Holding

Section 86(1)(f) of the Electricity Act, 2003 is the exclusive mechanism for adjudicating disputes between licensees and generating companies, thereby overriding Section 11 of the Arbitration and Conciliation Act, 1996.

Summary

The Gujarat Urja Vikas Nigam Ltd (GUVNL) filed an appeal against a Gujarat High Court order that appointed a retired Chief Justice as arbitrator under Section 11 of the Arbitration and Conciliation Act, 1996 to resolve a power‑purchase dispute with Essar Power Ltd. GUVNL contended that after the Electricity Act, 2003 came into force, disputes between a licensee and a generating company must be adjudicated only by the State Commission or an arbitrator it nominates under Section 86(1)(f) of that Act, rendering the 1996 Act inapplicable. The Supreme Court held that Section 86(1)(f) is a special provision that overrides the general arbitration provision of the 1996 Act, interpreting the word "and" in the statute as "or" and giving precedence to Sections 174 and 175 of the 2003 Act through harmonious construction using Mimāṃsā principles. Consequently, the High Court’s appointment of an arbitrator was set aside and the pending application before the Gujarat Electricity Regulatory Commission was directed to be disposed of expeditiously. The appeal was allowed, and the order for arbitration under the 1996 Act was vacated.

Issues considered

Whether Section 11 of the Arbitration and Conciliation Act, 1996 is applicable to disputes between a licensee and a generating company after the enactment of the Electricity Act, 2003.
Interpretation of the word "and" in Section 86(1)(f) of the Electricity Act, 2003.
Whether the special provision of Section 86(1)(f) overrides the general arbitration provision of the 1996 Act.
How to reconcile Sections 174 and 175 of the Electricity Act, 2003 in the context of the dispute.
Whether the provision in Section 86(1)(f) violates Article 14 of the Constitution.
Whether the arbitration clause in the 1996 power‑purchase agreement is enforceable post‑licence.

Legislation cited

Arbitration and Conciliation Act, 1996s. 11(5), s. 11(6)
Electricity Act, 2003s. 158, s. 173, s. 174, s. 175, s. 86(1)(f)

Subjects

Electricity Act 2003Arbitration and Conciliation Act 1996Section 86(1)(f)Section 11Statutory interpretationMimāṃsā principlesLicensee vs generating companyArticle 14Dispute resolution

Judgment

[2008] 4 S.C.R. 822 • J-
A GUJARAT URJA VIKASH NIGAM LTD.
~:
v.
ESSAR POWER LTD.
~

(Civil Appeal No. 1940 of 2008)
MARCH 13, 2008
B
(H.K. SEMA AND MARKANDEY KAT JU, JJ.)

Electricity Act, 2003: ~

s. 81(1)(f) rlw ss. 158, 173 and 174 - Disputes between
c licensees and generating Companies - HELD: Are to be
resolved either by the State Commission itself or by
arbitrator(s) nominated by it-In s.86(1)(f) word 'and' in between
the expressions 'generating companies' and 'to refer any
dispute' means 'or' - s. 11 of Arbitration and Reconciliation
D Act, 1996 has no application in such matters - Section 86( 1)(f)
being a special provision will override the general provision
).,
in s.11 of 1996 Act - However, s.86(1)(f) is only restricted to
¥
authority which is to adjudicate or arbitrate between licensees
and generating companies - Procedural and other matters
E relating to such proceedings will be governed by the 1996 Act
unless there is a conflicting provision in 2003 Act - Arbitration
and Conciliation Act; 1996 - ss. 11(5) and (6) - Interpretation
of Statutes - Special provision to override general provision.
SS. 174 and 175 - HELD: Are to be construed
F harmoniously to the effect that whenever there is a dispute -.,<
between a licensee and a generating company only the State "'
Commission or the Central Commission, as the case may
be, or arbitrator(s) nominated by it can resolve such a dispute,
whereas all other disputes (unless there is some other
G provision in the 2003 Act) would be decided in accordance
with s. 11 of the 1996 Act - Interpretation of Statutes -
Harmonious cons"truction.
lnteroretation of Statutes:

H 822

'i
GUJARAT URJA VI KASH NIGAM LTD. v. ESSAR 823
POWER LTD.

Mimansa Rules _of Interpretation - Sutra "'!]o/~(6l/6l/Rt¢fli/ A
~~fCITTf ~ k ~:" - Meaning of - 'Gunapradhan',
'Samanjasya' and 'Badha' principles - Applicability of
Words and Phrases:
Word 'and' occurring in s.86(1)(f) of Gujarat Electricity B
Industry (Reorganization and Regulation) Act, 2003 between
the expressions 'generating companies' and 'to refer any
dispute' - Connotation of.
The respondent-Company, which was engaged in the C
business of generating of electricity, entered into an
agreement on 30.5.1996 to allocate a certain amount of
electricity to the Gujarat Electricity Board, which was later
succeeded by the appellant-Gujarat Urja Vikas Nigam.
Clause 11 (2) of the agreement was the arbitration clause.
Certain disputes with regard to allocation of power arose D
between the parties. On 14.11.2005 the respondent-
.... Company called upon the appellant-Nigam to refer the
disputes to a certain arbitrator; whereas the Nigam filed
Application No. 873 of 2005 u/s 86(1 )(f) of the Electricity
Act, 2003 (the 2003 Act) before the Gujarat Electricity E
Regulatory Commission. The respondent then filed an
application under Sections 11(5) and (6) of the Arbitration
and Conciliation Act, 1996 (the 1996 Act). The High Court
appointed the arbitrator as suggested by the respondent.
Aggrieved, the Nigam filed C.A. No, 1940 of 2008. C.A. No. F
1941 of 2008 was filed against another order of the High
Court in an incidental matter.
It was contended for the appellant-Nigam that after
coming into force of the 2003 Act, disputes between G
licensee and generating companies were to be
adjudicated as specifically provided in s.86(1 )(f), and
keeping in view the provisions of ss. 158, 173 and 174 of
the 2003 Act, provisions of s.11 of the 1996 Act could not
be resorted to on the strength of s.175 of the 2003 Act.
H
824 SUPREME COURT REPORTS [2008] 4 S.C.R.

A The question for consideration before the Court was:
~
whether the application under Section 11 of the 1996 Act
,,
filed by the respondent-Company was maintainable in ..
view of the specific statufory provisions contained in the
2003 Act providing for adjudication of disputes between
B the. licensee and the generating companies?
Disposing of the appeals, the Court
HELD: 1.1 Section 86(1 )(f) of the Electricity Act, 2003 -1
is. a special provision for adjudication of disputes
c between the licensee and the generating companies.
Such disputes can be adjudicated upon either by the
State Commission or the person(s) to whom it is referred
for arbitra~ion. In Section 86(1 )(f) of the 2003 Act the word
'and' between the words 'generating companies' and the
D words 'to refer any dispute' means 'or', otherwise it will
lead to an anomalous situation because obviou~ly the
State ~ommission cannot both decide a dispute itself
and also refer it to some arbitrator. It is well settled
>. t-
that sometimes 'and' can mean 'or' and vice versa.
E
[para 26-27] [838-F-G; 839-A-B]
1.2 Section 86(1 )(f) of the 2003 Act, being a special
provision, will override the general provision in Section
11 of the 1996 Act for arbitration of disputes between the
licensee and generating companies. It is well settled that
F the special law overrides the general law. Hence, Section
'i ...
11 of the 1996 Act has no application to the question as to
who can adjudicate/arbitrate disputes between licensees
and generati':lg companies, and only Section 86(1 )(f) shall
apply in such a situation. This is also evident from Section
G 158 of the 2003 Act. [para 28-29] [839-C-D]
1.3 It is well settled that where a statute provides for
a thing to be done in a particular manner, then it has to be )-
done in that manner and in no other manner. Section
86(1 )(f) provides a special manner of making references
H
•
e
GUJARAT URJA VI KASH NIGAM LTD. v. ESSAR· 825
POWER LTD.

~
to an arbitrator in disputes between a licensee and a A
generating company. Hence by implication all other
methods are barred. [para 34] [841-8-C]
Chandra-Kishore Jha vs. Mahavir Prasad AIR 1999 SC
3558 Dhananjaya Reddy vs. State of Kamataka AIR 2001 SC
1512 - relied on. B

1.4 There is an implied conflict between Section
86(1 )(f) of the 2003 Act and Section 11 of the 1996 Act since
under Section 86(1 )(f) the dispute between licensees and
generating companies is to be decided by the State c
Commission or the arbitrator nominated by it, whereas
under Section 11 of the 1996 Act, the Court can refer such
disputes to an arbitrator appointed by it. Therefore, both
the provisions would be construed harmoniously to the
effect that whenever there is a dispute between a licensee
D
and the generating companies only the State Commission
-4 or Central Commission, as the case may be, or
....... arbitrator(s) no..minated by it can resolve such a dispute,
whereas all other disputes (unless there is some other
provision in the 2003 Act) would be decided in accordance
with Section 11 of the 1996 Act. [para 58] [850-A-D] E

1.5 Section 86 (1 )(f) is not violative of Article 14 at all.
It is in the discretion of the State Commission whether
the dispute should be decided by the Commission itself
or it should be referred to an arbitrator. Some leeway has F
~
~ to be given to the legislature in such matters and there
has to be judicial restraint in the matter of judicial review
of constitutionality of a statute. [para 30] [839-G-H; 840-A]
Government of Andhra Pradesh & Ors. vs. Smt. P Laxmi
Devi JT 2008(2) 8 SC 639 - relied on. G

2.1 At first glance there is an apparent inconsistency
between Section 175 and Section 174 of the 2003 Act.
While Section 174 of the 2003 Act says that the said Act
will prevail over other laws, Section 175 says that the said H
826 SUPREME COURT REPORTS [2008] 4 S.C.R. •
A Act is in addition and not in derogation of any other law ~:..,
(which would include Section 11 of the 1996 Act). To
resolve this conflict the Mimansa Principles of
Interpretation would be of great utility. One of the Mimansa
principles is the 'Gunapradhan' axiom as expressed in
B Sutra "~o/ti(O!loqffkfi~ ~ ~ ~ Wim:" 'Guna' means
subordinate or accessory, while 'Pradhan' means
principal. 'Gunapradhan' axiom states: "If a word or
sentence purporting to express a subordinate idea ~
clashes with the principal idea, the former must be
c adjusted to the latter or must be disregarded altogether."
[para 35-36, 48 and 49] [841-C-F; 846-E-F]
Beni Prasad vs. Hardai Devi (1892) ILR 14 All 67 (FB) -
referred to.

0 Mimansa Rules of Interpretation by K.L. Sarkar;
*Jaimini 2:1 :6; and Tantravartika by Kumarila Bhatta
as explained in Ganganath Jha's English Translation Vol.
3 page 1141 - referred to.
2.2 In the instant case, the 'gunapradhan' axiom
E applies. The principle laid down in Section 174 of the 2003
Act is the pradhan (principal or primary) whereas the
principle laid down in Section 175 is the guna
(subordinate to the principal). Hence Section 174 will
prevail over Section 175 in matters where there is any
F conflict (but no further). Section 174 and Section 175 can
be read harmoniously by utilizing the 'Samanjasya',
'Badha' and 'Gunapradhana' principle of Mimansa. This
can be done by holding that when there is any express or
implied conflict between the provisions of the 2003 Act
G and any other Act then the provisions of the 2003 Act will
prevail, but when there is no conflict, express or implied,
both the Acts are to be read together. Section 175 cannot
be read in isolation, it has to be read along with Section
174, and reading them together, certain words are to be
H added at the end of Section 175, namely, "except where
•
e
GUJARAT URJA VI KASH NIGAM LTD. v. ESSAR 827
POWER LTD.

.., there is a conflict, express or implied, between a provision A
in this Act and any other law, in which case the former will
prevail". Otherwise there will be an irreconciliable conflict
between Section 174 and Section 175. [Para 50, 55-57]
[848-C-E; 849-E, F, G]
S.S. Kalra vs. Union of India 1991 (2) SCC 87 - relied on. 8
~

GP Singh's 'Principles of Statutory Interpretation' Ninth
Edition, 2004 pages 71-74 - referred to.
2.3 No doubt ordinarily the literal rule of interpretation
should be followed, and hence the Court should neither c
add nor delete words in a statute. However, in exceptional
cases this can be done where not doing so would deprive
certain existing words in a statute of all meaning, or some
part of the statute may become absurd. [para 51]
[848-E-F] D
...(, 3. It is made clear that it is only with regard to the
~· authority which can adjudicate or arbitrate disputes that
the 2003 Act will prevail over Section 11 of the 1996 Act.
But, as regards, the procedure to be followed by the State
Commission (or the arbitrator nominated by it) and other E
matters related to arbitration (other than appointment of
the arbitrator), the 1996 Act will apply (except if there is a
conflicting provision in the Act of 2003). Thus, Section
86(1 )(f) is only restricted to the authority which is to
adjudicate or arbitrate between licensees and generating F
x
" '
companies. Procedural and other matters relating to such
proceedings will, of course, be governed by the 1996 Act,
unless there is a conflicting provision in the 2003. Act.
[para 60] [851 -:B, C, D]
G
4.1 In the instant case, it is true that there is a
provision for arbitration in the agreement between the
parties entered on 30.5.1996. However, since the 2003 Act
~ has come into force w.e.f. 10.6.2003, after this date
adjudication of all disputes between licensees and
H
e
•

828 SUPREME COURT REPORTS [2008]4 S.C.R.

A generating companies can only be done by the State ~
Commission or the arbitrator(s) appointed by it. It is further
clarified that all disputes, and not merely those pertaining
to matters referred to in clauses (a) to (e) and (g) to (k) in
Section 86(1 ), between the ncensee and generating
B companies can only be resolved by the Commission or ...
by arbitrator(s) appointed by it. This is because there is
no restriction in Section 86(1 )(f) about the nature of the
dispute.· [para 59] [850-E-H; 851-A]
4.2 It needs to be clarified .that the agreement dated
c 30.5.1996 is not a part of the licence of the licensee. An
agreement is something prior to the issuance of a licence.
Hence any provision for arbitration in the agreement
cannot be deemed to be a provision for arbitration in the
licence. In this view of the matter also it is the State
D Commission which alone has power to arbitrate/
adjudicate the dispute either itself or by appointing an >
arbitrator. [para 29] [839-D, E, F] .....

5. Since the High Court has appointed an arbitrator
for deciding the dispute between. the licensee and the
E generating company, the judgment of the Hi'gh Court is
set aside. It is left open to the State Commission or the
arbitrator(s) nominated by it to adjudicate/arbitrate the
dispute between the parties expeditiously. [para 61]
[851-E, F]
F ~ l
6.1 Case No.873 of 2005 filed by the appellant under
Section 86(1 )(f) of th.e 2003 Act before the Gujarat
Electricity-Regulatory Commission in 2005 is still pending.
The Commission would dispose of the petition as
expeditiously as possible. [para 62] [851-G, 8~2-A]
G
6.2 As reg\lrds the dispute giving rise to C.A. No. 194~
of 2008, filed regarding the deduction of Rs.5 crores, the ,...
appellant may file an application under Section 94(2) of
the 2003 Act, before the appropriate Commission, to pass
H such an interim order as it may consider appropriate.
•
e
GUJARAT URJA VIKASH NIGAM LTD. v. ESSAR 829
POWER LTD. [MARKANDEY KAT JU, J.]

-r [para 63] [852-A, B] A
Editorial Note: The Court observed that Mimansa
Rules of Interpretation were traditional principles of
interpretation laid down by Jaimini, whose Sutras were
explained by Shabar, Kumarila Bhatta, Prabhakar, etc.;
these Mimansa principles were regularly used by great B
jurists like Vijnaneshwara (author of Mitakshara),
Jimutvahana (author of Dayabhaga), Nanda Pandit, etc.
y
whenever they found any conflict between the various
Smritis or any ambjguity, incongruity, or casus omissus
therein; there is no reason why the courts cannot use c
these principles on appropriate occasions. [para 381
[842-A, B]
CIVILAPPELLATE JURISDICTION : Civil Appeal No. 1940
·of 2008
D
..(
From the final Judgment and Order dated 15.06.2006 of
... the High Court of Gujarat at Ahmedabad in Petition under
Arbitration Act No. 8/2006
WITH
E
Civil Appeal No. 1941 of 2007.
K.K. Venugopal, TR. Andhyarujina, Suresh Shelat,
Hemantika Wahi, M. R. Ramachandran and Liz Mathew, for the

;.
,,, Appellant.
F
F.S. Nariman, C.A. Sundram, Mahir Thakur, Bijal
Chatrapati,Arvind Kumar, E.C.Agrawala, MahesAgarwal, Rishi
Agrawala, Meru Gupta, Gaurav Goel, Rohini Musa, Abhishek
Gupta, Surabhi Chopra and Zafar for the Respondents.
G
Jayant Bhushan, Uttam Dutt (for M/s. Dua Associates)
for the Intervenor.

The Judgment of the Court was delivered by
MARKANDEY KATJU, J. 1. Leave granted.
H
I

e
830 SUPREME COURT REPORTS [2008] 4 S.C.R.

A 2. This appeal by special leave has been filed against the "'('"".:...
judgment of the learned Single Judge of the Gujarat High Court
dated 15.6.2006 which was passed on a petition under Section
11 (5) and (6) of The Arbitration and Conciliation Act, 1996
(hereinafter in short "the 1996 Act"). By that judgment the High
B Court has appointed Hon'ble Mr. Justice A.M. Ahmadi, retired
Chief Justice of India, as the sole arbitrator for deciding certain
disputes between the parties.
-.(
3. Heard learned counsel for the parties and perused the
record.
·C
4. The appellant-company is engaged in the business of
generation of electrical energy. The appellant-company has its
generation station at Hazira, Surat. On 30th May, 1996 the
appellant-company entered into a power purchase agreement
(hereinafter in short "the aforesaid agreement") with the Gujarat
D
Electricity Board. Under the aforesaid agreement the parties
agreed, inter alia, that out of the total generating capacity of )...
515MW electricity the appellant-company would allocate
300MW electricity to the Board and 215MW electricity to the
"'
Essar Group of Companies. Under Clause 11 of the agreement
E the parties agreed that in the ev~nt any dispute arose the same
1nay be resolved by the parties by mutual agreement as
envisaged by Clause 11(1) of the aforesaid agreement. In the
event of failure to resolve the dispute by amicable settlement,
the parties agreed that such dispute be submitted to arbitration
F vide Clause 11 (2). "'!(
4
5. In the meantime, under the Gujarat Electricity Industry
(Reorganization and Regulation) Act, 2003 published in the
Gujarat Government Gazette on 12th May, 2003 the assets and
liabilities of the Board were transferred to the appellant Nigam.
G
6. It appears that certain disputes had arisen bet\.veen the
parties mainly in connection with the allocation of power to the
Essar Group of Conipanies. It is not in dispute that the ~
respondent-company did not utilize its total generating capacity
H to generate 515MW electricity. It also did not supply 300MW
• GUJARAT URJA VI KASH NIGAM LTD. v. ESSAR
POWER LTD. [MARKANDEY KAT JU, J.]
831

electricity to the Board as agreed. According to the Board, in A
the event of the respondent-company generating less than its
total generating capacity of 515MW electricity under the
aforesaid agreement, the respondent-company was required
to maintain a ratio of 300MW:215MW in allocation of electrical
energy to the Board and the Essar Group of Companies B
respectively. The respondent-company, allegedly, did not
maintain the said ratio, and supplied more electricity to the
Essar Group than in accordance with the ratio of
300MW:215MW.
7. The respondent-company and the Board tried to settle C
the above dispute amicably. The State Government also
intervened in the matter but to no avail. After protracted
correspondence, on 14th November, 2005 the respondent-
company called upon the appellant-Nigam to refer the disputes
arising from the aforesaid agreement to the arbitrator Mr. Justice D
A.M. Ahmadi, retired Chief Justice of India. On the other hand,
the Nigam approached the Gujarat Electricity Regulatory
Commission, Ahmedabad (hereinafter in short "the
Commission") by Application No.873 of 2005 made under
Section 86(1 )(f) of the Electricity Act, 2003 (hereinafter in short E
"the Act of 2003").
8. Since the Nigam did not send its approval for
appointment of Mr. Justice A.M. Ahmadi as arbitrator, the
respondent-company approached the Gujarat High Court by
filing an application under Section 11 (5) and (6) of the 1996 F
Act, and by the impugned judgment dated 15.6.2006 the learned
Single Judge, Gujarat High Court, has appointed Mr. Justice
A.M. Ahmadi, retired Chief Justice of India, as the sole arbitrator
for resolving the disputes. Aggrieved, this appeal by special
leave has been filed by the Nigam before us. G
9. Mr. K.K. Venugopal, learned senior counsel for the
...J appellant, has relied on Section 174 of the Act of 2003 which
states :
"174. Act to have overriding effect- Save as otherwise H
832 SUPREME COURT REPORTS [2008] 4 S.C.R. •
A provided in section 173, the provisions of this Act shall "(--
have effect notwithstanding anything inconsistent therewith
contained in any other law for the time being in force or in
any instrument having effect by virtue of any law other than
this Act."
B 10. He has also invited our attention to Section 173 of the
Act of 2003 which states :
"173. Inconsistency. in laws - Nothinf.J contained in this
Act or any rule or regulation made thereunder or any
c instrument having effect by virtue of this Act, rule or
regulation shall have effect in so far as it is inconsistent
with any other provisions of the Consumer Protection Act,
1986 (68 of 1986) or the Atomic Energy Act, 1962 (33 of
1962):or the Railways Act, 1989 (24 of 1989)."
..
·

D 11. Mr. K.K. Venugopal submitted that a joint reading. of
··these provisions indicates that ordinarily the Act of 2003 will ,
~
prevail over:all other laws or- instruments, but the said Act will ~

have to giveway only to the Consumer Protection Act, the Atomic
Energy Act, or the Railways Act. In other words, except for the
E aforementioned three Acts, the Act of 2003 will prevail over all
other laws and instruments.
12. Mr. K.K. Venugopal then invited our attention to Section
86(1) of the Act of 2003 which states :

F "86. Functions of State Commission (1) The State
Commission shall disctiarge the following function, '-f . .
namely-
(a) determine the tariff for generation, supply,
transmission and wheeling of electricity, wholesale,
G bulk or retail, as the case may be, within the State:
Provided that where open access has been permitted
to a category of consumers under section 42, the
~
State Commission shall determine only the wheeling
charges and surcharge thereon, if any, for the said
H
..
GUJARAT URJA VI KASH NIGAM LTD. v. ESSAR 833
POWER LTD. [MARKANDEY KAT JU, J.]

category of consumers; A
-"Y'
(b) regulate electricity purchase and procurement
process of distribution licensees including the price
at which electricity shall be procured from the
generating companies or licensees or from other
sources through agreements for purchase of power B
for distribution and supply within the State;

)-' (c) facilitate intra-State transmission and wheeling of
electricity;
(d) issue licences to persons seeking to act as c
transmission licensees, distribution licensees and
electricity traders with respect to their operations
within the State;
(e) promote cogeneration and generation of electricity
D
from renewable sources of energy by providing
_,....,_ suitable measures for connectivity with the grid and
~ sale of electricity to any person, and also specify, for
purchase of electricity from such sources, a
percentage of the total consumption of electricity in
the area of a distribution licensee; , E

(f) adjudicate upon the disputes between the licensees
and generating companies and to refer any dispute
for arbitration;

(g) levy fee for the purposes of this Act; F
)f

(h) specify State Grid Code consistent with the Grid Code
specified under clause (h) of sub-section (1) of
section 79;
(i) specify or enforce standards with respect to quality, G
continuity and reliability of service by licensees;
0) fix the trading margin in the intra-State trading of
electricity, if considered, necessary;

(k) discharge such other functions as may be assigned H
834 SUPREME COURT REPORTS [2008]4 S.C.R.

A to it under this Act."
13. Learned counsel for the appellant submitted that
Section 86(1 )(f) of the Act of 2003 clearly indicates that the
disputes between the licensees and generating companies can
only be adjudicated upon by the State Commission, either itself
8 or by an arbitrator to whom the Commission refers the dispute.
Hence he submitted that the High Court cannot refer disputes
between licensees and generating companies to an arbitrator
since such power of adjudication or reference to an arbitrator
has been specifically given to the State Commission.
c
14. Shri K. K. Venugopal also relied on Section 158 of the
Act of 2003 which states :
"158. Arbitration - \Nhere any matter is, by or under this
Act, directed to be determined by arbitration, the matter
D shall, unless it is otherwise expressly provided in the licencP-
of a licensee, be determined by such person or persons
as the Appropriate Commission may nominate in that >
behalf on the application of either party; but in all other
respects the arbitration shall be subject to the provisions ·
E of the Arbitration and Conciliation Act, 1996 (26 of 1996)."
15. Shri K.K. Venugopal also relied on Section 2(3) of the
1996 Act which states :
"2(3) - This part shall not affect any other law for the tim.e
F being in force by virtue of which certain disputes may not
be submitted to arbitration."
16. Shri Venugopal submitted that Section 11 of the 1996
Act has no application because the Act of 2003 has provided
for arbitratfon of disputes between licensees and generating
G companies by the Commission or its nominated arbitrator.
Since the Electricity Act is a special law dealing with arbitrations
of disputes between licensees and the generating companies,
he submitted that the general provision in Section 11 of the )
Arbitration and Conciliation Act, 1996 will not apply for appointing
H an arbitrator for such disputes in view of the maxim Generalia
• GUJARAT URJA VIKASH NIGAM LTD. v. ESSAR
POWER LTD. [MARKANDEY KAT JU, J.]
835

specialibus non derogant (vide G.P. Singh's 'Principles of ·A
Statutory Interpretation', 9th Edition, 2004 page 133).
17. Shri K.K. Venugopal submitted that in view of Section
86(1 )(f) of the Act of 2003 it is only the State Commission or its
nominee which can adjudicate upon disputes between licensees
and generating companies. Hence he submitted that the 8
impugned judgment of the High Court referring the dispute to
an arbitrator was illegal, since the High Court has no such power.
18. On the other hand Shri F.S. Nariman, learned senior
counsel for the respondent, has invited our attention to the c
agreement between the parties dated 30.5.1996. The relevant
part of the agreement is.Article 11 which states:
"ARTICLE 11
ARBITRATION
D
11.1 RESOLUTION OF DISPUTES :
Except as otherwise provided in this Agreement, any
disagreement dispute controversy or claim (the "Dispute")
between the Board and the Company in connection with
or arising out of this Agreement, the Parties shall attempt E
to settle such Dispute in the first instance within thirty days
by discussion between the Com[any and the Board in the
following manner :
(a) Each Party shall designate in writing to the other F
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 the dispute under this Agreement within 15 G
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 15 days. H
836 SUPREME COURT REPORTS [2008] 4 S.C.R. •
A (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 records, information
B and data pertaining to any such Dispute.
11.2 ARBITRATION
In the event that any Dispute is not resolved betWeeri the
Parties pursuant to Article 11.1 then such _Dispute shall be
c 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
D
otherwise be considered justifiable or ripe for resolution
by any Court. This Agreement and the rights and obligations
of the Parties hereunder shall remain in fullforce and effect
pending the award in such Arbitration proceedings. The
award shall determine whether and when Termination of
E this Agreement, if relevant, shall become effective.
The Arbitration shall be in accordance with the Indian~
Arbitration and Conciliation Ordinance, 1996 or such
modifications or re-enactment thereof.
F 11.3 NUMBER OF ARBITRATORS
The arbitral tribunal shall consist either (a) of sole Arbitrator
mutually agreed upon or (b) of three (3) (Arbitrators - One
each to be chosen by each Party and third' person to be
selected by two Arbitrators so chosen before
G
commencement of arbitrati'on proceedings to act as an
Umpire/third Arbitrator.
11.4 PLACE OF ARBITRATION
The arbitration shall be conducted at Baroda.
H
• GUJARAT URJA VI KASH NIGAM LTD. v. ESSAR
POWER LTD. [MARKANDEY KAT JU, J.]
• 837

11.5 FINALITY AND ENFORCEMENT OF AWARD A
The arbitral tribunal shall give reasoned decision or award
which shall be final and binding upon the Parties. The
Parties hereto agree that the arbitral award may be
enforced against the Parties to the arbitration proceeding
8
or their assets wherever they may be found and that a
judgment upon the arbitral award may be entered in any
Court which shall have jurisdiction over the matter."
19. Shri F.S. Nariman invited our attention to Section 175
of the Act of 2003 which states : c
"175. Provisions of this Act to be in addition to and
not in derogation of other laws - The provisions of this
Act are in addition to and not in derogation of any other
law for the time being in force."
D
20. In view of the above provision, Shri Nariman submitted
that the Act of 2003 does not prohibit the application of the
provisions of the Act of 1996 including Section 11 thereof. Hence
he submitted that a reference can be made by the Court under
Section 11 (5) and (6) of the said Act of disputes between
licensees and generating companies. Accordingly he submitted, E
the High Court order was valid.
21. It appears that the respondent Essar Power limited
was obliged under its agreement with the Gujarat Electricity
Board to supply power to the Board and the Essar Steel Limited F
in the ratio of 300MW:215MW. The grievance of the Board (now
the Nigam) was that the Essar Power Limited has diverted
energy which was to be supplied to the Board to the Essar Steel
Limited. Hence the Board vide its letter dated 29.10.2003 raised
a demand of Rs.537 crores upon Essar Power Limited for G
diverting the said energy. On the other hand, Essar Power
Limited disputed the said claim by its reply dated 1.11.2003
and stated that the Board had not honoured its commitment
under the agreement regarding payment to it. The Board,
thereafter, raised further claims against Essar Power Limited.
H
I

838 SUPREME COURT REPORTS [2008] 4 S.C.R.
e i:-

A 22. The appellant company then approached the ~ujarat
Electricity Regulatory Commission under Section 86(1 )(f) of the -~ ,.-
Electricity Act, 2003 whereas Essar Power Limited filed a
petition in the Gujarat High Court under Section 11 (5) and (6) of
the Arbitration and Conciliation Act, 1996 in which the impugned
B order was passed.
23. It may be mentioned that before filing the petition in
the High Court the respondent Essar Power Limited sent a notice
dated 14.11.2005 invoking the arbitration clause and nominating
Mr. Justice A.M. Ahmadi as the sole Arbitrator in terms of Article -<
c 11 of the agreement, and called upon the Nigam to concur to
the said nomination or suggest its own nominee within thirty
;-
days. Instead of concurring to the nominee suggested by the
company or suggesting its own nominee, the Nigam vide its
letter dated 5.12.2005 denied that the dispute can be resolved
D by appointing an Arbitrator under Section 11 of the Act of 1996.
The Nigam contended that only the State Commission can
adjudicate the dispute under Section 86(1)(f) of the Act of 2003, )...
or refer the matter to an arbitrator.
24. The main question before us is whether the application
E under Section 11 of the Act of 1996 is maintainable in view of
the statutory specific provisions contained in the Electricity Act
of 2003 providing for adjudication of disputes between the
licensee and the generating companies.

F 25. In our opinion, the submiss1on of Mr. K.K. Venugopal
has to be accepted.
....,.. ~
2fl. It may be noted that Section 86(1 )(f) of the Act of 2003
is a special provision for adjudication of disputes between the
licensee and the generating companies. Such disputes can be
G adjudicated upon either by the State Commission or the person
or persons to whom it is referred for arbitration. In our opinion
the word 'and' in Section 86(1 )(f) between the words 'generating
•
companies' and 'to refer any dispute for arbitration' means 'or'.
It is well settled that sometimes 'and' can mean 'or' 'and
H sometimes 'or' can mean 'and' (vide G.P. Singh's,'Principle of
. .

GUJARAT URJA VI KASH NIGAM LTD. v. ESSAR 839.
POWER.LTD. [MARKANDEY KAT JU, J.]

Statutory Interpretation' 9th Edition, 2004 page 404.) A

27. In our opinion in Section 86(1 )(f) of the Electricity Act,
2003 the word 'and' between the words.'generating companies'
and the words 'refer any dispute' means 'or', otherwise it will
lead to ar1 anomalous situation because obviously the State
Commission cannot both decide a dispute itself and also refer 8
it to some Arbitrator. Hence the word 'and' in Section 86(1 )(f)
means 'or'.
28. Section 86(1)(f) is a special provision and hence will
override the general provision in Section 11 of the Arbitration c
and Conciliation Act, 1996 for arbitration of disputes between
the licensee and generating companies. It is well settled that
the special law overrides the general law. Hence, in our opinion,
Section 11 of the Arbitration and Conciliation Act, 1996 has no
application to the question who can adjudicate/arbitrate disputes
0
between licensees and generating companies, and only
Section 86(1 )(f) shall apply in such a situation.
29. This is also evident from Section 158 of the Electricity
Act, 2003 which has been quoted above. We may clarify that
the agreement dated 30.5.1996 is not a part of the licence of E
the licensee. An agreement is something prior to the issuance
of a licence. Hence any provision for arbitration in the agreement
cannot be deemed to be a provision for arbitration in the licence.
Hence also it is the State Commission which alone has power
to arbitrate/adjudicate the dispute either itself or by appointing F
an arbitrator.

30. Shri Jayant Bhushan, learned counsel for one of the
parties in the connected case submitted that Section 86(1 )(f) is
violative of Article 14 of the Constitution of India because it does
not specify when ttie State Commission shall itself decide a G
dispute and when it will refer the matter to arbitration by some
arbitrator. In our opinion there is no violation of Article 14 at all.
It is in the discretion of the State Commission whether the
dispute should be decided itself or it should be referred to an
arbitrator. Some leeway has to be given to the legislature in H
840 SUPREME COURT REPORTS [2008] 4 S.C.R.

A such matters and there has to be jud.icial restraint in the matter
of judicial review of constitutionality of a statute vide
Government of Andhra Pradesh & Ors. vs. Smt. P. Laxmi
Devi JT 2008(2) 8 SC 639. There are various reasons why the
State Commission may not decide the dispute itself and may
B refer it for arbitration by an arbitrator appointed by it. For
example, the State Commission may be overburdened and may
not have the time to decide certain disputes itself, and hence
such cases can be referred to an arbitrator. Alternatively, the --("
dispute may involve some highly technical point which even the
c State Commission may not have the expertise to decide, and
such dispute in such a situation can be referred to an expert r~
arbitrator. There may be various other considerations for which
the State Commission may refer the dispute to an arbitrator
instead of deciding it itself. Hence there is no violation of Article
14 of the Constitution of India.
D
31. We may now deal with the submission of Mr. Fali S.
).._
Nariman that in view of Section 175 of the Electricity Act, 2003,
Section 11 of the Arbitration and Conciliation Act, 1996 is also
available for arbitrating disputes between licensees and
E generating companies.
32. Section 175 of the Electricity Act, 2003 states that the
provisions of the Act are in addition to and not in derogation of
any other law. This would apparently imply that the Arbitration
and Conciliation Act, 1996 will also apply to disputes such as
F the one with which we are concerned. However, in our opinion ....,.. ..
Section 175 has to be read along with Section 174 and not in
isolation.
33. Section 174 provides that the Electricity Act, 2003 will
' .
prevail over anything inconsistent in any other law. In our opinion
G
the inconsistency may be express or implied. Since Section
86( 1)(f) is a special provision for adjudicating disputes between
licensees and generating companies, in our opinion by ~
implication Section 11 of the Arbitration and Conciliation Act,
1996 will not apply to such disputes i.e. disputes between
H
___,/
i GUJARAT URJA VIKASH NIGAM LTD. v. ESSAR 841
POWER LTD. [MARKANDEY KATJU, J.]

licensees and generating companies. This is because of the A
principle that the special law overrides the general law. For
adjudication of disputes between the licensees and generating
companies there is a special law namely 86( 1)(f) of the Electricity
Act, 2003. Hence the general law in Section 11 of the Arbitration
and Conciliation Act, 1996 will not apply to such disputes. B
34. It is well settled that where a statute provides for a thing
to be done in a particular manner, then it has to be done in that
manner, and in no other manner, vide Chandra Kishore Jha
vs. Maha.vir Prasad, Al R 1999 SC 3558 (para 12),
Dhananjaya Reddy vs. State of Karnataka, AIR 2001 SC c
1512 (para 22), etc. Section 86(1 )(f) provides a special manner
of making references to an arbitrator in disputes between a
licensee and a generating company. Hence by implication all
other methods are barred.
D
35. At first glance there is an apparent inconsistency
_... between Section 175 and Section 174 of the Electricity Act,
~ 2003. While Section 174 says that the said Act will prevail over
other laws, Section 175 says that the said Act is in addition and
not in derogation of any other law (which would include Section
11 of the Arbitration and Conciliation Act, 1996.) E
36. In our· opinion to resolve this conflict the Mimansa
principles of Interpretation would of great utility.
37. It is deeply regrettable that in our Courts of law, lawyers
quote Maxwell and Craies but nobody refers to the Mimansa F
(
... ~ Principles of Interpretation. Today many of our educated people
are largely unaware about the great intellectual achievements
of our ancestors and the intellectual treasury they have
bequeathed us. The Mimansa Principles of Interpretation is part
of that intellectual treasury but it is distressing to note that apart G
from a reference to these principles in the judgment of S~r John
Edge, the then Chief Justice of Allahabad High Court in Beni
~ Prasad vs. Hardai. Devi, (1892} ILR 14 All 67 (FB), and some
judgments by one of us (M. Katju, J.) there has been almost no
utilization of these principles even in our own country. H
I

\
'
842 SUPREME COURT REPORTS [2008] 4 S.C.R.

A 38. It may be mentioned that .the Mimansa Rules of
Interpretation were our traditional·principles of interpretation laid
down by Jaimini, whose Sutras were explained by Shabar,
Kumarila Bhatta, Prabhakar, etc. These Mimansa Principles
were regularly used by our great j_urists like Vijnaneshwara
s (author of Mitakshara), Jimutvahana (author of Dayabhaga), (-

Nanda Pandit, etc. whenever they found any conflict between
the various Smritis or any ambiguity, incongruity, or casus
omissus therein. There is no reason why we cannot use these
principles on appropriate occasions. However, it is a matter of
. C deep regret that these principles have rarely been used in our
law Courts. It is nowhere mentioned in our Constitution or any
other law that only Maxwell's Principles of Interpretation can be
used by the Court. We can use any system of interpretation which
helps us resolve a difficulty. In certain situations Maxwell's
principles would be more appropriate, while in other situations
0
the Mimansa principles may be more suitable.
39. The Mimansa principles of interpretation were created
for resolving the practical difficulties in performing the yagyas.
The rules for performing the various yagyas were given in books
E called the Brahmanas (all inSanskrit) e.g. Shatapath Brahmana,
Aitareya Brahmana, Taitareya Brahmana,.etc. There were many
ambiguities, obscurities, conflicts etc. in the Brahmana texts,
and hence the Mimansa Principles of Interpretation were created
for resolving these difficulties. ·
F 40. Although the Mimansa principles were created for
religious purpose, they were so rational and logical that they
subsequently began to be used in law, grammar, logic,
philosophy, etc. i.e. they became of universal application. The
books on Mimansa are all in Sanskrit, but there is a good book
G in English by Prof. Kishori Lal Sarkar called 'The Mimansa Rules
of Interpretation' published in the Tagore Law Lecture Series,
which may be seen by anyone who wishes to go deeper into
the subject.
41. In the Mimansa system there are three ways of dealing
H
GUJARAT URJA VI KASH NIGAM LTD. v. ESSAR 843
POWER LTD. [MARKANDEY KAT JU, J.]
.~ with conflicts which have been fully discussed by Shabar Swami A
in his commentary on Sutra 14, Chapter Ill, Book Ill of Jaimini.
(1) Where two texts which are apparently conflicting are
capable of being reconciled, then by the Principle of Harmonious
•
Construction (which is called the Samanjasya Principle in
Mimansa) they should be reconciled. The Samanjasya Principle B
has been laid down by Jaimini in Chapter II, Sutra 9 which states

'The inconsistencies asserted are not actually found. The
conflicts consist in difference of application. The real c
intention is not affected by application. Therefore, there is
consistency."
42. The Samanjasya axiom is illustrated in the Dayabhag.
Jimutvahana found that there were two apparently conflicting
texts of Manu and Yajnavalkya. The first stated "a son born after D
...._ a division shall alone take the paternal wealth". The second text
~ stated "sons, with whom the father has made a partition, should
. give a share to the son born after the distribution". Jimutvahana,
utilizing the Samanjasya principle of Mimansa, reconciled these
two texts by holding that the former applies to the case of E
property which is the self-acquired property of the father, and
the latter applies to the property descended from the grand-
father.
43. One of the illustrations of the Samanjasya principle is
~ -....,... the maxim of lost horses and burnt chariot (Nashtashvadaghda F
Ratha Nyaya). This is based on the story of two men traveling in
their respective chariots and one of them losing his horses and
the other having his chariot burnt through the outbreak of fire in
the village in which they were putting up for the night. The horses
that were left were harnessed.to the remaining chariot and the G
two men pursued their journey together. Its teaching is union for
mutual advaritage, which has been quoted in the 161h Vartika to
Panini, and is explained ·t>y Patanjali. It is referred to in Kumarila
Bhatta's Tantra Vartika.
H
844 SUPREME COURT REPORTS [2008] 4 S.C.R.

A (2) The second situation is a conflict where it is impossible ~·
to reconcile the two conflicting texts despite all efforts. In this
situation the Vikalpa principle applies, which says that whichever
law is more in consonance with reason and justice should be
preferred. However, conflict should not be readily assumed and
s every effort should be made to reconcile conflicting texts. It is
only when all efforts of reconciliation fail that the Vikalpa principle
is to be resorted to.
(3) There is a third situation of a conflict and this is where
there are two conflicting irreconciliable texts but one overrides
C the other because of its greater force. This is called a Badha in
the Mimansa system (similar to the doctrine of ultra vires). The
great Mimansa scholar Sree Bhatta Sankara in his book
'Mimansa Valaprakasha' has given several. illustrations of
Badha as follows :
D
"A Shruti of a doubtful character is barred by a Shruti
which is free from doubt. A Unga which is more cogent
bars that which is less cogent. Similarly a Shruti bars a
Smriti. A Shruti bars Achara (custom) also. An absolute
Smriti without reference to any popular reason bars one
E that is based upon a popular reason. An approved Achara
bars an unapproved Achara. An unobjectionable Achara
bars an objectionable Achara. A Smriti of the character of
a Vidhi bars one of the character of an Arthavada. A Smriti
of a doubtful character is barred by one free from doubts.
F That which serves a purpose immediately bars that which
is of a remote service. That which is multifarious in meaning
is barred by that which has a single meaning. The
application of a general text is barred by a special text.
A rule of procedure is barred by a mandatory rule. A
G . manifest sense bars a sense by context. A primary sense
bars a secondary sense. That which has a single indication
is preferable to what has many indications. An indication
of an inherent nature bars one which is not so. That which
indicates an action is to be preferred to what merely
H indicates a capacity. If you can fill up an ellipse by an
-- f
GUJARAT URJA VI KASH NIGAM LTD. v. ESSAR
POWER LTD. [MARKANDEY KATJU, J.]
845

_..._,.. expression which occurs in a passage, you cannot go A
beyond it."
(emphasis supplied)
44. The principle of Badha is discussed by Jaimini in the
tenth chapter of his work. Bad ha primarily means barring a thing B
owing to inconsistency. Jaimini uses the principle of Badha
mainly with reference to cases where Angas or sub-ceremonies
are to be introduced from the Prakriti Yagya (i.e. a yagya whose
~·
rules for performance are given in detail in the Brahmanas) into
a Vikriti (i.e. a yagya whose rules of performance are not
mentioned anywhere, or are incompletely mentioned). In such a c
case, though the Angas· or the sub-ceremonies are to be
borrowed from the Prakriti Yagya, those of the sub-ceremonies
which prove themselves to be inconsistent with or out of place
in the Vikriti Yagya, are to be omitted.
D
45. For example, in the Rajsuya Yagya, certain homas are
~ prescribed, for the proper performance of which one must
f borrow details from the Darshapaurnamasi Yagya. In the Rajsuya
Yagya, plain ground is directed to be selected as the Vedi for
the homas, while in the case of the Darshapaurnamasi, the Vedi E
should be erected by digging the ground with spade etc. Such
an act would be out of place in constructing the Vedi for the
homas in the Rajsuya Yagya. Here, there is a Badha (bar) of the
particular rule regarding the erection of the Vedi in the
Darshapaurnamasi Yagya, being extended to the Rajsuya Yagya.
This is the case of Badha by reason of.express text. F
.~

46. There are other instances in which the inconsistency
arises incidentally. For example, in- the Sadyaska there is no
need of cutting the peg with which the animal is to be tied. But,
in the Agni-Somiya Yagya which is the Prakriti of the Sadyaska G
Yagya, reciting of certain Mantras is prescribed in connection

. __..(
with the cutting of the peg. This recital being out of place in the
former Yagya is barred in carrying the Atidesha process .
Numerous other illustrations can be given. For example, in the
Satra Yagya the selection of Rittik is out of place and so omitted,
H
A
846 SUPREME COURT REP.ORTS [2008] 4 S.C.R.

though this is done in the Soma Yagya of which the Satra is the
Vikriti. The Krishnala Nyaya (black bean maxim) is another
"r-
-
instance. In cases whereAtidesha is to be made by implication,
it is altogether barred, ifthere is an express text against making
the implication.
13 47. When there is a negative ordinance prohibiting a thing,
it is to prevail notwithstanding that there is an Atidesha whict) by
implication enjoins the thing. For instance, there is a rule that all
sacrifices partake of the character of Darsha and Paurnarr'lasi
Yagyas. The result is that all the rules of Darsha and Paurnamasi
c Yagyas are applicable to the Pasu Yagya also. But there is a
text which says that the Aghara and the Ajyabhaga homas need
not be made in thePasu Yagya. Therefore, these homas need
not be made in the Pasu Yagya, though in the absence of the
prohibitory text they would have to be made on account of the
D rule which lays down that all Yagyas must partake of the character
of Darsha anp paurnamasi. ......_
~
48. One of the Mimansa principles is the Gunapradhan
Axiom, and since we are utilizing it in this judgment (apart from
the badha and samanjasya principles) we may describe it in
E some detail.
49. 'Guna' means subordinate or ac<?essory, while
'Pradhan' means principal. The Gunapradhan Axiom states :

"If a word or sentence purporting to express a subordinate
F idea clashes with the principal idea, the former must be ~~.
adjusted to the latter or must be disregarded altogether."
This principle is also expressed by the popular maxim
known as matsya nyaya i.e. 'the bigger fish eats the
smaller fish'.
G
According to Jaimini, acts are of two kind, principal and
subordinate (see Jaimini 2 : 1 : 6).
>--~
In Sutra 3 : 3 : 9 Jaimini states :

H 1011<d1Ci4fasti~ ac:q~1a ~ ~ m:
_,,
GUJARAT URJA VIKASH NIGAM LTD. v. ESSAR 847
POWER LTD. [MARKANDEY KAT JU, J.]

Kumarila Bhatla, in his Tantravartika (See Ganganath Jha's A
English Translation Vol.3, page 1141) explains this Sutra
as follows:
"When the Primary and the Accessory belong to two
different Vedas, the Vedic characteristic of the
Accessory is determined by the Primary, as the B
Accessory is subservient to the purpose of the·
primary."
It is necessary to explain this Sutra in some detail. The
peculiar quality C?f the Rigveda and Samaveda is that the c
mantras belonging to them are read aloud, whereas the
mantras in the Yajurveda are read in a low voice. Now the
difficulty arose about certain ceremonies, e.g.
Agnyadhana, which belong to the Yajurveda but in whtch
verses of the Samveda are to be recited. Are these
Samaveda verses to be recited in a low voice or loud D
voice? The answer, as given in the above Sutra, is that
they are to be recited in low voice, for although they are
Samavedi verses, yet since they are being recited in a
Yajurveda ceremony their attribute must be altered to make
it in accordance with the Yajurveda. E
Commenting on Jaimini 3 : 3 : 9 Kumarila Bhatta says :
"The Siddhanta (principle) laid down by this Sutra is
that in a case where there is one qualification
pertaining to the Accessory by itself and another .. _F
pertaining to it through the Primary, the former
qualification is always to be taker as set aside by. .
the latter. This is because the proper fulfillment of the
Primary is the business of the Accessory also as the ...
latter operates solely for the sake of the former. G
Consequently if, in consideration of its own
qualification ft were to deprive the Primary of its
natural accomplishment then there would be a
disruption of that action (the Primary) for the sake of
which it was meant to operate. Though in such a H

'
848 SUPREME COURT REPORTS [2008} 4 S.C.R.
•
A case the proper fulfillment of the Primary with all its
accompaniments would mean the deprival of the
Accessory of its own natural accompaniment, yet,
as the fact of the Accessory being equipped with all
its accompaniments is not so very necessary (as
B that of the primary), there would be nothing
incongruous in the said deprival". See Ganganath
Jha's English translation of the Tantravartika, Vol.3
page 1141.
50. In our opinion the gunapradhan axiom applies to this
C case. Section 174 is the pradhan whereas Secti6n 175 is the
guna (or subordinate). If we read Section 175 in isolation then
of course we would have to agree to Mr. Nariman's submission .
that Section 11 of the Arbitration and Conciliation Act, 1996
applies. But we cannot read Section 175 in isolation, we have
D to read it along with Section 174, and reading them together,
we have to adjust Section 175 (the gun a or subordinate) to make
it in accordance with Section 174 (the pradhan or principal).
For doing so we will have to add the following words at the end
of Section 175 "except where there is a conflict, express or
E implied, between a provision in this Act and any other law, in
which case the former will prevail".
51. No doubt ordinarily the literal rule of interpretation should
be followed, and hence the Court should neither add nor delete
words in a statute. However, in exceptional cases this can be
F done where not doing so would deprive certain existing words
in a statute of all meaning, or some part of the statute may
become absurd.
52. In the chapter on 'Exceptional Construction' in his book
G on 'Interpretation of Statutes' Maxwell writes:
"Where the language of a statute, in its ordinary meaning
and gramm~tical construction leads to a manifest
contradiction of the apparent purpose of the enactment,
or to some inconvenience or absurdity, hardship or
H injustice, presumably not intended, a construction may be
GUJARAT URJA VIKASH NIGAM LTD. v. ESSAR 849
POWER LTD. [MARKANDEY KAT JU, J.]
_-...,.. put upon it which modifies the meaning of the words, and A
even the structure of the sentence. This may be done by
departing from the rules of grammar, by giving an unusual
meaning to particular words, by altering their collocation,
by rejecting them altogether, or by interpolating other
words, under the influence, no doubt, of an irresistible B
conviction that the legislature could not possibly have
intended what the words signify, and that the modifications
thus made are mere corrections of careless language
and really give the true intention."
53. Thus, in S.S. Kalra vs. Union of India 1991 (2) SCC c
87, this Court has observed that sometimes courts can supply
words which have been accidentally omitted.
54. In G.P. Singh's 'Principles of Statutory Interpretation'
Ninth Edition, 2004 at pages 71-74 several decisions of this
D
Court and foreign Courts have been referred to where the Court
.~ has added words to a statute (though cautioning that normally
~ this should not be done).
55. Hence we have to add the aforementioned words at
the end of Section 175 otherwise there will be an irreconciliable E
conflict between Section 174 and Section 175.
56. In our opinion the principle laid down in Section 174 of
the Electricity Act, 2003 is the principal or primary whereas the
principle laid down in Section 175 is the accessory or
subordinate to the principal. Hence Section 174 will prevail over F
' "'r
Section 175 in matters where there is any confltct (but no further).
57. In our opinion Section 174 and Section 175 of the
Electricity Act, 2003 can be read harmoniously by utilizing the
Samanjasya, Bad ha and Gunapradhana principles of Mimansa.
G
This can be done by holding that when there is any express or
implied conflict between the provisions of the Electricity Act,
2003 and any other Act then the provisions of the Electricity Act,
•. .....(
2003 will prevail, but when there is no conflict, express or implied,
both the Acts are to be read together.
H
850 SUPREME COURT REPORTS , [2008] 4 S.C.R.

A 58. In the present case we have already noted that there
an implied conflict between Section 86(1 )(f) of the Electricity
Act, 2003 and Section 11 of the Arbitration and Conciliation
Act,. 1996 since under Section 86(1 )(f) the dispute between
licensees and generating companies is to be decided by the
s State Commission or the arbitrator nominated by it, whereas
under Section 11 of the Arbitrary and Conciliation Act, 1996,
the, Court can refer such disputes to an arbitrator appointed by
it. Hence on harmonious construction of the provisions of the
Electricity Act, 2003 and the A~bitration and Conciliation Act,
c 1996 we are of the opinion that whenever there is a dispute
between a licensee and the generating companies only the
State Commission or Central Commission (as the case may
be) or arbitrator (or arbitrators) nominated by it can resolve such
a dispute, whereas all other disputes (unless there is some other
provision in the Electricity Act, 2003) would be decided in
D accordance with Section 11 of the Arbitration and Conciliation
Act, 1996. This is also evident from Section 158 of the Electricity
Act, 2003. However, except for Section 11 all other provisions
of the Arbitration and Conciliation Act, 1996 will apply to
arbitrations under Section 86(1 )(f) of the Electricity Act, 2003
E (unless there is a conflicting provision in the Electricity Act, 2003,
in which case such provision will prevail.)
59. In the present case, it is true that there is a provision
for arbitration in the agreement between the parties dtd.
F 30.5.1996. Had the Electricity Act, 2003 not been enacted, there ·
could be no doubt that the arbitration would have to be done in
· accordance with the Arbitration and Conciliation Act, 1996.
However, since the Electricity Act, 2003 has come into force
w.e.f. 10.6.2003, after this date all adjudication of disputes
G between licensees and generating companies can only be done
by the State Commission or the arbitrator (or arbitrators)
appointed by it. After 10.6.2003 there can be no adjudication of
dispute between licensees and generating companies by
anyone other than the State Commission or the arbitrator (or
H arbitrators) nominated by it. We furth~r clarify that all disputes,
GUJARAT URJA VI KASH NIGAM LTD. v. ESSAR 851
POWER LTD. [MARKANDEY KAT JU, J.]

and not merely those pertaining to matters referred to in clauses A
(a) to (e) and (g) to (k) in Section 86(1 ), between the licensee
and generating companies can only be resolved by the
· Commission or an arbitrator appointed by it. This is because
there is no restriction in Section 86(1 )(f) about the nature of the
dispute. B
60. We make it clear that it is only with regard to the authority
which can adjudicate or arbitrate disputes that the Electricity
Act, 2003 will prevail over Section 11 of the Arbitration and
Conciliation Act, 1996. However, as regards, the procedure to
be followed by the State Commission (or the arbitrator C
nominated by it) and other matters related to arbitration (other
than appointment of the arbitrator) the Arbitration and
Conciliation Act, 1996 will apply (except if there is a conflicting
provision in the Act of 2003). In other words, Section 86(1 )(f) is
only restricted to the authority which is to adjudicate or arbitrate D
between licensees and generating companies. Procedural and
other matters relating to such proceedings will of course be
governed by Arbitration and Conciliation Act, 1996, unless there
is a conflicting provision in the Act of 2003.
61. Since the High Court has appointed an arbitrator for E
deciding the dispute between the licensee and. the generating
company, in our opinion, the judgment ofthe High Court has to
be set aside. Only the State Commission or the arbitrator (or
arbitrators) appointed by it could resolve such a dispute. We,
therefore, set aside the impugned judgment of the High Court F
b~t leave it open to the State Commission or the Arbitrator (or
Arbitrators) nominated by it to adjudicate/arbitrate the dispute-
between the parties expeditiously. Appeal allowed. The
impugned judgment set aside. "
62. Case No.873 of 2005 fileo by the appellant under G
Section 86(1 )(f) of the Electricity Act, 2003 before the Gujarat
Electricity Regulatory Commission, is still pending. Since the
matter is pending from 2005, we direct the Gujarat Electricity
1
Regulatory Commission to dispose of the petition as
H
852 SUPREME COURT REPORTS [2008] 4 S.C.R

A expeditiously as possible preferably within six months.
C.A. No1941/2008 [Arising out of 5.L.P.(C) No.675/
2007].
63. This appeal is filed regarding the deduction of Rs.5
s crores. The appellant may file application under Section 94(2)
of the Electricity Act, 2003 before the appropriate Commission,
to pass such an interim order, as may consider appropriate.
This appeal is, accordingly, dismissed.
R.P. Appeals disposed of.
c