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SUPREME COURT OF INDIA
A. ALAGIRISWAMI, P.N. BHAGWATI AND P.K. GOSWAMI, JJ.
Indian Aluminium Company (In C. A.1451/71): Comince Binani Zinc Ltd. (In C. A,1642/71),Appellants
Versus
Kerala State Electricity Board , Respondent.
Civil Appeals Nos. 1457 and 1642 of 1971 and Civil Appeals Nos. 1652-1654 of 1974,
D/- 23-7-1975
Civil Appeals Nos. 1457 and 1642 of 1971:
Civ. Appeals Nos. 1652-1654 of 1974:
Orissa State Electricity Board and another (In CA. No. 1652/74) M/s. Titagarh Paper Mills Ltd. (In CA. No. 1653/74): Orissa Textiles Mills Ltd. (In CA. No. 1654/74) Appellants
Versus
M/s. Indian Aluminium Co. Ltd. (In CA. No. 1952/74); Orissa State Electricity Board and another
(In C. As. 1653-1654/74), Respondents.
Advocates Appeared
Mr. S. V. Gupta, Sr. Advocate (in C. A. No. 1457 of 1971) and Mr. G. B. Pai, Sr. Advocate (in C. A. No. 1642 of 1971), M/s. Ajay Ray and P. Mathai, Advocates (in C. A. No. 1457 of 1971) (and M/s. O. C. Mathur, K. J. John and J. B. Dadachanji, Advocates of M/s J. B. Dadachanji and Co. with them) for Appellants, Mr. Lal Narain Sinha, Solicitor-Gereral (in C. A. No. 1457 of 1971) and Mr. A. G. Pudissery, Advocate, with him, for Respondents in C. As. Nos. 1457 and 1642 of 1971; Mr. G. Rath, Advocate-General for State of Orissa. Miss Sumitra Chakravarty (In C. A. No. 1652 of 1974) and Mr. B. Parthasarthy, Advocate with them, for Appellants in C. A. Nos. 1652 of 1974 and for Respondents (In C. A. S. Nos. 1653-1654 of 1974); M/s. A. K. Sen and B. Sep. Sr. Advocates, and M/s Ranjit Mohanty, Ajay Ray, O. C. Mathur, K. J. John and J. B. Dadachanji, (Advocates of M/s. J. B. Dadachanji and Co. with them), for Respondent in C. A. No. 1652 of 1974; M/s. K. R. Chowdhry anmd K. Rajendra Chowdhry. Advocates, for Intervener - Andhra Pradesh Electricity Board Mr. G. L. Sanghi, Sr. Advocate and M/s. P. V. Kapur, U. K. Khaitan, Advocate with him for the Applicant-intervener - Ferro Alloys Corp. Mr. Vinoo Bhagat, Advocate, for Appellant in C. As. Nos. 1653-1654 of 1974.
Constitution of India, 1950 - Article 226 - Arbitration Agreement - Levy of Coal - Claim to justify levy of coal surcharge - Whether a State Electricity Board has power to enhance the rates for supply of electricity notwithstanding an agreement binding it to supply electricity at certain rates where it finds that the contractual rates are less than the cost of generation, distribution and supply of electricity and in the result there is loss to the State Electricity Board in its operations? In order to appreciate how question arises, it is necessary to state a few facts giving the of the appeal – Held, facts and circumstances of the case, Board was justified under clause (13) of the agreement to levy the coal surcharge on the appellant, are plainly questions arising under the agreement and they are covered by the arbitration provision contained in clause (23) of the agreement. All the contentions raised by the appellant against claim to justify levy of coal surcharge by reference to clause (13) of agreement would, therefore, seem to be covered by arbitration agreement and there is no reason why appellant should not pursue the remedy of arbitration which it has solemnly accepted under clause (23) of the agreement and instead invoke extraordinary jurisdiction of the High Court under Article 226 of Constitution to determine questions which really form subject-matter of arbitration agreement. We are, therefore, of the view that High Court was right in exercising its discretion against entertaining writ petition on merits, in so far as it was directed against the validity of the levy of the coal surcharge under clause (13) of agreement - merits of the contentions raised by the appellant would have to be decided by arbitration as provided in clause (23) of agreement - Appeal dismissed.
Judgement
BHAGWATI, J. : - (Civil appeal No. 1457 of 1971) The short but important question which arises for determination in this appeal is whether a State Electricity Board has power to enhance the rates for supply of electricity notwithstanding an agreement binding it to supply electricity at certain rates where it finds that the contractual rates are less than the cost of generation, distribution and supply of electricity and in the result there is loss to the State Electricity Board in its operations? In order to appreciate how the question arises, it is necessary to state a few facts giving the of the appeal.
2. The petitioner is a limited liability company which carries on business of manufacturing aluminium. The manufacture of aluminium involves three processes, viz., mining of bauxite ore, dressing it and converting it into alumina and reduction of alumina into aluminium. The petitioner carried on bauxite mining at the quarries in Bihar and also set up its factory in Bihar for dressing Bauxite ore and converting it into alumina. So far as the process of reducing alumina into aluminium is concerned, it involves the application of the method of electrolysis in which electrical energy is a primary raw material and, therefore, the petitioner was anxious to set up a factory for this purpose at a place when electric power would be cheap. The Government of the then native State of Travancore offered to supply electric power to the petitioner at reasonable rates for a long period of time if the petitioner established its factory for reducing alumina into aluminium within its territory. An agreement dated 30-7-1941 was accordingly entered into between the petitioner and the Government of the State of Travancore for supply of electrical at certain rates for a period of 34 years from 1-7-1941 with an option of renewal in favour of the petitioner for a further period of 20 years. In view of this agreement, the petitioner established a factory at Alupuram near Alwaye for reducing alumina and converting it into aluminium, though alumina for this purpose had to be brought all the way from Bihar and the aluminium produced at the factory had to be transported outside the State of Travancore for the purpose of sale.
3. On the integration of the States of Travancore and Cochin, a new State of Travancore-Cochin was formed in 1948 and the agreement dated 30-7-1941 (hereinafter referred to as the principal Agreement) was accepted by the new State as binding upon it. The terms and conditions of supply of electrical energy laid down in the Principal Agreement were, however, varied and modified by a supplemental agreement (hereinafter referred to us the first Supplemental Agreement) dated 16-8-1955 entered into between the petitioner and the State of Travancore Cochin. On 1-11-1956 a new State of Kerala was formed comprising inter alia the territories of the existing State of Travancore Cochin, barring a small portion transferred to the State of Madras under the States Reorganization Act, 1956, and by reason of Section 87 of that Act, the Principal Agreement as modified by the First Supplemental Agreement was deemed to have been made in the exercise of executive power of the State of Kerala and all rights and obligations under it became the rights and obligations of the State of Kerala. 1970 The Kerala Government thereafter by a notification issued under Section 5, sub-section (1) of the Electricity Supply Act, 1948 (hereinafter referred to as the Supply Act), constituted the Kerala State Electricity Board (hereinafter referred to as the Board) with effect from 1-4-1957. Section 60 of the Supply Act provides, inter alia, that all the contracts entered into by or with the State Government for any of the purposes of the Act before the first constitution of the Board shall be deemed to have been entered into by or with the Board. The principal Agreement as modified by the first supplemental Agreement was, therefore, deemed to have been entered into
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