Case: U.P. Hotels Etc Vs. U.P. State Electricity Board

. The High court has set aside the award of the Umpire to appreciate the decision and the contentions urged, a few facts are necessary2. On or about October 20, 1962 there was a Bulk Supply Agreement entered into between Agra Electric Supply Co. Ltd. and the appellant herein, for supply of electrical energy to the latters hotel, inter alia, containing terms of rates, discounts, minimum sum payable and increase in the rates and sums payable once a year on account of increase in cost of production and distribution of electrical energy. Clause 9 of the said agreement contained terms of the rate of supply and contingencies in which such rates could be increased4. On or from September 26, 1973 the Agra Electric supply Co. Ltd. increased per unit rate of electricity from 0.20 p. to 21.5 p. in terms of clause 9 of the said agreement. Thereafter, the bills were sent @ 21.5 p. per unit, after giving discounts and rebates as per the agreement. On or about December 17/18, 1973, the respondent herein took over the undertaking of the Agra Electric Supply co. Ltd. On or about January 16, 1974, the respondent informed the appellant by a written communication that consequent upon the expiry of licence granted to Agra Electric Supply co. Ltd. to generate and supply electricity the respondent had taken it over and would supply electric energy to the hotel and that the Bulk supply Agreement with Agra Electric supply Co. Ltd. will continue to be in force with the respondent until such time the agreement is determined in accordance with its relevant provisions. All bills received subsequent to the take over were billed at the agreed rate allowing discounts and rebates5. On or about November 23, 1974, the appellant received a communication from the respondent informing that uniform tariff rates issued under Section 49 of the electricity Supply Act, 1949 will be applicable to the electrical energy supplied to the hotel w.e.f. October 12, 19746. After the said date the bills were sent at the enhanced rate of 0.30 p. per unit, adding fuel cost variation charges and without allowing any discount or rebate. On or about November 28, 1974, the appellant, however, protested against the unilateral withdrawal of contractual discount and rebates and enhancement in the rates and drew the attention of the respondent to the existing and subsisting bulk supply agreement, but the respondent, but the respondent took no action. On or about August 31, 1976, a circular was issued by the chief Engineer of the respondent advising alle of the undertakings to bill the consumers having special agreements with thes as per those agreements and steps be taken to terminate the old agreements with new agreements providing for application of tariff7. On October 7, 1977, vide written communication the appellant informed the respondent that upon latters failure to resolve the disputes and differences arising between them consequent to the illegal increase in the rates and discontinuation of discounts and rebates w.e.f. October 12, 1974, the appellant was referring the disputes for decision by the arbitrator and appointed Justice Manchanda, a retired Judge of the Allahabad High court, as the arbitrator and the respondent appointed Justice Nigam, another retired Judge of the same High Court, as its arbitrator. On or about April 8, 1977, the joint arbitrators appointed Justice V. Bhargava, a retired Judge of this Court as an Umpire8. Between November 3, 1979 and March 4, 1980, several sittings were held before the arbitrators but the parties were unable to agree and upon their disagreement the disputes were referred to the learned Umpire for decision. From March 4, 1980 onwards, proceedings started before the Umpire and there was a plea for de novo hearing of the proceedings before the Umpire, by the respondent. The learned Umpire started de novo proceedings taking evidence of the parties. On March 21, 1980, the respondent filed an application, being Case No. 59 of 1980 under Section 33 of the Arbitration Act, 1940 before the District Judge, Lucknow, denying the existence of the agreement dated October 20, 1962. The respondent also denied the acceptance and adoption of the agreement consequent upon the take over and sought a declaration from the court that the arbitration agreement did not exist. The Vth Additional district Judge by his order dated May 27, 1983 held that the agreement was duly executed, accepted and adopted by the respondent and was binding on it and that the arbitration proceedings were pursuant to the arbitration clause and, as such, the application under Section 33 of the Arbitration Act, was rejected11. Challenging the award, several contentions were raised, namely (i) that there was no agreement in existence and that neither the Umpire nor the arbitrator had any jurisdiction to make the award. This contention was rejected and no argument was advanced before us challenging this finding of the Umpire, (ii) that the appellant should prove the terms and conditions upon which the Supply Company was supplying the electricity to the appellant. This the Umpire held, had been duly proved and there was no challenge to either of the findings of the Umpire, (iii) it was thirdly contended that the agreement even if in existence, was not binding upon the respondent, and that while admitting that the respondent under Section 49 of the Act, issued notification under which the tariff was revised w.e.f. October 12, 1974, it was claimed that the opposite party had not, in any way, failed to fulfill its obligations on the alleged agreement and that the opposite party was fully competent under law to fix a uniform tariff and also to levy fuel adjustment charges. This is the main and substantial question involved in this matter12. It was then contended that the respondent was entitled even under the agreement and under its second proviso to clause 9 to revise the tariff and the appellant was not entitled to any relief. It was further urged that the payments were made after coming into operation of the Electricity (Supply) Act, under protest. In respect of theses contentions the learned Umpire held that the plea was that even if the agreement was in existence, it was not binding on the opposite party and that the opposite party was competent under Section 49 of the electricity Supply Act, to fix revised charges w.e.f. October 12, 1974 and had not violated any term of the agreement. The appellant had also relied on the alternative provisions of Section 49(3) of the Act, set out herein before. The saidn (3) provides that nothing contained ins (1) and (2) of Section 49 shall derogate from the power of the Board, if it happens to enter into an agreement at different rates of tariff with any person other than a licensee. It appears that when the Supply Company was taken over on December 17/18, 1973 the resident Engineer wrote a letter on January 16, 1974 in which he informed the appellant that the licence of M/s. Agra Electric Supply Co. Ltd. having expired and the U.P. State Electricity Board having taken over the supply, it was to supply energy to the appellant at the aforesaid rate. Their further contention was that the bulk supply agreement which the appellant had with M/s. Agra Electric Supply Co. Ltd. would continue to be in force with the State Electricity Board until such time as the agreement was determined in accordance with the relevant provisions thereof. The learned Umpire held that the letter clearly laid down that the U.P. Electricity Board had accepted the agreement which was in existence between the Supply company and the appellant, and the Umpire proceeded on that basis. The learned Umpire further stated as followsThe Board thus having accepted the agreement with the claimant, it became binding on the Board and undern (3) of section 49 of the Electricity Supply Act nothing contained ins (1) and (2) of Section 49 of the Act could have any bearing on the terms of the agreement. The result was that the uniform tariff fixed by the Board with effect form October 12, 1974 did not apply to the claimant and the claimant had to be granted the various rebates laid down in the agreement. The decision of the Supreme Court in Indian Aluminium Co. Ltd. v. Kerala State Board ((1975) 2 SCC 414 : (1976) 1 SCR 70 ) fully covers the case and supports the claim of the claimant. In the case before the Supreme Court an agreement had been entered into by the State Government and it was held that under Section 60 of the Electricity (supply) Act, 1948 it became binding on the Kerala State Electricity Board and further that that agreement was enforceable undern (3) of Section 49 irrespective of the fixation of uniform tariff unders (1) and (2) of Section 49. In the present case the only difference is that instead of the agreement being first binding between the consumer and the State Government, the agreement became binding on the Electricity Board, because it accepted the agreement and became a party to it by letter dated January 16, 1974 (Ex.R)

Court's reasoning:
27. In the instant case, the view taken by the Umpire on the interpretation of the agreement between the parties in the light of the observations of this Court in Indian Aluminium Co. case ((1975) 2 SCC 414 : (1976) 1 SCR 70 ) was at bests a possible view to take, if not the correct view. If that was the position then such a view, even if wrong, cannot be corrected by this court on the basis of long line of decisions of this Court. In the aforesaid view of the matter it is necessary to examine the aforesaid decision in the Indian Aluminium Co. case ((1975) 2 SCC 414 : (1976) 1 SCR 70 ). There under Section 49(1) and (2) of the Electricity (supply) Act, 1948, the legislature had empowered the State Electricity Board to frame Uniform tariffs and had also indicated the factors to be taken into account in fixing uniform tariffs. Undern (3), the Board was empowered, in the special circumstances mentioned therein, to fix different tariffs for the supply of electricity, but in doing so,n (4) directed that the Board was not to show undue preference to any person. Under Section 59 it was stipulated that the Board shall not, as far as practicable, carry on its operations at a loss and shall adjust its charges accordingly from time to time. Certain consumer of electricity had entered into agreements for the supply of electricity for their manufacturing purposes at specified rates for specified period. Some of the agreements were entered into with the State Governments and the others with the State Electricity Boards. In one of the agreements there was an arbitration clause. On account of the increase in the operation and maintenance cost, due to various causes which caused loss to the State Electricity Boards, the Boards wanted to increase the charges in all the cases. The consumers challenged the competency of the Boards to do so by petitions in the respective High Courts. The High Court sustained the Boards claim, in some cases, under Section 49 and 59, and in others, held that the Board was incompetent to do so. In the case of the consumer where there was the arbitration clause, the High court refused to entertain the petition on account of the clause. This Court held that fixation of special tariffs under Section 49(3) can be a unilateral Act on the part of the Board but more often it is the result of negotiations between the Board and the consumer and hence a matter of agreement between them. Therefore, the Board can, in exercise of the power conferred under the, enter into an agreement with a consumer stipulating for special tariff for supply of electricity for a specific period of time. The agreements for supply of electricity to the consumers must therefore be regarded as having been entered into by the Boards in exercise of the statutory power conferred under Section 49(3). The Umpire in his award stated that the decision of this Court covered and supported the claim of the claimant. In the present case the only difference is that there was only an agreement by which the Electricity Board accepted the agreement which was held by the Umpire to have become operative. Once that agreement was binding on the Board, its terms could not be varied form the uniform rate undern (1) and (2) of Section 49. The Umpire was right. In our opinion, the Umpire committed no error in arriving at such conclusion. Furthermore, such a conclusion is certainly a possible view of the interpretation of the decision of this Court in Indian Aluminium Co. case ((1975) 2 SCC 414 : (1976) 1 SCR 70 ), if not the only view. We need go no further than that28. We are, therefore, of the opinion that the view taken by the Umpire on Section 49 was a possible view in the light of the decision of this Court in Indian Aluminium case ((1975) 2 SCC 414 : (1976) 1 SCR 70 ). In the premises, a question of law arose certainly during the course of the proceedings. Such a question has been decided by the Umpire on view which is possible one to take. Even if there was no specific reference of a question of law referred to the Umpire, there was a question of law involved. Even on the assumption that such a view is not right, the award is not amenable to interference or correction by the courts of law as there is no proposition of law which could be said to be the basis of the award of the Umpire, and which is erroneous29. In the premises, we are of the opinion that the High Court and the learned Second Additional District Judge were in error in the view they took of the award of the Umpire.