Bihar mining department cannot charge default interest beyond two months under minor mineral rules, Patna High Court rules

The appellants were successful bidders for stone-mining blocks at Rajouli, Nawadah, and entered into lease arrangements after obtaining mining-plan approval and environmental clearance.

They did not pay the second instalments by the dates demanded; the Department later sought the instalments and interest.

In earlier writ proceedings, the appellants paid the principal and two months’ interest, while being given liberty to contest the remaining interest. After the competent authority rejected their representations and issued further demands, the appellants’ subsequent writ petitions were dismissed. They appealed, challenging the demand for interest beyond two months under Rule 52(5) of the Bihar Minor Mineral Concession Rules, 1972.

Whether Rule 52(5) authorises the Department to charge interest beyond two months for default in payment of an instalment

Whether the earlier orders directing payment of two months’ interest and permitting representations on the balance finally determined the appellants’ liability for interest beyond that period

Rule 52(5) of the Bihar Minor Mineral Concession Rules, 1972 provides for simple interest at 24 per cent up to two months after an instalment default and states that thereafter action for cancellation shall be taken.

The Court applied the principle that a statutory authority must act within the powers and limits prescribed by statute; where legislation prescribes how an act is to be done, the authority must follow that prescription, as reiterated in State of Jharkhand v. Ambay Cements.

It also relied on Tata Chemicals Ltd. v. Commissioner of Customs (Preventive), Jamnagar for the principle that statutory power must be exercised according to law and cannot be enlarged by estoppel, and Shridhar C. Shetty (Dead) through Legal Representatives v. Additional Collector and Competent Authority for the principle that a statutory authority cannot act beyond its statutory jurisdiction.

The Court distinguished the appellants’ admitted default from the separate question of the monetary consequences that Rule 52(5) permits. Reading the two parts of the Rule together, it held that the two-month limit on interest has operative effect and that the prescribed consequence thereafter is action for cancellation—not indefinite continuation of interest.

The agreements and the obligation to pay the instalments could not enlarge that statutory consequence.

The earlier orders had not finally decided that interest beyond two months was recoverable; they preserved the appellants’ ability to contest the remaining interest, so the statutory question remained open.

The Court did not decide the separate arguments concerning commencement of the lease, Rule 25(2), permissions, or force majeure.

It allowed all three appeals, set aside the Single Judge’s judgments, and quashed the orders dated 14 September 2023 and consequential demands insofar as they sought interest beyond that period.

The principal instalment liabilities and amounts already deposited, including two months’ interest, remained undisturbed; there was no order as to costs.