Full Judgment Text
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CASE NO.:
Appeal (civil) 1005 of 2003
PETITIONER:
The Tata Hydro-Electric Power Supply Co. Ltd. & Ors.
RESPONDENT:
Union of India
DATE OF JUDGMENT: 05/02/2003
BENCH:
M.B. SHAH, B.P. SINGH & H.K. SEMA.
JUDGMENT:
J U D G M E N T
Arising Out of S.L.P.( C) NO.4123 OF 2001
B.P.SINGH, J.
Special leave granted.
This appeal is directed against the judgment and order of the
High Court of Judicature at Bombay dated 5.10.2000 in Appeal
No.144 of 2000 whereby the Division Bench of the High Court
affirmed the judgment of the learned Single Judge allowing the
Arbitration Petition filed by the respondent under Section 34 of the
Arbitration and Conciliation Act, 1996 challenging the award of
the Umpire dated 30th March, 1998 on the ground of an error of
law apparent on the face of the Award.
The appellant-companies are licensees under the Indian
Electricity Act, 1910 (hereinafter referred to as "the Act"). A
Power Supply Agreement was executed on 7th July 1971 between
the aforesaid companies and President of India represented by
Central Railways and Western Railways. Under the agreement
electric power is supplied to the railways at a number of points on
the railways electrified track route for the operation of the railways
electric trains services. Clause 20 of the said agreement contains
an arbitration clause which reads as under:-
"20.0: In the event of any dispute or difference at
any time arising between the Government and the
Companies in regard to any matter arising out of or
in connection with this Agreement such dispute or
difference shall be referred to arbitration of two
arbitrators one to be appointed by each party
hereto and an Umpire to be appointed by the
Arbitrators before entering upon the reference and
decision or award of the said Arbitrators or Umpire
shall be final and binding on the parties hereto and
any reference made under this clause shall be
deemed to be a submission to arbitration under the
Arbitration Act, 1940, or any statutory
modification thereof for the time being in force.
The venue of arbitration shall be Bombay".
The facts of the case are that on 7th June, 1993 the appellants
found that Western Railways Feeder No.36 Red phase current was
lower (0.4 amps.) than Blue phase current (14 amps.). The
respondent was accordingly advised by message dated 9th June,
1993 indicating that the appellants would be carrying out further
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investigation. On 13th June, 1993 further investigation was carried
out in the presence of representative of Western Railways and it
was confirmed that in Feeder No.36, the main Current Transformer
(CT) in Red phase had developed inter-turn short resulting in lower
output from its secondary windings. The appellants, therefore,
replaced the defective CT and installed a new CT after showing the
test results on the defective CT to the representative of the Western
Railways. The meter was checked and found satisfactory.
Subsequent to the replacement of the defective CT on 13th June,
1993 the off take of the Trivector Meter and the sum of the energy
recorded on the two energy meters at Dharavi were found to be
higher by 28.7 per cent.
On 22.6.1993 the appellants informed the Western Railways
about the defect that had been detected and rectified and also that
they shall advise the Railways the exact period of under
registration and the estimation of the quantum of energy that had
not been registered by the tariff meter due to the defective CT. By
their subsequent letter of 16th July, 1993, they informed the
respondent that the Western Railway’s off take recorded at
Dharavi between October, 91 and June, 1993 was lower by about
34 per cent compared to the off take prior to October, 1991 and
that the recorded off take of Western Railways after replacement of
the defective CT on 13th June, 1993 had come back to the level
prevailing before October, 1991. The appellants, therefore,
expressed the need to make an adjustment of about 20.20 per cent
of the total monthly energy off take of Railways at Dharavi billed
since October, 1991 up to 13th June, 1993.
On 26th July, 1993, the appellants submitted a
supplementary bill to the respondent dated 26th July, 1993 for
Rs.8,89,32,367.50 for the period of under registration i.e. from 20th
October, 1991 to 13th June, 1993 giving inter-alia the extent of
adjustment in energy off take and M.D. Fuel, Adjustment charges
etc. A request was made for early payment of the bill. The
respondent vide its letter of 6th August, 1993 drew the attention of
the appellants to paras 10.1 and 10.3 of the contract agreement
between the parties and stated that the metering responsibility as a
whole lay with the appellants and that there is no interference by
the Railways in this regard. Moreover, para 10.3 of the contract
agreement provided a period of three months as a corrective period
during which the defective meter should have been put back to the
required accuracy level. Considering the date of the bill as
26.7.1993, the respondent expressed its readiness to consider the
period of under registration for a maximum period of three
preceding months i.e. w.e.f. May, 1993. If so advised, the
appellants were required to submit a revised bill.
It appears that several meetings took place between the
parties, but they could not come to an agreement. On 2nd June,
1995, the appellants wrote to the respondent referring to its
supplementary bill and the discussions which the parties had on the
subject. However, since the issue remained unresolved the
appellants informed the respondent that they were resorting to
Clause 20 of the Power Supply Agreement and refer the matter to
two arbitrators, one each to be appointed by the parties. This was
followed by letter dated 27th July, 1995 informing the respondent
that the appellants had appointed Mr. A.D. Limaye, (Retd.) Asstt.
General Manager (Supply) BEST as their arbitrator in terms of
Clause 20 of the Agreement. The respondent was requested to
name its arbitrator and advise the appellants. Accordingly by letter
dated 2nd February, 1996, the respondent appointed Shri R.K.
Sinha, Financial Advisor and Chief Accounts Officer, Western
Railways as its arbitrator and endorsed a copy of this letter to the
appellants for information. The arbitrators entered upon the
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arbitration but since they failed to agree, they referred the dispute
to the Umpire by their letter dated 29th November, 1996.
Thereafter the Umpire received the documents from both the
arbitrators in January, 1997. The claim was filed by the appellants
before the Umpire and a reply filed thereto by the respondent in the
months of March and April, 1997. The Umpire entered upon the
reference on 15th April, 1997 and ultimately passed an award on
30th March, 1998 awarding a lump sum of Rs. 4 crores to the
appellants with interest @ 12 per cent per annum from August,
1993 till the passing of the decree.
The respondent filed an Arbitration Petition 210 of 1998
under Section 34 of the Arbitration and Conciliation Act, 1996
challenging the award on the ground of error of law apparent on
the face of the award contending that the decision of the arbitrator
was clearly contrary to the law laid down by the Supreme Court by
its Judgment and Order dated 17th December, 1999. A learned
Single Judge of the High Court set aside the award on the ground
that it was contrary to the law as declared by the Supreme Court in
UPSEB Vs. Atma Steels and others : AIR 1998 SC 846. He
also held that the Umpire had no jurisdiction in the matter since the
dispute could be resolved only under Section 26 of the Indian
Electricity Act, 1910, which precluded private arbitration. The
dispute, therefore, could be resolved only by the Electrical
Inspector as provided in Section 26 of the Act.
The appellants preferred an appeal against the judgment and
order of the learned Single Judge setting aside the award but the
said appeal was dismissed by the Division Bench of the High
Court in Appeal No. 144 of 2000 by judgment and order dated 5th
October, 2000 affirming the judgment and order of the learned
Single Judge. The judgment and order of the Division Bench is the
subject matter of challenge in this appeal.
Section 26 of the Indian Electricity Act provides inter-alia
that in the absence of an agreement to the contrary, the amount of
energy supplied to a consumer or the electrical quantity contained
in the supply shall be ascertained by means of a correct meter, and
the licensee shall, if required by the consumer, cause the consumer
to be supplied with such a meter. Sub-sections (6) & (7) of Section
26 of the Act are relevant and read thus:-
"(6) Where any difference or dispute arises
as to whether any meter referred to in sub-section
(1) is or is not correct, the matter shall be decided,
upon the application of either party, by an
Electrical Inspector; and where the meter has, in
the opinion of such Inspector ceased to be correct,
such Inspector shall estimate the amount of the
energy supplied to the consumer or the electrical
quantity contained in the supply, during such time,
not exceeding six months, as the meter shall not, in
the opinion of such Inspector, have been correct;
but save as aforesaid, the register of the meter
shall, in the absence of fraud, be conclusive proof
of such amount or quantity:
Provided that before either a licensee or a
consumer applies to the Electrical Inspector under
this sub-section, he shall give to the other party not
less than seven days’ notice of his intention so to
do.
(7) In addition to any meter which may be
placed upon the premises of a consumer in
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pursuance of the provisions of sub-section (1), the
licensee may place upon such premises such meter,
maximum demand indicator or other apparatus as
he may think fit for the purpose of ascertaining or
regulating either the amount of energy supplied to
the consumer, or the number of hours during
which the supply is given, or the rate per unit of
time at which energy is supplied to the consumer,
or any other quantity or time connected with the
supply:
Provided that the meter, indicator or
apparatus shall not, in the absence of an agreement
to the contrary be placed otherwise than between
the distributing mains of the licensee and any
meter referred to in sub-section (1);
Provided also that, where the charges for the
supply of energy depend wholly or partly upon the
reading or indication of any such meter, indicator
or apparatus as aforesaid, the licensee shall, in the
absence of an agreement to the contrary, keep the
meter, indicator or apparatus correct; and the
provisions of sub-sections (4), (5) and (6) shall in
that case apply as though the meter, indicator or
apparatus were a meter referred to in sub-section
(1).
Explanation. A meter shall be deemed to
be "correct" if it registers the amount of energy
supplied, or the electrical quantity contained in the
supply, within the prescribed limits of error, and a
maximum demand indicator or other apparatus
referred to in sub-section (7) shall be deemed to be
"correct" if it complies with such conditions as
may be prescribed in the case of any such indicator
or other apparatus".
Two issues were highlighted before the High Court by the
parties. While it was contended on behalf of the appellants that a
Current Transformer (C.T.) is not a "meter" within the meaning of
Section 26 of the Act, the respondent contended that a Current
Transformer being an "apparatus" for the purpose of ascertaining
or regulating the amount of energy supplied to the consumer, it
was an apparatus contemplated by Section 26(7) of the Act, and for
this, reliance was placed on the decision of the Supreme Court in
Atma Steels (supra). Secondly, the respondents contended that
the dispute, since it related to a defective meter and consequent
under registering of electricity supplied, was a dispute within the
contemplation of Section 26(6) of the Act and, therefore, such a
dispute could be resolved only by the Electrical Inspector as
provided in sub-section (6) of Section 26. A statutory arbitration
provided in the aforesaid sub-section ruled out any private
arbitration and therefore the Umpire had no jurisdiction to pass an
award in respect of such a dispute even if referred to it by the
parties.
The appellants sought to sustain the award contending that
since the parties had submitted a specific question to the arbitrator
for his decision viz whether a CT was an "apparatus" within the
meaning of the proviso to Section 26(7) of the Act which could
confer exclusive jurisdiction on the Electrical Inspector to decide
the dispute, even if the specific question was decided erroneously
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by the arbitrator, the award could not be set aside on that ground.
On these questions the learned Single Judge as well as Appellate
Bench have held in favour of the respondents.
A perusal of the award of the Umpire would disclose that he
has noticed in detail the submissions urged before him by the
parties. The Umpire had also before him the statements of
monthly energy consumption as recorded by the appellants billed
figures and the Western Railways aggregate figures of the energy
recorded by Western Railways own meters at Railway’s end of the
5 Western Railway feeders. These were furnished by the Western
Railways in Annexure 12 of their letter dated 28.4.1997. The chart
which is incorporated in the award itself is as follows :-
"Col.1 Col.2 Col.3 Col.4
Month & Total energy Energy con- Col.3 & Col.4
Year consumed by summed by Ratio of consum-
Railways as per W.Rly 5 as per ption per TEC
Summation TEC’s in Vector meter vis--vis
of KMhr readings Meter Rly’s aggregate as
at Rly’s end of 5 per Rly’s Meters
feeders
July’91 6,271,200 7,364,763 1.174
Aug.’91 6,371,260 7,503,409 1.178
Sept.’91 6,339,740 7,349,398 1.159
Oct.’91 7,145,300 6,251,070 0.875
Nov.’91 6,802,400 4,944,667 0.727
Dec.’91 6,792,860 4,977,564 0.734
Jan.’92 7,068,760 5,183,124 0.731
Feb.’92 6,508,380 4,769,028 0.733
March’92 6,492,100 4,813,383 0.741
April’92 6,878,300 5,010,531 0.729
May’92 6,695,240 5,001,012 0.747
June’92 6,551,360 4,799,810 0.798
July,92 6,896,000 5,028,104 0,729
Aug.’92 6,637,300 4,722,777 0.712
Sept.’92 6,203,700 4,713,970 0.780
Oct.’92 7,066,000 5,169,855 0.782
Nov.’92 7,264,480 5,019,352 0.691
Dec.’92 7,822,600 5,229,249 0.668
Jan.’93 7,255,200 5,034,874 0.694
Feb.’93 7,112,540 4,930,264 0.693
March’93 7,639,460 5,481,025 0.715
April’93 7,399,900 5,267,613 0.712
May’93 7,443,700 5,096,903 0.688
June’93 7,450,500 7,396,796 0.992
July’93 9,046,800 8,563,222 0.947
Aug.’93 7,847,400 8.490,753 1.082
Sept.’93 7,156,600 7,592,191 1.061
It is observed from Col. 4 of the table that the ratio
of energy consumption as recorded by W. Rly’s
meter to that recorded by Rly’s meters at the
receiving end which was around 1.159 to 1.178
dropped to 0.875 in June 91 and from July 91 to
May 93 remained in the range of 0.685 to 0.760.
The ratio changed to 0.993 in June’93 and picked
upto 1.061 in Sept.’93. Notwithstanding W. Rly’s
foot note that Railway’s meters are not
periodically calibrated and therefore could not be
relied upon (though there was a contradiction on
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this front in the remarks of Mr. P.P. Sharma Sr.
Sec. Engineer (S/S) of W. Rly’s observation that
the KWhr. Elements of TVMs were being
calibrated once in 5 years) and Mr. Jain of W. Rly
later clarifying in W. Rly’s letter of 23.12.97 that
this practice was not being rigidly adhered to and
the further fact that aggregation of readings also
results in aggregation of errors of individual
meters, some positive and some negative is worth
noting that this comparison corroborates the fact of
the meter registration at Dharavi RS dropped down
from October 1991 onwards till in June 1993 when
the defective CT was replaced".
It is no doubt true that before the Umpire it was seriously
urged on behalf of the Railways that CT was an "apparatus" within
the meaning of the proviso to section 26(7) of the Indian
Electricity Act, 1910 while on the other hand it was contended on
behalf of the appellant that CT is not such an apparatus and,
therefore, any defect in the CT will not amount to a defect in the
meter. The Umpire in his award upheld the contention of the
appellant.
It was urged before the High Court as also before us that
having regard to the judgment of this Court in U.P.S.E.B. vs.
Atma Steel (supra) it is no longer open to the appellant to contend
that CT was not an apparatus within the meaning of section 26(7)
of the Act. Having perused the judgment of this Court in Atma
Steel’s case (supra), we also entertain no doubt that CT is an
apparatus within the meaning of section 26(7) of the Act.
The question that still survives consideration is whether the
dispute before the Umpire was in fact a dispute contemplated by
section 26(6) of the Act. Sub-section 6 of section 26 begins with
the words "where any difference or dispute arises as to whether
any meter referred to in sub-section (1) is or is not correct, the
matter shall be decided, upon the application of either party, by an
Electrical Inspector; .". Sub-section 6 contemplates a
difference or dispute, where one party contends that the meter has
rightly recorded the energy supplied while the other controverts
that position and contends that it has not correctly recorded the
supply of electrical energy. If such a dispute arises between the
parties, the matter is required to be decided by an electrical
inspector and it is he who can pronounce upon the question as to
whether the meter was or was not correct. Based upon his finding,
he is authorized to estimate the amount of the energy supplied
during such time, not exceeding six months, as the meter shall not
in his opinion have been correct. A dispute as to whether CT is an
apparatus within the meaning of sub-section 7 of section 26 is not
such a dispute, unless it is further contended that the CT which is
an "apparatus" within the meaning of sub-section 7 of section 26
was in fact defective, and, therefore, the meter had incorrectly
recorded the supply of electrical energy. In short, before an
electrical inspector can be called upon to decide a dispute under
sub-section 6 of section 26, it must be shown that while one party
contends that the meter, including the CT, is defective the other
contends to the contrary. In the facts of this case we find that there
was in fact no dispute that the CT was defective and it had,
therefore, to be replaced. In fact when the supplementary bill was
submitted by the appellant, the Western Railways did not dispute
the position that the CT was defective, but only denied their
liability to pay the amount of Rs.8.89 crores demanded in the
supplementary bill and contended that at best they were liable to
pay only Rs.12,20,740/- since demand for under registration by the
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meter could be permitted for a maximum period of 3 months of the
demand as per the Power Supply Agreement. Considering the date
of the bill as 26th July, 1993, the respondent expressed its readiness
to consider the period of under registration for a maximum period
of three preceding months i.e. with effect from May, 1993 and
wrote to the appellant that if so advised it may submit a revised
bill. It, therefore, appears that there was really no dispute between
the parties that the meter was defective. Even if we proceed on the
basis that CT is a meter/apparatus within the meaning of sub-
section 7 of section 26 of the Act, the only dispute was whether the
respondent was liable to pay the entire supplementary bill as
claimed by the appellant or whether their liability was limited to a
period of three months preceding the date of the bill.
Where there is no dispute that the meter is defective, such a
dispute is not one contemplated by sub-section (6) of section 26 of
the Act. It is no doubt true that if a dispute as contemplated by
sub-section (6) of section 26 of the Act arises, the matter has to be
referred to the Electrical Inspector, and in view of the statutory
provisions, private arbitration in the case of such a dispute is not
permissible in law. However, if there is no dispute as to whether
the meter is defective or not, there is nothing which prevents the
parties from referring their other disputes to arbitration for
determining the liability of the consumer in such cases. It is only
where any difference or dispute arises as to whether any meter
referred to in sub-section (1) of Section 26 is or is not correct, that
dispute has mandatorily to be resolved by the Electrical Inspector.
In resolving the dispute, the Electrical Inspector can make an
estimate of the electrical energy supplied during such time, not
exceeding six months, as the meter shall not in his opinion have
been correct. For the remaining period, the register of the meter is
deemed to be conclusive proof of such amount or quantity, in the
absence of fraud. All this pre-supposes the existence of a dispute
contemplated by Section 26(6) of the Act which has to be resolved
by the Electrical Inspector.
The Umpire no doubt held that CT was not an "apparatus"
within the meaning of sub-section (7) of section 26 of the Act.
Since an argument was raised before him that CT is such an
apparatus within the meaning of sub-section (7) of section 26, he
expressed his opinion in the matter and may be, he decided
wrongly. But that by itself will not bring the dispute under sub-
section (6) of section 26 of the Act. It was neither contended
before the Umpire nor was it decided by the Umpire, that the CT
was not defective. This was so because the parties were agreed
that the CT was defective. In any event that is not the basis of the
award. All that the Umpire had to decide was whether there was
under registration of supply of electrical energy to the respondent
and if so, the extent thereof and the liability of the respondent to
pay for such electrical energy supplied but not recorded. From a
perusal of the award it appears that that is precisely what the
Umpire has done. Having noticed all the facts and circumstances
of the case the Umpire recorded his finding in the following
words:-
"In the event, taking into account the facts
1) That it is nobody’s case that the Railway has
not been paying regularly according to the bills
preferred by TEC based on the energy
consumption and MD recorded by their meter,
the maintenance of whose accuracy is entirely
the responsibility of TEC in terms of the power
supply agreement as well as the I.E. Act and
which meter incidentally had been tested to be
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working properly in the tests carried out by
TEC in Nov.,91 and March 93 in the presence
of Railway’s representative.
2) That the traffic level handled by the W. Rly.
During the dispute period had not decreased or
remained static but had on the contrary
increased, while the aggregate energy
consumed had dropped despite the Railway not
having undertaken any improved methods of
operation or implementation of any energy
saving techniques and further that after the
disputed period the level of energy consumed
had attained higher levels in the consonance
with the traffic levels obtaining in these later
periods, establishes the fact that during the
disputed period there has been some part of the
energy consumed that has escaped metering.
3) That the time taken by TEC to discover the
defect that had arisen in their metering CT was
an abnormally long one and that the consumer
cannot be penalized for TEC’s failure to
discover this defect, for whatever reasons they
be, in a reasonable time, particularly when they
had the obligation to maintain the meter and
metering system in a state of good repair as
well as accuracy level and that the customer
cannot be penalized for the failure of the Ct
attributable to probable manufacturing defect, if
any, and with a view to answering that the ends
of natural justice, equity and fairplay are
properly met with, with respect to both the
parties I pronounce my lumpsum award of Rs.
4 crores only (Rupees Four Crores only) in
favour of the claimant, payable by the Railway,
I hold that the payment becomes due w.e.f.
Aug. 93. I also award interest charges of 12%
p.a. w.e.f. Aug. 93 till the passing of the court
decree".
As noticed earlier the Umpire took into account the readings
of the meters maintained by the Railways themselves, but did not
give to the appellant the full benefit thereof, otherwise the amount
would have been much higher. Only a lumpsum award of Rs. 4
crores was made.
In fact, during the pendency of the special leave petition
before this Court as well, the Court had noticed the fact that the
Western Railways was also maintaining meters at their end and the
said meters revealed the total energy consumed at the railways end
at 5 feeder stations. This was noticed by the Umpire as well.
There appeared to be no reason why the railways should not pay
the amount as per their own meters. It appeared unfair and
inequitable that the Union Government should deny to pay the
amount for the electricity consumed as per their own record.
Counsel for the Union of India was given time to consider the
matter and obtain necessary instructions. It, however, appears that
the Union of India was not inclined to settle the dispute and,
therefore, the matter had to be heard.
We, therefore, hold that the High Court erred in setting
aside the award of the Umpire on a finding that the dispute before
him was one contemplated by sub-section (6) of section 26 of the
Act and, therefore, not arbitrable. We hold that the parties never
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disputed the fact that the CT, which is an "apparatus" within the
meaning of sub-section (7) of section 26 of the Act, was in fact
defective. There being therefore, no dispute as to whether the
meter had ceased to be correct, the dispute was not one
contemplated by sub-section 6 of section 26 of the Act. In fact
none of the parties even raised a contention before the Umpire that
the CT was not defective, and therefore the Umpire was not
required to give his finding on the question, which in a dispute
under Section 26(6) of the Act is the primary question to be
decided. The dispute related only to the claim of the appellant who
had submitted a supplementary bill for the electrical energy
supplied but not recorded. In the absence of a dispute as to
whether the meter was or was not correct, such a dispute was
arbitrable. The Umpire on the basis of the material before him
particularly total energy consumed by the Railways as per
summation of KWhr readings at Railways end of 5 feeders for
which there is no dispute, made an Award, which in our view, he
was entitled to make. However, on one aspect of the matter we
feel that the award requires to be modified. The Umpire has
awarded interest @ 12% per annum with effect from August, 1993
till the passing of the court decree. In the facts and circumstances
of the case the award is required to be modified to the extent that
interest be awarded at the same rate, but with effect from the date
of the award i.e. 30th March, 1998 instead of August, 1993. The
impugned judgment and order of the High Court is set aside. The
appeal is accordingly allowed with the said modification. Let a
decree be drawn up accordingly. There shall be no order as to
costs.