ACC Limited, the Adani Group cement maker, has run a limestone mine at Kalaburagi for years to feed its cement operations, under a mining lease that the state's own mining department treated as having lapsed unless a fresh supplementary lease deed was executed. On that footing, Karnataka's Department of Mines and Geology demanded royalty on a basis ACC disputed, blocked the company's access to the state's ILMS portal used for tracking mineral dispatch, and finally imposed a penalty of Rs 482.69 crore against the company over its Kalaburagi operations.
That royalty demand rested on an unusual method. Rather than working from limestone actually extracted, the department calculated what it said ACC owed by applying a notional ratio converting the company's clinker production, the intermediate cement product made from limestone, back into an assumed quantity of limestone consumed. ACC's challenge argued that this notional limestone-to-clinker ratio had no statutory basis and did not reflect what the company had actually mined, and separately that its lease had not lapsed at all because an amendment to the Mines and Minerals (Development and Regulation) Act extended such leases by operation of law.
The High Court agreed on both counts. It held that Section 8A(5) of the MMDR Act statutorily extended ACC's mining lease through to 31 March 2030, which meant the lease was in force throughout the period the department had treated as a lapse requiring a fresh deed before operations could continue. Because the lease never lapsed, the department's underlying premise for much of its enforcement action, including the ILMS access block, fell away along with it.
On the royalty figure itself, the Court rejected the clinker-to-limestone conversion method outright, finding that a penalty built on a notional extraction figure rather than actual mined quantity could not be sustained. With both the lapse theory and the royalty computation method rejected, the Rs 482.69 crore penalty had no basis left to stand on, and the Court set it aside in full rather than remanding the quantum for recalculation on a corrected method.
The Court did not stop at quashing the penalty. It directed the state's Department of Mines and Geology to restore ACC's access to the ILMS portal, the system through which the company tracks and reports its mineral dispatches, recognising that the access block had been premised on the same lapsed-lease theory the Court had just rejected. It also ordered ACC to execute a supplementary lease deed, but on terms favourable to the company, specifying that this could be done without the state first requiring a no-dues certificate, which would otherwise have let the department hold the royalty dispute over ACC's head as a precondition to formalising the lease.
For large limestone and other mineral lease holders operating under leases that predate the 2015 MMDR amendments, the ruling gives real weight to the statutory extension under Section 8A(5) as a defence against a state department's insistence that a fresh lease deed is a precondition for continued lawful operation. It also puts a specific, litigated limit on how far a state can go in substituting a notional production-based formula for actual extraction data when computing royalty, a method that mining departments facing revenue pressure have reason to find administratively convenient but that this judgment treats as legally unsupportable absent some statutory basis for the conversion ratio used.
The ruling adds to a run of mining lease disputes in which Karnataka's mining department has taken an aggressive enforcement posture against large industrial users of state minerals, only to have the computation method or the underlying lapse theory rejected once tested in court. Companies facing similar ILMS access blocks or clinker-based royalty demands elsewhere in the state now have a reasoned precedent to draw on, both on the statutory extension point and on the limits of notional conversion methods for calculating what is actually owed.
Restoring portal access matters as much to ACC's day-to-day operations as the penalty figure itself does on paper. A mining company locked out of the ILMS system cannot lawfully dispatch mineral from the mine at all, since the portal is the mechanism through which dispatches are tracked and reported to the state, so an access block functions as a de facto operational shutdown regardless of whether the underlying royalty dispute is ever resolved. By tying restoration of that access directly to the rejection of the lapse theory, the Court addressed the practical pressure point the department's action had created, not merely the monetary penalty that drew the headlines.