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IN THE HIGH COURT OF BOMBAY
B.N. Srikrishna Smt. Ranjana Desai, JJ.
Tata Hydro-Electric Power Supply Co. Ltd. others.... Appellants.
Versus
Union of India.... Respondent.
Appeal No. 144 of 2000 in Arbitration Petition No. 210 of 1998 in Arbitration Award No. 18 of 1998, decided on 5-10-2000.
Advocates appeared :
T.R. Andhyarujina, Sr.C. with D.J. Khambatta and H.N. Vakil i/b Mulla Mulla and Craigie Blunt Caroe, for the appellants.
Rohit Kapadia with S.R. Rajguru, for the respondent.
ARBITRATION - ERROR OF LAW - JUDICIAL REVIEW - SPECIFIC QUESTION OF LAW - JURISDICTION - INDIAN ELECTRICITY ACT, 1910, SECTION 26(6) - POWER SUPPLY AGREEMENT - CURRENT TRANSFORMER (CT) - METER - DEFECT - ARBITRABILITY - UMPIRE'S DECISION - JUDICIAL INTERFERENCE.
Fact of the Case:
Tata Electric Companies (TEC) and Western Railway entered into a Power Supply Agreement in 1971, which included an arbitration clause. In 1993, TEC discovered a defect in the Current Transformer (CT) of the meter used to measure electricity consumption by Western Railway, resulting in under-registration of power consumption. TEC submitted a supplementary bill for the unrecorded power consumption, which Western Railway disputed. The dispute was referred to arbitration, and the arbitrators failed to agree, leading to the appointment of an Umpire. The Umpire awarded a sum of Rs. 4 crores to TEC, holding that the CT was not a "meter" within the meaning of section 26(6) of the Indian Electricity Act, 1910, and therefore the dispute was arbitrable.
Finding of the Court:
The Court held that the Umpire's decision on the issue of law was directly contrary to the judgment of the Supreme Court in U.P.S.E.B. v. Atma Steels, which held that a Potential Transformer (PT) or a Current Transformer (CT) is an apparatus attached to a meter and is part and parcel thereof and falls within the term "meter" as used in section 26 of the Indian Electricity Act. The Court further held that the dispute between the parties was admittedly a dispute about the under-registration on account of inter turn shorting in the CT, which was a defect in the "meter". Consequently, section 26 of the Indian Electricity Act vested the exclusive jurisdiction of deciding the dispute in the Electrical Inspector.
Issues: 1. Whether the Umpire's decision on the issue of law was directly contrary to the judgment of the Supreme Court in U.P.S.E.B. v. Atma Steels? 2. Whether the dispute between the parties was arbitrable?
Ratio Decidendi: 1. An arbitrator's award may be set aside for error of law appearing on the face of it, though the jurisdiction is not lightly to be exercised. 2. If a specific question of law is submitted to the arbitrator for his decision and he decides it, the fact that his decision is erroneous does not make the award bad on its face so as to permit its being set aside. 3. Where a question of law is the point at issue, unless 'both' sides 'specifically' agree to refer it and agree to be bound by the arbitrator's decision, the jurisdiction of the Courts to set an arbitration right when the error is apparent on the face of the award is not ousted. 4. Section 26(6) of the Indian Electricity Act, 1910, vests the exclusive jurisdiction of deciding disputes regarding the correctness of meters used to measure electricity consumption in the Electrical Inspector.
Final Decision: The Court allowed the appeal, set aside the Umpire's award, and held that the dispute was not arbitrable and should be decided by the Electrical Inspector.
2. Appeal admitted. Notice made returnable forthwith. Respondents waive notice through Counsel. By consent, Appeal is finally heard.
3. The appellants are licensees under the Indian Electricity Act, 1910 who supply electric energy to consumers. The respondent is Union of India which owns the Western Railway.
4. On 7th July, 1971, a Power Supply Agreement was executed between the appellants and the respondent, Western Railway, for supplying electricity to the Railways. Clause 20 of the Power Supply Agreement contains an arbitration clause which read 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 the 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."
5. Sometime on or about 7th June, 1993, the respondent discovered that Feeder No. 36 red phase of Current Transformer (hereinafter referred to as "CT") had become inter-turn short resulting in low output from its secondary winding. The said CT was replaced on 13th June, 1993. By letters dated 22nd June, 1993 and 16th July, 1993 the respondent informed the appellants of the aforesaid facts and that the off take of electricity of Western Railway between October 1991 to June, 1993 (19 months) was lower to the extent of 34 per cent as compared to the average offtake recorded for the thirty previous months (April 1989 to September 1991). On 26th July, 1993, the appellants forwarded a supplementary bill for the unrecorded power consumption in the amount of Rs. 8,89,32,347.50. By the letter dated 6th August, 1993 the respondent informed the appellants that payment for under-registration by the meter could be permitted only for the maximum period of three months as per the Agreement dated 7th July, 1971. By their letter of 27th September, 1993, the appellants insisted that they were entitled to be paid for the period of under-registration at the same rates as in the Agreement and in the total sum as indicated in the supplementary bill.
6. By letters of 2nd June, 1995 and 27th July, 1995, the appellants desired that the dispute/difference which had arisen between the parties be referred to arbitration as per clause 20 of the Agreement dated 7th July, 1971 and appointed one A.D. Limays, retired Assistant General Manager of Bombay Electric Supply and Transport Undertaking, as their Arbitrator and called upon the respondent to nominate its Arbitrator. By the letter dated 2nd February, 1996, the respondent nominated one A.K. Sinha, Financial Adviser and Chief Accounts Officer, as its Arbitrator. The arbitration proceedings were carried on thereafter. The Arbitrators failed to agree and, by their letter dated 25th September, 1996, referred the dispute to the Umpire, N.C. Narasingham.
7. On 14th January, 1997 and 28th January, 1997, the Umpire received the documents from both the Arbitrators. On 13th March, 1997 and 4th April 1997, the appellants filed their Statement of Claim, to which the respondent filed a reply. On 15th April 1997, the Umpire entered upon the reference. Af
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