The Indian Supreme Court has barred the British company Vedanta Resources from mining bauxite in the forests of the eastern state of Orissa.
The court has asked Vedanta to come back with fresh proposals.
The company has an agreement with the state government to set up a bauxite refinery in the Niyamgiri mountain region.
The region is considered sacred by tribes who live in the area and is protected by the constitution.
In recent months, Vedanta's plans have been attacked by environmental groups and tribal activists in India.
They fear that the mines will force local people from their homes and destroy their livelihoods.
In India, both the state and central government back the Vedanta plan as part of efforts to industrialise and exploit the mineral resources of underdeveloped eastern India.
The Supreme Court said it could not take "the risk" of handing over what it said was an important national asset to a company.
The Indian unit of Vedanta, Sterlite Industries, must now submit fresh proposals to the court, incorporating greater protection for the rights of local people.
The company said it will study the court order, adding that it is pleased that the court believes such large industrial projects should be supported.
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