7, partially allowed the appeals filed by the Odisha government against a previous directive from the Orissa High Court.
The legal battle stems from proceedings initiated by the Bhubaneswar-based Citizens’ Action Forum via a public interest litigation (PIL) before the Orissa High Court. The litigation drew attention to significant underutilisation of mineral reserves across Odisha, which holds nearly 28 percent of India’s total iron ore reserves across 63 valid leases. While environmental clearances permit an aggregate production capacity of roughly 246 million tonnes per annum (MTPA) across these sites, operational mines extracted only 159 million tonnes in FY 2024–25, utilising just 64 per cent of approved capacity. Highlighting this shortfall, the petitioner alleged that defaulting leaseholders were violating contract terms without adequate state intervention.
Responding to these concerns, a High Court division bench headed by Chief Justice Harish Tandon issued an order on January 29, directing the Odisha government to invoke Rule 12(1)(ee) to ensure optimal mineral extraction, recommending the deployment of the state-owned National Mineral Development Corporation (NMDC) or another central agency where private lessees failed to meet baseline thresholds.
On February 10, the High Court disposed of an interlocutory application by fixing a strict three-month deadline for the state to execute these measures, observing that government delay risks perpetuating inaction.
Challenging the premise that the state is legally forced to assume direct mining responsibilities, Odisha moved the apex court.
Examining the explicit language of Rule 12(1)(ee), the Supreme Court noted that while the provision enables the state government to initiate mining activity upon a lessee’s failure, and seek reimbursement of all associated expenses from the defaulting lessee, it does not create a compulsory duty for the government to perform the extraction itself. The Bench observed that an enabling mechanism for specific situations cannot be equated to a binding mandate. Consequently, the apex court modified Paragraph 13 of the High Court judgment. While setting aside the directive that made state-led mining compulsory, the top court retained the core mandate instructing Odisha to make standard endeavours under the law for the optimum and sustainable utilisation of its mineral resources.