Bombay High Court quashes ₹236 crore water bill against United Spirits' liquor unit

The Bombay High Court recently set aside demand notices of over ₹236 crore issued by Water Resources (Irrigation Department) against United Spirits Limited towards water charges for the water taken from Godavari river for its liquor manufacturing unit [United Spirits & Anr. vs. State of Maharashtra & Ors.].

A Division Bench of Justices Manish Pitale and YG Khobragade held that the authorities wrongly treated the entire water taken by the company from Godavari as raw material for the liquor unit.

The Court ruled that while the Maharashtra Water Resources Regulatory Authority (MWRRA) tariff orders of 2018 and 2022 were not unconstitutional, the authorities had failed to conduct the necessary exercise of determining how much water was actually used as raw material and how much for ancillary processes.

The Court observed that the authorities’ approach of billing the entire water intake as raw material use was arbitrary and unsustainable.

“Evidently, the said respondents have not undertaken any exercise to ascertain the extent to which the consumption of water by the manufacturing unit of the petitioner in its manufacturing activity is towards raw material and the extent to which it is utilized for other purposes like washing, cooling etc. during the process of manufacturing” the Bench said.

United Spirits, which operates a distillery at Dharmabad in Nanded district, had challenged successive demand notices beginning December 2018 that classified its unit as a raw material industry under the MWRRA tariff orders, leading to enhanced charges at the rate of ₹240 per cubic metre. The company contended that only a fraction of its water use was as raw material, with the bulk being for process-related purposes, and that past High Court rulings required authorities to distinguish between the two.

On the other hand, the State argued that liquor industries fell squarely within the raw material category and emphasised that United Spirits had failed to pay dues exceeding ₹400 crore while enjoying interim protection. Reliance was also placed on a NEERI report to claim that a majority of water consumed in liquor manufacturing should be treated as raw material use.

The Court rejected United Spirits’ plea to strike down the 2018 and 2022 tariff orders, noting that they were consistent with the MWRRA Act and could not be termed unconstitutional.

However, it faulted the authorities for failing to implement them correctly.

“We do not accept the contention of the petitioner that the bulk water tariff orders of the years 2018 and 2022 are required to be struck down as being arbitrary, unconstitutional or irrational...we find that the respondents no. 4 and 5 failed to carry out the exercise of determining the extent to which the water is utilized in the manufacturing unit of the petitioner towards raw material and the extent to which it is utilized for other purposes,” the Bench held.

Significantly, the Court quashed the orders of both the Primary Dispute Resolution Officer (PDRO) and the appellate authority, as well as all demand notices raised from 2018 onwards, including the ₹236.5 crore final demand issued in August 2022.

At the same time, the Court directed United Spirits to deposit ₹66.5 crore with the Water Resources Department within six weeks, based on earlier judicial precedents estimating 65% of water use in breweries as raw material consumption. This deposit, the Bench clarified, would be subject to adjustment against the final recalculated bills.

The Court ordered the Executive Engineer of the Water Resources Department to conduct a fresh assessment within three months after inspecting the company’s unit and considering material placed on record, to determine the correct proportion of water use as raw material and for process purposes.

The Bench stressed that the principles of natural justice must be followed during the reassessment exercise.

The Court also made it clear that any excess deposit by United Spirits would be adjusted against future bills.

United Spirits was represented by Senior Advocate Zal Andhyarujina along with advocates Shrey Sancheti, Vijay Purohit, Faizan M Mithaiwala, Samit Jain, Vinit Kamdar, Sagar S. Vidwauns, and Amol A. Waghmare from P&A Law Offices.

The State was represented by advocates Uday Warunjikar, VB Tapkir, SV Hange and Pratap P Mandlik.

[Read Judgment]