The Allahabad High Court, in a recent judgment on Writ Petition (Civil) No. 28355 of 2021, clarified the mechanism for recovering unpaid dues under the Uttar Pradesh Minor Minerals (Concession) Rules, 1963. Justices Siddhartha Varma and Manoj Bajaj highlighted that royalties or outstanding dues from a mining lease cannot be recovered from the security deposit made at the lease’s inception.

The case revolved around Smt. Kalpana Karwariya, who secured a 5-year lease for mining a specified area but encountered subpar mineral quality and unprofitable excavation. She sought a reassessment of mineral availability and lease determination. Despite depositing installments, she discontinued mining due to the unavailability of minerals, leading to a dispute regarding payment.

The petitioner contended that under Rule 58 of the 1963 Rules, non-payment of dues would lead to recovery as arrears of land revenue with interest, emphasizing that such defaults couldn’t be recovered by forfeiting the security deposit as per Rule 59. The dispute arose when the District Magistrate demanded pending installments, leading to rejected appeals and revisions before the State Government.

The Court’s verdict hinged on whether unpaid dues, due to lease termination, could be recovered from the initial security deposit. Relying on Rules 58, 59, and 60, the Court elucidated that recoverable amounts or royalties from the lease must be pursued as arrears of land revenue, distinct from the security deposit’s purpose.

Rule 58 pertains solely to the consequences of non-payment of royalties or dues, while Rule 59 deals with penalties for contravening specific conditions, recoverable from the security deposit. Rule 60 focuses on breaches except for payment-related violations.

The Court, after analyzing the rules collectively, determined that dues under the lease or royalty could solely be recovered as arrears of land revenue, explicitly excluding recovery from the security deposit. The security deposit forfeiture would only be applicable for penalties due to rule breaches, not for unpaid dues or royalties.

Consequently, in favor of the petitioner, the Court directed recovering the outstanding amount as arrears of land revenue while releasing the remaining security deposit.

The judgment In Smt. Kalpana Karwariya v. The State Of U P And 4 Others underscores the distinct treatment of recoverable dues and penalties under mining lease agreements. It emphasizes adherence to specific provisions for recovering unpaid dues and penalties, safeguarding security deposits from being utilized for recovering such liabilities.

This ruling clarifies the delineation between recovering lease-related dues and penalties, emphasizing adherence to statutory provisions for effective resolution of disputes arising from mining lease agreements.

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