Lessee Mining Company Liable To Pay 'Dead Rent' When Unable To Extract Mineral For Non-Availability Of Clearances: Andhra Pradesh High Court

The Court observed,

"It would be an implied condition of the lease that the responsibility of obtaining necessary clearances for carrying on mining activity would be on the lessee. In such a situation, it would not be permissible for a lessee to avoid payment of dead rent on the ground of lack of clearances for carrying on mining activity."

The petitioner had been granted a mining lease for silica sand in Siddawaram Village in Nellore District in 2003, for a period of 20 years, after which it commenced the quarrying operations. The mining activities were stopped following issuance of an environment impact assessment notice, allegedly making it mandatory for lessees for excavating minor minerals also to obtain environment clearance before the commencement of mining operations.

The petitioner, despite not carrying on any quarrying operations, had paid dead rent till 2017-18. It had stopped paying dead rent thereafter.

The counsel for the petitioner submitted that the grant of a mining lease could not be equated with a lease, as defined under the Transfer of Property Act. He retained that it must be understood to mean a grant of two rights, that is, a right to enter the leased/licensed area and a right to extract minerals from it. He further submitted that the transaction in the nature of profit a prendre. He submitted that once the petitioner's right to extract minerals had been suspended, on account of lack of environment clearance, there would be no liability on it to pay dead rent.

It was also submitted that the delay in obtaining the clearance was on account of the inaction of the authorities in granting necessary No Objection Certificates.

The Department of Mines & Geology filed a counter affidavit, disputing the petitioner's claim that the grant of the clearance was delayed on account of the government's inaction. They also contended that the respondents had never asked the petitioner to stop mining activity on the leased area. They argued that the notice had only requested the petitioner to submit required documents as per the EIA notification and the lessee itself gave a letter, informing the respondents that it had applied for the environment clearance and was temporarily discontinuing mining activities.

The respondents contended that the closure of mining by the petitioner was a voluntary decision and there was no demand for such closure by them. The respondents argued that the requirement to pay dead rent was not only on the basis of the terms of the grant of mining lease, but also on account of the provisions of Section 9(A)(1) of the Mines and Minerals (Development and Regulation) Act, 1957.

The Court opined that a mining lease of an area of land is given for the purposes of enabling the lessee to extract the mineral(s) specified in the deed of lease. This would mean that the lessee is being given the right to enter and occupy the land as well as the right to extract the mineral(s) specified in the deed of lease. However, the Court stated, there was no legal impediment stopping the petitioner from excavating the minor minerals for which it had been granted a lease.

As per the Court, the petitioner had misunderstood the scope of the notification requiring environment clearances and had voluntarily suspended mining activity in the lease area. There was no hindrance for the petitioner exercising both the rights of entering into the land as well as excavating the minor minerals, the Court noted.

Thus it held that liability of the petitioner to pay dead rent on account of non-availability of clearances would not cease. Accordingly, it dismissed the writ petition.

Case Title: M/s. Mangalore Minerals Pvt. Ltd. Vs. State of Andhra Pradesh and Ors.

Citation :2022 LiveLaw (AP) 118

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