The Indian tribe that took on a mining giant – and won

They said they considered the mountain their god, a living deity that provided them with everything they required to sustain their lives. They said they would fight to the death before seeing the pristine mountain destroyed. Remarkably, they won their battle.

Last night, the tribal people of the Niyamgiri Hills in eastern India were celebrating after the authorities in Delhi ruled that a British-based company would not be permitted to mine there for bauxite. Drawing a line under a "David-versus-Goliath" saga, India's environment minister acknowledged the potential human and social costs of the aluminium project that could have earned billions of pounds for Vedanta Resources Plc. "There has been a very serious violation of laws," Jairam Ramesh said. "Therefore, the project cannot go ahead."

In the state of Orissa, where the Niyamgiri Hills are located, Sitaram Kulesika, a senior member of the Dongria Kondh tribe, told activists by phone: "This is a great day for Kondhs. Mining would be the end of their existence and their god. We thank the Indian government."

Yet the impact of the ruling reverberated far beyond the quiet hills of eastern India, where the 10,000 members of the Dongria Kondh survive as subsistence hunters and farmers. While Vedanta saw 5 per cent tumble from its share price, activists celebrated what they said was a rare triumph for environmental and social justice against the interests of big business.

"This is a victory nobody would have believed possible," said Survival International's Jo Woodman. "The Dongria's campaign became a litmus test of whether a small, marginalised tribe could stand up to a massive multinational with an army of lobbyists and PR firms and the ear of government."

The mining industry in India is powerful and campaigners have long argued that it needs tighter regulation. While the government of Orissa, which supported the project, claimed activists were holding back much-needed development in the state, campaigners said they had faced widespread intimidation. "We strongly welcome this announcement as a vindication of the struggle that has been led by the indigenous people. The laws to protect their rights have been vindicated," said Bratindi Jena, who leads ActionAid India's work for indigenous people.

The controversy over the proposed mine dates back to 2004 and has involved India's highest court as well as a series of special committees. Many believed that fierce lobbying by Vedanta, owned by London-based industrialist Anil Agarwal, and the state government, would ensure permission would be granted to the company to proceed with its plans to mine bauxite for a refinery which it already operates close to the Niyamgiri hills using ore trucked in from a neighbouring state.

But last week a government-appointed panel recommended that permission be denied on the grounds that mining in the area would breach environmental laws. The panel also expressed concern that granting permission could boost the cause of Maoist rebels, active across India's heartland, who have seized on the resentment of tribal people against large industrial projects. "The committee is of the firm view that allowing mining... by depriving two primitive tribal groups of their rights... in order to benefit a private company would shake the faith of the tribals in the law of the land," the panel said.

Another factor may have been the involvement of Rahul Gandhi, who is widely tipped as a future prime minister. The son of ruling Congress party leader Sonia Gandhi, he visited Niyamgiri in March 2008 and said: "I feel mining the hill will destroy the environment, destroy the water supply source and destroy the culture as well as the livelihood of tribals." He is due to visit the site again later this week.

As the issue became a cause célèbre, campaigners attacked Vedanta from every angle. While activists attended shareholder meetings in London and flew in members of the Dongria Kondh to ensure maximum publicity, they also persuaded shareholders from the Church of England to the Norwegian government to get rid of their stakes.

The decision not to allow mining in Niyamgiri is not the only bad news for Vedanta. Mr Ramesh said their refinery, already operational using bauxite from other states, may be breaching environmental laws. It has also emerged that the Indian government may oppose Vedanta's purchase of a majority stake in Cairn India, a major oil producer.

Last night Vedanta, which says the claims by the pressure groups are "lies and hoax", rejected any accusation that it has broken the law. It also gave an assurance that it would not mine in the area "until all approvals are in place".

Pressure groups suggested that the statement hinted that the battle on the Niyamgiri mine might not be over. Meredith Alexander of ActionAid, said that while yesterday's ruling was a "massive victory", the row may not yet be over. "Vedanta could appeal this decision," she warned. "But the Kondh are asking the company to respect the Government's decision and their clearly expressed opposition to the mine."

Mr Agarwal, Vedanta's billionaire chairman and majority owner, has said the economic benefits of the project far outweigh any displacement of the Dongria Kondh, or damage to the environment. It also says that less than 3 per cent of the tribe would be forced to move because of the mine.