Important Points
1. The order of High Court holding the existence of a dispute between GRIDCO and ICCL regarding payment of arrears of energy charges arbitrable by Regulatory Commission under Section 37(1) of Orissa Electricity Reform Act, 1955 and also arbitrable under Section 3 r/w Schedule to Electricity Act, 1910 and appointing an arbitrator under Section 11 of Arbitration and Conciliation Act, 1996 and further directing to continue stay of disconnection without imposing any condition for payment of arrears would be illegal, unjust, improper and unfair as High Court erroneously assumed that Regulatory Commission failed to arbitrate under Section 37(1) of the Orissa Electricity Reform Act, 1955 and thus exceeded its jurisdiction in entertaining application under Section 11 of the Arbitration and Conciliation Act, 1996 since such application is premature and, therefore, not maintainable.
2. The Courts at interlocutory stage are required to bear in mind as to whether a prima facie case is made out for recovery of arrears of energy charges and on whose side the balance of convenience lies.

Headnote:Electricity Act, 1910-Sections 3 and 24(1) - Orissa Electricity Reform Act, 1955-Section 37(1)-Arbitration and Conciliation Act, 1996 - Section 11 - Supply of power-Electricity bills-Not paid by ICCL despite notice to pay-Notice of GRIDCO under Section 24(1) of Act of 1910 to disconnect power supply in default of payment within 7 days-Stayed by order of High Court without imposing any conditions for payment of arrears-Application by ICCL before Regulatory Commission under Section 37(1) of Reform Act raising dispute regarding bill amounts and its liability to pay-ICCL also filing petition for appointment of arbitrator under Section 11 of Arbitration Act-Order of High Court holding existence of a dispute between parties which is arbitrable falling within jurisdiction of Regulatory Commission under Section 37(1) of Reform Act and also arbitrable under Section 3 r/w Schedule to Act of 1910 and nominating a retired Chief Justice of India as sole arbitrator and also directing to continue stay of disconnection-Illegal, unjust, unfair and improper as High Court exceeded its jurisdiction in entertaining application under Section 11 of Arbitration Act and erroneously assumed that Regulatory Commission failed to arbitrate under Section 37(1) of Reform Act as application under Section 11 of Arbitration Act being premature was not maintainable-Further, Court at interlocutory stage required only to see whether a prima facie case is made out for recovery of arrears of energy charges and on whose side balance of convenience lies-Directions to ICCL to make payment at this stage on basis of monthly billing which is to be paid in instalments which facility in event of any 2 default would stand vacated and disconnection notice will revive.
       Held : In our considered view High Court has exceeded the jurisdiction while entertaining the application of ICCL under Section 11 of the Arbitration and Conciliation Act, 1996. The High Court erroneously assumed that the Regulatory Commission had failed to arbitrate under Section 37(1) of the Reform Act. This finding is factually incorrect because vide application dated 19.7.97 ICCL asked the Regulatory Commission to adjourn the proceedings pending before it on the ground that it had filed MJC No. 229/97 in the High Court. In view of this application the Regulatory Commission did not proceed in the matter. If this be so the High Court in our opinion was wrong in holding that there was failure on the part of Regulatory Commission to arbitrate and consequently the application made by ICCL under Section 11 of Arbitration Act is maintainable. In our considered view the application made by ICCL under Section 11 of the Arbitration Act, 1996 (MJC No. 229/97) was premature and the High Court could not have entertained the same and granted desired relief to ICCL. (Para 14)
       Further held : In our considered view the spacious claim pressed before us on behalf of ICCL cannot be accepted at this interlocutory stage. It is not denied by ICCL that back up power was available to its sister concern IMF and PPL and the manufacturing process was continuing. At this interlocutory stage what the courts are required to bear in mind is as to whether a prima facie case for recovery of arrears of energy charges is made out and on whose side the balance of convenience lies. In the facts and circumstances of the case whether interim order should be passed by imposing certain conditions or without any condition. The net result of the impugned order is that the GRIDCO is required to maintain back up power to the constituents of ICCL but for such supply latter was not required to make any payment for power consumed. Mr. Venugopal also disputed the recording of consumption of power on half hourly basis. It was according to learned counsel wholly illegal and as a result thereof the amounts in the bills stood inflated, and consequently ICCL is not liable to honour such bills. On the other hand Mr. Nariman urged that it is not open to ICCL to challenge the half hourly recording because it was specifically agreed upon between the parties under MOU and the agreement. We do not propose to deal with these rival contentions at this interlocutory stage and, therefore, they are kept open. (Paras 18 & 19)
       We proceed on the assumption that the amount reflected on the basis of monthly bills payable to the GRIDCO by ICCL would be Rs. 46.193 crores less 15 wheeling charges which would come Rs. 6.92 crores approximately. At this interlocutory stage even if we give benefit of this amount of Rs. 6.92 crores payable by ICCL to GRIDCO under the various bills still the outstanding arrears payable by ICCL to GRIDCO would come to Rs. 39.273 crores. (Para 20)
       The financial constraints of ICCL to make any payment cannot be a ground to allow ICCL to use power without any charges. We, therefore, feel that the fair and proper order to meet the ends of justice at this interim stage would be to direct ICCL to pay Rs. 39.273 crores in seven equal instalments of Rs. 5 crores payable on or before 10th of each month to GRIDCO and the 8th instalments would be for the balance amount. First instalment of Rs. 5 crores will be payable in the month of June, 1998. The Regulatory Commission while making the award, will pass appropriate orders as regards interest on the amount if found refundable to ICCL or recoverable by GRIDCO on their respective claims in accordance with law. In the event of any two defaults, facility of payment by instalment to stand vacated. Disconnection notices will revive and GRIDCO will be at liberty to take such steps as permissible in law. As regards the recurring charges if ICCL wants to use power it will have to make payment of such bills as and when served upon them. ICCL may raise a dispute before the Regulatory Commission. If there be any occasion to consider such application the Regulatory Commission will pass interim orders in accordance with law. These calculations and directions are without prejudice to the rights and contentions of the parties. (Para 21)

Judgment

S.P. Kurdukar, J.-Leave granted

2. These appeals are directed against a common Judgment and order dated 10.2.98 passed by the Learned Chief Justice of Orissa High Court, Cuttack in Miscellaneous Appeal Nos. 599/97, 600/97 and MJC No. 229/97. All these appeals are being disposed of by this Judgment.

The brief facts leading to the present controversy may be summarised as under:-

3. The GRID Corporation of Orissa Ltd., (for short ‘the GRIDCO’) is the appellant in all these appeals whereas M/s. Indian Charge Chrome Ltd., (for short ‘ICCL’) is the respondent. GRIDCO was the appellant in Miscellaneous Appeal Nos. 599/97-600/97 whereas ICCL was the petitioner in MJC No. 229/97 before the Orissa High Court.

4. The GRIDCO became the successor of the Orissa State Electricity Board (hereinafter referred to as ‘OSEB’) w.e.f. 1.4.1996 and was engaged in the business of transmission, distribution and supply of electricity to various consumers in the State of Orissa. Indian Metals and Ferro Alloys Company (For short ‘IMFA’) is a sister concern of ICCL. ICCL sometime in 1984 corresponded with the Government of Orissa seeking permission to generate power. Accordingly after completing the formalities ICCL sometime in 1989 set up the Captive Power Plant to generate power in the State of Orissa at Choudwar. Power generated at Choudwar was to be wheeled to The Indian Metals and Ferro Alloys Company (IMFA) at Therubali a sister concern of ICCL and PPL and the surplus power was to be sold to OSEB. For the purposes of administrative convenience ICCL was incorporated. Accordingly, an agreement dated February 14, 1989 was entered into between OSEB and ICCL and under the said agreement the power generated by ICCL at Choudwar was fed to the GRID of OSEB for further transmission to the Charge Chrome Manufacturing Plant of IMFA at Therubali. The arrangement between OSEB and ICCL continued until a Memorandum of Understanding dated 15.11.1994 was arrived at and signed by ICCL and OSEB and thereafter followed by an agreement dated 4.3.1995 w.e.f. 1.12.94. Under this MOU of 1994 power supplied by ICCL to OSEB was charged at 77 paise per unit; wheeling of power by OSEB (from ICCL) was charged @ 15 , (known as wheeling charges). ICCL was permitted to draw power from OSEB for supply to PPL/IMFA/PPT on payment of Rs. 2.31/- per unit (back-up power); ICCL guaranteed supply of power to OSEB at least 10 MW per day. Although this agreement was valid for six months, however the exchange of power on both sides continued even thereafter. OSEB used to raise the monthly bills as per the readings recorded on TOD meters with 30 minutes’ recording time. GRIDCO who became the successor of OSEB w.e.f. 1.4.96, called upon ICCL to pay outstanding dues for the period December, 1994 to December, 1996 amounting to Rs. 24.8281 crores. ICCL failed to make the payment. During this period the OSEB and thereafter GRIDCO had been wheeling/ supplying electricity to ICCL in terms of MOU dated 15.11.1994.

5. On 25.2.1997 ICCL filed an application before the Regulatory Commission constituted under the Orissa Electricity Reform Act, 1955 (for short ‘Reform Act’) raising a dispute as regards bill amounts and its liability to pay to GRIDCO. On 7.4.1997 GRIDCO informed ICCL that unless the arrears of Rs. 24.8281 crore are paid on or before 22.4.97, it will be compelled to discontinue the power supply in accordance with law. On 8.4.97 ICCL filed another petition before Regulatory Commission alleging that the claim of the GRIDCO for the arrears for the period from December, 1994 to December, 1996 is untenable inasmuch as the same is contrary to the MOU and the agreement. ICCL then alleged that because of variation of frequency in the GRID, the power generated by its Captive Power Plant could not be inducted into the GRID. It was an obligation of GRIDCO to check variation of frequency in the GRID and because of its negligence its captive power plant got damaged. The billing done by GRID

Click Here to Read the rest of this document