IMPORTANT POINT
The dispute relating to new project cost comes within the ambit of S. 44 of Electricity (Supply) Acts, 1948 and as such arbitrable u/s. 44(3) and the Award cannot be held to be without jurisdiction. However, it was not at all necessary for the High Court to go into the question of impact of cost upon the tariff structure.

Headnote:Electricity (Supply Act, 1948-Sections 44(1) and 44(3)-Respondent applying for licence to start a new project at Budge Budge to appellant-Dispute relating to project cost-Is it an arbitrable dispute u/s. 44(3) of the Act-Single Judge holding No but D.B. in appeal holding Yes -Appeal to Supreme Court-Whether a dispute relating to escalated project cost of a generating station would come under the purview of Section 44(3) of the Supply Act? (Yes)-Result-Appeal dismissed accordingly-(Arbitration and Conciliation Act, 1996-Sections 13 and 16).
       Held : 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. (Para 5)
       Held, however : 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. (Para 7)
       Held consequently : This appeal is accordingly dismissed with the aforesaid observations. There will be no order as to costs. (Para 8)

JUDGMENT

Pattanaik, J.-Leave granted.

2. The West Bengal State Electricity Board is in appeal against the judgment of the Division Bench of Calcutta High Court. The respondent is the licensee. The licensee, on 27th of December, 1989 submitted an application to the Board for getting its consent for establishment of new Thermal Generating Station at Budge Budge and a Project Report was enclosed with the said application. Under Section 44 of the Electricity (Supply) Act, 1948, [hereinafter referred to as the Supply Act ], no licensee can establish a new generating station without the previous consent in writing of the Board. Under Sub-section 2A of Section 44, the Board before giving consent to a licensee for establishing a new generating station, shall consult the Authority. The expression "Authority" has been defined in Section 2 (1) of the Supply Act to mean the Central Electricity Authority constituted under Section 3 of the Act. On 23.2.1990, the Board accorded sanction under Section 44 of the Supply Act for setting up a new generating station in Budge Budge with an installed capacity of 2 x 250 M.W. Units, operating on pulverised fuel fired boilers. The Board forwarded the Project Report to the CEA, requesting the authority to consider the proposal in the light of likely gap in system demand that would exist in the year 1995, after taking into account the plans of the Board to set up the Sagardighi. Thermal Project, which was at that point of time awaiting techno-economic clearance from C.E.A. The C.E.A. replied to the Board that issues may be resolved through Government of West Bengal and intimated that the techno-economic examination of the proposal was being withheld by CEA till the final views on the matter is conveyed by the Board. The Board in its letter dated 23rd of April, 1990, informed the CEA that the issues raised had been resolved and the consent already given may be treated as final and, therefore. CEA may take up the techno-economic examination. On 29th of January, 1991, CEA communicated its in principle clearance to the Budge Budge Project, subject to certain conditions mentioned therein. It also informed that any clearance required under Section 44 of the Supply Act would be made after the Department of Power, Ministry of Energy, Govt. of India, clears the project. Finally on 11th of November, 1991, CEA intimated its clearance of the Budge Budge Project under Section 44 of the Act at a total cost of Rs. 1285.70 crores, subject to the conditions mentioned in the letter. The licensee informed the CEA by its letter dated 23rd April, 1992, indicating that there has been an enhancement of Project cost which stands revised to Rs. 2220 crores and requested the CEA to convey its approval, after examining the estimates and other required particulars. On 24th of April, 1992, a revised breakup of the Project cost was furnished to the CEA. The Government of India, Ministry of Power by its letter dated 21st October, 1992 intimated its approval of the revised financial plan for the project at Rs. 1638 crores, with certain conditions mentioned in the said letter. The CEA then wrote a letter to the Government of West Bengal on 26th of September, 1996 regarding escalation of the Budge Budge Project cost to Rs. 2220 crores and it was stated therein that the CEA has not received any revised cost estimates from the Board though the same was required under Section 44 of the Supply Act. The Board then called upon the licensee by its letter dated 4th of December, 1996 to furnish the detailed break-up of the cost estimates as well as the revised cost of the Project which was then at Rs.2220 crores. The Government of West Bengal, through its Power Department also made correspondence with the licensee, seeking information as to whether the licensee has submitted the detailed proposal for revision of the Project cost, as required under Section 44 of the Supply Act and also further requested that the copies of th

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