Case Note & Summary
The appellant, OPG Power Generation Pvt. Ltd., was the supplier of electricity under a power supply agreement dated 18.04.2018 with the respondent, Shree Karthik Papers Ltd., for a period of three years. The agreement provided for monthly billing from the 28th of one month to the 27th of the next, with payment due within 7 days. The appellant stopped power supply abruptly on 28.09.2018, allegedly due to non-payment of a bill raised on 01.10.2018 for the period 28.08.2018 to 27.09.2018. The respondent contended that the stoppage was a breach of contract and filed a claim under Section 8(1) of the Arbitration and Conciliation Act, 1996, seeking reference to arbitration. The sole arbitrator passed an award on 31.01.2020, granting Rs.40,82,400/- as excess power charges incurred by the respondent from 28.09.2018 to 23.03.2019, along with interest at 12% p.a. from respective due dates, and also interest on additional security deposit paid to TANGEDCO. The appellant challenged the award under Section 34(2)(b)(ii) of the Act before a learned Single Judge, who dismissed the petition by order dated 19.08.2020. The appellant then filed the present appeal under Section 37 of the Act. The Division Bench considered whether the award suffered from patent illegality or was in conflict with public policy. The Court noted that the arbitrator had examined the evidence and found that the appellant had stopped supply without notice, which was a breach. The computation of damages was based on the difference in tariff rates and was supported by evidence. The Court held that the arbitrator's findings were plausible and not perverse, and the award did not violate Section 28(3) of the Act. The Court also upheld the grant of interest at 12% p.a., as it was within the arbitrator's discretion under Section 31(7). Consequently, the appeal was dismissed, and the order of the learned Single Judge was confirmed.
Headnote
A) Arbitration - Section 34 of Arbitration and Conciliation Act, 1996 - Setting Aside of Arbitral Award - Patent Illegality - The Court examined whether the arbitral award granting damages for breach of a power supply agreement was patently illegal. The Court held that the arbitrator's interpretation of the agreement and findings on breach were plausible and not perverse, thus not warranting interference under Section 34. (Paras 1-5) B) Contract - Breach of Contract - Power Supply Agreement - Abrupt Stoppage of Supply - The appellant stopped power supply abruptly without notice, which was held to be a breach of the agreement. The arbitrator awarded damages for the excess power charges incurred by the respondent. The Court upheld this finding as it was based on evidence and not contrary to the terms of the contract. (Paras 2-4) C) Damages - Computation of Damages - Interest - The arbitrator awarded Rs.40,82,400/- as excess power charges and interest at 12% p.a. from respective due dates. The Court found no patent illegality in the computation or the rate of interest, as the arbitrator had discretion under Section 31(7) of the Act. (Paras 4-5)
Issue of Consideration
Whether the arbitral award granting damages for abrupt stoppage of power supply and interest thereon suffers from patent illegality or is in conflict with public policy under Section 34(2)(b)(ii) of the Arbitration and Conciliation Act, 1996.
Final Decision
The appeal is dismissed. The order of the learned Single Judge dated 19.08.2020 in O.P.No. 353 of 2020 is confirmed. No costs.
Law Points
- Arbitration
- Breach of Contract
- Damages
- Interest
- Section 34 of Arbitration and Conciliation Act
- 1996
- Patent Illegality
- Public Policy
