M/S. INDSIL HYDRO POWER AND MANGANESE LIMITED versus STATE OF KERALA AND OTHERS on 6 September 2021

[2021] 13 S.C.R.

AM/S. INDSIL HYDRO POWER AND MANGANESE LIMITED

v.

STATE OF KERALA AND OTHERS

(Civil Appeal Nos.9845-9846 of 2016)

BSEPTEMBER 06, 2021

[UDAY UMESH LALIT AND VINEET SARAN, JJ.]

Electricity: Hydel schemes for generation of electricity –Royalty for use of water – Demand of – On facts, in terms of theCGovernment policy, the appellant-Captive Power Producersestablished Hydro Electric Project as Captive Generation Stationfor its industrial unit – Agreement between the appellant and theState Electricity Board wherein Clause 14 provided that royalty wouldbe charged for controlled supply of water – Appellants payingwheeling charges for consumption of electricity, as also chargesDfor the use of controlled supply of water at the rate specified inAgreement – Appellant then sought exemption from payment ofcharges for controlled release of water or royalty in respect ofelectricity generated by it at its Hydel Project – Rejection of theappellant’s claim by the High Court – On appeal, held: ReasonableEcharges for benefit derived by private entities justified – Since theprivate entity or agency would stand to gain from and out of thecapital outlay and infrastructure put in place by the State, somereasonable charges for such benefit would naturally be imposed –It was only under such Policy that both the appellants were givenpermissions to set up their electricity generating units and suchFterm was consciously accepted by them – Thus, the concerned Clausein the Agreement as well as the terms of the Policy cannot be termedunconscionable, arbitrary or unreasonable – Furthermore, theroyalty would be in terms of the agreement between the parties andnormally has direct relationship with the benefit or privilegeGconferred upon the grantee as against tax which is imposed undera statutory power without reference to any special benefit conferredon the payer of the tax – Whatever be the nomenclature, the chargesfor use of controlled release of water were for the privilege enjoyedby the CPPs, on basis of the arrangement between the parties.

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Dismissing the appeals, the Court

HELD: 1.1 The location of the project of CUMI is at a placewhere the discharge of water from Moozhiyar Power House ofthe Board is diverted to Kakkad Power House of the Board,which gets steady supply of water in the form of “tail race” benefitof the Moozhiyar Power House. After generation of electricity atthe Kakkad Power House, the water is allowed to flow back intothe river. The capacity of Kakkad Power House is 50 MW whilethat of CUMI is 12 MW. The supply of water even if meant for apowerhouse situated at a height and with larger capacity thusdefinitely ensures consistent and controlled supply of water tothe project of CUMI located at a lower altitude. Similarly, thewater from a larger reservoir namely, Anayirankal Dam is allowedto flow so as to reach Paniyar Power House having a capacity of32 MW electricity. Before reaching Paniyar Power House, thewater passes through the area where the project of INDSIL issituated, which has a capacity of 21 MW. The location of the projectof INDSIL would thus have natural advantage of consistent andcontrolled supply of water. [Para 31, 32][170-D-G]

1.2 The facts on record thus show that both the projectshave certainly derived advantage of controlled supply of water ascontemplated in Clause 14 of the Policy. How much benefit ofcontrolled supply of water each of the projects has received orwill receive in future would be a matter of computation andcalculation. [Para 33][170-G-H]

1.3 The Agreements entered into by CUMI and INDSILshow that the terms and conditions of the Policy including Clause14 thereof were consciously incorporated in the Agreements.Both CUMI and INDSIL were alive to the fact that because ofpeculiar location, their units would certainly have the advantageof controlled supply of water. Thus, the absence of a specific clause,akin to Clause 14 of CUMI Agreement, in INDSIL Agreement,would be of no consequence. The relationship between the partieswould be governed by Clause 14 of the Policy, as incorporated inthe respective Agreements. [Para 34][171-A-B]

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A1.4 In cases where a term of contract or agreement enteredinto between the parties is completely one sided, unfair andunreasonable, where the other party having less bargaining powerhad to accept such term by force of circumstances, the relief interms of the decision of this Court in Central Inland WaterTransport Corporation’s case can be extended. It may be statedBthat the Agreements were entered into after long deliberationswhere both CUMI and INDSIL had the advantage of legal counsel.It cannot be said that CUMI and INDSIL were in a position withlesser bargaining power or were so vulnerable that by force ofcircumstances they were forced to accept such term. Therefore,Cthe concerned Clause 14 in CUMI Agreement as well as the termsof the Clause 14 of the Policy that stood incorporated in therespective Agreements, cannot be termed unconscionable and/or manifestly arbitrary. [Para 40][173-E-G]

1.5 The Policy had made it quite clear that the benefit ofDcontrolled supply of water would normally be confined to theelectricity generating units or power houses in public sector. Thereason for such Policy statement would clearly be thatconsiderable amount of insfrastructure and development had beenand would be made by the State in erecting and maintaining damsand reservoirs and as such the incremental advantage or benefitEof such investment must go back to the public through units inpublic sector. If the advantage was, however, allowed to be givento a private entity or agency, the Policy contemplated impostionof charges for the use of such controlled supply of water. Thereis nothing arbitrary or unreasonable in having such term in theFPolicy. Since the private entity or agency would stand to gainfrom and out of the capital outlay and infrastructure put in placeby the State, some reasonable charges for such benefit wouldnaturally be imposed. It was only under such Policy that bothCUMI and INDSIL were given permissions to set up their electricity generating units and such term was consciouslyGaccepted by them. The submission that the relevant Clause 14 ofthe Policy would be manifestly arbitrary, therefore, does not meritacceptance. [Para 42][175-B-F]

1.6 Qualitatively, the Capive Power Producers (CPPs) andIndependent Power Producers (IPPs) have a basic distinction.H

CPPs produce electricity for self consumption. In the instant case,both CUMI and INDSIL generate electricity to be consumed intheir factories or industrial units. Under the terms of theirAgreements, if anything is produced in excess of theirrequirements, the surplus or excess electricity would be acceptedby the Board. However, the principal purpose and end use wouldbe self consumption. As against that, IPPs produce electricitynot for self consumption but for the use of the Board. Theelectricity generated by IPPs becomes part of the grid of theBoard to be supplied by the Board to its consumers like electricityproduced by the generating units or power houses of the Board.If the charges towards controlled supply of water were to beimposed uniformly for CPPs and IPPs, the effect would be thatthe electricity supplied through IPPs to common consumers andgeneral public would necessarily have an additional burden orload towards proportionate element of water charges. In thesecircumstances, if the Board decided not to apply Clause 14 of thePolicy in case of all IPPs, such decision would not be termed asdiscriminatory. The distinction or classification brought out wasbased on a clear rationale with the object of reducing the additionalburden on the consumers. Since the electricity generated by CPPswould be self consumed, there would be no such question of puttingany ultimate or resultant burden on the common consumers. Thebasis for such distinction or classification was quite correct andas such this question was rightly answered by the Division Benchof the High Court against CUMI and INDSIL. Rather than beingunnatural or irrational, the classification had a clear nexus orrelationship with the object of reducing resultant burden on thecommon consumers. This submission therefore, is, meritless andrejected. [Para 44][176-C-H]

1.7 As rightly observed, the basis or genesis of impositionof royalty or charges on controlled supply of water was Clause 14of the Policy which, as agreed between the parties, stoodincorporated in the respective Agreements. The appellantssubmitted that the royality or charges for controlled supply ofwater would be nothing but compulsory exaction and in theabsence of any statutory sanction behind such imposition, theactions on part of the Board would be without jurisdiction andthe case of the State and the Board was that such royalty or charges ABC

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Ahad the genesis in respective contracts and as such the action onpart of the Board was fully justified. [Para 45, 46][177-B-D]

1.8 The expression ‘Royalty’ has consistently beenconstrued to be compensation paid for rights and privilegesenjoyed by the grantee and normally has its genesis in theBagreement entered into between the grantor and the grantee. Asagainst tax which is imposed under a statutory power withoutreference to any special benefit to be conferred on the payer ofthe tax, the royalty would be in terms of the agreement betweenthe parties and normally has direct relationship with the benefitor privilege conferred upon the grantee. Whatever be theCnomenclature, the charges for use of controlled release of waterin the instant cases were for the privilege enjoyed by INDSILand CUMI. The controlled release of water made available toINDSIL and CUMI, has always gone a long way in helping themin generation of electricity. For such benefit or privilege conferredDupon them, the Agreements arrived at between the partiescontemplated payment of charges for such conferral of advantage.Such charges, were perfectly justified. [Para 54][188-E-H;189-A]

1.9 The submission that it was compulsory exaction andEthus assumed the characteristics of a tax was completely incorrectand untenable. It was a pure and simple contractual relationshipbetween the parties and the Division Bench was right in rejectingthe submissions advanced by CUMI and INDSIL.[Para 55,56][189-B-C]

FCentral Inland Water Transport Corporation v. BrojoNath Ganguly (1986) 3 SCC 156 : [1986] 2 SCR 278;ICOMM Tele Limited v. Punjab State Water Supply andSewerage Board and Anr. (2019) 4 SCC 401 : [2019] 2SCR 984; Pioneer Urban Land and Infrastructure Ltd.v. Govindan Raghavan (2019) 5 SCC 725 : [2019] 5GSCR 1169; State of Maharashtra & Ors. v. SalvationArmy, Western India Territory (1975) 1 SCC 509 :[1975] 3 SCR 475; S.K. Jain v. State of Haryana andAnother (2009) 4 SCC 357 : [2009] 2 SCR 1080; A.L.Kalra v. Project and Equipment Corporation of India H

M/S. INDSIL HYDRO POWER AND MANGANESE LIMITED v.STATE OF KERALA AND OTHERS

(1984) 3 SCC 316 : [1984] 3 SCR 646; Rajasthan StateIndustrial Development and Investment Corporationand Another v. Diamond and Gem DevelopmentCorporation Limited and Another (2013) 5 SCC 470 :[2013] 4 SCR 331; Hingir-Rampur Coal Co. Ltd. andOthers v. State of Orissa and Others [1961] 2 SCR 53747; State of West Bengal vs. Kesoram Industries Limitedand Ors. (2004) 10 SCC 201 : [2004] 1 SCR 564; IndiaCement Limited v. State of Tamil Nadu (1990) 1 SCC 12: [1989] 1 Suppl. SCR 692; Himachal Pradesh andOthers v. Gujarat Ambuja Cement Ltd. and Another(2005) 6 SCC 499 : [2005] 1 Suppl. SCR 684; JindalStainless Limited and Another v. State of Haryana andOthers (2017) 12 SCC 1 : [2016] 10 SCR 1; MineralArea Development Authority and Others v. SteelAuthority of India and Others (2011) 4 SCC 450 : [2011]4 SCR 19; Inderjeet Singh Sial and another v. KaramChand Thapar and Others (1995) 6 SCC 166 : [1995]4 Suppl. SCR 53; Union of India and Others v. MotionPicture Association and Others (1999) 6 SCC 150 :[1999] 3 SCR 875 – referred to.

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[2021] 13 S.C.R.

CIVIL APPELLATE JURISDICTION: Civil Appeal Nos. 9845-B9846 of 2016.

From the Judgment and Order dated 03.04.2014 of the High Courtof Kerala at Ernakulam in W.A. No. 1345 of 2013 & W.A. No.18 of2014.

WithC

Civil Appeal Nos. 9847-9850 of 2016

C.A. Sundaram, V. Giri, Joseph Kodiantara, Sr. Advs., AnandSukumar, Bhupesh Kr. Pathak, S. Sukumaran, Ms. Rohini Musa, ArjunSingh, Zaffer Inayak, Ms. Meera Mathur, Amit Krishnan,R. Gopalakrishnan, Advs. for the Appellant.D

P.V. Surendranath, Jaideep Gupta, Sr. Advs., C. K. Sasi, Ms. LekhaSudhakaran, Ms. Nayantara Roy, Abdulla Naseeh V.T., P. V. Dinesh,Ms. Sindhu T.P., Mukund P. Unny, Advs. for the Respondents.

The Judgment of the Court was delivered by EUDAY UMESH LALIT, J.

1. Civil Appeal Nos.9845-9846 of 2016 preferred by M/s IndsilHydro Power and Manganese Limited (hereinafter referred to as“INDSIL”) and Civil Appeal Nos.9847-9850 of 2016 preferred byCarborundum Universal Limited (hereinafter referred to as “CUMI”) areFdirected against the common judgement and order dated 03.04.2014passed by the Division Bench of the High Court[1 ]allowing Writ AppealNos.1345 and 1355 of 2013 preferred by State of Kerala against INDSILand CUMI respectively.

2. On 07.12.1990, the Government[2] framed a policy videGG.O.(MS)No.23/90/PD (the Policy, for short) allowing private agenciesand public undertakings to set up hydel schemes for generation of electricityat their own cost. As per the Policy, the matters concerning theconstruction, operation and maintenance of the hydel scheme were to be 1 The High Court of Kerala at Ernakulam.

2 The Government of Kerala

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managed as per the stipulations made by the Government/Board[3]. Clauses2, 14 and 15 of the Policy were as under: -

“2. Private agencies/ public undertakings shall be allowed thesetting up of sanctioned hydel schemes of the category small/mini/ micro at their own cost, the construction, operation andmaintenance being managed by them as per the stipulations insistedupon by Government/ Board. (The stipulated conditions as perIndian Electricity Act, 1910. Electricity (Supply) Act, 1948, otherrelated rules and orders from Central and State Governments).

14. Royalty for the use of water together with the tax and dutieson generation of power as fixed by Government/Board from timeto time have to be paid by the agency.

Normally generation of power from schemes of the category small/mini/micro utilizing the storage benefits of existing reservoirs andtailrace benefit of existing power stations will not be entrustedwith private agencies. But, Government may under specialcircumstances allow such schemes to be set up by private parties.In such cases, in order to account for the additional advantagegained by the agency by way of getting the Controlled releases,the agency will have to pay to Government or the Board, as thecase may be, in tariff equivalent to the cost component for thecontrolled release utilized by the agency for the energy generatedfrom the scheme. This will be in addition to the royalty of water ifany, to be paid. The tariff storage/controlled release as above areto be worked out in respect of each scheme separately taking intoaccount the above factors.

15. For assessment of water quantity used, the application of theformula BH-Power in KW where Q is in NI/Sec and H is the nethead in meter for which the machines are designed by themanufacturers, will be made use of.”

3. CUMI has three factories in State of Kerala and is in thebusiness of manufacturing electro minerals using electric arc furnaces,which process requires continuous supply of electricity. CUMI filed anapplication with the State for allotment of “Maniyar Hydel Scheme” inthe River Kakkad Basin. After the Scheme was allotted vide order dated18.01.1991, CUMI undertook to establish the Maniyar Hydro Electric 3 Kerala State Electricity Board

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AProject with 12 MW capacity on River Kakkad, as a Captive GeneratingStation for its industrial units. An Agreement was entered into betweenCUMI and the Board on 18.05.1991 (CUMI Agreement for short), whichspecifically referred to the Policy and stated that the terms and conditionsof the Policy “shall form part of this agreement as if incorporated herein”.

BClauses 8 and 14 of CUMI Agreement were as under:- “8. The energy from Maniyar Hydro Electric Project fed into theK.S.E.B. Grid will be metered at a location as detailed above(using meter duly calibrated by K.S.E.B.) and this quantum ofenergy less twelve percent towards wheeling charges and T & DLesses will be delivered free of cost to CUMI at their E.B.T.CTerminate at the point of supply in their installations. In the caseof supply or receipt made in LT Lines the allowance for lesseeand wheeling charges will be more and will be as stipulated by theKSEB.

DIn case energy in excess of the requirement of CUMI is generatedfrom the projects during one accounting year such excess energyshall be fed into the KSEB grid itself at rates to mutually agreedupon. Under no circumstances shall CUMI be entitled for thesale or transfer of any excess energy or any energy producedfrom the project to any party other than the KSEB. The accountingEof the energy fed into the grid and supplied by KESB to CUMI oroperating their factories in Kerala at Palakkad, Koratty andKalamaooery will be settled on an annual basis, the year beingreckoned from lot of July to 30[th] June.

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14. Royalty for the use of water together with the tax and dutieson generation of power as fixed by govt/KESB from time to timehave to be paid by CUMI, to K.S.E.B.

Maniyar Hydro Electric Projects will utilize the existing head worksGbenefit of the Maniyar Irrigation Dam of P.W.D. which is fedmainly by the controlled release of water from existing MoozhiarPower House of KSEB. In order to account for the additionaladvantage gained by way of getting such controlled released, CUMIwill have to pay to KSEB the cost components for the energygenerated from the scheme. This will be in addition to the royaltyHon water to be paid. The charges for controlled release as above

as well as royalty on water, will be reckoned on the quantum ofenergy generated and shall be ten percent of energy tariff rate forE.H.T. consumer current from time to time for every unit of energygenerated and shall be paid to the K.S.E.B.”

4. By 1994 the Project was commissioned by CUMI at a cost ofRs.22 crores and since then CUMI has been generating electricity whichis used for self consumption in terms of CUMI Agreement.

5. INDSIL has a factory in the State for the manufacture of FerroAlloys and was availing supply of electric energy from the Board.

6. INDSIL having expressed interest in setting up a small hydelscheme, due negotiations and meetings were held. In a meeting heldwith the Board on 08.04.1994, one of the decisions was :- “i) Royalty to be charged on water – It was decided that IrrigationDept. will be requested not to charge the cess or royalty especiallywhere water is being retained in the same basin and there is noconsumptive use.”

7. An Agreement (INDSIL Agreement, for short) was thereafterentered into between INDSIL and the Board on 30.12.1994 for settingup “Kuthungal Phase I and II Project” in Idukki district of the State with21 MW installed capacity for generation of electricity. INDSILAgreement referred inter alia to the terms and conditions set out in thePolicy and stated that said terms and conditions “shall form part of thisAgreement as if incorporated herein.” Clauses 10 and 19 of INDSILAgreement were to the following effect: - “10. The energy from KUTHUNGAL PHASE I AND PHASEII project fed into the KSEB grid will be metered, at a location asdetailed above (using meter duly calibrated by KSEB) and thisquantum of energy less 12% (Twelve percent) towards wheelingcharges and T & D losses will be delivered free of cost to thecompany and their associate M/s. Sun Metals & Alloys Pvt. Ltd.,Kanjikode, Palaghat at the EHT Terminals at the point of supply intheir installations if any, or it will be banked by the KSEB if thecompany so desires. The KSEB will collect 1% (One percent) ofthe energy so banked as its commission. This will be in addition towheeling and loss towards transmission and distribution charges.

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A19. Cess/ Royalties for use of water, if decided by the Governmenttogether with tax/ duties as fixed by the Government from time totime shall be paid by the company to Government.”

8. Since the setting up of the project by June, 2001 at a cost ofRs.50 crores, INDSIL has been generating electricity which is essentiallyBused by it and its associates as stated in Clause 10 of INDSIL Agreement.

9. The respective projects were thus set up by CUMI and INDSILfor Captive Power Consumption and such producers of electricity forown consumption are called Captive Power Producers (CPP) as againstIndependent Power Producers (IPP) who generate electricity not forCself consumption but for supply in its entirety to the Board.

10. On 11.10.2002, Guidelines were issued by the Governmentafter noting the Policy and the recommendations of the EmpoweredCommittee set up vide G.O. dated 5.9.2002. These Guidelines dealt withtransmission and distribution losses in wheeling the energy to CPPs butDdid not deal with royalty for the use of water. The relevant portion ofthese Guidelines was: -

“The Empowered Committee constituted as per the GO read as3[rd] paper above, to oversee the implementation of the reforms ofthe KSEB and to examine the details for the erection of SmallEand Mini Hydel Projects, in its meeting held on 5.9.02 and 12.09.02considered the scope for taking small hydel projects andrecommended to Government that the small hydel projects excludingdam toe and tail race projects should be opened up for captiveconsumers and Independent Power Producers including publicsector undertakings and also made the following recommendations:- F

1. The Public Sector undertakings and the power intensiveindustries within the State may be given preference in allotment ofthe small hydro projects.

2. The allowance to KSEB to compensate the T & D loss inwheeling the energy from generating station to the consumptionGpoint of Captive Power Producers (CPPs) which has been fixedat 10% as per clause (9) of the G.O. (MS) No.23/90/PD dt.7.12.90may continue to be allowed to KSEB.

3. Wheeling charges to KSEB which has been fixed at 2% as perclause (9) of G.O. (MS No.23/90/PD. dt. 7.12.90 may be increasedHto 5%.”

11. The Guidelines were revised vide G.O. dated 16.1.2003 whichdealt with CPPs and IPPs. As regards CPPs the revised Guidelinesstated: - “…… As per G.O. (MS) 23/90/PD dt.7.12.1990, Governmentlaid down terms and conditions for allotment of small hydel projects.Since the Government proposes to invite more private participationin this sector, it has become necessary to prescribe revisedguidelines for allotment. Power schemes utilizing controlled releasesform the existing reservoirs and tailrace are reserved for KSEBoard.”

Nothing was specified with regard to the royalty for the use ofwater by CPPs but while dealing with IPPs, it was stipulated: - “…15. Water Cess: Water Cess not required since, it will reflecton tariff and hence not investor friendly.”

12. Both CUMI and INDSIL have been paying wheeling chargesfor consumption of electricity. Right from 1994 till April 2003, CUMIhad also paid charges for the use of controlled supply of water at therate specified in Clause 14 of the CUMI Agreement. In May 2003,CUMI however made a representation that it be exempted, like otherprojects from payment of such charges. Attempts on part of the Boardto charge royalty/cost component for controlled release of water fromCUMI and INDSIL in terms of clause 14 of the Policy has led to thedisputes in the instant matters which are subject matter of these appeals.Before we set out the pleadings pertaining to such disputes, the locationsof the respective Projects and what kind of flow of water is used, mustbe noted:- CUMI: The water flowing down from Moozhiyar Power Houseof the Board is diverted to the Kakkad Power House (50 MW) of theBoard for generation of electricity using “tail race” benefit of MoozhiyarPower House. After power generation at the Kakkad Power House,the water is allowed to flow back into the river and is then utilized forirrigation and for the Maniyar Hydro Electric Project of CUMI.

INDSIL: Anayirankal Dam, one of the largest earthen dams inState of Kerala was built in the 1960s and soon thereafter, the PaniyarPower House having capacity of generating 32 MW electricity was builtby the Board. Kuthungal is situated in between Anayirankal Dam (at the

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Ahigher altitude) and Paniyar Power Station of the Board (at the lower level).Thus the water released from Anayirankal Dam for generation ofelectricity at Paniyar Power Station passes through the area where theproject of INDSIL is situated.

13. CUMI filed O.P. No.6880 of 2003 praying, inter alia, that theBBoard had no authority to levy, demand or collect any charges forcontrolled release of water or royalty from CUMI in respect of electricitygenerated by it at its Maniyar Hydel Project. The necessary pleadings from the writ petition were:

“2. … … The 2[nd] respondent Board had set up its 2[nd] largestCHydro-Electric project of Sabirigiri on River Pamba. The watersof the said river were utilized by the 2[nd] respondent Board forgenerating electricity at Moozhiyar Generating Station and part ofthe water flowing down from Moozhiyar Generating Station aftergeneration of electricity was being utilized for irrigation purposeDand rest of it is flown down to Arabian Sea. Part of the waterflowing from the Generating Station at Moozhiyar is utilized alsofor generating electricity at Maniyar Hydro Electric Project whichwas taken up by the petitioner as a captive generating station forthe petitioner’s industrial units at Kalamassery and Koratti to meetpart of its requirements. …… Petitioner had no option but to signEthe agreement stipulated by the respondents and was compelledto sign the same.

3. … … Apart from unconstitutional impost the method ofimposition and rate of royalty and alleged controlled release ofwater is totally irrational, arbitrary and unfair. The royalty canFonly be based on the quantity of material or benefit consumed bya person from the facility.

4. … … It is submitted that water required for generating electricityat the Mooziyar Power House is a fixed quantity based on thecapacity of the turbine and whatever water is required for suchGgeneration has to flow down from the turbine. There is absolutelyno controlled release of such water to the petitioner’s Hydro-Electric Project at Maniyar in Kakkad river. The water flowingdown from Moozhiyar Power House supplemented by water fromthe catchman area of river banks below the Moozhiyar Power H

Station was partly utilized for irrigation purpose and the remainingwater flows down earlier, it was only part of such water fromMoozhiyar Power Station and from catchman areas that is utilizedfor generation of electricity by the petitioner at its Maniyar HydelProject. However, from the year 1998 the water flowing downfrom Moozhiyar Power House was diverted to the Kakkad PowerHouse of the 2[nd] respondent and after generation of electricity atKakkad Power House the water flowing down flows back to thesame river at a lower stage and utilized for irrigation and partlyfor the petitioner’s Maniyar Project. It is submitted that the waterreleased from Moozhiyar Power House is thus diverted to KakkadPower House and utilized for power generation there. The allegedcontrolled release of water from Moozhiyar Power House to thepetitioner’s hydel project at Maniyar is no longer there and hasceased to be available to the petitioner after commissioning of theKakkad Power Station by the 2[nd] respondent. It is thereforesubmitted that the 2[nd] respondent cannot in any manner charge orcollect the so-called cost component for controlled release of waterfrom Moozhiyar Power House since there is no such release, muchless controlled release of water from Moozhiyar Power House tothe petitioner after 1998. Petitioner submits that in any event thecharge and collection of cost component from the petitioner after1998 is totally without authority of law, arbitrary, illegal and unfair.

5. … … There is no provision in the Electricity Supply Actconferring any power on the 2[nd] respondent to impose royalty orany charges on generating company which have the same powers,duties and functions for the flow of water in river Pamba or itstributaries.

6. Petitioner submits that the respondents have granted permissionand rights to several other generating companies like the petitionerto set up small hydel projects. Thus private industrial generatingcompanies like INDSIL Limited, Silcal Metallurgic Limited TECILHydro Power Limited had all set up private hydro-electric stationsin which the respondents have not subjected them to any royaltyor alleged cost component of released water form the Hydro-electric projects upstream on the respective rivers. Petitionersubmits that the respondents have singled out the petitioner andsubjected the petitioner to discriminatory charges.”

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A14. In the counter affidavit filed on behalf of the Board, the assertionsmade by CUMI in the writ petition were denied. It was submitted:

“2…… In the Ext.P1 Government Order dated 07.12.1990, it isclearly stated in Clause 21 that before implementation of thescheme, an agreement setting forth all the aspects in theGovernment Order and such conditions as found necessary willbe entered into between the agency on the one part and the KSEBoard/Government on the other. Hence the allegation of thepetitioner that the 2[nd] respondent has no authority of law orcompetency to stipulate or impose any conditions or agreement isnot true. Moreover, the respondents have not compelled thepetitioner to sign the agreement and hence the allegation in thisregard are not true and hence denied. The petitioner has appliedfor the captive generation station in pursuance of the Ext.P1Government Order dated 07.12.1990 and the Government havegranted permission strictly in accordance with stipulation in theabove said Government Order. Having executed the agreementand setting up the plant the petitioner cannot now turn around andsay that the conditions were thrust upon him.

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3……. The KSE Board had to construct and maintain dams andreservoir for collection of water by investing crores of rupees.EThe water stored in the dam is released periodically and controlledrelease of water is effected by the Board to the petitioner licensee.So the petitioner is getting sufficient water for generating powerregularly as per their requirement without any capital investmentfor storage of water. ....... It is further stated that normallygeneration of power from schemes of the category small/mini/Fmicro utilizing the storage benefit of the existing reservoir andtailrace benefit of existing power stations will not be entrustedwith private agencies. But Government under specialcircumstances allowed such schemes to be set up by privateparties. In such case, in order to account for the additionalGadvantage gained by the agency by way of getting the controlledrelease, the agency will have to pay to government or the Board,as the case may be, in tariff equivalent to the cost component forenergy generated from the scheme. This will be in addition to theroyalty of water if any, to be paid. The tariff storage/controlledrelease as above are to be worked out in respect of each schemeHseparately taking into account the above factors.

5. It is submitted that from the year 1998, the water flowing downfrom Moozhiyar Power House is collected in the reservoir ofKakkad Power House of the 2[nd] respondent and after generationof electricity at Kakkad Power House the water flowing down tothe same river and to the reservoir of the petitioner’s ManiyarProject. Thus, the water released from the Moozhiyar Power isfurther controlled at Kakkad Power House. Maniyar Project thusruns with the controlled release of water from the Kakkad PowerHouse which was commissioned after setting up of the ManiyarHydro Electric Project. Water utilized for generation in their projectis from absolute controlled release if it was either from MoozhiyarPower House or later on form Kakkad Power House and hencethe allegation that charge and collection of cost compound fromthe petitioner after 1998 is totally without authority of law, arbitrary,illegal and unfair is baseless and untenable.”

15. In its rejoinder to the aforestated counter affidavit, CUMIsubmitted:

6. … … Whatever quality of water used at the Kakkad PowerHouse can only flow down and cannot be prevented by the 2[nd]respondent from flowing down. There is no question of controllingthe water that has to flow down from the power house to the river.In addition to the water flowing down that Kakkad Power Stationlarge quantity of water flows into the river from the river banksflooding the river during heavy rains and there is no control on theflow of water to the petitioner’s Maniyar generating station, whichis about 6 kms. downstream from Kakkad generating station.”

16. On 03.07.2004 an order was issued by the Government that interms of Clause 19 of INDSIL Agreement, INDSIL would be liable topay royalty and cost of controlled release of water. The order stated:

“The Kuthungal HEP (21 MW) is a CPP implemented byM/s INDSIL. The project utilizes the water available from thefree catchment between Anayirankal Dam and Kuthungal weiras well as the controlled releases from Anayirankal Dam.

The Maniyar HEP (12 MW) the first CPP owned byM/s. Carbourandum Universal utilizes the controlled releases fromSabarigiri and Kakkad Hydro Electric Project of KSEB. The royalty A

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Afor this project is being charged at the rate of 10% of the energytariff rate for EHT Consumers and is paid to KSEB.

Government after detailed examination hereby order that the royaltyand cost of controlled release of water to the Kuthungal HEPshall be reckoned on the quantum of energy generated and shallBbe 10% of the energy tariff rate for EHT Consumers current fromtime to time for every unit of energy generated and in addition, theCompany is liable to pay 1.2 paise per unit as electricity duty foreach unit of electricity generated in accordance with the provisionof the Kerala Electricity Duty Act.

CThe Chief Electrical Inspector shall collect the royalty from thecompany and remit it to the State revenue.”

17. INDSIL challenged the order dated 03.07.2004 by filing WritPetition (C) No.22187 of 2004 in the High Court. The Writ Petition was however withdrawn with liberty to make an appropriateDrepresentation to the Government. This led to some correspondence andrepresentations from INDSIL. The Government, however, refused torecall its decision to recover royalty and cost of controlled release ofwater, which was communicated vide order dated 23.01.2008. The actionon part of the Government was challenged by INDSIL by filing WritPetition (C) No.4596 of 2008 in the High Court.E

18. With regard to the use of controlled water INDSIL submitted:-

18. With regard to the use of controlled water INDSIL submitted:- “11. Kuthungal is situated between Anayriankal at the higher endand Ponmudi at the lower end. Paniyar power station at Vellathoovalhas a capacity to generate 30 MW of power. The said powerFstation funcitons on water flowing across Paniyar river. Thereare two storages maintained by the KSEB for its Paniyar PowerStation. One is at Ponmudi and other is at Anayirankal which issituated at a height of 1850 Meters above the sea level. Assubmitted above, there is a reservoir at Anayirankal where thewater is stored. Water stored in the Anayirankal reservoir isGreleased by the KSEB during the peak summer months betweenJanuary and April for the generation of power at Paniyar PowerStation. This is done normally for a period of about 45 days out ofthe afore mentioned three/four months from January to April suchrelease of water by the KSEB from Anayirankal is dictated byHthe requirement in Paniyar Power Station at Vellathooval;

commencement of the releases is decided by the KSEB; quantumof water is controlled by the KSEB and determined by therquirements in Paniyar Power Station. Cessation of release is alsodecided by the KSEB to sit the requirement of Paniyar PowerStation. As submitted above, Kuthungal Hydro Electric Project issituated at Kuthungal which is at a lower level than Anayirankalbut higher than Paniyar Power Station.

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When there is a release of water from the Anayirankal Reservoirto enable generation of power at Paniyal Hydro Electric Stationat Vellathooval, petitioner company is also enabled to utilize thesaid water for diversion into Kuthungal Hydro Electric facility forgeneration of power there from. This is done only for a period ofabout 45 days during the peak summer months and controlledrelease of water from Anayirankal is effected by the KSEB onlyin accordance with its own schedule to suit its own requirement ofgeneration of power at Paniyar Hydro Electric Station and suchrelease of water is not simply done to suit the requirement ofpetitioner or to bring about any advantage to the petitioner as such.”

Seeking to draw distinction between the project of CUMI andthat of INDSIL, it was stated:- “….the agency under Exhibit-P2 agreement is dependent on thecontrolled release of water from Sabarigiri and Kakkad HydroElectric Project. Such controlled release, quantum of release andcessation of same are all made suited to the requirement of theproject in question. Release of water was utilized by MessrsCarboradum Universal Limited for the purpose of generatingpower in the Maniyar Hydro Electric Project. Water released fromSabarigiri and Kakkad Power Project are controlled releases. Thisis totally unlike in the case of the petitioner where the actualrelease of water from Anayrankil is in the manner mentionedabove.”

19. The reply given on behalf of the Government to the petition byINDSIL was:- “9. … … In fact, the scheme envisages utilization of controlledrelease from Anayirankal reservoir in addition to water from 114sq.km., free catchment downstream of the dam as per the detailed AB

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Aproject report prepared by KSEB in August, 1991. The petitionerhad also made their own assessment as per the techno economicfeasibility report submitted by them. As already mentioned, thescheme envisages utilization of water from 114 sq.km. of freecatchment downstream of existing Anayirankal reservoir drainedfrom a catchment of 65 sq. Km for power generation as per theBdetailed report mentioned above. The averment and allegations inparagraphs 10 and 11 of the writ petition are not fully correct andhence denied. The description of the project of the petitioner givenin the said paragraph explaining that is designed as a “run of theriver” scheme does not deny the fact that it is using the waterCreleased from Anayirankal reservoir for the months from Januaryto April. It is true that the release of water from Anayirankalreservoir is mainly decided based on the generation requirementsat the Panniyar Power Station. However, this water when releasedis being utilized at Kuthunnal for power generation. The entirewater after power generation flows down to Ponmudi reservoirDwithout any depletion of quantity of water which is the case inevery hydro electric project. The petitioner’s contention that therelease of water from Anayirankal reservoir is not done in orderto suit the requirement of the petitioner but in accordance with therequirement of Panniyar Power Station is in correct. In fact, theEpetitioner Company is getting the full advantage of powergeneration from the release of water from Anayirankal reservoirin the peak summer months.

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12. … … Even though the controlled release of water fromAnayirankal reservoir is made to suit the requirement of powergeneration at Panniyar, it is also utilized for power generation atKuthungal Hydro Electric Project. It is to be noted that the powergeneration from the Kuthungal Project was comparatively highwhen there is water releases from the Anayirankal reservoir, whichwould otherwise have been negligible if water from Anayirankalreservoir is not released. During this period a total generationwas 266.69 MU and generation from controlled released is 60.12MU, which is about 22.54% of the total generation. During thedrought year of 2002-03, 50% of the total generation from theproject was during summer months utilizing water release from F

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Anayirankal. The above facts clearly establishes that the petitioneris a beneficiary of the controlled release of water fromAnayirankal.”

20. Writ Petition (C) No. 4596 of 2008 preferred by INDSIL wasallowed by the Single Judge of the High Court by his judgment and orderdated 15.02.2013. It was observed that the action on the part of theGovernment was discriminatory, as all CPPs with the exception of CUMIwere not subjected to such royalty. The explanation offered that CPPsand IPPs stood on different footings was not accepted. It was concludedthat there was no jurisdiction to recover any royalty or cess andaccordingly the order dated 03.07.2004 was quashed.

21. O.P. No.6880 of 2003 preferred by CUMI was allowed bythe Single Judge of the High Court by his judgment and order dated03.04.2013 with following observations:

“Even though in W.P.(C) No.4596/2008, I have given some findingsagainst the petitioner, in view of my findings in Paragraphs 36 to41 and 51 to 53 of the said judgment, I allow this writ petition andset aside the impugned order, Annexure P-3 holding that theGovernment is devoid of jurisdiction to realize any amount fromthe petitioner by way of Royalty or other charges on the waterused for the Maniyar Hydel Project. In the circumstances, therewill be no order as to costs.”

22. The decisions of the Single Judge in the matters of INDSILand CUMI were called in question by the Board by filing Writ AppealNos.1345 of 2013 and 1355 of 2013 respectively before the DivisionBench, which appeals were allowed by the Division Bench vide itscommon judgment and order dated 03.04.2014.

The judgment of the Division Bench comprises of two parts: thefirst part dealt with the case of INDSIL; while the second part consideredthe case of CUMI.

22.1 After considering some of the decisions of this Court, it washeld that after entering into an agreement, a party would be estoppedfrom disputing its liability in terms of the agreement. With regard to thesubmission based on discrimination, the Division Bench observed:- “24. The first ground on which the learned single Judge hasinterfered with Ext.P11 is that it violated Article 14 of the A

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Constitution of India which prohibits discrimination. The judgmentshows that according to the learned single judge, the distinctionbetween 1[st] respondent’s Hydro Electric plant and others on thebasis that the former is a CPP and the latter is an IPP, is an artificialone and has no object that is sought to be achieved by it. In ourview, this conclusion of the learned single Judge has no basis. Aswe have already seen the Hydro Electric Project of the 1[st]respondent is a Captive Power Plant, which is meant only to caterto their own requirement of electrical energy at their factory inPalalkkad. Therefore, generation at CPP does not involve anysale either to the Electricity Board or to anybody else. On theother hand, the remaining power plants, except the one establishedby M/s Carborandum Universal Limited, are Independent PowerPlants which have entered into power purchase agreements withthe KSB on the basis of which the entire power generated ispurchased by the Electricity Board on terms and conditions whichare mutually agreed between the parties. In respect of the powerthus generated by the IPP’s, if the Board or the State levys royalty,cess or other charges, that will necessarily be added to the priceat which the energy generated is sold to the Board. Such increasedprice paid by the Board to the generating company, necessarilywill have to be passed on to the Board’s consumers, who are theend users of the energy generated. This necessarily will lead to asituation where the energy generated and sold to consumers wouldbecome costlier. According to the Board and the Government,this was the reason why the IPP’s were relieved of the obligationto pay royalties or cess or other charges on the energy generatedby them.

25. Learned single Judge has held that both IPP and CPP areestablished for the same purpose of augmenting energy generation.But the learned single Judge has lost sight of the distinguishingfactor that the energy generated by the CPP of the 1[st] respondentis not available for distribution to consumers and that it is only forself consumption unlike the other IPP’s. Therefore, in our view,the justification that if royalty or cess or other charges are levied,the energy generated at IPP’s would be more expensive to theconsumer and that it was therefore that the IPP’s were relievedof that obligation, is a valid reason for classification of IPP’s andCPP’s under Article 14 of the Constitution of India.

26. Secondly, IPP’s that are complained of by the 1[st] respondentwere established to Exts.P8 and P9 orders issued by theGovernment of Kerala in 2002 and 2003. These orders show thatthe terms and conditions that are incorporated in these orders aretotally different from what are contained in Ext.P1, pursuant towhich sanction was accorded, agreement was executed and theproject was established by the 1[st] respondent. Therefore, theobligations undertaken by the 1[st] respondent in Ext.P3 agreementand the obligations that are fastened on the beneficiaries of Ext.p8and Ext.P9 are incomparable and different. That itself shows thatthe 1[st] respondent and the owners of the independent power plantsfall in separate classes and therefore also there cannot be anydiscrimination to be complained of.

27. Yet another reason, in our view, a valid one, urged by theElectricity Board was that unlike the case of the 1[st] respondent,the 59 IPP’s are not beneficiaries of controlled release of water.The pleading show that according to the State, 22.54% of thepower generated by the 1[st] respondent at its CPP is attributable tocontrolled release of water. On the other hand, IPP’s are notbeneficiaries of such controlled release. That also is a sound reasonto hold that the CPP’s and IPP’s are not similarly situate.

28. In sum and substance, we are unable to endorse the conclusionof the learned single Judge that by issuing Ext.P11, the 1[st]respondent was treated in a discriminatory manner or the Ext.P11is arbitrary or unreasonable offending Article 14 of the Constitutionof India.”

22.2 Considering the nature of obligation undertaken in terms ofINDSIL Agreement, the Division Bench observed:- “38. Since royalty in these cases is only a contractual paymentreserved by the granter and is not a levy in the nature of tax, thequestion of the State being legislatively competent or incompetentto levy royalty on the water consumed at the hydel plant of thefirst respondent does not arise. Even if the words royalty and cessare interchangeably used, that is inconsequential, in so far as thenature of the levy of royalty is concerned. Therefore, thisconclusion of the learned single Judge also cannot be sustained.

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A39. The learned single Judge also held that even if the levy ispayable, such levy cannot have retrospective effect. This viewalso cannot be endorsed because once the 1[st] respondent hasundertaken the liability to pay royalty as and when levied by theGovernment, Government is always at liberty to levy royalty fromthe time the benefit of the agreement was derived by the 1[st]Brespondent. Therefore, this contention also cannot be accepted.

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40. Learned senior counsel for the 1[st] respondent argued that thecontrolled release of water from Anayirankal Dam was made bythe Board through Panniyar river depending upon the requirementsof the Panniyar Power Project of the Board. According to him,Cthis water is diverted by the weir across Panniyar river at Mukkudito the Kuthungal Project and made use of these only because ofthe situs of the Kuthungal Project. This, according to the counsel,is only an incidental benefit and that to make them liable forcontrolled release, water should be released solely at their instanceDand for generation at their project and not otherwise. In our view,this argument has no substance. Parties are governed by a mutuallyagreed contract evidence by Ext.P3. Agreement provides that forthe additional advantage of controlled release derived by them,the agency is liable to pay charges as provided in the agreement.Agreement does not state that such controlled release should beEat the instance of the 1[st] respondent and that it should be for theirsole benefit. Instead, if the agency is a beneficiary of the controlledrelease of water, they are liable to pay for it. Admittedly, the 1[st]respondent is generating energy utilizing the controlled release ofwater from Anayirankal and so long as it is so, in view of ClauseF14 of the Ext.P1, the 1[st] respondent cannot get itself absolved ofthat liability. Therefore, this contention is only to be rejected andwe do so.”

22.3 The Division Bench thus found that the Single Judge of theHigh Court had erred in allowing the Writ Petition preferred by INDSIL.GIt, however, concluded that the demand raised by the Government videorder dated 03.07.2004 was on the quantum of energy generated ratherthan being linked to the quantity of water used or the utilization of controlledrelease of water. It, therefore, directed the Government to pass freshorders after due notice to the appellant as under:- H

“42. Therefore, royalty under clause 14 of Ext.P1 GovernmentOrder should be levied assessing the quantity of water usedapplying Clause 15 of Ext.P1. However, in Ext. P11 royalty islevied on the quantum of energy generated. This, in our view, isinconsistent with Ext.P1 Government Order and Ext. P3agreement which permits levy of royalty only for the use of water,which also should be based on the quantity of water as assessedby applying the formula specified in Clause 15 thereof and not onthe quantity of energy generated.

43. Similarly, for the benefit of getting the controlled release ofwater, Government is free to levy on the agency, in tariff equivalentto the cost component for energy generated from the scheme.For this purpose, as is evident from clause 14 of Ext.P1 GovernmentOrder, what is payable by the 1[st] respondent is tariff equivalent tothe cost component for the controlled release utilized by the granteefor the energy generated. Though at one stage, it was contendedthat 35% of the energy generated was utilizing controlled release,in the counter affidavit filed, it is stated that it was 22.54%. Whilewe agree that this figure cannot be a constant one, it is a fact thatentire energy is not generated utilizing controlled release of water.But, since the charges for controlled release as ordered in Ext.P11,and which was confirmed by the Government in Exts.P15 andP28, is on the entire energy generated, the demand is inconsistentwith Exts. P1 and P3, we are unable to sustain the orders.”

22.4 With regard to the matter concerning CUMI, it was observed:

“57. In our view, the provisions of the Electricity (Supply) Act,1948 dealt with generation of electricity and the provisions of theAct did not prevent a Government or Board from entering into anagreement, agreeing to provide natural resources of water to agenerating company for the generation of energy by setting up ahydel generation station against royalty or other charges payableby the grantee. Therefore, if under the contract, the Governmentagree to a private party like the 1[st] respondent that it shall makeavailable water to a Hydro Electric Project for generation of energyand in consideration, royalty is required to be paid to the Governmentand that contractual right of the Government or the obligation ofthe generating company to pay are not affected by any of theprovisions of the Electricity (Supply) Act, 1948. Therefore, the 1[st]

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Arespondent who has willingly entered into an agreement undertakingto pay royalty and other charges to the Government and afterhaving enjoyed the benefit thereof, cannot now rely on theprovisions of the Electricity (Supply) Act and contend that theGovernment or the Board have no power under the Electricity(Supply) Act to realise the charges that are contractually payableBby them. Therefore, this contention of the learned senior counselis unacceptable and is rejected.

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58. The second contention raised by the learned senior counselfor the 1[st] respondent was that there was no controlled release tothe Maniyar Hydro Electric Project and that therefore the chargesClevied on them for controlled release of water is unsustainable.We have already rejected such a contention raised by the 1[st]respondent in WA Nos.1345/13 and 18/14 and the reasons assignedby us should apply to this case also. Morever, we are unable acceptthis contention of the learned senior counsel for the reason thatDClause 14 of Ext.P2 agreement provides for controlled release of water and the 1[st] respondent shall pay charges to the Board. Ifthere was no controlled release of water, there was no reasonwhy the 1[st] respondent should have entered into such an agreementtaking over the liability to pay charges for the controlled release ofwater also. That apart, both in Exts. P5 and P6, the representationsEmade by them objecting to the levy, they had no case that therewas no controlled release of water. Therefore, by the aboveagreement and correspondence, the first respondent themselveshave admitted that there is controlled release of water and thereforeit is too late in the day for them to turn around and contend thatFthere is no controlled release of water absolving them from thecontractual obligations in Clause 14 of the agreement.”

22.5 The Writ Appeal preferred against CUMI was thus allowedand the decision of the Single Judge was set aside.

23. INDSIL being aggrieved, filed Civil Appeals Nos.9845-9846Gof 2016 reiterating its submissions advanced in the High Court.

In the response filed on behalf of the Government, it was submittedinter alia:- “D. … …the Petitioner is a Captive Power Plant which generatespower from the water course along with the controlled release ofH

water from the Anayirankal reservoir to Ponmudi for self-consumptioin and thereby collection of royalty by Governmentcannot reflect in the tariff, because the energy so generated is notsold to KSEB for distribution. Further, 22.54% of the powergenerated by the Petitioner at its Captive Power Plant is attributableto controlled release of water. Unlike the case of the Petitioner,the 59 IPP’s are not beneficiaries of such controlled release.Royalty was demanded by Government as consideration forgranting the right to usage of water from the natural resourcevested in the Government, for generation of electricity, which doesnot fall within the purview of the powers of the RegulatoryCommission constituted between the Petitioner and KSEB isconclusive and is absolutely binding on the Petitioner.

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I. … … The project utilizes the water from the free catchmentbetween Anayirankal dam and Kuthunkal weir alongwith thecontrolled release of water. The controlled release of water fromAnayirankal dam was done by the Board through the PanniyarRiver depending upon the requirements of the Panniyar PowerProject of the Board. This water, when released, is being utilizedat Kuthungal for power generation. This controlled release of wateris diverted by a weir across Panniyar River at Mukkudi to theKuthungal project and used for generation of power. In the absenceof Anayirankal reservoir, the water would have flown to Ponmudiduring monsoon months and the weir would be overflowing mostof the time. And during summer months there would be substantialshortfall in the generation of power at the Kuthungal project in theabsence of water release from Anayirankal dam. The release ofwater at Anayirankal is made in the months of January, February,March and April every year and the scheme generates mostlyduring these months in a year and primarily generates power outof the water released from Anayirankal. The total generation ofpower during this period was 266.69 MU and generation fromcontrolled release was 60.12 MU, which is about 22.54% of thetotal generation. The Petitioner is getting the full advantage ofpower generation from the release of water from Anayirankalreservoir in the peak summer months. In the drought year of 2002-03, 50% of the total generation from the project was during summermonths by utilizing the water from Anayirankal dam.”

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A23.1 In the affidavit in rejoinder, it was submitted by the INDSIL:- “That Respondent no.1 & 2 have further drawn distinction on thefact that the petitioner’s project is based on controlled release ofwater from the Anayirankal dam while the other 59 projects arenot based on any controlled release. It is submitted that theBpetitioner’s project is not based on controlled release of water andtherefore there is no question of the petitioner utilizing the State’snatural resources with controlled release of water fromAnayirankal dam for our exclusive benefits. It is submitted thatwherever the State Government has entered into a contract witha party like M/s Carborandum’s project, involving controlled releaseCof water, it has provided a specific clause to this effect since itwould involve incurring of cost for providing the services. It issubmitted that in the case of the petitioner’s, no such clause isprovided and it is for this reason that the State Governmentspecifically agreed in the meeting dated 8[th] April, 1994 that waterDcess for the use of water would not be charged. It is thus submittedthat the petitioner is being discriminated against by respondentno.1 & 2 in the facts of the instant case in grave violation of itsfundamental rights guaranteed under Article 14 of the Constitutionof India.

E7. it is pertinent to mention here that respondent no.1 & 2 haveimposed the same rate of royalty on Carborundum’s project andthat of the petitioner’s. It is submitted that it is an admitted factthat Carborundum’s Project is based on controlled release. In thePetitioner’s case, there is no such controlled release. Further, onan average, only 22.54% of the petitioner’s generation comes fromFthe alleged controlled release. It is submitted that on this groundalone, the levy put on the petitioner is unreasonable and arbitrary.”

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24. In Civil Appeal Nos.9847-9850 of 2016, the grounds of appealraised by CUMI have reiterated its submissions before the High Court.The assertions with respect to the location of the project and use ofGcontrolled release of water were:- “The alleged controlled release of water must be directly to thepetitioners’ Maniyar Hydroelectric project from the water releasingpoint at Moozhiyar Power House of KSEB and not to IrrigationDam of PWD or to its own Hydroelectric project at Moozhiar.HAfter the year 1998, KSEB has set up its own Hydro Electric

Project at Kakkad upstream of the river and two more PrivateHydel Power Project had been approved and set up on the sameriver upstream, i.e. in between the Moozhiyar Power House ofKSEB and the Petitioner’s Maniyar Power Plant. It is pertinent tonote that the alleged controlled release of water being used by theBoard’s Hydro Electric Project at Kakkad at the first instance andthen flows further down to two other private Hydro ElectricProjects at Ullunkal & Karikkayam before it reaches the irrigationdam owned by PWD from where the Petitioner draws water forits Maniyar Hydro Electric Project. It is further to be noticed thatwhen the flow of the controlled release of water furtherstrengthened by two more minor rivers and forms confluence onits way of flowing further down along with the other source ofwater from the catchment area of 237 square kilometers asevidence by the map on record.”

24.1 In the affidavit in reply filed by the Board, it was stated:- “8. … …the Hydro Electric Project are generally classified intotwo categories based on the storage capacity namely (a) Hydroprojects with reservoir of large capacity and (b) Hydro projectshaving small capacity reservoir /run of river projects.

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11. The Sabarigiri Power Project comprises of two dams, oneacross the river Pamba (Pamba reservoir) and the other acrossits tributary Kakki (Kakki reservoir) with a flanking dam also atAnathode. These two reservoirs are connected through ainterconnecting tunnel of 105241 feet long (3209.82m). The waterfrom the Kakki reservoir is drawn through 18209 ft (5553.73m)long power tunnel and a set of three penstocks leading the watersto the power house with an original installed capacity of 300 MWconsisting of 6 units of 50 MW. After Renovation and Modernisationof the station, the installed capacity is increased to 340 MW. Thetotal storage capacity of Kakki and Pamba reservoirs is 477.67MCM (Million Cubic Metre). In addition to the above, augmentationschemes like Upper Moozhiyar (0.035 MCM, Meenar 1 (0.028MCM), Meenar – II (0.057 MCM) and Kullar – Gaviar (2.78MCM) agument the Pamba and Kakki reservoirs. Thus, the totalstorage capacity of Kakki and Pamba reservoirs is 480.54 MCM.

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12. The Maniyar Power House operated by M/s CarborandumUniversal Ltd. the petitioner herein belongs to the second categorywhere the gross storage is only 8 MCM (Million Cubic Metre),which is not even sufficient for two days full load operation of thePower House. However, the Maniyar Power Station is operatedthroughout the year only due to the large storage of the Pamba-Kakki storage reservoir (about 60 times larger than Maniyarstorage) and controlled release of water from Sabarigiri PowerHouse. When M/s Carborandum Universal Ltd., executed theagreement with KSEB on 18.05.1991, the construction of KakkadPower Station on the down stream of Sabarigiri Power Stationwas going on. It is to be noted that the Kakkad Power Station alsohas a very small storage capacity. The Moozhiyar reservoir withstorage capacity of 1.16 MCM and Veluthodu reservoir withstorage capacity of 0.607 MCM are the reservoirs of KakkadPower Station. Thus, the storage capacities of the three powerstations are as shown below:

Sabarigiri Power House – 480.54 MCM (Effective) KakkadPower House – 1.767 MCM (Effective) Maniyar Power House– 8.0 MCM (Gross)

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14. … … The Pamba Dam across Pamba river, Kakki Dam acrossKakki river and a flanking dam at Anathode are the main threedams of Sabarigiri Project. These Dams are at an elevation ofabout 900 M from the sea level. Water from the Kakki reservoir isbrought to Sabarigiri Power House, the water is again stored atMoozhiyar by a concrete Gravity Dam. Water from other smallstreams like Saippinkuzhy stream also reaches this reservoir. Thiswater is brought to Kakkad Power Station through under groundtunnel and utilized it for power generation. Water from anotherstream called Veluthode is also brought to Kakkad Power Stationby constructing a small Dam across the stream. Before thecommissioning of the Kakkad Power Station, the controlled releaseof water from Sabarigiri Power House directly reached the maniyarbarrage (owned by Kerala Irrigation Department) and this wasutilized by M/s. Caborandum Universal Ltd., for power generationat maniyar Power House. The only difference after thecommissioning of Kakkad Power Station is that the same water

is once again utilized for power generation at Kakkad PowerStation. There is an added advantage that some more control/regulation can be done at Kakkad Power House also. It is to benoted that there are no major sources of water (rivers) betweenKakkad and Maniyar which can substantially contribute for thesupply of water to Maniyar Power House. Now, two more smallpower stations at Ullumkal (7MW) and karikayam (10.5 MW) areestablished between Kakkad and Maniyar Power Stations. Allthese power stations at Kakkad, Ullumkal, Karikayam and Maniyarhave small reservoirs and utilize the huge storage and controlledrelease of water from the Sabarigiri Power Station for powergeneration throughout the year. Had there been no Sabarigiri PowerProject, the water from Pamba and Kakki rivers would have flownthough the natural flow path of these rivers and would reachedmuch below the Maniyar Power House as it can be seen from thesketch attached.”

24.2 In its rejoinder to the aforestated reply, it was submitted by CUMI:- “19. That the contents of para (8) of the counter affidavit needno reply as the said contents are not relevant for the adjudicationof the instant SLP.

20. That the contents of para (9) to (18) of the counter affidavitare denied as wrong and baseless. It is submitted that the avermentscontained in the aforesaid paragraphs are new pleas taken byrespondent no.2 for the first time before this Hon’ble Court andas such the same cannot be allowed to be raised for the first timeat special leave petition state….”

25. Mr. V. Giri, learned Senior Advocate for INDSIL submitted:-

a) Clause 14 of CUMI Agreement was distinct and different fromClause 19 of INDSIL Agreement. Further, the matter was required tobe seen in the light of the decision dated 08.04.1994 and imposition ofroyalty on the use of water would be in contravention of the decisiondated 08.04.1994.

b) No explanation was forthcoming as to why, as against specificinclusion of Clause 14 in CUMI Agreement, no such provision was madein INDSIL Agreement.

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Ac) Being at a lower level than the Anayirankal Reservoir but higherthan the Paniyar Power Station, the project of INDSIL was conceivedas a “run of the river scheme”. The release of water from AnnayirankalReservoir would be only for 45 days in a year, and the regulation ofrelease of water would be completely at the discretion of the Board andmeant to facilitate the generation of power at the Paniyar Power Station.BThe release of water would be determined by the requirements of theBoard at the Paniyar Power Station and that utilization of such controlledrelease constituted only 22.54% of the generation by the INDSIL.

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d) The controlled release of water in the case of CUMI would bemeant to suit the requirements of its project. On the other hand, suchCcontrolled release of water would not be exclusively for the benefit ofINDSIL but for the benefit of the Plant at Paniyar. It would therefore beillegal to draw similarity between the case of CUMI and that of INDSIL.

e) The imposition of royalty on the use of water would beunconstitutional as INDSIL was discriminated against other similarlyDsituated hydroelectric plants.

f) Imposition of royalty in terms of Clause 19 of INDSILAgreement would partake the nature and character of a “Tax”. Assumingthat the royalty imposed on INDSIL had genesis in a contract, no decisionwas taken by the Government as contemplated under said Clause 19.

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g) Assuming that the terms of the Policy were incorporated intoINDSIL Agreement, the tariff for storage/controlled release was requiredto be worked out in respect of each scheme separately.

26. Appearing for CUMI, Mr. C.A. Sundaram, learned SeniorAdvocate submitted:-F

a) When its Agreement was entered into, CUMI was the onlyPower Project in private sector and as such, there was no question ofany discrimination. However, the discrimination arose when other PowerProjects were given the benefit of controlled release of water withoutany charge.G

b) There could be no distinction between CPPs and IPPs.Guidelines of 2002 as revised did not make any such distinction. Thebasis for levy was the advantage gained from controlled release of water.Therefore, the differentia could be between those having the benefit ofcontrolled release of water on one hand and those not having suchH

advantage on the other. Any other distinction such as CPPs as againstIPPs would be unnatural and irrational.

c) Even if, the relevant Clause in the Agreement was a negotiatedClause, said Clause being arbitrary or discriminatory was liable to bestruck down. Reliance was placed on the decision of this Court in CentralInland Water Transport Corporation vs. Brojo Nath Ganguly[4],ICOMM Tele Limited v. Punjab State Water Supply and SewerageBoard and Anr.[5] and Pioneer Urban Land and Infrastructure Ltd. v.Govindan Raghavan[6].

d) The Power Plant of CUMI had been receiving water not justfrom Sabarigiri and Moozhiyar reservoirs but also from the streams inthe catchment area. Thus, the entirety of the supply of water to CUMIcould not be treated as controlled water from Moozhiyar Power Houseof the Board.

e) The relevant Clause in CUMI Agreement would, at best, attractlevy of charges for controlled release of water on the cost componentthereof. Therefore, the stipulation in Clause 14 of CUMI Agreementproviding 10% of tariff for the electricity generated was ultra vires thePolicy.

f) Further, the levy in question had to be commensurate with theservice rendered, otherwise, it would cease to be a fee and would bewholly beyond the competence of the Board. Reliance was placed uponthe decision of this Court in the State of Maharashtra & Ors. vs.Salvation Army, Western India Territory[7].

g) Considering the facts of the case, the calculations were requiredto be revisited where all relevant aspects had to be properly accountedfor and the levy had to be linked to the cost of advantage gained fromcontrolled release of water and not from other sources from catchmentarea.

27. Mr. Jaideep Gupta and Mr. P.V. Surendranath, learned SeniorAdvocates appearing for the Board and the State respectively, in boththe appeals, submitted: - 4 (1986) 3 SCC 156.5 (2019) 4 SCC 401.6 (2019) 5 SCC 725.7 (1975) 1 SCC 509.

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A(a) Terms and conditions of the Policy including Clause 14 of thePolicy stood specifically incorporated in INDSIL and CUMI Agreements.Said Clause 14 of the Policy dealt with the additional advantage gainedby an agency/ project by way of controlled release of water and stipulatedthat the cost component for such controlled release would be required tobe paid. Clause 15 of the Policy then set out the formula to be used forBascertainment of the relevant indicia. The Agreements having acceptedthe liability to pay such controlled release of water, the matter was purelyin the realm of contract.

(b) There was no unequal or unnatural bargaining so as to invokethe principles laid down in some of the decisions of this Court. BothCCUMI and INDSIL had willingly accepted the liability to pay for the useof controlled release of water. It was a commercial contract which wasentered into after due negotiations.

(c) The location of the projects of CUMI and INDSIL as well asthe facts on record would show that both the projects were enjoying theDbenefit of controlled supply of water. CUMI had been enjoying the benefitof “tail race” water discharge flowing down from Moozhiyar PowerHouse of the Board while INDSIL Project had been enjoying theadvantage of controlled supply of water discharge from Anayirankal Dam.

(d) Clause 14 of the Policy had stipulated that normally suchEbenefits of existing reservoirs and “tail race” benefit of existing powerstations would not be entrusted with private agencies but in case underspecial circumstances such schemes were allowed to the private parties,they would have to pay charges for controlled release of water.

(e) Unlike the projects which would depend upon irregular andFintermittent supply of water, the assured and controlled supply of waterenabled smooth running of the turbines for generation of electricity. Suchassured supply was the element based on which the terms of the Policywere incorporated in the Agreements and liability was accepted.

(f) Having agreed to abide by the terms of the Policy includingGClause 14 of the Policy, it would not be open to CUMI and INDSIL tosubmit that imposition of charges for controlled supply of water wouldbe discriminatory and irrational.

(g) Even if there was no specific clause in INDSIL Agreementsimilar to Clause 14 in CUMI Agreement, Clause 19 of INDSILHAgreement read with the terms of the Policy made the situation quite

clear and there would be no escape from the liability to pay the chargesfor controlled release of water.

(h) There was no inter se distinction between INDSIL on onehand and CUMI on the other. Both had been enjoying benefits of controlledrelease of water and their cases came within the ambit of Clause 14 ofthe Policy.

(i) The charges payable for controlled release of water had theirgenesis in the Policy and the terms of the Agreements. The submissionson the part of CUMI and INDSIL that it would amount to compulsoryexaction was therefore without any merit.

28. Before we deal with the principal submissions, an aspect ofthe matter highlighted on behalf of the Appellants needs to be dealt with.

It was submitted that a decision was taken on 08.04.1994 that nocharges for benefit of controlled water would be imposed if the water wasbeing retained in the same basin. The decision in said meeting was onlyto make a recommendation but the final call had to be taken by theIrrigation Department of the State. It cannot therefore be said that noliability could be imposed after 08.04.1994. Pertinently, INDSILAgreement was entered into on 30.12.1994. Though no specific Clausecomparable to Clause 14 of CUMI Agreement was included in INDSILAgreement a specific reference to the terms and conditions of the policywas made and such terms and conditions were incorporated in INDSILAgreement. Thus the decision dated 08.04.1994 had no bearing on thematter in question.

29. The first question that arises for consideration is whether theprojects of CUMI and INDSIL are located at places where the advantageof controlled supply of water is assured and can be derived.

30. Hydro-Electric Projects rely on the force of fall of water froma height to enable the turbines to generate electricity. Normally, the wateris supplied through penstocks from a reservoir. The stored water from areservoir assures consistent and regular supply of water for the smoothfunctioning of the generating units.

The supply of water from a large reservoir is one way of ensuringconsistent and controlled supply of water. However, because oftopography, large reservoirs are not always close to a generating unit. Insuch cases, the water from a large reservoir located at a greater height A

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Ais steadily released and collected in a smaller reservoir or a weir fromwhich the water is thereafter supplied to the generating units; and depletionin the stock of water is regularly replenished from the large reservoir.This is another way of ensuring consistent and controlled supply of waterfor generation of electricity.

BAfter the force of the water is used for propelling the turbines,the water is discharged from the generating unit or powerhouse. Suchdischarge of water or “tail race” benefit will also be consistent, dependingupon the supply of water that such generating unit or powerhouse receives.If another generating unit is at a lower level than such powerhouse, thedischarge from the powerhouse at a higher attitude may itself assumeCand ensure consistent supply of water to the generating unit at a lowerlevel or altitude.

31. The location of the project of CUMI is at a place where thedischarge of water from Moozhiyar Power House of the Board is divertedto Kakkad Power House of the Board, which gets steady supply ofDwater in the form of “tail race” benefit of the Moozhiyar Power House.After generation of electricity at the Kakkad Power House, the water isallowed to flow back into the river. The capacity of Kakkad PowerHouse is 50 MW while that of CUMI is 12 MW.

The supply of water even if meant for a powerhouse situated at aEheight and with larger capacity thus definitely ensures consistent andcontrolled supply of water to the project of CUMI located at a loweraltitude.

32. Similarly, the water from a larger reservoir namely, AnayirankalDam is allowed to flow so as to reach Paniyar Power House having aFcapacity of 32 MW electricity. Before reaching Paniyar Power House,the water passes through the area where the project of INDSIL issituated, which has a capacity of 21 MW. The location of the project ofINDSIL would thus have natural advantage of consistent and controlledsupply of water.G33. The facts on record thus show that both the projects havecertainly derived advantage of controlled supply of water as contemplatedin Clause 14 of the Policy. How much benefit of controlled supply ofwater each of the projects has received or will receive in future wouldbe a matter of computation and calculation.

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34. The Agreements entered into by CUMI and INDSIL showthat the terms and conditions of the Policy including Clause 14 thereofwere consciously incorporated in the Agreements. Both CUMI andINDSIL were alive to the fact that because of peculiar location, theirunits would certainly have the advantage of controlled supply of water.

Thus, the absence of a specific clause, akin to Clause 14 of CUMIAgreement, in INDSIL Agreement, would be of no consequence. Therelationship between the parties would be governed by Clause 14 of thePolicy, as incorporated in the respective Agreements.

35. The next questions to be considered are whether Clause 14 ofCUMI Agreement and Clause 14 of the Policy which stood incorporatedinto the respective Agreements could be termed to be unconscionableand/or manifestly arbitrary.

36. The decision of this Court in Central Inland Water TransportCorporation[4] which was pressed in service, was in relation to terms in aContract of Employment. This Court found that such term would getincluded in the contract only at the instance of the employer wherebecause of lack of bargaining power the employee would have no otheroption but to accept such term. It was in this context that the relevantterm contained in the Contract of Employement was found to beunconscionable. At the same time, the principles which weighed with theCourt for holding such terms unconscionable were specifically stated tobe inapplicable in cases of commercial contracts. The relevant discussionin paragraph 89 of the decision was:- “89. … …The Constitution was enacted to secure to all the citizensof this country social and economic justice. Article 14 of theConstitution guarantees to all persons equality before the law andthe equal protection of the laws. The principle deducible from theabove discussions on this part of the case is in consonance withright and reason, intended to secure social and economic justiceand conforms to the mandate of the great equality clause in Article14. This principle is that the courts will not enforce and will, whencalled upon to do so, strike down an unfair and unreasonablecontract, or an unfair and unreasonable clause in a contract,entered into between parties who are not equal in bargaining power.It is difficult to give an exhaustive list of all bargains of this type.No court can visualize the different situations which can arise in A

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Athe affairs of men. One can only attempt to give some illustrations.For instance, the above principle will apply where the inequalityof bargaining power is the result of the great disparity in theeconomic strength of the contracting parties. It will apply wherethe inequality is the result of circumstances, whether of the creationof the parties or not. It will apply to situations in which the weakerBparty is in a position in which he can obtain goods or services ormeans of livelihood only upon the terms imposed by the strongerparty or go without them. It will also apply where a man has nochoice, or rather no meaningful choice, but to give his assent to acontract or to sign on the dotted line in a prescribed or standardCform or to accept a set of rules as part of the contract, howeverunfair, unreasonable and unconscionable a clause in that contractor form or rules may be. Thisprinciple,however,willnotapplywherethe bargainingpowerofthecontractingpartiesisequaloralmostequal.Thisprinciplemaynotapplywhereboth parties arebusinessmen and the contract is a commercial transaction. InDtoday’s complex world of giant corporations with their vastinfrastructural organizations and with the State through itsinstrumentalities and agencies entering into almost every branchof industry and commerce, there can be myriad situations whichresult in unfair and unreasonable bargains between partiesEpossessing wholly disproportionate and unequal bargaining power.These cases can neither be enumerated nor fully illustrated. Thecourt must judge each case on its own facts and circumstances.”

(Emphasis added)

37. In S.K. Jain v. State of Haryana and another[8]a Bench ofFthree Judges of this Court summed up as under:-

“It is to be noted that the plea relating to unequal bargaining powerwas made with great emphasis based on certain observations madeby this Court in Central Inland Water Transport Corpn. Ltd. v.Brojo Nath Ganguly[4]. The said decision does not in any wayGassist the appellant, because at para 89 it has been clearly statedthat the concept of unequal bargaining power has no applicationin case of commercial contracts.

38. To similar effect, were the observations by this Court inICOMM Tele Limited[5], where this Court held:- “11. As has correctly been argued by learned counsel appearingon behalf of the respondents, this Court’s judgment in CentralInland Water Transport Corpn.[4], which lays down that contractsof adhesion i.e. contracts in which there is unequal bargainingpower, between private persons and the State, are liable to be setaside on the ground that they are unconscionable, does not applywhere both parties are businessmen and the contract is acommercial transaction (see para 89 of the said judgment). In thisview of the matter, the argument of the appellant based on thisjudgment must fail.”

39. In Pioneer Urban Land and Infrastructure Ltd[6], certainterms in the agreements entered into between the flat purchasers andthe builder were exfacie found to be one sided, unfair and unreasonable.Relying on the decision of this Court in Central Inland Water TransportCorporation[4] , it was held that the terms of the agreements would notbind the flat purchasers.

40. The law is thus clear that in cases where a term of contract oragreement entered into between the parties is completely one sided, unfairand unreasonable, where the other party having less bargaining powerhad to accept such term by force of circumstances, the relief in terms ofthe decision of this Court in Central Inland Water Transport Corporation[4]can be extended. It may be stated that the Agreements were enteredinto after long deliberations where both CUMI and INDSIL had theadvantage of legal counsel.

It cannot be said that CUMI and INDSIL were in a position withlesser bargaining power or were so vulnerable that by force ofcircumstances they were forced to accept such term. Therefore, theconcerned Clause in CUMI Agreement as well as the terms of the Policythat stood incorporated in the respective Agreements, cannot be termedunconscionable.

41. In ICOMM Tele Limited[5], this Court found Clause 25 (viii) ofthe Notice Inviting Tender to be arbitrary as said clause deterred a partyto an arbitration agreement from invoking the alternative dispute resolutionprocess unless it complied with requirements of pre-deposit. Thoughthis Court did not accept the submission, based on Central Inland Water A

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ATransport Corporation[4], that the clause in question was unconscionable,the matter was considered from the stand point whether said clause couldbe said to be manifestly arbitrary. The clause was found to be contraryto the object of de-clogging the Court process and rendering the arbitralprocess ineffective. Relying upon the decision of this Court A.L. Kalrav. Project and Equipment Corporation of India[9]it was found inBparagraph 23 that the clause had no nexus to the filing of frivolous claims.The discussion in paragraph 23 was:

“23. The important principle established by this case is that unlessit is first found that the litigation that has been embarked upon isfrivolous, exemplary costs or punitive damages do not follow.CClearly, therefore, a “deposit-at-call” of 10 per cent of the amountclaimed, which can amount to large sums of money, is obviouslywithout any direct nexus to the filing of frivolous claims, as itapplies to all claims (frivolous or otherwise) made at the verythreshold. A 10 per cent deposit has to be made before anyDdetermination that a claim made by the party invoking arbitrationis frivolous. This is also one important aspect of the matter to bekept in mind in deciding that such a clause would be arbitrary inthe sense of being something which would be unfair and unjustand which no reasonable man would agree to. Indeed, a claimmay be dismissed but need not be frivolous, as is obvious from theEfact that where three arbitrators are appointed, there have beenknown to be majority and minority awards, making it clear thatthere may be two possible or even plausible views which wouldindicate that the claim is dismissed or allowed on merits and notbecause it is frivolous. Further, even where a claim is found to beFjustified and correct, the amount that is deposited need not berefunded to the successful claimant. Take for example a claimbased on a termination of a contract being illegal and consequentdamages thereto. If the claim succeeds and the termination is setaside as being illegal and a damages claim of Rupees One croreis finally granted by the learned arbitrator at only ten lakhs, onlyGone-tenth of the deposit made will be liable to be returned to thesuccessful party. The party who has lost in the arbitrationproceedings will be entitled to forfeit nine-tenths of the depositmade despite the fact that the aforesaid party has an award against it. This would render the entire clause wholly arbitrary, being notH9 (1984) 3 SCC 316

only excessive or disproportionate but leading to the wholly unjustresult of a party who has lost an arbitration being entitled to forfeitsuch part of the deposit as falls proportionately short of the amountawarded as compared to what is claimed.”

42. On the touchstone of these principles, it needs to be seenwhether Clause 14 of the Policy can be termed to be manifestly arbitrary.The Policy had made it quite clear that the benefit of controlled supplyof water would normally be confined to the electricity generating unitsor power houses in public sector.

The reason for such Policy statement would clearly be thatconsiderable amount of insfrastructure and development had been andwould be made by the State in erecting and maintaining dams and reservoirsand as such the incremental advantage or benefit of such investmentmust go back to the public through units in public sector. If the advantagewas, however, allowed to be given to a private entity or agency, thePolicy contemplated impostion of charges for the use of such controlledsupply of water.

There is nothing arbitrary or unreasonable in having such term inthe Policy. Since the private entity or agency would stand to gain fromand out of the capital outlay and infrastructure put in place by the State,some reasonable charges for such benefit would naturally be imposed.It was only under such Policy that both CUMI and INDSIL were givenpermissions to set up their electricity generating units and such term wasconsciously accepted by them.

The submission that the relevant Clause would be manifestlyarbitrary, therefore, does not merit acceptance.

43. Though we have considered the submissions that Clause 14of the Policy would be unconscionable or arbitrary on merits, referencemay also be made to the following statement of law culled out in RajasthanState Industrial Development and Investment Corporation andAnother vs. Diamond and Gem Development Corporation Limitedand Another[10]:-

“15. A party cannot be permitted to “blow hot-blow cold”, “fastand loose” or “approbate and reprobate”. Where one knowinglyaccepts the benefits of a contract, or conveyance, or of an order,

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Ahe is estopped from denying the validity of, or the binding effectof such contract, or conveyance, or order upon himself……”

44. Moving further, even if the relevant term in the Policy is notfound to be unconscionable or arbitrary and is found to be perfectlyjustified, the question still remains whether in the application of said termBto CPPs alone and not to IPPs, was any discriminatory treatment metedout to CPPs.

Qualitatively, the CPPs and IPPs have a basic distinction. CPPsproduce electricity for self consumption. In the present case both CUMIand INDSIL generate electricity to be consumed in their factories orCindustrial units. Under the terms of their Agreements, if anything isproduced in excess of their requirements, the surplus or excess electricitywould be accepted by the Board. However, the principal purpose andend use would be self consumption. As against that, IPPs produceelectricity not for self consumption but for the use of the Board. Theelectricity generated by IPPs becomes part of the grid of the Board toDbe supplied by the Board to its consumers like electricity produced bythe generating units or power houses of the Board. If the charges towardscontrolled supply of water were to be imposed uniformly for CPPs andIPPs, the effect would be that the electricity supplied through IPPs tocommon consumers and general public would necessarily have anEadditional burden or load towards proportionate element of water charges.In these circumstances, if the Board decided not to apply Clause 14 ofthe Policy in case of all IPPs, such decision would not be termed asdiscriminatory.

The distinction or classification brought out was based on a clearFrationale with the object of reducing the additional burden on theconsumers. Since the electricity generated by CPPs would be selfconsumed, there would be no such question of putting any ultimate orresultant burden on the common consumers. The basis for such distinctionor classification was quite correct and as such this question was rightlyanswered by the Division Bench of the High Court against CUMI andGINDSIL. Rather than being unnatural or irrational, the classification hada clear nexus or relationship with the object of reducing resultant burdenon the common consumers.

This submission therefore, is, meritless and rejected.

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45. This takes us to the last set of submissions challenging theimposition of royalty or charges on controlled supply of water on theground of absence or lack of jurisdiction and some ancilliary issues.

The matter in that behalf was considered by the Division Benchof the High Court in paragraphs 38, 39 and 57 as quoted hereinabove.As rightly observed, the basis or genesis of such imposition was Clause14 of the Policy which, as agreed between the parties, stood incorporatedin the respective Agreements.

46. The submission on behalf of the appellants was that the royalityor charges for controlled supply of water in the instant case would benothing but compulsory exaction and in the absence of any statutorysanction behind such imposition, the actions on part of the Board wouldbe without jurisdiction. The counter submission on behalf of the Stateand the Board was that such royalty or charges had the genesis inrespective contracts and as such the action on part of the Board wasfully justified.

47. The distinction between tax and fee was brought out by theConstitution Bench of this Court in Hingir-Rampur Coal Co. Ltd. andOthers vs. State of Orissa and Others[11]as under:- “The first question which falls for consideration is whether thelevy imposed by the impugned Act amounts to a fee relatable toEntry 23 read with Entry 66 in List II. Before we deal with thisquestion it is necessary to consider the difference between theconcept of tax and that of a fee. The neat and terse definition oftax which has been given by Latham, C.J., in Matthews v. ChicoryMarketing Board[12]is often cited as a classic on this subject. “Atax”, said Latham, C.J., “is a compulsory exaction of money bypublic authority for public purposes enforceable by law, and is notpayment for services rendered”. In bringing out the essentialfeatures of a tax this definition also assists in distinguishing a taxfrom a fee. It is true that between a tax and a fee there is nogeneric difference. Both are compulsory exactions of money bypublic authorities; but whereas a tax is imposed for public purposesand is not, and need not, be supported by any consideration ofservice rendered in return, a fee is levied essentially for services 11 (1961) 2 SCR 537

12 (1938) 60 C.L.R. 263, 276

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rendered and as such there is an element of quid pro quo betweenthe person who pays the fee and the public authority which imposesit. If specific services are rendered to a specific area or to a specificclass of persons or trade or business in any local area, and as acondition precedent for the said services or in return for themcess is levied against the said area or the said class of persons ortrade or business the cess is distinguishable from a tax and isdescribed as a fee. Tax recovered by public authority invariablygoes into the consolidated fund which ultimately is utilised for allpublic purposes, whereas a cess levied by way of fee is not intendedto be, and does not become, a part of the consolidated fund. It isearmarked and set apart for the purpose of services for which itis levied. There is, however, an element of compulsion in theimposition of both tax and fee. When the Legislature decides torender a specific service to any area or to any class of persons, itis not open to the said area or to the said class of persons to pleadthat they do not want the service and therefore they should beexempted from the payment of the cess. Though there is an elementof quid pro quo between the tax payer and the public authoritythere is no option to the tax-payer in the matter of receiving theservice determined by public authority. In regard to fees there is,and must always be, co- relation between the fee collected andthe service intended to be rendered. Cases may arise where underthe guise of levying a fee Legislature may attempt to impose atax; and in the case of such a colourable exercise of legislativepower courts would have to scrutinise the scheme of the levyvery carefully and determine whether in fact there is a co-relationbetween the service and the levy, or whether the levy is either notcorelated with service or is levied to such an excessive extent asto be a pretence of a fee and not a fee in reality. In other words,whether or not a particular cess levied by a statute amounts to afee or tax would always be a question of fact to be determined inthe circumstances of each case. The distinction between a taxand a fee is, however, important, and it is recognised by theConstitution. Several Entries in the Three Lists empower theappropriate Legislatures to levy taxes; but apart from the powerto levy taxes thus conferred each List specifically refers to thepower to levy fees in respect of any of the matters covered in thesaid List excluding of course the fees taken in any Court.

The question about the distinction between a tax and a fee hasbeen considered by this Court in three decisions in 1954. InCommissioner, Hindu Religious Endowments, Madras v. SriLakshmindra Thirtha Swamiar of Sri Shirur Mutt[13]the viresof the Madras Hindu Religious and Charitable Endowments Act,1951 (Madras Act 19 of 1951), came to be examined. Amongstthe sections challenged was Section 76(1). Under this section everyreligious institution had to pay to the Government annualcontribution not exceeding 5% of its income for the servicesrendered to it by the said Government; and the argument was thatthe contribution thus exacted was not a fee but a tax and as suchoutside the competence of the State Legislature. In dealing withthis argument Mukherjee, J., as he then was, cited the definitionof tax given by Latham, C.J., in the case of Matthews[14]and haselaborately considered the distinction between a tax and a fee.The learned Judge examined the scheme of the Act and observedthat “the material fact which negatives the theory of fees in thepresent case is that the money raised by the levy of the contributionis not earmarked or specified for defraying the expense that theGovernment has to incur in performing the services. All thecollections go to the consolidated fund of the State and all theexpenses have to be met not out of those collections but out of thegeneral revenues by a proper method of appropriation as is donein the case of other Government expenses”. The learned Judge nodoubt added that the said circumstance was not conclusive andpointed out that in fact there was a total absence of any co-relationbetween the expenses incurred by the Government and the amountraised by contribution. That is why Section 76(1) was struck downas ultra vires.

The same point arose before this Court in respect of the OrissaHindu Religious Endowments Act, 1939, as amended by amendingAct 2 of 1952 in Mahant Sri Jagannath Ramanuj Das v. Stateof Orissa[15]. Mukherjea, J., who again spoke for the Court, upheldthe validity of Section 49 which imposed the liability to pay thespecified contribution on every Mutt or temple having an annualincome exceeding Rs 250 for services rendered by the State 13 (1954) S.C.R. 1005

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AGovernment. The scheme of the impugned Act was examinedand it was noticed that the collections made under it are not mergedin the general public revenue and are not appropriated in the mannerlaid down for appropriation of expenses for other public purposes.They go to constitute a fund which is contemplated by Section 50of the Act, and this fund to which the Provincial GovernmentBcontributes both by way of loan and grant is specifically set apartfor the rendering of services involved in carrying out the provisionsof the Act. 12. The same view was taken by this Court in regardto Section 58 of the Bombay Public Trust Act, 1950 (Act 29 of1950) which imposed a similar contribution for a similar purposeCin Ratilal Panachand Gandhi v. State of Bombay[16]. It wouldthus be seen that the tests which have to be applied in determiningthe character of any impugned levy have been laid down by thisCourt in these three decisions; and it is in the light of these teststhat we have to consider the merits of the rival contentions raisedbefore us in the present petition.”D48. In State of West Bengal vs. Kesoram Industries Limitedand Ors.[17], another Constitution Bench of this Court explained certainobservations in India Cement Limited vs. State of Tamil Nadu[18], andstated as under:- E“59. First we will refer to certain dictionaries oft-cited in courtsof law:

Words and Phrases, Permanent Edn. (Vol. 37-A, p. 597):

“ ‘Royalty’ is the share of the produce reserved to owner forpermitting another to exploit and use property. The wordF‘royalty’ means compensation paid to landlord by occupier ofland for species of occupation allowed by contract betweenthem. ‘Royalty’ is a share of the product or profit (as of amine, forest etc.) reserved by the owner for permitting anotherto use his property.”

GStroud’s Judicial Dictionary of Words and Phrases (6th Edn.,2000, Vol. 3, p. 2341):

16 (1954) S.C.R. 105517 (2004) 10 SCC 201H18 (1990) 1 SCC 12

“The word ‘royalties’ signifies, in mining leases, that part ofthe reddendum which is variable, and depends upon the quantityof minerals gotten or the agreed payment to a patentee on everyarticle made according to the patent. Rights or privileges forwhich remuneration is payable in the form of a royalty.”

Words and Phrases, Legally Defined (3rd Edn., 1990, Vol. 4, p.112):

“A royalty, in the sense in which the word is used in connectionwith mining leases, is a payment to the lessor proportionate tothe amount of the demised mineral worked within a specifiedperiod.”

Wharton’s Law Lexicon (14th Edn., p. 893):

“Royalty.—Payment to a patentee by agreement on everyarticle made according to his patent; or to an author by apublisher on every copy of his book sold; or to the owner ofminerals for the right of working the same on every ton orother weight raised.”

Mozley & Whiteley’s Law Dictionary (11th Edn., 1993, p. 243):

“A pro rata payment to a grantor or lessor, on the working ofthe property leased, or otherwise on the profits of the grant orlease. The word is especially used in reference to mines, patentsand copyrights.”

Prem’s Judicial Dictionary (1992, Vol. 2, p. 1458):

“Royalties are payments which the Government may demandfor the appropriation of minerals, timber or other propertybelonging to the Government. Two important features of royaltyhave to be noticed, they are, that the payment made for theprivilege of removing the articles is in proportion to the quantityremoved, and the basis of the payment is an agreement.”

Black’s Law Dictionary (7th Edn., p. 1330):

“Royalty.—A share of the product or profit from real property,reserved by the grantor of a mineral lease, in exchange for thelessee’s right to mine or drill on the land.

Mineral royalty.—A right to a share of income from mineralproduction.”

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60. In D.K. Trivedi & Sons v. State of Gujarat[19]a Bench oftwo learned Judges of this Court dealt with “rent”, “royalty” and “deadrent” and held as follows: (SCC pp. 53-54, paras 38-39)

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“38. Rent is an integral part of the concept of a lease. It is theconsideration moving from the lessee to the lessor for demise ofthe property to him.

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39. In a mining lease the consideration usually moving from thelessee to the lessor is the rent for the area leased (often calledsurface rent), dead rent and royalty. Since the mining lease confersCupon the lessee the right not merely to enjoy the property as underan ordinary lease but also to extract minerals from the land and toappropriate them for his own use or benefit, in addition to theusual rent for the area demised, the lessee is required to pay acertain amount in respect of the minerals extracted proportionateDto the quantity so extracted. Such payment is called ‘royalty’. Itmay, however, be that the mine is not worked properly so as not toyield enough return to the lessor in the shape of royalty. In orderto ensure for the lessor a regular income, regardless of whetherthe mine is worked or not, a fixed amount is provided to be paid tohim by the lessee. This is called ‘dead rent’. ‘Dead rent’ is calculatedEon the basis of the area leased while royalty is calculated on thequantity of minerals extracted or removed. Thus, while dead rentis a fixed return to the lessor, royalty is a return which varies withthe quantity of minerals extracted or removed. Since dead rentand royalty are both a return to the lessor in respect of the areaFleased, looked at from one point of view dead rent can bedescribed as the minimum guaranteed amount of royalty payableto the lessor but calculated on the basis of the area leased and noton the quantity of minerals extracted or removed.”

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In H.R.S. Murthy v. Collector of Chittoor[20]too the ConstitutionBench of this Court had defined royalty to mean “the paymentmade for the materials or minerals won from the land”.

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61. The judicial opinion as prevailing amongst the High Courtsmay be noticed. A Full Bench of the High Court of Orissa held in 19 (1986) Supp SCC 20H20 AIR 1965 SC 177 : (1964) 6 SCR 666

Laxmi Narayan Agarwalla v. State of Orissa[21]: (AIR p. 224,para 12) “[R]oyalty is the payment made for the mineralsextracted. It is not tax.” In Surajdin Laxmanlal v. State of M.P.,Nagpur[22]a Division Bench of the High Court of Madhya Pradeshreferred to Wharton’s Law Lexicon and Mozley & Whiteley’sLaw Dictionary and said (at AIR p. 130, para 7) “royalties arepayments which the Government may demand for the appropriationof minerals, timber or other property belonging to the Government”.The High Court opined that there are two important features ofroyalty: (i) the payment is in proportion to the quantity removed;and (ii) the basis of the payment is an agreement.

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71. We have clearly pointed out the said error, as we are fullyconvinced in that regard and feel ourselves obliged constitutionally,legally and morally to do so, lest the said error should cause anyfurther harm to the trend of jurisprudential thought centring aroundthe meaning of “royalty”. We hold that royalty is not tax. Royaltyis paid to the owner of land who may be a private person and maynot necessarily be a State. A private person owning the land isentitled to charge royalty but not tax. The lessor receives royaltyas his income and for the lessee the royalty paid is an expenditureincurred. Royalty cannot be tax. We declare that even in IndiaCement[23]it was not the finding of the Court that royalty is a tax.A statement caused by an apparent typographical or inadvertenterror in a judgment of the Court should not be misunderstood asdeclaration of such law by the Court. We also record our expressdissent with that part of the judgment in Mahalaxmi Fabric MillsLtd.[24]which says (vide para 12 of SCC report) that there was no“typographical error” in India Cement[23]and that the saidconclusion that royalty is a tax logically flew from the earlierparagraphs of the judgment.”

49. In State of Himachal Pradesh and Others vs. GujaratAmbuja Cement Ltd. and Another[25], a Bench of three Judges of thisCourt observed:- 21 AIR 1983 Ori 210 : (1983) 55 Cut LT 364 (FB)22 AIR 1960 MP 129 : 1960 MPLJ 3923 (1990) 1 SCC 12

24 1995 Supp (1) SCC 642

25 (2005) 6 SCC 499

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“44. “Royalty” is not a term used in legal parlance for the priceof the goods sold. It is a payment reserved by the grantor of apatent, lease of a mine or similar right, and payable proportionatelyto the use made of the right by the grantee as held in TitaghurPaper Mills Co. Ltd. case[26].

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B45. In its primary and natural sense “royalty” in the legal world, isknown as the equivalent or translation of “jura regalia” or “juraregia”. Royal rights and prerogatives of a sovereign are coveredthereunder. In its secondary sense, the word “royalty” would signify,as in mining leases, that part of the reddendum, variable though,payable in cash or kind, for rights and privileges obtained. (SeeCInderjeet Singh Sial v. Karam Chand Thapar[27].)

46. “Royalty” is not a tax. Simply because the royalty is levied byreference to the quantity of the minerals produced and the impugnedcess too is quantified by taking into consideration the same quantityof the mineral produced, the latter does not become royalty. TheDformer is the rent of the land on which the mine is situated or theprice of the privilege of winning the minerals from the land partedwith by the Government in favour of the mining lessee. The cessis a levy on mineral rights with impact on the land and quantifiedby reference to the quantum of mineral produced. The distinction,Ethough fine, yet exists and is perceptible. (See State of W.B. v.Kesoram Industries Ltd.[16]).

50. On the essential charcteristics of a tax, following observationsof Banumathi, J. in the concurring opinion in Jindal Stainless Limited andanother vs. State of Haryana and others[28]cull out the essence:- F

“334. The essential characteristics of a tax are that: (i) it is imposedunder a statutory power without the taxpayer’s consent and thepayment is enforced by law; (ii) it is an imposition made for publicpurpose without reference to any special benefit to be conferredon the payer of the tax; and (iii) it is part of the common burden.GIn Commr., Hindu Religious Endowments v. Sri LakshmindraThirtha Swamiar of Sri Shirur Mutt[13], the Constitution Benchhas laid down the characteristics of a tax which has since beenconsistently followed and it is as under: (AIR p. 284, para 43)

26 1985 Spp SCC 280 : 1985 SCC (Tax) 538

27 (1995) 6 SCC 166H28 (2017) 12 SCC 1

“43. … “A tax” … ‘is a compulsory exaction of money by apublic authority for public purposes enforceable by law and isnot payment “for services rendered”.’

This definition brings out, in all opinion, the essentialcharacteristics of a tax as distinguished from other forms ofimposition which, in a general sense, are included within it. It issaid that the essence of taxation is compulsion, that is to say, itis imposed under statutory power without the taxpayer’sconsent and the payment is enforced by law. The secondcharacteristic of tax is that it is an imposition made for publicpurpose without reference to any special benefit to be conferredon the payer of the tax. This is expressed by saying that thelevy of tax is for the purposes of general revenue, which whencollected forms part of the public revenues of the State. Asthe object of a tax is, not to confer any special benefit uponany particular individual there is as it is said, no element of“quid pro quo” between the taxpayer and the public authority.…Another feature of taxation is that as it is a part of the commonburden, the quantum of imposition upon the taxpayer dependsgenerally upon his capacity to pay.”

51. It is true that as a result of order passed by this Court inMineral Area Development Authority and Others vs. Steel Authority ofIndia and Others[29], certain questions concerning “royalty” as determinedunder the provisions of Mines and Minerals (Development and Regulation)Act, 1957 now stand referred to a Bench of nine Judges, which referenceis still pending consideration. However, none of those issues arise in thepresent matter.

52. On the use of the expression “royalty” in a contract, we maynote following observations in Inderjeet Singh Sial and another vs.Karam Chand Thapar and others[27]:- “12. … … The word ‘royalty’ thus, in the deed was used in aloose sense so as to convey liability to make periodic payments tothe assignor for the period during which the lease would subsist;payments dependent on the coal gotten and extracted in quantitiesor on despatch. We have therefore to construe document Ex. D-5on its own terms and not barely on the label or description given to A

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Athe stipulated payments. Conceivably this arrangement could wellhave been given a shape by using another word. The word ‘royalty’was perhaps more handy for the authors to be employed for anarrangement like this, so as to ensure periodic payments. In noevent could the parties be put to blame for using the word ‘royalty’as if arrogating to themselves the royal or sovereign right of theBState and then make redundant the rights and obligations createdby the deed.

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13. The commodity goes by its value; not by the wrapper in whichit is packed. A man is known for his worth; not for the clothes hewears. Royal robes worn by a beggar would not make him a king.CThe document is weighed by its content, not the title. One needsto go to the value, not the glitter. All the same, we do not wish tominimise the importance of the right words to be used in documents.What we mean to express is that if the thought is clear, its translationin words, spoken or written, may, more often than not, tend to beDfaulty. More so in a language which is not the mother tongue.Those faulted words cannot bounce back to alter the thought.Thus in sum and substance when the contracting parties and thedraftsman are assumed to have known that the word ‘royalty’ ismeant to be employed to secure for the State something out ofwhat the State conveys, their employment of that word for private Eensuring was not intended to confer on the assignor the status ofthe sovereign or the State, and on that basis have the documentvoided. … … “.

53. We may also note the following observations from the decisionof a Bench of three Judges of this Court in Union of India and othersFvs. Motion Picture Association and others[30], where the payment offee was under the terms of a contract between the parties.

“31. The exhibitors also contend that the charge of one per centon the net recoveries is a compulsory exaction in the form of atax. Neither the Act nor the provisions of the licence stipulateGpayment of any such tax. Hence imposition of this amount is inviolation of Article 265 of the Constitution. It is true that neitherthe relevant Act nor the notification nor the rules nor the termsand conditions of the licence stipulate the payment of any rental.

This amount is required to be paid under an agreement which theexhibitors individually enter into with the Films Division for thesupply of these films. It is a payment under the terms of a contractbetween the two parties. It cannot, therefore, be viewed as a taxat all. The exhibitors contend that because they are required toenter into these agreements, any payment under the agreement isa compulsory exaction and is, therefore, tax. We do not agree.Under the terms of the agreement, the Films Division has to supplycertain prints to the theatre owners at stated intervals. The FilmsDivision is required to maintain a distribution network for thispurpose. It is required to pack these films and is required to allowthe exhibitors to retain these films in their possession for a certainperiod. The films are to be returned to the Films Division thereafter.The charge is termed in the agreement as rental for the films. Itcovers charges for preparing the prints of the films for distribution,and for packing them for delivery. These are clearly servicesrendered by the Films Division for which it is paid one per cent ofthe net collection as a rental. As stated earlier, the total cost ofpreparing prints, packing them and distributing them is much higherthan the total recovery made by the Films Division by way ofrental from all the exhibitors. There is a clear nexus between theservices rendered and the payment to be made. The payment,therefore, is in the nature of a fee rather than a tax though theremay not be an exact quid pro quo.

Nevertheless the element of quid pro quo is very much present.

32. The exhibitors relied upon a number of cases which distinguisha tax from a fee. We will only refer to some of them. In the caseof District Council of the Jowai Autonomous Distt. v. DwetSingh Rymbai[31]this Court held that a compulsory exaction forpublic purposes would amount to a tax while a payment for servicesrendered would amount to a fee. On the facts in that case, theCourt said that there was no element of quid pro quo which willjustify the imposition of royalty as a fee. In Commr., H.R.E. v. SriLakshmindra Thirtha Swamiar of Sri Shirur Mutt[13]this Courtas far back as in 1954, laid down the distinction between a taxand a fee. This Court has described a tax as a compulsory exactionfor public purposes which does not require the taxpayer’s consent;

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Awhile fee is a charge for specific service to some, and it musthave some relation to the expenses incurred for the service. InAhmedabad Urban Development Authority v. SharadkumarJayantikumar Pasawalla[32]this Court has said that an expressauthorisation for the levy of a fee is necessary. In the presentcase, however, the rental is charged by the Films Division by virtueBof an agreement between the Films Division and the individualexhibitor. This is in consideration of the Films Division supplyingfilms to the exhibitor, packing the film and arranging for its delivery.This is clearly an agreed fee charged for rendering services. Itcannot be viewed as a compulsory exaction or as a tax. There isCa statutory obligation which is cast on the exhibitors to exhibitcertain films. To carry out this statutory obligation, if the exhibitorsenter into an agreement with the Films Division and agree to paya certain amount of rental for procuring the films from the FilmsDivision to comply with the statutory obligation, the levy must,since it is correlated with the Films Division discharging certainDobligations under the contract, be viewed, at the highest, as a feeand not as a tax. It is an agreed payment, and is not unreasonable.The High Court has rightly negatived the contention of therespondent exhibitors.”

54. Thus, the expression ‘Royalty’ has consistently been construedEto be compensation paid for rights and privileges enjoyed by the granteeand normally has its genesis in the agreement entered into between thegrantor and the grantee. As against tax which is imposed under a statutorypower without reference to any special benefit to be conferred on thepayer of the tax, the royalty would be in terms of the agreement between Fthe parties and normally has direct relationship with the benefit or privilegeconferred upon the grantee.

Whatever be the nomenclature, the charges for use of controlledrelease of water in the present cases were for the privilege enjoyed byINDSIL and CUMI. Like the case in Motion Picture Association[31],Gthe basis for such charges was directly in terms of, and under thearrangement entered into between the parties, though, not referable toany statutory instrument. The controlled release of water made availableto INDSIL and CUMI, has always gone a long way in helping them ingeneration of electricity. For such benefit or privilege conferred upon

them, the Agreements arrived at between the parties contemplatedpayment of charges for such conferral of advantage. Such charges, inour view, were perfectly justified.

55. The submission that it was compulsory exaction and thusassumed the characteristics of a tax was completely incorrect anduntenable. It was a pure and simple contractual relationship between theparties and the Division Bench was right in rejecting the submissionsadvanced by CUMI and INDSIL.

56. Thus, all the submissions advanced on behalf of CUMI andINDSIL are rejected. The instant appeals are, therefore, dismissed withoutany order as to costs.

Nidhi Jain

Appeals dismissed.

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