Madras High Court
M/S.Opg Energy Pvt. Ltd vs M/S.Gail (India) Limited on 6 December, 2013
Author: V.Ramasubramanian
Bench: V.Ramasubramanian
IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED: 06-12-2013 CORAM THE HON'BLE MR. JUSTICE V.RAMASUBRAMANIAN O.A.Nos.932, 933, 934, 937, 938, 985, 986 and 987 of 2011 and O.A.Nos.7, 8 and 9 of 2012 M/s.OPG Energy Pvt. Ltd., 117, P.S.Sivaswami Salai, St. Ebba's Avenue, Mylapore, Chennai-600 014. .. Applicant in OAs 932 to 934/2011 M/s.Saheli Exports Pvt Ltd., No.25, Sri Madhavan Nair Road, Mahalingapuram, Nungambakkam, Chennai-600 034. .. Applicant in OA 937/2012 M/s.Kaveri Gas Power Limited, 5, Ranganathan Garden, Anna Nagar, Chennai-600 040 .. Applicant in OA 938/2011 M/s.Coromandel Electric Co. Ltd., Represented by its Director, Mr.P.L.Subramanian, No.93, Santhome High Road, Karpagam Avenue, R.A.Puram, Chennai-600 028. ..Applicant in OAs 985 to 987/2011 M/s.Arkay Energy (Rameswaram) Ltd., No.20 (Old No.129), Chamiers Road, Nandanam, Chennai-600 035 represented by its President. .. Applicant in OAs 7 to 9/2012 vs. M/s.GAIL (India) Limited, GAIL Building, No.16, Bhikaji Cama Place, R.K.Puram, Ring Road, New Delhi-110 066. .. Respondent in OAs 932 to 934, 937, 938, 985 to 987/2011 and OAs 7 to 9/2012 O.A.No.932 of 2011 is filed by the applicant for an interim order of injunction restraining the respondent from issuing/raising any debit notes on the applicant for the gas supplied during the period from 1.1.2011 to 15.11.2011 in terms of the Gas Sales and Transmission Agreement (GSTA) dated 24.12.2010 pursuant to the letter dated 29.11.2011 pending the arbitration proceedings. O.A.No.933 of 2011 is filed by the applicant for an interim order of injunction restraining the respondent from issuing/raising invoices for the supply of natural gas to the applicant in terms of (GSTA) dated 24.12.2010 at the Non-APM price of US$4.75 pending the arbitration proceedings. O.A.No.934 of 2011 is filed by the applicant for an interim order of injunction restraining the respondent from issuing/raising any debit notes on the applicant for the gas supplied during the period from 1.7.2005 to 31.12.2010 in terms of the agreement dated 13.10.2000 pursuant to the letter dated 29.11.2011 pending the arbitration proceedings. O.A.No.937 of 2011 is filed by the applicant for an interim order of injunction restraining the respondent from issuing/raising any debit notes on the applicant for the gas supplied during the period from 6.6.2006 to 31.5.2010 in terms of the gas supply contract dated 6.10.2010 pursuant to the letter dated 29.11.2011 pending the arbitration proceedings. O.A.No.938 of 2011 is filed by the applicant for an interim order of injunction restraining the respondent from issuing/raising any debit notes on the applicant for the gas supplied during the period from 6.6.2006 to 31.5.2010 in terms of the gas supply contract dated 12.10.2000 pursuant to the letter 29.11.2011 pending the arbitration proceedings. O.A.No.985 of 2011 is filed by the applicant for an interim order of injunction restraining the respondent from issuing/raising any debit notes on the applicant for the gas supplied during the period from 1.1.2011 to 15.11.2011 in terms of the Gas Sales and Transmission Agreement (GSTA) dated 15.12.2010 pursuant to the letter dated 29.11.2011 pending the arbitration proceedings. O.A.No.986 of 2011 is filed by the applicant for an interim order of injunction restraining the respondent from issuing/raising invoices for the supply of natural gas to the applicant in terms of Gas Sales and Transmission Agreement (GSTA) dated 15.12.2010 at the Non-APM price of US$4.75 pending the arbitration proceedings. O.A.No.987 of 2011 is filed by the applicant for an interim order of injunction restraining the respondent from issuing/raising any debit notes on the applicant for the gas supplied during the period from 1.7.2005 to 31.12.2010 in terms of the Agreement dated 19.1.2000 pursuant to the letter dated 29.11.2011 pending the arbitration proceedings. O.A.No.7 of 2012 is filed by the applicant for an order of interim injunction restraining the respondent from in any manner enforcing, demanding or compelling the payment of the amounts as demanded under debit notes dated 19.12.2011 raised by the respondent pending disposal of the arbitration proceedings. O.A.No.8 of 2012 is filed by the applicant for an order of interim injunction restraining the respondent from claiming through it or authorised by it from, in any manner, discontinuing the supply of agreed quantity of gas to the applicant's power plant pursuant to the agreement dated 24.12.2010 pending disposal of the arbitration proceedings. O.A.No.9 of 2012 is filed by the applicant for an order of interim injunction restraining the respondent herein, its men, agents, servants, from in any manner enforcing, demanding or compelling the payment of the amounts as demanded under debit notes dated 19.12.2011 raised by the respondent pending disposal of the arbitration proceedings. For Applicant in OAs 932 to 934, 937 and 938/2011 : Mr.R.Yashodvardhan, Senior Counsel for Mr.P.Vinoth Kumar. For Applicant in OAs 985 to 987/2011: Mr.P.S.Raman, Senior Counsel for Mr.K.Harishankar. For Applicant in OAs 7 to 9/2012 : Mr.AR.L.Sundaresan, Senior Counsel for Mrs.AL.Ganthimathi. For Respondent in all OAs : Mr.M.Ajmalkhan, Senior Counsel for Mr.J.Sivanandaraj. C O M M O N O R D E R
The applicants, who were allotted a specified quantity of natural gas by the Government of India, Ministry of Petroleum and Natural Gas, to be supplied by the Gas Authority of India Limited, which is a Government of India undertaking, have come up the above applications under Section 9 of the Arbitration and Conciliation Act, 1996, seeking interim orders of injunction restraining Gas Authority of India Limited from raising debit notes for the gas supplied during the period from 06.6.2006 to 31.5.2010, pursuant to the letters issued to each one of them on 29.11.2011, pending disposal of the arbitration proceedings.
2. I have heard M/s.R.Yashod Vardhan, Mr.AR.L.Sundaresan, Mr.P.S.Raman, learned Senior Counsel and Mr.Vinod Kumar, learned counsel appearing for the applicants and Mr.M.Ajmalkhan, learned Senior Counsel for the respondent.
3. Under separate agreements, entered into in the year 2000, the respondent agreed to supply to the applicants, a fixed quantity of gas, as allotted by the Government of India. The period of validity of the agreements was fixed generally as 31.12.2010, though in individual cases, there were some variations. The agreements provided for the extension of the period of contract. Insofar as the price of gas is concerned, Article 10 of the agreements stipulated that up to 31.3.2000, the price as fixed by the Government of India under a Pricing Order dated 18.9.1997 would be adopted. After 31.3.2000, the respondent reserved the right to fix the price as per the directives, instructions or Orders of the Government of India. It was also stated that the price was likely to be market related in accordance with current policy of liberalisation of the Government of India.
4. In other words, (i) the quantity of gas to be supplied to each of the applicants was determined by the Government of India, by individual letters of allotment; and (ii) the price payable by the applicants was to be in accordance with the Pricing Orders issued by the Government of India from time to time. The agreements also contained a clause for resolution of disputes through arbitration.
5. From the time the applicants entered into Gas Supply Contracts with the respondent, till the year 2005, there were no issues. But, on 20.6.2005, the Government of India issued a Pricing Order bearing No.L-12015/5/-4-GP(I), revising the pricing methodology that was in force from 18.9.1997. The decisions communicated by the Pricing Order dated 20.6.2005, which are relevant for the purpose of our present case, are as follows:
" (iii) Power and fertilizer sectors are critical to the economic development of the country and the output price of these sectors is either controlled or regulated by the Central and State Governments, who have to bear subsidy to a large extent for any increase in the output price. The specific end users committed under Court Orders/small scale consumers having allocations upto 0.05 MMSCMD also deserve priority in gas supply. Accordingly, it has been decided in the public interest that all available APM gas would be supplied to only the power and fertilizer sector consumers against their existing allocations along with the specific end users committed under Court orders/small scale consumers having allocations upto 0.05 MMSCMD at the revised price of Rs.3200/MCM. This price would be linked to a calorific value of Rs.10,000 K.cal/cubic.metre. However, the gas price for transport sector (CNG), Agra-Ferozabad small industries and other small scale consumers having allocations upto 0.05 MMSCMD would be progressively increased over the next 3 to 5 years to reflect the market price.
(iv) Consumers other than fertiliser, power and specific end users committed under Court Orders/Small scale consumers having allocations upto 0.05 MMSCMD and getting existing gas supplies through GAIL network, would be supplied natural gas at market related price depending on the producer price being paid to joint venture and private operators at landfall point, subject to a ceiling of ex-Dahaj RLNG (regassified LNG) price of US$3.86/MMBTU for the current year i.e. 2005-06."
6. It may be seen from the relevant portion of the Pricing Order dated 20.6.2005 extracted above, that two different pricing mechanism were adopted. One was termed as APM meaning 'Administered Price Mechanism'. The second was market related price, which depended upon the producer price being paid to joint venture and private operators at landfall point. By virtue of Clause 10 of the Gas Supply Contracts that the parties had entered into, it is obvious that the Pricing Order dated 20.6.2005 was to come into effect.
7. By a letter dated 05.6.2006, the Government of India also sent a communication to the respondent indicating that as per the Pricing Order dated 20.6.2005, revision of APM gas prices was to be carried out for all consumers, other than those in power and fertiliser sectors, in a phased manner over the next 3-5 years. Accordingly, the Government of India increased the price of APM gas supplied to City Gas Distribution Projects and small consumers having allocation up to 0.05 MMSCMD, by 20% over the current APM price of Rs.3,200/MSCM for general consumers and Rs.1,920/MSCM for North-East consumers. The revised prices for other consumers were also indicated in the said letter.
8. Thereafter, the respondent sought a clarification from the Director in the Ministry of Oil, Petroleum and Natural Gas, by a letter dated 12.6.2006. It appears that the respondent had earlier sent a similar letter dated 05.6.2006 for clarification.
9. In response, the Under Secretary to the Government of India sent a reply dated 27.6.2006. The crucial portion of the said reply was as follows:
"APM gas price would be applicable for only those quantities of gas which are used for generating electricity, which is supplied to the grid for distribution to the consumers through the public utilities/licensed distribution companies."
10. Immediately upon receipt of the clarification, the respondent appears to have sent communications to the applicants, seeking a confirmation about generation and distribution of electricity according to the guidelines issued by the Ministry on 10.7.2006. All the applicants appear to have informed the respondent as to how they were generating electricity and supplying the same to the TNEB grid for distribution to the consumers.
11. Thereafter, the Government of India issued another Pricing Order dated 31.5.2010, revising the APM price inclusive of royalty to a particular rate. It was followed by another clarification dated 24.11.2010, wherein it was indicated that the gas is supplied at APM rate only to those categories of customers mentioned in the Ministry's letter dated 20.6.2005 and that supply of APM gas produced by National Oil Companies from the nominated blocks to all other categories will be at non-APM rate decided by the Government.
12. The individual agreements that the applicants had with the respondent, expired, as stated elsewhere, on 31.12.2010. Therefore, the applicants entered into fresh agreements titled as "Gas Sales and Transmission Agreement", in the last week of December 2010. The period of contract stipulated in the fresh agreements, was five years from 01.01.2011 up to 31.12.2015. These agreements contained an indication about the price of gas, under Article 10, as fixed by the Government of India in the Pricing Order dated 31.5.2010. However, Article 10.1 also indicated that the respondent will have a right to fix the gas price at any time in future, as per the Directive, Instruction or Order of the Ministry. It should be pointed out at this stage that the agreements also contained an article which provided for billing at fortnightly intervals and payments thereafter.
13. It appears that after the fresh contracts were entered into by the respondent with the applicants, for the period from 01.01.2011 to 31.12.2005, the Indian Audit and Accounts Department communicated to the Government of India a draft paragraph titled "Undue benefit extended to power purchasers relating to GAIL", in the report of the Comptroller and Auditor General of India. In the draft paragraph, proposed to be included in the report of the Comptroller and Auditor General, the Audit and Accounts Department had pointed out that there were actually four categories of consumers. They were (i) Category A - State Electricity Boards and Government companies generating power for supply to grid for distribution to consumers, (ii) Category B - Private companies generating power and selling to State Boards as IPP, (iii) Category C - Consumers generating electricity for captive consumption without supplying to grid, and (iv) Category D - Consumers generating electricity and supplying to various consumers using wheeling arrangement with State Electricity Boards. The objection of the Audit and Accounts Department was that the respondent charged its customers coming under Category D also at the same rate as the others and that though the respondent sought clarifications from the Ministry way back in June 2006, no clarification had been issued till September 2011. Therefore, in paragraph 12.2 of Report No.3 of 2011-12 of the Comptroller and Auditor General, it was pointed out that the extension of the benefit of APM price to Category-D consumers who were supplying power at commercially agreed rates, resulted in under-recovery of Rs.227.37 Crores from seven consumers during the period from April 2006 to March 2010. This benefit, according to the Comptroller and Auditor General, had increased to Rs.246.16 Crores by March 2011. The audit report also considered the reply submitted by the respondent to the effect that Category-D consumers were also utilising the services of the Electricity Board for wheeling. But, the Comptroller and Auditor General stated that the reply was unconvincing.
14. Upon the receipt of the said draft paragraph from the Audit and Accounts Department, the Government of India sent a communication to the respondent on 07.11.2011, directing the respondent to take action for recovery of dues from the customers. Immediately thereafter, the respondent sent individual communications dated 29.11.2011 to all the applicants, pointing out that APM gas price would be applicable only for the quantity of gas which are used for generating electricity which is supplied to the grid for distribution to the consumers through the public utilities/licensed distribution companies. Therefore, the respondent indicated to the applicants that the price to be charged for the applicants, for the period from 06.6.2006 up to 31.5.2010 was Rs.3,840/1000 SCM and that it would be USD 4.2/MMBTU from 01.6.2010 onwards. Following the said communication, the respondent also raised debit notes.
15. Upon receipt of the debit notes, all the applicants rushed to this Court with the above applications, seeking interim orders of injunction to restrain the respondent either (i) from issuing/raising fresh invoices for the natural gas supplied to them in terms of agreement, or (ii) from enforcing, demanding or compelling the payment of amounts as demanded under the debit notes, or (iii) from discontinuing supply of agreed quantity of gas to their power plants.
16. The above applications came up for ad-interim ex parte orders in the second /third week of December 2011 and this Court granted a limited interim order of injunction only in respect of past supplies. In other words, the injunction granted was to restrain the respondent from raising debit notes in respect of past supplies up to October 2011.
17. Upon being served with copies of the interim orders so passed, the respondent came up with applications seeking interim suspension of the order of injunction. But, those applications were rejected by this Court. Thereafter, the above main applications were taken up for hearing.
18. Before proceeding to consider the rival submissions, I should bring on record the following facts:
(i) that in respect of some of the applicants herein, Hon'ble Mr.Justice G.N.Ray, Retired Judge of the Supreme Court, had already concluded arbitration proceedings, heard the arguments finally and reserved award on 05.8.2013;
(ii) that in respect of few other applicants, the arbitration proceedings are at a final stage; and
(iii) that in respect of few others, arbitration proceedings are under progress.
19. As pointed out earlier, the interim order of protection that the applicants obtained in December 2011 in their favour is only to the effect that the respondent cannot make any demand for an enhanced rate in respect of the past period from 2006 up to October 2011. The applicants have accepted this order. Therefore, with effect from November 2011, all the applicants are admittedly paying the enhanced rate as demanded by the respondent. Consequently, the dispute in these applications has now narrowed down to only one question, namely as to whether the applicants should be continued to be protected till the arbitration proceedings are concluded, from being compelled to pay the revised rates for the period from 2006 to October 2011 or not.
20. Since the applicants are asking for an interim protective order in the nature of an injunction, the principles that govern the grant of an interim order under Order XXXIX, Rule 1, CPC would apply. In Adhunik Steels Ltd. v. Orissa Manganese and Minerals (P) Ltd [2007 (7) SCC 125], the Supreme Court held that while considering an application under Section 9 for injunction, the Court should apply the same principles that govern the grant of interim injunction under Order XXXIX Rules 1 and 2, CPC. Therefore, on this position of law, there is no dispute. Hence, let me now apply the triple test of prima facie case, balance of convenience and irreparable hardship.
21. Drawing my attention to the decision of the Delhi High court in M/s.Sai Regency Power Corporation Pvt Ltd vs. Gail (India) Ltd [OMP No.55 of 2012 decided on 20.1.2012], it is submitted by the learned counsel appearing for the applicants that in respect of identical contracts, the Delhi High Court had granted an interim injunction in so far as the claim for arrears is concerned.
22. It is true that the Delhi High court has granted prohibitory orders in respect of identical claims. But it does not mean that I should not test the ingredients necessary for the grant of an injunction. Interim orders, especially those passed by other High courts, do not even have persuasive value, though they deserve respect and we may draw inspiration from them. Therefore, I would proceed to test them independently.
PRIMA FACIE CASE :
23. On the following facts, there is no dispute (i) that till October 2011, the applicants were paying the price which is called the Administered Price Mechanism rate as fixed by the Government of India, (ii) that the applicants were being granted supplies by the respondent under various Gas Supply Contracts entered into in the year 2010, which expired on 31.12.2010; (iii) that fresh contracts were entered into in December 2010, by the respondent with the applicants for a period of five years with effect from 01.01.2011; and (iv) that it was only after the Comptroller and Auditor General's report and the letter of the Government of India that the respondent started making a demand in November 2011, for an enhanced rate, with retrospective effect from 2006.
24. Based on the above admitted facts, the contentions of the applicants are:
(i) that in respect of contracts executed and concluded on 31.12.2010, a demand for an enhanced price cannot be made after 11 months of the contracts working themselves out;
(ii) that a major portion of the claim of the respondent, is patently barred by limitation;
(iii) that all the applicants are in fact loading the power generated by them, into the grid of the Tamil Nadu Electricity Board for supply to the consumers and they are entitled to APM price;
(iv) that the respondent was fully aware of the total quantity of power generated by the applicants, the quantity supplied to the grid and the manner of distribution to their customers and the respondent did not question the entitlement of the applicants so far to the APM price; and
(v) that therefore, the respondent was totally unjustified in making claim retrospectively for an enhanced rate.
25. However, the reply of the respondent is
(i) that as per the Pricing Order issued by the Government of India on 20.6.2005, it is only the consumers who are in the power and fertiliser sectors, who are entitled to the supply of gas at the APM price, as the output price of their own products are regulated by the Government;
(ii) that when the respondent seeks to rectify a mistake in the pricing adopted, the same cannot be objected to by the applicants; and
(iii) that by virtue of Article 10 of the contract, the applicants have agreed to abide by the Pricing Orders of the Government of India, and that therefore, they cannot now attempt to wriggle out of the contractual obligations.
26. I have carefully considered the rival contentions. All the contracts entered into in the year 2000 by the applicants with the respondent, contained a total of about 19 Articles. Article 1 contained definitions and interpretations, Article 2 stipulated the period of contract, Article 3 contained a clause for extension, Article 4 contained prescriptions regarding delivery of gas, Article 5 contained the stipulations as to quantity and so on and so forth. Article 10 contained the stipulation relating to the price of gas. It reads as follows:
"10.01 Present price of 1000 (One Thousand) Standard Cubic meters of GAS w.e.f. 1.10.1997 is applicable as per Government Pricing Order No.L-12015/3/94-GP dated 18.9.1997 (Annexure III). After 31.3.2000 the SELLER shall have right to fix the price of GAS which may be as per directive, instruction, order, etc. of the Government of India etc which is likely to be market related in accordance with current policy of liberalisation of the Government of India and the BUYER shall pay to the SELLER such price of GAS. Provided further, the price of GAS so fixed is exclusive of Royalty, Taxes, Duties, Service/Transportation (Transmission) charges and all other statutory levies as applicable at present or to be levied in future by the Central or State Government or Municipality or any other local body or bodies payable on purchase of GAS from ONGCL/Other Producer(s) by the SELLER or on sale from SELLER to the BUYER and these shall be borne by the BUYER over and above the aforesaid price."
27. Therefore, it is clear that though the parties agreed as between themselves (a) upon the quantity of gas to be supplied, (b) upon the quality of gas to be supplied, (c) upon the period of supply, and (d) upon the method of measurement and calibration, etc. including billing and payment, the parties did not indicate in the contract itself, the price at which gas was to be supplied. Since the allotment of gas to the applicants was not made by the respondent, but made by the Government of India, the applicants and the respondent agreed that the price of gas supplied, will be determined by the Government of India as per the Pricing Order.
28. What is important to note is that the entire contract does not give an indication as to whether the price payable by the applicants was a subsidised one or the market rate. Article 10 simply stipulated that the rate payable by the applicants would be as per the Government Pricing Order dated 08.9.1997 up to 31.3.2000. After 31.3.2000, the discretion was with the respondent to fix the price, which may be as per the directive, instruction, order etc. of the Government of India and which was likely to be market related in accordance with the policy of liberalisation of the Government of India. Keeping in mind the above provision, let me now take a look at the provisions of the Sale of Goods Act, to which such a contract can be related.
29. Section 9(1) of the Sale of Goods Act, 1930, stipulates that the price in a contract of sale may be fixed by the contract or may be left to be fixed in a manner thereby agreed or may be determined by the course of dealing between the parties. Sub-section (2) states that if the price is not determined in accordance with the previous sub-section, the buyer should pay a reasonable price. What is a reasonable price is a question of fact depending on the circumstances of each particular case.
30. Section 10(1) states that where there is an agreement to sell goods on the terms that the price is to be fixed by the valuation of a third party and such third party cannot or does not make such valuation, the agreement is avoided. But, if part of the goods had been delivered to and appropriated by the buyer, he should pay a reasonable price.
31. Therefore, it is clear that the agreements that the applicants and the respondent entered into, are agreements which could be traced either to Section 9 or to Section 10 of the Act. I do not wish to pronounce in categorical terms as to which Section would apply, as it may prejudice the rights of parties before the Arbitrator, before whom the proceedings are already concluded in some cases.
32. If an agreement to sell certain goods stipulates that the price is to be fixed by a third party, normally, the word of that third party would be final and binding. It is especially so when the parties agree to abide by directives such as Pricing Orders issued by the Government of India. Therefore, prima facie, I see nothing wrong in the respondent making a demand.
33. However, drawing inspiration from the decision of the Apex court in Bhupendra Singh Bhatia vs. State of Madhya Pradesh [2006 (13) SCC 700], it is contended by the learned Senior Counsel for some of the applicants that the price once fixed, can never be altered. In that case, the Supreme Court held that when a sale of any commodity is made, the seller and purchaser both have to know the sale/ purchase price at the time of or before the sale. The Supreme court made a sweeping statement in that case that "the fixation of sale/purchase price subsequent to the transaction, is unknown to the whole world".
34. But unfortunately, this decision of the Supreme Court does not take note of the provisions of the Sale of Goods Act which I have referred to above. Therefore, I would not take this decision as laying down the law on the point with respect to the Sale of Goods Act.
35. Since the impugned action of the respondent is on the basis of an audit objection raised by the Comptroller and Auditor General of India, it is contended by Mr.R.Yashod Vardhan, learned Senior Counsel that the Government Authorities should not act simply on the basis of the reports of the Comptroller and Auditor General. Placing reliance upon the decision in Arun Kumar Agrawal vs. Union of India [2013 (7) SCC 1], the learned Senior counsel contended that unless the reports of the Comptroller and Auditor General are submitted to the President and laid before each Houses of Parliament and adopted, it is not permissible to rely upon those reports.
36. But the above contention loses sight of an important aspect. The fact that Article 10 of the Contract deals with the pricing aspect and that the Pricing Orders issued by the Government of India are to be followed by both parties, are not in dispute. The applicants were given the benefit of supplies at APM rate due to a particular interpretation to the Pricing Orders. The CAG merely pointed out what he thought to be an error in the interpretation of the contract. The government had accepted the same and directed the respondent to raise revised bills for the recovery of the differential amounts. Therefore, it is not a case where CAG report was blindly accepted and a levy made by the respondent. The question as to whether the interpretation given by CAG is correct or not, may be open to adjudication before the Arbitral Tribunal. But the report by itself cannot be rejected outright and the decision of the Supreme court is of no avail to the applicants.
37. Insofar as the question of limitation is concerned, it is true that by the communications dated 29.11.2011, the respondent raised a demand for the first time, for the period from 06.6.2006 up to 31.5.2010 and from 01.6.2010 up to the date of the circular. Therefore, the claim is obviously for a period both within and beyond the normal period of limitation of three years.
38. But, I cannot straight away come to the conclusion that a part of the claim of the respondent is clearly barred by limitation. The reasons are (i) that when the price determined by the third party, namely, the Government of India, is made clear to the respondent, only by the communication dated 17.11.2011, the starting point for the period of limitation may not be 06.6.2006, and (ii) that in any case, the question of limitation is a mixed question of fact and law and hence the Arbitral Tribunal may have to see whether the applicants had a mutual, open, running and current account, which would save them from the plea of limitation or not.
39. The applicants have raised two issues on merits. They are (i) that some of them supplied the entire quantity of electricity generated by them only for consumption by the Tamil Nadu Electricity Board and its customers, and (ii) that though some of them are supplying to their own consumers, the same is done only through the grid of the Tamil Nadu Electricity Board. In other words, some of the applicants have taken a stand that they do not supply electricity generated by them to any consumer other than the Tamil Nadu Electricity Board and its consumers. Some of them have taken a stand that it was never made clear to them as to what the term "consumer" connoted. In the letter of the Government of India dated 27.6.2006, addressed to the respondent, what was mentioned was only the following:
"APM gas price would be applicable only for those quantities of gas which are used for generating electricity which is supplied to the grid for distribution to the consumers through the public utilities/licensed distribution companies".
40. In pursuance of the said letter, the respondent appears to have sought a clarification from the applicants by a letter dated 04.7.2006. The applicants replied to the effect that the gas consumed by them was used for generating electricity that is supplied to the Electricity Board grid for distribution to the consumers. By the term "consumers", the applicants meant their own consumers. According to the applicants, the respondent was aware of this and yet chose to keep quiet. Therefore, they contend that non-APM price is not applicable to them.
41. In addition, the applicants also contend that even the tariff fixed by them, for the supply of electricity to their own consumers is not determined unilaterally by them. The agreed rates have to be approved by the Tamil Nadu Electricity Regulatory Commission. Therefore, the applicants contend that their output price of electricity is regulated by statute and hence, they cannot be charged non-APM price.
42. The applicants are partly right and partly wrong. It is true that the rate per unit of electricity supplied by them to their own consumers is to be approved by the Electricity Regulatory Commission. But, the question is not entirely about this. The original policy of the Government of India, as stipulated in the Pricing Order dated 20.6.2005 was to supply gas at APM rate, to power and fertiliser sectors, whose output price is either controlled or regulated by the Central or State Governments and who are made to bear subsidy to a large extent. Insofar as the applicants are concerned, the output price is not regulated by the Central or State Governments, even though they may be in the power sector. Their output price does not carry any subsidy, unless the distribution is by the Electricity Board itself.
43. More over, the question as to whether and to what extent the applicants supplied gas to the grid of the State Electricity Board for the consumption of consumers of the Electricity Board itself, is a question of evidence. Most of the parties have already let in evidence before the Arbitrator on this aspect. Therefore, today, I cannot proceed on the footing that the entire quantity generated by the applicants was or was not supplied to the Electricity Board for the consumption of the consumers of the Electricity Board itself.
44. But, the point that the present demand is made by the respondent in respect of the sale and supplies concluded under a contract which expired on 31.12.2010, tilts the balance in favour of the applicants, in so far as prima facie case is concerned. The test for determining the existence of a prima facie case in respect of the demand for arrears, is not exactly the same as the test for determining a prima facie case for the supplies to be effected in future. Fortunately, in respect of supplies for the period from November 2011, the applicants have been refused an order of injunction. Therefore, I am now testing the existence of a prima facie case only in relation to the demand for the past period.
45. The demand for the past period, raises several questions. In Transmission Corporation of A.P. Ltd vs. Lanco Kondapalli Power (P) Ltd [2006 (1) SCC 540], the Supreme Court pointed out that while considering a prayer for injunction, the Court should also look into the conduct of the parties apart from the elements of prima facie case, balance of convenience and irreparable injury. If the parties had been acting in a particular manner for a long time in interpreting the terms and conditions of a contract, any decision asking the parties to maintain status quo till the final determination of the lis, cannot be found fault with. Applying this decision, it is seen that upto the issue of the letter dated 29.11.2011, the respondent themselves were satisfied that the applicants are entitled to the supply of gas at APM price. Therefore, the applicants have a prima facie case for the maintenance of status quo at least in respect of the arrears for the past period. Hence, I think the prima facie case is in favour of the applicants, though there are also arguable points in favour of the respondents.
BALANCE OF CONVENIENCE AND IRREPARABLE HARDSHIP :
46. On the question of balance of convenience and irreparable hardship, it is the contention of the applicants (i) that all the applicants have a positive net worth and hence, the respondent will be able to recover any amount, in the event of the arbitration proceedings being decided in their favour; (ii) that the applicants depend 100% upon the supply of gas by the respondent and hence, the enforcement of any award passed in favour of the respondent, is quite easy, since the applicants cannot survive, if the respondent seeks to terminate the contract; (iii) that if the applicants are made to pay a huge amount towards past arrears, at this juncture, their liquidity will be seriously hampered; and (iv) that in any case, the applicants maintain an irrevocable standby Letter of Credit as per Article 11.01 and hence, the recovery of the amounts by the respondent in the event of their success in the arbitration proceedings, is quite easy.
47. In response to the above contentions, it is submitted by Mr.M.Ajmal Khan, learned Senior Counsel for the respondent that in cases of this nature, the balance of convenience should be construed to be in favour of the respondent and that in so far as the financial position is concerned, the respondent stands far ahead of the applicants. The respondent is one of the companies considered to be Navaratnas of the Government of India. Therefore, in the event of the applicants succeeding before the Arbitrators, the applicants can always recover the amounts from the respondent. But, on the contrary, if the respondent succeeds in the arbitration proceedings, it would be difficult for the respondent to recover the amount from the applicants.
48. I have carefully considered the rival submissions. There is no doubt in my mind that even if I reject the prayer for interim relief and the applicants eventually succeed in the arbitration, the applicants can (i) either recover the excess payments made to the respondent (ii) or at least have the supply of gas for the value equivalent of the excess payments made. The financial strength and credibility of the respondent is beyond any pale of doubt.
49. But as rightly contended by the applicants, the rejection of their prayer for interim protection, at least in so far as the past claim is concerned, would result in a financial paralysis of the applicants. After all, the applicants are not wholly responsible for the present state of affairs. The respondent as well as the inaction on the part of the Ministry to issue a clarification at the earliest point of time, has resulted in this situation. Therefore, overall public interest demands that an order crippling several running industries, is to be avoided.
50. In ITC Limited vs. State of Uttar Pradesh [2011 (7) SCC 493], the Supreme Court brought out the distinction between a transfer, pure and simple, governed by the Law of Contracts and the Transfer of Property Act, 1882 and a transfer that is in the domain of public law. If a case falls in the domain of public law, the Court will have to consider two questions before a completed transfer is interfered. The first question is whether the transferee had any role to play, such as fraud, misrepresentation, undue influence, etc. Even in cases where the transferee had acted bona fide and was blameless, saving of the transfer would depend upon the further question whether public interest had suffered or not. Therefore, it is necessary to keep in mind, public interest before an interim order is granted.
51. In the cases on hand, there are 2 elements of public interest at play. One is purely financial and that is in favour of the recovery of money due to a public corporation such as the respondent herein. Another is purely non-financial and that is in preventing the killing of the goose that lay golden eggs periodically to the very same respondent Corporation. Public interest operates both ways in these cases. The applicants generate electricity and distribute the same to various industries. Even if they do so for a profit, several industries that depend on the applicants for electricity and to whom the State Electricity Boards are unable to supply, would face the threat of closure if the applicants are closed down due to a financial crunch, created by the refusal of an interim order. In other words, the grant of an interim order in favour of the applicants would have only a financial impact upon the respondent, which is a public corporation. But the refusal of an interim order would have a spiralling effect both upon the applicants and the industries that depend on them for power. Therefore, the balancing of both should be done, by looking at the consequences that would flow out of an order one way or the other:
(i) If an interim order is granted in favour of the applicants and they succeed in the arbitration, the respondent may have to refund to the applicants, the excess amounts collected during the period from November 2011 upto date (2 years).
(ii) If an interim order is not granted in favour of the applicants, but they succeed in the arbitration, the respondent may have to refund to the applicants, the excess amounts collected during the period from June 2006 onwards upto date (7-1/2 years)
(iii) If an interim order is granted in favour of the applicants, but the respondent succeeds in the arbitration, the applicants would become liable to pay to the respondent, the differential amount for the period from June 2006 to October 2011.
(iv) If an interim order is not granted in favour of the applicants, but the respondent succeeds in the arbitration, no liability to pay would arise on either side, since the applicants would have paid the amounts as demanded.
52. In 2 out of the above 4 alternative scenarios, it is the respondent, which would become liable to make payment to the applicants. In the last scenario, no liability to pay arises on either side. It is only in the 3rd scenario that the applicants would become liable to pay. Therefore, the dice is cast mostly in favour of the applicants even in respect of balance of convenience.
53. In State of Maharashtra vs. Nagpur Distilleries [2006 (5) SCC 112], the Supreme Court reversed the unconditional interim order granted by the Bombay High Court and directed the licensee to pay 50% and to give an undertaking to pay the balance 50% in the event of success in the main petition, so as to balance the equities and afford protection to the interests of both parties. I think the same formulae would balance equities between the parties, in view of the alternatives we have seen above.
54. Relying upon the decision of the Supreme court in Chandi Prasad Uniyal vs. State of Uttarakhand [2012 (3) LLN 533], the learned Senior Counsel for the respondent contended that while dealing with excess payment of public money, which is often described as tax payers' money, the issue of fraud or misrepresentation is not relevant, for the purpose of directing recovery.
55. But the said decision arose out of a demand for recovery of excess money paid to the employees. The above decision deals with a demand made after a final determination of liability. But in the cases of this nature, no final determination is made as yet by the arbitral tribunal. Therefore, the above decision is of no avail to the respondent.
56. Several decisions were also cited with regard to the interim orders of injunction, against the enforcement of bank guarantees. I do not wish to go into those decisions, as they are not of relevance to the situation on hand.
57. As pointed out above, there is a clash of 2 elements of public interest in the cases on hand. Both have to be balanced.
58. According to the learned Senior Counsel for the applicants, public interest in favour of the respondent is also safeguarded by two things. The first is that all the applicants have given revolving standby Letters of Credit, which can be invoked by the respondent in the event of success in the arbitration proceedings. The second is that for the continued existence of the applicants, they have to go only to the respondent for the supply of gas and that since the applicants cannot buy gas from any other source, they are at the mercy of the respondent. Therefore, it is their contention that the claim of the respondent will always stand safe and secured.
59. In so far as the first thing pointed out by the applicants is concerned, it is the contention of the respondent that the revolving standby Letter of Credit covers only the bills outstanding for one fortnight. But, the claim of the respondent is in respect of a period of about 5 years. Therefore, in respect of the applicants, except the applicants in O.A.Nos.937 and 938 of 2011, the amount for which the revolving standby Letter of Credit is given by the applicants, would not cover even 1/10th of the claim. But, it is conceded by Mr.M.Ajmalkhan, learned Senior Counsel for the respondent that in so far as the applicants in O.A.Nos.937 and 938 of 2011 are concerned, the value of the standby Letter of Credit is more than 50% of the total claim.
60. In respect of the second contention raised by the applicants, it is stated by the respondent that for testing the balance of convenience and irreparable injury, the main consideration is as to what will happen if an interim order is refused, but the applicants succeed. Alternatively, the Court should also see what would happen, if an interim order is granted, but the applicants fail in the arbitration proceedings.
61. I have already examined this aspect in an earlier paragraph. In these cases, none of the applicants dispute the fact that they can always recover money from the respondent, in the event of their success before the Arbitral Tribunal. On the contrary, the respondent claims that they will not be able to recover the amount from the applicants, in the event of the respondent succeeding before the Arbitral Tribunal. Therefore, I suggested in the course of arguments that the applicants could at least furnish security to the extent of the claim of the respondent for the past period.
62. But, all the learned Senior Counsel appearing for the applicants, could not agree, According to them, this is not a case where the respondent could satisfy the requirements of Order XXXVIII Rule 5 of the Code of Civil Procedure, so as to have security for their claim. Some of the learned Senior Counsel for the applicants also attempted to draw support from several decisions of this Court and of the Supreme Court to highlight the parameters, on which, a prayer for furnishing security has to be tested.
63. But, I am unable to sustain the objections of the applicants. The principles of Order XXXVIII Rule 5, CPC would apply, if the respondent had come up with applications for attachment before judgment. The respondent has not come up before me with a prayer for attachment. Therefore, I am not obliged to test as to whether the apprehension of the respondent that the applicants would try to do something to delay and defeat the rights of the respondent in the event of a decree being passed against them, is justified or not. In fact, the respondent is not even asking for security. The respondent is actually demanding payment of the amounts claimed in the form of debit notes on the ground that the respondent would repay the excess amount, in the event of the applicants succeeding before the Arbitral Tribunal.
64. Today, it is the applicants who have come up with a prayer to prevent the respondent from making any claim. There are three alternatives open to a court. The first is to grant an unconditional interim prohibitory order. The second alternative is to dismiss the applications outright. The third alternative is to grant a conditional order of injunction that will put the interests of both parties on equal scales. This can be done by asking the applicants to furnish security for the claim relating to the past period. For doing so, I need not apply the principles of Order XXXVIII Rule 5. Imposing conditions for the grant of an interim order of injunction, is not something unknown to law. There is nothing either in the Code of Civil Procedure or in Section 9 of the Arbitration and Conciliation Act that suggests that the imposition of conditions for the grant of an order of interim injunction should satisfy the principles behind Order XXXVIII Rule 5. Therefore, I am of the view that these applications can be allowed, subject to the condition that the applicants furnish security to the extent of the claim of the respondent for the period from June 2006 to October 2011.
65. Accordingly, all these applications are ordered to the following effect :
(i) There will be an interim order of injunction restraining the respondent from enforcing their claim for the difference between the APM price and the non APM price only in respect of the period from June 2006 to October 2011;
(ii) However, the interim injunction as ordered in the preceding clause shall be subject to the condition that the applicants furnish security to the extent of the amount claimed by the respondent for the period mentioned above;
(iii) The applicants shall furnish security to the extent of the said claim, within a period of four weeks from the date of receipt of a copy of this order;
(iv) While furnishing security, the applicants are also entitled to deduct the amount, for which, they have already given revolving standby Letters of Credit. In other words, the amount, for which, the applicants shall furnish security, shall be the amount arrived at after deducting the value of the irrevocable Letters of Credit given by them from the claim amount of the respondent; and
(v) In so far as the future period is concerned, the applicants shall continue to pay as per the earlier orders of this Court dated 23.12.2011, at the rate as charged by the respondent, pending determination of the lis by the Arbitral Tribunal.
There will be no order as to costs.
06-12-2013 Index : Yes. Internet : Yes. Svn/kpl/RS V.RAMASUBRAMANIAN,J Svn/kpl/RS Common Order in O.A.Nos.932, 933, 934, 937, 938, 985, 986 and 987 of 2011 and O.A.Nos.7, 8 and 9 of 2012 06-12-2013