Case: West Bengal State Electricity Board Vs. Calcutta Electric Supply Corpn. Ltd

of revised cost can only be under sub-section (2) of Section 44 and in fact the Board also communicated the same in the purported exercise of power under sub-section (2) of Section 44. The further consent in respect of the revised project cost having been given under sub-section (2) of Section 44, a dispute did arise within the ambit of sub-section (3) of Section 44 and, therefore, the authority concerned contemplated under sub-section (3) of Section 44, gets jurisdiction to arbitrate upon the dispute between the parties and in the case in hand, the said authority ultimately passed an award. In view of our analysis, as stated above, it is difficult for us to sustain the argument of Mr. Reddy, appearing for the Board that the so-called dispute regarding the project cost, cannot be a dispute arising out of the provision of Section 44 and as such would not be arbitrable under sub-section (3) of the said Section. We, therefore, are in agreement with the conclusion of the Division Bench of Calcutta High Court and hold that the dispute in question did come within the purview of sub-section (2) of Section 44 and as such was arbitrable under sub-section (3) thereof and the award cannot be held to be without jurisdiction, as contended by the Board.6. There is yet another facet in the case in hand, namely how the Board itself as well as the authority have themselves understood the provisions of the Act. The concerned authority, who was the statutory arbitrator under sub-section (3) of Section 44, while deciding the question of jurisdiction, unequivocally came to the conclusion that Section 44(1)(a)(ii) brings within its sweep the cost aspect of the project which is important for taking decision regarding establishment or acquisition of a generating station and the revision of cost is also being done under said section 44. With this conclusion is rejected the prayer of the Board, challenging the jurisdiction of the arbitrator. When the question of revision of project cost cropped up, the Chief Engineer of the Board by its letter dated 4.12.1996 called upon the licensee to furnish the detailed break up of the cost estimate, while it furnished the application originally in the year 1991 and the revised cost claimed by the licensee to the tune of Rs. 2220 crores. On 18th of December, 1996, the Joint Secretary to the Government of West Bengal also called upon the licensee to submit a detailed proposal for revision of the project cost, as required under Section 44 of the Supply Act. Again on 4th June, 1998, the Government wrote to the Board, requiring the approval of the Board to the revised project cost under Section 44 of the Act. On the very same date, that is on 4th June, 1998, the Government also wrote to the licensee that under the provisions of the Electricity Supply Act, the revised cost of the project of the licensee has to be worked out and approved by the State Electricity Board under Section 44 of the said Act and in the event the licensee is not satisfied with the decision of the Board, then the relief is available in the Supply Act itself, obviously referring to an arbitrator under sub-section (3) of Section 44. On 11th June, 1998, the Board wrote to the licensee that after careful and detailed examination of all data and records furnished by the licensee, the Board in its 505th meeting held on 22nd May, 1998, resolved that the reasonable project cost would be Rs. 1853 crores and as such the Board approves the revised project cost at Rs. 1853 crores under Section 44 of the Electricity (Supply) Act. The Board, therefore not only understood that the project cost is required to be approved under Section 44, but did take a decision, approving the reasonable revised project cost at a particular figure in exercise of its power under Section 44. The Board having exercised power under Section 44 and having approved the revised cost at a particular figure, cannot take a stand when the dispute regarding the project cost was referred to the authority for arbitration that the project cost does not come within the purview of Section 44. Thus, apart from our conclusion on interpreting the provisions of Section 44 of the Electricity (Supply) Act, the conduct of the Board itself disentitles it to take a stand that the revised project cost would not come within the ambit of Section 44 of the Supply Act. In the aforesaid premises, we do not find any merits in the contention of Mr. Reddy, challenging the jurisdiction of the arbitrator to entertain the dispute regarding the reasonability of the revised project cost. In our considered opinion, the dispute is one, which comes within the ambit of Section 44 and as such arbitrable under sub-section (3) of Section 44 and the Award cannot be held to be without jurisdiction. The conclusion of the Division Bench of the Calcutta High Court on this score remains unassailable.7. Mr. Reddy, then contended that the High Court was not justified in making any observations with regard to the impact of the revised project cost on the tariff, as the same was not a subject matter and the only question that had been raised before the High court was whether the arbitrator had the jurisdiction or not. We find sufficient force in the aforesaid contention of Mr. Reddy and Mr. Shanti Bhushan, the learned senior counsel, appearing for the licensee also fairly stated that it was not necessary for the High Court to make any observation as to what would be the effect of the reasonable project cost on the tariff structure. While, therefore, upholding the Division Bench Judgment of the Calcutta High Court, we further observe that it was not at all necessary for the High Court to go into the question of impact of the project cost upon the tariff structure and any observations made in respect of the same are set aside.

Decision (1 = appeal accepted, 0 = rejected): 0

Explanation:
0[ds]A plain reading of the aforesaid sub-section would indicate that an applicant is bound to furnish all such particulars which the Board may reasonably require to enable the Board to give its consent and where a consent is given, then while acting in pursuance of that consent, the applicant shall not without further consent of the Board, make any material variation in the particulars, so stated. If the project cost is one of the particulars required to be given by an applicant, while making an application under sub-section (1) of Section 44, then in the event, Board gives the consent and while acting in pursuance of that consent, the project cost varies, then for such variation, further consent of Board would be necessary, as provided under sub-section (2) of Section 44. Since the Board could withheld the consent, if it shows to the applicant that the electricity required by him could be more economically obtained within a reasonable time from another appropriate source, to arrive at such conclusion, it would be reasonable to infer that the applicant must indicate the project cost in its application for consent. If the project cost is not indicated in the application for consent, then the Board will not be in a position to find out whether the electricity required by the applicant could be more economically obtained from another appropriate source within a reasonable time and, therefore, in our view it is necessary for every applicant while invoking power of the Board under sub-section (1) of Section 44 to obtain the previous consent in writing for establishment of a generating station to indicate the cost of the project. This being the position, where consent is received on the basis of the project cost indicated in the application, while acting in pursuance of such consent, if the project cost varies, then it would be a material variation of an important particular and consequently, a further consent of the Board would be necessary under sub-section (2) of Section 44. In the case in hand, the original consent of the Board had been obtained and while acting in pursuance of such consent, it was found that the project cost has got escalated and application for further consent was made to the Board and the Board also did accord its further consent at Rs. 1853 crores, which was communicated to the applicant-licensee. While the applicant-licensee had indicated the revised project cost at a much higher figure but the Board approved the revised cost at Rs. 1853 crores and this further consent on the basis of revised cost can only be under sub-section (2) of Section 44 and in fact the Board also communicated the same in the purported exercise of power under sub-section (2) of Section 44. The further consent in respect of the revised project cost having been given under sub-section (2) of Section 44, a dispute did arise within the ambit of sub-section (3) of Section 44 and, therefore, the authority concerned contemplated under sub-section (3) of Section 44, gets jurisdiction to arbitrate upon the dispute between the parties and in the case in hand, the said authority ultimately passed an award. In view of our analysis, as stated above, it is difficult for us to sustain the argument of Mr. Reddy, appearing for the Board that the so-called dispute regarding the project cost, cannot be a dispute arising out of the provision of Section 44 and as such would not be arbitrable under sub-section (3) of the said Section. We, therefore, are in agreement with the conclusion of the Division Bench of Calcutta High Court and hold that the dispute in question did come within the purview of sub-section (2) of Section 44 and as such was arbitrable under sub-section (3) thereof and the award cannot be held to be without jurisdiction, as contended by the Board.6. There is yet another facet in the case in hand, namely how the Board itself as well as the authority have themselves understood the provisions of the Act. The concerned authority, who was the statutory arbitrator under sub-section (3) of Section 44, while deciding the question of jurisdiction, unequivocally came to the conclusion that Section 44(1)(a)(ii) brings within its sweep the cost aspect of the project which is important for taking decision regarding establishment or acquisition of a generating station and the revision of cost is also being done under said section 44. With this conclusion is rejected the prayer of the Board, challenging the jurisdiction of the arbitrator. When the question of revision of project cost cropped up, the Chief Engineer of the Board by its letter dated 4.12.1996 called upon the licensee to furnish the detailed break up of the cost estimate, while it furnished the application originally in the year 1991 and the revised cost claimed by the licensee to the tune of Rs. 2220 crores. On 18th of December, 1996, the Joint Secretary to the Government of West Bengal also called upon the licensee to submit a detailed proposal for revision of the project cost, as required under Section 44 of the Supply Act. Again on 4th June, 1998, the Government wrote to the Board, requiring the approval of the Board to the revised project cost under Section 44 of the Act. On the very same date, that is on 4th June, 1998, the Government also wrote to the licensee that under the provisions of the Electricity Supply Act, the revised cost of the project of the licensee has to be worked out and approved by the State Electricity Board under Section 44 of the said Act and in the event the licensee is not satisfied with the decision of the Board, then the relief is available in the Supply Act itself, obviously referring to an arbitrator under sub-section (3) of Section 44. On 11th June, 1998, the Board wrote to the licensee that after careful and detailed examination of all data and records furnished by the licensee, the Board in its 505th meeting held on 22nd May, 1998, resolved that the reasonable project cost would be Rs. 1853 crores and as such the Board approves the revised project cost at Rs. 1853 crores under Section 44 of the Electricity (Supply) Act. The Board, therefore not only understood that the project cost is required to be approved under Section 44, but did take a decision, approving the reasonable revised project cost at a particular figure in exercise of its power under Section 44. The Board having exercised power under Section 44 and having approved the revised cost at a particular figure, cannot take a stand when the dispute regarding the project cost was referred to the authority for arbitration that the project cost does not come within the purview of Section 44. Thus, apart from our conclusion on interpreting the provisions of Section 44 of the Electricity (Supply) Act, the conduct of the Board itself disentitles it to take a stand that the revised project cost would not come within the ambit of Section 44 of the Supply Act. In the aforesaid premises, we do not find any merits in the contention of Mr. Reddy, challenging the jurisdiction of the arbitrator to entertain the dispute regarding the reasonability of the revised project cost. In our considered opinion, the dispute is one, which comes within the ambit of Section 44 and as such arbitrable under sub-section (3) of Section 44 and the Award cannot be held to be without jurisdiction. The conclusion of the Division Bench of the Calcutta High Court on this score remains unassailable.7. Mr. Reddy, then contended that the High Court was not justified in making any observations with regard to the impact of the revised project cost on the tariff, as the same was not a subject matter and the only question that had been raised before the High court was whether the arbitrator had the jurisdiction or not. We find sufficient force in the aforesaid contention of Mr. Reddy and Mr. Shanti Bhushan, the learned senior counsel, appearing for the licensee also fairly stated that it was not necessary for the High Court to make any observation as to what would be the effect of the reasonable project cost on the tariff structure. While, therefore, upholding the Division Bench Judgment of the Calcutta High Court, we further observe that it was not at all necessary for the High Court to go into the question of impact of the project cost upon the tariff structure and any observations made in respect of the same are set aside.