Jurisdiction - India
Reports and Analysis
India – The Mines and Minerals (Development and Regulation) Amendment Ordinance, 2015.

6 March, 2015

 

 
Background The Mines and Minerals (Development and Regulation) Act, 1957 (the ‘Act’) provides for the development and regulation of mines and minerals under the control of the Government of India. It primarily deals with the process and manner in which mineral concessions, namely reconnaissance permits, prospecting licenses and mining leases, are to be granted in respect of various minerals specified in the Act.
 
On January 12, 2015, through the exercise of limited legislative powers vested in it under the Constitution of India (during a period when Parliament is not in session), the Government of India promulgated the Mines and Minerals (Development and Regulations) Amendment Ordinance, 2015 (the ‘Ordinance’) to amend the Act, which came into force with immediate effect. The Ordinance has been promulgated to address certain problems that have emerged in the mining sector.
 
What The Ordinance Provides For
 
The key amendments brought in by virtue of the Ordinance are as follows:
 
1. The grant of (i) a prospecting license-cum-mining lease (a two stage concession whereby prospecting operations followed by mining operations can be undertaken); and (ii) a mining lease on land parcels (in which various major minerals1 other than coal, lignite and atomic minerals2 vest in the Government), will now be by way of auction, i.e. through competitive bidding, including e-auction. Prospecting license-cum-mining lease will be granted by the relevant State Government, subject to such terms and conditions as may be approved by the Central Government, on the basis of competitive bidding to the qualified bidders who satisfy the bidding parameters for selection and other relevant conditions as may be prescribed by the Central Government in notified areas where there is inadequate evidence to show the existence of notified mineral contents. Similarly, mining lease will be granted by the relevant State Government, subject to such terms and conditions as may be approved by the Central Government, on the basis of competitive bidding to the qualified bidders who satisfy the bidding parameters for selection and other relevant conditions as may be prescribed by the Central Government in notified areas where there is established existence of notified mineral contents. A holder of a prospecting license-cum-mining lease, who completes the prospecting operations within a period of three years or an extended period not exceeding five years and establishes the existence of mineral contents in the area in conformity with the prescribed parameters, will be required to apply for a mining lease for such area. The Ordinance also provides that such a holder of a prospecting license-cum-mining lease will have the right to get the mining lease and thereafter undertake the mining operations in accordance with the provisions of the Act.
 
2. As regards the rights of existing concession holders and applicants, the Ordinance provides that all applications for grant of a reconnaissance permit, prospecting license or mining lease, in respect of land in which the minerals vest with the Government received prior to the commencement of the Ordinance, will be deemed to be ineligible save and except applications received for grant of reconnaissance permit, prospecting license or mining lease in respect of coal or lignite by certain companies engaged in production of iron and steel, generation of power, etc. through auction by competitive bidding. With respect to the existing concessions holders, such permit holders or licensees shall have a right of obtaining the prospecting license or a mining lease, as the case may be, in the event such existing permit holder or the licensee satisfies the State Government that (i) it has undertaken reconnaissance operations or prospecting operations (as the case may be) to establish the existence of mineral contents in such land in accordance with the prescribed parameters; (ii) has not breached the prescribed terms and conditions of the reconnaissance permit or the prospecting license, as the case may be; (iii) has not become ineligible under the provisions of the Act; and (iv) has not failed to apply for the grant of the prospecting license or the mining lease, as the case may be within the prescribed period.
 
3. The provisions relating to term of mining leases for minerals (other than minor minerals) have been amended as follows:
 
i. Mining leases in respect of coal or lignite may continue to be granted for a minimum period of 20 years and a maximum period of 30 years;
 
ii. Mining leases in respect of minerals other than coal, lignite and atomic minerals granted after the commencement of the Ordinance will be for a period of 50 years;
 
iii. Mining leases in respect of minerals other than coal, lignite and atomic minerals granted prior to the commencement of the Ordinance will be deemed to be for a period of 50 years;
For the mining leases specified in (ii) and (iii) above, on the expiry of the lease period, the mining lease will be put up for auction as per the procedure set out in the Ordinance. However, the lease holders having mining lease for minerals used for captive purposes will have a right of first refusal at the time of auction3 held for such lease after the expiry of the lease period.
 
iv. Subject to (iii) above:
 
a. Mining leases in respect of minerals other than coal, lignite and atomic minerals where the lease is set to expire prior to March 31, 2030, and where the mineral is being used for captive purpose will be deemed to be extended upto March 31, 2030; and
 
b. Mining leases in respect of minerals other than coal, lignite and atomic minerals where the lease is set to expire prior to March 31, 2020 and where the mineral is not being used for captive purpose will be deemed to be extended up to March 31, 2020. This implies that all the presently subsisting mining leases for non-captive and captive uses are extended up to March 31, 2020, and March 31, 2030 respectively.
 
4. The Ordinance stipulates definitive time periods within which the relevant State Government or the holder of a mining lease, as the case may be, is under an obligation to take the following actions in respect of the lapse of the lease due to failure to undertake and/or discontinuance of mining operations by a holder of a mining lease for a period of two years from the date of execution of a mining lease:
 
i. Where an application is made to the State Government by the holder of the mining lease prior to its lapse, setting out reasons beyond the control of the holder due to which mining operations could not be commenced or continued, the State Government may make an order preventing such lease from lapsing within a period of three months from the date of receipt of the application;
 
ii. Where the State Government makes an order preventing such lease from lapsing and the holder of such mining lease fails to undertake mining operations within a period of six months from the date of the State Government’s order, such mining lease will lapse;
 
iii. Where an application is made to the State Government by the holder of the mining lease within a period of six months from the lapse of such lease, setting out reasons beyond the control of the holder due to which mining operations could not be commenced or continued, the State Government may make an order reviving the lease within a period of three months from the date of receipt of the application. However, no lease will be so revived more than twice during its term.
 
It is pertinent to note that where the State Government fails to make such orders within the aforementioned time periods, the applicant may approach the Central Government to seek appropriate orders.
 
5. Transfer of mineral concessions: The Ordinance provides for transfer of a mining lease or prospecting licence-cum-mining lease which has been granted by way of auction, in respect of major minerals other than coal, lignite and atomic minerals. Such transfers are permissible subject to prior approval of the relevant State Government, and in such manner as may be prescribed by the Central Government, to any person eligible to hold such mining lease or prospecting license-cum-mining lease in accordance with the Act and the rules made thereunder. The State Government is under an obligation to convey its approval or rejection of such transfer within a period of 90 days from the date of receipt of the notice pertaining to such transfer failing which it will be construed that the State Government has no objection in respect of such transfer. The holder of the original mining lease or the prospecting license-cum-mining lease is under an obligation to inform the State Government the consideration for which the transfer is proposed to be made by the original lessee including the consideration in respect of the prospecting operations already undertaken and the reports and data generated during such operation.
 
The Ordinance does not contain any provision in respect of such mining leases which are presently subsisting (i.e., the ones which have not been granted through auction in pursuance of section 10B or section 11 of the Ordinance). This may mean that the current transfer related provisions under the Mineral Concession Rules, 1961 (which have been framed under the Act), would continue to apply in respect of such leases. It is pertinent to mention that such provisions under the aforesaid rules do not specify timelines within which the State Government should grant its consent to, or reject, the application for the transfer of a mining lease. Further, the aforesaid rules do not contain any guidance on the grounds on which a request for transfer of mining lease could be refused.
 
6. Development Funds: The Ordinance provides for creation of the District Mineral Foundations and the National Mineral Exploration Trust.
 
i. District Mineral Foundation: A District Mineral Foundation is to be set up by the relevant State Government in each district where areas are affected by mining operations, to work for the benefit of such areas and the people living there. Their composition and functions will be as prescribed by the State Government in this behalf. The holder of a mining lease or a prospecting licence-cum-mining lease is to pay the relevant District Mineral Foundation an amount equivalent to such percentage of royalty, payable on the minerals raised/ removed, as may be prescribed by the Central Government, which amount will not exceed one-third of such royalty.
 
ii. National Mineral Exploration Trust: The National Mineral Exploration Trust will be set up by the Central Government for the purpose of carrying out regional and detailed exploration in the manner prescribed by the Central Government. Its composition and functions will be as prescribed by the Central Government. The holder of a mining lease or a prospecting licence-cum-mining lease will have to pay the National Mineral Exploration Trust a sum equivalent to 2% of the royalty payable on the mineral raised/ removed.
The effect of the above could be an increase in an outlay of up to 35% over and above the prevailing royalty payments.
 
7. Special Courts: The Ordinance provides for constitution of special courts by the State Governments which will hear proceedings in respect of illegal mining, i.e. carrying out reconnaissance, prospecting or mining operations without the requisite mineral concession, and for storing or transporting minerals otherwise than in accordance with the provisions of the Act and the rules made thereunder. Each special court will be deemed to be a Court of Session and will have all the powers of a Court of Session in such proceedings. An appeal to the High Court may be preferred within a period of 60 days from the order of the special court by any person aggrieved by such order.
 
What If The Ordinance Lapses
 
As indicated hereinabove, the Ordinance was promulgated by the Government of India on January 12, 2015. The Ordinance would have to be placed before both Houses of Parliament, for approval, within six weeks of commencement of the immediately subsequent Parliamentary session. However, if one of the Houses of Parliament does not re-assemble, then the Ordinance continues to be operative till such time that both Houses of Parliament are jointly in session, and the six week period commences on the date on which the later of the two Houses re-assembles (to illustrate, if the Rajya Sabha commences its session on February 1, 2015 and the Lok Sabha commences its session on February 4, 2015, then the six week period will be computed from February 4, 2015). The next scheduled session of the Parliament is the budget session in February though it cannot be predicted with certainty as to whether both Houses of Parliament would re-assemble and consequently, whether the Ordinance can be taken up for consideration.
 
In the event that the (i) the Ordinance is not passed within the discussed time frame; or (ii) both the Houses of Parliament do not approve enacting the Ordinance into a legislation, then the Ordinance lapses, and the Act, as was in force prior to coming into effect of the Ordinance, would automatically revive and become applicable. However, for the period during which it remains operational, the Ordinance would have the same force and effect as an act of Parliament. Further, it is an established legal principle that all actions that are taken during the period in which an ordinance is in force remain valid and binding even after the lapse of such ordinance. An ordinance can also be revived, subject to the President of India being satisfied that circumstances exist which renders it necessary for immediate action to be taken in respect of the subject matter of such ordinance.
 
Factually, at the time that the Ordinance lapses (and is not re-promulgated), one would need to consider the stage at which the licensing process is with respect to the prospective license-cum-mining lease / mining lease. For instance, if the auction process has been completed and the requisite license / lease has been granted, but the actual operations have not been commenced by the time the Ordinance lapses, one interpretation could be that since the license / lease was validly granted at the time that the Ordinance was in place and had the effect of law, such license / lease would be deemed to be validly granted and on the conditions set out in the Ordinance. On a conservative basis, if the auction process was on-going and the selection of the bidder was not completed, one could take a position since the law has reverted to the old position owing to the lapse of the Ordinance, the license / lease will have to be granted in accordance with the process and as per the conditions set out under the Act and regulations thereunder.
 
Accordingly, it would be preferable to tread the landscape with caution and to obtain legal advice in the specific context of applying for a license / lease
 
End Notes:
 
1 Major minerals are minerals other than building stones, gravel, ordinary clay, ordinary sand (other than sand used for prescribed purposes) and any other mineral which the Central Government may, by notification in the Official Gazette, declare to be a minor mineral (i.e., not a major mineral).
 
2 Process for grant of mineral concessions in respect of coal and lignite has been covered under the Coal Mines (Special Provisions) Second Ordinance, 2014. Further, the Ordinance specifies that the Central Government may make rules in relation to atomic minerals for regulating the grant of mining leases or other mineral concessions.
 
3 Though the provision does not provide adequate clarity, it appears that the intent of legislation is to afford an opportunity to the lessee of a captive mine to take renewal of the mining lease by matching the offer made by the successful bidder. Possibly, clarity on this aspect may come forth through sub-ordinate legislations.
 
AZB  

For further information, please contact:

 

Bahram N. Vakil, AZB & Partners
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Yashwant Mathur, AZB & Partners 
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Prashanth Sabeshan, AZB & Partners 
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