On April 7, 2005, the High Court in Kerala rendered a favourable decision for the Coca-Cola Company allowing us to re-open the plant and also to resume our use of local groundwater for plant operations. The Court’s ruling was on the merits and disposed of all points of contest.

The dispute before the High Court primarily involved two (2) issues:

• Whether the local Panchayat was within its legal right to revoke and/or fail to renew the Company’s local license to operate the Kerala plant; and
  
• Whether the Kerala plant’s operations negatively affected the local aquifer thereby requiring a prohibition against the plant withdrawing and using local groundwater for plant operations.
  

The Court determined both issues in favor of the Company.

Local License to Operate:

The High Court found that the Panchayat acted “arbitrarily” and “was not justified” in revoking the Kerala plant’s local license to operate. The Court based its decision, among other things, on the fact that the Panchayat made its decision without the benefit of any scientific review of the Kerala plant’s actual impact on the local aquifer. The Court also determined that the Panchayat was not authorized nor expert enough to consider allegations that Company biosolids or wastewater sludge are contaminants to local land, or that Company products in India contain pesticide residues. Such issues properly reside with other Indian government agencies.

The High Court therefore ordered the Panchayat to properly consider a plant application for renewal of its local license to operate, provided that the plant applies for the same “within two weeks” of the Court’s decision. Our local India office has made this application this week. In addition, the Court ordered the Panchayat to grant us a license to operate the Kerala plant if we obtain a “Factories Act license” and “clearance from the [Kerala State] Pollution Control Board.” We are already in possession of both.

Withdrawal/Usage of Local Groundwater:

The High Court further found that the Company’s Kerala beverage plant is not negatively affecting the local aquifer and that we have the right to withdraw and use local groundwater for our operations. The Court relied heavily on the expert scientific report (which we gave you) which was commissioned by an earlier court ruling that concluded the above as well. The Court stated: “We find that the report of the Committee is fair, it appears to be authentic, based on data collected, mature and therefore acceptable.” The Court also appeared to be significantly influenced by the fact that local groundwater wells continued to dry up although the Kerala plant ceased operations some time ago.

The High Court found that a private person, including a company, has the right under Indian law to extract groundwater from underneath his or her property within “reasonable limits,” unless prohibited or otherwise restricted by statute. In India, to date, there is no statutory prohibition or restriction on withdrawal or use of groundwater.

Consistent with the expert report, the High Court determined that the cause of the water shortage in the local Kerala area was reduced rainfall during the last several years, not the Company’s Kerala plant. The Court therefore ordered that the Kerala plant may withdraw and use up to 500,000 liters of water per day during 2005-06, again consistent with the findings of the expert panel and accounting for less than 5% of total available groundwater in the local area. To date, maximum groundwater usage at the Kerala plant has not exceeded 460,000 liters per day. As expected, the Court further found that in future years, the Kerala plant may be required to extract and use less groundwater if there is reduced rainfall in a particular year.

Finally, and of interest, the High Court “directed” the Company to be “actively involved in community development programs for the people residing in the locality, especially in the matter of health and drinking water supply.” The Court’s rationale for ordering this is the “general public apprehension about the shortage of drinking water.” The Company’s involvement is be supervised by the local Panchayat. Currently, the Company is actively involved with the community by means of providing tanker loads of drinking water, as well as assisting with rainwater harvesting programs, health camps etc.

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