Mining leases in Bihar are being held up because State departments fail to supply basic documents after the letter of intent is issued, the Patna High Court has said, ordering the government to refund a bidder’s Rs 2.90 crore deposit with 12 per cent interest and laying down timelines for every future mining tender.
Patna: The Patna High Court has held the Bihar Government and a stone-block bidder jointly responsible for a nine-year failure to execute a mining lease in Sheikhpura, setting aside the forfeiture of the bidder’s Rs 2.90 crore deposit, directing its refund with 12 per cent annual interest, and issuing guidelines that make the State liable in damages if its departments fail to provide the documents needed for a lease [State of Bihar and Others v. M/s Balaji Enterprises].
A Division Bench of Justice Bibek Chaudhuri and Justice Rana Vikram Singh allowed the State’s Letters Patent Appeal against a single-judge order that had directed the authorities to complete the lease within six weeks, but found that the State’s own negligence barred it from keeping the bidder’s money. A copy of the judgment has been sent to the Chief Secretary for compliance with the guidelines.
The case
The District Magistrate, Sheikhpura auctioned nine stone blocks in 2017. M/s Balaji Enterprises emerged the highest bidder for Stone Block No. 27 at Mauza Hazratpur Mandro Chandi, spread over five hectares, and a letter of intent was issued on September 21, 2017. Under the Bihar mining rules, the lease deed had to be executed within a fixed period, but only after the bidder produced an approved mining plan and environmental clearance.
The firm took its first step towards environmental clearance only in August 2018. Its case was that clearance was then held up for years because the District Survey Report (DSR) prepared by the mining office did not carry the geo-coordinates, the latitude and longitude, of its block, and the State Environment Impact Assessment Authority (SEIAA) would not grant clearance without them. On January 23, 2023, the District Magistrate cancelled the letter of intent and forfeited the deposit, citing a delay of over five years, and the Commissioner of Mines upheld the order in July 2023.
On May 2, 2026, a single judge allowed the firm’s writ petition and directed the authorities to finalise the DSR, extend time and settle the lease within six weeks. The State appealed. The firm, meanwhile, sought to stop a fresh auction of the same block notified in August 2026.
State: revocation is automatic
Advocate General S.D. Sanjay argued that under the rules, a sanction is deemed revoked and the deposit forfeited if the bidder fails to produce the required documents within the prescribed period, and that the firm had not taken a single step for nearly 11 months. He pointed out that the single judge had himself found “delay and latches” on the firm’s part, and contended that equity could not override a statutory rule. He also objected that the single judge had issued directions to the SEIAA, which was not even a party.
Counsel for the firm, Suraj Samdarshi, argued that preparing a DSR with geo-coordinates was the State’s duty, that the firm could not obtain environmental clearance without it, and that the rules allow the Collector to permit execution after the deadline where the bidder is not to blame.
Both sides negligent
Tracing the shift in the law on judicial review of State contracts through the Supreme Court’s decision in Subodh Kumar Singh Rathore v. Chief Executive Officer, (2024) 15 SCC 461, the Bench reiterated that courts can intervene to prevent arbitrariness and abuse of power by public authorities even in contractual matters.
On the facts, the Court found that the firm had offered no explanation for its 11-month delay, but that after August 2018 the State too had delayed supplying the documents, and “in the meantime about nine years have elapsed.” It concluded that “both the parties are responsible for contributory negligence in the matter of timely execution of the lease deed,” and that the single judge had overlooked this and the revenue lost to the State. Since the royalty fixed in 2017 could not hold good after nearly a decade, the six-week direction to settle the lease was set aside.
At the same time, the Court refused to let the State keep the money:
“Since the State Government failed to comply with the part of their promise by providing necessary documents for environmental clearance within the stipulated period of time, the State Government/appellants were negligent in the same manner as that of the writ-petitioner who initiated the process of having D.S.R. and environmental clearance after about one year of issuance of letter of intent.”
It set aside the forfeiture of the Rs 2,90,00,000 initial bid amount, directed its refund with interest at 12 per cent per annum from the date of deposit, and ordered that the payment be made before a fresh tender for Block No. 27 is started. The firm will be allowed to take part in the new tender, and its past conduct cannot be held against it.
Guidelines for all future mining tenders
Observing that the problem was not confined to this case, the Bench said:
“In the instant case as well as in many other cases of similar type we have noticed that execution of lease deed is being delayed because of the failure on the part of the State Government in its various departments to produce necessary documents immediately after the letter of intent.”
To prevent leases being revoked for want of documents such as environmental clearance, the Court laid down the following guidelines:
- The District Survey Report for the tender must be produced along with the notice of tender for mining blocks.
- The DSR must contain geo-coordinates, with latitude and longitude, and all other information for each block separately.
- The letter of intent must be published within 15 days of the auction.
- The successful bidder must deposit the mining plan within 15 days of receiving the letter of intent.
- The mining plan must be approved within 15 days of its submission.
- Within seven days thereafter, the bidder must apply to the SEIAA for environmental clearance, and on receipt of clearance, the lease deed must be executed within the statutory period.
- Failure to provide the information by executing appropriate documents will be treated as non-performance of promise by the department concerned, and the State Government shall be obliged to pay damages.
The District Magistrate, Sheikhpura was directed to refund the deposit with interest within the stipulated time, and a copy of the order was directed to be sent to the Chief Secretary for appropriate directions to follow the guidelines in the execution of mining leases.
Case Title: State of Bihar and Others v. M/s Balaji Enterprises [Letters Patent Appeal No. 865 of 2024 in CWJC No. 11678 of 2023]
Bench: Justice Bibek Chaudhuri and Justice Rana Vikram Singh, Patna High Court
Date of Judgment: October 1, 2026
Appearances: Advocate General S.D. Sanjay with Prakash Chandra Agrawal, GA-5 and Surbhi Agrawal, JC to GA-5 for the Appellants; Advocates Suraj Samdarshi, Avinash Shekhar, Simran Kumari and Abhilasha Jha for the Respondent