Court rules against State's attempt to recover Rs.146.79 Lakhs from Reliance Industries, citing impermissible retrospective reassessment.
In a significant judgment dated April 15, 2026, the Gujarat High Court has quashed the demand notice issued by the State of Gujarat to Reliance Industries Ltd. for retrospective recovery of water charges amounting to Rs.146.79 Lakhs. The court held that the retrospective reassessment of water charges, based on government resolutions not previously acted upon, was impermissible and unfairly burdened the petitioners.
The case stemmed from an agreement entered into by Reliance Industries with the State Government in 1993, which specified the water charges for industrial and domestic use. Payments were made according to this agreement until June 2005. However, a demand notice issued on July 21, 2005, sought arrears based on a retrospective reassessment, which relied on government resolutions from 1997 and 2002.
Justice Hemant M. Prachchhak, presiding over the case, emphasized that the transaction between the parties was concluded upon payment of the agreed charges in 2005, and the State could not retrospectively levy additional charges. The judgment cited principles of fairness and estoppel, noting that petitioners had acted upon previous government resolutions and that the State was estopped from demanding arrears based on resolutions not previously enforced.
The court also exercised its power under Article 226 of the Constitution of India to quash the impugned demand notice and the ensuing bills, declaring them arbitrary and contrary to contractual terms. The ruling highlights the importance of contractual sanctity and the impermissibility of imposing additional financial burdens retroactively.
This decision marks a victory for Reliance Industries, which had challenged the State's retrospective demand as arbitrary and inconsistent with the executed agreements. The court's ruling reinforces the principle that concluded transactions should not be reopened, ensuring stability and predictability in commercial dealings.
Bottom Line:
Retrospective recovery of water charges by reassessment and reliance on government resolutions is impermissible where the transaction has already been concluded and payments made as per earlier terms.
Statutory provision(s): Article 226 of the Constitution of India, Contractual Obligations, Estoppel, Administrative Law.
Reliance Industries Ltd. v. State of Gujarat, (Gujarat) : Law Finder Doc id # 2887854
