LEGAL ISSUE: Whether Captive Power Producers (CPPs) are liable to pay royalty and charges for using controlled water releases for power generation. CASE TYPE: Contract Law, Energy Law. Case Name: M/s. Indsil Hydro Power and Manganese Limited vs. State of Kerala and Others and Carborundum Universal Limited vs. State of Kerala and Others. Judgment Date: 06 September 2021

Introduction

Date of the Judgment: 06 September 2021
Citation: Civil Appeal Nos. 9845-9846 of 2016 etc.
Judges: Uday Umesh Lalit, J. and Vineet Saran, J.
Can private companies generating their own electricity be charged for using water released from government-controlled reservoirs? The Supreme Court of India recently addressed this question, focusing on whether companies using water from existing government dams for their captive power plants should pay royalty and charges for the controlled release of water. This judgment clarifies the contractual obligations of private power producers and their liability to pay for the use of natural resources.

Case Background

The case involves two companies, M/s. Indsil Hydro Power and Manganese Limited (INDSIL) and Carborundum Universal Limited (CUMI), both operating captive power plants in Kerala. INDSIL established the Kuthungal Phase I and II Project, while CUMI set up the Maniyar Hydro Electric Project. Both companies entered into agreements with the Kerala State Electricity Board (KSEB) to generate electricity for their own use. The core issue revolves around whether these companies should pay royalty and charges for using water from government-controlled reservoirs for their power generation.

The Government of Kerala, on 07.12.1990, issued a policy (G.O.(MS)No.23/90/PD) allowing private entities to set up hydel schemes for electricity generation at their own cost. The policy stipulated that these entities would manage the construction, operation, and maintenance of the schemes as per government guidelines. It also mentioned that royalty for water usage and taxes would be applicable. The policy also stated that if the project used the storage benefits of existing reservoirs or tailrace benefits of existing power stations, the agency would have to pay a tariff equivalent to the cost component for the controlled release of water, in addition to the royalty.

CUMI’s project used water released from the Moozhiyar Power House, which was further diverted to the Kakkad Power House before being used by CUMI. INDSIL’s project was located between the Anayirankal Dam and the Paniyar Power Station, utilizing water released from the dam. Both companies initially complied with the agreements, but later contested the charges, arguing that they were discriminatory and lacked legal basis.

Timeline

Date Event
07.12.1990 Government of Kerala frames policy (G.O.(MS)No.23/90/PD) allowing private hydel schemes.
18.01.1991 Maniyar Hydel Scheme allotted to CUMI.
18.05.1991 Agreement between CUMI and KSEB.
08.04.1994 Meeting between INDSIL and KSEB regarding royalty charges.
30.12.1994 Agreement between INDSIL and KSEB.
By 1994 CUMI commissions Maniyar Hydro Electric Project.
By June 2001 INDSIL sets up Kuthungal project.
11.10.2002 Government issues guidelines on transmission and distribution losses.
16.01.2003 Revised guidelines issued by the Government.
May 2003 CUMI requests exemption from controlled water release charges.
2003 CUMI files O.P. No.6880 of 2003 challenging the levy.
03.07.2004 Government orders INDSIL to pay royalty and cost of controlled water release.
2004 INDSIL files Writ Petition (C) No.22187 of 2004, later withdrawn.
23.01.2008 Government refuses to recall its decision to recover royalty from INDSIL.
2008 INDSIL files Writ Petition (C) No.4596 of 2008.
15.02.2013 Single Judge of High Court allows INDSIL’s writ petition.
03.04.2013 Single Judge of High Court allows CUMI’s writ petition.
03.04.2014 Division Bench of High Court allows appeals by the State, setting aside Single Judge’s orders.
06.09.2021 Supreme Court dismisses appeals by INDSIL and CUMI.

Legal Framework

The judgment primarily revolves around the interpretation and application of the following:

  • ✓ G.O.(MS)No.23/90/PD (the Policy): This policy, dated 07.12.1990, allowed private agencies to set up hydel schemes. It stipulated that the construction, operation, and maintenance would be managed by them as per government guidelines. Clauses 2, 14, and 15 were specifically relevant:
    • “2. Private agencies/ public undertakings shall be allowed the setting up of sanctioned hydel schemes of the category small/ mini/ micro at their own cost, the construction, operation and maintenance being managed by them as per the stipulations insisted upon by Government/ Board.”
    • “14. Royalty for the use of water together with the tax and duties on generation of power as fixed by Government/Board from time to time have to be paid by the agency.”
    • “15. For assessment of water quantity used, the application of the formula BH -Power in KW where Q is in NI/Sec and H is the net head in meter for which the machines are designed by the manufacturers, will be made use of.”
  • ✓ CUMI Agreement: The agreement between CUMI and KSEB, dated 18.05.1991, incorporated the terms of the Policy. Clauses 8 and 14 were crucial:
    • “8. The energy from Maniyar Hydro Electric Project fed into the K.S.E.B. Grid will be metered…and this quantum of energy less twelve percent towards wheeling charges and T & D Lesses will be delivered free of cost to CUMI…”
    • “14. Royalty for the use of water together with the tax and duties on generation of power as fixed by govt/KESB from time to time have to be paid by CUMI, to K.S.E.B….The charges for controlled release as above as well as royalty on water, will be reckoned on the quantum of energy generated and shall be ten percent of energy tariff rate for E.H.T. consumer current from time to time for every unit of energy generated and shall be paid to the K.S.E.B.”
  • ✓ INDSIL Agreement: The agreement between INDSIL and KSEB, dated 30.12.1994, also incorporated the terms of the Policy. Clauses 10 and 19 were significant:
    • “10. The energy from KUTHUNGAL PHASE I AND PHASE II project fed into the KSEB grid will be metered…and this quantum of energy less 12% (Twelve percent) towards wheeling charges and T & D losses will be delivered free of cost to the company…”
    • “19. Cess/ Royalties for use of water, if decided by the Government together with tax/ duties as fixed by the Government from time to time shall be paid by the company to Government.”

Arguments

Arguments by INDSIL:

  • ✓ Clause 14 of CUMI Agreement is different from Clause 19 of INDSIL Agreement. Royalty imposition violates the decision of 08.04.1994.
  • ✓ No explanation for the absence of a clause similar to Clause 14 of CUMI Agreement in INDSIL Agreement.
  • ✓ INDSIL’s project is a “run of the river scheme,” depending on water released for the Paniyar Power Station, not for its exclusive benefit. The controlled release of water is for 45 days in a year and only 22.54% of the generation is from controlled release.
  • ✓ Royalty imposition is unconstitutional, discriminating against other similarly situated hydroelectric plants.
  • ✓ Royalty under Clause 19 is a “Tax,” and no government decision was taken as contemplated under the clause.
  • ✓ Tariff for storage/controlled release should be worked out separately for each scheme.
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Arguments by CUMI:

  • ✓ CUMI was the only private power project when its agreement was made, but discrimination arose when other projects were given benefits without charges.
  • ✓ No distinction between CPPs and IPPs. Levy should be based on the benefit of controlled water release, not on whether it is for self-consumption or not.
  • ✓ Even if the clause is negotiated, it can be struck down if arbitrary or discriminatory.
  • ✓ CUMI receives water from various sources, not just the Moozhiyar Power House.
  • ✓ Levy should be based on the cost component of controlled water release, not 10% of the energy tariff.
  • ✓ Levy must be commensurate with the service rendered.

Arguments by the State of Kerala and KSEB:

  • ✓ The terms of the Policy, including Clause 14, are incorporated into the agreements of both INDSIL and CUMI.
  • ✓ There was no unequal bargaining power; both companies willingly accepted the liability.
  • ✓ Both projects benefit from controlled water supply: CUMI from tailrace water and INDSIL from Anayirankal Dam releases.
  • ✓ The policy stipulates charges for private agencies using controlled water releases.
  • ✓ Assured water supply allows smooth turbine operation, justifying the charges.
  • ✓ Clause 19 of INDSIL Agreement and the policy terms make it clear that charges are applicable.
  • ✓ No distinction between INDSIL and CUMI; both benefit from controlled water release.
  • ✓ Charges are based on the policy and agreements, not compulsory exaction.
Main Submission Sub-Submissions by INDSIL Sub-Submissions by CUMI Sub-Submissions by State of Kerala & KSEB
Liability for Charges
  • Clause 14 of CUMI Agreement is different from Clause 19 of INDSIL Agreement.
  • Royalty imposition violates the decision of 08.04.1994.
  • No explanation for the absence of a clause similar to Clause 14 of CUMI Agreement in INDSIL Agreement.
  • The agreement was a “run of the river scheme.”
  • Levy should be based on the benefit of controlled water release, not on whether it is for self-consumption or not.
  • The levy should be commensurate with the service rendered.
  • The terms of the Policy, including Clause 14, are incorporated into the agreements of both INDSIL and CUMI.
  • There was no unequal bargaining power; both companies willingly accepted the liability.
  • Both projects benefit from controlled water supply.
  • The policy stipulates charges for private agencies using controlled water releases.
  • Assured water supply allows smooth turbine operation, justifying the charges.
  • Clause 19 of INDSIL Agreement and the policy terms make it clear that charges are applicable.
  • No distinction between INDSIL and CUMI; both benefit from controlled water release.
  • Charges are based on the policy and agreements, not compulsory exaction.
Discrimination
  • Royalty imposition is unconstitutional, discriminating against other similarly situated hydroelectric plants.
  • CUMI was the only private power project when its agreement was made, but discrimination arose when other projects were given benefits without charges.
  • No distinction between CPPs and IPPs.
  • The distinction or classification brought out was based on a clear rationale with the object of reducing the additional burden on the consumers.
Nature of Levy
  • Royalty under Clause 19 is a “Tax,” and no government decision was taken as contemplated under the clause.
  • Levy should be based on the cost component of controlled water release, not 10% of the energy tariff.
  • The charges for use of controlled release of water in the present cases were for the privilege enjoyed by INDSIL and CUMI.
  • It was a pure and simple contractual relationship between the parties.
Calculation of Charges
  • Tariff for storage/controlled release should be worked out separately for each scheme.
  • CUMI receives water from various sources, not just the Moozhiyar Power House.

Issues Framed by the Supreme Court

The Supreme Court considered the following key issues:

  1. Whether the projects of CUMI and INDSIL are located at places where the advantage of controlled supply of water is assured and can be derived.
  2. Whether Clause 14 of CUMI Agreement and Clause 14 of the Policy, which stood incorporated into the respective Agreements, could be termed to be unconscionable and/or manifestly arbitrary.
  3. Whether in the application of said term to CPPs alone and not to IPPs, was any discriminatory treatment meted out to CPPs.
  4. Whether the imposition of royalty or charges on controlled supply of water was valid and within the jurisdiction of the Board.

Treatment of the Issue by the Court

Issue Court’s Decision Brief Reasoning
Whether the projects of CUMI and INDSIL are located at places where the advantage of controlled supply of water is assured and can be derived. Yes CUMI’s project uses tailrace water from Moozhiyar Power House and INDSIL’s project uses water released from Anayirankal Dam, ensuring controlled supply.
Whether Clause 14 of CUMI Agreement and Clause 14 of the Policy could be termed to be unconscionable and/or manifestly arbitrary. No The agreements were commercial contracts entered into after negotiations; the terms were not unconscionable or arbitrary.
Whether in the application of said term to CPPs alone and not to IPPs, was any discriminatory treatment meted out to CPPs. No CPPs generate electricity for self-consumption, while IPPs generate for the grid. Charging IPPs would increase costs for consumers, justifying the distinction.
Whether the imposition of royalty or charges on controlled supply of water was valid and within the jurisdiction of the Board. Yes The charges were based on the contractual agreements and not a compulsory exaction or tax.

Authorities

The Supreme Court relied on the following authorities:

Authority Court How it was used
Central Inland Water Transport Corporation vs. Brojo Nath Ganguly [1986] 3 SCC 156 Supreme Court of India Explained that the principle of unequal bargaining power does not apply to commercial contracts.
S.K. Jain v. State of Haryana and another [2009] 4 SCC 357 Supreme Court of India Reiterated that the concept of unequal bargaining power has no application in case of commercial contracts.
ICOMM Tele Limited v. Punjab State Water Supply and Sewerage Board and Anr. [2019] 4 SCC 401 Supreme Court of India Stated that contracts of adhesion do not apply where both parties are businessmen in a commercial transaction.
Pioneer Urban Land and Infrastructure Ltd. v. Govindan Raghavan [2019] 5 SCC 725 Supreme Court of India Cited to highlight that one-sided, unfair and unreasonable terms in agreements would not bind the parties.
A.L. Kalra v. Project and Equipment Corporation of India [1984] 3 SCC 316 Supreme Court of India Emphasized that unless litigation is frivolous, exemplary costs or punitive damages do not follow.
Rajasthan State Industrial Development and Investment Corporation and Another vs. Diamond and Gem Development Corporation Limited and Another [2013] 5 SCC 470 Supreme Court of India Stated that a party cannot approbate and reprobate, and is estopped from denying the validity of a contract if they have accepted its benefits.
Hingir-Rampur Coal Co. Ltd. and Others vs. State of Orissa and Others [1961] 2 SCR 537 Supreme Court of India Explained the difference between a tax and a fee, emphasizing that a fee is for services rendered with an element of quid pro quo.
Commissioner, Hindu Religious Endowments, Madras v. Sri Lakshmindra Thirtha Swamiar of Sri Shirur Mutt [1954] S.C.R. 1005 Supreme Court of India Discussed the distinction between a tax and a fee, stating that a tax is for public purposes without a quid pro quo.
Mahant Sri Jagannath Ramanuj Das v. State of Orissa [1954] S.C.R. 1046 Supreme Court of India Upheld the validity of a contribution for services rendered by the State Government.
Ratilal Panachand Gandhi v. State of Bombay [1954] S.C.R. 1055 Supreme Court of India Upheld a contribution for a similar purpose as in the above case.
State of West Bengal vs. Kesoram Industries Limited and Ors. [2004] 10 SCC 201 Supreme Court of India Defined “royalty” as a share of the produce reserved for the owner for allowing another to use property.
India Cement Limited vs. State of Tamil Nadu [1990] 1 SCC 12 Supreme Court of India The Court clarified that royalty is not a tax.
D.K. Trivedi & Sons v. State of Gujarat [1986] Supp SCC 20 Supreme Court of India Explained the concepts of rent, royalty, and dead rent in mining leases.
H.R.S. Murthy v. Collector of Chittoor AIR 1965 SC 177 Supreme Court of India Defined royalty as payment for materials or minerals won from the land.
Laxmi Narayan Agarwalla v. State of Orissa AIR 1983 Ori 210 High Court of Orissa Held that royalty is payment for extracted minerals and not a tax.
Surajdin Laxmanlal v. State of M.P., Nagpur AIR 1960 MP 129 High Court of Madhya Pradesh Opined that royalties are payments for the appropriation of minerals or other government property.
State of Himachal Pradesh and Others vs. Gujarat Ambuja Cement Ltd. and Another [2005] 6 SCC 499 Supreme Court of India Clarified that royalty is a payment for the right to mine, not a tax.
Jindal Stainless Limited and another vs. State of Haryana and others [2017] 12 SCC 1 Supreme Court of India Explained the essential characteristics of a tax.
Mineral Area Development Authority and Others vs. Steel Authority of India and Others [2011] 4 SCC 450 Supreme Court of India Mentioned that certain questions concerning “royalty” under the Mines and Minerals Act are referred to a nine-judge bench.
Inderjeet Singh Sial and another vs. Karam Chand Thapar and others [1995] 6 SCC 166 Supreme Court of India Explained that the word “royalty” can be used loosely in a contract and should be construed based on the terms of the contract.
Union of India and others vs. Motion Picture Association and others [1999] 6 SCC 150 Supreme Court of India Held that a payment under a contract for services rendered is a fee, not a tax.
District Council of the Jowai Autonomous Distt. v. Dwet Singh Rymbai [1984] 4 SCC 38 Supreme Court of India Distinguished between a tax and a fee, stating that a fee is for services rendered.
Ahmedabad Urban Development Authority v. Sharadkumar Jayantikumar Pasawalla [1992] 3 SCC 285 Supreme Court of India Stated that an express authorization for the levy of a fee is necessary.
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Judgment

The Supreme Court dismissed the appeals of both INDSIL and CUMI, upholding the decision of the Division Bench of the High Court. The Court held that:

Submission Court’s Treatment
Clause 14 of CUMI Agreement is different from Clause 19 of INDSIL Agreement and royalty imposition violates the decision of 08.04.1994. Rejected. The court held that the terms of the Policy were incorporated into both agreements, making both liable for charges.
No explanation for the absence of a clause similar to Clause 14 of CUMI Agreement in INDSIL Agreement. Rejected. The court stated that the incorporation of the policy terms in the INDSIL agreement was sufficient.
INDSIL’s project is a “run of the river scheme,” and the controlled release of water is not for its exclusive benefit. Rejected. The court found that INDSIL’s project still benefited from the controlled release of water.
Royalty imposition is unconstitutional, discriminating against other similarly situated hydroelectric plants. Rejected. The court found the distinction between CPPs and IPPs to be valid.
Royalty under Clause 19 is a “Tax,” and no government decision was taken as contemplated under the clause. Rejected. The court held that the charges were based on the contractual agreements and not a tax.
Tariff for storage/controlled release should be worked out separately for each scheme. The court directed the government to pass fresh orders assessing the quantity of water used by applying Clause 15 of the Policy.
CUMI was the only private power project when its agreement was made, but discrimination arose when other projects were given benefits without charges. Rejected. The court found the distinction between CPPs and IPPs to be valid.
No distinction between CPPs and IPPs. Levy should be based on the benefit of controlled water release, not on whether it is for self-consumption or not. Rejected. The court found the distinction to be based on a clear rationale with the object of reducing the additional burden on the consumers.
Even if the clause is negotiated, it can be struck down if arbitrary or discriminatory. Rejected. The court held that the agreements were commercial contracts entered into after negotiations; the terms were not unconscionable or arbitrary.
CUMI receives water from various sources, not just the Moozhiyar Power House. Rejected. The court found that CUMI still benefited from the controlled release of water.
Levy should be based on the cost component of controlled water release, not 10% of the energy tariff. The court directed the government to pass fresh orders assessing the quantity of water used by applying Clause 15 of the Policy.
Levy must be commensurate with the service rendered. The court held that the charges were for the privilege enjoyed by INDSIL and CUMI under the agreements.

How each authority was viewed by the Court?

  • ✓ Central Inland Water Transport Corporation vs. Brojo Nath Ganguly [1986] 3 SCC 156*: The Court clarified that the principle of unequal bargaining power does not apply to commercial contracts, thus not supporting the appellants’ claims.
  • ✓ S.K. Jain v. State of Haryana and another [2009] 4 SCC 357*: The Court reiterated that the concept of unequal bargaining power has no application in case of commercial contracts.
  • ✓ ICOMM Tele Limited v. Punjab State Water Supply and Sewerage Board and Anr. [2019] 4 SCC 401*: The Court used this case to reinforce that contracts of adhesion do not apply where both parties are businessmen in a commercial transaction.
  • ✓ Pioneer Urban Land and Infrastructure Ltd. v. Govindan Raghavan [2019] 5 SCC 725*: The Court distinguished this case, noting that the terms in the present case were not one-sided, unfair, or unreasonable.
  • ✓ A.L. Kalra v. Project and Equipment Corporation of India [1984] 3 SCC 316*: The Court used this case to highlight that unless litigation is frivolous, exemplary costs or punitive damages do not follow, which was not the case here.
  • ✓ Rajasthan State Industrial Development and Investment Corporation and Another vs. Diamond and Gem Development Corporation Limited and Another [2013] 5 SCC 470*: The Court applied the principle that a party cannot approbate and reprobate, thus the companies were estopped from denying the validity of the contract.
  • ✓ Hingir-Rampur Coal Co. Ltd. and Others vs. State of Orissa and Others [1961] 2 SCR 537*: The Court used this case to distinguish between a tax and a fee, stating that the charges were in the nature of a fee for the services and privileges enjoyed.
  • ✓ Commissioner, Hindu Religious Endowments, Madras v. Sri Lakshmindra Thirtha Swamiar of Sri Shirur Mutt [1954] S.C.R. 1005*: The Court used this case to further explain the distinction between a tax and a fee.
  • ✓ Mahant Sri Jagannath Ramanuj Das v. State of Orissa [1954] S.C.R. 1046*: The Court cited this case to show that a contribution for services rendered by the State Government can be valid.
  • ✓ Ratilal Panachand Gandhi v. State of Bombay [1954] S.C.R1055*: The Court cited this case to show that a contribution for a similar purpose can be valid.
  • ✓ State of West Bengal vs. Kesoram Industries Limited and Ors. [2004] 10 SCC 201*: The Court used this case to define “royalty” as a share of the produce reserved for the owner for allowing another to use property.
  • ✓ India Cement Limited vs. State of Tamil Nadu [1990] 1 SCC 12*: The Court used this case to clarify that royalty is not a tax.
  • ✓ D.K. Trivedi & Sons v. State of Gujarat [1986] Supp SCC 20*: The Court used this case to explain the concepts of rent, royalty, and dead rent in mining leases.
  • ✓ H.R.S. Murthy v. Collector of Chittoor AIR 1965 SC 177*: The Court used this case to define royalty as payment for materials or minerals won from the land.
  • ✓ Laxmi Narayan Agarwalla v. State of Orissa AIR 1983 Ori 210*: The Court used this case to hold that royalty is payment for extracted minerals and not a tax.
  • ✓ Surajdin Laxmanlal v. State of M.P., Nagpur AIR 1960 MP 129*: The Court used this case to opine that royalties are payments for the appropriation of minerals or other government property.
  • ✓ State of Himachal Pradesh and Others vs. Gujarat Ambuja Cement Ltd. and Another [2005] 6 SCC 499*: The Court used this case to clarify that royalty is a payment for the right to mine, not a tax.
  • ✓ Jindal Stainless Limited and another vs. State of Haryana and others [2017] 12 SCC 1*: The Court used this case to explain the essential characteristics of a tax.
  • ✓ Mineral Area Development Authority and Others vs. Steel Authority of India and Others [2011] 4 SCC 450*: The Court referred to this case which mentioned that certain questions concerning “royalty” under the Mines and Minerals Act are referred to a nine-judge bench.
  • ✓ Inderjeet Singh Sial and another vs. Karam Chand Thapar and others [1995] 6 SCC 166*: The Court used this case to explain that the word “royalty” can be used loosely in a contract and should be construed based on the terms of the contract.
  • ✓ Union of India and others vs. Motion Picture Association and others [1999] 6 SCC 150*: The Court used this case to hold that a payment under a contract for services rendered is a fee, not a tax.
  • ✓ District Council of the Jowai Autonomous Distt. v. Dwet Singh Rymbai [1984] 4 SCC 38*: The Court used this case to distinguish between a tax and a fee, stating that a fee is for services rendered.
  • ✓ Ahmedabad Urban Development Authority v. Sharadkumar Jayantikumar Pasawalla [1992] 3 SCC 285*: The Court used this case to state that an express authorization for the levy of a fee is necessary.
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Flowchart

Government of Kerala Policy (G.O.(MS)No.23/90/PD) allows private hydel schemes.
↓
CUMI & INDSIL enter into agreements with KSEB for captive power plants.
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Dispute arises over royalty and charges for controlled water releases.
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CUMI & INDSIL challenge the levy in the High Court.
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High Court initially rules in favor of CUMI & INDSIL but Division Bench reverses.
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CUMI & INDSIL appeal to the Supreme Court.
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Supreme Court upholds royalty charges, dismissing the appeals.

Sentiment Analysis

The Supreme Court’s judgment reflects a clear stance on upholding contractual obligations and the validity of charges for the use of controlled water releases by captive power producers. The sentiment can be described as:

Aspect Sentiment Explanation
Contractual Obligations Strongly Affirmative The Court emphasized that the agreements between the companies and KSEB were commercial contracts entered into willingly, and their terms must be upheld.
Validity of Charges Affirmative The Court found that the charges for the use of controlled water releases were valid, as they were based on the contractual agreements and not a compulsory exaction or tax.
Distinction between CPPs and IPPs Justified The Court upheld the distinction between captive power producers and independent power producers, finding a rational basis for treating them differently.
Discrimination Claims Dismissive The Court rejected claims of discrimination, stating that the differential treatment was justified.
Judicial Intervention Limited The Court was hesitant to interfere in commercial contracts and emphasized the need to respect the terms agreed upon by the parties.

Ratio and Implications

The key ratio of the judgment is that:

  • ✓ Captive power producers (CPPs) are liable to pay royalty and charges for the use of controlled water releases if such charges are stipulated in their agreements with the relevant authorities.
  • ✓ The principle of unequal bargaining power does not apply to commercial contracts where both parties are businesses.
  • ✓ The distinction between CPPs and IPPs is valid, with CPPs being charged for the benefit they receive from controlled water releases.
  • ✓ Charges for controlled water releases are considered a fee for services rendered, not a tax.

Implications:

Implication Description
Precedent for CPPs The judgment sets a precedent for other captive power producers, clarifying their obligations to pay for the use of controlled water releases.
Contractual Sanctity The judgment reinforces the importance of upholding contractual obligations and the need for businesses to adhere to the terms they have agreed upon.
Policy Clarity The judgment clarifies the policy of the Government of Kerala regarding charges for the use of controlled water releases, providing certainty for future projects.
Regulatory Framework The judgment underscores the need for a clear regulatory framework for the use of natural resources in power generation.
Financial Implications The judgment has significant financial implications for CPPs, as they are now liable to pay the charges for the use of controlled water releases.

Conclusion

The Supreme Court’s judgment in the case of Indsil & CUMI vs. State of Kerala (2021) is a significant ruling that clarifies the liability of captive power producers to pay for the use of controlled water releases. The Court emphasized the importance of contractual obligations, upheld the validity of the charges, and found a rational basis for the distinction between CPPs and IPPs. This judgment provides clarity on the legal framework for the use of natural resources in power generation and reinforces the need for businesses to adhere to the terms of their agreements. It also highlights the need for clear and consistent policies regarding the use of natural resources.

Source: Indsil & CUMI vs. State of Kerala