Full Judgment Text
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PETITIONER:
GUJARAT ELECTRICITY BOARD
Vs.
RESPONDENT:
AHMEDABAD ELECTRICITY CO. LTD. & ORS.
DATE OF JUDGMENT28/11/1973
BENCH:
PALEKAR, D.G.
BENCH:
PALEKAR, D.G.
KRISHNAIYER, V.R.
SARKARIA, RANJIT SINGH
CITATION:
1974 AIR 314 1974 SCR (2) 492
1974 SCC (4) 623
ACT:
Electricity Supply Act 1948, Ss. 57A, 60(1), 76 (1) and (2)
and Para 16 of Sch. 6 Reference by licensee of dispute
between it and Electricity Board to arbitration of Central
Electricity Authority-If operates as bar to appointment of
Rating Committee by Board.
HEADNOTE:
In September 1963 the respondent company intimated to the
appellant-Board and the State Government of its intention to
revise the rates of electricity on certain grounds. Both
the State Government and the Board informed the respondent
that they were not satisfied that there was any
justification for the revision. The respondent, however,
brought the rates into effect in November, 1963. Being of
the view that the respondent was over charging the consumers
in breach of the provisions of the 6th Schedule to the
Electricity Supply Act, the appellant issued a notice to
show cause why a Rating Committee under s. 57A should not be
constituted for inquiring into the matter. The respondent
justified the increase and also intimated that if its
explanation was not accepted the issues involved would be
referred to the arbitration of the Central Electricity
Authority under para 16 of the Schedule read with s. 76 of
the Act. As the respondent did not receive any intimation,
it referred the matter to the arbitration of the Central
Electricity Authority. The appellant, however, not being
satisfied with the explanation given to the show cause
notice appointed a Rating Committee.
On a petition filed by the respondent, the High Court held
that a dispute or difference between the Board and the
Electricity Company which was referable to the arbitration
of the Authority under para 16 of the 6th Schedule had
arisen, and since pending such arbitration, no Rating
Committee could be constituted because of the second proviso
to s. 57A the constitution of the Rating Committee by the
appellant was illegal and the Committee had no power to
function.
Allowing the appeal to this Court,
HELD:There is no provision in the Act which makes a
dispute between the Board and the licensee as to whether the
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provisions of the 6th Schedule had been complied with or not
referable to the Central Electricity Authority. The second
proviso to s. 57A does not contemplate holding up of the
constitution of the Rating Committee merely on the ground
that such a dispute was referred by the licensee to the
Authority. [504 C-E]
(a)Under s. 57A the State Electricity Board has power to
interfere by the’ appointment of a Rating Committee if it is
satisfied that the licensee has over charged the consumers
by committing a breach of any of the financial principles
mentioned in the 6th Schedule. The second proviso to the
section contains three conditions which are to coexist, if
the Rating Committee was not to be constituted by the Board:
(i) there should be an alleged failure of the licensee to
comply with any provisions of the 6th Schedule; (ii) such
alleged failure must raise a dispute or difference as to the
interpretation of the said provisions or any matter arising
therefrom; and (iii) and such difference or dispute had been
referred by the licensee to the arbitration of the Authority
under para 16 of that Schedule before a certain date. [497
H-498 B; 501 C-E; 502 F]
In the present case, there is an allegation by the appellant
Board that the licensee had failed to comply with the
provisions of the 6th Schedule. It could also be assumed
that the alleged failure raised a dispute or difference as
to the interpretation of the said provisions or any matter
arising therefrom, though it is not clear whether Parliament
wanted, for purposes of s. 57A and para 16 of the 6th
Schedule, that the Authority should be approached not merely
for the interpretation of the provisions of the 6th Schedule
but also for sundry matters of detail arising out of the
provisions. As regards the third condition the dispute had
been referred by the licensee to the arbitration of the
Authority within the time allowed by the statute, but it was
not a
493
reference under para 16 of the Schedule, because, the
reference to arbitration by the Authority under that
paragraph could be made by the licensee only. against the
grantor of the licence, namely the State Government and not
the Board. [501 E, 502CE ]
(b)There is no agreement between the appellant-Board and
respondent-compAny to refer any dispute to the arbitration
of the Authority. There is no substance in the contention
that para 16 of the 6th Schedule is a statutory provision
for arbitration to which s. 46 of the Arbitration Act, 1940,
would apply. (497 C; 504 C]
(c) The State Government and the Board have been required
by the Act to be vigilant and if they find that by any
illegal manipulation in the financial structure the licensee
is overcharging the consumers they have to step in. To that
end the two Schedules, namely the 6th and 7th are made by
the Act part of the licence issued by the State Government
to the licensee under the Indian ’Electricity Act, 1910, and
have effect notwithstanding any other inconsistent
provisions or terms of that licence. The parties to the
licence in spite of the incorporation of the provisions of
the 6th Schedule continued to be the State Government and
the respondent company, and therefore, if any of the
provisions of that licence including incorporated provisions
of the 6th Schedule provide for arbitration of a dispute the
dispute, unless otherwise expressly indicated must be
between the parties to the licence, namely the State
Government and the respondent-company. Paragraph 16 of the
6th Schedule provides for arbitration clause and this
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arbitration clause is incorporated in the licence to which
the State Government and the electricity company are
parties. On its plain construction the alleged dispute or
difference should be between the State Government and the
respondent and that dispute or difference alone is referable
to the Authority. There is no specific provision in the Act
that the Board shall be substituted in the place of the
State Government as grantor of the licence. Indeed, the
functions of the State ’Government and the Board are well-
defined under both the Acts and the Board , as such, is not
substituted in the place of the State Government. [497 E-H.
498 G; 499D]
The Amalgamated Electricity Co. Ltd. v. N. S. Bathena,
[1959] Suppl, 2 S.C.R 213, followed.
(d)Section 76(1) of the Act as it stood at the relevant
time, also dealt with arbitration but under that sub-section
it is not all disputes with the Board that were referable to
the Authority but only those referred to in sub-s. 2 (a),
that is, only those cases for which the Act provides. There
is no provision in the Act which makes a reference to the
Authority compulsory in a dispute between the Board and the
electricity-company relating to the non-compliance of the
provisions of the 6th Schedule. [500 C-E]
(e)Under s. 76 (2) there could have been an arbitration by
two arbitrators. But such an arbitration would not have
helped the licensee to prevent the appointment of the Rating
Committee, because, that arbitration was not by the
Authority as required by the second proviso to 57A. The
mere fact that in similar circumstances the State Government
could have been compelled to submit to arbitration of the
Authority is not an adequate answer. [503 C-E]
(f)It is true that if arbitration for any sort of non-
compliance of the provisions of the 6th Schedule fell within
the second condition of the proviso, and, there was a
competent arbitration between the licensee and the State
Government, the licensee could have possibly prevented the
constitution of the Rating Committee by the State
Government. But the interposition of the Board made all the
difference, because, para 16 of the 6th Schedule
contemplates a dispute between the State Government and the
licensee and a reference to the Authority only of such
dispute,. and not a dispute between the Board and the
Company. [502 H-503B]
(g)Section 60 of the 1948-Act cannot be invoked with a
view to substitute the Board in the place of the State
Government for the purpose of arbitration under para 16.
After the 1948-Act came into force where the Boards were not
constituted, the State Government had to departmentally
implement the relevant provisions of’ the Act and in their
implementation the State Government had to incur debts and
obligations, and entering into contracts, and other
engagements for the purpose of’ the Act. Under s. 60 as
soon as the Board was constituted, all these liabilities
were statutorily transferred to the Board and in cases where
suits were filed or other
602Sup CI/74
494
legal proceedings were taken by or against the State
Government they had to be continued or defended by the
Board. But to say that para 16, that is the arbitration
agreement between the State Government and the licensee was
an obligation imcurred by the State Government within the
meaning of s. 60 (1) would be to unnecessarily strain the
language. [500 E-501 C]
(h)Having regard to the urgency of the matter and the
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proviso to para 16 Parliament did not want to prevent the
constitution of the Rating Committee except when there was
an important dispute involving the interpretation of the
provisions of the 6th Schedule and such dispute was already
before the Authority. It may be that there is a lacuna in
the legislation in the Board not being liable to submit to
the arbitration of the Authority but if so, it is for
Parliament to correct that. [503E, G]
JUDGMENT:
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 1797 of
1967.
From the Judgment and Order dated the 15th December, 1964 of
the Gujarat High Court in Special Civil Application No. 388
of 1964.
F.S. Nariman, Additional Solicitor General of India and I.
N. Shroff, for the appellants.
M.C. Chagla, D. N. Mishra and J. B. Dadachanji, for
respondent No. 1
The Judgment of the Court was delivered by
PALEKAR, J.-This appeal by certificate from the judgment and
Order of the High Court of Gujarat in Special Civil
Application No. 388 of 1964 raises the question whether a
reference by the respondent Electricity Co. of an alleged
dispute between itself and the Appellant Board to the
Arbitration of the Central Electricity Authority
(hereinafter called the Authority) operates as a bar to the
constitution of a Rating Committee by the Board under
section 57A of the Electricity (Supply) Act, 1948
(hereinafter called the Act).
A few facts may be necessary to be stated. The appellant
Board is constituted under section 5 of the Act and has
several functions to perform under the Act. Respondent no.
1, the Electricity Company, holds a licence to generate,
transmit and distribute electrical energy within the
licensed area of Ahmedabad.
On September 11, 1963 the Electricity Company intimated to
the Board and the State Government of its intention to
revise the rates of electricity with effect from November
16, 1963 on the ground that the cost of operation had
increased and it anticipated that the clear profit for the
year 1963-64 ending on March 31, 1964 would clearly fall
short of the reasonable return. Along with this notice the
Electricity Company sent some financial data also. The
State Government informed the Electricity Company that the
financial data was not correct and there was no
justification for the proposed increase of the rates. The
Board also by its letter dated November 14, 1963 informed
the Electricity Company that they were not satisfied with
the data given and considered that there was no
justification for revising the rites. The Electricity
Company informed the Government and the Board that it did
not agree with the view taken by them and, in the meantime,
brought the new rates into effect from 16-11-1963.
495
After applying its mind in greater detail the Board proposed
to appoint a Rating Committee under section 57A of the Act,
being of the view-that the Electricity Company was over-
charging the consumers which it was not entitled to do. But
before constituting the Rating Committee it gave a notice to
the Electricity Company, as required by the first proviso of
section 57A, to show cause why the Committee should not be
constituted. The notice was issued on 7-3-1964. The
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notice, in short, informed the Electricity Company that by
bringing into effect the enhanced rates of supply from
September 16, 1963 the Electricity Company was over-charging
the consumers and had thus failed to comply with the
provisions of the Sixth Schedule to the Act. Therefore, the
Board proposed to appoint a Rating Committee to make
recommendations to the Government regarding charges for
electricity which the Company could make to its consumers.
However, before proceeding to constitute the Committee the
show-cause notice was being given. This brought a reply
from the Electricity Company dated March 26, 1964 in which
some attempt was made to justify the increase and it was
alleged that the Company cannot be regarded as having
breached the provisions of the Sixth Schedule. The letter
was closed on this note : "We have endeavored to answer all
the points raised by the Board in the hope that the issues
raised will be appreciated in the proper context and that
the Board would not pursue the matter further. If,
therefore, the Company fails to hear from the Board, say, by
6th April, 1964, that the explanations offered are accepted,
the issues involved will be referred to the arbitration of
the Central Electricity Authority in terms of para XVI of
the Sixth Schedule read with section 76 of the Electricity
(Supply) Act 4. 1948."
The threat held out in the above letter was carried out on
6-4-1968 (See : Ext. 8) by which the reference was made to
the Authority in the following words :................ As
the Company has no information as to whether the Board have
accepted the explanations preferred by the Company, we
hereby refer the ’disputes’ raised by the Gujarat
Electricity Board to the arbitration of the Central Elec-
tricity Authority in terms of para XVI of the Sixth Schedule
read with sections 57A(a) (1) and 76 of the Electricity
(Supply) Act, 1948." The disputes were not formulated but it
appears that the copies of correspondence between the Board
and the Electricity Company were enclosed with the letter.
The Board not being satisfied with the explanation given to
the show-cause notice appointed a Rating Committee on 30-4-
1964 as per Ext. H. Since the Rating Committee was likely
to proceed with the enquiry, the Electricity Company filed
the special Civil Application No. 388 of 1964 to quash its
appointment and to restrain it from functioning.
The High Court held that a dispute or difference between the
Board and the Electricity Company was referable to the
arbitration of the Authority under para XVI of the Sixth
Schedule, and since pending such arbitration no Rating
Committee could be constituted
496
under the second proviso to section 57A, the constitution of
the Rating Committee by the Board was illegal and the
Committee had no power to function. These findings are
challenged in this Court.
Though we are chiefly concerned with the Electricity (Supply
Act, 1948 a reference is also necessary to the Indian
Electricity Act, 19 1 0 because it was under the latter Act
that the licence was issued by the State Government to the
Electricity Company-the licensee. Section 3 of that Act
empowers the State Government to grant the licence. It may
impose several obligations on the licensee. Subsection (2)
sub-clause (f) shows that apart from other terms imposed,
the provisions contained in the Schedule to the Act shall be
deemed to be incorporated with and to form part of every
licence granted, save in so far as they are expressly added
to, varied or excepted. Sections 4 and 4A give the State
Government alone the power to revoke or amend the licence.
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Certain consequences follow where the licence is revoked as
shown in Section 5 and Section 6 permits the purchase of the
Undertaking by the State Electricity Board. Under section 7
the Undertaking vests in the purchaser like the State
Electricity Board who from then on is deemed to be a
licensee. Only one more provision need be noted in this Act
and that is section 52. It provides that where any matter
is by or under the Act directed to be determined by
arbitration the matter shall unless it is otherwise provided
in the licence of a licensee, be determined by such person
or persons as the State Government may nominate in that
behalf on the application of either party. But in all other
respects the arbitration shall subject to the provisions of
the Arbitration Act, 1940. Hence if a dispute under the
licence arises between the State Government and the licensee
and if such dispute is referable to arbitration under
section 52, it shall be so referred either at the instance
of the State Government-the licenser, or the Electricity
Company-the licensee.
The Electricity (Supply) Act, 1948 was passed as
complementary to the Indian Electricity Act, 1910 and made
some special provisions with a view to meet the needs of
increased electricity consumption. The Preamble to the Act
states that the Act was passed to provide for the
rationalization of the production and supplying of
electricity and generally for taking measures conducive to
electrical development. By sub-section 3 the Central
Government was empowered to constitute a body called the
Central Electricity Authority and two of its functions were
(1) to develop a sound, adequate and uniform national power
policy and particularly to guarantee the activities of the
planning agencies in relation to the control and utilisation
national power resources; (2) to act as arbitrators in
matters arising between the State Government or the Board
and a licensee or other person as provided in the Act. The
Central Electricity Authority is called the Authority in the
rest of the Act. Under-section 5 power is given to the
State Government to constitute by notification in the
Official Gazette a State Electricity Board. Its
constitution and jurisdiction are given. in Chapter III of
the Act, section 12 of which says that the Board shall be a
body corporate having perpetual succession and common seal
with power to acquire and hold property and to sue and be
sued. Chapter IV provides for the powers and duties of the
497
State Electricity Board and we may only refer, to section 26
therein which says that subject to the provisions of the Act
the Board shall in respect of the whole State have all
powers and obligations of a licensee under the Indian
Electricity Act, 1910 and the Supply Act of 1948 is deemed
to be the licence of the Board for the purposes of the
Indian Electricity Act, 1910.
The principal question before us is whether the claim made
by the Electricity Company that its dispute with the Board
was legally referable to the Authority is sustainable in
law. For such a claim, there must be either an agreement
between the parties to refer any particular dispute to its
arbitration or there must be a statutory Provision. It is
not the case that there is any agreement between the Board
and the Electricity Company to refer any dispute to the
arbitration of the Authority. But it is contended that
there are statutory provisions making such a reference
competent and, therefore, we shall have to deal with some
other provisions of the Act. To begin with, we shall refer
to the two Schedules of the Act which are known as the Sixth
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Schedule and the Seventh Schedule. The Seventh Schedule is
incorporated by reference in the Sixth Schedule with which
we are principally concerned. The Sixth Schedule consists
of XVII paras the last one dealing with definitions of words
used in the Schedule. The whole Schedule deals with
financial principles in, accordance with which the business
of the licensee is to be carried on. The principle is
accepted that a licensee is entitled to ’clear profit’ but
it is also provided that this clear profit shall not exceed
the amount of ’reasonable return’ In other words, these
financial provisions are laid down with a view to ensure
that the consumer of electricity is not exploited by the
licensee. Therefore the State Government and the Board have
been required by the Act to be vigilant and if they find
that by any illegal manipulation in the financial structure
the licensee is over-charging the consumer, they have to
step in on the ground that the provisions of the Sixth
Schedule are not complied with. To that end these two
Schedules are made by the Act part of the licence issued by
the State Government to the licensee under the Indian
Electricity Act, 1910. Section 57 provides, so far as we
are concerned, that the provisions of the Sixth Schedule and
the Seventh Schedule shall be deemed to be incorporated in
the licence of every licensee..................
and..................................... the licensee shall
comply with the provisions of the said Schedules
accordingly. The provisions of these Schedules, after
incorporation in the licence, are to prevail over any
provisions of the Indian Electricity Act, 1910, the licence
granted to the licensee therein and of any other law,
agreement or instrument applicable to the licensee in so far
as they are inconsistent with the provisions of section 57-A
and the said Schedules. In other words, the provisions of
the Schedules must prevail wherever they are inconsistent
with the other terms of the licence granted by the State
Government to the licensee to the extent of the
inconsistency.
Section 57-A gives a direct hand to the Board to interfere
by the appointment of a Rating Committee if it is satisfied
that the licensee
498
has failed to comply with any of the provisions of the Sixth
Schedule i.e., in other words, over-charged the consumer by
committing a breach of any of the financial principles
mentioned in the Schedule. it will be the function of the
Rating Committee under-section 57-A to examine the
licensee’s charges for the supply of electricity and to make
recommendations in that behalf to the State Government. The
section has three provisos. The first proviso requires that
when it is proposed to constitute a Rating Committee on the
ground that the licensee had failed to comply with any
provisions of the Sixth Schedule the Committee shall not be
constituted unless the licensee had been given a notice in
writing of 30 clear days, to show cause against the action
proposed. In the present case the show-cause notice was
given and nothing turns on it. The third proviso also is
not applicable. It is the second proviso which is important
and the Electricity Company case is mainly based on this
proviso. The proviso reads as follows:-
"Provided further that no such Rating
Committee shall be constituted if the alleged
failure of the licensee to comply with any
provisions of the Sixth Schedule raises any
dispute or difference as to the interpretation
of the said provisions or any matter arising
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therefrom and such difference or dispute has
been referred by the licensee to the
arbitration of the authority under paragraph
XVI of that Schedule before the notice
referred to in the preceding proviso was given
or is so referred within the period of the
said notice."
it was and is the contention of the Electricity Company that
there was a dispute between the Board and itself under
paragraph XVI referable to the Authority, and since the same
was referred within time provided in the proviso the Board
had no power to constitute the Rating Committee and if any
such Rating Committee was constituted it had no jurisdiction
to function.
Section 57, as we have already seen, incorporates the Sixth
Schedule in the licence issued by the State Government to
the licensee as far back as 1944. The grantor was the State
Government and the grantee viz. the licensee was the
electricity company. The provisions of the Sixth Schedule
became part of this licence and had effect notwithstanding
any other inconsistent provisions or terms of that licence.
Nevertheless, the engagement between the State Government
and the licensee continued to bind them to each other.
There is no specific provision in the whole Act to the
effect that the Board shall be substituted in the place of
the State Government as the grantor of the licence. The
functions of the State Government and the Board are well-
defined under both the Acts and the Board, as such, is not
substituted in the place of the State Government. The
parties to the licence, therefore, in spite of the
incorporation of the provisions of the Sixth Schedule
continue to be the State Government and the Electricity
Company. Therefore, if any of the provisions of that
licence including an incorporated provision of the Sixth
Schedule provides for arbitration, the dispute, unless
otherwise expressly indicated, must be
499
between the parties to the licence namely the State
Government, on the one hand, and the Electricity Company, on
the other. Para XVI of the Sixth Schedule provides for the
arbitration clause. It is as follows:
"Any dispute or difference as to the
interpretation or any matter arising out of
the provisions of this Schedule shall be
referred to the arbitration of the Authority;
Provided that where a Rating Committee has
been constituted under Section 57-A no such
dispute or difference shall be referred to the
arbitration of the Authority during the period
between the date of the constitution of such
Committee and the date of the Order of the
State Government made on the recommendations
of the Committee."
Since Para XVI i.e. the arbitration clause is incorporated
in the licence to which the State Government, on the one
hand, and the Electricity Company, on the other are parties
the plain construction of the arbitration clause would be
that the alleged dispute or difference should be between the
two and that dispute or difference alone is referable to the
Authority. That view was taken by this Court in The
Amalgamated Electricity Co. Ltd. v. N. S. Bathena (1). In
that case this particular clause was sought to be pressed
into service by the Electricity Company in a regular suit
filed by a consumer against the Electricity Company for
over-charging. The Electricity Company prayed for the stay
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of the suit on the ground that the consumers remedy was only
to go to the arbitration of the Authority under Para XVI.
This Court rejected the contention in the following words at
page 216. :
Therefore all that we get is that the licence
which is granted by the Government to a
supplier of electricity, like the appellant,
is to contain a clause that certain disputes
would be referred to arbitration. The licence
is an engagement between the Government and
the licensee, binding the parties to it to its
provisions. It is unnecessary to decide
whether this engagement is contractual or
statutory, for, in either case,it is between
the two of them only. An arbitration clause
in an instrument like this can only be in
respect of disputes between the parties to it.
Such an arbitration clause does not
contemplate a dispute between a party to the
instrument and one who is not such a party."
It is, therefore, obvious that since the Board is not a
party to the licence, unless there are other provisions in
that respect, the arbitration clause in the licence cannot
be exploited by the Electricity Company for referring its
disputes with the Board to the arbitration of the Authority.
We have, then to see if there are any statutory provisions
which make disputes between them referable to the
arbitration of the Authority. Section 76 of the Act read as
follows in 1964 when the present dispute arose :
(1) [1959] Supp. 2 S.C.R. 213
500
"76(1) All questions arising between the State
Government or the Board and a licensee or
other person shall be determined by ar-
bitration;
(2) Where any question or matter is, by this
Act, required to be referred to arbitration,
it shall be referred :
(a) in cases where the Act so provides, to
the Authority, and on such ’reference the
Authority shall be deemed to have been duly
appointed as Arbitrators, and the award of the
Authority shall be final and conclusive; or
(b) in other cases, to two arbitrators, one
to be appointed by each party to the dispute.
(3) Subject to the provisions of this
section, the provisions of the Arbitration
Act, 1940 shall apply to arbitrations under
this Act."
Sub-section (1) was deleted by Act 30 of 1966. When the
dispute arose a dispute between the Board and the licensee
was undoubtedly referable to arbitration. But all disputes
were ’not referable to the Authority only those referred to
in sub-clause (a) of sub-section (2) i.e. to say only those
cases for which the Act provides. There are some cases
where the Act provides for the Arbitration by the Authority
between the Board and the licensee, See : for example
sections 44(3), 45(3) and 55(2)., No similar provision has
been brought to our notice which makes a reference to the
Authority compulsory in a dispute between them relating to
the non-compliance of the provisions of the Sixth Schedule.
It was however, contended for the Electricity Company-a con-
tention which found favour with the High Court-that by
virtue of section 60(1) of the Act the Board stepped into
the shoes of the State Government. That sub-section reads:
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"60(1) All debts and obligations incurred, all contracts
entered into and all matters and things engaged to be done
by, with or for the State Government for any of the purposes
of this Act before the first constitution of the Board shall
be deemed to have been incurred, entered into or engaged to
be done by, with or for the Board; and all suits or other
legal proceedings instituted or which might but for the
issue of the notification under sub-section (4) of section 1
have been instituted by or against the State Government may
be continued or instituted by or against the Board." A mere
reading of the section would show that the provision is made
in respect of the engagements of the State Government prior
to the constitution of the Board. It will be seen from
section 1 (3) that section 1 and some other sections
including sections 57 and 57-A and the provisions of the
Sixth and the Seventh Schedules came into force at once i.e.
in 1948 only. By section 5 the State Governments were given
power to constitute the Boards. Some States exercised that
power early, some others did not. Where the Boards were not
constituted the State Government had to departmentally
implement the relevant provisions of the Act and in their
implementation the State Government had to incur debts and
obligations enter into contracts, and other engagements for
the purposes of the Act. But as soon as the
501
Board was constituted all these liabilities were statutorily
transferred to the Board, and in cases where suits were
filed or legal proceedings taken by or against the State
Government they had to be continued or defended by the
Board. To say that paragraph XVI i.e. the arbitration
agreement between the State Government and the licensee was
an obligation incurred by the State Government within the
meaning of section 60(1) would be to unnecessarily strain
the language. Under the arbitration clauses both the State
Government and the licensee were equally entitled to refer
their dispute or difference to the arbitration of the
Authority and, similarly, equally obliged thereunder to
submit to its arbitration. Such a clause cannot be
described as an obligation incurred by the State Government
in favour of the licensee for any of the purposes of the
Act. In our opinion, section 60 cannot be invoked with a
view to substitute the Board in the place of the State
Government for the purposes of arbitration under para XVI.
Now to turn to the second proviso of section 57A which we
have already quoted. According to that proviso, the bar
against the constitution of the Rating Committee operates
under 3 conditions. (1) There should be an alleged failure
of the licensee to comply with any provisions of the Sixth
Schedule; (2) This alleged failure raises a dispute or
difference as to the interpretation of the said provisions
or any matter arising therefrom; (3) and such difference or
dispute has been referred by the licensee to the arbitration
of the Authority under paragraph XVI of that Schedule before
a certain date.
In the present case there is no doubt that there is an
allegation by the Board that the licensee had failed to
comply with the provisions of the Sixth Schedule. As
regards the second condition there is considerable dispute
as to what exactly it means. it is contended by the learned
Additional Solicitor General on behalf of the Board that the
dispute or difference should be one as to the interpretation
of the provisions or any matter arising therefrom i.e. the
interpretation. On the other hand, it is contended by Mr.
Chagla on behalf of the Electricity Company that the
expression "any matter arising therefrom" is not limited to
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interpretation only, and in this connection he has referred
to para XVI itself. The wording of para XVI is rather
complicated. But it seems it may be possible to rewrite it
in this form "Any dispute or difference as to the
interpretation of the provisions of this Schedule or any
matter arising, out of the provisions of this Schedule." Mr.
Chagla contends that para XVI contains cognate words
throwing light on the words in the second proviso and since
para XVI clearly shows that the dispute or difference is not
merely confined to the interpretation of the provisions but
also extends to any factual matter arising out of the
provisions a similar construction should be placed on the
second condition in the second proviso. The learned
Additional Solicitor General has pointed out that an all
India body like the Authority, whose task it is to develop a
sound, adequate and national power policy, may be only
properly invested with the power of interpreting the
provisions of the Sixth Schedule because uniformity of
interpretation throughout India would be very necessary. On
the other hand, disputes with regard to facts
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as to how much amount is to be included under this provision
or how much amount is to be excluded under some other
provision of the Sixth Schedule are matters of detail which
could not have been intended to be referred to the
Authority. According to him the almost similar expressions
used in the second proviso and para XVI must be so in-
terpreted that the Authority’s jurisdiction as arbitrator
was confined to the interpretation of the provisions and
matters subsidiary thereto. Undoubtedly we see force in
this submission but we do not find it necessary to express
any final opinion on the point. We shall only say this that
there is ground for argument as to whether the one thing or
the other was intended. It is for the Parliament to clear
the doubt and uncertainty. For our present purpose we shall
proceed on the assumption that in the present case the
alleged failure raises a dispute or difference as to the
interpretation of the said provisions or any matter arising
therefrom. Coming to the third condition we find that the
reference must be by the licensee to the arbitration of the
Authority under paragraph XVI of the Sixth Schedule. No
doubt the dispute had been referred by the licensee to the
arbitration of the Authority within the time allowed by the
Statute. But was it a reference under paragraph XVI of the
Schedule ? The answer must be in the negative. The
reference to arbitration to the Authority under paragraph
XVI of the Schedule could be made by the licensee only
against the grantor of the licence namely the State
Government and not the Board. If the licensee could make
such reference under any other provisions of the Act, it is
another matter. The present reference, to the Authority
against the Board however could not be described as a
reference under paragraph XVI of the Schedule. That proviso
puts an embargo on the constitution of the Rating Committee
if at that time there is already a reference to the
Authority of a dispute between the State Government and the
licensee for the interpretation of any of the provisions of
the Sixth Schedule. The object is clear. There would be no
point in constituting a Rating Committee if the
interpretation of the provisions is referred to the
Authority in a reference competently made as between the’
State Government and the licensee. All the three conditions
of the second proviso were necessary to co-exist if the
Rating Committee was not to be constituted by the Board.
But since the third condition is absent it must be concluded
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that there could be no bar to the appointment of the Rating
Committee by the Board.
As a branch of the same argument it was pointed out that if
the Board had not been constituted and the power under
section 57A were left to be exercised by the State
Government it would have been possible for the licensee to
go to the arbitration of the Authority on the question
whether the State Government had good ground to be satisfied
that the licensee had not complied with the provisions of
the Sixth Schedule and thus held up the constitution of the
Rating Committee. It was, therefore, submitted that the
mere interposition of the Board which took over the
functions of the State Government should not make any
difference. It is true that if arbitration for any sort of
non-compliance of the provisions of the Sixth Schedule fell
within the second condition of the proviso, and, otherwise,
there was
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a competent arbitration between the licensee and the state
Government the licensee could have possibly prevented the
constitution of them Rating Committee by the State
Government. Unfortunately the interposition of the Board
makes all the difference because as already stated para XVI
of the Sixth Schedule contemplate a dispute between the
State Government and the licensee and a reference to the
Authority only of such a dispute. It is not the case that
the provisions. of the Sixth Schedule would not, in the
very.’nature of things, generate any dispute between the
State Government and the licensee ’with regard to the
interpretation of the provisions or other matters. In that
event to read the Board in the place of the State Government
would be incorrect. It is not as if the Act has made no
provision at all for referring disputes between the Board
and the licensee to the arbitration of the authority. We
have already referred to them. Then again sub-section (1)
of section 76 of the Act which had not been deleted till
1966 could have also given an opportunity to the present
licensee for an arbitration under subsection (2) of two
arbitrators if not the Authority. Indeed such an
arbitration would not have helped the licensee to prevent
the appointment of the Rating Committee because that.
arbitration was, not by the Authority which is requisite for
the second proviso. However that may be, the whole point of
the matter is whether the Board could be compelled to submit
to the arbitration, of the Authority. The mere fact that in
similar circumstances the State Government could, perhaps,
have been compelled to submit to arbitration of the
Authority is no adequate answer. if this is a lacuna in the
legislation it is for the Parliament to correct it. We may,
however, point out that-in enacting section 57A Parliament
seemed to attach some importance to the appointment of the
Rating. Committee and must have intended that the enquiry
by the Committee should be expeditious. The Board takes the
decision to appoint the Committee only when it is satisfied
that the provisions of the Sixth Schedule are not complied
with that is to say, the licensee ’Was overcharging the
consumer. The proviso to para XVI of the sixth Schedule
also emphasizes this. It says that even if there be any
dispute or difference between the State Government and the
licensee with regard to the interpretation of any provision
or any matter arising out of the provisions, no such dispute
or difference would be referred to the arbitration of the
Authority when a Rating Committee has been constituted and
is making the necessary enquiry. Having regard to the
urgency of the matter and the proviso to para XVI just
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referred to, it seems more likely that Parliament did not
want to prevent the constitution of the Rating Committee
except when there was an important dispute involving the
interpretation of the provisions of the: Schedule and such a
dispute was already before the Authority. The matter is not
free from difficulty. It is perfectly arguable that if’ the
State Government while implementing the Act is liable to
submit to the arbitration of the Authority, there was no
good reason why the Board taking over the functions of the
State Government should not be so liable in similar
circumstances. Then again it is not clear on a comparison
of the wording of the second proviso of section 57A and the
wording of para XVI of the Sixth Schedule whether Parliament
wanted for the purposes of both provisions that the
Authority should
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be approached not merely for the interpretation of the
provisions of the Sixth Schedule but also sundry matters of
detail arising out of the provisions. It is for the
legislature to remove doubts and uncertainties. But as
things now stand and in the light of the decision of this
Court in The Amalgamated Electricity Co. Ltd. v. N. S.
Bathana already referred to we must say that in the absence
of any express provision substituting the Board in the place
of the State Government for the purposes of arbitration in a
dispute or difference between the Board and the licensee, we
cannot construe the second proviso as contemplating an
arbitration before an Authority in a dispute to which only
the licensee and the Board are parties.
Nor is there any substance in the contention that para XVI
of the Sixth Schedule is a statutory provision for
arbitration to which section 46 of the Arbitration Act, 1940
would apply. The point was specifically urged in the above
case and has been rejected.
In our opinion the second proviso to section 57A does not
contemplate holding up of the constitution of the Rating
Committee merely on the ground that there is a dispute or
difference between the Board and the licensee as to whether
the provisions of the Sixth Schedule had been complied with
or not and such a dispute was referred to the Authority.
Nor are we referred to any provision in the Act which makes
such a dispute between the Board and the licensee referable
to the Authority.
We have, therefore, to conclude that the finding of the High
Court on which relief was given to respondent no. 1 cannot
be sustained in law. It appears that some other issues had
been also raised before the High Court but they were not
dealt with in view of the finding recorded. The parties,
therefore, are agreed that the case will have to go back to
the High Court for disposal in accordance with law after
considering the other issues raised in the Special Civil
Application. ,Accordingly the case is remanded to the High
Court for disposal. The costs shall be costs in the cause.
V.P.S. Appeal allowed and Case remanded.
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