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

Citation: [2021] 13 S.C.R. 136 · Decided: 06-09-2021 · Supreme Court of India · Bench: UDAY UMESH LALIT · Disposal: Dismissed

Cited by 2 judgment(s) · cites 13 · see the full citation network in Lexace

Judgment (excerpt)

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SUPREME COURT REPORTS
[2021] 13 S.C.R.
M/S. INDSIL HYDRO POWER AND MANGANESE LIMITED
v.
STATE OF KERALA AND OTHERS
(Civil Appeal Nos.9845-9846 of 2016)
SEPTEMBER 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 the
Government policy, the appellant-Captive Power Producers
established Hydro Electric Project as Captive Generation Station
for its industrial unit – Agreement between the appellant and the
State Electricity Board wherein Clause 14 provided that royalty would
be charged for controlled supply of water – Appellants paying
wheeling charges for consumption of electricity, as also charges
for the use of controlled supply of water at the rate specified in
Agreement – Appellant then sought exemption from payment of
charges for controlled release of water or royalty in respect of
electricity generated by it at its Hydel Project – Rejection of the
appellant’s claim by the High Court – On appeal, held: Reasonable
charges for benefit derived by private entities justified – Since the
private entity or agency would stand to gain from and 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 the appellants were given
permissions to set up their electricity generating units and such
term was consciously accepted by them – Thus, the concerned Clause
in the Agreement as well as the terms of the Policy cannot be termed
unconscionable, arbitrary or unreasonable – Furthermore, the
royalty would be in terms of the agreement between the parties and
normally has direct relationship with the benefit or privilege
conferred upon the grantee as against tax which is imposed under
a statutory power without reference to any special benefit conferred
on the payer of the tax – Whatever be the nomenclature, the charges
for use of controlled release of water were for the privilege enjoyed
by the CPPs, on basis of the arrangement between the parties.
[2021] 13 S.C.R.136
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Dismissing the appeals, the Court
HELD: 1.1 The location of the project of CUMI is at a place
where the discharge of water from Moozhiyar Power House of
the Board is diverted to Kakkad Power House of the Board,
which gets steady supply of water in the form of “tail race” benefit
of the Moozhiyar Power House. After generation of electricity at
the Kakkad Power House, the water is allowed to flow back into
the river. The capacity of Kakkad Power House is 50 MW while
that of CUMI is 12 MW. The supply of water even if meant for a
powerhouse situated at a height and with larger capacity thus
definitely ensures consistent and controlled supply of water to
the project of CUMI located at a lower altitude. Similarly, the
water from a larger reservoir namely, Anayirankal Dam is allowed
to flow so as to reach Paniyar Power House having a capacity of
32 MW electricity. Before reaching Paniyar Power House, the
water passes through the area where the project of INDSIL is
situated, which has a capacity of 21 MW. The location of the project
of INDSIL would thus have natural advantage of consistent and
controlled supply of water. [Para 31, 32][170-D-G]
1.2 The facts on record thus show that both the projects
have certainly derived advantage of controlled supply of water as
contemplated in Clause 14 of the Policy. How much benefit of
controlled supply of water each of the projects has received or
will receive in future would be a matter of computation and
calculation. [Para 33][170-G-H]
1.3 The Agreements entered into by CUMI and INDSIL
show that the terms and conditions of the Policy including Clause
14 thereof were consciously incorporated in the Agreements.
Both CUMI and INDSIL were alive to the fact that because of
peculiar location, their units would certainly have the advantage
of 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 parties
would be governed by Clause 14 of the Policy, as incorporated in
the respective Agreements. [Para 34][171-A-B]
M/S. INDSIL HYDRO POWER AND MANGANESE LIMITED v.
STATE OF KERALA AND OTHERS
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SUPREME COURT REPORTS
[2021] 13 S.C.R.
1.4 In cases where a term of contract or agreement entered
into between the parties is comple

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