Supreme Court Dismisses JSW Steel's Plea Against ₹127.66 Crore Recovery in Bomman Iron Ore Lease Dispute

The Supreme Court on Thursday dismissed a Special Leave Petition filed by JSW Steel Limited challenging a Karnataka High Court order that had refused to restrain recovery of Rs 127.66 crore and invocation of its bank guarantees over alleged non-compliance with minimum production requirements under the Bomman Iron Ore Mining Lease.

A bench comprising the Chief Justice Surya Kant, Justice Joymalya Bagchi and Justice Vipul M Pancholi declined to interfere with the High Court's order.

“We see no ground to entertain this special leave petition. The same is, accordingly, dismissed.” the bench held

The dispute arose after the state government raised a demand of Rs. 127.66 crore and initiated steps to invoke the bank guarantees furnished by the company.

JSW Steel had acquired rights over 93.60 hectares of land through a government auction conducted under the Mineral (Auction) Rules, 2015. After being declared the successful bidder, a letter of intent was issued to the company. Subsequently, a Mine Development and Production Agreement was executed in July 2020, and a fresh mining lease valid for fifty years was granted.

Before the High Court, JSW Steel contended that during 2020–2022, it faced “various difficulties” in carrying out production and dispatch operations due to legacy ore stocks left by the erstwhile lessee, reduction in permissible production limits, COVID-19 disruptions, lower than expected ore quality, and challenges in moving low grade ore.

The Karnataka High Court rejected JSW Steel's interim plea seeking to restrain the authorities from recovering the amount and invoking bank guarantees.

The High Court observed that invocation of unconditional bank guarantees cannot be normally restrained, except in cases like egregious fraud and special equities.

“Concededly, none of the aforesaid grounds on which a bank guarantee may be interdicted has been pleaded or arises in the present case.” the High Court observed

The High Court further held that any commercial difficulties faced by the company would not absolve it of its obligation to meet the minimum production requirement.

“Commercial difficulties cannot be a ground for exempting the obligations in question.” it added

Accordingly, the interim relief was declined, leading to the appeal before the Supreme Court, which has now been dismissed.

For Petitioner: Senior Advocate Dr. A. M. Singhvi, Advocates Mahesh Agarwal, Madhavi Agrawal, Aditya Narayan, Lalia Elizabeth Philip, Prerna Prakash, Shweta Shrimal, Naman Agarwal, L. Nidhram Sharma, and E. C. Agrawala, AOR