Holding

The High Court exceeded its jurisdiction; the Section 11 application was premature, and the appointment of an arbitrator was quashed.

Summary

GRID Corporation of Orissa Ltd. (GRIDCO) succeeded the Orissa State Electricity Board and sued Indian Charge Chrome Ltd. (ICCL) for non‑payment of electricity bills arising from ICCL's captive power plant supplying power to the board. Multiple proceedings were instituted: a reference before the Orissa Electricity Reform Act Regulatory Commission, injunction applications in district courts, and a stay order by the Orissa High Court which also entertained ICCL's application under Section 11 of the Arbitration & Conciliation Act and appointed an arbitrator. The Supreme Court held that the High Court exceeded its jurisdiction because the Regulatory Commission had not yet failed to arbitrate; the application under Section 11 was premature. The Court also clarified that ICCL was not a licensee under the Electricity Act, 1910 or the Reform Act, but the dispute was still arbitrable under Section 37(1) read with Section 33 of the Reform Act. Consequently, the High Court’s order appointing an arbitrator was set aside, ICCL was directed to pay arrears of Rs 39.273 crore in seven instalments, and the reference before the Regulatory Commission was revived.

Issues considered

Whether the Orissa High Court had jurisdiction to entertain ICCL's application under Section 11 of the Arbitration & Conciliation Act when the Regulatory Commission had not failed to arbitrate.
Whether ICCL qualifies as a licensee under the Electricity Act, 1910 and the Orissa Electricity Reform Act, 1995.
Whether the dispute between GRIDCO and ICCL is arbitrable under Section 37(1) of the Reform Act and Section 33 thereof.
Whether an injunction restraining disconnection of power supply can be granted without imposing conditions for payment of arrears.
Appropriate interim relief and payment schedule for the outstanding electricity dues.

Legislation cited

Arbitration & Conciliation Act, 1996s. 11, s. 9
Code of Civil Procedure, 1908s. Order 39 Rules 1&2
Electricity Act, 1910s. 24, s. 2(h)
Orissa Electricity Reform Act, 1995s. 14(1), s. 2(e), s. 2(f), s. 33, s. 37(1)

Subjects

arbitrationelectricityregulatory commissionlicenseearrearsinjunctionSection 11Section 37Orissa Electricity Reform ActElectricity Act 1910captive power plantdisconnection

Judgment

GRID CORPORATION OF ORI SSA LIMITED A
v.
INDIAN CHARGE CHROME LIMITED

MAY 13, 1998

[G.T. NANA VA Tl AND S.P. KURDUKAR, JJ.] B

Arbitration & Conciliation Act, 1996-Section I I-Maintainability of
Application under-Proceedings before Regulatory Commission under Orissa
Electricity Reform Act, 1995-0ne of the parties later applying under Section C
11 of the Arbitration Act before the High Court-Proceeding before the
Regulatory Commission adjourned by it on an application filed by the party
approaching High Court under Section 11 of the Arbitration Act-High
Court on erroneous assumption that Regulatory Commission has failed to
arbitrate under Section 37(1) of the Reform Act, entertained the application
under Section I I-Held, application under Section 11 was premature and D
High Court exceeded its jurisdiction in entertaining the same-Orissa
Electricity Reform Act, 1995, Section 37(1).

Orissa Electricity Reform Act, 1995-Sections 37(1), 33, 2(e) and (j)
and 14-Arbitrability of dispute-Licensee-Respondent was authorised!
engaged in supplying electricity through its captive power plant to Electricity E
Board and later to appellant, its successor-No formal licence issued to
respondent under the Electricity Act or under the Reform Act-Held, High
court erred in taking the view that the respondent was licensee under the
Section 2(h) of Electricity Act and continued to be the same even after
coming into force of the Reform Act-Hence the dispute was arbitrable under F
Section37(1) read with Section 33 of the Reform Act-Electricity Act, 1910,
Section 2(h).

Electricity Act, 1910-Section 24-Notice for payment of arrears of
electricity bill or else power supply would be disconnected-Application for
injunction-Held, injunction orders could be passed only if prima facie case G
existed and balance of convenience in favour of the party-Financial
constraint cannot be a ground to allow the party to use power without
; charges-However, instalments fixed for payment of undisputed outstanding
arrears-Arbitration & Conciliation Act, 1996, Section 9-Civil Procedure
Code, 1908, Order 39, Rules 1& 2. H
375
376 SUPREME COURT REPORTS [1998] 3 S.C.R.

A Respondent set up a Captive Power Plant in 1989 after due permission
from the state for supplying power to its sister concerns IMFA and PPL and
surplus power to State Electricity Board (OSEB) and accordingly an
agreement was signed between the respondent and the OSEB. This
arrangement continued until a MOU of 1994 followed by an agreement of
1995 signed between the respondent and OSEB. Under the MOU of 1994 the
B power supplied by the respondent to OSEB was charged at 77 paise per unit
and a wheeling charge@ 15% Appellant became the successor of OSEB in
1996. Appellant thereafter called upon respondent to pay outstanding dues
for the pehod December 1994 to December 1996 amounting to Rs. 24.8281
crores. DJring this period the OSEB and thereafter appellant had been
C wheeling/supplying power to respondent.
Respondent filed an application before the Regulatory Commission in
February 1997 constituted under the Orissa Electricity Reform Act raising
a dispute as regard bill amounts and its liability to pay to appellant In April
1997 appellant informed respondent that unless the arrears are paid, they
D would be compelled to discontinue the power supply in accordance with law.
When no payment was, made the appellant issued another notice under
Section 24(1) of the Electricity Act calling upon the respondent to pay the
arrears within seven days or else face disconnection. The respondent on the
contrary moved a petition under Section 9 of the Arbitration & Conciliation
Act iii the Court of District Judge for relief of injunction which was granted
E by it ex-parte. Appellant thereafter filed an appeal before the High Court
which stayed the operation of the order of the District Judge. However the
High Court recalled its earlier Order and directed the appellant to restore
the supply which was disconnected subject to the condition that 5 crores
would be deposited out of the total areas. Aggrieved by that order of the High
F Court, an SLP was filed before this Court which confirmed the order of the
· High Court but granted facility to make the payment in two instalments.

In the meantime the Regulatory Commission asked respondent to
clarify as to how its petition could be treated as reference under Section
37(1) of the Reform Act since it was not a licensee under the said Act.
G Respondent filed an application to treat them a licencee under the Reform
Act, which was objected by the appellant.

After the payment of Rs. 5 crores pursuant to the orders of this Court,
the respondent again defaulted in making payments of further bills and
again a disconnection notice was issued by the appellant. The respondent
H again challenged the said notice before the Addi. District Judge, which
GRID CORPN. OF ORISSA LTD. v. INDIAN CHARGE CHROME LTD. 377
granted interim order staying the notice without any condition. Respondent A
also moved an application before the High Court under Section 11 of the
Arbitration & Conciliation Act for appointment of an arbitrator. In the
meantime, District Judge confirmed the two earlier order passed by it
directing the appellant not to disconnect the supply.

Aggrieved by these orders, the appellant filed appeal before the High B
Court. the High Court clubbed the appeals of the appellant and the application
of respondent for appointment of arbitrator. The High Court held that there
\ was a dispute between respondent and appellant which was arbitrable falling
within the jurisdiction of Regulatory Commission under Section 37 of the
Reform Act and also arbitrable under Section 3 read with schedule of the C
Electricity Act. The High Court further held that as the Regulatory
Commission failed to arbitrate, it nominated a sole arbitrator. Hence this
appeal

Allowing the appeal, this Court
D
HELD : I. The High Court has exceeded its jurisdiction while
entertaining the application of the respondent under Section 11 of the
Arbitration & Conciliation Act. The High Court erroneously assumed that
the Regulatory Commission had failed to arbitrate under Section 37(1) of
the Orissa Electricity Reform Act. This finding is factually incorrect because
by why of an application, respondent asked the Regulatory Commission to E
adjourn the proceedings pending before it on the ground that it held filed an
application under Section 11 of the Arbitration Act in the High Court. In
view of this application the Regulatory Commission did not proceed in the
matter. If this be so the High Court was wrong in holding that there was
failure on the part of Regulatory Commission to arbitrate and consequently F
the application filed by respondent under Section II of Arbitration Act is
maintainable. The application made by respondent was premature and the
High Court could not have entertafned the same and granted desired relief
to respondent. [383-E-H]

2. It is not seriously disputed that respondent after a long drawn G
correspondence with the Orissa Government had received no objection to put
up the Captive Power plant to generate power. Accordingly in 1989 the
Captive Power Plant started generating power which was supplied to the
OSEB. This arrangement continued till 1994 when MOU and agreement
were entered into between respondent and OSEB. The appellant being a
successor of OSEB, naturally the MOU of 1994 and agreement of 1995 will H
y
378 SUPREME COURT REPORTS [1998] 3 S.C.R.

A be binding upon the appellant in the absence of any material to the contrary.
It is not the contention of the appellant that respondent did not supply any
power at all during the period for which the bills were raised on respondent.
Despite this factual position it appears that no formal licence was issued
under Section 2(h) of the Indian Electricity Act or under the Orissa. P,lectricity ..__
Reform Act. It cannot be ignored that the investment of respondent in putting '
B up a Captive Power Plant is running into few hundred crores. From the facts
and in view of Section 14(1) of the Reform Act it is quite clear that respondent
was/is authorised and engaged in supplying the electricity to OSEB and
thereafter to appellant and respondent could be arbitrable under Section ./
37(1) read with Section 33 of the Reform Act. The specious claim pressed
c on behalf of respondent cannot be accepted at this interlocutory stage. It is
not denied by respondent that back up power was available to its sister
concern !MFA and PPL and the manufacturing process was continuing. At
this interlocutory stage what the Courts are required to bear in mind is as
to whether a prima facie case for recovery of arrears of energy charge' is
made out and on whose side the balance of convenience lies. In the facts and
D circumstances of the case whether interim order should be passed by
imposing certain conditions or without condition. The net result of the
,. •
impugned order is that the appellant is required to maintain back up power
to the constituents of respondent but for such supply latter was not required
to make any payment for power consumed. It also needs mentioned that under
E the MOU of 1994 and the agreement of 1995 respondent is required to pay
for consumption of energy @Rs. 2.30 per unit which is far less then the
rate at which power is supplied to other commercial units. It is true that
respondent when supplies power to appellant the latter pays at the rate of 77
paise per unit to former. [384-D-E; 386-D-G)

F 3. As regard payment of the amount as reflected on the basis of
monthly bills payable to the appellant by respondent, viz. Rs 46.193 crores
less 15% wheeling charges, the fair and proper order to meet the ends of
justice at this interim stage would be to direct respondent to pay Rs. 39.273
crores in seven equal instalment of Rs. 5 crores payable on or before 10th
of each month to appellant and the 8th instalment would be for the balance
G amount. The Regulatory Commission while making the award, will pass
appropriate orders as regards interest on the amount if found refundable to
respondent or recoverable by appellant on there respective claims in •
accordance with law. In the event of any two default, facility of payment by -'
instalment would stand vacated, disconnection notices will revive and appellant
H will be at liberty to take such steps as permissible in law. As regard the
GRID CORP. OF ORIS.LTD. v. IND. CHARGE C. LTD. [S.P. KURDUKAR, J.] 379

recurring charges if respondent wants to use power it will have to make A
payment of such bills as and when served upon them. Re~pondent may raise
a dispute before the Regulatory Commission. If there beany occasion to
consider such application the Regulatory Commission will pass interim
orders in accordance with law. These calculation and directions are without
prejudice to the rights and contentions of the parties. [387-D-H)
B
CIVIL APPELLATE JURISDICTION : Civil Appeal Nos. 2686-88of1998.

\. From the Judgment and Order dated 10.2.98 of the Orissa High Court
in M.A.No 599-600 and M.J.C.No. 229of1997.

F.S. Nariman, G.L. Sanghi, M.G. Ramachandran, N.C. Panigrahi and Raj C
Kumar Mehta for the Appellant.

K.K. Venugopal, Ms. Indra Jai Singh, Ms. Anuradha Dutt and Ms. Vijay
Lakshmi Memon for the Respondent.

The Judgment of the Court was delivered by D

S.P. KURDUKAR, J. Leave granted.

(2) These appeals are directed against a common Judgment and order
"~ted I 0.2.98 passed by the Learned Chief Justice of Orissa High Court,
Cuttack in Miscellaneous Appeal Nos. 599/97, 600/97 and MJC No. 229/97. All E
these appeals are being disposed of by this Judgment.

The brief facts leading to the present controversy may be summarised
as under:-

(3) The GRID Corporation ofOrissa Ltd., (for short 'the GRIDCO') is the F
appellant in all these appeals whereas MIS Indian charge Chrome ltd., (for
short 'ICCL') is the respondent. GRIDCO was the appellant in Miscellaneous
Appeal Nos. 599/97-600/97 whereas !CCL was the petitioner in MJC No. 229/
97 before the Orissa High Court.

(4) The GRIDCO became the successor of the Orissa State Electricity G
Board (hereinafter referred to as 'OSEB') w.e.f. 1.4.1996 and was engaged in
the business of transmission, distribution and supply of electricity to various
consumers in the State of Orissa. Indian metals and Ferro Alloys Company
(for short '!MFA') is a sister concern of !CCL. !CCL sometime in 1984
corresponded with the Government of Orissa seeking permission to generate H
y
380 SUPREME COURT REPORTS [1998] 3 S.C.R.

A power. Accordingly after completing the formalities ICCL sometimes in 1989
set up the Captive Power Plant to generate power in the State of Orissa at
Choudwar. Power generated at Choudwar was to be wheeled to The Indian
Metals and Ferro Alloys Company (!MFA) at Therubali a sister concern of
!CCL and PPL and the surplus power was to be sold to OSEB. For the
B purposes of administrative convenience !CCL was incorporated. Accordingly,
an agreement dated February 14, 1989 was entered into between OSEB and
!CCL and under the said agreement the power generated by !CCL at Choudwar

•·•
was fed to the GRID of OSEB for further transmission to the Charge Chrome
Manufacturing Plant of IMFA at Therubali. The arrangement between OSEB
and !CCL continued until a Memorandum of Understanding dated 15.11.1994
C was arrived at and signed by !CCL and OSEB and thereafter followed by an
agreement dated 4.3.1995 w.e.f. 1.12.94. Under this MOU of 1994 power supplied
by !CCL to OSEB was charged at 77 paise per unit; wheeling of power by
OSEB (from !CCL) was charged@ J 5%, (known as wheeling charges). !CCL
was permitted to draw power from OSEB for supply to PPL/IMFA/PPT on
payment of Rs. 2.31 per unit (back- up power); !CCL guaranteed supply of
D power to OSEB at least 10 MW per day. Although this agreement was valid
for six months, however the exchange of power on both sides continued even
thereafter. OSEB used to raise the monthly bills as per the readings recorded
on TOD meters with 30 minutes' recording time. GRIDCO who became the
successor of OSEB w.e.f. 1.4.96, called upon !CCL to pay outstanding dues
E for the period December, 1994 to December, J996 amounting to Rs. 24.8281
crores. !CCL failed to make the payment. During this period the OSEB and
thereafter GRIDCO had been wheeling/supplying electricity to !CCL in terms
ofMOU dated 15.11.1994.

(5) On 25.2.1997 !CCL filed an application before the Regulatory
F Commission constituted under the Orissa Electricity Reform Act, 1955 (for
Short Reform Act') raising a dispute as regards bill amounts and its liability
to pay to GRIDCO. On 7.4. J997 GRIDCO informed !CCL that unless the arrears
of Rs. 24.8281 crore are paid on or before 22.4.97, it will be compelled to
discontinue the power supply in accordance with law. On 8.4.97 !CCL filed
G another petition before Regulatory Commission alleging that the claim of the
GRIDCO for the arrears for the period from December, 1994 to December, 1996
is untenable inasmuch as the same is contrary to the MOU and the agreement.
!CCL then alleged that because of variation of frequency in the GRID, the
power generated by its Captive Power Plant could not be inducted into the
GRID. It was an obligation of GRIDCO to check variation of frequency in the
H GRID and because of its negligence its captive power plant got damaged. The
GRID CORP. OF ORIS. LTD. v. IND. CHARGE C. LTD. [S.P. KURDUKAR, J.] 381

billing done by GRIDCO on the basis of half hourly reading was totally A
unjustified. The GRIDCO in this reply denied the allegations and stated that
variations of frequency in the GRID was maintained by using proper electric
system. The frequency was maintained as prescribed under the Indian
Electricity Rules. The power was wheeled according to the MOU dated
15.11.1994 and the agreement dated 4.3.1995. As regards the maintenance of
frequency it was stated that it depends upon all operators in the GIRD Which B
is coordinated by the Eastern Regional Load Despatch Centre. The GRIDCO
used to receive power from various sources. The claim set up by ICCu as
regards the damage to their Captive Power Plant is untenable. As regards the
billing it was stated that it is established practice for all heavy industrial
consumers that though billing is done on a monthly basis, but for billing C
purposes exchange of energy/power supplied to the consumers is measured
on the basis of consumption for each 30 minutes block separately. To facilitate
this TOD meters are installed atthe supply point. Clause 16(2) of the Agreement
dated 4.3.95 provides for such billing.

(6) Despite the notice no payment was made by JCCL and therefore, D
vide notice dated 24.4.97 under Section 24(1) of the Indian Electricity ACT the
ICCL was called upon to pay the arrears within seven days, in default power
supply will be discontinued.

(7) The JCCL did not make any payment. But on the contrary on 30.4.97
1CCL filed a petition under Section 9 of the Arbitration and Conciliation Act, E
1996 (for short 'Arbitration Act') in the Court of District Judge, Puri which
was numbered as Arbitration Case No. 195/97 for relief of injunction. The
District Judge on 30.4.97 granted ex-parte injunction restraining GRIDCO from
disconnecting back up power supply to !CCL, IMFA and PPL. GRIDCO
aggrieved by this order filed appeal before the Orissa High Court on 15.5.97. F
The High Court Stayed the operation of the order of the District Judge dated
30.4.97. on 16.5.97 !CCL appeared before the High Court and prayed for recall
of the order of stay dated 15.5.97. The High Court recalled its order and
directed to restore the electric supply which was disconnected, subject to
deposit of Rs.5 crores by ICCL as against the arrears of Rs. 24.8281 crores. G
Aggrieved by this order dated 16.5.1997 JCCL filed SLP in this Court which
came to be disposed of on 27.5.97 confirming the direction of payment of Rs.
5 crore but, however, this Court granted facility to make payment in two
instalments. As regards the recurring charges the Court observed as under:-

"We are not passing any order with regard to recurring charges. The H
382 SUPREME COURT REPORTS [I 998] 3 S.C.R.

A matter is left open. The appeals are disposed of accordingly''.

(8) In the meantime the Regulatory Commission on 21.5.97 asked !CCL
to clarify as to how its petition could be treated as Reference under Section
37(1) of the Reform Act since it is not a licensee under the said Act. On 2.6.97
!CCL filed another application before the Regulatory Commission stating that
B the same may be treated as a Reference under Section 37(1) of the Reform Act.
On 9.6.97 GRIDCO filed its reply and took a preliminary objection to the
maintainability of the application for Reference under Section 37(1) of the
Reform Act. The Regulatory Commission adjourned the matter to 19.7.97 for
hearing on the question of maintainability.
c (9) On payment of rupees five crores by !CCL in pursuance of the order
of this Court the GRJDCO restored power supply to !CCL. Again for the
period of January, I 997 to May, 1997 the !CCL failed to pay the bills amounting
to Rs. 5,12,45,546.06 and, therefore, on 19.6.97/20.6.97 the GRIDCO issued a
notice to !CCL to pay the said amount within seven days in default power
D supply will be disconnected. The !CCL approached the Additional District
judge Challenging the said notice and the Court on 27 .6.1997 granted interim ,,
order staying the operation of the notice dated 19/20.6.97 of disconnection "
without imposing any condition. On 14.7.97 the !CCL filed a petition before
the Orissa High Court under ~ection 11 of the Arbitration Act being MJC No.
229/97 for appointment of an Arbitrator. In the meantime the Additional
E District Judge who was seized of the two applications disposed of the same
by two separate orders dated 26.7.97 restraining GRIDCO from disconnecting
power supply to' ICCL/IMF A till disposal of Case No. 15197 pending before
the Regulatory Commission. Both these orders did not impose any condition
for payment of arrears or current charges except stating therein that in the
F event !CCL failed to comply with the order of the Supreme Court, GRJDCO
may take appropriate action.

(10) Aggrieved by the tow orders dated 26.7.97 passed by the additional
District Judge the GRIDCO on 14.8.97 filed two appeals before the Orissa High
Court being M.A. Nos. 599-600 of 1997 challenging the legality and correctness
G of the said orders.

(11) In view of the blanket stay order dated 26.7.97, !CCL did not make •
-'(
any payment for the amounts due from June, 1997 to September, 1997 in the
aggregate sum of Rs. 13, 18,88000. On 7.11.1997 GRIDCO, therefor~, issued a
H notice of disconnection for non payment of the dues of Rs. 13,18,88000.
GRID CORP. OF ORIS. LTD. v. IND. CHARGE C. LTD. [S.P. KURDUKAR, J.J 383

On receipt of this notice JCCL on I 0.11.1997 filed an application before the A
High court praying for stay of the notice dated 7.11.97 of disconnection and
the High Court on I J .11.1997 granted the interim relief.

(12) The Learned Chief Justice of Orissa High Court took up for final
disposal Miscellaneous appeal Nos. 5991600 of 1997 filled by GRIDCO and B
MJC No. 229 of 1997 filled by !CCL. The High Court by its order dated I 0.2.98
held that there was a dispute between !CCL and the GRIDCO which is
.. arbitrable falling within the jurisdiction of the Regulatory Commission under
• Section 37 oft he Reform Act and also arbitrable under Section 3 read with
Schedule of Electricity Act. The High Court further held that since the
Regulatory Commission failed to arbitrate in the matter and/or failed to appoint c
an Arbitrator, nominated a Retired Chief Justice of India as the sole Arbitrator.
The High court further directed that stay of disconnection shall continue.
From the return filed on behalf of !CCL it appears that ICCL without loss of
any time, on 25.2.98 filed statement of claim on its behalf before the sole
arbitrator. D

(13) The GRIDCO aggrieved by the common judgment and order passed
by the High Court filed these three appeals challenging the legality and
correctness thereof.
E
(14) We have gone through the judgment of the High Court and in our
considered view it h1d exceeded the jurisdiction while entertaining the
application of !CCL under Section 11 of the Arbitration and Conciliation Act,
1996. The High Court erroneously assumed that the Regulatory Commission
had failed to arbitrate under Section 37(1) of the Reform Act. this finding is F
factually incorrect because vide application dated 19.797 !CCL asked the
Regulatory Commission to adjourn the proceedings pending before it on the
ground that it had filed MJC No. 229/97 in the High Court . In view of this
application the Regulatory Commission did not proceed in the matter. If this
be so the High Court in our opinion was wrong in holding that there was
failure on the part of Regulatory Commission to arbitrate and consequently G
the application made by !CCL under Section 11 of Arbitration Act is
maintainable. In our considered view the application made by !CCL under
Section 11 of the Arbitration Act, 1996 (MJC No. 229/97) was premature and
the High Court could not have entertained the same and granted desired relief
~~ H
384 SUPREME COURT REPORTS (1998) 3 S.C.R.

A (15) Another question which was seriously contested on behalf of
GRIDCO before the Regulatory Commission as well as before the High Court
was that ICCL is not a licensee within the meaning of Section 2(h) of Indian
Electricity Act, 1910 and also under Section 2(e) and (f) of the Reform Act,
1995. The High Court recorded a finding that !CCL is a licensee under the
B Indian Electricity Act, 1910 and it continued to be a licensee even after Reform
Act, 1995 came into force. The High Court placed reliance on Section 14(1)
of the Reform Act and held that !CCL is authorised by the State Authority

••
in the business of supplying the electricity. It was thus concluded that ICCL
in view of Section 14 of the Reform Act, 1995 shall continue to be a licensee.
In view of this finding the High Court held that the dispute is arbitrable under
C Section 37(1) read with Section 33 of the Reform Act, 1995. It is not seriously
disputed that !CCL after a long drawn correspondence with the Orissa
Government had received no objection to put up the Captive Power Plant at
Choudwar to generate power. Accordingly in 1989 the Captive Power Plant
started generating power which was supplied to the OSEB. This arrangement
continued till 1994 When MOU and agreement were entered into between
D !CCL and OSEB. The GRIDCO being a successor ofOSEB naturally the MOU
of 1994 and agreement of 1995 will be binding upon the GRIDCO in the
absence of any material to the contrary. It is not the contention of the
GRIDCO that !CCL did not supply any power at all during the period for
which the bills were raised on !CCL. Despite this factual position it appears
E that no formal licence was issued under Section 2(h) oflndian Electricity Act,
1910 or under the Reform Act, 1995. It cannot be ignored that the investment
of !CCL in putting up a Captive Power Plant at Choudwar is running into few
hundred crores. Section 2( e) and (f) of the Reform Act read as under:

F
"( e) "licence" means a licence granted under Chapter VI;

(f) "licence" or "licence holder" means a person licensed under Chapter
--
VI to transmit or supply energy including Gridco".

CHAPTER VI DEALS WITH LICENSING OF TRANSMISSION
AND SUPPLY
G
Section 14( I) reads as under:
,
No person, other than those authorised to do so by licence or by .-'<
virtue of exemption under this Act or authorised or exempted by any
other authority under the Electricity (Supply) Act, 1948 shall engage
H in the State in the business of
GRID CORP. OF ORIS. LTD. v. IND. CHARGE C. LTD. [S.P. KURDUKAR, J.J 385

(a) transmitting; or A

- (b) supplying electricity.

From the facts noted hereinabove and in view of Section 14(1) of the Reform
Act it is quite clear that !CCL was/is authorised and engaged in supplying
the electricity to OSEB and thereafter to GRIDCO and if this be so the dispute B
between the GRIDCO and !CCL could be arbitrable under Section 37(1) read
with Section 33 of the Reform Act, 1995.

((16) Mr. F.S. Nariman, Learned Senior Counsel in support of these
appeals urged that not only the District Judge but even the High Court had
totally ignored a welt settled rule while injuncting the GRIDCO from performing C
its statutory function of disconnection of power supply to !CCL for non
payment of arrears of electricity bills without imposing any condition as
regards payment of arrears and recurring charges and consequently the
GRIDCO is obliged to continue power supply. The order passed by the High
Court is neither just nor fair and is opposed to the rule of balance of
convenience. As regards the amount of arrears of Rs. 24 crore recoverable D
pursuant to the first demand/disconnection notice for the period December,
1994 to December, 1996 at the moment it is covered by the interim order of
this Court. His grievance is as regards the subsequent arrears from January,
1997 to March, 1998 come to Rs. 46.193 crores (approximately) on monthly
settlement basis. On half hourly settlement basis the amount payable would E
come to Rs. 62.52 crores including delayed payment surcharge @ 2% per
month. Demand/disconnection notices have already been served but in view
of various orders passed by the courts the GRIDCO is unable to recover
arrears and in addition it has been injuncted from disconnecting power supply.
The only equitable order in such circumstances ought to be to call upon ICCL
to pay all the arrears since ICCL had availed facility of power/energy to run F
its plants IMFA and PPL. He urged that no reasons whatsoever are given by
the Courts below white granting unconditional interim orders in favour of
!CCL.

(17) Mr. K.K. Venugopal, Learned Senior Counsel while countering
these submissions urged that !CCL was neither in arrears nor it neglected to G
pay the bill amount. According to him the bills served on !CCL were patently
wrong because billing was done on the basis of half hourly consumption
recorded on TOD meter. ICCL·was not obliged to honour such bills. He also
urged that ICCL was generating power but it was because of high frequency
in the GRID it could not absorb power generated by !CCL and as a result H
JS'
386 SUPREME COURT REPORTS [1998) 3 S.C.R.

A thereof its Captive Plant and boilers were required to be shut down. At times .-
the boilers were closed down for several hours. Though the high rise frequency •
was intermittent but once the boilers were shut down they used to take more
than two hours to produce the steam which is supplied to the turbines to
generate power. The GRID high frequency had caused damage to the blades
of the turbines costing about couple of crores in replacing the same. Mr.
B Venugopal then urged that in fact the GRIDCO owed certain amounts to !CCL
and had received Rs. 10 crores and for the balance the matter is pending
before the high power Committee set up by Government of Orissa. As regards
>
,;
the wheeling charges counsel disputed any liability thereof and urged that
there was no question of paying any wheeling charges when power was not
c wheeled by GRIDCO by reason of time to time shutting down to turbines and
boilors of !CCL. It was, therefore, urged that the GRIDCO had no claim
whatsoever against the !CCL and therefore the courts below were right in
staying the disconnection notices without imposing any condition.

(18) In our considered view the spacious claim pressed before us on
D behalf of! CCL cannot be accepted at this interlocutory stage. It is not denied
by !CCL that back up power was available to its sister concern IMFA and PPL
~
and the manufacturing process was continuing. At this interlocutory stage .;

what the courts are required to bear in mind is as to whether a prima facie
case for recovery of arrears of energy charges is made out and on whose side
the balance of convenience lies, In the facts and circumstances of the case
E
whether interim order should be passed by imposing certain conditions or
without any condition. The net result of the impugned order is that the
GRIDCO is required o maintain back up power to the constituents of !CCL
but for such supply latter was not required to make any payment for power
consumed. It also needs to be mentioned that under the MOU dated 15.11.94
F and agreement dated 4.3.95 ICCL is required to pay for consumption of energy
JI!
@ Rs. 2.31 per unit which is far less than the rate at which power is supplied
to other commercial units. It is true that !CCL when supplies power to GRIDCO
the latter pays at the rate of 77 paise per unit to former. Some dispute is also
raised as regards interpretation of MOU and agreement but we do not think
it appropriate to deal with these contentions at this point of time.
G
(19) Mr. Venugopal also disputed the recording of consumption of
power on half hourly basis. It was according to learned counsel wholly illegal ,
A:
and as a result thereof the amounts in the bills stood inflated, and consequently
ICCL is not liable to honour such bills. On the other hand Mr. Nariman urged
H that it is not open to !CCL to challenge the half hourly recording because it
GRID CORP. OF ORIS. LTD. "v. IND. CHARGE C. LTD. [S.P. KURDUKAR, J.J 387

was specifically agreed upon between the parties under MOU and the A
~

.. agreement. We do not propose to deal with these rival contentions at this
.... interlocutory stage and, therefore, they are kept open .

(20) Mr. Nariman alternatively urged that at any rate on the basis of
monthly billing, the amounts payable by !CCL to GRIDCO would come to Rs.
46.193 crores and, therefore, at this interlocutory stage without touching the B
controversy as regards half hourly recording is right or wrong, !CCL must
make the full payment of this amount. Another dispute also relates to wheeling
...
• charges @ 15%. According the GRIDCO power was in fact wheeled but
according to Mr. Venugopal when the turbines were shut down though
intermittantly there was no question of wheeling the power. This issue again c
needs further investigation in depth and at this interlocutory stage it would
not be proper to conclude one way or the other. We, therefore, proceed on
the assumption that the amount reflected on the basis of monthly bills payable
..... to the GRIDCO by !CCL would be Rs. 46.193 crores less 15% wheeling
charges which would come Rs. 6.92 crores approximately. At this interlocutory
stage even if we give benefit of this amount of Rs. 6. 92 crores payable by D
!CCL to GRIDCO under the various bills still the outstanding arrears payable
.......
by !CCL to GRIDCO would come to Rs. 39.273 crores.

(21) Now the question is what could be the fair and just order as regards
the payment of these arrears. Mr. Venugopal although expressed the financial
E
constraints of ICCL to make any payment but that cannot be a ground to
allow !CCL to use power without any charges. We, therefore, feel that the fair
and proper order to meet the ends of justice at this interim stage would be
to direct !CCL to pay Rs. 39.273 crores in seven equal instalments of Rs. 5

- ~~
crores payable on or before I 0th of each month to GRIDCO and the 8th
instalment would be for the balance amount. First instalment of Rs. 5 crores F
will be payable in the month of June, 1998. The Regulatory Commission while
making the award, will pass appropriate orders as regards interest on the
amount if found refundable to !CCL or recoverable by GRIDCO on their
respective claims in accordance with law. In the event of any two defaults,
facility of payment by instalment to stand vacated. Disconnection notices will
revive and GRIDCO will be at liberty to take such steps as permissible iii law.
G
As regards the recurring charges if !CCL wants to use power it will have to
make payment of such bills as and when served upon them. !CCL may raise
a dispute before the Regulatory Commission. If there be any occasion to
consider such application the Regulatory Commission will pass interim orders
in accordance with law. These.calculations and directions are without prejudice H
388 SUPREME COURT REPORTS (1998] 3 S.C.R.

A to the rights and contentions of the parties.
(22) For the conclusions recorded hereinabove all the three appeals are
allowed. The judgment and order dated I 0.2.98 passed by the High Court is
set aside and resultantly the appointment af the Arbitrator stands quashed.
The !CCL is directed to make the payment of arrears as indicated above. The
B application made by ICCL to the Regulatory Commission to arbitrate will
stand revived and the Regulatory Commission will dispose of the matter in
accordance with law. In the facts and circumstances of the case the parties
are directed to bear their own costs.

R.K.S. Appeals allowed.

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