Supreme Court Upholds Odisha Government’s Decision to Reject Mining Lease Renewal

The Supreme Court of India has delivered a significant ruling in the case of Chief Secretary, Government of Odisha v. Bharat Process & Mechanical Engineers Ltd. (In Liquidation) & Others. The judgment, pronounced on May 17, 2024, upheld the Odisha Government’s decision to reject the renewal of mining leases for three major iron and manganese ore blocks, thereby putting an end to a prolonged legal battle over mining rights.

Background of the Case

The case centers around three mining leases—Kolha-Roida, Thakurani, and Dalki—originally granted to Bird and Company Ltd. in the early 20th century. These leases were later transferred to its subsidiary, Odisha Mineral Development Company Ltd. (OMDC). In 1980, Bird & Co. was nationalized, and its undertakings were vested with Bharat Process & Mechanical Engineers Ltd. (BPMEL), a government entity. Despite this, OMDC continued mining operations under a power of attorney.

However, in 1996, BPMEL was declared a sick company and ordered to be wound up. Since then, multiple legal battles ensued over the renewal of these mining leases, particularly between the Odisha Government, BPMEL, and a financial firm, TGP Equity Management Pvt. Ltd., which acquired BPMEL’s debt claims from UCO Bank in 2009.

Legal Proceedings and Arguments

Over the years, BPMEL and OMDC filed renewal applications for the mining leases, which were rejected by the Odisha Government. The dispute reached the Calcutta High Court, where the Company Judge directed the formation of a High-Powered Committee to reconsider the lease renewal. This decision was challenged by the Odisha Government before the Supreme Court.

Arguments by the Odisha Government

The government argued that BPMEL had been non-operational for over 30 years, making renewal of its leases legally untenable.
The Mines and Minerals (Development and Regulation) Act, 1957, does not support automatic renewal in such cases.
OMDC, which continued operations under BPMEL’s power of attorney, had accrued penalties amounting to Rs. 800 crores due to regulatory violations.
Given OMDC’s financial incapacity and BPMEL’s liquidation status, further renewal was impractical.

Arguments by TGP Equity Management Pvt. Ltd.

TGP, claiming rights as a creditor, argued that renewing the leases would enable BPMEL to pay its debts, including worker wages.
The company cited Rule 72 of the Minerals (Other than Atomic and Hydrocarbon Energy) Concession Rules, 2016, asserting that government companies like BPMEL are entitled to automatic lease extensions.
They contended that the Odisha Government’s rejection of renewal was arbitrary and legally unsound.

Supreme Court’s Observations

The Supreme Court, led by Justices Sanjiv Khanna and Dipankar Datta, dismissed TGP’s claims and upheld the Odisha Government’s decision. Key findings included:

The prolonged non-operation of BPMEL (since 1996) made lease renewal impractical.
OMDC’s financial liabilities, particularly penalties of Rs. 800 crores, made future mining operations unviable.
TGP, as an assignee of UCO Bank’s debts, could not claim lease renewal rights.
Past Supreme Court rulings confirmed that mining leases that have expired and were non-operational cannot be revived.
The judgment reaffirms that workers’ dues must be settled through liquidation proceedings rather than lease renewals.

Final Judgment

The Supreme Court ruled:

The appeals filed by the Odisha Government were allowed, overturning the Calcutta High Court’s order for a High-Powered Committee.
The appeals filed by TGP Equity Management Pvt. Ltd. were dismissed.
Mining lease renewal for Kolha-Roida, Thakurani, and Dalki was definitively rejected.
All future proceedings related to BPMEL’s debts and workers’ payments will continue in the Calcutta High Court’s Company Court as per the Companies Act, 1956.

Implications of the Judgment

This judgment has far-reaching consequences:

It upholds the authority of state governments in regulating expired and non-operational mining leases.
It reinforces the principle that long-dormant companies cannot claim automatic renewal of mining leases.
The decision safeguards state resources and prevents misuse of legal loopholes by financial entities seeking commercial gain from expired leases.
It ensures that creditors and workers receive their dues through liquidation proceedings rather than speculative lease extensions.

Conclusion

The Supreme Court’s ruling in Chief Secretary, Government of Odisha v. Bharat Process & Mechanical Engineers Ltd. provides legal clarity on expired mining leases, reinforcing the authority of state governments to regulate their renewal. The judgment underscores that financial creditors cannot override statutory provisions to claim mining rights. This decision marks a crucial precedent in ensuring transparent and lawful management of India’s mineral resources.

Petitioner Name: Chief Secretary, Government of Odisha.
Respondent Name: Bharat Process & Mechanical Engineers Ltd. (In Liquidation) & Others.
Judgment By: Justice Sanjiv Khanna, Justice Dipankar Datta.
Place Of Incident: Odisha.
Judgment Date: 17-05-2024.

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