Karnataka High Court Sets Aside ₹482.69 Crore Penalty Against Adani Group's ACC Over Kalaburagi Mining

The Karnataka High Court has set aside a ₹482.69 crore penalty demand against Adani Group cement company ACC Limited over limestone mining at its Wadi operations in Kalaburagi district.

The Court held that ACC's mining lease in Kalaburagi stood deemed to have been extended until 31 March 2030 under Section 8A(5) of the Mines and Minerals (Development and Regulation) Act, 1957 (MMDR Act).

A coram of Chief Justice Vibhu Bakhru and Justice K.S Hemalekha also dismissed the State Government's challenge to an order of the Revisional Authority which had rejected the use of a notional limestone consumption ratio for calculating royalty arrears.

ACC Limited, a cement manufacturer, holds a mining lease in Karnataka for extracting limestone and shale for captive consumption. The lease was renewed from time to time and remained valid until 18 February 2023.

A dispute arose between ACC and the Department of Mines and Geology (DMG) over royalty computation. ACC claimed that royalty was payable on the basis of actual extraction or consumption, while the State adopted a notional limestone to clinker ratio.

Although the State Government passed an order dated August 25, 2022 extending the lease until 31 March 2030, execution of the Supplementary Lease Deed was made subject to statutory clearances and payment of outstanding dues. Since ACC disputed the royalty arrears and could not obtain a No Due Certificate, the deed was not executed.

After the lease's formal expiry, ACC continued mining by virtue of Section 8A(5) of the Mines & Minerals (Development & Regulation) Act, 1957 (MMDR) . The DMG subsequently blocked ACC's access to the Integrated Lease Management System (ILMS) Portal, preventing it from obtaining e-permits and making royalty payments.

On 5 June 2025, the DMG issued a demand notice seeking ₹482.69 crore as penalty under Section 21(5) of the MMDR Act, alleging that ACC had extracted 78,33,415 metric tonnes of limestone without lawful authority between 19 February 2023 and 14 August 2024.

Meanwhile, the Revisional Authority, by order dated 9 September 2025, held that royalty could not be assessed on a notional basis where ACC's actual weighment data had not been satisfactorily disproved. It accordingly remanded the matter to the State government to take suitable measures. The State challenged that order before theHigh Court.

The connected petitions therefore concerned the validity of ACC's mining operations after 18 February 2023, the necessity of executing a Supplementary Lease Deed and the legality of the notional method of royalty assessment.

ACC contended that the MMDR Act and the applicable Rules did not require execution of a Supplementary Lease Deed for the statutory extension of a mining lease. It also argued that royalty had to be calculated on the actual quantity of minerals removed or consumed under Section 9, and that the State could not rely on a notional conversion ratio without proving that the actual weighment data was unreliable.

The DMG, on the other hand, argued that the Supplementary Lease Deed was essential for continued mining and that the lease's extension was conditional on payment of arrears, which ACC had not made. They also defended the notional royalty calculation, claiming that reliable limestone consumption data was unavailable before the beltometer was installed in 2009 and that earlier weighbridge data was doubtful.

The Court allowed ACC's writ petitions and dismissed the State's challenge.

It held that ACC's mining lease stood deemed to have been extended until 31 March 2030 by virtue of Section 8A(5) of the MMDR Act.

The Court referred to the Statement of Objects and Reasons of the Mines and Minerals (Development and Regulation) Amendment Bill, 2015, which noted that prolonged delays in lease renewals had caused hardship to the mining industry. It therefore held:

“It would frustrate the legislative intent of statutorily extending the term of mining leases if the same is held to be contingent on execution of the further deeds and conditions. Bearing the aforesaid in mind, the State Government's contention that the mining must be held to be unlawful for want of a Supplementary Lease Deed covering the period of deemed extension must be rejected.”

On the need for execution of Supplementary Lease Deed, the Bench held that while executing such a deed may be desirable, its non-execution did not prevent ACC from continuing mining under the statutory extension granted by Section 8A(5) of the MMDR Act.

It also observed that Rule 24A of the Mineral Concession Rules, 1960, statutorily extended mining leases pending renewal application. It held that mining during this period could not be treated as unlawful, even without a formal lease deed covering the extended term.

The Bench also recorded the stand of the Additional Solicitor General of India, who supported ACC's stand that mining during the extended lease period did not depend on executing a Supplementary Lease Deed, relying on the Ministry of Mines' letter dated 05.02.2015.

 "It is clear from the above that the Central Government has also understood that executing a Supplementary Lease Deed would not be an essential condition for carrying on lawful mining activity during the extended lease period.” it observed

The Court recorded that ACC was willing to execute the Supplementary Lease Deed and pay the required stamp duty. However, it stated that mining during the intervening period could not be treated as unlawful or attract penalty under Section 21 of the MMDR Act. It consequently found the DMG's decision to block ACC's ILMS access unsustainable.

The Court also upheld the Revisional Authority's finding that the State had not provided sufficient justification for rejecting ACC's actual weighment data and applying the notional consumption ratio.

“The State has not established a compelling case that the reported consumption pattern was impossible or that the assessment of limestone consumption on a notional basis presents a more accurate method of assessment of actual consumption. Thus, absent any finding that the weighment equipment was inaccurate, assessment of Royalty on a notional basis would be unjustified.” it concluded

Accordingly, the Court set aside the demand notice, directed the State and the DMG to restore full access to the ILMS Portal, directed the concerned authorities to execute the Supplementary Lease Deed, and ordered the refund of the amount deposited by ACC pursuant to an interim order passed by the High Court. It also dismissed the State's challenge to the impugned order.

For Petitioner: Senior Advocate K.N Phaneendra and Advocate Vaishali Hegde

For Respondents: Advocates Vinay Venugopal, CGSC, Reuben Jacob, AAG and K.S Harish, Government Advocate