A department cannot keep charging 24 per cent interest on a defaulted mining instalment for as long as the default lasts when the rule itself caps interest at two months and then directs cancellation, the Patna High Court has held, quashing the Bihar Mines and Geology Department’s demands for interest beyond that period on three stone blocks in Nawadah.
Patna: The Patna High Court on Wednesday, September 30, allowed three Letters Patent Appeals by stone mining lessees at Rajouli, Nawadah, holding that Rule 52(5) of the Bihar Minor Mineral Concession Rules, 1972 does not authorise the State to levy interest on a delayed instalment beyond two months, and quashed the Department of Mines and Geology’s orders and demands to that extent [M/s Mahadev Enclave Pvt. Ltd. v. State of Bihar and Others].
A Division Bench of Justice Bibek Chaudhuri and Justice Rana Vikram Singh set aside the Single Judge’s judgments of February 4, 2025, in a judgment authored by Justice Chaudhuri.
Background of the case
The appeals were filed by M/s Mahadev Enclave Pvt. Ltd., the successful bidder for Block Nos. 1 and 2, and Sainik Industries Pvt. Ltd. (formerly Sainik Foods Pvt. Ltd.), the successful bidder for Block No. 5, all at Mouza Rajouli, following a tender notice of November 12, 2014. Letters of acceptance were issued on February 10, 2015, environmental clearance was granted on June 27, 2017 and the lease deeds were executed on September 18, 2017.
The Department demanded the second instalment on January 5, 2018. The lessees objected, saying that mining could not begin until statutory consents and permissions, including that of the District Collector, were obtained, and deposited the second instalment in January or February 2019. On February 24, 2020, the Department raised fresh demands for the instalment and interest, including Rs 2,65,54,000 for Block No. 1 and Rs 1,85,19,600 for Block No. 5. Writ petitions against those demands were disposed of in September and November 2020 with directions to pay the principal and two months’ interest in three monthly instalments, with liberty to represent on the interest for the remaining period.
After the representations were rejected and further demands raised, fresh writ petitions were disposed of on July 13, 2023 with a direction to submit fresh representations. The competent authority passed orders on September 14, 2023, which the lessees challenged. The Single Judge dismissed the writ petitions on February 4, 2025, finding that the authority had complied with the July 2023 directions.
What the parties argued
Senior Advocate Devasish Baruka, appearing with Gautam Kejriwal and others for the lessees, argued that Rule 52(5) provides for simple interest at 24 per cent up to two months and then action for cancellation, so the Department could not keep interest running indefinitely. He said that the earlier orders did not finally decide their liability for the whole period of interest, that the second instalment could not be treated as due before the statutory clearances, and that the Department’s failure to invoke cancellation mattered. He relied on R.K. Saxena v. Delhi Development Authority, State of Jharkhand v. Ambay Cements and Central Coalfields Ltd. v. SLL-SML (Joint Venture Consortium), among others.
Advocate Abhinav Mishra, for the State, with Special Public Prosecutor Naresh Dixit for the officials, argued that the lessees were bound by the agreements and admittedly did not deposit the instalment in time, that the July 2023 orders had recorded the default and confined further consideration to sympathetic waiver or payment in instalments, and that the authority had passed reasoned orders permitting payment of the dues in instalments.
Rule 52(5) read as a whole
The Court noted that there was no dispute that the second instalments were not deposited in time, and framed the narrower question of how much interest the Rule permits. Rule 52(5) provides that if an instalment is not deposited in time, “24 percent simple interest shall be charged upto two months and after that action for cancellation shall be taken”. The Bench held that the two parts must be read together and that nothing in the Rule authorises interest to continue indefinitely while the default remains uncured. It held:
“To permit interest to continue indefinitely, notwithstanding the express statutory prescription of the period of two months and the consequence contemplated thereafter, would amount to adding to the Rule something which is not contained therein.”
Relying on State of Jharkhand v. Ambay Cements, Tata Chemicals Ltd. v. Commissioner of Customs (Preventive), Jamnagar and Shridhar C. Shetty v. Additional Collector and Competent Authority, it reiterated that where a statute prescribes the manner of doing an act, the authority must follow it, and that a statutory authority cannot act beyond its powers. The Court separated the obligation to pay the instalment under the agreement from the statutory consequence of default, and said the existence of the former cannot enlarge the latter.
Earlier orders did not settle the question
The Court held that the earlier orders recording the default and directing payment of the principal with two months’ interest, with liberty to represent on the rest, cannot be read as a final adjudication that interest was recoverable for an unlimited period. It said the September 2023 orders had proceeded on sympathetic waiver and payment in instalments, when the lessees had specifically raised the statutory question, and that compliance with the earlier directions does not conclude the separate question of how much interest can lawfully be recovered. The finding of default, it added, and the determination of its consequence are two different matters, and it saw no occasion to disturb the former.
The Bench declined to decide the lessees’ wider pleas, including the commencement of the mining lease, the effect of Rule 25(2), the date from which rent or royalty becomes payable, the statutory permissions needed for actual mining and force majeure. It also declined to hold that the Department’s mere failure to cancel the settlements amounts to waiver, extension of time or novation, observing that such a proposition would be wider than necessary.
Directions
The Court held that the lessees cannot be subjected to continuing liability for interest beyond two months solely on account of the default under Rule 52(5):
“We accordingly hold that the appellants cannot be subjected to continuing liability towards interest beyond the period of two months solely on account of the default contemplated under Rule 52(5).”
It allowed all three appeals, set aside the Single Judge’s judgments, and quashed the September 14, 2023 orders and consequential demands to the extent they sought interest beyond two months. The liability for the principal amounts of the instalments remains unaffected, and the amounts already deposited under the earlier orders, including two months’ interest, stay undisturbed. There was no order as to costs.
The Bench also recorded its appreciation for the research assistance of the Court’s Law Researchers, Shri Aditya Shekhar and Shri Ribhava Raj.
Case Title: M/s Mahadev Enclave Pvt. Ltd. v. State of Bihar and Others; Sainik Industries Pvt. Ltd. v. State of Bihar and Others
Case Number: Letters Patent Appeal Nos. 311, 348 and 349 of 2025, arising out of CWJC Nos. 16238, 15514 and 16168 of 2023
Bench: Justice Bibek Chaudhuri and Justice Rana Vikram Singh, Patna High Court
Date of Judgment: September 30, 2026
Appearance: Senior Advocate Devasish Baruka with Gautam Kejriwal, Atal Bihari Pandey, Alok Jha, Mukund Kumar and Pawan Kumar Singh for the appellants; Advocate Abhinav Mishra with Vaibhav Veer Shanker, Archisha Singh, Priyanshu Singh, Hardik Dimamia, Utkarsh Bhushan, Vatsal Vishal and Ashish Kumar Ranjan for the State; Special Public Prosecutor Naresh Dixit with Shruti Singh and Utkarsh Pathak for Respondent Nos. 2, 3 and 5