JUDGMENT
D.B. Bhosale, J.
1.The petitioner, by means of this writ petition filed under Article 226 of the Constitution of India, seeks to challenge the propriety and validity of the notification issued on 24th April, 1991 by the Maharashtra Water Supply and Sewerage Board, revising the water rates for bulk non-domestic use from 1st June, 1991 for the various categories of consumers enumerated therein, who are being supplied water from Temghar, Badlapur and Ulhasnagar water works in project area until further orders.
2. The petitioner is a limited company incorporated under the Indian Companies Act, having their factory at Ambarnath. Respondent No. 2 is the Member Secretary of the Maharashtra Water Supply and Sewerage Board (for short ,”Board”). The Board has been established under section 3 of the Maharashtra Water Supply and Sewerage Board Act, 1976 (for short, “Act of 1976) in 1976 for the rapid development and proper regulation of the water supply and sewerage services in the State of Maharashtra. Prior to the establishment of the Board, the Public Works Department of the first respondent used to supply water to the petitioner. Thereafter the Environmental Engineering Works Sub-Division, Kulgaon which functions under the control and direction of the Board started supplying water to the petitioner. The petitioner’s daily consumption of water is 2400 M.T. approximately and accordingly monthly consumption is about 72000 M.T.
3. The Board levies and revises the rates for water supply to the domestic and various categories of non domestic consumers from time to time. Since July 1982 to July 1989 water rates were revised on five different occasions viz. in June 1982, May, 1983, August, 1985, May 1989 and April 1991 by issuing notifications. The last such notification till filing of the instant petition was issued on 24th April 1991 which is impugned in the present petition. In 1982 water rates were increased from Rupee 0.90 to Rs. 1.40 per 1000 liters and in April 1991 it were increased by the impugned notification from 5.85 to Rs. 6.70 per 1000 liters. The petitioner in all fairness has made reference to an agreement entered into with the Board for the purposes of water supply to the petitioner company, dated 31st March, 1990. The said agreement, inter alia, contains various terms and conditions relating to the terms of water supply, tariff, measurement of water supply and other incidental matters.
3. Mr. Nerlekar, learned Counsel for the petitioner has challenged the enhancement of water rates by the impugned notification on two grounds. Firstly, he contended that neither the provisions of the Act of 1976 nor the Rules framed thereunder and published in the Government Gazette dated 18th August, 1977, empowers the Board to enhance rates to be charged for the services rendered to the customers by the Board. He further submitted that no guidelines have been provided under the provisions of the Act or the Rules and the respondents are charging the water rates arbitrarily without any reference to the cost incurred by the Board. Secondly, he submitted that the levy of fees has no nexus or corelation to the services rendered. Under the guise of levying the fees, the Board has levied tax and such power of taxation cannot be derived from section 67 of the Act of 1976. In other words, according to Mr. Nerlekar, incurring of expenses in discharging obligatory services cannot form the nexus for levying fees and levying of fees must be corelated with the services rendered. Mr. Nelekar, further submitted that under the guise of revising rate of fees for supply of water, the Board is indirectly collecting tax and the respondents have failed to show any relation how higher rates of fees are corelated with the services intended to be rendered. In support of his submission, Mr. Nerlekar took us through the various provisions of the Act of 1975, the rules and bye-laws and submitted that the impugned levy of fees is unreasonable and the power of the Board to enhance water rates, is beyond the scope of section 67 as well as section 66 of the Act of 1976.
4. The Board, in opposition, has filed detailed affidavit, and placed reliance on the annexure thereto controverting the case set up by the petitioner. Rise in the rates of water supply from time to time has been justified by the Board contending that under the various provisions of the Act and the Rules, the Board is empowered to enhance water charges. The reliance is placed on the agreement entered into by the petitioner on 31st March, 1990. Under this agreement, according to the Board, they have powers of revision and, therefore, the petitioner cannot make any grievance whatsoever in respect of water charges. The respondents in their affidavit, detailed the expenses incurred by them for rendering the services, to which we would make reference at appropriate stage in the judgment.
5. Before we consider the challenge in the instant petition, it would be advantageous to refer to the relevant provisions of the Act of 1976, on which the Counsel appearing for the parties placed reliance in support of their contentions and also to the relevant bye-laws framed with the previous approval of the State Government and duly gazetted in the Government Gazette dated 25th January, 1990. At this stage, we may also refer to the amendment made to the Act of 1976 in the year 1997. By this amendment, the words “water supply and Sewerage Board” stood substituted by the words “Jeevan Authority” and the word “Board” has been substituted by the word “Authority”. However, we would refer respondent No. 2 in this judgment as “Board” for the sake of convenience.
6. Section 35 of the Act of 1976, empowers the Board to fix the cost of water to be supplied according to volume, and also the minimum cost to be charged in respect of each connection, by notification in the Official Gazette. Section 38 lays down that the Board may by bye-laws provide for requiring any consumers or class of consumers to deposit such sums as may be specified therein as security for prompt payment of its dues and due performance of the conditions subject to which services are rendered to them. Section 60 lays down that in the performance of its duties and discharge of its functions, the Board shall be guided by such directions on questions of policy as may be given to it, from time to time, by the State Government. Sub-section (2) of section 60 lays down that the decision of the State Government shall be final. Section 65 empowers the State Government to make Rules consistent with the Act to carry out the purposes of this Act. Section 66 empowers the Board to make regulation, with the previous approval of the State Government, consistent with the Act and the Rules, for the administration of the affairs. Sub-section (2) of section 66 lays down that without prejudice to the generality of the foregoing power, such regulations may provide for all or any of the matters, in Clauses (a) to (i) thereto. Sub-section (3) of section 66 lays down until any regulations are made by the Board under sub-section (1) any regulations which may be made by it may be made by the State Government, and any regulations so made may be altered or rescinded by the Board in exercise of its power under sub-section (1). Section 67 empowers the Board to frame bye-laws with the previous approval of the State Government, consistent with the Act of 1976. Section 67 reads thus :
“67(1) The Board may, with the previous approval of the State Government, make bye-laws consistent with this Act and the Rules, for carrying out the purposes of this Act in respect of any matter affecting the general public.
(2) Without prejudice to the generality of the foregoing power, such bye-laws may provide for all or any of the following matters, namely:
(a) the terms and conditions of supply of water for domestic or other purposes;
(b) the installation of meters or the transfer of their connection, and their use, maintenance, testing, disconnecting and reconnection, the fees rent and other charges in respect thereof, including the furnishing of security by the consumer and matters connected therewith;
(c) the fees, rent and other charges to be paid for connection with a sewer of the Board and other terms and conditions for such connection;
(d) any other fees and charges to be paid to the Board for services to the consumers;
(e) any other matter for which provision is to be or may be made by bye-laws.
7. Bye-law No. 3(2) framed under the aforesaid provisions of section 67 is relevant for our purposes which reads thus :
“In the case of bulk supply of water to any consumer, the supply shall be regulated by an agreement subject to the provisions of the Act and the Rules made thereunder.”
In the light of the provisions of the Act of 1976 and the bye-law quoted above and the arguments advanced by the learned Counsel appearing for the parties, we proceed to consider challenge in the instant petition.
8. At the outset, section 67(1) and section 67(2)(a) empower the Board to make bye-laws with the previous approval of the State Government for carrying out the purposes of this Act consistent with the Act and the Rules in respect of any matters affecting the general public. Clause (a) of section 67(2) empowers the Board to frame bye-laws which would take care of terms and conditions for supply of water for domestic and other purposes. It appears that powers conferred by this provision, the Board has framed bye-laws which came into force on 1st January, 1990 and they have also been published in the Maharashtra Gazette dated 25th January, 1990. Bye-law 3(2) quoted in the foregoing paragraph provides that in the case of bulk supply of water to any consumer, the supply shall be regulated by “an agreement” subject to the provisions of the Act and the Rules made thereunder. Admittedly, an agreement was entered into between the petitioner and the Board on 31st March, 1990, governing the supply of water to the petitioner. It is worth noting that Clause No. 3 of the agreement, which provides clauses relating to the rates of water supply and the power of revision. Clause 3 of the agreement reads thus :
“3 TARIFF.
3.1. The rate of water supply chargeable to said factory shall be at Rs. 5.85/1000 liters with effect from 1-7-89. The rates are further subject to revision and the revised rates as approved by the Board from time to time will be made applicable with effect from dates prescribed by the Board.
3.2. The factory hereby agrees that any consumption below the 2 ML/month will be charged at the minimum level of 2 ML/month.
3.3. The said factory shall give Bank Guarantee to the Board equivalent to the amount of three months average water supply bill, i.e. Rs. 10.00 lakhs for a period of five years against regular bill payments as a security.
3.4. The Board shall prefer the bill for the month by the 1st of July 1989 following the month of supply. The Factory shall arrange to pay the bill within the prescribed date of receipt of the bill as per the bills served by Board. Any dispute regarding the bill amount shall be settled after the payment of bill only. For delay in excess of the prescribed time limit, factory shall be liable to pay interest at the rate of 18% per annum.”
It is abundantly clear from the terms of the agreement quoted above that the petitioner had agreed to the rates of water supply chargeable to the factory of the petitioner at the rate of 5.85 per 1000 liters with effect from 1st July, 1989. It was further agreed that the rates are subject to revision and the revised rates as approved by the Board from time to time will become applicable with effect from the dates prescribed by the Board. It is specifically contended by the learned Counsel for the Board that the impugned notification issued on 24th April, 1991 revising the rates from 5.85 to 6.70 is consistent with the said agreement. We may note at this stage that the petitioner has not challenged the provisions of section 67 which empowers the Board to frame bye-laws and the Bye-law No. 3(2) which empowers the Board to enter into an agreement regulating the supply of water. Having entered into an agreement and acted upon the same, in our opinion, it is not open for the petitioner to make any grievance whatsoever in respect of revision of water rates made by the impugned notification and such writ petition cannot be entertained in our extra ordinary jurisdiction under Article 226 of the Constitution of India. We do not find any reason to interfere in the instant petition. However, we would like to address on other points raised by the petitioner.
9. The next question falls for our consideration is whether the Board has power to levy and revise water rates under the provisions of the Act, Rules and Bye-laws and whether they are disproportionate to the services rendered by the Board. In other words, whether the rates are corelated with the services rendered by the Board. In this connection two other provisions in the Act are relevant. Section 27 gives general principles for the Board finance which reads thus :
“27. The Board shall not, as far as practicable, and after taking credit for any grant or subvention from the State Government under section 28, carry on its operation under this Act at a loss.”
This provision provides that the Board is not supposed to carry on its operations under this Act at a loss. Section 35(1) deals with fixing cost of water to be supplied according to volume and also the minimum cost to be charged in respect of each connection. As observed earlier, bye-law 3(2) provides that in the case of bulk supply of water to the consumer, the supply will be regulated by an agreement between the parties which will again be subject to the provisions of the Act and the Rules made thereunder. In view of this, it cannot be said that the Board has been revising the water rates without there being any rules, bye-laws or any guidelines in the Act in that behalf. The net effect of the powers vested in the Board under the various provisions quoted in the foregoing paragraphs, in our opinion, the Board does have power or authority to revise rates of water supply. We do not agree with the submission of Mr. Nerlekar, learned Counsel for the petitioner, that the Act does not lay down any guidelines with regard to the water rates. In our view, the provisions of sections 27 and 35 of the Act of 1975 are sufficient enough to guide the Board finance. Sections 27 and 35(1) of the Act contemplates that the operations of the Board are not to be carried out at a loss and the Board has power to fix the cost of water according to volume and the minimum cost to be charged in respect of each connection.
10. At this stage, we would like to note some factual aspect of the matter to appreciate the argument advanced by Mr. Nerlekar, that the hike in the water rates is disproportionate to the services rendered by the Board. The petitioner company or the consumers in Ambarnath get water from Badlapur treatment plant which provides water to the belt starting from village Kulgaon, Badlapur etc. upto Ambarnath. Water from Shahad treatment plant is provided to parts of Kalyan, Dombivali and Ulhasnagar. The water from the Temghar treatment plant is provided to Bhiwandi, Thane, Bhyander and partly to Kalyan. This supply includes water for domestic as well as industrial or non-domestic purposes. Since all these townships are situated in a close proximity, the cost of water supply to different township is uniform. It appears that until the revision made by the impugned notification the rates charged for water supply were depending upon the cost of water supply which was arrived at on the basis of source of water supply. It is specifically contended by the Board that in June 1991 uniform rates have been brought about taking into account the several factors concerning the cost of water supply. The Board has justified their costing contending that the rates for domestic supply need to be kept at the minimum as far as possible within the paying capacity of the consumer. Resultantly, it becomes necessary to enhance the water rates for non-domestic consumers.
11. The Board has further justified their action of enhancement of the water rates which, according to them, are commensurate with the cost incurred. The Board in their affidavit has placed on record a clause in an agreement entered into between the International Development Association and the Board dated 21st June, 1979 which provides as follows :
“4.04 Except as the Association may otherwise agree, MWSSB shall, before the commencement of each fiscal year, review and adjust, if necessary, its tariffs for bulk water supply;
(a) In the project area, to ensure that operating revenues are sufficient to (i) meet MWSSB’s operating expenses, and straight-line depreciation of the fixed assets in operation, for each of the fiscal years 1981 through 1983 and (ii) produce an annual rate of return on the average value of MWSSB’s net fixed assets in operation in the project area of at least 4% in fiscal years 1984 and 1985, 5% in fiscal year 1986 and 6% thereafter.”
Thus, it is clear that as per the loan condition in fiscal year, 1986, the Board is required to have an annual rate of return of 5% and the rate of 6% thereafter. The revenue collected at the revised rate will give the Board a return which will not be at the rate of 6%. The entire cost of the project is around Rs. 70 crores and the return expected at 6% will have to be not less than Rs. 4.20 crores per year, whereas at the revised rate it will be Rs. 1.06 crores only which is just about 1.51%. Looking to these facts and figures, we have no hesitation in holding that the Board was fully justified in issuing impugned notification since enhancement of water rates are commensurate with the cost incurred and they are required to be further revised from time to time looking to the rising cost of electricity, establishment, maintenance and treatment expenditure.
12. Needless to say that this Court as well as the Apex Court have consistently upheld classification of consumers based on the residential and commercial premises. Classification inter-se between the commercial premises has also been held to be permissible by this Court while dealing with challenge in the case of Piem Hotels and another v. Municipal Corporation of Greater Bombay and others, . The challenge in the report was that the standing committee has no power to make classification of the consumers and prescribe different charges for different consumers for the same quantity of water and prescribes rates and charges on the basis of paying capacity of consumers concerned. The constitutionality of sections 140 and 169 of the Bombay Municipal Corporations Act, 1888 was under challenge in the report. This Court held that the classification made in taxing economical affluent class cannot be said to suffer from vice of discrimination or arbitrariness nor can such classification is said to be in violation of Article 14 of the Constitution. Once it is found that the standing committee is competent to make classification in respect of the premises or in respect of consumers or users of water. It is further held that the classification of the premises and consumers with regard to the commercial premises or commercial use cannot be faulted particularly keeping in view the social welfare project. Classification of consumer having capacity to pay is proper and cannot be termed to be hostile. In view thereof, we do not find any fault whatsoever in the classification made between the domestic and non-domestic consumers and further charging more on the basis of capacity to pay more, much less to the consumers availing bulk water supply. Moreover, if the water rates of non-domestic supply are not revised or kept equivalent to rates with domestic rate, the water rates of domestic consumption will shoot up and ultimate sufferer will be common man. The said notification cannot be said to be unreasonable. Taking overall facts and circumstances of the case, coupled with the provisions of Act, Rules and Bye-laws, we have no manner of doubt in holding that the Board was justified in their action of charging more to the non-domestic consumers and to the bulk water consumers in particular.
13. In the result, we are satisfied that the impugned revised rates are not in any way exorbitant or unreasonable or amount to taxation and that the Board’s power of revision is beyond the scope of sections 66 and 67 of the Act of 1976. In the circumstances, we do not see any reason to invoke our extra ordinary jurisdiction under Article 226 of the Constitution. Writ petition is accordingly, dismissed.