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U.P. State Electricity Board Vs. Vth Additional District Judge and ors. - Court Judgment

LegalCrystal Citation
SubjectArbitration
CourtAllahabad High Court
Decided On
Case NumberWrit Petn. Nos. 2399 and 3303 of 1980
Judge
Reported inAIR1984All320
ActsArbitration Act, 1940 - Sections 30
AppellantU.P. State Electricity Board
RespondentVth Additional District Judge and ors.
Appellant AdvocateSudhir Chandra, Adv.
Respondent AdvocateH.S. Joshi, Standing Counsel
DispositionPetition allowed
Excerpt:
arbitration - error in the award - section 30 of arbitration act, 1940 - umpire based his decision on erroneous legal principle - courts entitled to interfere whenever the error is apparent on the face of the award - error of, law by itself, not sufficient to justify court's interference. - - the conclusion of the umpire that the petitioner was entitled to 50 per cent and 80 per cent amount of the minimum consumption charges on account of the supply made being to that extent only is clearly based upon the assumption that the payment of minimum guarantee charges is relatable to the extent of the supply made, i. their orders as well as the award cannot be sustained......has held in the former case that the petitioner was entitled to charge only 50 per cent of the minimum guarantee amount while in the latter case, he has taken the view that the petitioner was entitled to charge 80 per cent of the amount. this award was upheld by the learned civil judge, budaun who rejected the objection of the petitioner under section 30 of the arbitration act. the appeals filed by the petitioner under section 39 of the arbitration act were also dismissed by the additional district judge, budaun.3. the case of the petitioner, as presented in this court by sri sudhir chandra, is that as the umpire was in error in holding that the consumer was not liable to pay the minimum consumption charges in regard to the contracted demand in its entirety only because fifty per.....
Judgment:
ORDER

V.K. Mehrotra, J.

1. In these two petitions under Article 226 of the Constitution, the petitioner U. P. State Electricity Board has assailed the decision of the courts below to the effect that the award given by the Umpire in the dispute between the petitioner and the third respondent was not liable to be set aside as it did not suffer from an apparent error of law and had been, made by the Umpire on principles of Justice, equity and fair play. M/s Crystal Sugar Works. Bisauli (district Budaun) is the third respondent in writ petition No. 2399 of 1980 while M/s. G T. Cold Storage and Ice Factory, Uihani (district Budaun) is the third respondent in writ petition No. 3033 of 1030

2. The third respondent in each of these petitions is a bulk consumer of electricity and under the agreement under which they are being supplied electricity by the petitioner, they had undertaken to pay by way of minimum consumption guarantee, on their contracted demand. The petitioner had on its part undertaken to make continuous supply of electricity available to the consumer during the off peak hours each day throughout the whole period of the agreement subject. amongst others, to the condition that it shall not be responsible for deficiency of energy caused, inter alia, on account of any direction issued by the Government of Uttar Pradesh or for some other cause beyond the control of the petitioner. The dispute in these cases relates to the amount payable to the petitioner by the third respondent by way of minimum consumption guarantee amount for the period between Nov. 1972 and Sept. 1974 in the case of M/s. Crystal Sugar Works and between January, 1973 and Oct. 12, 1974 in the case of M/s G. T. Cold Storage. The Umpire before whom the matter came up dueto the difference between the two Arbitrators appointed by the parties in terms of the Agreement, has held in the former case that the petitioner was entitled to charge only 50 per cent of the minimum guarantee amount while in the latter case, he has taken the view that the petitioner was entitled to charge 80 per cent of the amount. This award was upheld by the learned Civil Judge, Budaun who rejected the objection of the petitioner under Section 30 of the Arbitration Act. The appeals filed by the petitioner under Section 39 of the Arbitration Act were also dismissed by the Additional District Judge, Budaun.

3. The case of the petitioner, as presented in this Court by Sri Sudhir Chandra, is that as the Umpire was in error in holding that the consumer was not liable to pay the minimum consumption charges in regard to the contracted demand in its entirety only because fifty per cent and eighty per cent supply was made by the petitioner during the period in dispute to the third respondent in these cases and that the Umpire could not legally come to that conclusion without considering the fact that the petitioner had made supply of electricity for such duration in each of these cases which was sufficient to ensure it to the extent of the amount of minimum guarantee charges. It has been urged that the Umpire acted contrary to the settled legal position when he did not apply the principle laid down by this Court in Bhagwan Industries (P) Ltd. v. Uttar Pradesh State Electricity Board, AIR 1979 All 249. In that case the view taken was that the imposition of minimum consumption guarantee charges was justified where supply was given for sufficient time to cover the amount of minimum charges.

4. That the Arbitrator (or the Umpire) is bound to decide a dispute in accordance with law is not in dispute. The question whether he has done so in a particular case or not is always amenable to scrutiny by the court subject, of course, to the limitation set for themselves by the courts that as far as possible they would not interfere with the decision given by an Arbitrator chosen by the parties.

5. One of the principles, in the matter of interference by the courts with the award of the Umpire, is that except where the Umpire has based his decision on an erroneous legal principle which appears on the face of the award, an error of law, by itself, would not be sufficient to interfere with it. And, the face of the award has been described to be the award itself or some paper accompanying it wherein the Umpire records his reasons (in cases where he chooses to do so) for his ultimate conclusion. This, of course, would be a principle inapplicable to a case where a specific question of law is referred by the parties to the Arbitrator for his decision. There, the error, if any, in the view of law taken by the Arbitrator would not entitle the court to interfere with it. See: Upper Ganges Valley Electricity Supply Co. Ltd. v. U. P. Electricity Board, AIR 1973 SC 683; Iftikhar Ahmed v. Syed Meharban Ali, AIR 1974 SC 749; N. Chellappan v. Secy., Kerala State Electricity Board, AIR 1975 SC 230; Bareilly Electricity Supply Co. Ltd. v. State of Uttar Pradesh, AIR 1977 Cal 328 and Patel Engineering Co. Ltd. v. Indian Oil Corporation Ltd., AIR 1975 Pat 212.

6. In these petitions, a perusal of the award of the Umpire shows that one of the issues specifically framed was 'whether the petitioner was entitled to charge the amount of minimum charges as per the Agreement in the absence of supply according to it?' While dealing with this issue, the Umpire referred to the fact that the supply had not been made in terms of the Agreement but had been made at fifty per cent in the case of M/s. Crystal Sugar Works and eighty per cent in the case of M/s. G. T. Cold Storage. In his award, in the case of both these consumers, the Umpire has given his reasons for coming to his conclusions. The conclusion of the Umpire that the petitioner was entitled to 50 per cent and 80 per cent amount of the minimum consumption charges on account of the supply made being to that extent only is clearly based upon the assumption that the payment of minimum guarantee charges is relatable to the extent of the supply made, i.e., the charges payable are to be proportionate to thesupply actually made. This assumption is legally erroneous in view of the principle laid down by this Court in M/s. Bhagwan Industries (AIR 1979 All 249) (supra). To that extent, the award suffers from an error of law apparent on the face thereof.

The learned Civil Judge, while disposing of the objection of the petitioner under Section 30 of the Arbitration Act, and the learned Additional District Judge, while disposing of the appeals under Section 39 of the Act, were of opinion that the award was not liable to be set aside as a mere error of law was not enough to justify interference with it. They were not right in thinking so, inasmuch as, the award in both these cases was based upon an erroneous assumption in law which was the basis of the conclusion arrived at by the Umpire and the assumption, as seen earlier, was about the correlation between the supply of electricity and the right to realise proportionate amount by way of minimum guarantee charges.

7. Both the courts below, as is clear from their decisions, felt that the plea taken on behalf of the petitioner before them that the supply had been made for sufficient length of time to cover the amount of minimum guarantee charges was of no avail to the petitioner as, in their opinion, the petitioner was not entitled to realise anything in excess of the amount proportionate to the extent of supply made by the petitioner in view of its obligation to give supply continuously. They thought that the fact that for a period subsequent to the period in dispute in these cases, the Board had decided to realise proportionate charges from the consumers was indicative of the right of petitioner to realise only the proportionate minimum guarantee charges under the Agreement for the period in dispute. This approach is untenable in law. The right of the parties under the relevant Agreement would not depend upon any concession given to the consumer by the Board for a future period.

8. One of the factors which was taken into account by the courts below in refusing to set aside the award was that the Umpire had held the petitioner disentitled from claiming the minimum guarantee charges on the principle of equity andjustice which, according to the Umpire, was subject to fulfilment of the clause relating to constant and. regular supply of electricity. Such a decision, according to the courts below, was not liable to be interfered with. They felt that they were supported in their view by the decision of the Supreme Court in M/s. Northern India Iron and Steel Co. v. State of Haryana, AIR 1976 SC 1100. The courts below, however, overlooked that even in the case of M/s. Northern India Iron and Steel Co., the Supreme Court had based its decision upon Clause 4(f) of the Agreement relating to supply of energy which provided that in certain circumstances beyond the control of the consumer when he could not consume electrical energy, the consumer was entitled to a proportionate reduction in demand charges. The Supreme Court was of opinion that the circumstances of power cut disabling the Board from giving full supply of energy to a consumer on account of government orders was a circumstance disabling the consumer from consuming electricity as per the contract and this was a circumstance beyond the control of the consumer entitling the consumer to a proportionate reduction in the demand charges. The Supreme Court held that this interpretation of Clause 4(f) would be a legal and equitable interpretation. The Supreme Court did not lay down in that case any principle of equity and justice, unrelated to a statutory or contractual obligation, entitling the consumer to a proportionate reduction in his liability for the minimum guarantee charges whenever there was shortage in supply of electricity by the supplier. The courts below were not right in thinking that any such principle had been laid down, by the Supreme Court.

9. The counsel for the third respondent brought to my notice an unreported decision of Gopi Nath, J. in the U. P. State Electricity Board v. Ujhani Cold Storage and Refrigeration, Ujhani (Civil Revision No. 422 of 1977--decided on Feb. 5, 1980) wherein this court declined to interfere with the decision of the courts below refusing to interfere with an award passed in a matter relating to payment of minimum guarantee charges. In that case, the Arbitrator had reducedthe minimum guarantee charges from Rs. 12/- per K.W. to Rs. 6/- per K.W. on account of irregular and short supply of electricity by the U. P. State Electricity Board. The Arbitrator had taken the view that the supply was admittedly short by 50 per cent and that would justify the reduction of minimum guarantee charges to half. This court expressed itself thus :--

'In reducing the minimum guarantee charges no proposition of law was laid down by the Arbitrator but only a statement of fact was made that the supply of electric energy was admittedly short by 50 per cent. The appellate court observed that in these circumstances 'if the arbitrator came to the conclusion that only 50 per cent of the minimum guarantee was payable there was no mistake apparent on the face of the record.....' In N. Chellappan v. Secretary, Kerala State Electricity Board. AIR 1975 SC 230 it was held that a mere error of law was no ground for setting aside an award. It was observed : 'where the umpire as sole Arbitrator was not bound to give a reasoned award and if in passing the award he makes a mistake of law or of fact, that is no ground for challenging the validity of the award.' The Arbitrator does not seem to have laid down any proposition of law which can be said to be erroneous on the face of it. He reached his conclusions on the facts and in the circumstances of the case. The order accordingly does not call for any interference in this revision.'

10. The observations aforesaid have to be read in the background of the facts of the case. There, as held by this Court, the Arbitrator had reduced the minimum guarantee charges from Rs. 12/- per K. W. to Rs. 6/- per K. W. on finding that the supply of energy was short by 50%. He did not seem 'to have laid down any proposition of law', according to this Court, which could be said to be erroneous on the face of it. That was the basic reason for this Court in refraining from interfering with the Award. It was not ruled, as a matter of law, as suggested by the counsel for the third respondent, that where an award proceeds upon consideration of equity, it was not to be interfered with even though it may befounded upon a manifestly erroneous assumption about the legal position.

11. In sum, it must be held that the award of the Umpire suffers from an error of law apparent on the face thereof and the Courts below were in error in refusing to set it aside. Their orders as well as the award cannot be sustained. They deserve to be and are quashed. The matter would, however, be open to reconsideration by the Umpire in accordance with law. The petitions succeed in these terms but the parties are left to bear their own costs of this Court.


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