Nominated Authority Under Coal Ministry Entitled To Encash Performance Bank Guarantee For Delay In Coal Mine Milestones; Delhi High Court Upholds ₹29.23 Crore Deduction Against Vedanta
Safiya Malik
The High Court of Delhi Single Bench of Justice Amit Sharma, on 2 December 2025, disposed of a writ petition challenging a Union Government decision to recover Rs. 29.23 Crores from the petitioner company’s performance bank guarantee for a commercial coal mine. Upholding the order of the Nominated Authority in the Ministry of Coal, the Court held that the petitioner obtained the requisite environmental clearance beyond the stipulated milestone period under the Coal Mine Development and Production Agreement and that the consequent financial deduction from the guarantee flowed from the agreed efficiency parameters. The writ petition was accordingly rejected, with the Court affirming that the contractual consequences for delayed compliance would stand.
The petitioner challenged an appropriation order dated 21.07.2025 issued by the Nominated Authority, Ministry of Coal, directing deduction of 10% of its Performance Bank Guarantee for alleged non-achievement of Milestone-3 under the Coal Mine Development and Production Agreement (CMDPA). The petitioner was allotted the Radhikapur (West) Coal Mine following auction and executed the CMDPA on 11.01.2021. A Vesting Order was issued on 03.03.2021 transferring rights and approvals.
The petitioner submitted commencement plans, applied for transfer of statutory clearances, and faced delays relating to boundary coordinate discrepancies, forest and environmental clearance processes, and issues arising from the elephant corridor and compensatory afforestation. Two show cause notices were issued—SCN-I on 08.02.2022 for MS-2 delay (later waived on 23.08.2022) and SCN-II on 06.06.2024 for MS-3 delays. The Scrutiny Committee in August 2024 recommended that the petitioner operationalise the mine by 03.06.2025, failing which penalty could be imposed. The petitioner provided an undertaking on 12.08.2024. After a personal hearing on 18.07.2025, the impugned order was issued. The petitioner invoked force majeure and sought extension of milestones and change of Zero Date.
Respondents relied on CMDPA conditions, statutory timelines, and Section 27 of the Coal Mines (Special Provisions) Act, 2015, to argue that disputes must be adjudicated before the designated Tribunal.
The Court recorded the principles governing injunction against encashment of bank guarantees, stating that “the beneficiary is entitled to realise such a bank guarantee… irrespective of any pending disputes” and that courts should be slow to interfere unless fraud or irretrievable injustice is shown. It noted that the Performance Bank Guarantee furnished by the petitioner was unconditional, and that “the bank’s liability under this present being absolute and unequivocal.”
The Court examined the petitioner’s undertaking dated 12.08.2024 and stated that the petitioner “despite claiming time loss for the reasons beyond its control, chose to submit the undertaking to operationalise the subject mine before the due date of 03.06.2025.” It recorded that the undertaking was neither given under protest nor challenged, and that the same issues—boundary discrepancies, statutory clearances—had been raised earlier and considered by the Scrutiny Committee. The Court stated that “the said recommendations were given after considering the reply of the petitioner to SCN-II… and these issues were well within petitioner’s knowledge.”
Regarding maintainability, the Court stated that it was “not inclined to exercise its jurisdiction under Article 226… as the petitioner has an alternate efficacious statutory remedy as provided under Section 27 of the CM (SP) Act, 2015.” It quoted Section 27 and recorded that disputes “shall be adjudicated by the Tribunal constituted under the Coal Bearing Areas (Acquisition and Development) Act, 1957.”
The Court relied on the Division Bench decision in Trimula Industries Limited v. Union of India, noting that the judgment was “binding on this Court” and that the issues raised were “disputed questions of fact… over which learned Tribunal… has jurisdiction/authority to adjudicate.”
It recorded that arguments based on precedents such as Whirlpool, SJS Business Enterprises, and others did not alter the outcome because “the present case is squarely covered by the decision of the learned Division Bench.”
The Court directed that “the present petition is disposed of with liberty to the petitioner to avail its alternate efficacious remedy in accordance with Section 27 of the CM(SP) Act, 2015 before the concerned learned Tribunal situated at Talchar, Odisha, within a period of 10 days from today. Till that time, interim order dated 23.07.2025 passed by this Court in the present petition, directing maintenance of status quo with respect to Performance Bank Guarantee furnished by the petitioner, shall continue to operate.”
“This extension of interim order is for ten days or till the time the petitioner approaches learned Tribunal in terms of the directions contained herein else whichever is earlier and the Bank Guarantee should be kept alive. Nothing stated hereinabove should be construed as an expression of opinion by this Court as to merits of the disputes raised by the parties.”
Advocates Representing the Parties
For the Petitioner: Mr. Nidhesh Gupta, Senior Advocate; Mr. Prashanto Chandra Sen, Senior Advocate; Mr. Naveen Kumar; Mr. Bikram Dwivedi; Mr. Ujjwal Kumar Rai; Mr. Rohit Ghosh; Mr. Jimut Mohapatra; Mr. Utkarsh Chandra; Mr. Prabhat Kumar Rai; Mr. Aditya Goel; Mr. Lakshay Singh.
For the Respondents: Mr. Chetan Sharma, ASG; Mr. Ankur Mittal, CGSC; Mr. Aviraj Pandey; Ms. R. Jaiswal; Ms. Jutirani Talakdar.
Case Title: Vedanta Limited v. Nominated Authority, Ministry of Coal & Ors.
Neutral Citation: 2025: DHC:10744
Case Number: W.P.(C) 10686/2025
Bench: Justice Amit Sharma
