Pepsico India Holding Pvt.Ltd vs State Of Maharashtra & Ors

PepsiCo India Holding Pvt. Ltd. .... Appellant

Versus

State of Maharashtra & Ors. .... Respondents

JUDGMENT

Dr. MUKUNDAKAM SHARMA, J.

1. Leave granted.

2. The appeal is directed against the judgment and order dated

04.11.2009 passed by the High Court of Judicature at Bombay

in Writ Petition No. 5834 of 2005. The said Writ Petition was

filed by the appellant herein questioning the levy of increased

Page 1 of 36

water charges on ground that it cannot be given retrospective

effect by the respondent herein.

3. The facts leading to the filing of the present appeal are that

the appellant - PepsiCo India Holdings Pvt. Ltd. is incorporated

in India under the Companies Act, 1956 for manufacturing and

distributing carbonated soft drinks, bottled drinking water and

other food products. Appellant stated that it is one of the

leading manufacturers of Carbonated Soft Drinks and bottled

drinking water in the entire State of Maharashtra and a

significant portion of the entire national demand for the

appellant's product is met from the production made within the

State of Maharashtra itself.

4. The State of Maharashtra, represented by Secretary, Deptt.

of Industries, Mantralaya is respondent no. 1, the Maharashtra

Industrial Development Corporation ["MIDC"] is respondent no.

2 which is responsible for infrastructure required for any industry,

i.e. land, water and electricity. All the Industrial Estates of State

Government in Maharashtra come under the purview of

respondent no. 2. MIDC at Roha Div. Alibag is respondent no. 3

and is the branch of respondent no. 2 and shares the same

Page 2 of 36

objective. Department of Irrigation is respondent no. 4 and is

responsible for the supply of water to all industrial estates under

respondent no. 2 in Maharashtra.

5. The appellant stated that respondent no. 2, acting through

respondent no. 3 invited business undertakings to set up

industrial units in the industrial areas to add impetus to industrial

development in the State of Maharashtra. Accordingly, the

appellant decided to set up its manufacturing plant in the State of

Maharashtra at Paithan, Distt. Aurangabad and Roha, Dist.

Raigad. In this case, however, we are concerned with the

manufacturing plant of the appellant located at Roha.

6. The primary business of the appellant is to manufacture

non-alcoholic beverages in its plant and for the manufacturing of

the same, water is used as one of the raw materials.

7. The plant from where the appellant operates its unit at

Roha, Maharashtra was earlier owned by another company by the

name Voltas India Limited. The said company had entered into a

Water Supply Agreement with respondent no. 3 for its facilities

at Dhatav, Roha under the Water Supply Regulation Act, 1973.

Page 3 of 36

8. There are regulations in respect of supply of water, namely,

`Maharashtra Industrial Development Corporation Water Supply

Regulations'. Regulation 2(2) defines "Consumer", which means

any person or persons who has applied for supply of water from

any works of the Corporation and to whom MIDC has agreed to

supply water or any person or persons otherwise liable for

payment of water charges to the Corporation. Clause 27 of the

Water Supply Agreement provides that the Respondents shall fix

charges for water from time to time and increase or decrease the

water charges in its discretion after giving notice of one month to

the consumer. Clause 36 of the Water Supply Agreement

provides for penalty in case of failure on part of the consumer to

pay the water bill. Clause 27 of the Water Supply Regulations,

1973 are as under:

"Clause 27: Water Rate: The charges for

water shall be fixed by the Corporation from

time to time. The Corporation shall increase or

decrease the water charges in its discretion

after giving notice of one month to the

consumer. The rates of water charges so fixed

or altered shall be conclusive and be binding on

the consumers."

Page 4 of 36

Regulation 28 provides for recovery of arrears on account of

water charges or any other expenses incurred by the Corporation

in connection with water supply to the consumer, which shall be

recoverable as arrears of land revenue. The Corporation also has

the right to disconnect the water supply in the event of

contingencies provided under the regulations.

Regulation 35 is in respect of Water Rate, which reads as under:

"Regulation 35: Water Rate: The consumer

shall pay the charges for water supply which

shall be fixed by the Corporation from time to

time. The Corporation shall increase the water

charges in its discretion after giving notice of

one month to the consumer. The rates so fixed

or altered by the Corporation shall be final and

binding on the consumer."

Regulation 36 provides for recovery of arrears as land revenue.

Clause 42 of the agreement provides for a forum of Chief

Engineer, MIDC, for resolution of the disputes arising out of

interpretation or otherwise of the regulations and that the

decision of the dispute resolution authority shall be final and

binding on the consumer. Regulation 51 provides that for

disputes arising out of the interpretation or otherwise of the

provisions of the Agreement, the decision of the Chief Engineer,

MIDC shall be final and binding on the consumer.

Page 5 of 36

9. Appellant purchased its plant at 100/1, A-Road, MIDC,

Dhatav, Roha, Distt. Raigad from Voltas Limited, the original

owners of the property. Voltas issued its no objection to transfer

water connection in the name of the appellant. Since then, the

respondent no. 3 has been issuing all the water bills in the name

of the appellant.

10. Respondent no. 4 while acting upon a recommendation of

the Finance Commission issued Government Resolution No. WSR

1001/(5/2001)/IM (P) dated September 12, 2001 increasing the

water cess. The revision was made after drawing a classification

differentiating three categories of consumers of water, namely:-

"Category 1 - Water used for purpose of

drinking - present rates of water cess doubled.

Category 2 - Water for industrial use - present

rates of water increased three times.

Category 3 - Industries where water is being

used as a raw material as drinking water, for

such industries (that is, cold drinks, mineral

water etc.) - present rates of water increase

ten times".

For category 3 this is what was provided:-

xxxxxxxxxxxxxxxxxxxx

Page 6 of 36

xxxxxxxxxxxxxxxxxxxx

A5 "Drinking water industries where water is

being used as raw material means cold drinks,

breweries, mineral water and similarly based

industries."

Above increase in rates was made effective from 1st September,

2001 as per clause A4.

11. The old rate of water was Rs. 3.65 per cubic meter which

was increased to Rs. 36.50 pcm from September 1, 2001 for

industries where water is being used as a raw material as

drinking water. It was also specified that the revised rates would

increase by 15% in the month of July of every following year.

12. Consequently, the appellant was placed in the third category

i.e. industry using water as raw material. On that basis, the

appellant was directed to pay water cess, on increased rates.

Subsequently, some industrial associations/organisations/

industrialists made representations to the State Government

requesting it not to increase the water cess.

13. On October 24, 2001 the respondent no. 4 issued another

Govt. Resolution Errata No. WSR 10001/ (5/2001)/IM (P). The

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corrigendum changed the increased water cess from the new

rates of Rs. 36.50 pcm to Rs. 40 pcm and made the same

effective from September 1, 2001 with a clarification that while

deciding/fixing water rates vide Government Resolution No. WSR

1001/(5/2001)/IM (P) dated September 12, 2001, some

deficiencies were left out and the same are being removed by

Errata dt. 24.10.2001 with the following resolution:

"A(3) In the industries where water is being

used as raw material as drinking water, for such

industries (i.e. Cold Drinks, Mineral Water etc.)

present rates, (which have been made effective

from 01/07/2000) are being made 10 times.

A (4) Above increase in rates shall be effective

from 1st September, 2001"

14. On 31.10.2001, respondent no. 2 issued a Circular No.

G/30/2001 deciding to increase its water charges levied on the

consumers and thereby implementing the revised rates of water

charges from November 1, 2001 onwards. Relevant portion of

the Circular is reproduced hereunder:

"Pursuant to the policy decision taken during

246th meeting of Board of Directors of MIDC

held on 3.10.1997 and as approved by the Sub-

Committee of the Corporation appointed for

that purpose, the Corporation has issued

revised rates of water supply from 1.4.2001

vide the Circular under reference No. 1.

Page 8 of 36

Thereafter the Irrigation Department of

Government of Maharashtra have issued

revised rates of water supply for drinking and

for industrial use vide the aforesaid reference

No.2. The prevailing charges for drinking water

have been doubled (from 1.7.2000) and water

charges for industrial use have been increased

three times (from 1.7.2000). It has been

mentioned that the said increase in rate is

effective from the date 1st September, 2001.

Due to this increase in water charges, the

amount to be paid by the Corporation to the

Irrigation Department would be increased and

therefore, it is inevitable for the Corporation to

increase its water charges. Pursuant thereto the

Corporation has decided to implement the

revised rates of water charges from the date

1.11.2001.

Revised rates to be implemented from

1.11.2001 have been mentioned in the

accompanying schedule No A-1 to A-5.

While determining the revised rate of water

supply the prevailing water charges for

domestic use have been increased by Rs.0.25

per c.m. while for industrial usage it has been

increased by Rs. 6.50 p.c.m. and accordingly

the revised rates have been made applicable to

all the concerned consumers from the date

1.11.2001.

As stated above, all the Executive Engineers are

requested to issue a separate circular regarding

increase of water charges and to supply it

immediately to all the consumers as per the

accompanying form.

Page 9 of 36

Water consumed by the consumers from the

date 1.11.2001 should be charged at the

revised rates."

15. On 06.12.2001, respondent no. 2 issued a Circular No. G-

32/2001 informing the industrial organisations that the proposed

increase in rates is due to the increase in water charges effected

by respondent no. 4 and till the time respondent no. 4 does not

withdraw the increase in water charges, the respondent no. 2

cannot reduce the water rates. It was further stated that

representations received have been forwarded to the Government

and therefore during the pendency of the said representations,

the industrialists can pay the water bills at previous rates. On

13.08.2002, respondent no. 2 issued another Circular informing

the pendency of representations before the Government, in which

it was also stated that industrialists are allowed to pay the bills at

the old rates and the same should be accepted and the balance

amount should be shown as arrears.

16. On 28.11.2002, respondent no. 4 issued a fresh Govt.

Resolution No. SANKIRN 2002/(148/2002)/IM (P), whereby the

water cess for different categories was amended as follows:-

Page 10 of 36

"Category 1 - Water used for purpose of

drinking - present rates of water cess doubled.

Category 2 - Water for industrial use - present

rates of water increased doubled.

Category 3 - Industries where water is being

used as a raw material as drinking water, for

such industries (that is, cold drinks, mineral

water etc.) - present rates of water increase

ten times."

17. By the above amendment, the only change was made in

category 2 and no change was made for the use of water by the

Industry where water is being used as a raw material.

18. On 27.05.2003, a Circular No. G/06/2003 was issued by

Chief Engineer (Head Office) MIDC, Mumbai 93 stating about the

water tariff increase and thereby confirming the rates set out vide

Govt. Resolution dated 28.11.2002. The said Circular provided for

the amended policy of water supply of industrial and residential

use, which was required to take effect from June 1, 2003. On the

same day respondent no. 2 issued another Circular No. G/7/2003

wherein the rate of water supply of the consumers under the

industrial area using water as raw material was fixed at same as

Page 11 of 36

of the rates in industrial area. Relevant portion of the Circular is

reproduced hereunder:

"1. As per the Circular dated 24.10.2001 of the

Irrigation Department, water rate is increased

for industrial use - water rate 200 percent for

residential use - water rate 100 percent for use

water as raw material - water rate at 1000

percent. For recovering the increasing rate in

water charges, by amending the rate of water

supply of Corporation, were made applicable by

Circular No. G/30 dated 31.10.2001 and the

rate for use water as raw material, the rates

were made applicable as per Circular No. G/17

dated 30.7.2002, with effect from 01.11.2001.

The Corporation had raised the

issue/representation against this price revision

with the State Government. The said

case/representation seeking reduction in water

rate was under consideration of Government.

Therefore, approval was given to accept the

bills of water supply at old rate from the

Industrialists under the industrial area as per

Circular No. G/31 dt. 6.12.2001 and Circular

No. G/18 dt. 13.8.2002 of this Office.

Similarly, it was informed by Circular No. G/433

dt. 26.11.2001 not to increase rate of water

supply at the placed where water charges are

not payable to the Irrigation Department for

industrial area.

2. Now as per the circular dated 28.11.2002

of the Irrigation Department, the water rate for

industrial use has been decreased from 200

percent to 100 percent. The increase in

residential use and use water as raw materials

is confirmed. The amended rates are made

applicable from 1.9.2001. As per circular dt.

28.11.2002, the Irrigation Department has

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increased 15 percent increase from 1.7.2002

and 15 percent increase from 1.7.2003.

5. The rate of water supply of the consumers

under the Industrial area using water as raw

material will be the same as of the rates in

Industrial area. However, the rate of water of

such consumers outside industrial area be

charged by including difference of rates of

water tax.

6. The representations seeking reductions of

water charges are under the consideration of

Government. Therefore, though the bills are

sent to the consumers at increased rate, the

concession was given to pay the same at the

earlier rate (of prior to 01.11.2001). For this

reason, the arrears to that extent and late

charges thereon have been shown in the bills of

consumers, however, the rates during the

period from 01.11.2001 to 31.05.2003 and the

bills may not be revised presently. The decision

in that regard will be issued separately. All

consumers will be bound to pay the bills of

water at the rate of water supply in this circular

is made applicable from 01.06.2003."

In this view of the matter, no final decision was taken for the bills

relating to the period from 01.11.2001 to 31.05.2003. The

Maharashtra Industrial Development Corporation an undertaking

of the Maharashtra Government issued a Policy of water supply

and made it effective from 1st June, 2003.

Page 13 of 36

19. On 11.06.2003, the respondent no. 2 issued Circular No.

G/08/2003 revising rates of water supply for the period from

November 1, 2001 till May 31, 2003. It was specified that for

the period November 1, 2001 to November 30, 2002, the

different amount as per the revised rates should be shown as

arrears in the water bills. It was mentioned that if an

undertaking is given by the consumer to pay the arrears, then

the arrears would not be shown. Further, for the period from

December 1, 2002 to May 31, 2003, the arrears calculated as per

the revised rates were to be retrospectively recovered from the

consumer in three equal monthly instalments.

20. On 18.05.2005, respondent no. 2 vide its Circular No.

G/01/2005 revised the rates in respect of water supply to the

customers in industrial area using water as raw material.

Respondent no. 2 specifically observed that Circulars dated

27.05.2003 and 11.06.2003 provided for amended policy, which

implemented equal rates for all types of industries. By Circulars

dated 27.05.2003 and 11.06.2003 equal rates were fixed for the

water supply to all industries including the industries using water

Page 14 of 36

as raw material in industrial area. Relevant part of the Circular is

reproduced hereunder: -

"B. In accordance with Government Resolution

dated 28.11.2002 of the Irrigation Department,

the rates of using residential water use and

industrial water use under the Industrial area

and outside the area by Circular No. G/7/2003

and by Circular No. G-8 dated 11.6.2003, the

orders are issued regarding as to how the said

rates should be implemented.

C. By these circulars, equal rates are fixed for

the water supply to all industries including the

industries using water as raw material in

industrial area. However, while implementing

this policy it is found that in some industrial

area, the use of water by industries which are

using water as raw material, is in huge extent.

Since the rates of water use as raw material,

are more than five time of the water tax rate of

general industrial use, the financial burden of

amount of difference is falling on Corporation.

With a view not to put financial burden of such

type on Corporation, the decision of amending

the rates of water supply of the customers

using water as raw material under the Industrial

area, has been taken. The rates of water supply

of such customers be amended as follows: -

1) Revised rates: -

By extending the rates by Rs. 34.60 per c.m. of

water supply of respective industrial area issued

by issued under Circular No. G/7 dated

27/05/2003, the rates of water supply be

amended from 1/11/2001.

2) Recovery of Bills of water supply: -

Page 15 of 36

i) For the period from 01/11/2001 to

30/11/2002 - The water-tax be levied at

revised rates for the aforesaid period. The

amount of difference drawn by amended

rates of water be shown as arrears. On the

amount comes due to difference in rate of

water during this period, late fee may not

be charged. The amount of arrears may

not be shown in the monthly bill of water

and for recovery of this amount,

undertaking be taken from the customers

on court-stamp paper of Rs. 20/-. In

respect of the said arrears, separate

orders will be issued as per the decision of

Irrigation Department.

ii) For the period from 01/12/2002 to

30/04/2005 - For the aforesaid period, the

amount of difference of amended bill be

recovered in six equal instalments. First

instalment be recovered with the bill of

May, 2005 and last instalment be

recovered with the bill of October, 2005.

On the arrears of amount of its difference,

no late fees be charged till 30.11.2005.

iii) Recovery of bills of water supply from

1/5/2005 - The recovery of further bills

from 1/5/2005 be made regularly by

amended rates of water supply as above."

21. On 06.06.2005, the Deputy Engineer of respondent no. 2

issued a letter to the appellant regarding revision of water rates

for the consumers within the Industrial Area using water as raw

material. By the said letter respondent no. 2 informed the

appellant that respondent no. 4 had increased the rate of royalty

Page 16 of 36

by five times w.e.f. 01.09.2001 for consumers within the

Industrial Area using water as raw material and appellant was

further informed that its rate has been revised to Rs. 48.10 pcm

w.e.f. 01.09.2001. The Deputy Engineer proposed recovery of

water charges in the following manner:

1) The water bills at revised rate will be paid regularly by

the appellant from 01/05/2005 onwards. Accordingly, May

2005 bill is prepared & issued at the rate of Rs. 48.10 pcm.

2) The water bills for the period 01/11/2001 to

30/11/2005 revised as per revised rate. Differential amount

given in separate page in tabular form amount to Rs.

69,97,385/-. However, the recovery of the differential

payment will be kept in abeyance till the issue of royalty

payment for this period is resolved by the Irrigation

Department. For arrears of this period appellant will have to

give an undertaking on the stamp paper of Rs. 20/-

regarding payment of water charges to this office.

3) For making differential payment of water bills as per

revised rates for the period from 01/12/2002 to 30/04/2005

Page 17 of 36

amounting to Rs. 1,57,62,618/- appellant will be allowed six

monthly equal instalment of Rs. 26,27,103/- each.

The appellant was directed to pay the instalments failing which

the amount would be charged along with interest to be calculated

after six months.

22. On 24.06.2005, respondent no. 3 issued another letter to

the appellant reiterating the observations made by the Deputy

Engineer, MIDC, and reminding the appellant about the increased

water rates for consumers using water as a raw material with

effect from 01.11.2001. Through this letter appellant was

directed to submit bank guarantee of Rs. 69,97,385/- towards

differential amount due to revision of water rates and to pay Rs.

1,57,62,618/- being differential amount from December 1, 2002

to April 30, 2004 in six equal installments of Rs. 26,27,103/- each

from May 2005 to October, 2005.

23. Thereafter, M/s. Waluj Industrial Association Paithan,

Aurangabad, who was facing the similar situation as the appellant

herein, filed Writ Petition No. 4263 of 2005 before the High Court

of Judicature at Bombay, Aurangabad Bench, challenging the

Page 18 of 36

circulars and notices issued by respondents. In the said case

similar agreement and the same regulation were applicable to the

writ petitioner as the present appellant. Relevant part of the

Judgment delivered by the High Court and having relevance to

the present case is reproduced hereunder:

13. In view of the clauses referred to above,

contained in Water Supply Regulations and

Water Supply Agreement, conclusion can be

drawn that the Corporation is within its right to

revise water rates. It is a common grievance

made by the petitioners, firstly that prescribing

exorbitant water rates is unreasonable for

which there is no basis. It is also contended

that levy of water charges with retrospective

effect is not permissible.

14. Respondents have placed on record

Government Resolution dated 24.10.2001

whereby it has been directed by the State

Government that royalty for lifting water by

MIDC from the Irrigation Department shall be at

the rates prescribed in the said Resolution. The

aforesaid Resolution prescribed different rates

in respect of use of water for normal industrial

use as well as for user of water for

manufacturing activity where water is used as a

raw material. The Corporation issued notices to

different industrial establishments in respect of

revision of water rates and made demand in

respect of payment of water charges at revised

rates. Although petitioners have made a

grievance that levy of water charges is with

retrospective effect and respective industrial

establishments were not informed about the

Page 19 of 36

revision of water charges on previous

occasions, however, Respondent-Corporation

has contended in its affidavit-in-reply that in

fact different industrial establishments,

operating within the area of Industrial

Development Corporation, have been

specifically informed in respect of revision of

water rates and their liability to pay water

charges at revised rates.

15. During the course of hearing, learned

Counsel for Respondent-Corporation has made

available record in respect of communications

made by petitioners in Writ Petition No.

4263/2005 i.e. Waluj Industries Association. On

perusal of an application tendered by Waluj

Industries Association on 23.11.2001, it

appears that said communication is in response

to a Circular dated 05.11.2001 relating to

revision of water rates issued by MIDC. It is

urged in the application that the whole industry

is passing through a phase of recession and

cannot bear the hectic increase. The Association

has protested against the hike in water charges

and requested the Corporation to take up the

issue with Irrigation Ministry. A further

application appears to have been tendered by

the Chamber of Marathwada Industries and

Agriculture on 16th August 2003 in respect of

revision of water rates and communications

made by the Corporation in that behalf to

respective industrial units. Similar

communications find place in the record dated

14th July 2003 by Industries Association of

Young Entrepreneurs, Aurangabad and dated

24th July 2003 by the Chamber of Marathwada

Industries and Agriculture. Many industrial units

operating within the industrial area have

tendered undertakings in the prescribed form in

compliance with the directives issued by MIDC.

Page 20 of 36

It is, therefore, unacceptable that petitioners

were not aware of the decision rendered in

respect of revision of water rates by the

Corporation and were also not communicated

about such decision. Respondent-Corporation

has also stated on oath that each industrial

establishment has been communicated in the

year 2001 and thereafter every time in respect

of revision of water rates by the Corporation.

16. The argument advanced by petitioners

regarding impermissibility of revision of water

rates by the Corporation with retrospective

effect is not acceptable. On perusal of the

decisions rendered by the State Government in

respect of levy of royalty for supply of water to

MIDC at higher rates, contained in various

Government Resolutions, it is difficult to accept

the argument advanced by the petitioners that

there is no nexus for upward revision of water

charges by the MIDC. Petitioners have

contended that no distinction can be made in

respect of levy of water charges on account of

user of water for normal industrial use or for

use as a raw material for finished products. The

distinction made for charging different rates in

respect of user of water for normal industrial

use as well as in respect of user as a raw

material for manufacturing activity is based on

intelligible differentia and is based on sound

reasoning."

Consequently, High Court declined to quash the notices and

disposed of the petition with following directions: -

"(i) Respondent - Maharashtra Industrial

Development Corporation shall be at liberty to levy

water charges at revised rates. However, so far as

portion of water supplied, which is being used for

Page 21 of 36

manufacture of liquor, beverages, etc., wherein

water is used as a raw material, Respondent-

Corporation would be within their right to recover

water charges at higher rates, whereas the portion of

water utilized for the purposes other than the

manufacturing activity as raw materials,

Respondent-Corporation shall have to recover water

charges at normal rates.

(ii) Respondent-Corporation may tender revised bills

taking into consideration the distinction made above.

(iii)Respective petitioners may make suitable

representations to the Respondents in respect of

revision of water rates effective from 2002 onwards

and on receipt of the representations, Respondents

shall take appropriate decision on considering

grievances raised by respective petitioners."

24. Appellant in the year 2005 filed a writ petition before the

High Court of Bombay which was registered as WP No. 5834 of

2005 challenging the Govt. Resolutions passed by Respondent no.

4 dated 12.09.2001, 24.10.2001 and 28.11.2002 along with

letters issued by Respondent Nos. 2 & 3 dated 6.6.2005 and

24.6.2005 and prayed for quashing the same by issuance of writ

of certiorari or such other writ and to direct the respondents to

refrain from severing any water connections with respect to

industrial units of the appellant. The High Court vide its order

dated 6.9.2005 stayed the operation of the notices dated

6.6.2005 and 24.6.2005 and allowed the appellant to continue to

Page 22 of 36

pay the bills at the pre-revised/earlier rates and charges.

Consequently, however, vide order dated 4.09.2009 High Court

dismissed the Writ Petition of the appellant in terms of the

decision of the coordinate bench of the said High Court in Writ

Petition No. 4263/2005. The High Court held in the following

manner: -

"(i) It will be open to the petitioners to submit documentary

evidence before the respondents showing the water which

they were using as a raw-material and the water which they

were using for allied activities. The respondents thereafter to

complete the entire exercise within 16 weeks from today.

(ii) On the petitioners providing such information supported

by documentary evidence, the respondents to charge the

petitioners in terms of the directions issued by this court in

writ petition no. 4263 of 2005.

(iii) Considering direction no. 3 in paragraph 19 of the

Judgment in Waluj Industries Association, it will be open to

the petitioners to make suitable representation in respect of

revision of water rates effected from 2002 onwards and on

receipt of the representation, the respondents shall take

appropriate decision after considering the grievances raised

by the respective petitioners."

25. Against the said decision of the High Court, appellant has

filed the present appeal, on which, we heard the learned counsel

appearing for the parties. Counsel appearing for the parties have

Page 23 of 36

taken us meticulously through the entire relevant materials on

record.

26. Learned counsel appearing for the appellant contended that

the High Court erred in ignoring that inter se classification of

industrial users on the basis of their usage without any

reasonable differentia is discriminatory and that respondents are

not allowed to categorize industrial users into consumers of

"water as raw materials" and consumers for other purposes

without any reasonable classification. It was submitted by him

that the notification dated 18.05.2005 being prospective in

operation and that there being no specific stipulation that it would

be retrospective in operation, the respondent could not demand

tax at the revised rate from a retrospective date. It was also

submitted by him that in view of clause 27 of the agreement

there could not have been any demand from a retrospective date.

Counsel also relied upon clause 5 of Circular dt. 27.5.2003 and

submitted that the rate of water supply to the consumers under

the industrial area using water as raw material should be the

same as that of the rates in industrial area.

Page 24 of 36

27. Counsel appearing for the respondents, however, not only

refuted the contentions put forth by the counsel appearing for the

appellant but also submitted that the demand for payment of

water tax with arrear, payable by the appellant is just and

proper, as there was a continuing liability to pay at increased rate

from the year 2001 itself on the part of the appellant but not paid

pursuant to the representations filed by him. He also submitted

that the irrigation department vide its circular dated 25th October,

2001 initially increased the rate of royalty by 10 times and the

same was not altered even upon representations submitted by

the aggrieved persons including the appellant and therefore the

demand made, which is a subject matter of the appeal, cannot be

said to be a retrospective demand made by the respondent. It

was also submitted that industries using water as raw material

stands clearly on an independent footing than the other industries

not using water as raw material and, therefore, there is an

intelligible criteria in making a clear distinction between two

categories of industries.

Page 25 of 36

28. In the light of the aforesaid submissions and the materials

on record, we proceed to dispose of this appeal by recording our

reasons.

29. The specific stand of the respondents in respect of their

liability to supply water in lieu of water charges emanates from

their responsibility of making water available to the residential

houses, industries, factories and entrepreneurs and also to those

industries where water is used as raw material and the

corporation does not by itself generates water and instead of it

procure water from the respondent nos. 1 [State of Maharashtra]

and 4 [Department of Irrigation] and provides the same to the

residential houses, industries, factories and entrepreneurs etc.

30. It is also a specific stand of the respondent that water is

made available by corporation to its allottees at no profit no loss

basis. The corporation obtains water from the Irrigation

Department for which it is obliged to pay royalty and the charges

as fixed by the State Government. The Corporation also has to

revise water charges to cover the expenditure of water,

particularly, taking into consideration the increase in royalty and

Page 26 of 36

water charges by the State Government as well as other factors

like increase in price of water purification, chemicals, energy

charges, laying down pipelines, overhead tanks and other factors.

31. There is no dispute with regard to the fact that the State

Government with effect from 1st September, 2001 upon

consideration of the recommendation of the Finance Commission,

Irrigation Commission and National Water Policy as well as the

deficit arising due to the then prevalent low rates of water supply

revised the water rates. Consequent upon the said revision, the

Corporation also had to revise water rates to put in parity with

the charges towards water supply by the State Government.

Consequent, there upon in the year 2001 itself the appellant was

intimated the revision of water rates by the circular issued by the

Corporation on 31.10.2001. A number of representations came

to be filed from various aggrieved persons due to which a Circular

dated 6.12.2001 was issued permitting the industries to pay at

the pre revised/earlier rates in order to reconsider old rates in

view of the fact that several representations were pending and

were being considered by the State Government. The appellant

himself submitted such a representation intimating that they are

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not paying at the increased rate in view of the pendency of the

issue before the State Government. The appellant also in the

present proceedings has admitted that they had knowledge about

the increase of water charges in the year 2001 itself.

32. Another communication dated 28.11.2002 was issued by the

State Government and in the said communication it was stated

that there is recession world over in the field of industry and

taking sympathetic view on the representation submitted by the

industrialists with the Government, a decision has been taken to

make some revisions in the rates of water cess of industrial use

of water. It was, however, made clear in the said communication

that no change has been made for the use of water by the

industry producing drinking water and cold drinks/breweries

where water is being used as raw material. The Government

resolution communicated by the said resolution stated that rates

of the industrial use are being doubled but so far industries where

water is being used as raw material, for such industries the rates

are being made 10 times.

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33. A communication, however, came to be issued on

27.05.2003 by the Maharashtra Industrial Development

Corporation referring to circular dated 24.10.2001 and

28.11.2002 issued by the Irrigation Department. By referring to

Circular dated 28.11.2002, it was stated that water rate for

industrial use has been decreased from 200 percent to 100

percent but the increase in residential use of water as raw

material is confirmed.

34. Consequent upon issuance of the Circulars by the

Government regarding increase in the rate of water charges the

matter of taking a policy decision in respect of water supply was

put up before the Board of Directors of the Maharashtra Industrial

Development Corporation, who had taken a decision that the rate

of water supply of the consumers under the industrial area using

water as raw material, will be same as of the rates in industrial

area. It was also intimated therein that the representation

seeking reduction of water charges is under the consideration of

the Government and therefore though the bills are sent to the

consumers at increased rate, a concession was given to pay the

same at the earlier rate.

Page 29 of 36

35. The Corporation issued yet another circular on 18.05.2005

and in this Circular reference was made to the Government

resolution dated 28.11.2002 stating further that pursuant to the

State Government resolution a circular dated 11.06.2003 was

issued stating therein as to how the rates fixed by the

Government resolution should be implemented. It was also

stated that by the aforesaid circular dated 11.06.2003 equal rates

are fixed for the water supply to all industries including the

industries using water as raw material in industrial area but while

implementing the said policy it was found that in some industrial

areas, the use of water by industries which are using water as

raw material is in huge extent and that as the rates of water use

as raw material are more than five time of the water tax rate of

general industrial use, the financial burden of amount of

difference is falling on the corporation. It was also intimated that

with a view not to put financial burden on the corporation,

decision of amending the rates of water supply under industrial

area has been taken. The rates of water supply of such

consumers who use water a raw material was revised by

extending the rates by Rs. 34.60 per cm of water supply of

Page 30 of 36

respective industrial area issued vide circular no. G/7 dated

27.05.12003, the rates of water supply was amended from

01.11.2001. As to how water bills relating to the period from

01.11.2001 to 30.11.2002 should be recovered was also spelt out

in the said notification.

36. Consequent thereto a letter was written to the appellant

herein by Deputy Engineer, Maharashtra Industrial Development

Corporation, on 06.06.2005 intimating him that he is required to

pay water bills for the period from 01.11.2001 to 30.11.2005 as

per revised rates.

37. It is, therefore, established from all the aforesaid policy

decisions of the Government for increasing the rates of water

supply charges and also from the resolution of the Corporation

taking a policy decision and also from the circulars issued for

raising the water charges to 10 times that the decision was taken

by the Corporation to increase the water charges based on the

decision of the State Government to increase such rates of water

charges. The Corporation supplies water to all needy persons be

it residential houses, industrial units or to those industries where

Page 31 of 36

water is used as raw material on "no profit no loss basis".

Consequent upon revision of the rates by the Government at

which rate the Corporation is to make payment to the

Government, the Corporation has no other alternative but to

revise the same and follow the increase rates as demanded by

the State Government itself. The State Government has increased

the water charges so far those industries where water is used as

raw material to 10 times and the said rates were circulated by the

Government to the Corporation in 2001 itself. The fact of such

increase was intimated to all the persons to whom water was

supplied by the Corporation including the appellant who was fully

aware about the aforesaid increase of water charges from 2001.

38. There cannot be any dispute to the fact that in the industries

like that of the appellant, consumption of water is much more

than all other types of industries as they use water as raw

materials. Requirement and use of water in these industries is

huge and therefore they are placed as one distinct category or

class of their own. These industries stand apart from other

industries and also differently situated from residential houses.

Page 32 of 36

Therefore, there is an intelligible differentia between these three

categories so there is no discrimination.

39. However, a demand for payment of water charges at the

aforesaid increased rates was for some time kept in abeyance in

view of the several representations pending at the level of the

Government from the aggrieved and affected persons including

that of the appellant. But since the Government did not change

its position and informed the Corporation to make payment at the

revised rate which was increased in 2001 itself, the Corporation

has no other alternative but to release the payment of water

tax/bill at the increased rate demanded by the State

Government. Although in 2003 a policy decision was taken to

charge half the rate of the increased rate i.e. five times instead of

ten times, at par with the industrial uses, but later on it was

found that half the rate is not feasible and that what is being

charged at the earlier point of time is required to be paid as

Corporation's financial loss was continuously increasing. That

policy decision of 2003 was also a stop gap arrangement which is

indicated from paragraph 6 thereof and the said decrease finally

came to be amended in the notification of 2005.

Page 33 of 36

40. The appellant is receiving the facility of water supply from

the Corporation and is obliged to pay at such rates which are

demanded by the Corporation as the same rate is being charged

by the Government. The Corporation cannot be asked to suffer a

loss for extensive user of water by the appellant using water as

raw material for its business as it is discharging its public and

welfare duty for supplying water to help and assist industries like

the appellant. The stand of the appellant that the increased rate

of water charges is being demanded from them on a retrospective

basis is erroneous and fallacious and not proper because it is

established from the record that the appellant had the knowledge

about the aforesaid increase in 2001 itself when the Government

issued the notification intimating such increase which fact is an

admitted position. Therefore, there is no violation of clause 27

nor is there any question of giving any retrospective effect to the

aforesaid increase. It was also submitted that appellant was not

paying increased water charges as the matter was pending for

final consideration in view of several pending representations. In

the pleadings before us, the said fact is clearly proved by the

statement of the appellant in the affidavit filed.

Page 34 of 36

41. We have gone through the judgment and order passed by

the High Court in the coordinate Bench which was followed by the

High Court in the present case. From the judgment it is distinctly

indicated that while rejecting the contentions of the counsel

appearing for the appellant the High Court has recorded cogent

reasons for rejecting such contentions. We find no infirmity in the

said reasons. We however make it clear that a representation of

the nature as suggested by the High Court could still be made by

the appellant on all the grounds specifically mentioned therein

and any other valid ground, which when filed would be disposed

of expeditiously.

42. Consequently, we find no merit in this appeal and the same

is dismissed with the aforesaid liberty and leaving the parties to

bear their own costs.

............................................J

[Dr.

Mukundakam Sharma]

..............................................J

[Anil R. Dave]

New Delhi,

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September 12, 2011.

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