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GAUHATI HIGH COURT
BRIJESH KUMAR, C. J. , JJ.
Bharat Hydro Power Corporation Ltd., Guwahati -Appellant
Versus
Assam State Electricity Board, Guwahati -Respondent
Civil Reference (ARB) No. 6 of 1996
Decided On : 18-05-1999
ARBITRATION - TERMINATION OF CONTRACT - EFFECT ON ARBITRATION CLAUSE - ALTERNATIVE FORUM PROVIDED BY STATUTE - VALIDITY OF ACT - DISPUTE SETTLEMENT MECHANISM - COMMISSION APPOINTED UNDER ACT - POWERS AND JURISDICTION - JUDICIAL PROCEEDINGS - APPEAL - CHANGE OF FORUM - MAINTAINABILITY OF PETITION FOR APPOINTMENT OF ARBITRATOR.
Fact of the Case:
Petition filed under Section 11 of the Arbitration and Conciliation Act, 1996, for appointment of a sole arbitrator to decide disputes between petitioners (M/s. Bharat Hydro Power Corporation Ltd. and M/s. Subhash Projects and Marketing Ltd.) and respondent (Assam State Electricity Board). Disputes arose from a Memorandum of Understanding (MOU) for transfer of a hydroelectric power generation project. Petitioners claimed losses and damages due to short delivery of assets and other lapses by respondent. Respondent contended that the MOU was terminated by the Bharat Hydro Power Corporation Limited (Acquisition and Transfer of Undertaking) Act, 1996, and all contracts and arrangements, including the arbitration clause, were deemed to have been terminated. A Commission was constituted under the Act to determine the amount payable to the company and settle disputes.
Finding of the Court:
The Court held that the Bharat Hydro Power Corporation Limited (Acquisition and Transfer of Undertaking) Act, 1996, was valid and effective. The Act terminated all contracts and arrangements, including the arbitration clause in the MOU, by operation of law. The Court found that the Act provided an alternative forum for settlement of disputes through a Commission headed by a sitting or retired High Court Judge. The Commission had wide powers to investigate facts, summon witnesses, and conduct judicial proceedings. An appeal was also provided against the Commission's decision. The Court held that the change of forum from arbitration to the Commission was not a grievance since the Commission had more powers and provided an effective dispute resolution mechanism.
Issues: 1. Whether the Bharat Hydro Power Corporation Limited (Acquisition and Transfer of Undertaking) Act, 1996, was valid and effective. 2. Whether the Act terminated the Memorandum of Understanding (MOU) and the arbitration clause contained therein. 3. Whether the Act provided an alternative forum for settlement of disputes. 4. Whether the change of forum from arbitration to the Commission was a grievance.
Ratio Decidendi: 1. The Court held that the Bharat Hydro Power Corporation Limited (Acquisition and Transfer of Undertaking) Act, 1996, was valid and effective. The Court relied on a previous decision of the Division Bench of the High Court upholding the validity of the Act. 2. The Court held that the Act terminated all contracts and arrangements, including the arbitration clause in the MOU, by operation of law. The Court interpreted Section 4(4) of the Act, which stated that any contract or arrangement relating to the management of the affairs of the company in relation to its undertaking shall be deemed to have been terminated on the appointed day. The Court held that the MOU, which was related to the management of the company's affairs, was terminated by the Act. 3. The Court held that the Act provided an alternative forum for settlement of disputes through a Commission headed by a sitting or retired High Court Judge. The Court referred to Sections 7, 11, 14, and 26 of the Act, which provided for the Commission's powers, jurisdiction, and procedure. The Court held that the Commission had wide powers to investigate facts, summon witnesses, and conduct judicial proceedings. An appeal was also provided against the Commission's decision. 4. The Court held that the change of forum from arbitration to the Commission was not a grievance. The Court reasoned that the Commission had more powers and provided an effective dispute resolution mechanism. The Court also noted that the Commission's proceedings were judicial proceedings and subject to appeal.
Final Decision: The Court dismissed the petition for appointment of an arbitrator, holding that the disputes between the parties were to be settled by the Commission constituted under the Bharat Hydro Power Corporation Limited (Acquisition and Transfer of Undertaking) Act, 1996.
This a petition filed under Section 11 of the Arbitration and Conciliation Act, 1996, with a prayer that a sole arbitrator may be appointed to decide the disputes pending between the petitioners, namely, M/s. Bharat Hydro Power Corporation Ltd. (for short, BHPCL) and M/s. Subhash Projects and Marketing Ltd. (for short SPML), of the one part, and the Assam State Electricity Board (for short, ASEB), of the other part. The disputes between the parties, as indicated by the petitioners are those as referred to in the letter of demand dated 17-8-96, by which it was informed to the respondents that the petitioners had appointed their arbitrator and the respondents were called upon to appoint their arbitrator within 30 days of receipt of the said letter. Since the respondents failed to appoint their arbitrator, therefore, the present petition has been preferred by the petitioners.
2. A Memorandum of Understanding (hereinafter to be called MOU) was entered into and signed on 25th March, 1993 by SPML and the ASEB under which 100 MW capacity Karbi Langpi (Lower Borpani) Hydro Electric Power Generation Project was to be transferred by the ASEB to a Registered Public Company to be formed by the parties to the said MOU. This is how M/s. Bharat Hydro Power Corporation Ltd. (BHPCL) came into being, having been registered on 2nd April, 1993. A Deed of Assignment was executed between the ASEB and BHPCL on 8th April, 1993 and the MOU formed part of the Deed of Assignment. According to the claim of the petitioners, all the assets which were liable to be handed over by the ASEB to BHPCL in pursuance of the MOU were not transferred. The worth of such assets as not transferred is said to be about Rs. 39.94 crores. This shortage in handing over the assets is said to be checked and verified by the Chartered Accountants, whose reports have also been placed on the record. A perusal of the letter dated 17-8-96 indicating the disputes between the parties shows that it was claimed that the petitioners suffered losses and damages due to various types of lapses on the part of the ASEB. According to the case of the petitioners as given out in the letter dated 17-8-96, losses suffered by them was to the tune of Rs. 100.27 crores, apart from damages on account of loss of good will.
3. In regard to the claim on account of short delivery of the assets by the ASEB to the BHPCL, our attention is drawn to Clause 34 of the MOU, which reads as follows :-
"34. Notwithstanding anything to the contrary herein contained, in case at the time of taking physical possession of the said Project, if it is found that any item in the inventory of the said properties are not available in the site of the said Project, then and in that event the cost of such assets and properties, plants and/or machineries, fittings and/or fixtures as shown in the accounts of the said Electric Power Generation Project shall be deducted out of the total consideration payable to ASEB under these presents."
4. It is submitted that since all that was required to be done by the respondents was not being accomplished and the petitioners had been suffering losses including on account of short handing over of the assets, the petit-ioners invoked the arbitration clause, as contained in Clause 18 of the MOU, which reads as follows :-
"18. If any dispute or difference shall at any time arise between the parties to this MOU on any clause or matter herein contained or in respect of their respective rights, claims or liabilities hereunder, however, in relation to or arising out of this MOU, such disputes or differences shall be referred to arbitration of two arbitrators comprising of one nominee each of ASEB and SPML and to the umpire to be appointed by the said two arbitrators before entering upon the references. The procedure and proceedings for such arbitration shall be governed by Indian Arbitration Act. The venue of Arbitration shall be Guwahati only, unless otherwise agreed to between the parties. It i
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