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1997(7) Supreme 589
SUPREME COURT OF INDIA
(From Delhi High Court)
Mrs. Sujata V. Manohar and M. Jagannadha Rao, JJ.
D.C.M. Ltd. etc. -Appellants
versus
Municipal Corporation of Delhi & Anr. etc. -Respondents
Civil Appeal No. 1269 of 1987
With
C.A. Nos. 1270-1294/1987, 1298/1987, 4408/1995, 1300-1303/1987 & 11765-11800/1995
Decided on 8-8-1997
Counsel for the Parties :
For the Appearing Parties : Gopal Subramanium, Ashok Grover, Ashwani Kumar, Sr. Advocates, N.K. Chawla, Bimal Roy Jad, M.R. Chawala, Mrs. Nandini Gore, Ms. Ruby Ahuja, Navin Chawala, B.R. Sabharwal, Rakesh K. Sharma, (Ms. Gauri Rasgotra) Advocate for M/s. Khaitan & Co., Advocates, K.C. Dua, B. Mohan, D.K. Garg, P.K. Bakshi, R.K. Maheswari, Ms. Ruchi Narula, Kh. Nobin Singh, Advocates.
In-person for the Appellant in C.A.No. 1291/87 : Vikas Puri.
In-person for the Appellant in C.A.No. 1292/87 : R.K. Puri.
In-person for the Appellant in C.A. No. 1303/87 and Respondent in C.A. No. 11765-800/95 : Lt. Col. R.S. Khurana.
In-person for Respondent No. 16 in C.A. Nos. 11765-800/95 : R.P. Jain.
In-person for Respondent No. 36 in C.A. No. 11765-11800/95 : Ram Kishan.
Held : The arbitrator was required to examine the narrow question whether the formula had been properly applied. It was not open to him to examine the correctness or otherwise of the formula. He had to examine how the formula had been worked. The formula had clearly set out the various factors to be taken into account. To arrive at the units which were sold, the second respondent had deducted from the total units available for distribution, units which are lost in transit. This is not something which is irrelevant to the formula. It is an essential element which has to be taken into account in order to decide one basic item of the formula, namely, the units which were sold. The arbitrator, therefore, was not right in distorting this formula by removing the factor of transmission and distribution losses from calculation of the units sold. The arbitrator s jurisdiction was confined to examining whether the calculations were in accordance with the formula. Therefore, in effect, the arbitrator has acted beyond the scope of his reference in eliminating an important factor in calculation of the formula. This can also be looked upon as an error of law apparent on the face of the record. The figure of units sold cannot take into account units which were, in fact, not sold but were lost during transmission and distribution. By ignoring the manner in which this formula had been applied for more than 10 years uniformly in the case of all large industrial corporations, the arbitrator has committed an error of law apparent on the face of record. Because he has thereby distorted the formula and thus acted beyond the scope of his reference which was confined to examining a proper quantification of the increase in fuel adjustment charges in accordance with the formula (Para 12)
The arbitrator was not authorised to examine the validity of the formula or to change it. He has, therefore, committed a jurisdictional error in so "interpreting" the formula. This is a jurisdictional error which is also apparent on the face of the award. (Para 15)
It is well established that an arbitrator cannot go beyond the scope of his reference. If he has exceeded his jurisdiction, the award to that extent can be set aside provided that the part of the award being quashed in severable from the rest. In the present case, therefore, the High Court was right in setting aside the award to the extent that it excluded transmission and distribution losses. (Para 16)
JUDGMENT
Mrs. Sujata V. Manohar, J.-These appeals arise as a result of certain increases in fuel adjustment charges levied by the second respondent on the appellant and the resultant arbitration. The award of the learned arbitrator was the subject matter of challenge in the High Court. These appeals arise from the judgment and order of the Division Bench of the Delhi High Court.
2. For the sake of convenience we are referring to the facts in Civil Appeal No. 1269 of 1987. The facts in other appeals are similar and the disputes raised are the same.
3. The appellant entered into an agreement dated 26th of September, 1972 with respondent No. 2 Delhi Electricity Supply Undertaking (DESU) for the supply of electrical energy. Clause 15(a) of the agreement is as follows:-
15(a): The consumer shall pay each month to the undertaking for electrical energy supplied during the preceding month such amount as shall be calculated and ascertained in accordance with the Rate Schedules LIP attached hereto. The rates contained in the schedule are those in force at the time of executing this agreement. The consumer be eligible for whatever reduction or rebate as may be granted on the rates and shall be liable to pay for whatever surcharge or increase in those rates as may from time to time be levied or made by the Undertaking. Any other method of charging decided by the Undertaking shall also be application".
The Rate Schedule of Large Industrial Power (LIP) which was annexed to the said agreement was the same as was prescribed from time to time by the Tariff which was fixed by respondent No. 2 for the relevant year. The Tariff pertaining to Large Industrial Power sets out the availability of such power to large industrial consumers having connected load above 100 K.W. and the character of service - viz. A.C. So cycles, 3 phase, 11 K.V. The Tariff is divided into two parts. The first part deals with demand charges. In addition the consumers are also required to pay energy charges. Under energy charges, Clause 1 provides for fuel adjustment charges as follows:-(For the year 1982-83)
"1. An adjustment of energy charges as under :-
(i) The above energy charges are based on the basic average fuel and purchase cost of 15.25 paise per KWH.
(ii) The actual cost of fuel used during any period shall be the amount in rupees of the cost of all types of fuel burnt in the Undertaking s Thermal Generating Plants in that period.
(iii) The actual cost of energy purchased shall by the amount paid in rupees for import of energy for that period.
(iv) The cost of energy per KWH sold shall be the quotient computed on dividing the sum of (ii) and (iii) by the KWH sold during the period.
(v) The increase or decrease in cost of per KWH sold shall be the difference of (iv) & (i) above and accordingly shall be added or substracted to the above energy rates.
Final adjustment on account of variation in energy charges will be made as soon as possible after the close of the period of account but adjustment as may be provisionally fixed by the DESU Management from time to time will be incorporated as a part of the monthly bill and shall be payable by the consumer. Such provisional rates as and when finalised shall have retrospective effect from the beginning of that financial year."
This was the Tariff for the year 1982-83. The energy charges were prescribed at Rs. 15.25 per KWH. These were subject to adjustment.
4. Respondent No. 2 enhanced the energy charges from Rs. 15.25 to 20.44 paise per unit whereupon the appellants disputed the increase and filed suits under Section 20 of the Arbitration Act for referring their dispute relating to the increase in fuel adjustment charges to arbitration. During the pendency of the suit, fuel adjustment charges were further enhanced from 20.44 paise per unit to 27.97 paise per unit on 12th of March 1983, and to 29.47 paise per unit in May, 1983.
5. In the suit o
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