The Karnataka High Court has set aside a ₹482.69 crore penalty imposed on A.C.C. Limited for mining limestone after the expiry of its renewed lease term, holding that the company’s mining lease stood statutorily extended till March 31, 2030.
A Division Bench comprising Chief Justice Vibhu Bakhru and Justice K.S. Hemalekha delivered the judgment on September 8, 2026, in a batch of three connected writ petitions concerning ACC’s mining operations in Kalaburagi.
Background of the Case
ACC’s mining lease, bearing ML No.2641, had a renewed term ending on February 18, 2023. The State Government had earlier passed an order extending the lease up to March 31, 2030, but execution of a Supplementary Lease Deed was linked to statutory clearances and payment of outstanding royalty.
The dispute intensified after the Department of Mines and Geology blocked ACC’s Integrated Lease Management System (ILMS) portal, affecting the company’s ability to obtain electronic transport permits and make royalty payments.
In June 2025, the department demanded ₹482.69 crore from ACC under Section 21(5) of the Mines and Minerals (Development and Regulation) Act, alleging that limestone had been extracted without lawful authority between February 19, 2023 and August 14, 2024 because the supplementary deed had not been executed.
Court's Observation on Lease Extension
The High Court rejected the State's contention that the absence of a supplementary deed by itself made the mining unlawful. It noted that Section 8A(5) of the MMDR Act provides for deemed extension of certain captive mining leases up to March 31, 2030.
The Court held that the statutory extension could not be made dependent merely on execution of another deed.
"By virtue of the statute, ACC held the mining lease and the right to extract minerals — subject to possessing all other clearances - till the expiry of the term of the lease as statutorily extended."
The Bench consequently found that the penalty imposed solely because a Supplementary Lease Deed had not been executed could not be sustained.
Royalty Dispute and Notional Assessment
The Court also examined the State's use of a 1:1.42 clinker-to-limestone conversion ratio for calculating royalty. It found that consumption ratios varied between manufacturers and from year to year.
The Bench held that a notional assessment could be used where there was a credible challenge to actual weighment data. In ACC's case, however, the Court found no credible challenge to the accuracy of its weighment records. It also noted that the National Council for Cement and Building Materials had physically verified consumption at ACC's plant.
The Court further held that the State could not disregard the Revisional Authority's earlier 2019 order directing reconsideration of royalty in light of the 2012 decision favouring actual production and weighment.
Decision
The Karnataka High Court set aside the impugned demand notice, rejected the State's challenge to the Revisional Authority's order, and directed the authorities to provide ACC full access to the ILMS portal.
The Court also directed the authorities to execute the Supplementary Lease Deed in favour of ACC without insisting upon a no-dues certificate and ordered the State to refund the amount deposited by ACC under the earlier interim order.
W.P. Nos. 25298 of 2024 and 18655 of 2025 were allowed, while W.P. No. 36850 of 2025 filed by the State was dismissed.
