IMPORTANT POINT
High Court erred in setting aside the award of the Umpire on a finding that the dispute before him was one contemplated by Section 26(6) of Electricity Act, 1910 and, therefore, not arbitrable. In fact the dispute was arbitrable. But interest on awarded amount is modified with effect from date of award instead of w.e.f. from date of Bill.

Headnote:Electricity Act, 1910-Sections 26(6) and (7)-Defective Current Transformers (CT)-Matter in dispute whether there was under registration of supply of electrical energy to the respondent and if so, the extent thereof and the liability of the respondent to pay for such electrical energy supplied but not recorded-Bill of 1993-Dispute referred to two arbitrator-Difference-Umpire gave award of Rs. 4 crores to appellants with interest @ 12 p.a. from August 1993 till date of decree-Petition filed under Section 34 of Arbitration and Conciliation Act, 1996-High Court finding dispute was to be decided by Electrical Inspector as provided under Section 26 of Electricity Act-Award set aside on ground of error of law apparent on the face of award since umpire had no jurisdiction-Appeal to Supreme Court-Whether CT is an apparatus within the meaning of Section 26(7) of Electricity Act? (Yes)-Whether dispute before the Umpire was in fact a dispute contemplated by Section 26(6) of the Act? (No)-Effect-High Court was wrong in setting aside award-Whether award be decreed? (Yes with modification as to period of interest)-Appeal allowed accordingly-AIR 1998 SC 846.
       Held : It was urged before the High Court as also before us that having regard to the judgment of this Court in U.P.S.E.B. vs. Atma Steel (supra) it is no longer open to the appellant to contend that CT was not an apparatus within the meaning of section 26(7) of the Act. Having perused the judgment of this Court in Atma Steel s case (supra), we also entertain no doubt that CT is an apparatus within the meaning of section 26(7) of the Act. (Para 14)
       The question that still survives consideration is whether the dispute before the Umpire was in fact a dispute contemplated by section 26(6) of the Act. (Para 15)
       Where there is no dispute that the meter is defective, such a dispute is not one contemplated by sub-section (6) of section 26 of the Act. It is no doubt true that if a dispute as contemplated by sub-section (6) of section 26 of the Act arises, the matter has to be referred to the Electrical Inspector, and in view of the statutory provisions, private arbitration in the case of such a dispute is not permissible in law. However, if there is no dispute as to whether the meter is defective or not, there is nothing which prevents the parties from referring their other disputes to arbitration for determining the liability of the consumer in such cases. It is only where any difference or dispute arises as to whether any meter referred to in sub-section (1) of Section 26 is or is not correct, that dispute has mandatorily to be resolved by the Electrical Inspector. In resolving the dispute, the Electrical Inspector can make an estimate of the electrical energy supplied during such time, not exceeding six months, as the meter shall not in his opinion have been correct. For the remaining period, the register of the meter is deemed to be conclusive proof of such amount or quantity, in the absence of fraud. All this pre-supposes the existence of a dispute contemplated by Section 26(6) of the Act which has to be resolved by the Electrical Inspector. (Para 16)
       The Umpire no doubt held that CT was not an "apparatus" within the meaning of sub-section (7) of section 26 of the Act. Since an argument was raised before him that CT is such an apparatus within the meaning of sub-section (7) of section 26, he expressed his opinion in the matter and may be, he decided wrongly. But that by itself will not bring the dispute under sub-section (6) of section 26 of the Act. It was neither contended before the Umpire nor was it decided by the Umpire, that the CT was not defective. This was so because the parties were agreed that the CT was defective. In any event that is not the basis of the award. All that the Umpire had to decide was whether there was under registration of supply of electrical energy to the respondent and if so, the extent thereof and the liability of the respondent to pay for such electrical energy supplied but not recorded. From a perusal of the award it appears that that is precisely what the Umpire has done. (Para 17)
       Held consequently : We, therefore, hold that the High Court erred in setting aside the award of the Umpire on a finding that the dispute before him was one contemplated by sub-section (6) of section 26 of the Act and, therefore, not arbitrable. We hold that the parties never disputed the fact that the CT, which is an "apparatus" within the meaning of sub-section (7) of section 26 of the Act, was in fact defective. There being therefore, no dispute as to whether the meter had ceased to be correct, the dispute was not one contemplated by sub-section 6 of section 26 of the Act. In fact none of the parties even raised a contention before the Umpire that the CT was not defective, and therefore the Umpire was not required to give his finding on the question, which in a dispute under Section 26(6) of the Act is the primary question to be decided. The dispute related only to the claim of the appellant who had submitted a supplementary bill for the electrical energy supplied but not recorded. In the absence of a dispute as to whether the meter was or was not correct, such a dispute was arbitrable. The Umpire on the basis of the material before him particularly total energy consumed by the Railways as per summation of KWhr readings at Railways end of 5 feeders for which there is no dispute, made an Award, which in our view, he was entitled to make. However, on one aspect of the matter we feel that the award requires to be modified. The Umpire has awarded interest @ 12 per annum with effect from August, 1993 till the passing of the court decree. In the facts and circumstances of the case the award is required to be modified to the extent that interest be awarded at the same rate, but with effect from the date of the award i.e. 30th March, 1998 instead of August, 1993. The impugned judgment and order of the High Court is set aside. The appeal is accordingly allowed with the said modification. Let a decree be drawn up accordingly. There shall be no order as to costs. (Para 20)

JUDGMENT

B.P. Singh, J.-Special leave granted.

This appeal is directed against the judgment and order of the High Court of Judicature at Bombay dated 5.10.2000 in Appeal No. 144 of 2000 whereby the Division Bench of the High Court affirmed the judgment of the learned Single Judge allowing the Arbitration Petition filed by the respondent under Section 34 of the Arbitration and Conciliation Act, 1996 challenging the award of the Umpire dated 30th March, 1998 on the ground of an error of law apparent on the face of the Award.

2. The appellant-companies are licensees under the Indian Electricity Act, 1910 (hereinafter referred to as "the Act"). A Power Supply Agreement was executed on 7th July 1971 between the aforesaid companies and President of India represented by Central Railways and Western Railways. Under the agreement electric power is supplied to the railways at a number of points on the railways electrified track route for the operation of the railways electric train services. Clause 20 of the said agreement contains an arbitration clause which reads as under:-

"20.0: In the event of any dispute or difference at any time arising between the Government and the Companies in regard to any matter arising out of or in connection with this Agreement such dispute or difference shall be referred to arbitration of two arbitrators one to be appointed by each party hereto and an Umpire to be appointed by the Arbitrators before entering upon the reference and decision or award of the said Arbitrators or Umpire shall be final and binding on the parties hereto and any reference made under this clause shall be deemed to be a submission to arbitration under the Arbitration Act, 1940, or any statutory modification thereof for the time being in force. The venue of arbitration shall be Bombay".

3. The facts of the case are that on 7th June, 1993 the appellants found that Western Railways Feeder No.36 Red phase current was lower (0.4 amps.) than Blue phase current (1.4 amps). The respondent was accordingly advised by message dated 9th June, 1993 indicating that the appellants would be carrying out further investigation. On 13th June, 1993 further investigation was carried out in the presence of representative of Western Railways and it was confirmed that in Feeder No.36, the main Current Transformer (CT) in Red phase had developed inter-turn short resulting in lower output from its secondary windings. The appellants, therefore, replaced the defective CT and installed a new CT after showing the test results on the defective CT to the representative of the Western Railways. The meter was checked and found satisfactory. Subsequent to the replacement of the defective CT on 13th June, 1993 the off take of the Trivector Meter and the sum of the energy recorded on the two energy meters at Dharavi were found to be higher by 28.7 per cent.

4. On 22.6.1993 the appellants informed the Western Railways about the defect that had been detected and rectified and also that they shall advise the Railways the exact period of under registration and the estimation of the quantum of energy that had not been registered by the tariff meter due to the defective CT. By their subsequent letter of 16th July, 1993, they informed the respondent that the Western Railway s off take recorded at Dharavi between October, 91 and June, 1993 was lower by about 34 per cent compared to the off take prior to October, 1991 and that the recorded off take of Western Railways after replacement of the defective CT on 13th June, 1993 had come back to the level prevailing before October, 1991. The appellants, therefore, expressed the need to make an adjustment of about 20.20 per cent of the total monthly energy off take of Railways at Dharavi billed since October, 1991 up to 13th June, 1993.

5. On 26th July, 1993, the appellants submitted a supplementary bill to the respondent dated 26th July, 1993 for Rs. 8,89,32,367.50 for the period of under registration i.e. from 20th October, 1991

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2003 Supreme(SC) 141

Cases Referred (1)