The Gujarat High Court set aside a demand of ₹146.79 lakh raised against Reliance Industries, holding that the State cannot retrospectively recover water charges after a concluded contractual arrangement.
Background of the Case
The case, Reliance Industries Ltd & Anr. vs State of Gujarat & Anr., arose from a dispute over water charges levied for drinking and industrial use.
Reliance had entered into agreements with the State government for water supply tied to the Singanpur Weir project. Over the years, the company paid water charges as billed, and by October 2003, it had cleared dues exceeding ₹1065 lakh. A “No Due Certificate” was also issued confirming no outstanding liability.
However, in July 2005, authorities issued a fresh demand of ₹146.79 lakh, retrospectively recalculating charges from 1997 to 2005.
Reliance argued that the reassessment was arbitrary and violated the agreed terms and government resolutions.
Counsel for the company submitted that once bills had been raised and fully paid, the State could not reopen the matter years later. It was also argued that water supplied for drinking purposes, including free supply to nearby villages as a social initiative, was wrongly billed at industrial rates.
“The respondents are estopped from raising such demands after accepting payments,” the petitioner’s counsel contended during the hearing.
The State government defended the demand, stating that the revised calculation was based on applicable Government Resolutions. It argued that due to an earlier oversight, the full legally recoverable amount had not been billed and was now being corrected.
The State maintained that the petitioner was bound by contractual terms and liable to pay the reassessed amount.
Justice Hemant M. Prachchhak examined the agreements, resolutions, and payment history.
The Court noted that the transaction between the parties had already been concluded, with bills raised and paid in full up to 2005. It observed that reopening settled accounts based on retrospective application of policies would be unjust.
“The contract was acted upon and concluded. It would now be unfair to demand arrears,” the Court observed.
The bench also emphasized that such retrospective recovery would impose an undue burden, especially when the company could not pass on the cost to consumers after the fact.
Allowing the petition, the Court quashed the demand notice dated July 21, 2005, along with all consequential bills.
It held that the State government could not seek retrospective recovery once the contractual obligations had been fulfilled and payments accepted.
Case Details:
Case Title: Reliance Industries Ltd & Anr. vs State of Gujarat & Anr.
Case Number: Special Civil Application No. 5789 of 2006
Judge: Justice Hemant M. Prachchhak
Decision Date: 15 April 2026
