No Vested Right in an Application—State Can Shift to Auction Regime for Minor Mineral Leases: Andhra Pradesh High Court Upholds G.O.s 13 & 14 of 2022

Policy Shift to Auction Not Ultra Vires—Pending Applications Can Be Rendered Ineligible Without Retrospective Violation: Andhra Pradesh High Court comprising Chief Justice Dhiraj Singh Thakur and Justice R. Raghunandan Rao, in Sri Muppalla Penchala Raju v. State of Andhra Pradesh & Others [W.P. No. 19459 of 2022 & Batch], dismissed a batch of over 40 writ petitions challenging amendments to the A.P. Minor Mineral Concession Rules, 1966 and the A.P. Minor Mineral Auction Rules, 2022, brought in via G.O.Ms.No.13 and G.O.Ms.No.14 dated 14.03.2022.

The petitioners had claimed that the abolition of the first-come-first-serve system, rendering pending applications ineligible, and introducing auction for lease grants, violated their vested rights. Rejecting these arguments, the Court held: “No applicant has a vested right to grant of a lease merely by filing an application—even if in proper form. The State is within its powers to regulate the grant process under Section 15 of the MMDR Act.”

“System That Can Be Created by Rules Can Also Be Modified by Rules—Auction Is a Valid Policy Shift”

The Court emphasized that the 1966 Rules themselves created the earlier category-based system, and hence, the State could lawfully amend those very rules to introduce a premium-based auction process. It held: “Once it is accepted that the State, by way of rules under Section 15, had brought in a first-come-first-serve method, it cannot be said that it does not have power to change it through the same rule-making authority.”

Referring to the Supreme Court's ruling in D.K. Trivedi v. State of Gujarat (1986 Supp SCC 20), the Bench reiterated that the State’s power under Section 15 is wide and illustrative, not restrictive, and auction-based grant is well within its domain.

“Pending Applications Rejected Under New Rules—But That Does Not Make the Rules Retrospective”

The petitioners contended that returning all applications pending as on 14.03.2022 amounted to retrospective operation, which was impermissible under law.

The Court clarified: “Applications pending without a letter of intent do not enjoy any statutory protection. The amendment is prospective—it only affects applications not yet processed.”

Citing State of Rajasthan v. Sharwan Kumar Kumawat (2023 SCC OnLine 898), the Court noted: “A mere filing of application does not create a right. A vested right arises only when there is a statutory recognition and decision in-principle.”

“Granite and Marble Rules Not in Conflict With Auction Framework—They Regulate Extraction, Not Lease Grant”

The petitioners argued that auctioning leases for granite and marble violated the Granite Conservation and Development Rules, 1999 and the Marble Development and Conservation Rules, 2002, framed by the Centre.

Rejecting this contention, the Court held: “These Rules regulate how mining is to be conducted, not how leases are to be granted. They do not preclude the application of the State’s 1966 Rules regarding lease allotment.”

“No Discrimination Against Cooperative Societies—Auction Rules Provide Inclusive Participation”

Petitioners further argued that Mutually Aided Cooperative Societies were excluded from participating in the auction process. The Court examined the definition of ‘local societies’ in the new Rules and concluded: “The auction rules, in fact, confer additional benefits to local societies. Mutually Aided Cooperative Societies are not excluded—they are explicitly included under Rule 2(h) of the 2022 Rules.”

“Three-Year Dead Rent as Security Deposit Is Policy—Court Will Not Interfere Unless It’s Arbitrary”

A challenge was also raised to the requirement of depositing security equivalent to three times the annual dead rent in cash. The Court declined to interfere with this fiscal policy, observing:

“The petitioners have not shown any material to prove this causes arbitrary hardship or violates Section 9A of the Act. What form and quantum of security is required lies within policy discretion.”

In a comprehensive ruling, the Court upheld the legality and validity of G.O.Ms.No.13 and G.O.Ms.No.14, concluding that:

“The amended Rules are not ultra vires. They do not operate retrospectively and do not violate any vested rights. The shift to auction is a valid policy change in exercise of lawful rule-making power.”

This judgment firmly establishes that State Governments have the power to overhaul mineral lease systems through delegated legislation, as long as such change does not override existing statutory rights or operate retrospectively. The Andhra Pradesh High Court has drawn a clear line between policy and constitutional infirmity, upholding the auction mechanism as a valid regulatory evolution.

In the Court’s own emphatic words: “A right to apply is not a right to receive—policy can change, and with it, the process must follow.”

Date of Decision: 20 March 2025