Jharkhand High Court
The Bihar State Electricity Board vs Usha Beltron Ltd. on 5 March, 2001
Equivalent citations: 2001 AIR - JHAR. H. C. R. 148
Author: M.Y. Eqbal
Bench: M.Y. Eqbal
ORDER M.Y. Eqbal, J.
1. This appeal is directed against the order dated 25.9.2000 passed by Subordinate Judge I, Saraikella in Misc. Case No. 2/2000 thereby and whereunder he has allowed the application' filed under Section 9 of the Arbitration and Conciliation Act, 1996 and by temporary injunction restrained the appellant-Board from enforcing the award and further restrained the appellant-Board to disconnect the supply of electricity to the factory premises of the respondent till the disposal of the application filed under Section 34 of the said Act.
2. The relevant facts of the case lie in a narrow compass.
3. The respondent-M/s. Usha Beltron Ltd. is High Tension Consumer of the appellant-Bihar State Electricity Board. In 1996, an inspection in the premises of the petitioner was conducted and it was alleged that the respondent was indulging in theft and misuse of electricity. On the basis of inspection report, a bill was raised on 4.4.1996 for Rs. 11,42,34,683.71 paise. The respondent-M/s. Usha Beltron Ltd. challenged the bill before the Ranchi Bench of the Patna High Court in CWJC No. 1388/96(R). The said writ application was allowed in terms of order dated 10.7.1996 and the bill was set aside with certain direction to the appellant-Board. The Board being aggrieved by the said order, moved the Division Bench by filing appeal being LPA No. 172/96 (R). The Division Bench by judgment dated 28.7.1997 disposed of the appeal holding that the impugned bill was covered under clause 6(b) of the Tariff framed by the Board. However, the Division Bench gave a direction for determination of the question involved, as it was necessary to decide the controversy between the Board and the consumer on the question of methodology adopted by the Board in determining the actual capacity of the electricity by the respondent-consumer. Accordingly, as agreed by the parties, the Division Bench appointed the following persons as the Board of Arbitrators and referred the matter for adjudication :
"(i) Shri B.P. Jeevan Reddy, Retired Judge of the Supreme --Chairman. (ii) Director, National Physical Laboratory, New Delhi. --Member. (iii) Head of the Department of Metallurgical Engineering. IIT, New Delhi. --Member."
4. In the said judgment, a time-limit of six months was fixed for giving the award and it was directed that if any amount is found payable by the consumer under the award, the same would be paid in four monthly equal instalments within the period to be fixed by the Board of Arbitrators. The respondent moved the Supreme Court against the said judgment in SLP (C) No. 15482/97. The said special leave was granted and the appeal was allowed by order dated 15.12.1997. The Supreme Court set aside the judgment of the learned Single Judge and the Division Bench of the High Court insofar as they have decided the issues referring the applicability of Clause 6(b) and (g) of the Tariff and Section 26 of the Indian Electricity Act, 1910. Their Lordships, however, referred the matter to the Board of Arbitrators consisting of following persons for deciding all the issues :--
"(i) Hon'ble Mr. Justice E.P. Jeevan Reddy, (Retd.) --Chairman.
(ii) The Director of National Physical Laboratory or his nominee (who shall be a Senior Scientist). --Member. (iii) A Metallurgist holding the rank of Professor to be nominated by the Head of the Department of Applied Mechanics, IIT, New Delhi. --Member."
5. In terms of the Supreme Court order, the Board of Arbitrators gave their award on 2.5.2000 and in the said award, the respondent-consumer was held responsible for payment of Rs. 6,34,00,000 and it was directed that the said amount shall be paid in four equal monthly instalments of Rs. 1,58,50,000/-. The date of payment of the first instalment was on or before 1.8.2000, the second instalment on or before 1.11.2000, the third instalment on or before 1.2.2001 and the fourth and last instalment on or before 1.5.2001. The Board of Arbitrators also made it clear that if the amount of instalment was not paid on the due date, it will carry interest @ 15% per annum, and in case it was defaulted in paying two consecutive instalments within the period prescribed, it was open to the Board to disconnect the electricity connection and to recover the full amount in accordance with law. The Board of Arbitrators sent the award together with records concerned to the Supreme Court for placing the award before the appropriate Bench and copies of the award were also sent to the respective consumers or the parties. In the meantime, the respondent-M/s. Usha Beltron Ltd. moved the Board of Arbitrators for correction of topographical and calculation error in the award by filing petition. At the same time the respondent also moved one I.A. application in the Supreme Court in disposal of Civil Appeal No. 8738/97 being I.A. No. 2/2000 and, inter alia, prayed that a direction be given for making of an application under Section 34 of the Arbitration & Conciliation Act, 1996 (in short 'Act') for setting aside the award in such Court as the Supreme Court may be found to be appropriate Court having jurisdiction. Further, prayer was made for stay of the operation of the award until disposal of the application. It is also worth to mention here that when the award was received by the Supreme Court, the Registry of the Supreme Court issued notices to the respective parties for filing objection, if any, to the said award. The Supreme Court, after hearing the parties on the I.A. petition and rejoinder filed therein, finally dismissed the said application on 11.8.2000. After disposal of the application by the Supreme Court, the respondent filed a regular application under Section 34 of the Act before the Subordinate Judge. Saraikella for setting aside the award. The said application was registered as Misc. Case No. 2/2000. In the Misc. Case No. 2/2000, the respondent also filed a separate application purported to be under Section 9 of the said Act making a prayer for staying the operation of the said award dated 2.5.2000 and for injunction restraining the Board from disconnecting the supply of electricity to the factory premises of the respondent. The appellant-Board appeared in the said case before the Subordinate Judge, Saraikella and filed rejoinder to the said application under Section 9 of the Act stating, infer alia, that both the applications under Sections 34 and 9 of the Act were not maintainable. It was contended that after publication of the award and dismissal of the I.A. application by the Supreme Court, the respondent cannot be allowed to challenge the award. The Subordinate Judge passed the impugned order and held that both the applications under Sections 34 and 9 of the Act are maintainable and further allowed the application filed under Section 9 of the Act and restrained the appellant-Board to enforce the award and to disconnect the supply of electricity to the factory premises of the respondent till the disposal of the application under Section 34 of the said Act.
6. Mr. Mihir Kumar Jha, learned counsel appearing for the appellant-Electricity Board, assailed the impugned order as being illegal and wholly without jurisdiction. Learned counsel firstly submitted that the Court below has committed grave error of law in holding that the application under Section 34 of the Act is maintainable and further committed serious illegality in staying the operation of the award. Learned counsel submitted that after submission of the award by the Board of Arbitrators to the Supreme Court, the respondent had filed a petition seeking leave and the order of the Supreme Court for filing an application for setting aside the award and the said prayer was rejected by the Supreme Court by dismissing the said application. Learned counsel submitted that after dismissal of the I.A. Petition No. 2/2000 by the Supreme Court, it was not open to the Court below to entertain the application for setting aside the award as it would amount to sitting over the order of the Supreme Court. Learned counsel then submitted that the award given by the Board of Arbitrators has reached its finality for the reason that on the basis of the agreement of both the parties, the matter was referred to the Board of Arbitrators by the Supreme Court with the specific direction that the award that may be given by the Board of Arbitrators, shall be binding of both the parties. Learned counsel further submitted that in no event, the award, which is in the nature of a money decree, could have been stayed by the Court below.
7. On the other hand, Mr. L.K. Bajla, learned counsel appearing for the respondent firstly submitted that the question of jurisdiction has yet to be decided by the Court below as to whether the application under Section 34 of the said Act is maintainable. Learned counsel submitted that in any view of the matter, it is the Civil Court only which has jurisdiction to entertain the application under Section 34 of the Act for setting aside the award. Learned counsel further submitted that the impugned order passed by the Court below is perfectly legal and valid and in accordance with the provisions of Section 9 of the said Act. Learned counsel lastly submitted that this Court cannot and should not interfere with the impugned order, which is an interlocutory order.
8. In order to appreciate and for judging the merit of the contention of the counsel for the parties, it would be appropriate to discuss below the relevant provisions of the Arbitration and Conciliation Act, 1996.
9. The Arbitration and Conciliation Act repeals and replaces the Indian Arbitration Act, 1940, the Foreign Awards (Recognition and Enforcement) Act, 1961 and the Arbitration (Protocol and Convention) Act, 1937. By one stroke the entire existing law of Arbitration has been changed. The Act has been enacted to consolidate and amend the law relating to both domestic and international commercial arbitrations. This Act is different from 1940 Act and the provisions of the Act shall have to be construed independently. In order to get help construing the provisions, the Court has to refer the relevant provisions of the United Nations Commission of International Trade Law (UNCITRAL) Model Law. Chapter II of the Act deals with the provisions relating to the arbitration agreement which consist of Sections 7 to 9. Section 7 speaks about the arbitration agreement. Section 8 provides the power of the Judicial authority in the matter of reference of dispute to arbitration. Section 9 confers power to the Court to pass interim orders before or during arbitration proceeding or at any time after making of the arbitral award but before it is enforced in accordance with Section 36 of the Act. For better appreciation, Section 9 of the Act of 1996 is quoted herein below :
"Interim measures by Court--A party may, before or during arbitral proceedings or at any time after the making of the arbitral award but before it is enforced in accordance with Section 36, apply to a Court-
(i) for the appointment of a guardian for a minor or a person of unsound mind for the purposes of arbitral proceedings; or
(ii) for an interim measure of protection in respect of any of the following matters, namely-
(a) the preservation, interim custody or sale of any goods which are the subject-matter of the arbitration agreement;
(b) securing the amount in dispute in the arbitration;
(c) the detention, preservation or inspection of any property or thing which is the subject-matter of the dispute in arbitration, or as to which any question may arise therein and authorising for any of the afore-said purpose any person to enter upon any land or building in the possession of any party, or unauthorising any samples to be taken or any observation to be made, or experiment to be tried, which may be necessary or expedient for the purpose of obtaining full information or evidence;
(d) interim injunction on the appointment of a receiver;
(e) such other interim measure of protection as may appear to the Court to be just and convenient.
and the Court shall have the same power for making orders as it has for the purpose of, and in relation to, any proceedings before it."
10. Section 9 of the Act corresponds to Article 9 of the UNCITRAL Model Law and also similar to Section 41 read with second schedule of Arbitration Act, 1940. Article 9 of the Model Law reads as under :
"Article 9 : Arbitration agreement and interim measures by Court :
It is not incompatible with an arbitration agreement for a party to request, before or during arbitral proceedings, from a Court an interim measure of protection and for a Court to grant such measure."
11. From bare reading of the afore-said provision, it is manifest that Section 9 of the Act is not identical to Article 9 of the UNCITRAL Model Law but the expression "before or during arbitral proceedings" has been inserted with a view to give the same meaning as that of Article 9 of the Model Law. In the case of Sundram Finance Ltd. v. NEPC India Ltd., AIR 1999 SC 565, the Supreme Court after considering the scope of the new Act has observed as under :--
"The position under the Arbitration Act, 1940 was that a party could commence proceedings in Court by moving an application under Section 20 for appointment of an arbitrator and simultaneously, it could move an application for interim relief under the second schedule read with Section 41(b) of the 1940 Act. The 1996 Act does not contain a provision similar to Section 20 of the 1940 Act. Nor is Section 9 or Section 17 similar to Section 41(c) and the Second Schedule to the 1940 Act. Section 8 of new Act is not pan materia with Section 20 of the 1940 Act. It is only if in an action which is pending before the Court that a party applies that the matter is the subject of an arbitration agreement docs the Court get jurisdiction to refer the parties to arbitration. The said provision does not contemplate, unlike Section 20 of the 1940 Act. A party applying to a Court for appointing an arbitrator when no matter is pending before the Court.
Under the 1996 Act, appointment of arbitrator/s is made as per the provision of Section 11 which does not require the Court to pass a judicial order appointing arbitrator/s. The High Court was, therefore, wrong in referring to these provisions of the 1940 Act while interpreting Section 9 of the new Act."
12. However, law has been settled now that the Court has jurisdiction to entertain application under Section 9 of the Act either before arbitral proceedings or during the arbitral proceedings or after making of the arbitral award but before it is enforced in accordance with Section 36 of the Act.
13. Now, I shall analyse the impugned order passed by Court below under Section 9 of the said Act. By the impugned order, the Court below has allowed the application under Section 9 of the said Act and granted temporary injunction restraining the appellant/opposite party from enforcing the award and also from disconnecting the electricity supply in the factory premises of the respondent till the disposal of Misc. case filed under Section 34 of the said Act.
14. Without expressing any opinion with regard to maintainability of the application under Section 34 of the said Act for setting aside the award, I shall only decide the question whether the grant of temporary injunction by the Court below in purported exereise of power under Section 9 of the said Act is justified. While deciding the question of grant of temporary injunction, the Court below has formulated three questions, namely, (i) whether the applicant has got prima facie case, (ii) whether balance of convenience lies in favour of the appellant, (iii) whether the applicant will suffer irreparable loss if temporary injunction is refused. The Court below is of the opinion that when application under Section 34 of the Act has been admitted for hearing then before the disposal of the application, the Board has got no right to enforce the award. The Court below is further of the view that Section 34 of the Act prohibits the Board to disconnect the line of the respondent till disposal of the Misc. case. According to the Court below, the respondent has, therefore, prima facie case and the balance of convenience lies in its favour and further respondent-applicant will suffer irreparable loss if temporary injunction is refused.
15. Having regard to the facts and circumstances of the case and the orders passed by this Court and the Supreme Court, I am of the opinion that the Court below has taken absolutely wrong approach in deciding the question of prima facie case, of balance of convenience and irreparable injury.
16. As noticed above, in 1996, the respondent challenged the bill raised by the Board for a sum of Rs. 11,42,34,683.71 paise by filing CWJC No. 1388/96(R). The matter was concluded by a Division bench of this Court by judgment dated 28.7.1997 passed in LPA No. 172/96(R). The Division Bench took the view that the matter needs examination by the technical experts and as such, claim was referred with the consent of the parties to the Board of Arbitrators. The respondent being dissatisfied with the judgment, moved the Supreme Court by filing SLP No. 15482 of 1997. However, before the Supreme Court, both the parties have filed a memorandum of understanding for reference of the dispute to arbitration agreeing that if any amount is found due to the Board from the respondent, it should be allowed to be paid in four equal instalments. The Supreme Court accordingly disposed of Civil Appeal and referred the matter to the Board of Directors. The operative portion of the judgment and order passed by the Supreme Court is quoted hereinbelow :
"The Board of Arbitrators will render a reasoned card, which will be final and binding on the parties. The award is to be made within a period of six months from the date of their entering upon the reference. If under the award, any amount is payable by the petitioner/applicant herein to the respondent- Board, the same would be paid in four monthly equal instalments within a period to be fixed by the Board of Arbitrators. Till the matter is finally decided by the Board of Arbitrators, the respondent- Board will not take any coercive measure for the realisation of the amount mentioned in the supplementary bill dated 4.4.1996. We make it clear that we have not gone into the merit of the matter.
The Civil Appeal is dispose of accordingly."
17. In terms of the aforesaid order passed by the Supreme Court, the Board of Arbitrators finally gave their award on 2.5.2000 and held that as against the claim of Rs. 11 crores and odd, the respondent-consumer is liable to pay Rs. 6,34,00,000/-and the same shall be paid in four equal instalments of Rs. 1,58,50,000/- each. The dates of payment of the instalment have already been fixed in the award. The Board of Arbitrators also made it clear that in the event of default in payment of instalments, the said amount will carry interest and it will not be open to the Board to disconnect the electricity connection and recover the full amount.
18. It is, therefore, evident that the parties filed memorandum of understanding before the Supreme Court that whatever amount is found payable by the respondent/consumer to the appellant-Board by the Board of Arbitrators in their award, the same shall be paid in four equal instalments. The Supreme Court also directed that the amount which shall be found due by the Board of Arbitrators shall be binding on the parties and shall be paid by the respondent in four equal instalments.
19. Besides the above, when the Board of Arbitrators submitted their award in the Supreme Court, notices were issued to both the parties by the registry of the Supreme Court and the said notice was received by the respondent. The respondent after receipt of the copy of the award from the Board of Arbitrators filed an application for correction of typographical and calculation error, which was corrected by the Board of Arbitrators. The respondent also filed an Interlocutory application in the disposal of Civil Appeal which was registered as I.A. No. 2/2000. In the said application, the respondent prayed inter alia that a direction be given to the respondent for making application under Section 34 of the Act for setting aside the award in such Court as may be found by the Supreme Court to be the appropriate Court having jurisdiction. Further prayer was made for stay of operation of the award and for grant of temporary injunction. The said application was opposed by the appellant Board and the Supreme Court after hearing the parties finally dismissed the Interlocutory application No. 2/2000 on 11.8.2000. It was only after dismissal of the application by the Supreme Court, the respondent filed application under Section 34 of the Act before the Subordinate Judge, Saraikella for setting aside the award.
20. Taking into consideration all these facts, I have no doubt in my mind that the Court below has committed serious illegality in allowing the application under Section 9 of the Act and passing blanket order of temporary injunction staying the operation of the award and restraining the Board from disconnecting supply of electricity for nonpayment of the instalments fixed under the award. The Court below conveniently overlooked the fact that after the submission of the award by the Board of Arbitrators in the Supreme Court, the respondent moved by filing Interlocutory application making prayer mentioned thereinabove and the said application was dismissed by the Supreme Court. The finding of the Court that because of the pendency of the application under Section 34 of the Act, the balance of convenience lies in favour of the respondent and further because of disconnection of supply of electricity, the factory will be closed and the petitioner will suffer irreparable loss are erroneous in law. Admittedly, the award is as good as money decree and in terms of the award the respondent was liable to pay the amount determined in the award in equal instalments. Taking action by the Board for the recovery of the amount and for disconnection of supply of electricity for nonpayment of the instalments cannot be said to be irreparable injury.
21. The way the Court below has recorded his finding on the question of prima facie case, balance of convenience and irreparable injury, it appears that he has not correctly appreciated the law on this point. Merely because the Board will take steps for non-payment of instalments fixed under the award, it will not amount to irreparable injury. As noticed above, in the matter of grant of injunction the Court has to follow the settled principles of law. The Apex Court while considering the question of grant of temporary injunction in the case of "Dalpat Kumar and Anr. v. Prahlad Singh and Ors., 1992 (1) UJ (SC) 501, has held:
"Therefore, the burden is on the plaintiff by evidence aluandi by affidavit or otherwise that there is "a prima facie case" in his favour which needs adjudication at the trial. The existence of the prima facie right and infraction of the enjoyment of his property or the right is a condition for the grant of temporary injunction. Prima facie case is not to be confused with prima facie title which has to be established, on evidence at the trial. Only prima facie case is a substantial question raised, bona fide, which needs investigation and a decision on merits.
Satisfaction that there is a prima facie case by itself is not sufficient to grant injunction. The Court further has to satisfy that non-interference by the Court would result in "irreparable injury" to the party seeking relief and that there is no other remedy available to the party except one to grant injunction and he needs protection from the consequences of apprehended injury or dispossession. Irreparable injury, however, does not mean that there must be no physical possibility of repairing the injury, but means only that the injury must be a maternal one, namely one that cannot be adequately compensated by way of damages. The third condition also is that "the balance of convenience" must be in favour of granting injunction. The Court while granting or refusing to grant injunction should exercise sound judicial discretion to find the amount of substantial mischief of injury which is likely to be caused to the parties, if the injunction is refused and compare it with that it is likely to be caused to the other side if the injunction is granted. If on weighing competing possibilities or probabilities of likelihood of injury and if the Court considers that pending the suit, the subject matter should be maintained in status quo, an injunction would be issued. Thus the Court has to exercise its sound judicial discretion in granting or refusing the relief of ad interim injunction pending the suit."
22. In the case of Grid Corporation of Orissa Limited v. Indian Charge Chrome Ltd., 1998(1) Arbitration Law Reporter 589, a similar question came for consideration before the Supreme Court. The fact of that case was that the GRIDCO, successor of the Orissa State Electricity Board made a claim against ICCL, for payment of arrears within a certain date failing which it would be compelled to disconnect the power supply. The ICCL filed application before the Regulatory Commission constituted under the Orissa State Electricity Act, 1955 raising dispute with regard to bill amount and its liability to pay it to GRIDCO. Against the bill and against the notice issued by the GRIDCO, the ICCL instead of making payment filed petition under Section 9 of the Arbitration and Conciliation Act, 1996 in the Court of District Judge, Puri. The District Judge granted ex parte injunction restraining the GRIDCO from disconnecting back-up power supply to ICCL. The GRIDCO aggrieved by the said order filed appeal before the Orissa High Court and the High Court stayed the operation of the order of the District Judge. However, the High Court recalled its order and directed to restore the electric connection which was disconnected subject to deposit of Rs. 5.00 crore by ICCL. Aggrieved by the said order, the ICCL filed SLP before the Supreme Court and the Supreme Court confirmed the order of the High Court but directed for payment of Rs. 5.00 crore in two instalments. Again for the subsequent month, there was default in payment of bills by ICCL and notice of disconnection was issued and the matter ultimately came in appeal before the Orissa High Court. The Orissa High Court, however, directed for reference of the matter to the Arbitrator and further directed that the stay of disconnection shall continue. The GRIDCO aggrieved by the said judgment and order passed by the High Court filed appeals before the Supreme Court. The apex Court interfered with the order of stay passed by the Court in purported exercise of power under Section 9 of the Act and held that even if there is financial constrain of ICCL to make payment, that cannot be ground to allow ICCL to use power without any charges. Accordingly. ICCL was directed to make payment of the amount in instalments.
23. In the instant cases as noticed above, the claim of arrears of the Board amounting to Rs. 11 crores and odd, was ultimately referred to the Board of Arbitrators with mutual understanding by the parties that if any amount is found payable by the Board of Arbitrators, the same shall be paid by the respondent in instalments. The Board of Arbitrators gave their award. It was only after the award was given by the Board of Arbitrators and the prayer of the respondent for stay of the operation of the award was refused by the Supreme Court, the petitioner filed application under Section 34 of the Act before the Subordinate Judge. Saraikella. In such circumstances, there is no justification at all to pass blanket order of injunction staying the operation of the award and restraining the Board from disconnecting the supply of electricity in the event the instalment fixed in the award is not paid by the respondent. Notwithstanding the provisions contained in Section 36 of the Act to the effect that the award shall be enforced in the same manner as if it were a decree of the Court after the refusal of application under Section 34 of the Act, the Court can-
not stay the operation of the award by passing a blanket unconditional order of stay.
The impugned order passed by the Court below therefore cannot be sustained in law.
24. This appeal is, therefore, allowed and the impugned order passed by the Court below is set aside. However, there shall be no order as to cost. The Court below shall dispose of the application pending before him under Section 34 of the said Act in accordance with law.
25. Appeal allowed.