United Spirits gets relief as HC quashes ₹443cr dues

What the Bombay High Court decided

The Aurangabad bench of the Bombay High Court has set aside water charge demand notices raised by Maharashtra’s Water Resources Department (Irrigation Department) against United Spirits Limited (USL) for water drawn from the Godavari river for its liquor manufacturing unit at Dharmabad in Nanded district. The notices were issued for outstanding dues exceeding ₹400 crore, with reporting in the case pointing to a final demand notice of ₹236.5 crore issued in August 2022, and aggregate claims cited at ₹443 crore. A division bench of Justices Manish Pitale and YG Khobragade held that the department’s approach of treating the entire water intake as “raw material” consumption was arbitrary and unsustainable.

At the same time, the court refused to strike down the Maharashtra Water Resources Regulatory Authority (MWRRA) bulk water tariff orders of 2018 and 2022. It held that these tariff orders were consistent with the MWRRA Act and could not be termed unconstitutional. The key issue, the bench said, was the lack of a proper assessment of how much water was actually used as raw material versus how much was used for ancillary processes such as washing, cooling, and other process needs.

Why the demand notices were challenged

United Spirits had challenged successive demand notices beginning December 2018. The department classified the Dharmabad unit as a “raw material industry” under the MWRRA tariff orders, which led to higher charges of ₹240 per cubic metre. USL argued that only a fraction of its water use is as raw material, and that earlier High Court rulings required the authorities to distinguish between raw material consumption and process-related consumption.

In a more specific contention recorded in reporting, the company maintained that only 2% of the water drawn was used as raw material for alcohol production, with the rest used for cleaning, cooling, and other processes. The state government argued that liquor industries fall within the raw material category and also contended that dues exceeding ₹400 crore remained unpaid even as the company continued to enjoy interim protection.

Court’s reasoning on raw material versus process usage

The bench noted that officials did not carry out the necessary exercise to determine the split between raw material use and ancillary process use. In its observations, the court said the respondents had not undertaken any exercise to ascertain the extent to which water consumption was towards raw material in manufacturing activity and the extent to which it was used for other purposes like washing and cooling during the manufacturing process.

This finding became central to the ruling because the department’s billing method assumed that all water intake should be charged at the raw material rate. The High Court held that such a blanket approach could not stand without a factual inquiry into actual usage patterns at the unit.

What was quashed and what was upheld

The High Court quashed the demand notices raised between 2018 and 2022, including the final ₹236.5 crore demand notice. It also quashed the orders passed by the Primary Dispute Resolution Officer (PDRO) and the appellate authority.

But the bench declined USL’s request to invalidate the 2018 and 2022 MWRRA tariff orders themselves. The court’s order, therefore, keeps the tariff framework intact, while requiring the state to apply it only after a proper, unit-level assessment of usage categories.

Interim deposit of ₹66.5 crore and the basis

Even while granting relief on the demand notices, the court directed United Spirits to deposit ₹66.5 crore with the Water Resources Department within six weeks. This interim payment was linked to earlier judicial precedents that estimated 65% of water usage in breweries as raw material consumption.

The court clarified that this amount is not a final determination of liability. It is to be adjusted against the recalculated bills after the fresh assessment. If the deposit is in excess of the final recalculated dues, the surplus must be adjusted against future bills.

Reassessment timeline and “natural justice” directions

The bench directed the executive engineer of the Water Resources Department to conduct a fresh assessment within three months. The order requires an inspection of the unit and consideration of the material on record. The court also instructed that the reassessment must comply with principles of natural justice, which typically includes giving the company an opportunity to present its case before any fresh demand is raised.

The reassessment is to cover bills from November 2018 onwards, applying the prevailing tariff rates in the 2018 and 2022 orders, while correcting the classification to reflect actual raw material versus process usage.

Key facts at a glance

Market and investor relevance

For investors, the order reduces immediate uncertainty by setting aside the existing demand notices and requiring a recalculation based on a verified bifurcation of water usage. USL, in its stock exchange disclosure cited in reporting, said it was evaluating next steps and that it does not anticipate a material financial impact from the ruling.

Separately, the dispute has had continuing regulatory visibility. Reporting also referenced a notice to USL to pay water charge arrears of ₹345.45 crore for the period November 2018 to April 2024, with a seven-day payment demand and a reference to stoppage of water supply under Section 49(J) of the Maharashtra Irrigation Act, 1976, and a writ petition filed before the Bombay High Court.

Why the ruling matters for industrial water billing

The judgement reinforces that tariff orders may be valid on paper, but their application must be backed by a factual exercise at the unit level when charges depend on end-use classification. The court’s refusal to strike down the tariff orders, while still invalidating notices raised without a usage assessment, draws a clear line between the legality of the tariff framework and the legality of its execution.

It also highlights a recurring operational issue for manufacturing units where a single water intake supports multiple functions. When billing depends on categories such as “raw material” versus process use, the regulator and billing authority may be required to document the split rather than assume it.

What to watch next

The immediate next steps are procedural and time-bound: the interim deposit within six weeks, followed by the executive engineer’s inspection-led reassessment within three months. Fresh bills, if any, will depend on the outcome of that assessment and the adjusted classification of water usage at the Dharmabad unit. Any additional company disclosures to stock exchanges are likely to focus on the reassessment outcome and the eventual net payable after adjustment.