The Orissa High Court on Wednesday stayed an approval given by the Orissa government to give license to Posco's project in the state.

The stay which came as a major setback to the Korean steel company as it has been trying hard to clear its Rs. 51,000 crore steel project to start in Paradip port. It had got the recommendation of the state government for the Khandadhar iron ore reserve in its favor.

Orissa court allowed a writ petition made by the Geomin Minerals and Marketing Ltd and asked the state government to reconsider its recommendation, regarding the license. Geomin is a Karnataka-based private company and had asked for studying the preferential right of consideration given to Posco.

It was in January, 2009 that the Orissa government had asked the Central government to grant PL in favor of Posco which talks about 2,500 acre of Khandadhar iron ore reserve. It also is to consider 12 MTPA of greenfield steel plant that is under the Section 11(5) of Mining and Minerals (Regulation and Development) Act.

Court said that the decision of Orissa government was arbitrary and illogical.