Hegde even invoked Underworld to support his argument that those indulged in illegal mining business can not claim compensation.
"We can not ask illegalities to be perpetrated because some people are going to remain hungry...Frankly speaking (this is like) many people losing their jobs if Dawood Ibrahim were to be arrested", he quipped.
Hegde was addressing reporters on the sidelines of a seminar on 'Global Business and Human Rights' organised by Union Internationale des Avocats (UIA), a UN-recognised NGO.
Responding to a query on Manohar Parrikar-led BJP government offering compensation to those who lost jobs due to interim ban on mining in the state following the Supreme Court order last year, Hegde said he was totally against the government's action.
"I am totally against it. People who are indulged in illegal activities which amount to crime, can not be compensated just because the future of their activity is taken away", Hegde said.
"It might be a livelihood in reality but is against law", the former Karnataka Lokayukta said.
The compensation ranges between Rs 4,000 to Rs 12,000 depending on the type of beneficiary.
Hegde also raised doubts over Goa government's commitment in implementing the recommendations of the Centre-appointed Justice M B Shah Commission which had blown the lid off the widespread illegal mining in Goa.
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