Delhi High Court
Raj Electricals (Regd.) vs Bses Rajdhani Power Ltd. on 16 July, 2007
Equivalent citations: 2007(3)ARBLR449(DELHI), 142(2007)DLT687
Author: Shiv Narayan Dhingra
Bench: Shiv Narayan Dhingra
JUDGMENT Shiv Narayan Dhingra, J.
1. This application has been made under Section 9 of Arbitration and Conciliation Act by the petitioner/applicant for granting an interim injunction against the respondent restraining respondent from disconnecting supply of electricity to the petitioner or from taking direct control of distribution of electricity and directing the respondent to maintain status quo in respect of the agreement entered into between parties till the decision of the dispute by the arbitrator.
2. The brief facts relevant for the purpose of deciding this application are that Delhi Vidyut Board (DVB), the earlier body responsible for supply and distribution of electricity in the city, had entered into an agreement with the petitioner under a scheme whereunder the unauthorized colonies were provided electricity through contractors. DVB was supplying electricity to the petitioner at single point and the petitioner contractor was supplying electricity to the cluster of houses in unauthorized colony. The petitioner contractor was called Single Point Delivery Contractor. The agreement was entered into for a period of seven years and could be renewed for further period by mutual consent. The agreement was terminable by either party in case of certain eventualities. The relevant clauses of the agreement providing for termination of the agreement are as under:
PAYMENT TERM (Clause 14) Payment of the fees shall be made monthly against certificate from the "Officer" about the work performed.
If the agreement is terminated early by one party, the party in default will pay suitable liquidated damages to compensate for the loss suffered by the other party on the account of such termination.
TERMINATION OF DEFAULT (Clause 7 of Additional Terms and Conditions of Contract) Specific events of default will entitle the DVB to terminate the agreement, the party committing an even of default which is.-
If the agreement is terminated early by one party, the party in default will pay suitable liquidated damages to compensate for the loss suffered by the other party on account of such termination.
The agreement can however otherwise be terminated by either party by giving six months notice.
Agency shall indemnify DVB against any claims, demands, costs and expenses whatsoever which may be made against it, because of failure of the agency or its any representative in the performance of their duties and negligence, any accident or injury to any person or untimely payment to any employee.
FALL BACK AGREEMENT (Clause 8 of Additional Terms and Conditions of Contract) In the event of failure of the agency to fulfilll its obligations, duties and responsibilities as per the agreement terms, DVB shall have all the rights, at any time to resort to fall back agreement. Under this plan, DVB shall take charge after giving suitable notice and can recover from the security deposit the losses suffered due to such failure, if the security deposit is insufficient the agency shall pay the difference to DVB failing which DVB shall have right to recover the same through legal or other means.
The DVB shall have the right in such circumstances to mange the system itself after taken charges of the facilities as above or through any other agency as it may deem fit and no claim of agency for compensation in this aspect shall be entertained.
3. Clause 11 of the additional terms and conditions of the contract provided that in case of disputes, the same shall be settled by mutual discussion. Failing the same, the disputes will be referred to arbitration.
4. The respondent, who is successor of DVB served a notice dated 6th June, 2007 upon the petitioner intimating the petitioner that the agreement between the petitioner and respondent would stand terminated after expiry of 15 days from the date of the legal notice and the company shall take the distribution itself. The reasons for termination of agreement given in the notice are that the petitioner failed to lay insulated low voltage wires of appropriate specifications on poles for distribution of electricity, thereby causing danger to the life and property of the residents of the area. There were several complaints of the residents of the area. The petitioner also failed to pay outstanding dues of Rs. 8,00,443/- to the respondent on account of electricity consumption. The agreement did not create any contractual relationship for perpetuity between the company and the contractor. A number of persons of the area of the contractor have deposited charges for availing electricity connection directly from the respondent company.
5. The present petition has been filed by the petitioner after above notice. It is pleaded by the petitioner that the petitioner was solely authorized to distribute electricity within its area of operation for a period of seven years. The petitioner had installed PCC poles and laid underground cables, earthing, meter board, service lines, meters etc. and developed an electricity distribution network. The petitioner was providing good services to the residents of the area and was making payment of the electricity bills to the respondent timely. The petitioner had invoked arbitration clause earlier also for settlement of the dispute arising between petitioner and respondent because of respondents raising arbitrary bills against the petitioner and the dispute was referred to the arbitrator. The learned arbitrator passed an award and observed that parties were bound by the terms of the agreement. However, the arbitrator refused to give benefit of T and D/AT and C losses and other benefits to the petitioner. The petitioner, therefore, challenged the award by filing a petition under Section 34 of Arbitration and Conciliation Act. The respondent, thereafter served the above notice as the respondent was adamant to terminate the agreement. The agreement could not be terminated by the respondent in the manner it has been terminated. The allegations made in the notice were absolutely false. The petitioner had no other remedy except to approach this Court for interim relief under Section 9 of Arbitration and Conciliation Act.
6. During the arguments, the counsel for petitioner submitted that the agreement between the petitioner and the respondent was governed by the Schedule to Indian Electricity Act, 1910, since, the petitioner was a licensee and in terms of the Clause 9(iv) of the Schedule, a minimum of 12 months notice in writing was required to be given by the respondent for terminating the license. The counsel submitted that although the Indian Electricity Act, 1910 has been repealed and a Electricity Act, 2003 has come into force but the Schedule to Indian Electricity Act, 1910 was still relevant and applicable in case of the petitioner. He relied upon Section 185 of The Electricity Act, 2003 which reads as under:
185. Repeal and Saving- (1) Save as otherwise provided in this Act, the Indian Electricity Act, 1910 (9 of 1910), The Electricity (Supply) Act, 1948 (54 of 1948) and the Electricity Regulatory Commissions Act, 1998 (14 of 1998) are hereby repealed.
(2) Notwithstanding such repeal-
(a) anything done or any action taken or purported to have been done or taken including any rule, notification, inspection, order or notice made or issued or any appointment, confirmation or declaration made or any license, permission, authorisation or exemption granted or any document or instrument executed or any direction given under the repealed laws shall, in so far as it is not inconsistent with the provisions of this Act, be deemed to have been done or taken under the corresponding provisions of this Act;
(b) the provisions contained in Sections 12 to 18 of the Indian Electricity Act, 1910 (9 of 1910) and rules made there under shall have effect until the rules under Sections 67 to 69 of this Act are made;
(c) the Indian Electricity Rules, 1956 made under Section 37 of the Indian Electricity Act, 1910 (9 of 1910) as it stood before such repeal shall continue to be in force till the regulations under Section 53 of this Act are made.
(d) all rules made under Sub-section (1) of Section 69 of the Electricity (Supply) Act, 1948 (54 of 1958) shall continue to have effect until such rules are rescinded or modified, as the case may be;
(e) all directives issued, before the commencement of this Act, by a State Government under the enactments specified in the Schedule shall continue to apply for the period for which such directions were issued by the State Government.
(3) The provisions of enactments specified in the Schedule, not inconsistent with the provisions of this Act, shall apply to the States in which such enactments are applicable.
(4) The Central Government may, as and when considered necessary, by notification, amend the Schedule.
(5) Save as otherwise provided in Sub-section (2), the mention of particular matters in that section, shall not be held to prejudice or affect the general application of Section 6 of the General Clauses Act, 1897 (10 of 1897), with regard to the effect of repeals.
THE SCHEDULE ENACTMENTS [See Sub-section (3) of Section 185]
1. The Orissa Electricity Reform Act, 1995 (Orissa Act No. 2 of 1996)
2. The Haryana Electricity Reform Act, 1997 (Haryana Act No. 10 of 1998)
3. The Andhra Pradesh Electricity Reform Act, 1998 (Andhra Pradesh Act No. 30 of 1998).
4. The Uttar Pradesh Electricity Reform Act, 1999 (Uttar Pradesh Act No. 24 of 1999).
5. The Karnataka Electricity Reform Act, 1999 (Karnataka Act No. 25 of 1999).
6. The Rajasthan Electricity Reform Act, 1999 (Rajasthan Act No. 23 of 1999)
7. The Delhi Electricity Reforms Act, 2000 (Delhi Act No. 2 of 2001)
8. The Madhya Pradesh Vidyut Sudhar Adhiniyam, 2000 (Madhya Pradesh Act No. 4 of 2001).
9. The Gujarat Electricity Industry (Reorganisation and Regulation) Act, 2003 (Gujarat Act No. 24 of 2003).
7. It is argued by the counsel for petitioner that since provisions of Delhi Electricity Reforms Act, 2000 which are consistent with The Electricity Act, 2003 have not been repealed and are still valid, the Schedule to Indian Electricity Act, 1910 shall be valid. This is argued on the basis of part VI of Delhi Electricity Reforms Act, 2000 which deals with the licensing and it is provided in Clause 20(6) that the provisions contained in the Schedule to The Indian Electricity Act, 1910 shall be deemed to be incorporated and shall form part of the every supply license granted under this part, except where they have been expressly varied or excepted. It is thus, argued by the counsel for petitioner that petitioner was a licensee under Delhi Electricity Reforms Act, 2000 and was therefore, governed by the Schedule to the Indian Electricity Act, 1910. This Schedule and Delhi Electricity Reforms Act, 2000 were saved by Section 185 of The Electricity Act, 2003, so a minimum notice of 12 months was required. The agreement between the petitioner and the respondent could not be terminated by the respondent in the arbitrary manner.
8. On the other hand it is argued by the counsel for respondent that the agreement between the petitioner and the respondent was not a license agreement neither the petitioner was a licensee in terms of either Indian Electricity Act, 1910 or Delhi Electricity Reforms Act, 2000 or The Electricity Act, 2003. The relationship between the petitioner and the respondent was contractual and was governed by the terms and conditions of the agreement entered into between the petitioner and the respondent. The respondent had issued notice of termination because of the violation of the terms of agreement by the petitioner. The petitioner could claim liquidated damages in terms of the agreement, in case it is found that the termination was not valid and the petitioner suffered certain losses. The petitioner cannot claim perpetuation of contract with the help of Section 9 of the Arbitration Act neither the petitioner can claim perpetual right to distribute the electricity in the area.
9. Whether the petitioner is a licensee as envisaged under Indian Electricity Act, 1910 or under Delhi Electricity Reforms Act, 2000 is the issue raised. A perusal of the Schedule relied upon by the petitioner would show that the Schedule is applicable in respect of licenses granted under the Act in terms of Section 3 of the Indian Electricity Act, 1910. Section 3 of The Indian Electricity Act, 1910 provides that only State Government, on an application made in prescribed form and on payment of prescribed fee, can grant license after consulting State Electricity Board to any person to supply energy in any specified area and also to lay down or place electric supply lines for conveyance and transmission of the energy. Such a license can be revoked by the State Governments alone by giving a notice of three months as provided under Section 3(iii). It is thus, clear that in order to create a licensee in terms of Indian Electricity Act, 1910 provisions of part 2 of the Act comprising of Section 3 and other Sections are to be followed. If these provisions are not followed and license is not granted in terms of the statutory provisions, it is not a licensee. It is not the case of the petitioner that license was granted to the petitioner by the State Government on payment of the prescribed fee in terms of Section 3 of Indian Electricity Act, 1910. Licensing under Delhi Electricity Reforms Act, 2000 is governed by part 4 of the Act. The Act created an Electricity Regulatory Commission for National Capital Territory of Delhi and it is provided that no person can be a licensee except as provided under Indian Electricity Act, 1910 or The Electricity (Supply) Act, 1948. Power to grant licenses has been given to the Commission under Section 20 of the Delhi Electricity Reforms Act, 2000 and Section 20 is on the same lines as Section 3 of the Indian Electricity Act, 1910. This license can be revoked by the commission in terms of the Act. It is not the case of the petitioner that petitioner was granted license by the Delhi Electricity Regulatory Commission in terms of Section 20 of the Act. Thus, petitioner is not a licensee under Delhi Electricity Reforms Act, 2000. The relationship between the petitioner and the DVB was governed by the agreement entered into by the petitioner and DVB. Since DVB has been succeeded by the respondent the respondent has stepped into the shoes of DVB.
10. The relationship between the petitioner and respondent was purely a contractual relationship. Erstwhile DVB was unable to handle the problem of distribution of electricity to the unauthorized colonies which stood regularized. There was lot of theft of electricity and due to its inability to handle the problem, a scheme was drawn up by DVB to engage contractors for distributing electricity to the cluster of houses in unauthorized colonies all over Delhi. These contractors were being supplied electricity at single point and the contractors were to further distribute electricity to the cluster of houses in the unauthorized colonies in terms of the agreement. The contract was entered into initially for a period of seven years. The agreement could be terminated by DVB as well as by the respondent like any other contract. The respondent would be liable to face the consequences of the termination of the contract, if by termination the respondent has violated certain terms and conditions of the agreement resulting into loss to the petitioner. Similarly, if the petitioner had terminated the agreement or failed to comply with the agreement, the respondent could claim damages/loss from the petitioner. The contract is of the nature of a service provider where petitioner is the service provider to the respondent. If the respondent is not satisfied by the services being provided by the petitioner, the respondent is always at liberty to terminate the contract. The contract is a pure commercial contract and has to be governed by commercial laws. It is not a statutory contract either under Indian Electricity Act, 1910 or under Delhi Electricity Reforms Act, 2000 or under The Electricity Act, 2003 entered into by State Governments or by the instrumentalities of the State and is not governed by any statutory provisions.
11. Like any other contract this contract is also to be governed by the commercial interest of the parties. If the respondent considers that the arrangement which was made by DVB of Single Point Distribution seeking services of the contractor has outlived its utility and the respondent was in a better position to serve the people of the area, the respondent can terminate the contract and suffer the consequences in terms of agreement between the parties. The Court cannot compel the respondent to continue with an agreement. The respondent, who is a company incorporated for supply and distribution of electricity has a better infrastructure available with it to fulfilll the needs of the electrification of the areas. While the contractors who are either individuals or firms in fact were introduced merely to overcome a problem which erstwhile DVB could not tackle at the time. A contractor cannot be made a permanent feature of the electricity supply system. It is a right and obligation of the respondent to supply electricity in the area for which respondent is a licensee under Delhi Electricity Reforms Act, 2000. If the respondent considers it can provide better services and facilities it can always terminate the contract of the contractors.
12. Even otherwise in order to grant any injunction under Section 9 of the Arbitration Act, the Court can grant such a relief only if an irreparable loss or injury is going to be caused to the party. In the present case, there is no question of irreparable loss or injury since the agreement itself provides that in case of wrongful termination of the agreement either party shall be entitled to the damages. Damages in such case can be determined by the arbitrator to whom the dispute is referred. Even otherwise where the party can be compensated by way of damages, the Court should refrain from issuing interim injunction.
13. I, therefore, find no force in the application. The application is dismissed.