2004 (4) TMI 651 - HC - Indian Laws

Summary

Issues Involved:
1. Legality of the demand notice for penal water charges.
2. Authority of the Executive Engineer to issue circulars.
3. Applicability of the Sick Industrial Companies (Special Provisions) Act, 1985 (S.I.C.A.).
4. Allegations of discrimination and violation of Article 14 of the Constitution.
5. Whether the action taken by the respondent-Corporation was penal or punitive.

Issue-wise Detailed Analysis:

1. Legality of the Demand Notice for Penal Water Charges:
The petitioners challenged the demand notice dated 23rd December 2003, for an amount of Rs. 2,09,64,344/-, arguing that they had regularly paid water charges at normal rates and the demand for penal rates was illegal. They contended that they had complied with all conditions laid down in the circular dated 31st July 1998, which exempted them from paying penal rates. However, the court found that the circulars dated 5th November 1997 and 25th November 1997, issued by the Chief Executive Officer of the Maharashtra Industrial Development Corporation (M.I.D.C.), mandated penal charges for those who had not obtained a Building Completion Certificate (B.C.C.). The court held that the petitioners were bound to comply with these regulations and dismissed their claim.

2. Authority of the Executive Engineer to Issue Circulars:
The petitioners relied on a circular dated 31st July 1998 issued by the Executive Engineer of Ambernath Sub-Division, which purportedly exempted them from paying penal rates. The court found that the Executive Engineer had no authority to issue such a circular and that it was unauthorized and unlawful. The court noted that the Chief Executive Officer had issued a show-cause notice to the Executive Engineer and had taken corrective action by canceling the unauthorized circular. The court concluded that the petitioners could not claim any benefit under the unauthorized circular.

3. Applicability of the Sick Industrial Companies (Special Provisions) Act, 1985 (S.I.C.A.):
The petitioners argued that they were protected under S.I.C.A. as their reference was pending before the Board for Industrial and Financial Reconstruction (B.I.F.R.). They contended that no recovery could be effected against them under Section 22 of S.I.C.A. The court, however, held that the respondent-Corporation was not enforcing compliance under any decree or order but merely an obligation under the agreement and regulations relating to the supply of water. The court cited the Supreme Court's decision in Indian Maize and Chemicals Limited v. State of U.P., which held that enforcement of compliance under a contract or regulation is not covered by Section 22(1) of S.I.C.A.

4. Allegations of Discrimination and Violation of Article 14 of the Constitution:
The petitioners alleged that the respondent-Corporation's actions were arbitrary and discriminatory, violating Article 14 of the Constitution. They argued that other similarly situated plot holders were granted benefits that were denied to them. The court found that all plot holders/consumers in the State of Maharashtra were required to pay penal charges if they did not have a B.C.C. The court held that the classification between those who had obtained a B.C.C. and those who had not was reasonable and based on intelligible differentia. The court concluded that the respondent-Corporation's actions were neither arbitrary nor discriminatory.

5. Whether the Action Taken by the Respondent-Corporation was Penal or Punitive:
The petitioners contended that the demand for penal charges was punitive in nature and required express authority, application of mind, and adjudication. The court, however, held that the levy of 1.5 times the normal water charges was not a penalty but an additional charge for those who had not obtained a B.C.C. The court found that the classification was reasonable and had a rationale nexus to the object sought to be achieved, which was to ensure that construction was completed in accordance with sanctioned plans.

Conclusion:
The court dismissed the petition, holding that the demand notice for penal water charges was legal and valid. The court found that the Executive Engineer had no authority to issue the circular exempting the petitioners from penal charges and that the respondent-Corporation's actions were neither arbitrary nor discriminatory. The court also held that the provisions of S.I.C.A. did not apply to the enforcement of compliance under the water supply regulations. The demand notice was upheld, and the interim relief granted earlier was vacated.