In Brief
Two hydroelectric projects—Maniyar by Carborundum Universal Ltd (CUMI) and Kuthungal by Indsil Hydro Power and Manganese Ltd (INDSIL)—challenged the State of Kerala's demand for royalty and charges for controlled release of water. The Supreme Court held that both projects benefited from controlled water supply: CUMI from tail-race discharge of upstream power houses, and INDSIL from controlled releases from Anayirankal Dam. Since their agreements expressly incorporated the Policy's Clause 14 requiring such payment, the levy was a valid contractual obligation, not a tax. The distinction between captive power producers (self-consumption) and independent power producers (grid sale) is rational—applying charges only to CPPs prevents passing costs to end-consumers. The terms were not unconscionable; both parties had legal counsel and equal bargaining power. Royalty, as compensation for rights granted under contract, differs from tax. The Court dismissed both appeals, affirming the contractual liability to pay.
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