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High Court Of Delhi
KAPUR AIR PRODUCTS - Appellant
Versus
MUNICIPAL CORPORATION OF DELHI - Respondent
First Appeal Order 56 of 1986
Decided On : 04/09/1987
ELECTRICITY TARIFF - FUEL ADJUSTMENT CHARGES - ARBITRATION - REFERENCE OF DISPUTE - SCOPE - CONSTRUCTION OF TARIFF - RELEVANCY OF COMPONENTS IN ASCERTAINING ACTUAL COST OF FUEL - TRANSMISSION AND DISTRIBUTION LOSSES - WHETHER RELEVANT FOR CALCULATING VARIABLE ENERGY CHARGES - ERROR OF LAW APPARENT ON THE FACE OF THE AWARD.
Fact of the Case:
The appellants, large industrial power consumers, challenged the award of a sole arbitrator appointed to resolve disputes regarding fuel adjustment charges in the electricity tariff fixed by the Delhi Electric Supply Undertaking (DESU). The main dispute was whether the basic average fuel and purchase cost in the fuel adjustment clause would include only the invoice price of coal or also related expenses. The arbitrator held that demurrage charges incurred by DESU were not relevant for determining the actual cost of fuel, and that transmission and distribution losses could not be considered as a separate item of charge under the adjustment formula.
Finding of the Court:
The Court held that the arbitrator had acted illegally in reaching his decision on the question of transmission and distribution losses, as these losses were not a factor for calculating the variable energy charges under the Tariff. The Court found that the arbitrator had substituted words in the formula, which is not permissible in interpreting statutory provisions or subordinate legislation. However, the Court upheld the arbitrator's decision on the question of demurrage charges, as it was a question of law specifically referred to the arbitrator and the arbitrator's decision was not perverse.
Issues: 1. Whether a specific question of law was referred to the arbitrator and if so, whether the award cannot be challenged on that account? 2. Whether the award is liable to be set aside/modified in respect of demurrage charges when the arbitrator says that this cannot be taken into consideration while working out the adjustment formula? 3. Whether the award is liable to be set aside/modified/remitted when the arbitrator says that transmission and distribution losses cannot be taken into consideration?
Ratio Decidendi: 1. A question of law is specifically referred to an arbitrator for his decision, it would be contrary to well-established principles for a Court of law to interfere with the award even if the Court itself would have taken a different view. 2. The arbitrator's decision on the question of demurrage charges was final and binding on the parties, as it was a question of law specifically referred to the arbitrator and the arbitrator's decision was not perverse. 3. The arbitrator acted illegally in reaching his decision on the question of transmission and distribution losses, as these losses were not a factor for calculating the variable energy charges under the Tariff.
Final Decision: The appeals were partly allowed. The award was modified to exclude transmission and distribution losses from the calculation of variable energy charges, and as modified, was made a rule of the Court. The parties were left to bear their own costs. The appellants were directed to pay interest at the rate of 12% per annum on the amounts in dispute from the date of the order of the Division Bench of the Court.
( 1 ) THIS judgment will dispose of a batch of first appeals arising out of a common judgment determining the objections against the award dt. Sept. 24, 1985 of the sole arbitrator relating to fuel adjustment charges in the electricity Tariff of the Delhi Electric Supply Undertaking.
( 2 ) THE Municipal Corporation of Delhi is a body corporate established under S. 3 of the Delhi Municipal Corporation Act, 1957 (hereinafter called the Act) and is charged with the Municipal Government of Delhi under its statutory provisions. Under S. 42 of the Act, one of the obligatory functions of the Municipal Corporation of Delhi (for short called the Corporation) is the construction or purchase, maintenance, extension, management and conduct of any undertaking for the generation or supply and distribution of electricity to the public. For the efficient performance of its functions, a number of municipal authorities under the Corporation are constituted including the Delhi Electric Supply Committee (for short called D. E. S. C. ). The D. E. S. C. is responsible for the conduct and management of the Delhi Electric Supply Undertaking (for short called DESU) and for the efficient discharge of such responsibility is to exercise such powers and perform such functions as are conferred or imposed by or under the Act. The provisions relating to the electric supply are contained in Chap. XIII, Ss. 274 to 286 of the Act. In addition to the provisions of the Act, the provisions of the Electricity Act, 1910, the Electricity Rules, 1956 framed thereunder and the Electric (Supply) Act, 1948 are relevant. S. 275 lays down the duty of the D. E. S. C. to develop and maintain an efficient coordinated and economical system of electric supply for the whole of the Union Territory of Delhi. In the discharge of its functions in relation to electric supply, the D. E. S. C. , inter alia, is to promote the use of all economical methods of generating, transmitting and distributing electricity. By virtue of S. 277 the Corporation have all the powers and obligations of a licensee under the Electricity Act, 1910. According to sub-sec. (2) of S. 278 the General Manager (Electricity) is authorised on behalf of the Corporation to exercise all powers and be subject to all the obligations of a licensee under the Electricity Act, 1910 or any other law for the time being in force relating to the generation or supply of electricity. Section 281 contains the powers of the Corporation to make arrangements with licensees and for that purpose enter into agreements with them without showing any undue preference to any licensee. Section 283 makes provisions for the charges for the supply of electricity and reads as under :-
"subject to the provisions of any law for the time being in force, charges shall be leviable for the supply of electricity by the Corporation at such rates as may, from time to time, be fixed by the Delhi Electric Supply Committee with the approval of the Corporation. "in exercise of the powers conferred by S. 283 of the Act, charges for supply of electricity, called electricity Tariff, are fixed from time to time almost yearly. The Tariff divides the consumers for the purposes of charging them in different categories like domestic, non- domestic, industrial load, agriculture, street lighting, night load tariff, railway traction, temporary supply etc. It also includes general conditions of application, one of which is that the supply of electricity in all cases is subject to the execution of agreements including compliance of commercial formalities by the consumers. The industrial consumers are further sub-divided into small industrial power consumers and large industrial power consumers. We are concerned in these cases with the bulk consumers called Large Industrial Power (LI. P.) consumers.
( 3 ) ON Feb. 15,1982, the Commissioner of the Corporation (while exercising the powers of the Delhi Electric Supply Committee/ Standing Committee/corporation)
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