Andhra HC (Pre-Telangana)
Lanco Kondapalli Power (P) Ltd. vs Transmission Corporation Of A.P. Ltd. on 5 October, 2004
Equivalent citations: 2004(6)ALD829, 2004(6)ALT293, 2005(1)ARBLR30(AP)
JUDGMENT T. Meena Kumari, J.
1. The present CMA has been directed aggrieved by the orders of the II Additional Chief Judge, CCC, Hyderabad in LA. No.750 of 2004 in OP No.2996 of 2003 dated 11.8.2004 wherein the request of the appellant to grant ad interim injunction restraining the respondent from re-fixing the capacity of the plant as 334.75 MW x RH factor at the site reference conditions with tolerance limit of + or - 5% has been dismissed.
2. The appellant herein i.e., M/s. Lanco Kondapalli Power Private Limited is the plaintiff and the respondent herein is the defendant i.e., M/s. Transmission Corporation of Andhra Pradesh Limited in the OP.
3. The brief facts that led to the filing of the present CMA are as follows:
It is stated by the appellant that pursuant to the policy of the Government for attracting private sector investments in power sector and in line with the Government policy, the Board invited bids for short gestation power projects and that the appellant has submitted its bid to design, finance, construct, complete, own and operate a liquid fuel based Power Station of 355 MW (ISO) Capacity at Machilipatnam Krishna District and the respondent accepted the bid made by the appellant. Later, at the request of the respondent the appellant changed the location to establish the said project at Kondapalli instead of Machilipatnam. After considerable negotiations, the appellant and the respondent entered into a Power Purchase Agreement on 31.3,1997. The said agreement contains Articles 1 to 14 and Scheduled A to K. Out of those articles, the relevant one for the CMA is Article 14 i.e., Arbitration, which reads thus :
"14.1 Informal dispute resolution :
(a) Each Party shall designate in writing to the other party a representative who shall be authorized to resolve any dispute arising under this Agreement in an equitable manner.
(b) If the designated representatives are unable to resolve a dispute under this Agreement within fifteen (15) days, such dispute shall be referred by such representatives to a Senior Officer designated by the Company and a Senior Officer designated by the Board, respectively, who shall attempt to resolve the dispute within a further period of fifteen (15) days.
(c) The Parties hereto agree to use their best efforts to attempt to resolve all disputes arising hereunder promptly, equitably and in good faith, and further agree to provide each other with reasonable access during normal business hours to any and all non-privileged records, information and data pertaining to any such dispute.
14.2. Arbitration :
(a) in the event that any dispute in not resolved between the Parties pursuant to Article 14.1, then such dispute shall be settled exclusively and finally by arbitration. It is specifically understood and agreed that any dispute that cannot be resolved between the Parties, including any matter relating to the interpretation of this -Agreement, shall be submitted to arbitration irrespective of the magnitude thereof, and the amount in dispute or whether such dispute would otherwise be considered justiciable or ripe for resolution by any Court or Arbitral Tribunal. This agreement and the rights and obligations of the Parties hereunder shall remain in full force and effect pending the award in such arbitration proceedings, which award shall determine whether and when termination of this Agreement if relevant shall become effective.
(b) Each arbitration shall be conducted in accordance with the arbitration rules of the United Nations Commission on International Trade Laws from time to time (the 'Rules) except to the extent the rules conflict with the provisions of this Article 14.2 in which event the provisions of this Article 14.2 shall prevail. Any award rendered pursuant to arbitration hereunder shall be a 'foreign award' within the meaning of the Arbitration and Conciliation Act, 1996 (the 'Act') to the extent consistent with such Act.
(c) to (e) xxx
(f) Any decision or award of an Arbitral Tribunal appointed pursuant to this Article 14.2 shall be final and binding upon the Parties and shall be the sole and exclusive remedy between the Parties regarding any claims, counter claims, issues or accountings presented or plead to the Arbitrators. The parties waive any rights to appeal or any review of such award by any Court or Tribunal of the competent jurisdiction. The parties agree that any arbitration award made may be enforced by the Parties against assets of the relevant Party wherever those assets are located or may be found, and judgment upon any arbitration award may be entered by any Court of competent jurisdiction thereof. The parties expressly submit to the jurisdiction of any such Court.
(g) to (i) xxx 14.3. No arbitration of buyout price :- Notwithstanding the generality of the provisions of Articles 14.1 and 14.2 any determination of the Buyout price described in Schedule G shall be made exclusively by the Independent Appraiser in accordance with Article 12.5 and neither Party shall have the right to cause any such determination to be resolved by arbitration or otherwise."
4. The grievance of the appellant is that the respondent vide its Letter No. CE (Comml and IT)/DE(1PP)/ADE(1PP)F. LANCO/D.No. 180/03 dated 11-12-2003 has issued a legal notice to the appellant towards the installed capacity of the project and the respondent is under presumption that the installed capacity is 355 MW as furnished in the bid adjusted to ambient reference conditions the current installed Capacity will be 351.49 MW (after applying + 5% tolerance limit). The respondent also sought the reply of the petitioner to show-cause as to why the respondent should not fix the capacity of the plant as 334.75 MW with a tolerance limit of plus or minus 5% and also to pay all the future power bills based on the capacity of 334.75 MW besides revising all the previous power purchase bills from inception based on the capacity of 334.75 MW x TH factor including the tolerance limit. As the respondent issued the show-cause notice dated 11-12-2003, the appellant filed OP seeking the following reliefs:
"....... And pending resolution of disputes through the dispute resolution mechanism under Article 14 of the PPA, the Honourable Court may be pleased to grant injunction restraining the respondent from taking any unilateral decision pursuant to the letter dated 1 lth December, 2003 in particularly:
(a) Re-fixing the capacity of the plant, as 334.75 MW x RH factors at the site reference conditions with tolerance limit of+or-5%.
(b) Paying all the future power bills (fixed charges, variable charges, incentive, etc.) based on the capacity of 334.75 MW x RH factor, and as per all other provisions of PPA including tolerance limit.
(c) Revising the Petitioners previous power purchase bills (Fixed charges, variable charges, incentive etc.) from inception based on the capacity of 334.75 MW x RH factor and as per the other provisions of PPA including tolerance limit."
5. The appellant along with the OP also filed LA. No.750 of 2004 seeking the following relief:
"In the facts and circumstances and for the reasons stated above and pending resolution of disputes through the dispute resolution mechanism under Article 14 of the PPA, the Hon'ble Court may be pleased to grant ex parte ad interim injunction restraining the respondent from taking any unilateral decision pursuant to the letter dated 11th December, 2003 in particular: Restraining the respondent from re-fixing the capacity of the plant, as 334.75 MW x RH factor at the site reference conditions with tolerance limit of + or - 5% and xxx"
As seen from the material on record, the Trial Court initially granted interim orders on 20-12-2003.
6. Before the Court below, Exs.A-1 to A-25 have been marked for the appellant and on behalf of the respondent Exs.B-1 to B-4 were marked.
7. Later, the learned II Additional Chief Judge, CCC, Hyderabad by his order dated 11-8-2004 dismissed the LA. Hence, the appellant filed the present CMA.
8. Heard the learned Counsel for the appellant Mr. C. Kodandaram and the learned Senior Counsel for the respondent Mr. T. Ananiha Babu.
9. The main contention urged by the learned Counsel for the appellant is that though the Civil Court has vested with jurisdiction to grant ad interim injunction pending adjudication of dispute by the Arbitral Tribunal under Section 9 of the Arbitration and Conciliation Act, 1996 but the learned Chief Judge without exercising his powers dismissed the same by erroneously holding that the A.P. Electricity Regulatory Commission is the appropriate and competent authority to resolve the dispute. Further, it is contended that the appellant sought the above relief pending resolution of disputes through the dispute resolution mechanism under Article 14 of the Power Purchase Agreement as the respondent is not coming forward for Constitution of the Arbitral Tribunal and hence the balance of convenience lies in favour of the appellant to grant the relief sought by it, otherwise the interest of the appellant would be jeopardized as it has installed the project by spending crores of rupees.
10. As per Section 9 of the Arbitration and Conciliation Act, 1996, the competent Court can grant interim measure of protection. For better appreciating, Section 9 of the Arbitration and Conciliation Act, 1996 is reproduced below:
"Interim measures etc., 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) xxx; or
(ii) For an interim measure of protection in respect of any of the following matters, namely,-
(a) xxx;
(b) xxx;
(c) xxx
(d) xxx
(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."
11. The learned Counsel for the appellant relies on the judgment of the Supreme Court in the case of M/s. Sundaram Finance Limited v. M/s. NEPC India Limited, , in support of his contention that the competent Court can pass an interim orders even before commencement of arbitral proceedings under Section 9 of the Arbitration and Conciliation Act, 1996. in the said judgment, the Supreme Court observed as follows:
"It is true that when an application under Section 9 is filed before the commencement of the arbitral proceedings there has to be manifest intention on the part of the applicant to take recourse to the arbitral proceedings, if at the time when the application under Section 9 is filed, the proceedings have not commenced under Section 21 of the 1996 Act. However for that it would not be necessary that a notice invoking the arbitration clause must be issued to the opposite party before an application under Section 9 can be filed. The Court is not debarred from dealing with an application under Section 9 merely because no notice has been issued under - Section 21 of the 1996 Act."
12. Thus, it is clear that the Courts have the power for making orders as it has for the purpose of and in relation to, any proceedings. In this case, Article 14 of the Power Purchase Agreement between the appellant and the respondent deals with Arbitration. Article 14.2 (a) of the Power Purchase Agreement has specifically stated that in the event that any dispute is not resolved between the parties pursuant to Article 14.1, then such dispute shall be settled exclusively and finally by arbitration. It is also mentioned that any matter relating to the interpretation of the agreement, shall be submitted to arbitration irrespective of the magnitude thereof. It is further averred that the Power Purchase Agreement and the rights and obligations of the Parties hereunder shall remain in full force and effect pending the award in such arbitration proceedings. Hence, the main contention urged by the learned Counsel for the appellant is that the dispute that arose pursuant to the letter of the respondent dated 11-12-2003 has to be adjudicated before the Arbitral Tribunal and that before or during arbitral proceedings, the Court has the power to grant relief by way of interim measure.
13. On the other hand, the learned Senior Counsel submits that under Section 50 of the A.P. Electricity Reform Act, 1998, the jurisdiction of the Civil Court has been ousted and hence the learned Chief Judge has rightly dismissed the LA. filed by the appellant, which needs no interference. Further, the learned Senior Counsel also submits that if the appellant aggrieved by the impugned letter dated 11-12-2003, the appellant has to approach the Electricity Reforms Tribunal but not the Arbitral Tribunal.
14. Section 50 of the A.P. Electricity Reform Act, 1998 reads thus:
"50. Bar of jurisdiction :-No order or proceeding made under this Act or rules or regulations framed under the Act shall be appealable except as provided in the Act and no Civil Court including under the Arbitration and Conciliation Act, 1996 shall have jurisdiction in respect of any matter which the Commission or the Appellate Authority under the Act is empowered by or under, this Act."
15. Hut, it is contended by the learned Counsel for the appellant that the appellant filed W.P. No. 7838 of 2004 seeking writ of prohibition prohibiting the first respondent therein i.e., A.P. Electricity Regulatory Commission from proceeding to adjudicate the dispute between the appellant herein and the second respondent therein i.e., Transmission Corporation of A.P. Limited (the respondent in this CMA) and this Court has granted interim direction directing the first respondent not to proceed with the disputes and the said interim direction is not vacated by this Court and it is governing the field as on today. The said fact of filing writ petition and granting interim direction by this Court is not disputed by the learned Senior Counsel appearing for the respondent. Thus, the bar of jurisdiction of the Civil Court as imposed in Section 50 of the A.P. Electricity Reform Act, 1998 is sub-judiced before this Court in W.P. No.7838 of 2004 and it is pending for adjudication before this Court.
16. On analysis of the above section by keeping in mind that this Court granted interim stay of the operation of the functioning of the Electricity Reforms Tribunal, the inevitable conclusion that has to be drawn is that the order or proceedings made under the Act or Rule or Regulation framed under the A.P. Electricity Reform Act, 1998 shall be appealable except as provided in the Act i.e., agitating the dispute before the A.P. Electricity Regulatory Commission has been suspended. When the functioning of the A.P. Electricity Regulatory Commission has been suspended by virtue of the interim orders granted by this Court in W.P. No.7838 of 2004, it cannot be said that by virtue of Section 50 of the A.P. Electricity Reform Act, 1998 the jurisdiction of the Civil Court or the Arbitral Tribunal has been ousted.
17. When this Court is of the view that the power of the Arbitral Tribunal or the Civil Court has not been ousted, the dispute has to be adjudicated as per the terms of the Power Purchase Agreement dated 31-3-1997. In the said agreement, Article 14 has been incorporated which deals with Arbitration. As per Article 14.2(a) of the Power Purchase Agreement, in the event that any dispute is not resolved between the parties pursuant to Article 14.1, then such dispute shall be settled exclusively and finally by arbitration. The learned Counsel for the appellant further submits that as per Article 14 of the Power Purchase Agreement, the dispute in question has to be placed before the Arbitral Tribunal and the respondent has any dispute with regard to the jurisdiction of the Arbitral Tribunal, the same has to be agitated before the Arbitral Tribunal and the respondent cannot be permitted to say that the Arbitral Tribunal has no jurisdiction without raising such issue before it.
18. Further, the learned Counsel for the appellant submits that it has requested the respondent to appoint its nominee as a member of the Arbitral Tribunal in terms of the Articlel4 of the Power Purchase Agreement while intimating that the appellant has appointed its representative to resolve the disputes in question. As the respondent did not come forward, it filed an Arbitration Application No. 18/2004 under Sections 11, 3 and 4 before this Court for appointment of Arbitrator as the respondent failed to appoint its Arbitrator. Both the learned Counsel did not inform what had happened to that application.
19. The Supreme Court in the case of Hindustan Petroleum Corporation Limited v. M/s. Pinkcity Midway Petroleums, 2003 (5) ALD 26 SC = 2003 (1) Decisions Today (SC) 648, has held that if there is any objection as to the applicability of the arbitration clause to the facts of the case, the same will have to be raised before the concerned Arbitral Tribunal.
20. In this case, the appellant addressed a letter to the respondent on 8-9-2003 vide letter LKPPL:PRW:APTRANSCO :01216 :2003 intimating that the petitioner was forced to invoke the Article 14 of the Power Purchase Agreement as the respondent did not make any efforts to settle the various amounts due and payable. But the respondent on 24-9-2003 requested the appellant not to seek reference under Article 14 and promised to convene a meeting to discuss the pending issues between the parties. Thus, it is discernable from the letter of the respondent dated 24-9-2003 that it is not sure that the issue in question would fall within the jurisdiction of the A.P. Electricity Reforms Tribunal. Further, from the above letter it goes to show that the respondent is under the impression that the issue would be governed by Article 14 of the Power Purchase Agreement.
21. Further, a lot of correspondence was exchanged between the appellant and the respondent. The learned II Additional Chief Judge dealt with the correspondence that was exchanged between the appellant and the respondent at Para 22 as follows:
"The petitioner addressed a letter dated 8.9.2003 to the respondent informing that some disputes have remained unresolved for long period, in spite of constant efforts made by them and furnished the detailed particulars with regard to unresolved issues i.e., with regard to non-payment of capacity charges by the respondent, breach of various provisions of P.P.A. by the respondent and other issues which were annexed to the said letter. Pursuant to ExA-4, the respondent replied dated 24-9-2003 under Ex.A-21, requested that not to seek reference to arbitration for the resolution of the disputes until final settlement. The petitioner addressed a letter dated 14-10-2003 to the respondent calling upon to designate its representative for mutual negotiations to facilitate resolution of the disputes as per Article 14.1 of the PPA. By virtue of letter dated 20-2-2004, covered under Ex.A-16, the petitioner calls upon the respondent to name and notify its Arbitrator within 30 days in order to resolve the dispute through resolution mechanism as laid down in Article 14.1 of PPA. As per Ex.A-5, dated 10-12-2003, it is apparent on the face of the record that the respondent appointed Sri Pathanjali Rao, Chief General Manager, to act on behalf of the A.P. Transco, to resolve the pending issues, referred to in the arbitration notice, as per the Article 14.1 of the PPA. The respondent informed to the petitioner by addressing a letter dated 10-12-2003 covered under Ex.A-5 that the respondent nominated Sri Pathanjali Rao, Chief General Manager to act on its behalf to resolve the pending issues referred in the arbitration notice. Thereafter the petitioner addressed a letter dated 24-12-2003 to Sri Patanjali Rao to inform the date, time and place of his convenience for discussion to resolve the issues under Article 14.1 of PPA. Again the petitioner addressed a letter dated 31-1-2004 to the said Pathanjali Rao expressing that so far, it has not received any communication and once again requested him to communicate the date, time and place to have discussions to resolve the said issues, covered under Ex.A-19."
From the above, it goes to show that a lot of correspondence was exchanged between the appellant and the respondent herein to act as per Article 14.1 of the Power Purchase Agreement.
22. Further, it is to be seen that the A.P. Electricity Reform Act, 1998 came into force with effect from 1-2-1999. Section 3 of the said Act deals with establishment and Constitution of the Commission. Though the said Act came into force on 1-2-1999, the respondent did not inform or invite the appellant herein drawing its intention to amend the Power Purchase Agreement which was entered on 31-3-1997 with regard to Article 14 (Arbitration clause) accordingly. Moreover, it is not clear whether the said Act will operate retrospectively or not. Any how, all these questions have to be gone into the writ petition filed by the appellant herein and hence this Court is not expressing any opinion on that aspect.
23. The learned Senior Counsel Sri T. Anantha Bahu for the respondent contends that the Supreme Court in the case West Bengal Electricity Regulatory Commission v. C.E.S.C Limited, , while dealing with the powers of the West Bengal Regulajtory Commission has held that it is the Commission of West Bengal which is the sole authority to determine the tariff, of course as per the procedure in the said Act. But, in this case, as to whether the A.P. State Electricity Regulatory Commission has the power to go into the dispute in question is the subject- matter before this Court in W.P. No.7838 of 2004 and this Court granted the interim direction in the said writ petition prohibiting the Regulatory Commission. Hence, the decision relied upon by the learned Senior Counsel is not applicable to the facts of the present case.
24. The learned Counsel for the appellant submits that the learned II Additioanl Chief Judge has gone into the merits of the other aspects which are not the subject-matter before it. Further, the learned II Additional Chief Judge has given his categorical findings when the issue 'whether the A.P. Electricity Regulatory Commission has the jurisdiction or not to decide the matter in question' is pending before this Court in W.P.No.7838 of 2004 and hence the learned Counsel for the appellant requested this Court to declare the findings of the learned Chief Judge that the Regulatory Commission is the appropriate and competent authority to resolve the dispute are unwarranted.
25. The learned II Additional Chief Judge in his order with regard to the powers of the A.P. Electricity Regulatory Commission observed as follows:
"When once the petitioner demonstrated and proved its installed capacity, after Ex.A-3, I am of the considered view, in view of Section 37(1), the disputes raised by the respondent, covered under Ex.A-6 can be resolved now also through the Regulatory Commission, on the ground that it is only APERC, which is an expert technical body, which is more competent to decide the technical disputes and not by the arbitrators as sought by the petitioner.
xxx Now when once the dispute herein between the petitioner and the respondent is pending before the A.P. Electricity Regulatory Commission, I am of the considered view that the Regulatory Commission is appropriate and competent authority to resolve the dispute. On the other hand, the Regulatory Commission has its expert technical body, which is more competent to resolve the technical disputes rather than the arbitrators for re-fixing the capacity of the plant, if the allegations of the respondent are true as covered under Ex.A-6."
26. As observed above, the appellant herein instituted W.P. No.7838 of 2004 questioning the validity of establishment of A.P. Electricity Regulatory Commission under the A.P. Electricity Reform Act, 1998 and this Court granted interim stay in the said writ petition and hence the said matter is sub-judiced before this Court. When the constitution of the A.P. Electricity Regulatory Commission is sub-judiced before this Court, the findings of the learned II Additional Chief Judge that the Regulatory Commission is the appropriate and competent authority to resolve the dispute and also held that the Regulatory Commission has its expert technical body which is more competent to resolve the technical dispute rather than the Arbitrators are unwarranted and it has given its findings beyond the relief sought in the O.P. The above findings would amount to deciding the issue before the A.P. Electricity Reforms Commission. Under the above circumstances, we find force in the contentions of the learned Counsel for the appellant that the learned II Additional Chief Judge has granted the relief beyond the scope of the O.P. and hence those findings, in our considered view, are liable to be set aside.
27. Though the learned Counsel for the appellant has placed reliance on several decisions, we are not inclined to go into the same since if any opinion is expressed by us it would have the effect on the findings of the writ petition and hence we are constrained not to express any opinion on the decisions relied on by the learned Counsel for the appellant.
28. It is to be seen that by letter dated 8-11-2001, a test for gross generation capacity was witnessed by the respondent along with their external consultant and it was proved that the installed capacity was 368.144 MW as per the terms of the Power Purchase Agreement and that the respondent has been paying the amount for more than two years from the date of initial testing on 8-11-2001 and at this point of time, the respondent cannot say that it has paid an excess amount of Rs.35 crores. However, we made it clear that the above observation is made only to decide as to whether the appellant is entitled to have the interim direction as prayed for in the LA. Since the respondent is paying the amount for the last two years as per the contract and considering the fact that the matter has to be decided finally in the writ petition as to whether the A.P. Electricity Reforms Commission has the jurisdiction or not, and considering the fact that the appellant has been generating the power and supplying the same to the respondent as per the terms of the Power Purchase Agreement, the balance of convenience lies in favour of the appellant to have the interim injunction as sought for in the LA. and accordingly the CMA is allowed and the order of the learned II Additional Chief Judge, CCC, Hyderabad in I.A. No.750 of 2004 in O.P. No.2996 of 2003 dated 11-8-2004 is set aside. Further, the respondent is hereby restrained from re-fixing the capacity of the plant as 334.75 MW x RH factor at the site till the disposal of the O.P.
29. As a matter of caution, it is again re-iterated that the observations made herein are only meant for the disposal of the CMA.
30. With the above observations, this CMA is allowed. No costs.