The Supreme Court has issued a notice to Tata Steel on an appeal by Odisha against an April decision of the high court that quashed the state's demand notices of Rs 4,313 crore against the company for alleged shortfalls in mineral dispatch.
The Orissa High Court in April has delivered a major relief to Tata Steel, setting aside demand notices worth about Rs 4,313 crore raised by the Odisha government over alleged shortfalls in chromite dispatch from the Sukinda chromite block. The court, however, upheld the validity of Rule 12A of the Mineral Concession Rules, 2016, which formed the basis of the state's action.
The state had appealed the decision before the Supreme Court, which has issued notice to Tata Steel on the matter, reopening the case over whether the miner will have to pay the Rs 4,313-crore demand notice.
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The dispute arose after Tata Steel Mining, which acquired the Sukinda Chromite Block through the auction process in 2020, was issued multiple demand notices by the Odisha government for failing to meet prescribed dispatch targets under the Mine Development and Production Agreement. The state initially issued a demand of Rs 1,563.75 crore for the fourth lease year, later revising it upward to Rs 1,902.72 crore. A further demand of Rs 2,410.89 crore was raised for the fifth lease year. Together, the notices sought recovery of nearly Rs 4,313 crore from Tata Steel.
Tata Steel challenged the demands, arguing that the Indian Bureau of Mines had approved a modified mining plan that substantially reduced production targets because of geological and operational constraints at the mine. The company contended that while the State continued to calculate dispatch obligations based on MDPA commitments, the approved mining plan legally permitted lower production, making the prescribed dispatch targets impossible to achieve.
The company also pointed to IBM's approval of a Final Mine Closure Plan and its decision to cease mining operations from December 2024 as part of the closure process. It argued that penalties based on higher dispatch requirements ignored the regulatory approvals governing the mine's actual operations.
The Odisha government, on the other hand, maintained that Rule 12A was introduced to ensure sustained mineral production and supply after auctioned mines changed hands and that lessees were obligated to meet dispatch requirements envisaged under the MDPA.
In its ruling, the high court held that the mining plan approved under the MMDR framework carries statutory force and governs mining operations. The bench said there is no restriction on IBM approving production below MDPA expectations and, where a conflict exists, the approved mining plan would prevail over contractual production commitments under the MDPA.
The court further held that while Rule 12A itself is valid, the state could not impose penalties based on dispatch obligations that were inconsistent with the approved Mining Plan. Consequently, all demand notices issued to Tata Steel that ran contrary to these findings were quashed.
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