The court emphasized the importance of fairness and adherence to the principles of natural justice in contractual disputes, and held that it would be unfair to demand arrears of charges based on a resolution that was not acted upon.

JUDGMENT :

1. The petitioner herein is a registered company incorporated under the Companies Act, 1956 and is engaged in refining and marketing petroleum products. The petitioner’s refinery at Vadodara is engaged in the processing of crude petroleum products and the petitioner plays a vital role in supplying the petroleum products across the country. By way of present petition, the petitioner seeks to challenge the action of the respondent authority whereby, the respondent authority has ordered to charge and collect water tax to the tune of Rs.1,82,11,534/-. Being aggrieved by the aforesaid action initiated by the respondent authority, the petitioner herein has approached this Court seeking following reliefs:

“[a] this Hon’ble Court be pleased to issue an appropriate writ, order or direction quashing and setting aside the resolution dated 24.09.2002 as also the demand notices dated 01.10.2005, 13.10.2005 and 23.02.2006 and be further pleased to restrain the respondents from raising bills/revised rate;

[b] this Hon’ble Court be pleased to hold and declare that the respondents have acted wholly without jurisdiction in issuing resolution dated 24.09.2002;

[c] that pending admission, hearing and final disposal of this petition, this Hon’ble Court may be pleased to stay the effect and implementation of the demands made under letters of 01.10.2005, 20.10.2005 and 23.02.2006 towards arrears for the period 1997-98 onwards;

[d] that pending admission, hearing and final disposal of this petition, this Hon’ble Court may be pleased to direct the respondents to raise demand for water charges as per the methodology adopted prior to March, 2005;

[e] Be pleased to pass such other and further orders, as may deem just and proper in the facts and circumstances of the case.”

2. The brief facts leading to the filing of the present petition reads thus:

2.1 The petitioner required supply of water from Mahi river, near Vasad and in view thereof, entered into an agreement dated 08.02.2002 with the respondent – State of Gujarat. As per clause 5(i) of the said agreement, the petitioner was required to pay at the rate of 0.75 paisa per 1000 liters towards water charges for industrial use and 0.20 paisa per 1000 liters for drinking purpose for the period from 01.04.1997. As per clause 5(ii) of the agreement, the water charges for the water actually drawn was at the rate of Rs.2.50 per 1000 liters for industrial use and Rs.0.30 paise per 1000 liters for drinking purposes. The rates stated in clause 5 of the agreement are subject to the resolution passed by the Government from time to time.

2.2 The petitioner duly paid the bills raised by the respondent No.2 from time to time. The petitioner herein is governed by the provisions of the Bombay Irrigation Act, 1879 which empowers the respondent No.1 – State to arrive at such contractual requirement for supply of water from any interstate river on payment of price at the rate fixed from time to time. The provision of the said Act empowers the State Government to enter into an agreement with a party desirous of drawing water from canal, river, stream, lake, natural collection of water etc. The Act further provides for determination of rates for supply of canal water for irrigation purpose or for any other purposes.

2.3 It is the case of the petitioner that the respondent – State, from time to time, prescribed the rate for supply of water. So far as the present petition is concerned, the petitioner herein states that a reference is required to be made to certain Government letters/Resolutions, which read thus:

(a) Government Resolution dated 22.05.1990 fixing rates of water for industrial purposes and for drinking water purposes.

(b) Government Resolution dated 01.05.1997, by which the rates of water effective from 01-04-1990 were upwardly revised.

(c) Government Resolution dated 27.01.1999, by which it was abundantly made clear that out of the total quantity of water supplied to an industry, rebate for the drinking water qu