Case Background
A private company had taken a five-year mining lease for stone at Mathokar Surdaspur in Sheikhpura district after emerging as the highest bidder in an auction for Rs. 29 crore. A lease deed was executed on 30.03.2017 for the period 30.03.2017 to 29.03.2022. The company deposited security of Rs. 2.90 crore and was required to pay the auction amount as royalty in five equal yearly instalments of Rs. 5.80 crore each.
The company also obtained environmental clearance in December 2016 fixing its annual production capacity. Over five years, the company claimed to have produced about 12.02 crore cubic feet (cft) of mineral and dispatched about 11.54 crore cft, which was less than the total quantity it was permitted to extract.
After the lease expired on 29.03.2022, about 1,92,457.376 metric tonnes of boulder/stone were still lying at the lease site as per the company’s monthly return for March 2022. The company argued that because it had not extracted more than the permitted quantity, it owed no additional royalty. Still, under pressure and wrong advice, it initially paid about Rs. 1.18 crore as additional royalty.
On 04.07.2022, the Mineral Development Officer, Sheikhpura, issued a demand letter asking the company to pay Rs. 6.25 crore as additional royalty, alleging that the company had dispatched mineral worth about Rs. 36.43 crore but deposited only about Rs. 30.18 crore. The company’s reply was rejected and it was directed to pay the additional royalty along with income tax and District Mineral Foundation (DMF) contributions.
The company appealed to the Collector under Rule 67 of the 2019 Bihar mining rules. In the meantime, a criminal case (Sheikhpura P.S. Case No. 396 of 2022) was lodged for alleged illegal sale of stock and non-payment of additional royalty. The company’s director later obtained anticipatory bail from the Patna High Court subject to conditions including monthly deposits, linked to lifting of minerals.
Over 2022–2024, multiple writ petitions, appeals, revisions and representations followed. The company repeatedly asked to be allowed to lift the already-excavated mineral, and to pay the disputed additional royalty in instalments, pointing out that delay in issuing “capping” (permission/limit for dispatch) by the Mining Department had caused serious financial strain.
In October 2023, in CWJC No. 13532 of 2023, the Patna High Court had already allowed the company to pay Rs. 6.25 crore additional royalty in six equal monthly instalments and permitted lifting of minerals, but made it clear that any default in a monthly instalment would automatically cancel this benefit and allow the Department to proceed as it wished, including auction.
Subsequently, in November 2023, the Mines Commissioner, in Revision Case No. 02 of 2023 and Misc. Case No. 08 of 2023, fixed a higher monthly deposit of Rs. 1,99,65,771/- for six months, linking it with permission to lift a fixed quantity of mineral each month. The company paid the first two instalments, but claimed that delayed capping (34 days after the first instalment and 48 days after the second) blocked its funds and caused further difficulty in paying the third instalment.
On 29.06.2024, the Assistant Director recalled the permission to lift mineral, seized remaining stock of about 32,07,628.14 cft, and directed removal of the company’s machines. The company’s later representation seeking more time and reduction of instalment amount was rejected by the Director, Mines on 24.10.2024. On the same day, the Director ordered seizure of all minerals within the lease area and instructed the Collector to auction them.
The company’s revision against this order was dismissed in January 2025 on the ground that no revision lay against the Director’s order, though liberty was given to move a representation. The company then represented to the Principal Secretary on 06.02.2025 requesting extension of time and instalments, and followed up with a reminder. The Director, Mines replied on 02.04.2025, simply stating that the earlier rejection of 24.10.2024 still stood.
Soon thereafter, a public notice (PR No. 000159 (Mines) 2025-26) was published in Dainik Bhaskar on 04.04.2025, proposing auction of 32,20,180.39 cft of mineral lying at the company’s lease area, with auction scheduled for 21.05.2025. The company then filed the present writ petition challenging both the Director’s letter dated 02.04.2025 and the auction notice.
What the Court Examined and Decided
In this writ petition, the company asked the Patna High Court to quash the Director’s letter dated 02.04.2025 rejecting its representation, and the auction notice for 32,20,180.39 cft of mineral. It also prayed for permission to pay the remaining additional royalty in instalments and to lift the mineral lying at the lease site. The company further claimed that its earlier non-compliance with the Mines Commissioner’s order of November 2023 was due to the Department’s own delay in granting capping.
The company argued that:
- Under the Bihar mining concession rules, where settlement is by auction, the auction amount itself is the royalty; it had already paid the Rs. 29 crore auction amount plus interest.
- Its total dispatch was less than the total permitted quantity, so no additional royalty was due in substance, though it had already paid some amount under pressure.
- It was still ready to pay the remaining additional royalty, which it calculated at Rs. 7,98,63,083/-, provided it was allowed to lift the mineral lying at the site.
- The Department was prepared to auction this mineral at a reserve price of only about Rs. 1.36 crore, which was far lower than what the company was willing to pay, causing loss to the State.
- Delays in issuing capping after the first two instalments under the Mines Commissioner’s order blocked its funds and contributed to its inability to continue deposits on time.
- The representation dated 06.02.2025 was addressed to the Principal Secretary, but rejection came from the Director, merely repeating the earlier order, without a fresh decision by the Principal Secretary.
On the other hand, the Mines Department relied heavily on the earlier judgment dated 12.10.2023 in CWJC No. 13532 of 2023. In that case, the Court had:
- Allowed the company to pay the additional royalty of Rs. 6,25,34,581/- in six equal monthly instalments.
- Permitted lifting of boulders/stones only after payment of the first instalment by a fixed date.
- Specified that the entire additional royalty must be paid within six months.
- Clearly warned that failure to pay any monthly instalment would automatically cancel the order and allow the Department to take appropriate action, including fresh settlement and auction.
The Mines Department contended that because the company had defaulted in timely payment of instalments, it was fully within its rights, under the terms laid down by the Court itself, to cancel the facility and proceed with auction. On this basis, it argued that the current writ petition was meritless.
The Court recorded all submissions and noted the long chain of litigation and orders. Before entering into a detailed legal ruling on the correctness of the Department’s actions or the validity of the additional royalty claim, the Court considered an offer made in open Court by the company’s counsel.
The company offered to:
- Deposit the entire remaining additional royalty of Rs. 7,98,63,083/- in six equal monthly instalments of Rs. 1,33,10,514/- each.
- Be allowed, after each instalment, to lift mineral from the site proportionate to the instalment paid.
- Do so without prejudice to its pending challenge to the very imposition of additional royalty.
The Mines Department’s counsel was initially unwilling but, on considering the possibility that the auction might fetch less than what the company offered, agreed in principle, on strict conditions. The Department insisted that:
- If the company failed to pay any instalment in any month, for any reason, the Department would be free to cancel the benefit and immediately proceed for auction.
- The company must undertake that in such a situation it would not challenge the Department’s decision to cancel the order or to auction the mineral.
- The entire remaining amount should ideally be cleared in four instalments, not six.
After discussion, both sides agreed to a middle path and placed a mutually acceptable arrangement before the Court. The Court then disposed of the writ petition in terms of this settlement, which it recorded in detail.
The key terms recorded by the Court are:
- The company will pay Rs. 7,98,63,083/- in five equal monthly instalments of Rs. 1,59,72,617/- each.
- These instalments are to be paid by 25.06.2025, 25.07.2025, 25.08.2025, 25.09.2025, and 25.10.2025 respectively.
- After deposit of each instalment, the company must be allowed to lift mineral from the site proportionate to that instalment, within ten days of payment.
- This payment is without prejudice to the company’s right to continue its legal challenge to the very imposition of additional royalty.
- If the company fails to pay any instalment, the order will stand cancelled and the Department will be free to take any action, including fresh auction, and the company will not challenge this.
To give legal effect to this arrangement, the Court:
- Quashed the Director’s Letter No. 2005 dated 02.04.2025, which had rejected the company’s representation.
- Quashed the auction process initiated through PR No. 000159 (Mines) 2025-26 published on 04.04.2025 in Dainik Bhaskar for auction of 32,20,180.39 cft of mineral at the company’s lease site.
The Court also expressly appreciated the Mines Department’s counsel for taking a pragmatic, commercially sensible stand in the interest of the Department and the State. With this, the writ petition was disposed of on agreed terms, rather than by a contested final judgment on the legality of the additional royalty.
Why This Judgment Matters
This judgment is important for both mining lessees and the Mines Department in Bihar. It shows that even after serious disputes, criminal cases, and earlier defaults, the Patna High Court can facilitate a practical financial arrangement that secures revenue for the State and avoids wasteful auction if both sides are willing.
For lessees, it highlights that:
- The Court may provide instalment facilities, but strict timelines will be enforced.
- Past non-compliance with orders can lead to loss of rights and exposure to auction of stock.
- However, a clear and reasonable proposal, backed by willingness to pay and legal undertakings, can still be considered.
For the Department, the decision reinforces its right to proceed with auction after default, but also encourages evaluation of whether direct payment from a lessee may yield higher revenue than auction at a low reserve price.
The judgment also underscores the value of recording detailed settlement terms in Court orders, so that both sides are bound and future litigation is minimized. Anyone facing similar disputes with the Mines Department over additional royalty or lifting of minerals can understand that timelines, compliance, and clear communication are crucial.
Legal Issues and Answers
- Issue: Could the Mines Department proceed with auction of already-extracted mineral despite the company’s request for more time to pay additional royalty?
Answer: The Court did not finally rule on the Department’s past action, but, by consent, quashed the auction notice and substituted a strict instalment plan linked to lifting rights. - Issue: Was the rejection of the company’s representation by the Director, Mines, instead of the Principal Secretary, sustainable?
Answer: Again, without giving a detailed finding, the Court quashed the Director’s letter dated 02.04.2025 as part of the agreed settlement and replaced it with the new instalment arrangement. - Issue: What happens if the company defaults again in paying instalments of additional royalty?
Answer: The Court clearly recorded that any default in any monthly instalment will automatically cancel the benefit, allow the Department to proceed with fresh auction, and the company will not be entitled to challenge that action.
Cases Cited by the Court
- No external case law citations are referred to in the judgment text apart from the Court’s own earlier orders in related writ and criminal miscellaneous cases involving the same parties.
Case Details
Case Number: Civil Writ Jurisdiction Case No. 6873 of 2025
Case Title: Arena Food and Agro Industries Private Limited v. The State of Bihar & Ors.
Coram: Hon’ble Mr. Justice Alok Kumar Sinha
Citation: 2025(3) PLJR 71
Advocates:
For the petitioner: Mr. Suraj Samdarshi, Advocate; Mr. Avinash Shekhar, Advocate
For the State: Standing Counsel (20); Mr. Mahendra Prasad Verma, AC to SC-20
For the Mines Department: Mr. Naresh Dikshit, Advocate; Mrs. Kalpana, Advocate
Nature of the Case: Writ petition under Article 226 of the Constitution challenging rejection of representation and auction notice regarding auction of mineral stock and seeking permission to pay additional royalty in instalments and to lift mineral.
Link to judgement ; https://patnahighcourt.gov.in/viewjudgment/MTUjNjg3MyMyMDI1IzEjTg==-yl–ak1–yuDrCt5g=
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