REPORTABLE

IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO.   7780 OF 2011 [Arising out of SLP (C) No. 7443 of 2010]

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  

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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  

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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.

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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.”

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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.

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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:-

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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.  

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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.

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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:-

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“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  

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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.  

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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  

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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: -

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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  

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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  

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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.  

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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  

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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  

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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  

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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.

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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  

Page 27 of 36

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.

Page 28 of 36

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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