Orissa High Court
M/S Indian Metals And Ferro Alloys vs State Of Odisha & Others .... Opp. ... on 9 October, 2025
IN THE HIGH COURT OF ORISSA AT CUTTACK
W.P.(C) NO. 26402 OF 2021
In the matter of an application under Articles 226 & 227 of the
Constitution of India.
M/s Indian Metals and Ferro Alloys .... Petitioners
Limited & Another
-Versus-
State of Odisha & Others .... Opp. Parties
Advocates appeared in this case:
For Petitioner : Mr. Suryakanta Padhi, Sr. Advocate with
M/s. S.S. Mohanty, S. Rout and
N. Agarwal, Advocates
For Opp. Parties : Mr. Umesh Chandra Behura,
Addl. Government Advocate
CORAM:
THE HON'BLE MR. JUSTICE DIXIT KRISHNA SHRIPAD
JUDGMENT
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Date of hearing : 25.09.2025 :: Date of judgment : 09.10.2025
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PER DIXIT KRISHNA SHRIPAD,J.
Petition prayers essentially are for the quashment of: (i)
demand notices dated 23.07.2021 & 11.08.2021 issued by OP No.3 for
arrears quantified at Rs.50720525/- along with interest of Rs.970482/-
and (ii) order dated 15.03.2019 issued by OP No.1 whereby its
application "for refund/adjustment of the excess payment due to the delay
in issuance of reduction order from September, 2015 to June, 2018 for an
amount of Rs.51580982/-...." has been rejected.
2. THE FOUNDATIONAL FACTS OF THE CASE:
2.1. Petitioner Company has been inter alia engaged in the business
of manufacturing & sale of High Carbon Ferro Chrome. It also generates
power for its captive consumption. Second petitioner is its Director/
Shareholder. Company entered into an Agreement with the State on
06.08.2014 for the supply of 10.332 cusecs of water from river
Mahanadi. This Agreement is in the statutory format, namely, Form-K
relatable to Rules 23A(2)(e) & 26 of the Odisha Irrigation Rules, 1961
promulgated under the Odisha Irrigation Act, 1959. The tenure of
Agreement was three years. The rate was Rs.4.50 per 1000 litres. The
source point was near Chasapada.
2.2. The Company, vide Letter dated 13.07.2015, requested the
Government for reducing the quantum of water from 10.332 cusecs to
4.332, "....due to coal block deallocation pursuant to Supreme Court
judgment resulting in reassessment of our requirement,...." There was no
response and therefore, it sent another letter dated 03.08.2015 for
surrendering 4.332 cusecs of water accompanied by a bank draft for
Rs.1000/- towards processing fee as per Odisha Irrigation Amendment
Rules, 2010 requesting to formalize a fresh Agreement with the
Executive Engineer for drawl of 6.076 cusecs of water. To facilitate this,
it had enclosed the application in Form-J, along with a note on
calculation of quantity of water required, water management plan coupled
with water balance diagram & Revised water quantity. There was a
stoney silence from the side of OPs. Company sent another reminder
dated 17.02.2017 specifically asking for refund/adjustment of the excess
money already paid to the tune of Rs.2,47,53,970/- for the period
between September, 2015 & January, 2017. It also said that the payment
of license fee for the month of January, 2017 was being made under
protest.
2.3. Stoney silence continued, as it could happen, more often than
not, in governmental circles. Company sent to OP No.4 yet another
reminder dated 02.05.2017 pressing him for expeditious execution of
fresh Agreement with reduced quantity of water, since 2014 Agreement
was expiring on 05.08.2017. There was no response and therefore, it sent
another letter dated 09.05.2017 reiterating the version of earlier ones
giving full particulars of actually reduced consumption of water during
the period between January & November of 2016. This was done on the
basis of reading of the Consumption Meter. The Director of Water
Resources Allocation (hereafter „DoWR‟) vide letter No. 18313 dated
31.07.2017 had asked the Company to justify its 2015 request for
reduction in allocation of water.
2.4. In the meanwhile, the Engineer-in-Chief, i.e., OP No.2, vide
letter No.34837 dated 29.09.2015 addressed to the Government, had
recommended the case of Company. A copy of the said recommendation
was marked to the Company vide Memo No. 18807 dated 17.06.2017
that was issued by the DoWR, who too had recommended for the renewal
of Agreement with reduced quantity "to avoid future complications".
This he did after vetting the Company‟s draft Renewal Agreement. As
strange things would happen in the government levels, the meeting
scheduled between the Company personnel and the Government officials
in that connection had unilaterally been cancelled. In fact, the DoWR
vide Memo No. 18807 dated 17.06.2017 had offered for the renewal of
Agreement with the reduced quantity of water. However, that too came to
be withdrawn unilaterally on 29.07.2017. This was when, the 2014
Agreement was to expire just within seven days. The Company, vide
letter dated 31.07.2017, informed OP No.2 that it was ready & willing to
execute the Renewal Agreement with the same terms of 2014 Agreement,
pending outcome of its representation for the reduced quantity of water.
OP No.4, vide letter No.4143 dated 01.08.2017, invited the Company for
executing the Agreement for 10.332 cusecs of water and accordingly it
was executed on 04.08.2017.
2.5. In the meanwhile, one more development happened: OP No.1
vide Resolution No. 11011 dated 18.08.2015 had raised a demand of
Rs.25.83 crore towards Water Conservation Fund. Company had filed
WP(C) No.8350 of 2016 and a Coordinate Bench of this Court vide ad
interim order dated 17.05.2016 had interdicted coercive action. This
petition later came to be favourably disposed off, vide order dated
16.05.2022, observing that, the so-called demand was only a „request‟,
and therefore was not coercive. Company, vide its letter dated
03.10.2017, again requested for reduction of water quantity to 5.98
cusecs. The DoWR, vide letter dated 30.11.2017, solicited the views of
IDCO on the same. Company, by letter dated 08.12.2017, requested the
State Government to instruct its officials for executing Revised
Agreement for reduced quantity. Nothing having happened from the side
of OPs, it filed WP(C) No. 26318 of 2017 and eventually withdrew
earlier WP(C) No. 5831 of 2017 on 16.04.2018.
2.6. The DoWR, vide letter dated 02.06.2018, informed the
Company that the Government agreed to reduce quantity of water from
10.332 cusecs to 5.98. Accordingly, a Supplementary Agreement was
also executed between the parties on 25.06.2018. Therefore, a Co-
ordinate Bench of this Court, vide order dated 21.08.2018, disposed off
WP(C) No. 26318 of 2017 reserving liberty to the Company to apply to
the Government for refund of money; it also directed the OPs to take a
call thereon in accordance with law. Therefore, Company, vide letter
dated 01.10.2018, sought for refund of the excess water price quantified
at Rs.51580932/- collected from September, 2015 till the execution of
Supplementary Agreement, i.e., 25.06.2018. It had also sent a reminder
dated 28.12.2018. OP No.1, vide Order No.7742 dated 15.03.2019,
rejected the claim for refund. The Company, vide letter dated
31.07.2019, requested for the reconsideration of said decision.
2.7. OP No.3, vide letter dated 13.01.2020, asked the Company to
sign a Revised Agreement with new rate on the basis of certain Audit
Objections followed by a High Level Committee Reports, which recorded
a finding that Chasapada was "Irrigation Source" and not "Government
Source" of water. Company‟s letter correspondence, in this regard,
yielded no fruit eventually resulting into a Supplementary Agreement
dated 05.02.2020, whereunder water rate was revised to Rs.7.28 per
thousand litres, Source being treated as "Irrigation Works". This led to
Renewal Agreement dated 03.08.2020 and Supplementary Agreement to
the Renewal Agreement dated 03.03.2021, whereunder the Water
Allocation was reduced to 4.75 cusecs from 5.98 from Irrigation Source
and rate came to be refixed at Rs.5.88 per thousand litres.
2.8. Things being as above, OP No.3, vide letter dated 23.07.2021,
demanded a sum of Rs.50720525/- claiming it to be the outstanding
arrears for the period between October, 2014 & January, 2020. This was
on the basis of said Audit Report & the High Level Committee
Recommendation. Further, vide Letter Nos.4600 & 4661 both dated
11.08.2021, the said OP assessed fees to be deposited along with the said
arrears and furthermore levied interest @ 2% amounting to Rs.9,70,482/-,
which included water drawl charges for the current month. Aggrieved
thereby, petitioners are complaining before the Writ Court.
3. GIST OF SUBMISSIONS MADE ON BEHALF OF
PETITIONERS:
3.1. The impugned Order No.7742 dated 15.03.2019, whereby
Company‟s request for reduction of water quantity and consequent refund
of excess amount paid was rejected, and also the demand Notice No.
4370 dated 23.07.2021 followed by Notices vide Nos. 4600 & 4611 both
dated 11.08.2021, are unjust, arbitrary & unreasonable.
3.2. The impugned rejection Order & demand Notices, being in
violation of the principles of natural justice, are unsustainable. At no
point of time, any opportunity of hearing was given. The Audit Report &
High Level Committee Recommendation could not have been acted upon
unilaterally especially when the same were prepared keeping the
Company in darkness.
3.3. The impugned rejection order is the result of refusal to exercise
discretion in the circumstances that were beyond the control of Company,
the request for reduction of water quantity having been made in the light
of Apex Court decision in Manohar Lal Sharma v. Union of India1 that
had resulted into de-allocation of State Largess, namely, Coal Blocks.
3.4. The impugned demand Notices run counter to the substratum,
on which the original Agreement of 2014 has been structured, and that it
is grossly in violation of the foundational principle of Contract Law,
namely, pacta sunt servanda.
3.5. The impugned Orders/demand Notices are the result of
contradictory stand of the OPs, who, being Article 12 Entities under the
Constitution, should not be permitted to blow hot & cold, to the
enormous prejudice of the Company.
3.6. The impugned Order of rejection is not only a non-speaking
order, but is a product of governmental process that did not take into
account the relevant material, namely, the recommendation of its own
authorities having expertise in the matter. There is gross non-application
of mind to the material that was available to the OP No.1.
4. CONTENTIONS URGED ON BEHALF OF OPs:
4.1. There is enormous delay & laches on the part of petitioners in
presenting the writ petition and that has not been explained plausibly;
therefore, constitutional court should decline indulgence in the matter.
Law does not come to the aid of sleepy & tardy.
4.2. In contractual matters, Writ Petition is misconceived, more
particularly when the principal Agreement of 2014 provided for
(2014) 9 SCC 516
arbitration; added the petition involves disputed facts that cannot be
adjudged in writ jurisdiction.
4.3. Under the terms of 2014 Agreement, OP No.1 has reserved to
itself the discretion to alter its conditions unilaterally, and that the said
alteration, namely, from „Government Source‟ to „Irrigation Source‟ has
been done on the basis of Audit Report & High Level Committee
Recommendation. Therefore, the impugned order and the demand
notices, cannot be faltered.
4.4. By entering into subsequent Agreements, Company has not
only waived the arguable cause of action on which the petition is
founded, but is also estopped from contending to the contrary.
4.5. The question of violation of principles of natural justice does
not arise in matters relating to contract; even otherwise the end result
would not have been different had petitioners been given any opportunity
of hearing before the Government, Audit Party or High Level Committee.
5. Having heard learned counsel appearing for the parties, perused
the petition papers and adverted to relevant of the rulings, this Court is
inclined to grant indulgence in the matter as under and for the following
reasons:
5.1. AS TO MAINTAINABILITY OF THE PETITION:
5.1(a). The 1st Agreement dated 06.08.2014 is not a private contract
between two individuals, pure & simple. It is regulated by the provisions
of 1959 Act and 1961 Rules. The very object & reasons of the Statute
read:
"An Act to consolidate and amend the laws relating to
irrigation, assessment and levy of water rate and cess in
force in different parts of the State of Orissa and to provide
for the Regulation of use of water from Government source."
Section 4 is the definition clause of the Act. Clause (6-a) inserted vide
Amendment Act No.3 of 1994 w.e.f. 02.02.1994 defines "Government
water source" to mean any water source created naturally. Clause (9)
defines Irrigation Work inter alia to include all reservoirs, tanks, dams,
canals, channels, pipes, wells, etc. that are constructed, maintained or
controlled by the State Government or its entities. Section 20A gives
power of regulation & use of water from Government water sources for
industrial & commercial purposes. Sub-section (3) of this Section
provides for the grant of license on payment of fees inter alia for
consuming water from Government source. Sub-section (5) makes
consumption of water from Government water source sans license an
offence punishable with imprisonment and/or with fine. Sub-section (6)
speaks of criminal liability of Companies like the 1 st petitioner. Sub-
section (7) empowers the Government to exempt payment of license fee in
the interest of industrial & commercial developments in the State.
5.1(b). Section 53 of the Act vests rule making power in the
Government. Section 56 vests enormous power in the Government to
remove difficulties and do anything for such removal, subject to the same
being not inconsistent with the Act or the Rules. The Government, in
exercise of power under Section 53, has promulgated 1961 Rules. Rule
23A brought on the Statute Book, vide OGE No. 1571 dated 04.10.2010,
prescribes a whole lot of procedure relating to drawl of water from
Government water source. Sub-Rule (2)(f) prescribes the license fees.
The proviso to Sub-Rule (2)(f) gives discretion to the Government to
revise rates of license fees. Similarly, Sub-Rule (2)(g) gives power to
grant concession from the payment of license fee to any industrial
establishment. Schedule-III is relatable to Rule 23-A(2)(f), which
prescribes format of application, i.e., FORM „K‟. There are processes &
mechanisms and adjudicatory bodies created under the Act for working
out grievances and for enforcing the statute. Thus, there is force in the
submission of learned Senior Advocate Mr. Padhi appearing for the
petitioners that the Agreements in question have abundant public law
elements that make them instruments of statutory character, in the light of
Apex Court decision in LIC of India v. Escorts Limited2. Therefore, the
writ petition cannot be summarily thrown out. It is more so because the
impugned order rejecting Company‟s application for reducing the
allocation of water quantity has trappings of public law, namely, the 1959
Act and the 1961 Rules.
5.2. AS TO AVAILABILITY OF ARBITRATION CLAUSE AS
ALTERNATE REMEDY:
5.2(a). Learned AGA Mr. Behura vehemently contended that Clause
(15) of Para-III in the 2014 Agreement provides for arbitration and
therefore, petitioners should be relegated to the arbitrator, more
particularly when disputed facts are involved in the case. Mr. Padhi
counters this by telling in his inimitable style that the Government itself
having made the impugned order, asking his clients to go for arbitration
would be, a case of appeal from Caesar to Caesar‟s wife. He is more than
justified in employing the metaphor: It is apparent from the record that the
[1986] 59 Comp Cases 548
author of rejection order is none other than the Government itself. The
arbitration clause in the subject Agreement reads as under:
"15. In case of any dispute/arising out of this agreement, the
same shall be referred to Government and the decision of the
Government in Water Resources shall be final."
Thus, no useful purpose would be served by relegating the petitioners to
arbitration at the hands of Government. An argument to the contrary if
countenanced, would be a mockery of justice. After all, the doctrine of
alternate remedy is not a China Wall that blocks entry of litigants to the
portals of Writ Court, as a Thumb Rule.
5.2(b). The vehement contention of Mr. Behura that the case involves
disputed facts and therefore, Court should decline to exercise writ
jurisdiction, again does not impress much. Reasons for this are not far to
seek: Firstly, plea of the kind is taken sans bona fide. Company had
applied for downward revision of allocation of water, way back on
13.07.2015. Despite a slew of reminders and writ petitions, Government
slept over the matter till 15.03.2019. No explanation is offered for this
delay. Secondly, though the said order refers to the recommendation
dated 29.09.2015 for reduction of allocation, no justifiable reason is
forthcoming for not agreeing with the same. Thirdly, it does not duly
discuss the ground urged by Company, namely, the decision of Apex
Court on de-allocation of State Largess, consequent to which user
potential of water was drastically diminished. Constitutional Courts do not
countenance a stand that is marred by lack of bona fide, be it factual or
legal. It is more so, because our constitutional jurisprudence expects State
& its instrumentalities to conduct themselves as Model Litigants. The
contentions they have taken in this legal battle does not behoove their
stature.
5.2.(c). It is not that in every case involving disputed facts, a Writ
Court should invariably abdicate its constitutional obligation of doing
justice to the worthy cause brought to its portal. The correct approach
would be to ask, whether the disputed facts can be adjudged on the basis
of evidentiary material borne out by record in the light of battle lines
drawn through the pleadings of the parties. If answer is in the
affirmative, a litigant cannot be sent back empty handed by quoting some
jurisprudential theories. It was Justice Oliver Wendell Holmes, who in
DAVIS v. MILLS3 has observed as under:
"Constitutions are intended to preserve practical and
substantial rights, not to maintain theories..."
The dispute involved in the petition can be fairly adjudicated in writ
jurisdiction on the basis of abundant evidentiary material available on
record. Added, petition is of the year 2021 and years have rolled since
then. At least, as a concession to the shortness of human life, this legal
battle should come to an end, right to speedy justice being a facet of
Article 21 of the Constitution of India.
5.3. AS TO DELAY & LACHES IN PETITIONING:
5.3(a). Mr. Behura passionately contended for the dismissal of petition
on the ground of delay & laches saying that the impugned order was made
on 15.03.2019, whereas petition has been filed only on 31.08.2021 with
no explanation whatsoever therefor. He also told the Court that the 1st
194 US 451 (1904)
petitioner is an industrial company and the 2nd happens to be its Director;
had petitioners been illiterates, peasants, labourers or the like, matter
would have been different. This contention is difficult to agree with:
Firstly, there is no limitation period constitutionally prescribed for
invoking writ jurisdiction. Secondly, no litigant would benefit by
belatedly instituting the petition. Thirdly, it is not that had the petitioners
approached this Court immediately, by this time the petition would have
been heard & decided. Much older petitions than this have been still
languishing in the court cupboards, without a sun ray falling on their
papers for years. Fourthly, what prejudice is caused to the OPs by virtue
of delay arguably brooked in the matter, remains enigmatic. Fifthly,
dispute in the petition essentially relates to claim for money. Even for a
money suit, the limitation period is three years under the Schedule to the
Limitation Act, 1963. It is fairly settled that whilst adjudging delay &
laches in invoking writ jurisdiction, the statutory period of limitation for
lis of the kind, is one of the parameters.
5.3(b). Let me examine the contention of delay & laches in the
backdrop of uncontroverted fact matrix: Company‟s representation is
dated 13.07.2015. Despite a series of reminders, OPs slept over the
matter. Petitioners moved WP(C) No. 5831 of 2017 seeking an order for
the execution of fresh agreement for the reduced quantity of 6 cusecs of
water from the stipulated 10.322, in the light of Apex Court decision
relating to de-allocation of coal blocks. The Engineer-in-Chief, vide
Memo dated 30.05.2017, and DoWR, vide Letter No.18805 dated
17.06.2017, had recommended the case of Company. WP(C) No. 23618
of 2017 also followed for a direction to the OPs to execute reduced
quantity Agreement. Supplementary Agreement came to be executed on
25.06.2018, OP No.1 having agreed to the proposal of DoWR. Therefore,
said writ petition came to be disposed of on 21.08.2018 reserving liberty
to the petitioners to apply to the Government for refund. Petitioners did it
on 01.10.2018 and sent a reminder on 28.12.2018.
5.3(c). OP No.1 made the impugned order only on 15.03.2019 rejecting
Company‟s claim for refund/adjustment of the excess amount. However,
that was not communicated to the petitioners and therefore, they had sent
another reminder on 31.07.2019, being unaware. Subsequently, coming
to know of the said order, they had, vide representation dated 20.01.2020,
sought for copies of Audit Report & High Level Committee
Recommendation. After obtaining the same, they made another
representation dated 06.03.2020 for reconsideration of their prayer for
refund of the excess amount. Whilst awaiting for the response of OP No.1,
they received demand notice dated 23.07.2021 for another sum of
Rs.50720525/-. They also sent a reply dated 31.07.2021 disputing the
claim and demanding for the refund of their own money. OP No.3
reiterated the demand and asked for additional amount vide Letter
Nos.4660 & 4661 both dated 11.08.2021. The instant petition is filed on
31.08.2021. In the circumstances, this Court is at loss to know, how the
contention of delay & laches can sustainably be taken, OP No.1 itself
having brooked long delay in taking the decision on the claim of
petitioners.
5.4. AS TO VIOLATION OF PRINCIPLES OF NATURAL
JUSTICE:
5.4(a). The contention of Mr. Behura that in contractual matters, a
party cannot invoke the principles of natural justice, appears to be too
farfetched. There could be some scope for contention of the kind, had the
contract been purely private as distinguished from the statutory one.
However, when statutory orders are the subject-matter of examination,
and their authors happen to be high functionaries of the State, there is no
scope for such a contention. As discussed above, rejection of petitioners‟
request for reduction of water allocation is not preceded by an opportunity
of hearing. Enormity of its consequences on the interest of Company
lends support to the contention that an opportunity of hearing ought to
have been given. In fact, it was the specific case of Company that due to
Coal Block de-allocation in the wake of Apex Court decision, it was not
in a position to use even half of water that has been allocated and
therefore, it wanted to surrender 4.332 cusecs of water out of allocated
10.332 under 2014 Agreement. OPs had asked the Company to justify
that it did not require so much of water. This fact sounds stranger than a
fiction. There were recommendations by high functionaries of the
Government in favour of the Company. What heavens would have fallen
down, had an opportunity of hearing been given to the petitioners, remains
a mystery, here too.
5.4(b). The impugned demand notices are structured on the basis of
Audit Report & High Level Committee Recommendation to the effect that
the Company was drawing water from „Irrigation Works‟ and not from
„Government Source‟. Petitioners had no opportunity of participation in
the proceedings of Audit Party or of High Level Committee. Nor were
they given the copies of said reports before raising the demand in crores
of rupees. OP No.1 ought to have furnished the copies of reports so that
their arguable unworthiness could be demonstrated or that they could not
be made use of in the face of 2014 Agreement could be pleaded, because
it was conclusive between the parties at least so far as the nature of source
of water is concerned. Thus, there is a gross violation of principles of
natural justice, as rightly submitted by Mr. Padhi. The contention of Mr.
Behura that even if the Company was heard in the matter, that would not
have enured to its benefit, would ill lie in the mouth of a party, who has
violated these sacrosanct principles vide S.L. Kapoor v. Jagmohan4. The
principles of natural justice, at times, seek shelter under the ever-
expanding umbrella of Article 14 of the Constitution.
5.4(c). Mr. Padhi is also right in submitting that the Engineer-in-Chief
and DoWR had recommended the case of Company for reducing allocated
quantity of water, after examining all aspects of the matter. The
impugned order ritualistically refers to the same; however, the
Government has not given due consideration to the same, even when they
had statutory trappings. When de-allocation of Coal Block happened
because of Apex Court decision, obviously, the substratum on which the
allocation was made under 2014 Agreement had partly collapsed. What
more was necessary for the Government from the side of Company to
justify its offer to surrender excess allocation, is un-understandable, to say
the least. More is not necessary to substantiate the contention of non-
application of mind to the relevant material. Thus, the impugned order
suffers from the vice of lack of due advertence and therefore is vitiated.
5.5. AS TO SUSTAINABILITY OF ALTERING CONSTIT-
UENT COMPONENTS OF 2014 AGREEMENT:
5.5(a). 2014 Agreement at Annexure-3 has the following schedule:
AIR 1981 SC 136
SCHEDULE
Purpose for Volume of Water if Period The Place at which
which any of it will be supplied
water will supply
be supplied
Industrial 25279 m3/per day 3(three) River Mahanadi
(10,362 cusecs) years near Chasapada
(Previously
allocation 5.722
cusecs + present
allocation 4.61
cusecs)
Obviously, the factors mentioned in the schedule are relatable to Section 20-A
of the Act. Sub-Sections (1) & (3) thereof, being relevant, are reproduced:
20-A. Regulation and use of water from Government
water source:-
(1) The State Government may, in the public interest-
regulate the use, diversion, collection or consumption of
water from Government water source for industrial and
commercial purposes other than agriculture.
xxx xxx xxx
(3) The licence referred to in Sub-section (1) shall be
subject to such terms and conditions, and shall be
obtained from such authority, in such manner, and
subject to payment of such fees, as may be prescribed.
(Other Sub-Sections, not being much relevant, are not reproduced.)
5.5(b). The above provisions specify „Government Water Source‟ as
distinguished from „Irrigation Water Works‟, the latter being regulated by
Section 20. „Government Water Source‟ is defined under Rule 4(6-a) to
mean any water source created naturally or water in a state of running as
rivers. It is a "means definition" and not "inclusive definition" unlike in
the case of "Irrigation Work", i.e., Irrigation Water Source. The word
„fee‟ is defined under Rule 2(e) to mean a charge levied for supply of
water from Government Water Source inter alia for industrial purpose.
The „license‟ is defined under Rule 2(g) to mean a permission granted by
a competent authority for use of water from a Government Water Source.
Sub-Rule (2) of Rule 23A states that it is the Government in its Water
Resources Department which shall be the competent authority to grant
license under the Act inter alia to industrial establishments. Rule
23A(1)(b) provides for installation of Flow Meter to measure the quantum
of water to be drawn by industrial establishment from the Government
Water Source. Conspicuously, there is no corresponding provision in
respect of water drawn from Irrigation Water Works. Rule 26 has a
heading "Supply of water for any purpose other than irrigation". Rule
23A(2)(e) prescribes FORM-K for the Agreement. Clause (f) provides for
charging and collecting the license fee as specified in Schedule-III to the
Rules.
5.5(c). Let me now examine how 2014 Agreement is structured: On its
forehead "FORM-K" is printed; immediately below that, what appears is
"[See rule 23-A(2)(e) & rule 26]". Next below is scripted
"AGREEMENT FOR SUPPLY OF WATER FOR THE PURPOSE OF
INDUSTRIAL/ COMMERCIAL USE". Parties to the Agreement are the
Governor of Odisha on the one part and authorized representative of 1st
petitioner-Company, on the other. There are Vice-President-Operation
(Power) & Sr. General Manager-Legal, as sureties. It hardly needs to be
mentioned that the word "Governor" is a shorthand for the State
Government vide Maru Ram v. Union of India5. The Agreement at
page-2, i.e., immediately below the cause title reads as under:
"WHEREAS, the applicant has made an application for
supply of water from Government water source/Irrigation
works for the period as mentioned in the Schedule; here to
annexed;
The term "Irrigation Works" occurring in this clause along with
"Government Water Source" is superfluous, inasmuch as the very
application mentions "Government Water Source" only, which becomes
clear from the schedule. Even otherwise, it has to be so construed because
it is the Government, which processed the application as being the
competent authority under Rule 23-A(2)(e), which is mentioned in the
very heading of the Agreement. Clauses 24, 25 & 26 of the Agreement
specifically referred to river Mahanadi as the source from which
petitioner-Company has to draw water. Obviously, it fits into the
definition of "Government Water Source" as distinguished from
"Irrigation Works". This apart, the rate of license fee fixed in the
Agreement is relatable to Schedule-III referred to in Rule 23-A(2)(f).
This schedule has the heading:
"RATE OF LICENCE FEE FOR INDUSTRIAL/
COMMERCIAL USE OF WATER FROM
GOVERNMENT WATER SOURCE"
That being the position, it falls foul of Government to say that the
Company is drawing water from "Irrigation Works".
5.5(d). It hardly needs to be stated that any Agreement will have
preliminary negotiation which leads to meeting of the minds as to intent &
(1981) 1 SCC 107
policy content of the contract in contemplation. As already mentioned,
Section 20-A of the Act read with Rule 23-A of the Rules prescribes a
whole lot of procedure which the functionaries under the Act have to
follow before finalizing the Agreement of enormous implication both in
terms of water as a resource and levies as revenue flowing to the Public
Exchequer. It is not that the officials of the Government were blindfolded
whilst inking the Agreement. Entire exercise was undertaken in the
normative process, is apparent. It is not the case of OPs that the Company
or its personnel perpetrated any act of misrepresentation, let alone fraud.
That being the position, the doctrine of estoppel comes in the way of
unilaterally altering the substratum, namely, "Government Water Source"
which constitutes essential component of the contract. What irks one is
that such alteration is made with retrospective effect and that too long
after tenure of the Agreement had expired. Chitty on Contracts 25th
Edition Vol. I at Para-28 writes as under:
"Estoppel. "A party who executes a deed is estopped in a
court of law from saying that the facts stated in the deed
are not truly stated." The principle has been extended to
statements in recitals in a deed. It is a question of the
construction of the deed as a whole as to which parties are
estopped by a recital. When a recital is intended to be a
statement which all the parties to the deed have mutually
agreed to admit as true, it is an estoppel upon all...."
5.6. AS TO GOVERNMENT'S POWER TO ALTER TERMS OF
CONTRACT:
5.6(a). The vehement submission of Mr. Behura that the Government
has reserved right to alter the conditions vide Clause 32 at internal Page-7
of the 2014 Agreement is difficult to countenance. The one-liner clause
that is vociferously pressed into service, runs:
"Government shall be at liberty to review the water
allocation unilaterally in case of exigencies."
Government as a party to the contract is given power to alter allocation of
water, is true. However, it does not mean that the Government can alter
the nature of source of water, i.e., from „Government Water Source‟ to
„Irrigation Works‟. Allocation of water, in the text & context of the
Agreement only means the quantum of water, as specified by the parties,
and not the nature of source. To illustrate, Government may reduce the
„agreed quantity‟ of water, may be because the same is needed for other
comparatively more important purposes like drinking, agriculture, etc.
Any contention in variance with this view would run counter to the policy
content of the Agreement, in addition to rendering the arrangement
between the parties, topsy-turvy.
5.6(b). Mr. Behura‟s further contention that the decision to alter the
source of water is founded on the reports of Audit & High Level
Committee, may be true. However, such reports/recommendations cannot
constitute a legally sustainable basis for altering the essential terms of
contract between the parties, that too unilaterally to the detriment of
Company. As already mentioned, there is no power to alter the source of
water. Assuming that there existed such power, the same becomes
redundant once the discharge of contract happens by its performance or
efflux of time. In other words, there is no warrant for effecting
retrospective alteration of the terms of contract. Such power lies in the
domain of legislature, and not in the realm of contract. A contrary view, if
countenanced, would rob away the sanctity of foundational principle of
contract, namely, pacta sunt servanda literally meaning „abide by what is
agreed upon‟. His contention that the Government, being the guardian of
the public resources, like the river water, has taken the decision to protect
revenue generation, is attractive at the first blush. However, the said
foundational principle leaves no scope for such a contention. In the
matters of contract, what governs the parties, is its terms and not alien
things that make much ado signifying nothing.
5.6(c). The impugned demand of excess charges is made on the basis
of altered substratum of 2014 Agreement, is fully demonstrated. The
expression „Government Water Sources‟, is substituted by „Irrigation
Works‟. As a corollary & consequence, the Schedule of rates is changed
to the prejudice of Company. All this happened long after the discharge of
2014 Agreement. The Audit Report or High Level Committee
Recommendation would not come to the rescue of OPs. However, they
can be subject-matter of fresh arrangements. But what has already been
accomplished, is a settled fact that cannot be unsettled in exercise of
executive power of the Government. Rule of law also requires Article 12
Entities to abide by their words given to others for consideration. An
argument to the contrary would strike at law, at reason & at justice. It is
not a small contract relating to teen bhiga land between two little men in a
remote village. Parties herein are tall & mighty: One is the
Governor/Government and the other is an industry that generates
employment & revenue. The contract is statutory and it is drawn in the
prescribed form, a lot of ground work having been done before. Its terms
are clearcut & dry. It was Jeremy Bentham who said "what is Government
without justice, but a band of robbers." That being the position, sustaining
the impugned demand in excess of what is payable under the terms of
Agreement would be unconscionable, which a Writ Court cannot afford to
take cognizance of.
5.7. AS TO SUSTAINABILITY OF IMPUGNED ORDER
DATED 23.07.2021, WHEREBY REQUEST FOR
REDUCTION OF WATER ALLOCATION IS
REJECTED:
5.7(a). The Agreement was entered into on 06.08.2014, whereunder
allocation of water was 10.332 cusecs. The Company, vide letter dated
13.07.2015, specifically requested for the reduction of allocation to 4.332
cusecs. In the said letter, it was stated:
"However, due to coal block deallocation pursuant to
Supreme Court judgment resulting in reassessment of our
requirement, we would like to now surrender 4.332 cusecs
of allocated Water from the existing 10.332 cusecs
allocation."
Then followed an application in the prescribed format, i.e., FORM-J for
surrendering 4.332 cusecs of water along with revised note on water
quantity & water balance diagram. It was accompanied by bank draft for
Rs.1000/-, as required under Irrigation Amendment Rules, 2010, so that a
fresh Agreement with altered terms should be executed. Copies were
marked to all the OPs. A slew of reminders went to the OPs, with no
avail. It was specifically stated that the industry of the Company was
consuming much less than 50% of allocation. This was on the basis of
Flow Meter reading. The Engineer-in-Chief (Water Resources), vide
report No.34837 dated 29.09.2015, had recommended the case of
Company. Nothing happened in the matter.
5.7(b). Strangely, the Engineer-in-Chief-cum-Special Secretary to
Government, vide letter No.18312/WR dated 31.07.2017, in response to
Company‟s letter dated 03.08.2015, said as under:
"Sub: Application of M/s IMFA Ltd. For reduction of
allocation to 6.0 cusecs from river Mahanadi for its Plat at
Choudwar, Cuttack.
Sir,
I am directed to invite reference to our Letter dated
03.08.2015 on the subject noted above and request you to
justify the reduction in allocation of water from 10.332
cusecs to 6.076 cusecs from river Mahanadi to this
Department at the earliest."
This response from the OPs came little less than two years after
Company‟s letter. Looking to this, if one says that the Government moves
with snail‟s speed, snails may sue one for defamation. What irks the Court
is not just the long delay in response; but it is the very content of response
itself. The consumer, namely, Company has specifically stated that
because of de-allocation of coal blocks in the wake of Apex Court
decision, it was not able to consume even 50% of allocated water under
the Agreement. The statutory functionaries of the Government, more
particularly the Engineer-in-Chief himself, having ascertained the factual,
had recommended the case of Company for reduction of allocation. What
more was required „to justify the reduction in allocation of water‟, is
beyond one‟s imagination. Mr. Behura‟s contention that the Company did
not elaborate its stand „and for other reasons‟, is bereft of reason & logic.
No prudent person in the trade would have told the consumer to consume
more than what he can or he requires. When one suffices, forcing two on
him is unfair & unjust, as rightly contended by Mr. Padhi.
5.7(c). The contention of Mr. Behura that under the terms of 2014
Agreement, the Government has no power to reduce the prescribed
allocation, is not true: Clause 32 at page 7 of the Agreement specifically
reserves discretion to the Government to do it in case of exigencies. For
the ease of reference, this short clause is again reproduced:
"32. Government shall be at liberty to review the water
allocation unilaterally in case of exigencies."
The Government, by asking the Company to justify its request for
reduction, admits the availability of such power. The word „unilaterally‟
does not exclude the intended bilateral Arrangement. What is being
construed, is the language employed in an agreement between parties, and
not those in a statute. After all, a word is the skin of living thought; it has
no fixed contours; it takes its colour and meaning from the company of
other words, as observed by Justice Holmes. The terminology used in
agreements has to be ordinarily construed in common parlance. The words
„exigency‟ & „emergency‟ are explained by jurist P. Ramanatha Aiyar as
under:
"Exigency, Emergency. The exigency is more common but
less pressing: the emergency is imperious when it comes,
but comes less frequently; a prudent traveler will never
carry more money with him than what will supply the
exigencies of his journey; and in case of an emergency will
rather borrow of his friends than risk his property."
The case of Company for reduction of water allocation perfectly accords
with „exigency‟ even in the lexicographical sense, nothing contra having
been pointed out.
5.7(d). Case of the Company is adumbrated and that of the OPs is
demolished by the very impugned order of the Government dated
15.03.2019 because it accepted the recommendation of the Water
Allocation Committee and allowed reduction to 5.98 cusecs. It is relevant
to reproduce the fourth unnumbered paragraph in the said order:
"That, M/s IMFA, Choudwar has applied for reduction of its
allocation from 10.332 Cusecs to 5.98 Cusecs in September,
2015. The Water Allocation Committee recommended the
case to the government in Water Resources Department vide
letter dated 29.09.2015. After observing all official
procedures and getting recommendation of the IPICOL on
dt. 29.01.2018, the Government in Department of Water
Resources communicated the decision of reduction of water
allocation vide letter dt.02.06.2018."
The reasoning of the Government that the 2014 Agreement was for three
years and therefore it was not in a position to alter anything in the matter
of allocation, is contrary to law and devoid of justice. On the one hand,
the Government had altered the very source of water, i.e., from
„Government Water Source‟ to „Irrigation Works‟, that too with
retrospective effect. On the other hand, it tells the Company that it has to
abide by the terms of subject Agreement and therefore, cannot reduce the
water allocation. Mr. Padhi is more than justified in pressing into service
the doctrine against approbation & reprobation. Ours is a constitutionally
ordained Welfare State. Therefore, its action should be just & reasonable.
It cannot be favourably selective when it comes to its own interest, to the
prejudice of others‟. Any civilized jurisdiction shuns the act of blowing
hot & cold. The way the OPs have treated the petitioners remains
Shakespeare‟s Merchant of Venice. The Government officials cannot act
like Shylock, who wanted to extract one pound of flesh from Antonio in
terms of contract.
5.8. CAN GOVERNMENT ALLOW CONCESSION EVEN IN
MATTERS OF CONTRACT...?
5.8(a). When the substratum, on which the contract is structured, is
altered for reasons beyond the control of any party, he cannot be asked to
adhere to the agreed terms, more particularly when the other party is State
or its instrumentality under Article 12 of the Constitution of India which
have to act with fairness standards obtaining in the field. It is more so,
when the contract has statutory character like the one at hand, as already
discussed. The Company was not in a position to consume even half of
the allocated water because of de-allocation of coal blocks that happened
on account of Apex Court decision as a nova causa interveniens. Thus,
the circumstances, that led to Company laying a claim for reduction of
water allocation, were beyond its control and anybody‟s contemplation.
5.8(b). Where a statutory contract creates a duty or charge and the party
is disabled from performing it, there the law will excuse him in all
civilized jurisdictions. Power avails to the Government not only in the
domain of contract but also in the statute. This view gains considerable
support from the Apex Court decision in GMR Warora Energy Limited v.
Central Electricity Regulatory Commission (CERC)6. Sub-Section (7) of
Section 20-A of the Act empowers the State Government to make rule for
exempting in part or in full the payment of required license fee for any
specified period in the interest of industrial development in the State.
Accordingly, Rule 23-A(2)(g) has been promulgated. It reads as under:
"the State Government in its Water Resources Department
may grant concession from the payment of licence fees to
any industrial, commercial or other establishment as
maybe considered necessary pursuant to Industrial Policy
Resolutions of the State"
In fact, Company had furnished the data of water consumption which fell
below 50% of the allocation. This is not disputed by the OPs. It is not the
(2023) 10 SCC 401
case of Government that Company does not understand its own
requirement of water.
5.9. AS TO CONTENTION OF ESTOPPEL AGAINST
PETITIONER-COMPANY:
5.9(a). Learned AGA Mr. Behura very effectively contended that the
Company having entered into subsequent contract with the same terms for
a certain period, is estopped from taking a position in variance with
agreed terms. This contention cannot gain acceptance of the Court for
more than one reason: Firstly, the contract is prima facie statutory and it is
drawn in a prescribed form. Secondly, the Government lacks bona fide,
inasmuch as that was not the stand iterated in the impugned order with
justifiable reason. Thirdly, estoppel is not a one way traffic; it should
apply equally to both the sides. The OPs had altered essential components
of the contract that too after its discharge due to efflux of time. Fourthly,
such a contention would not avail to the Government, since it had asked
the Company to justify its offer for surrender of water. Thus, by its
conduct it has waived the arguable doctrine.
5.9(b). It is not the case of Government that any policy evolved by it
would come in the way of reducing the allocation of water. The provisions
of the Act and the Rules promulgated thereunder regulate allocation of
water as a State Largess to private entities for industrial purpose. Even
discretion is vested in the State Government to evolve policies in that
direction. Industrial development in the State would generate private
employment and public revenue. Petitioner-Company cannot be burdened
by compelling it to consume more water than required for its industrial
activities. After the 2014 Agreement, new arrangements have been made
between the parties, is true. However, in making that Company had no
option, river water being State captive resource. Petitioner-Company had
no option than to sign renewal of contracts, there being no other source of
water. Availability of public resource like water & power, is no ground to
compel private entities to buy more than what they require. Without
source, the industrial activity would be badly affected, if not closed.
Therefore, it is unconscionable for the State to invoke the doctrine of
estoppel.
5.9(c). There is another angle to the matter: Fundamental right to
establish business/industry is constitutionally guaranteed under Article
19(1)(g), of course subject to certain exceptions. However, right to close
an existing industry is not as expansive as the right to establish an
industry, interest of several other stakeholders like the workmen being
involved, vide Excel Wear v. Union of India7. Arguably, the conditions
of employment of workmen cannot be prejudiced due to the reduction of
industrial resources like water, power, etc., which may cause fall in the
output. An employer may be compelled to pay compensation even to the
retrenched workmen, right to retrench itself being very restrictive. An
industry is incurring losses for reasons beyond the control of management,
is a poor justification for not paying wages or retrenchment compensation.
It was in the wake of that, the subsequent contracts have been entered
into, as a supplement to the 2014 Agreement, as a matter of inevitability,
the OP No.1 being the captive holder of water resource. Mr. Padhi is right
in telling that, there was no level playing field between the parties to
contract. This aspect assumes relevance in decision making process.
Added, the law is well settled that if the action or decision is perverse or is
AIR 1979 SC 25
such that no reasonable body of persons, properly informed, could come
to or has been arrived at by the authority misdirecting itself by adopting a
wrong approach, or has been influenced by irrelevant or extraneous
matters, such a decision becomes vulnerable for challenge.
In the above circumstances, this petition succeeds. A Writ of
Certiorari issues quashing the impugned order and demand notices. Matter
is remitted to the portals of OP No.1 for fresh consideration in the light of
following structural directions:
(i) The subject Agreements shall be treated as comprising
Government Water Source and not Irrigation Works both for the purpose
of allocation of water and fixation of tariff.
(ii) The application of petitioner-Company for reduction of water
allocation from 10.332 to 6.00 cusecs of water to be allowed with effect
from 03.08.2015, this quantity having been stated in Company‟s letter
dated 02.05.2017.
(iii) The matter in remand shall be decided within a period of two
months reckoned from this day, after giving an opportunity of hearing to
all the stakeholders including the petitioners.
(iv) Any amount excessively charged and exacted from the
petitioner-Company shall be refunded with interest at the rate of 1% per
mensem within one month subject to and reckoned from the decision on
remand, failing which the delay attracts additional 1%.
Costs reluctantly made easy.
Web copy of judgment to be acted upon by all concerned.
Dixit Krishna Shripad,
Judge
Designation: JOINT REGISTRAR-CUM-PRINCIPAL
Orissa High Court, Cuttack
SECRETARY
Reason: Authentication The 9th day of October, 2025/GDS
Location: HIGH COURT OF ORISSA : CUTTACK
Date: 10-Oct-2025 16:11:09
