M/S. Indian Metals and Ferro Alloys Ltd. Vs State of Odisha

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

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CORAM:

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THE HON’BLE MR. JUSTICE DIXIT KRISHNA SHRIPAD

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J U D G M E N T

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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 .

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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

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in issuance of reduction order from September, 2015 to June, 2018 for an amount of Rs.51580982/-…. ” has been rejected.

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2. THE FOUNDATIONAL FACTS OF THE CASE:

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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.

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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

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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.

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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.

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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

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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.

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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.

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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 Coordinate 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.

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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.

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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.

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3. GIST OF SUBMISSIONS MADE ON BEHALF OF PETITIONERS:

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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.

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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.

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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

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of Apex Court decision in Manohar Lal Sharma v. Union of India¹ that had resulted into de-allocation of State Largess, namely, Coal Blocks.

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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 .

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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.

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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.

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4. CONTENTIONS URGED ON BEHALF OF OPs :

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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.

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4.2. In contractual matters, Writ Petition is misconceived, more particularly when the principal Agreement of 2014 provided for

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1 (2014) 9 SCC 516

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arbitration; added the petition involves disputed facts that cannot be adjudged in writ jurisdiction.

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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.

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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.

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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.

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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:

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5.1. AS TO MAINTAINABILITY OF THE PETITION :

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5.1(a). The 1^st 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:

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“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.”

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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 ali a 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. Subsection (7) empowers the Government to exempt payment of license fee in the interest of industrial & commercial developments in the State.

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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.

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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.

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5.2. AS TO AVAILABILITY OF ARBITRATION CLAUSE AS ALTERNATE REMEDY :

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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

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2 [1986] 59 Comp Cases 548

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author of rejection order is none other than the Government itself. The arbitration clause in the subject Agreement reads as under:

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“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.”

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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.

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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

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contentions they have taken in this legal battle does not behoove their stature.

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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:

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“Constitutions are intended to preserve practical and substantial rights, not to maintain theories…”

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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.

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5.3. AS TO DELAY & LACHES IN PETITIONING :

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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 1^st

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3 194 US 451 (1904)

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petitioner is an industrial company and the 2^nd 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.

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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

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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.

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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.

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5.4. AS TO VIOLATION OF PRINCIPLES OF NATURAL JUSTICE :

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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

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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.

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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

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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 everexpanding umbrella of Article 14 of the Constitution.

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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 nonapplication of mind to the relevant material. Thus, the impugned order suffers from the vice of lack of due advertence and therefore is vitiated.

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5.5. AS TO SUSTAINABILITY OF ALTERING CONSTITUENT COMPONENTS OF 2014 AGREEMENT :

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5.5(a). 2014 Agreement at Annexure-3 has the following schedule:

4 AIR 1981 SC 136

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SCHEDULE

Purpose for which water will be supplied	Volume of Water if any	Period of supply	The Place at which it will be supplied
Industrial	25279 m3/per day (10,362 cusecs) (Previously allocation 5.722 cusecs + present allocation 4.61 cusecs)	3(three) years	River Mahanadi near Chasapada

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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:

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20-A. Regulation and use of water from Government water source :–

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(1) The State Government may, in the public interestregulate the use, diversion, collection or consumption of water from Government water source for industrial and commercial purposes other than agriculture.

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(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.

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(Other Sub-Sections, not being much relevant, are not reproduced.)

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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

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„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.

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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 1^st 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

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Government vide Maru Ram v. Union of India⁵ . The Agreement at page-2, i.e., immediately below the cause title reads as under:

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“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;

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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:

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“RATE OF LICENCE FEE FOR INDUSTRIAL/ COMMERCIAL USE OF WATER FROM GOVERNMENT WATER SOURCE”

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That being the position, it falls foul of Government to say that the Company is drawing water from “Irrigation Works”.

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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 &

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5 (1981) 1 SCC 107

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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 25^th Edition Vol. I at Para-28 writes as under:

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“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….”

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5.6 . AS TO GOVERNMENT’S POWER TO ALTER TERMS OF CONTRACT :

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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:

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“Government shall be at liberty to review the water allocation unilaterally in case of exigencies .”

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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 .

¶122

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

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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.

¶125

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.

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5.7. AS TO SUSTAINABILITY OF IMPUGNED ORDER DATED 23.07.2021, WHEREBY REQUEST FOR REDUCTION OF WATER ALLOCATION IS REJECTED :

¶128

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:

¶129

“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.”

¶130

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.

¶131

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:

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“Sub: Application of M/s IMFA Ltd. For reduction of allocation to 6.0 cusecs from river Mahanadi for its Plat at Choudwar, Cuttack.

¶134

Sir,

¶135

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.”

¶136

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.

¶137

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

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reserves discretion to the Government to do it in case of exigencies. For the ease of reference, this short clause is again reproduced:

¶140

“32. Government shall be at liberty to review the water allocation unilaterally in case of exigencies.”

¶141

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:

¶142

“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.”

¶143

The case of Company for reduction of water allocation perfectly accords with „exigency‟ even in the lexicographical sense, nothing contra having been pointed out.

¶144

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:

¶145

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“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.”

¶147

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.

¶148

5.8. CAN GOVERNMENT ALLOW CONCESSION EVEN IN MATTERS OF CONTRACT…?

¶149

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

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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.

¶152

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:

¶153

“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”

¶154

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

¶155

6 (2023) 10 SCC 401

¶156

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case of Government that Company does not understand its own requirement of water.

¶158

5.9. AS TO CONTENTION OF ESTOPPEL AGAINST PETITIONER-COMPANY :

¶159

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.

¶160

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

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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.

¶163

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

¶164

7 AIR 1979 SC 25

¶165

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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.

¶167

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:

¶168

(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.

¶169

(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.

¶170

(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.

¶171

(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%.

¶172

Costs reluctantly made easy.

¶173

Web copy of judgment to be acted upon by all concerned.

¶174

Dixit Krishna Shripad,

¶175

Signature Not Verified

¶176

Judge

¶177

Digitally Signed Signed by: GAYADHAR SAMAL Designation: JOINT REGISTRAR-CUM-PRINCIPAL Orissa High Court, Cuttack SECRETARYReason: Authentication The 9^th day of October, 2025/GDS Location: HIGH COURT OF ORISSA : CUTTACK Date: 10-Oct-2025 16:11:09

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M/S. Indian Metals and Ferro Alloys Ltd. v. State of Odisha

Case brief

What is this about?

What did the court decide?

M/S. Indian Metals and Ferro Alloys Ltd. v. State of Odisha

Case brief

What is this about?

What did the court decide?

Why is it important?

What the court decided

Issues for consideration

Cases cited

Statutes considered

Procedural history

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Coram

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