Case Note & Summary
The appeal by certificate before the Supreme Court of India arose from a judgment of the Gujarat High Court in Special Civil Application No. 388 of 1964. The dispute concerned the power of the Gujarat Electricity Board (appellant) to appoint a Rating Committee under Section 57A of the Electricity (Supply) Act, 1948 to investigate alleged overcharging by the Ahmedabad Electricity Co. Ltd. (respondent licensee), which held a licence for Ahmedabad. The Central Electricity Authority was the arbitral body under the Act. In September 1963 the licensee intimated its intention to revise electricity rates with effect from November 16, 1963, claiming increased costs and anticipated shortfall in clear profit. The State Government and the Board both informed the licensee that the financial data was incorrect and no justification existed. The licensee nevertheless brought the new rates into effect. On 7 March 1964 the Board issued a show-cause notice under the first proviso to Section 57A alleging that the licensee had failed to comply with Sixth Schedule provisions by overcharging consumers, and proposing to constitute a Rating Committee. The licensee replied on 26 March 1964 asserting no breach and stating that if no acceptance by 6 April 1964, it would refer the issues to arbitration of the Central Electricity Authority. The Board, not satisfied, appointed the Rating Committee. The licensee then filed a writ petition in the Gujarat High Court contending that a dispute referable to the Authority under Para 16 of the Sixth Schedule had arisen and pending such arbitration no Rating Committee could be constituted due to the second proviso to Section 57A. The High Court accepted this and quashed the constitution. The core question before the Supreme Court was whether a reference by the licensee of an alleged dispute with the Board to arbitration of the Central Electricity Authority operated as a bar to the Board's constitution of a Rating Committee under Section 57A. Subsidiary issues involved the interpretation of Para 16 of the Sixth Schedule, Section 60 and Section 76 of the Act, and whether the Board was substituted for the State Government in the arbitration agreement. The Board contended that the reference by the licensee was not under Para 16 because that provision only applied to disputes between the State Government and the licensee, not the Board; therefore the second proviso's conditions were not met. The licensee argued that Para 16 read with Section 76 created a statutory arbitration covering disputes with the Board, and its reference barred the Rating Committee. The Supreme Court examined the statutory scheme and held that the second proviso to Section 57A required three coexisting conditions to bar the Rating Committee: alleged failure to comply with Sixth Schedule, dispute as to interpretation, and reference by licensee to Authority under Para 16. The first two could be assumed, but the third failed. Para 16, incorporated into the licence, provided arbitration only between State Government and licensee; the Board was not a party and no provision substituted it. Section 60 only transferred liabilities, not the arbitration agreement. Section 76(1) did not make such disputes referable to the Authority, and Section 76(2) arbitration by two arbitrators was not by the Authority. The Court followed Amalgamated Electricity Co. Ltd. v. N. S. Bathena. Accordingly, the Supreme Court allowed the appeal, set aside the High Court judgment, and held that the constitution of the Rating Committee was legal and the Committee could function; the reference to the Authority did not bar it.
Headnote
A) Statutory Interpretation - Rating Committee - Conditions Precedent - Electricity (Supply) Act, 1948, Section 57A and Sixth Schedule - The second proviso to Section 57A bars constitution of Rating Committee only if three conditions coexist: alleged failure to comply with Sixth Schedule, dispute as to interpretation, and reference by licensee to Authority under Para 16 of Sixth Schedule before certain date. In this case, the first two conditions could be assumed, but the third failed because the reference was not under Para 16, as that provision permitted reference only against State Government, not Board. Held that Board could constitute Rating Committee. B) Arbitration - Arbitration Clause in Licence - Parties - Electricity (Supply) Act, 1948, Sixth Schedule Para 16 and Indian Electricity Act, 1910 - Sixth Schedule provisions are incorporated into the licence issued by State Government to licensee, making State Government and licensee parties to arbitration clause; no provision substitutes Board for State Government. Therefore, alleged dispute referable under Para 16 must be between State Government and licensee, not Board. Held that Board was not party to arbitration agreement. Followed Amalgamated Electricity Co. Ltd. v. N. S. Bathena, [1959] Suppl. 2 S.C.R. 213. C) Arbitration - Statutory Reference - Central Electricity Authority - Electricity (Supply) Act, 1948, Section 76(1) and (2) - Section 76(1) provided arbitration only for cases referred to in sub-section (2)(a), i.e., cases for which Act provides; no provision made reference to Authority compulsory for dispute about non-compliance with Sixth Schedule. Section 76(2) arbitration by two arbitrators would not bar Rating Committee because it was not arbitration by Authority as required by second proviso. Held that no bar arose from Section 76. D) Statutory Interpretation - Transfer of Liabilities - Electricity (Supply) Act, 1948, Section 60 - Section 60 transferred debts, obligations, contracts of State Government to Board but did not substitute Board as party to arbitration agreement under Para 16; such arbitration agreement was not an obligation incurred by State Government within meaning of Section 60(1). Held that Section 60 could not be invoked to substitute Board for State Government for arbitration. E) Consumer Protection - Overcharging - Rating Committee Purpose - Electricity (Supply) Act, 1948, Section 57A and Sixth Schedule - Act required State Government and Board to be vigilant against overcharging by licensee through illegal financial manipulation. Second proviso barred Rating Committee only when important dispute involving interpretation of Sixth Schedule was already before Authority. Held that Board's action was within statutory purpose. F) Arbitration Act Applicability - Arbitration Agreement - Electricity (Supply) Act, 1948, Sixth Schedule Para 16 and Arbitration Act, 1940, Section 46 - No agreement existed between Board and company to refer disputes to Authority; Para 16 was not a statutory arbitration provision to which Section 46 of Arbitration Act, 1940 would apply. Held that contention rejected. G) Statutory Interpretation - Licensing Authority - State Government and Board - Electricity (Supply) Act, 1948 and Indian Electricity Act, 1910 - State Government remained grantor of licence; Board was not substituted, even though functions were defined under both Acts. Thus arbitration clause in licence bound only State Government, not Board. Held that Board not bound. H) Legislative Policy - Lacuna - Parliamentary Drafting - Electricity (Supply) Act, 1948, Section 57A and Sixth Schedule - It might be a lacuna that Board was not liable to submit to arbitration of Authority, but Parliament must correct it; court could not strain language. Held that appeal allowed.
Issue of Consideration
Whether a reference by the respondent Electricity Company of an alleged dispute between itself and the Appellant Board to the Arbitration of the Central Electricity Authority operates as a bar to the constitution of a Rating Committee by the Board under Section 57A of the Electricity (Supply) Act, 1948
Final Decision
Appeal allowed; judgment and order of Gujarat High Court dated 15 December 1964 in Special Civil Application No. 388 of 1964 set aside; constitution of Rating Committee by Board held legal and Committee empowered to function; reference by licensee to Central Electricity Authority not a bar.
Law Points
- Second proviso to Section 57A of Electricity (Supply) Act
- 1948 bars Rating Committee only if three conditions coexist including reference under Para 16 of Sixth Schedule
- Para 16 arbitration clause is between State Government and licensee only
- Board not substituted
- Section 60 does not transfer arbitration agreement
- Section 76(1) only arbitrates where Act provides
- Section 76(2) two arbitrators not Authority
- no bar to Rating Committee
