Case Background
The case arose out of a long‑running settlement for mining sand ghats in Bhojpur district, Bihar.
The petitioner, a private company, had participated in an auction for settlement of sand ghats for five years, from 2015 to 2019. It became the highest bidder and work orders were issued year‑wise for 2015, 2016, 2017 and 2018. The original agreement period ended on 31.12.2019.
Meanwhile, the State of Bihar notified a new Bihar Sand Mining Policy, 2019 on 14.08.2019. In exercise of powers under Section 15 read with Sections 23‑C and 26 of the Mines and Minerals (Development and Regulation) Act, 1957, the State framed the Bihar Minerals (Concession, Prevention of Illegal Mining, Transportation & Storage) Rules, 2019. These 2019 Rules repealed the earlier Bihar Minor Mineral Concession Rules, 1972, Bihar Minerals (Prevention of Illegal Mining, Transportation and Storage) Rules, 2003 and Bihar Minor Minerals Rules, 2017.
The 2019 Rules came into force on 17.09.2019. They contain detailed provisions on settlement of sand, cancellation of mineral concession, exit option for concession holders and power of the State Government to relax provisions in public interest.
Using its power under Rule 77(2) of the 2019 Rules, the State Government, through the Department of Mines and Geology, issued a notification dated 27.12.2019. By this, the Government extended the period of settlement for existing sand ghats settlees whose settlements were ending on 31.12.2019.
The extension was allowed up to 31.10.2020 or until new settlees obtained environmental clearance, whichever was earlier. The settlement amount was increased by 50 per cent. Later, the Government further extended these settlements till 31.12.2020 by resolution dated 14.09.2020 and again till 31.03.2021 by resolution dated 30.12.2020. The petitioner took benefit of all these extensions.
Yet another notification dated 31.03.2021 granted a fresh extension from 01.04.2021 to 30.09.2021. Based on this, the Assistant Director, District Mining Office, issued a work order on 31.03.2021 to the petitioner. The petitioner accepted this extension and deposited the first instalment of royalty of Rs. 27,35,37,240/‑.
Soon after, on 26.04.2021, the petitioner wrote to the Assistant Director, District Mining Office, Bhojpur. It stated that due to rampant illegal sand mining and lack of cooperation from State machinery, it would not be possible to pay the next royalty instalment. The company expressed its decision to surrender the settlement for sand mining in Bhojpur, Patna and Saran districts with effect from 01.05.2021.
The District Magistrate‑cum‑Collector, Bhojpur, responded by letter dated 28.04.2021. Referring to Rule 50(1) of the 2019 Rules, the Collector rejected the surrender application on the ground that the petitioner had not complied with the requirements of that Rule. The petitioner was directed to deposit the second instalment, due before 30.04.2021, failing which action would be taken under Rule 47 of the 2019 Rules.
Later, by Memo No. 2985 dated 07.07.2021, the Collector raised a demand of Rs. 1,39,50,39,924/‑ plus 24 per cent interest. This amount represented the second, third and fourth instalments of royalty for the extended settlement period from 01.04.2021 to 30.09.2021. The memo also warned of initiation of certificate proceedings in case of default.
The petitioner filed the present writ petition (Civil Writ Jurisdiction Case No. 13251 of 2021) before the Patna High Court challenging this demand notice. It also sought a declaration that it was not liable to pay the second, third and fourth instalments as it had already surrendered the settlement, and that such surrender could not be treated as contrary to Rule 50(1) of the 2019 Rules. The petitioner further asked the Court to declare that Rule 50(1) did not apply to extensions granted under Rule 77(2).
What the Court Examined and Decided
The writ petition was heard by Hon’ble Mr. Justice Chakradhari Sharan Singh. The Court heard the senior counsel for the petitioner, counsel for the Department of Mines and Geology, and the State’s counsel.
First, the Court noted that the facts about the initial settlement, subsequent extensions and acceptance of the last extension with payment of first instalment were not in dispute.
The respondents filed counter affidavits alleging that the petitioner was a habitual defaulter and had itself indulged in illegal sand mining in areas not allotted to it. It was stated that the petitioner had fraudulently removed or stocked sand without e‑challans worth Rs. 15.84 crores. Two FIRs, Chandi P.S. Case No. 30 of 2021 and Sahar P.S. Case No. 37 of 2021 (registered on 04.02.2021 and 08.02.2021 respectively), were cited as instances of such violations.
The respondents also alleged that the petitioner had violated environmental norms and had been penalised on several occasions. They stated that the State had taken strict measures against illegal mining and transportation of sand, and relied upon this Court’s earlier judgment in CWJC No. 6890 of 2019 (2019(4) PLJR 246) to show that the petitioner’s mining interests were never jeopardised.
Importantly, the Court recorded that the petitioner did not file any rejoinder to these counter affidavits. Therefore, the allegations remained uncontroverted.
Petitioner’s arguments
The petitioner advanced two main arguments.
First, it argued that due to unhampered and uncontrolled illegal mining in Bihar and lack of cooperation from State authorities, it had become impossible to continue with the settlement. A later State policy decision dated 16.12.2020, prohibiting the use of trucks with 14 or more wheels for transporting sand and stone chips, allegedly worsened the situation. As a large percentage of sand was transported in such trucks, the petitioner claimed heavy losses during January, February and March 2021.
On this basis, the petitioner relied on Section 56 of the Contract Act, 1872 (frustration of contract) and the Supreme Court’s decision in Delhi Development Authority v. Kenneth Builders and Developers Private Limited, (2016) 13 SCC 561. It argued that “impossibility” under Section 56 includes impracticability or uselessness from the point of view of the purpose of the contract. Therefore, according to the petitioner, the settlement contract had become void due to supervening events, and its surrender with immediate effect was justified. The Collector, it said, had casually rejected the surrender application by merely citing Rule 50(1), without considering its plight.
Secondly, the petitioner contended that Rule 50(1) of the 2019 Rules did not apply to settlements granted under Rule 77(2). Rule 50(1), in Chapter XII on cancellation of mineral concession, allows a mineral concession holder to exit the business by giving six months’ notice to the Collector, but denies this option to concession holders who have not paid their bidding or settlement amount or who have violated settlement conditions.
The petitioner argued that Rule 77(2) is a non obstante clause, giving the State Government independent powers to grant mining settlements “notwithstanding anything contained in these Rules”. Relying on Union of India v. G.M. Kokil, 1984 Supp SCC 196, the petitioner argued that a non obstante clause has overriding effect over contrary provisions. Thus, in its view, settlements granted under Rule 77(2) were not controlled by Rule 50(1), and the Collector wrongly invoked Rule 50 to reject the surrender.
It also submitted that because the extension period itself was less than six months, the requirement of six months’ notice under Rule 50(1) could not apply.
State’s and Department’s response
Counsel for the Mines Department argued that the petitioner was taking inconsistent stands. On one hand, it had not denied the allegations of indulging in illegal mining and violating environmental laws. On the other, it claimed that illegal mining by others made it impossible for it to operate.
It was contended that Rule 77 falls in Chapter XIII, which allows exemptions and relaxations in public interest. The non obstante clause in Rule 77(2), according to the State, is limited to permitting grant of mining lease or settlement, quarrying permit or movement permit on terms and conditions different from those prescribed in the Rules. It does not exclude the application of other chapters like Chapter XII on cancellation or exit.
The Department also argued that the petitioner had not paid the full settlement amount and had violated settlement conditions. Therefore, under Rule 50(1), it did not qualify to use the exit option. Once the petitioner had accepted the extended settlement and paid the first instalment, it could not simply walk out without following the statutory and contractual conditions.
The State’s counsel also stressed that the petitioner could not be allowed to approve and disapprove at the same time: it had chosen to accept the extension despite knowing about all the alleged difficulties, and was now trying to avoid its obligations.
Court’s analysis on the Collector’s order
The Court first examined the Collector’s letter dated 28.04.2021 rejecting the surrender. Rule 50(1) was quoted in that communication. After reproducing the Rule, the Collector stated that the petitioner had not complied with its requirements while seeking surrender.
The Court held that, on a plain reading of the communication, the absence of six months’ notice was not the sole reason for rejecting the application. The Rule clearly says that the exit option is not available to concession holders who have not paid their bidding or settlement amount or who have violated any settlement condition. Therefore, the petitioner’s claim that non‑service of six months’ notice was the only ground of rejection was found untenable and was rejected.
Court’s interpretation of Rule 77(2)
Turning to the effect of the non obstante clause in Rule 77(2), the Court considered the Supreme Court’s decision in G.M. Kokil. It noted that a non obstante clause is meant to give overriding effect over contrary provisions, not to make the rest of the statute redundant.
The Court observed that Chapter XIII of the 2019 Rules empowers the State to exempt minor minerals from the Rules, while Rule 77 allows relaxation of provisions in public interest. Under Rule 77(1), the State may relax operation of one or more provisions. Rule 77(2) specifically authorises the State Government to grant mining leases or settlements and to authorise quarrying or movement permits to any person, on terms and conditions other than those prescribed in the Rules, for reasons recorded in writing.
The Court held that the expression “notwithstanding anything contained in these Rules” in Rule 77(2) refers only to aspects relating to grant of mining lease or settlement and authorisation of permits, and to the power to prescribe different terms and conditions. It cannot be read as an independent overriding provision that excludes all other chapters of the Rules, including those on cancellation or exit.
The Court accepted the Mines Department’s submission that the non obstante clause in Rule 77(2) overrides only the provisions laying down the usual procedure for grant of mining lease, settlement, quarrying permit or movement permit, such as those in Chapters IV, V, VI and VII. It allows the Government, in public interest, to deviate from standard procedures and terms while granting such rights, but it does not nullify obligations relating to exit, cancellation or management once a settlement is in place.
If the petitioner’s interpretation were accepted, the Court pointed out, then settlements granted under Rule 77(2) would fall completely outside Chapters like XII. That would mean provisions dealing with suspension or cancellation of mineral concession, takeover of management by the Collector, and requisition of minor minerals would not apply to such settlees. This would lead to an anomalous situation and cannot be the intention of the Rules.
Further, if Rule 50(1) were totally inapplicable to settlements under Rule 77(2), there would be no statutory exit option available at all to such settlees. This, the Court observed, would be self‑defeating even for the petitioner, which was relying on an exit right.
Outcome of the case
Considering all these aspects, the Court held that Rule 77(2) cannot be read in isolation from the rest of the 2019 Rules. The Collector was justified in relying on Rule 50(1) to test the validity of the petitioner’s attempt to surrender the settlement.
The Court expressly refrained from commenting on the allegations of irregularities by the petitioner, noting that those could be the subject matter of separate proceedings before appropriate forums. However, it concluded that the writ petition lacked merit.
The Patna High Court therefore dismissed the writ application. No order as to costs was made. As a result, the demand raised by Memo No. 2985 dated 07.07.2021 for Rs. 1,39,50,39,924/‑ plus interest remained in force, along with the threatened certificate proceedings for recovery.
Why This Judgment Matters
This judgment is important for all companies or individuals involved in sand mining settlements in Bihar under the 2019 Rules.
First, it clarifies that once a settlee accepts an extension granted under Rule 77(2) and starts operating by paying instalments, it cannot later walk out citing business difficulties unless it strictly follows Rule 50(1). Exit is not a matter of choice alone; it is controlled by clear statutory conditions.
Second, the decision explains that the State’s special power to relax rules under Rule 77(2) is limited to how leases or settlements are granted and on what terms. It does not wipe out other protections and controls in the Rules, such as cancellation powers, exit conditions or the ability of the Collector to take action on defaults.
Third, the Court’s emphasis that non‑rebutted allegations in counter affidavits remain uncontroverted is a reminder that parties in writ proceedings must respond to factual claims against them. Silence can weaken their case.
Overall, for existing and future sand ghat settlees in Bihar, this ruling underlines that financial losses or policy changes on transport alone are unlikely to justify sudden surrender of settlements, especially after accepting extensions and benefits.
Legal Issues and Answers
-
Issue: Could the petitioner surrender the extended sand mining settlement without liability for remaining royalty instalments by claiming impossibility of performance and immediate surrender?
Answer: No. The Court held that the petitioner, having accepted the extension and paid only the first instalment without fulfilling Rule 50(1) conditions, could not validly exit and remained liable for the demanded royalty. -
Issue: Does Rule 50(1) of the Bihar Minerals (Concession, Prevention of Illegal Mining, Transportation & Storage) Rules, 2019 apply to settlements granted or extended under Rule 77(2)?
Answer: Yes. The Court held that Rule 77(2)’s non obstante clause is confined to grant of settlements and permits and their terms, and does not exclude the application of Rule 50(1) or other chapters such as those on cancellation and exit. -
Issue: Was the Collector’s rejection of the surrender application bad in law for treating lack of six months’ notice as the sole reason?
Answer: No. On reading the communication, the Court found that the rejection was based on non‑compliance with Rule 50(1) as a whole, including the bar against exit where settlement amounts remain unpaid or conditions are violated, and not only on the six‑month notice requirement.
Cases Cited by the Court
- Delhi Development Authority v. Kenneth Builders and Developers Private Limited and Others, (2016) 13 SCC 561 (relied upon by the petitioner to interpret “impossible” under Section 56 of the Contract Act).
- Union of India and Another v. G.M. Kokil and Others, 1984 Supp SCC 196 (relied upon by the petitioner on the scope of non obstante clauses; discussed by the Court while interpreting Rule 77(2)).
- Mohinder Singh Gill and Another v. Chief Election Commissioner, New Delhi and Others, AIR 1978 SC 851 (cited by the petitioner regarding testing validity of orders on their stated reasons).
- CWJC No. 6890 of 2019, reported in 2019(4) PLJR 246, M/s. Aditya Multicom Private Limited vs The State of Bihar and others and analogous matters (referred to by respondents to show the petitioner’s mining interests were protected).
Case Details
Case Number: Civil Writ Jurisdiction Case No. 13251 of 2021
Case Title: Broad Son Commodities Private Limited v. The State of Bihar & Ors.
Citation: 2022(1) PLJR 259
Court: High Court of Judicature at Patna
Coram: Hon’ble Mr. Justice Chakradhari Sharan Singh
Date of Judgment: 08.12.2021
Advocates for Petitioner: Mr. S.B. Upadhyay, Senior Advocate; Mr. Suraj Samdarshi, Advocate; Mr. Nishant Kumar, Advocate; Mr. Piyush Ranjan, Advocate
Advocates for State of Bihar: Mr. Gyan Prakash Ojha, G.A.-7; Mr. Abhishek Singh (AC to G.A.-7)
Advocate for Department of Mines and Geology: Mr. Naresh Dixit, Advocate
Nature of Case: Writ petition (civil) challenging demand notice for royalty instalments and rejection of surrender of sand mining settlement under the Bihar Minerals (Concession, Prevention of Illegal Mining, Transportation & Storage) Rules, 2019.
Impugned Communication: Memo No. 2985 dated 07.07.2021 issued by the District Magistrate‑cum‑Collector, Bhojpur, demanding Rs. 1,39,50,39,924/‑ plus interest.
Relevant Statutory Provisions: Section 15, Section 23‑C and Section 26 of the Mines and Minerals (Development and Regulation) Act, 1957; Bihar Minerals (Concession, Prevention of Illegal Mining, Transportation & Storage) Rules, 2019, particularly Rules 2(15), 29A(1), 47, 50, 77; Section 56 of the Contract Act, 1872.
Link to Judgment: Click here to read the full judgment of the Patna High Court
If you found this explanation helpful and wish to stay informed about how legal developments may affect your rights in Bihar, you may consider following Samvida Law Associates for more updates.
