Holding

The Supreme Court dismissed the appeal, holding that Section 9 of the Arbitration Act only confers interim‑relief powers, the Chief Justice’s appointment power is judicial, and the High Court’s jurisdiction to determine the arbitrator‑appointment issue is proper, thus no interference under Article 136 is warranted.

Summary

The appellant Transmission Corporation of A.P. Ltd. issued a show‑cause notice to the respondent Lanco Kondapalli Power Pvt. Ltd. seeking to re‑fix the capacity charges for a power purchase agreement, prompting the respondent to invoke the arbitration clause and seek a permanent injunction under Section 9 of the Arbitration and Conciliation Act, 1996. The civil court dismissed the injunction, holding that the Andhra Pradesh Electricity Regulatory Commission alone had jurisdiction, but the High Court stayed that order and granted an injunction restraining the corporation from re‑fixing the charges. The corporation appealed, arguing that the Commission’s jurisdiction barred the courts and that the High Court erred in granting interim relief. The Supreme Court held that the power of the Chief Justice (or his nominee) to appoint an arbitrator under the 1996 Act is a judicial function, that Section 9 only provides interim measures to preserve the status‑quo pending arbitration, and that the High Court’s jurisdiction to decide the arbitrator‑appointment issue is proper. Consequently, the Supreme Court dismissed the appeal, refusing to interfere under Article 136.

Issues considered

The extent of jurisdiction of the civil court versus the Andhra Pradesh Electricity Regulatory Commission under the 1998 and 2003 Acts.
Whether the High Court could grant an injunction under Section 9 of the Arbitration and Conciliation Act, 1996.
Whether the power of the Chief Justice to appoint an arbitrator is judicial or administrative.
Whether the Supreme Court should interfere with the High Court’s order under Article 136.

Legislation cited

Andhra Pradesh Electricity Reforms Act, 1998s. 28, s. 37, s. 50
Arbitration and Conciliation Act, 1996s. 11, s. 9
Electricity Act, 2003s. 145, s. 154, s. 174, s. 83, s. 84, s. 86, s. 94

Subjects

ArbitrationInterim injunctionSection 9Electricity Regulatory CommissionJurisdictionPower Purchase AgreementCapacity chargesArticle 136Judicial comity

Judgment

M/S. TRANSMISSION .CORPORATION' OF A.P. LTD. _,,
A ...
v.
MIS. LAN CO KONDAPALLI POWER PVT. LTD.

DECEMBER IS, 2005
I
B [S.B. SINHA AND P.P. NAOLEKAR, JJ.]

Arbitration and Conciliation Act; 1996; Sec!fon 9/Andhra Pradesh
Electricity Reforms Act, 1998; Ss.28, 37 and 50/Electrlcil)' Act, 2003; Ss. 83,
84, 86, 94, 145, 154 and 174: r
c
Power purchase agreem~nt between generator/supplier and
Transm_lssion Corporation-Rate fixed on the basis of certain capacity charges
on the output-Corporation issuing show cause notice to the supplier for
re.fixing capacity charges-Filing of an application before Civil Court by the
D supplier for issuance of permanent injunction against the Corporation-
Dismissed by Civil Court-High Court granted an injunction restraining the
Corporation from reftxing the capacity charges-Filing of an application by
the Corporation for re.fixing the capacity charges before State Electricity
Regulatory Commission-Challenge to--Proceedings before the Commission
stayed by High Court-On appeal. Held: Since the po·wer of the Chief Justice
E or his nominee to appoint an arbitrator is judicial, jurisdiction of the High
<
Court/Civil Court In terms of the 1996 Act would be a subject matter for
determination by the High Court in the writ proceedings pending before It-
The Court under Section 9 of the 1996 Act could formulate interim measures
to protect the right of the parties before the Arbitral Tribunal from being
r
F frustrated by directing the parties to maintain status quo-A Writ Court
could grant an l'lfunctlon In exercise of its power under Article 226, however,
final relief could be granted by the Arbilral Trlbunal~Though, Supreme
Court's power to Interfere with the order of the High Court Is discretionary,
but it is not a.fit case to interfere with the order of the High Courts In exercise
of the power under Article I 36 of the Constitution of India.
G
Appellant-Transmission Corporation and respondent-supplier/generator
of electricity entered Into a Power Purchase Agreement. In terms of the
agreement, the price to be paid therefor by the Corporation included "Capacity
charges" and "variable charges". Though the Corporation had been paying
790
H
/

~
/4_
TRANSMISSION CORPN. OF A.P. LTD. 1•. LANCO KONDAPALLI POWER PVT. LTD. 791
the price on the basis of capacity charges on the output of the plant fixed at A
368.144 MW but it issued a show cause notice to the supplier for refixing
the capacity charges on the out put of the plant at 351.49 MW with
retrospective effect. Respondent-supplier filed an application in terms of the
arbitration clause in the agreement under Section 9 of the Arbitration and
Conciliation Act praying for issuance of a permanent injunction against the B
Corporation restraining It from taking any unilateral decision pursuant to
the show cause notice. The Corporation filed an application before the Andhra
Pradesh Electricity Regulatory Commission praying for refixation of the
Installed capacity of the plant in terms of Section 37(1) of the A.P. Electricity
Reforms Act, 1998/Sectlon 86(l)(f) r/w Section 74 of the Electricity Act,
2003. The supplier filed an application in terms of Article 14 of the C
Arbitration clause of the Power Purchase Agreement before the Chief Justice
of the Andhra Pradesh High Court, for Issuing a writ of prohibition against
the Commission. The High Court stayed the proceedings. In the meantime,
application for grant of Injunction was dlsmlsi;ed by the Civil Court holding
that the Commission alone had the jurisdiction to decide the dispute. On
appeal, the High Court set aside the order of the Civil Court and granted an D
injunction restraining the Commission from refixing the capacity charges
till disposal of the original petition by the Civil Court. Hence the present
appeaL

- It was contended by the appellant-Transmission Co1·poration that the
Respondent-supplier, although not being a licensee within the meaning of the E
2003 Act, was required to have a licence as It supplied electrical energy to
the appellant; that by virtue of the provisions contained In the 1998 Act and
the 2003 Act, not only the jurisdiction of the Civil Court Is barred, but also
the dispute and differences, If any, arose between the two ltcenHes and/or
two generating companies could be referred to the Commission only In terms F
of Section 86(1)(f) of the 2003 Act and thus the High Court committed a
serious error In passing an order of injunction; that the Hlah Court despite
/
findings of the City Civil Court to the effect that It had no jurisdiction to pass
an Interim order In terms of Section 9 of the 1996 Act, did not address itself
to the said question, and granted an Injunction only on the premise that the G
jurisdiction of the Commission to proceed with the arbitration In terms of
the reference made by the appellant Is subjudice.

Respondent submitted that Sections 37 and SO of the Andhra Pradesh
Electricity Reforms Act have no application to the facts of the present case as
it is not a case where a dispute between the two licensees Is involved; that the H
792 SUPREME COURT REPORTS [2005) SUPP. 5 S.C.R.

A dispute between the parties being confined to the interpretation of the
expression 'installed capacity' within the meaning of the provisions of the
agreement; that the Commission which is primarily concerned with framing
of tariffs and adjudication of disputes between licensees and others have no
jurisdiction to decide disputes and differences between the parties arising
under an agreement; that the parties were ad idem as regard construction of
B the agreement as payments of the bills had been made on the basis of the
installed capacity of 368.144 MW; and that without resolution of the dispute,
the Appellant could not have· taken an unilateral action in changing the terms
and conditions thereof for the purpose of the payments of bills.

Dismissing the appeal, the Court
c
HELD: l.l. A 7-Judge Bench of this Court in the case of Mis S.B.P. &
Co. v. Patel Engineering Ltd & Anr., by overruling an earlier Constitution
Bench Judgment of this Court in Konkan Railway Corporation Ltd & Anr. ..
v. Rani Constructions Pvt. ltd., held that the power of the Chief Justice or
D his nominee under the Arbitration and Conciliation Act, 1996 is a judicial
power as opposed to the administrative power. The contention of the Appellant
that the City Civil Court or for that matter the High Court have no jurisdiction
in terms of the 1996 Act, therefore, must finally be determined by the High · ·
Court itself. Such a question indisputably will also be a subject-matter of
determination by the High Court in the writ proceedings pending before it.
E (804-D, E]

Mis S.B.P. & Co. v. Patel Engineering Ltd. & Anr., (2005) 9 SCALE 1,
followed.

West Bengal Electricity Regulatory Commission v. CESC Ltd, 12002] 8
p SCC 715 and Grid Corporation of Orissa Ltd v. Indian Charge Chrome Ltd,
(1998] 5 sec 438, held inapplicable.

1.2. The Court under Section 9 is only formulating interim measures
so as to protect the right under adjudication before the Arbitral Tribunal from
being frustrated. Section 9 of the 1996 Act should be applied so that status
G quo may be directed to be maintained having regard to the fact that the parties
understood the workability of the agreement in a particular manner.
(807-D-E]

Firm Ashok Traders and Anr. v. Gurumukh Das Saluja and Ors., 12004)
3 SCC 155 and Jagdish Chandra Gupta v. Kajaria Traders (India) Ltd, AIR
H (1964) SC 1882, referred to.
TRANSMISSIONCORPN.OF A.P.LID. "· LANCOKONDAPAUJPOWERPVT. LTD. 793
1.3. A writ court can also grant injunction in exercise of ;~-power under A
Article 226 of the Constitution of India. If injunction is refused in this __ _
proceeding, the interim order passed in the writ proceedings shall continue.
· tt may give rise to a stalemate. It may violate the well-known rule of judicial
comity. (807-G(

Wander ltd and Anr. v. Antox India P. Ltd., (1990( Supp. SCC 727 and B
Mis Power Control Appliances and Ors. v. Sumeet Machines Pvt. Ltd, (1994(
2 sec 448, referred to.

'A Treatise ~n The Law Go~er~ing Injunctions' by Spelling and Lewis',
referred to. '
c
2.1. The interim direction ordinarily would precede finding of a prima
facie case. When existenee of a primafacie case is es~ablished, the court shall
consider the_ o>thcr relevant factors, namely, balance of convenience and
irreparable injuries. The High Court in its impugned judgment although not
directly but indirectly has'considered this aspect of the matter.when on merit D
it noticed that the Appellant ha_s raised a dispute as regard payment of an
excess amount ofRs.35 crores although according to the Respondent a sum
ofRs.132 crures is due to it from the Appellant and the Appellant had been
I paying the amount for the last two years as per the contract. If the parties
bad been acting in a particular manner for a long time upon interpreting the . E
terms and conditions of the contract, if pending determination of the lis, an
ord•r is passed that the parties would continue to do so, the same would not
render the decision as an arbitrary one. Even the Appellant had prayed for
adjudication at the hands of the Commission in the same manner. Thus, it
itself thought that the final relief would be granted only by the Arbitrator.
The Commission is yet to apply its mind. Even before the Commission, the F
Appellant has not made any application for a direction in terms of sub-section
(2) of Section 94 of the Act. (808-G, H; 809-Al ,_

2.2. The Respondent h~s installed the Power Generation Plant. It has
continuously been supplying electrical energy to the Appellant. It has to G
discharge its contractual obligation. The Appellant being the only consumer,
·the Respondent has no other option but to supply electrical energy to it. In
the event, the dispute is referred to the arbi~~tor, the equity between the parties
-can be adjusted. (809-DI - -- ·

3.1. It is well-settled that this Court would not interfere with an order H
-•
794 SUPREME COURT REPORTS [2005) SUPP. S S.C.R.

A of the High Court only because it will be lawful to do so. Article 136 of the
Constitution vests this Court with a discretionary jurisdiction. In a given case,
.
it may or may not exercise Its power. It is not a fit case where Interference
with the High Court's judgment would be a proper exercise of jurisdiction
under Article 136 of the Constitution of India. (809-G I

B Chandra Singh and Ors. v. State of Rajasthan and Anr.. (2003] 6 SCC
545; State of Punjab v. Savinderjit Kaur, 12004) 4 SCC 58; N.K. Prasada v.
Government of India and Ors., (2004] 6 SCC 299; lnder Parkash Gupta v.
State of J&K and Ors., (2004] 6 SCC 786 and State of Uttaranchal Through
Collector, Dehradun and Anr. v. Ajlt Singh Bhola and Anr., 12004) 6 SCC
C 800, relied on. (81 l·A, Bl

3.2. The High Court is requested to consider the desirability of hearing
both the writ petition as also the petition under Section 11 of the 1996 Act
flied by the Respondent. All the contentions of the parties shall remain open
and any observation made by the High Court in the Impugned order or by this
D Court must be considered to have been made for the purpose of disposal of
the Interim prayer.

CIVIL APPELLATE JURISDICTION: CivilAppeal No. 7522 of200S.

E From the Judgment and Order dated S.10.2004 of the Andhra Pradesh
High Court in A.A.O. No. 3269 of 2004.

P.P. Rao, A.T. Rao and A. Subba Rao with him for the Appellant.

C.A. Sundram, 0. Ramakrishna Prasad, Mohd. Wasay Khan, Dr. K.P.
F Kyalasanath, Suyodhan Byrapanchi, Kodanram and Shiv Prasad with him for
the Respondent. · ·

The Judgment of the Court was delivered by

S.B. SINHA, J, Leave granted.

G Background facts
The parties herein entered into a Power Purchase Agreement on
31.03.1997 for short gestation liquid fuel based power project of 3SS MW.

H The said agreement contained an arbitration clause in Article 14 thereof.
TRANSMISSION CORl'N. OF A.P. LTD.'· LANCO KONDAPALLI POWER PVT.LTD. (SINHA, l.J 795

Dispute

The Plant was commissioned. In terms of the said agreement, the power
generated in the Plant constructed by the ,Respondent herein was to be
supplied to the Appellant Corporation. The price to be paid therefor by the
Appellant included 'capacity charges' and 'variable charges'. Upon commission
of the Plant, various tests as regard capacity of the plant to generate electricity B
were carried out. The Appellant herein had been paying capacity charges on
the output of the Plant which was fixed at 368.144 MW from 08.11.2001. A
notice, however, was issued by the Appellant· alleging that the capacity
charges payable by it with reference to the installed capacity should have
been fixed at 334.7S MW x Rh (relative humidity) factor with tolerance limit C ,
of+ or So/o as per the agreement which works out at JS 1.49 MW and on that
premise as to why future payments should not be made accordingly and why
the previous bills should not be revised with reference thereto. The Respondent
by a letter dated 17.12.2003 demanded withdrawal of the said notice from the
Appellant.
D
Proceedings

l In view of the threatened action on the part of the Appellant herein, an
application purported to be under Section 9 of the Arbitration and Conciliation
Act, 1996 (for short, 'the 1996 Act') was tiled before the City Civil Court
praying for a permanent injunction restraining· the Appellant herein from E · ?
taking any unilateral decision pursuant to the said show cause notice, Evidently, '
the said application was filed relying on or on the basis of the arbitration. ,
clause contained In the said Power Purchase Agreement. ·
,,
· The Appellant, however, filed an application before the Andhra Pradesh ·
Electricity Regulatory Commission (for short, 'the Commission') originally · F
constituted under the Andhra Pradesh Electricity Reform Act,_ 1998 (for short,
'1998 Act'), praring, Inter al/a, for fixing the installed capacity of the Plant
and for consequential reliefs.. . .

The said application before the Commission was filed by the Appellant
herein on the premise that the Commission alone has the jurisdiction to G
arbitrate in respect of disputes and differences arising between the parties or
to nominate an arbitrator therefor in terms of Section 37(1) of the 1998 Act
corresponding to Section 86(1Xf) read with Section 174 of the Electricity Act,
2003 (for short, '2003 Act'). However, in the meantime, as no arbitrator was
.-' appointed by the Appellant in terms of the arbitration agreement contained H
796 SUPREME COURT REPORTS (2005) SUPP. 5 S.C.R.

A in Article 14 of the Power Purchase Agreement, an application purported to
be under sub-sections (3) and (4) of Section 11 of the 1996 Act was filed
before the Chief Justice of the Andhra Pradesh for appointment of an arbitrator.
The said application is still pending.

A writ petition marked as Writ Petition No.7838 of2004 was also filed
B by the Respondent before the Andhra Pradesh High Court on or about
22.04.2004 praying for issuance of a writ of prohibition against the Commission
restraining it from proceeding to adjudicate the dispute between the parties
on the premise that the constitution of the Commission was incomplete. In
the said writ petition, an interim order was passed by the High Court directing
C "interim stay of the impugned proceedings purported to be taken by
Respondent No. I (Appellant herein) in terms of the impugned notice".

The Respondent's application for grant of injunction in the proceedings
initiated before the City Civil Court in the meanwhile was taken up for hearing
and by an order dated I I .08.2004, the said Interlocutory Application was
D dismissed, holding that having regard to the provisions of the I 998 Act and
the 2003 Act, the Commission alone had the jurisdiction to decide the dispute
and not the City Civil Court.

Contentions of the Appellant

E An appeal thereagainst was preferred by the Respondent before the
High Court which was marked as Appeal No.3269 of 2004, wherein by reason
of the impugned judgment and order dated 05.10.2004, the High Court while
setting aside the said order of the City Civil Court granted an injunction
restraining the Appellant herein from refixing the capacity of the Plant at
334. 75 MW x Rh Factor at the site· till disposal of the OP by the City Civil
F Court.

Mr. P.P. Rao, the learned Senior Counsel appearing on behalf of the
Appellant, would submit that the Respondent herein, although not being a
licensee within the meaning of the 2003 Act, was required to have a licence
G as it supplied electrical energy to the Appellant herein.

It was urged that in view of the provisions contained in the I 998 Act
and the 2003 Act, not only the jurisdiction of the Civil Court is barred, any
dispute and difference between the two licensees and/or two generating
companies can be referred to an arbitration of the Commission only, as
H envisaged under Section 86(1 )(t) of the 2003 Act and in that view of the

,,.__
•,,
TRANSMISSION CORPN. OF A.P. LTD.''- LANCO KONDAPALLI POWER PVT.LTD. [SINHA. J.) 797

matter, the High Court committed a serious error in passing an order of A
injunction.

It was submitted that bo!h under the 1998 Act as also under the 2003
Act, the Commission had the requisite jurisdiction to pass an interim order
also and, thus, the said Acts are self-contained Codes.
B
Mr. Rao contended that the High Court despite findings of the City Civil
Court to the effect that it had no jurisdiction to pass an interim order in terms
of Section 9 of the l 996 Act, did not address itself to the said question, could
not have proceeded to allow the appeal preferred by the Respondent herein
and granted ad interim order of injunction only on the premise that the
jurisdiction of the Commission to proceed with the arbitration in terms of the C
reference made by the Appellant herein is subjudice.

Contentions of the Respondent

Mr. C.A. Sundatam, the learned Senior Counsel appearing on behalf of
the Respondent, on the other hand, submitted that Sections 37 and 50 of the D
1998 Act have no application to the facts of the present case as it is not a
case where a dispute between the two licensees is involved. The dispute
between the parties being confined to the interpretation of the expression
'installed capacity' within the meaning of the provisions of the agreement, the
Commission which is primarily concerned with framing of tariffs and E
adjudication of disputes between licensees and others as envisaged, inter
alia, under Section 9, 29 and 33 of the Act can be said to have no jurisdiction
to decide disputes and ·differences between the parties arising under an
agreement. In view of the fact that the parties were ad idem as regard
construction of the said agreement as payments of the bills had been made
on the basis of the installed capacity 368.144 MW from 08.l l.2001to10.12.2003, F
and having regard to the arbitration agreement contained in the contract;
without resolution of the dispute in terms thereof, the Appellant could not
h.ave taken an unilateral action in changing the terms and conditions thereof
for the purpose of the payments of bills.

In any view of the matter, the Appellant itself having made the following G
prayers before the Commission :

"In the aforesaid facts and circumstances, the Applicant prays
that Hon'ble Commission may pass appropriate orders in respect of
the following : H
798 SUPREME COURT REPORTS [2005] SUPP. 5 S.C.R.

A (a) To fix the Installed Capacity of the plant, M/s Lanco Kondapalli
Power Limited, as 334.75 MW x RH factor at the site Reference
Conditions (as per PPA) with tolerance limit of+ 5%.

(b) To allow AP TRANSCO to pay all future power purchase bills
(fixed charges, variable charges, Incentive etc.) based on the capacity
B on 334.75 MW x RH factor and as per all other provisions of PPA
including tolerance limit.

(c) To .allow APTRANSCO to revise all previous power purchase
bills (fixed charges, variable charges incentive etc.) from inception
based on the capacity of 334.75 fylW x RH factor and as per all other
C provisions of PPA including tolerance limit;

and thus cannot now tum round and contend that it would do so unilaterally
without any award made in that behalf. The Respondent, thus, not only has
a prima facie case keeping in view that that a sum of Rs.132 crores is due
to the Respondent, the balance of convenience also lies in its favour.
D
Agreement

Clause 35 of Article I of the said agreement defines 'Installed Capacity'
to mean :

E "the maximum electrical generating capacity of the Project or a
Generating Unit, as the case may be, in megawatts ("MW") as
measured at the generator terminals, determined from time to time
pursuant to the tests given in Schedule F, subject to adjustments for
the Ambient Reference Conditions.

F Explanation I : Where the output of one or more Generating Units
of the Project or of the Project as a w~ole, in final tests to be specified
by the Board is higher than the output initially guaranteed by the
manufacturer /supplier thereof, the output initially guaranteed by the
manufacturer/supplier will be the installed capacity thereof, as from
the date of such final tests. However, where the output of one or more
G Generating Units of the Project or of the Project as a whole, in final
tests to be specified by the Board is lower than the output initially
guaranteed by the manufacturer/supplier thereof, that lower output
alone will be the installed capacity thereof.

Explanation 2 : The installed Capacity furnished in the Bid is taken
H
TRANSMISSION CORPN. OF A.P. LTD. 1·. LANCO KONDAPALLI POWER PVT.LTD. [SINHA, J.] 799

as the nominal capacity and for installed Capacity as determined as A
per Explanation 1 above, a tolerance limit of plus or minus 5% is
permitted."

The expression 'Project' has been defined in sub-clause 47 of the said
agreement to mean :
B
"the combined cycle power station proposed to be established at
Kondapally, Krishna Dist., in Andhra Pradesh, India, consisting of 2
(two) Generating Units, which are designed for poly-fuel-firing and 1
(one) steam Generating Unit, having a nominal installed capacity of
355 Mega Watts (ISO) adjusted to Ambient Reference Conditions."
c
Schedule A appended to the said agreement provides for the technical
limits, clause 3 whereof defines 'Dynamic Parameters' to mean :

"3. Dynamic Parameters
The Dynamic Parameters are the essential operating characteristics
which will define the limits within which a Unit or the Project is D
required to operate during normal operation.
The Dynamic Parameters of each Unit and the Project will initially
be those projected in the EPC Contract. During testing under the
CPC Contract, the Company will establish Dynamic Parameters
and it will supply details of these to the Board. Subject to the E
Dynamic Parameters being adjusted and verified prior to the
COD of each Unit and the Project COD, the Dynamic Parameters
established by the Company shall replace those projected in the.
EPC Contract and shall be deemed incorporated into this
Schedule." F
Relevant parts of Article 14 containing the arbitration agreement between
the parties, read as under:

"Article 14

14.l Information Dispute Resolution G
(a) Each party shall designate in writing to the other party is a
representative who shall be authorized to resolve any dispute
arising under this Agreement in an equitable manner.
(b) If the designated representatives are unable to resolve a dispute H

I - -------- ---
800 SUPREME COURT REPORTS (2005] SUPP. S S.C.R.
\
A under this Agreement within fifteen (15) days, such dispute shall
be referred by such representatives to a senior officer designated
by the Company and a senior officer designated by the Board,
respe_ctively, who shall attempt to resolve the dispute within a
further period of fifteen (15) days.

B (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 within
· ·reasonable access during normal business hours to any and all
non-privileged records, information and data pertaining to any
·su~h dispute.. ·
c
142 Arbitration
(a) In the event that any dispute is not resolved between the Parties
pursuant to Article 14.1, then such dispute shall be settled
exclosively and finally by _arbitration. It is specifically understood
· and agreed that any dispute that cannot be resolved between
D
the parties, including any matter relating tO the interpretation of
f this Agreement, shall be submitted to arbitration irrespective of
the magnirude thereof, and the amount in dispute or whether
such dispute would otherwise be considered justiciable or ripe
for resolution by.any court or arbitral tribunal. This Agreement
E and the rights and obligations of the Parties hereunder shall
remain in full force and effect p_ending the award h such
arbitration proceedings; which award shall determine whether
and when termination of this Agreemeniifrelevant shall become .
effective. · · · · ·

F xxx xxx xxx
(f) an
Any decision or award of arbitral tribun?l appointed pursuant
to this Article 14.2 shall be final and binding upon the Parties
and shall be the sole and exclusive remedy between the Parties
regarding any cJaims, counterclaims, isslles or accountings
G presented or pied to the arbitrators. The Parties waive any rights
to appeal or any review_ of such award by any court or tribunal
of the competent jurisdiction. The Parties agree that any
arbitration made may be enforced by the Parties against assets
of the relevant Party wherever those assets are located or may
be· found, and judgment upon any arbitration award· may be
H '
-· ------
TRANSMISSION CORPN. OF AP. LTD. • LANCO KONDAPALLI POWER PVT.LTD. [SINHA, l.J 80 J
.
entered by any court of competent jurisdiction thereoCThe- A
Parties expressly submit to the jurisdiction of any such court.
(g) All arbitration awards shall be denominated in Indian Rupees. If
the arbitration award (or part thereof) consists of any currency
othe.r than Indian Rupees, then award (or part thereof) shall be
converted to Indian Rupees based on the applicable market B
rate(s) of foreign exchange, not exceeding such TI selling rate(s)
as published by the State Bank of India on the date of such
payment. Interest at a rate equal to· the Working Capital Rate
. plus two percent (2%) shall be due and payable to the Party on
receipt of an arbitration award from the date thirty (30) days after
the date such award is made pursuant to this Article 14.2 through c
the date of payment
(h) Any arbitration proceedings or award rendered hereunder and
the validity, effect and interpretation of this Article 14 shall be
governed by the laws of India and (to the extent applicable) the
· New York Convention on the Recognition and Enforcement of D
Arbitral Awards, June, 10, 1958, to which England and India are
I parties.
(i) The Parties agree that any amount due under this Article .14.2
shall be due as a separate debt and shall not be affected by or \

merged .into any judgment being obtained for any other sum due E '''
under or in respect of this Agreement." ·
'
StaJutory provisions : ...
The State of Andhra Pradesh enacted the Andhra Pradesh. Electricity
Reforms Act, 1998, for providing the constitution of an Electricity Regulatory F
Commission, restructuring of the electricity industry, rationalization of the
generation, transmission, distributio~ and supply of electricity avenues for
participation of private sector in the electricity industry and generally for
taking measures conducive to the development and management of the
electricity industry in an efficient, economic and competitive manner and for
matters connected therewith or incidental thereto. G
---
'Licensee' has been defined in Section 2(e) of the 1998 Act as under:

"Licensee" or "licence holder" means a person licensed under section
__, 14 of the Act to transmit or supply energy including APTRANSCO;"
H

-·
802 SUPREME COURT REPORTS [2005] SUPP. S S.C.R.

A It is not in dispute that the Commission was constituted in terms of the
Act. Section 37 of the said Act contains a non-obstante clause stating that
notwithstanding anything contained in the 1996 Act, any dispute arising
between the licensees shall be referred to the Commission. The Commission
may proceed to act as arbitrator or nominate arbitrator or arbitrators to
adjudicate and settle such disputes. Section 28 of the 1998 Act empowers the
B Commission to issue an interim order as it deems proper for securing compliance
if it is satisfied'that a licensee is contravening or is likely to contravene any
relevant condition or requirement of the licence.

The 2003 Act came into force with effect from 26.05.2003. Sub-section
C (64) of Section 2 of the said Act defines the State Commission to mean, inter
alia, the State Electricity Regulatory Commission constituted under sub-
section ( 1) of Section 82 thereof. In tenns of Section 82, a State Government
is enjoined with a duty to constitute a commission within six months from the
appointed day. The proviso appended to sub-section (1) of Section 82, however,
postulates that the commission earlier constituted shall continue and its
D Chairperson, Members, Sec:·etary and officers and other employees shall
continue to function for the purpose of the said Act. Section 86 provides for
functions of the State Commission. Clause (f) of sub-section (I) thereof
empowers the State Commission to adjudicate upon the disputes between the
licensees ·and generating companies and to refer any dispute for arbitration.
E Section 158 of the said Act occurring in Pa.rt XVI deals with dispute resolution,
which reads as under :

"158. Arbitration.-Where any matter is, by or under this Act,
directed to be determined by arbitration, the matter shall, unless it is
otherwise expressly provided in the licence of a licensee, be determined
by such person or persons as the Appropriate Commission may
F
nominate in that behalf on the application of either party; but in all
other respects the arbitration shall be subject to the provisions of the
Arbitration and Conciliation Act, 1996 (26 of 1996)"

Sub-section (2) of Section 94 of the Act empowers the State Commission
G to pass an interim order in any proceeding before it. The Civil Court's
jurisdiction is barred under Section 145 of the said Act which reads as under::

"145. Civil court not to have jurisdiction.-No civil court shall have
jurisdiction to entertain any suit or proceeding in respect of any
matter which an assessing officer referred to in section 126 or on
H appellate authority referred to in section 127 or the adjudicating officer

(
'
TRANSMISSION CORPN. OF A.P. LTD. 1•. LANCO KONDAPALLI POWER PVT. LTD. (SINHA, J.) 803

appointed under this Act is empowered by or under this Act to A
determine and no injunction shall be granted by any court or other
authority in respect of any action taken or to be taken in pursuance
of any power conferred by or under this Act."

In terms of the Section 185, the Electricity Regulatory Commissions Act,
1998 was repealed but in terms of sub-section (3) thereof the provisions of B
the enactments specified in the Schedule, not inconsistent therewith shall
apply to the States in which such enactments are applicable. Item No.3 of the
Schedule refers to the Andhra Pradesh Electricity Reform Act, 1998.

Analysis of the agreement and the statutory provisions
c
The Appellant is a licensee within the meaning of both the 1998 Act and
the 2003 Act.

The question as to whether the Respondent should have taken a licence
or permit under the 2003 Act or not is not a matter which requires our
immediate attention. The Appellant is a licensee and the Respondent is a D
generating company in terms of the provisions of the 2003 Act. Section 3 7
of the 1998 Act deals with disputes between the licensees.

Primafacie Section 50 of the 1998 Act, which bars the jurisdiction of
the Civil Court keeping in view the language employed therein, is required to E
be read with Section 37 thereof. The resolution of the disputes between the
parties rests upon the proper interpretation of the said Power Purchase
Agreement and in particular the definition of 'installed capacity'. Who would
arbitrate in respect of the said dispute is the principal question. It is no doubt
true that in the event if it ultimately be held that the arbitration clause
contained in the contract between the parties dated 31.03 .1997 stood F
superseded in view of the provisions of the 1998 Act and the 2003 Act,
arguably, the question of Civil Court's granting of an order of injunction in
tenns of Section 9 or the High Court to determine the question as to who
should be appointed as an arbitrator, may not arise. As to whether Section
86(1 )(t) of the 2003 Act confers an exclusive jurisdiction to decide all disputes G
and differences between a licensee and a generating company is open tc
question. It may or may not be that the said provision may have to be read
with other provisions contained in the power of the Commission to resolve
disputes between various parties as for example Sections 9; 20 or 29 thereot:
But it would be matter of construction of the relevant provisions as to
whether by reason of Section 86(1)(f) of the 2003 Act, the Commission derives H
804 SUPREME COURT REPORTS (2005] SUPP. 5 S.C.R.

A a power so as to enable it to arbitrate also in relation to a dispute arising out
an agreement although the Commission may not have any role to play
-
whatsoever in respect thereof.

Determination

B The learned Counsel for the parties, as noticed hereinbefore, have
argued before us on the interpretation of the provisions of the relevant
statutes and agreement for detennining the effect and purport thereof.

As at present advised, however, we refrain ourselves from expressing
any opinion one way or the other having regard to the fact that the matter
C ultimately must receive a detailed consideration at the hands of the High
Court both in the writ petition as also in the application filed by the Respondent
under Section 11 of the 1996 Act.

We do so for the reason that recently a 7-Judge Bench of this Court
D in Mis S.B.P. & Co. v. Patel Engineering Ltd & Anr., (2005) 9 SCALE 1
overruling an earlier Constitution Bench Judgment of this Court in Konkan
Railway Corporation Ltd. & Anr. v. Rani Constructions Pvt. ltd., [2002] 2
sec 388, held that the power of the Chief Justice or his nominee under the
1996 Act is a judicial power as opposed to the administrative power. The
contention of the Appellant that the City Civil Court or for that matter the
E High Court have no jurisdiction in tenns of the 1996 Act, therefore, must
finally be determined by the High Court itself. Such a question indisputably
will also be a subject-matter of determination by the High Court in the writ
proceedings pending before it.

However, it is not a case where any dispute has arisen in respect of a
F statutory function of the Commission to frame tariff and in that view of the
matter the decision of this Court in West Bengal Electricity Regulatory
Commission v. CESC Ltd., [2002] 8 SCC 715 cannot be said to have any
application whatsoever.

The ratio laid down in Grid Corporation of Orissa Ltd. v. Indian
G Charge Chrome Ltd, [1998] 5 SCC 438 whereupon Mr. Rao placed strong
reliance is not applicable in this case as therein it was found that the High
· Court erroneously assumed that the Regulatory Commission had failed to
arbitrate under Section 3 7(1) of the 1998 Act, which was found to be factually
incorrect.
H
TRANSMISSION CORPN. OF A.P. LTD. 1•. LANCO KONDAPALLI POWER PVT.LTD. (SINHA, J.) 805

- In A.P. Gas Power Corporation Ltd. etc. v. A.P. State Regulatory A
Commission and Anr etc., [2004] 10 SCC 511, the question was as to whether
the Appellant therein was required to take, under the law, a licence for
utilization/sale or supply of power generated by it to the participating/
shareholding industries ()r to .their sister concerns or the industries to whom
the shares of A.P. GPCL have been transferred by the participating industries.
It was held that such licence was necessary, stating B
" ... It would surely be a supply to a non-participating industry and .in
that event it would be necessary to have a licence under the relevant
provisions of law. If there is such a legal requirement, merely an
agreement amongst certain parties would not exclude the application
of law. Provisions of law regulating the situation, would prevail over
c
any kind of agreement amongst some individuals as a group or
othe1wise. We are, therefore, of the view that such a clause in the
Memorandum of Understanding would not do away with the
requirement of having a licence for supply of electricity generated by
A.P. GPCL to such concerns which may be under the same group as D
the participating industries but not the participating industries
themselves."

The Respondent, therefore, has raised triable issues. What would
constitute triable issues has succinctly been deah with by the House of Lords
in its well-known decision in American Cyanamid Co v. Ethicon Ltd., (1975) E
l AER 504, holding :

"Your Lordships should in my view take this opportunity of
declaring that there is no such rule. The use of such expression as
'a probability', 'aprimafacie case', or 'a strongprimafacie case' in
F
the context of the exercise of a discretionary power to grant an
interlocutory injunction leads to confusion as to the object sought to
be achieved by this form Of temporary relief. The court no doubt must
be satisfied that the claim is not frivolous or vexatious; in other
words, that there is a serious question to be tried."
G
It was further observecJ :

"Where other factors appear to be evenly balanced it is a <:ounrel
of prudence to take such measures as are calculated to preserve the
status quo. If the defendant is enjoined temporarily from doing
something that he has not done before, the only effect of the H
...
806 SUPREME COURT REPORTS ·(2005] SUPP. S S.C.R.

A interlocutory injunction in the event of his succeeding at the trial is
to postpone the date at. which he is able to embark on a course of
action which he has not previously found it necessary to undertake;
.·~·
-
. whereas to interrupt him in the conduct of an established enterprise
would cause much greater inconvenience to him since he would have
to start again to establish it in the· event of his succeeding at the trial.
B
•••
The factors which he took into consideration, and in my view
properly, were that Ethicon's sutures XLG were not yet on the market;
so that had no business which would be brought to a stop by the
c injunction; no factories would be closed and no workpeople would be
thrown out of work. They held a dominant position in the United
Kingdom market for absorbable surgical sutures and adopted· an
aggressive sales policy."

We are, however, not oblivious of the subsequent development of law
D both in England as well as in this jurisdiction. The Chancery Division in
Series 5 Software v. Clarke, [ 1996] 1 All ER 853 opined:

"In many cases before American Cyanamid the prospect of success
was one of the important factors taken into account in assessing the
balance of convenience. The courts would be less willing to subject
E
the plaintiff to the risk of irrecoverable loss which would befall him
if an interlocutory injunction was refused in those cases where it
thought he was likely to win at the trial than in those cases where it
thought he was likely to lose. The assessment of the prospects of
success therefore was an important factor in deciding whether the
F court should exercise its discretion to grant interlocutory relief. I~ is
this consideration which American Cyanamid is said to have prohibited
in all but the most exceptional case. So it is necessary to' consider with
some care what was said in the House of Lords on this issue."

G In Colgate Palmolive (India) Ltd v. Hindustan Lever Ltd, (1999] 7 SCC
l, this Court observed that Laddie, J. in Series 5 Software (supra) had been
able to resolve the issue without any departure from the true perspective of
the judgment in American Cyanamid. In that case, however, this Court was
considering a matter under Monopolies and Restrictive Trade Practices Act,
1969.
H
In S.M Dyechem Ltd v. Cadbury (India) Ltd., [2000] 5 SCC 573,
TRANSMISSION CORPN. OF A.P. LTD. 1·. LANCO KONDAPALLI POWER PVT. LTD. [SINHA. J.) 807

Jagannadha Rao, J. in a case arising under Trade and Merchandise Marks A
Act, 1958 reiterated the same principle stating that even the comparative
strength and weaknesses of the parties may be a subject matter of consideration
for the purpose of grant of injunction in trade mark matters stating :

"21. Therefore, in trademark matters, it is now necessary to go into the
question of ••comparable strength" of the cases of either party, apart B
from balance of convenience. Point 4 is decided accordingly."

The said decisions were noticed yet again in a case involving
infringement of trade mark in Cadila Health Care ltd. v. Cadila
Pharmaceuticals ltd, [2001] 5 SCC 73.
c
We are, however, herein concerned with a different type of case. Same
standard would be applicable in a case involving Section 9 of the 1996 Act.

In this connection, we may notice a decision of this Court in Firm
Ashok Traders and Anr. v. Gurumukh Das Saluja and Ors., [(2004) 3 SCC 155].
Although therein the applicability of the arbitration agreement was in question D
having regard to a Constitution Bench decision of this Court in Jagdish
Chandra Gupta v. Kajaria Traders (India) Ltd., AIR (1964) SC 1882, this
Court maintained an order appointing a Receiver albeit with certain
modifications on the premise that the right arising from the partnership deed
or conferred by the Partnership Act is being enforced in the Arbitral Tribunal; E
the court under Section 9 is only formulating interim measures so as to protect
the right under adjudication before the Arbitral Tribunal from being frustrated.

- We have referred to Firm Ashok Traders, (supra) not because we agree
with the principle laid down therein but only to suggest that Section 9 of the
1996 Act should be applied so that status quo may be directed to be maintained F
having regard to the fact that the parties understood the workability of the
agreement in a particular manner.

A writ court can also grant injunction in exercise of its power under
Article 226 of the Constitution of India. If injunction is refused in this
proceeding, the interim order passed in the writ proceedings shall continue. G
It may give rise to a stalemate. It may violate the well-known rule of judicial
comity.

In 'A Treatise on The Law Governing Injunctions' by Spelling and
Lewis' it is stated :
H
808 SUPREME COURT REPORTS [2005) SUPP. S S.C.R.

A "Sec. 8. Conflict and Loss of Jurisdiction.
Where a court having general jurisdiction and having acquired
-
jurisdiction of the subject-matter has issued an injunction, a court of
concurrent jurisdiction will usually refuse to interfere by issuance of
a second injunction. There is no established rule of exclusion which
B would deprive a court of jurisdiction to issue an injunction because
of the issuance of an injunction between the same parties appertaining
to the same subject-matter, but there is what may properly be termed
a judicial comity on the subject. And even where it is a case of one
court having refused to grant an injunction, while such refusal does
not exclude another coordinate court or judge from jurisdiction, yet
c the granting of the injunction by a second judge may lead to
complications and retaliatory action"

The High Court, therefore, while noticing the interim order passed in the
writ proceedings may have the said principle in mind.
D In Wander Ltd. and Anr. v. Antox India P. ltd., (1990) Supp. sec 727,
it is stated :

"The interlocutory remedy is intended to preserve in status quo, the
rights of parties which may appear on a primafacie case. The court
also, in restraining a defendant from exercising what he considers his·
E legal right but what the plaintiff would like to be prevented, puts into
the scales, as a relevant consideration whether the defendant has yet
to commence his enterpr!se or whether he has already been doing so
in which latter case considerations somewhat different from those that
apply to a case where the defendant is yet to commence his enterprise,
F are attracted."

{See also Mis Power Control Appliances and Ors. v. Sumeet Machines
Pvt. Ltd. [1994) 2 sec 448].

The interim direction ordinarily would precede finding of a primafacie
G case. When existence of a prima facie case is established, the court shall
consider the other relevant· factors, namely, balance of convenience and
irreparable injuries. The High Court in its impugned judgment although not
directly but indirectly has considered this aspect of the matter when on merit
it noticed that the Appellant has raised a dispute as regard payment of an
excess amount of Rs.35 crores although according to the Respondent a sum
H (
TRANSMISSION CORPN. OF A.P. LTD. 1•. LANCO KONDAPALLI POWER PVT. LTD. [SINHA, J.] 809

of Rs.132 crores is due to it from the Appellant and the Appellant had been A
paying the amount for the last two years as per the contract.

Conduct of the parties is also a relevant factor. If the parties had been
acting in a particular manner for a long time upon interpreting the terms and
conditions of the contract, if pending determination of the lis, an order is
passed that the parties would continue to do so, the same would not render B
the. decision as an arbitrary one, as was contended by Mr. Rao. Even the
Appellant had prayed for adjudication at the hands of the Commission in the
same manner. Thus, it itself thought that the final relief would be granted only
by the Arbitrator.

The Commission is yet to apply its mind. Even before the Commission, C
the Appellant has not made any application for a direction in terms of sub-
section (2) of Section 94 of the Act.

The Respondent has installed the Power Generation Plant. It has
continuously been supplying electrical energy to the Appellant. Indisputably, D'
it has to discharge its contractual obligation. The Appellant being the only
consumer, the Respondent has no other option but to supply electrical energy
to it. In the event, the dispute is referr~d to the arbitrator, the equity between
the parties can be adjusted. Without going into the correctness or otherwise
of the claim of the Respondent, we may notice, that according to it, the
Appellant owes a hefty sum of Rs.132 crores to it. According to the Appellant, E
in the event, the disputes and differences between the parties are determined
in its favour, it may be held, that it has paid an excess sum of Rs.35 crores
only.

Clause 2 of Article 14 postulates that pending arbitration, the rights and
obligations of the parties shall remain in full force and effect pending the F
award in such arbitration proceedings, which award shall determine whether
and when te1mination of the said agreement if irrelevant shall become effective.

It is now well-settled that this Court would not interfere with an order
of the High Court only because it will be lawful to do so. Article 136 of the G
Constitution vests this Court with a discretionary jurisdiction. In a given case,
it may or may not exercise its power. The question came up for consideration
before this Court in Chandra Singh and Ors. v. State of Rajasthan and Anr.,
[2003] 6 sec 545 wherein it was observed:

"42. In any event, even assuming that there is some force in the H
810 SUPREME COURT REPORTS [2005) SUPP. 5 S.C.R.

A contention of the appellants, this Court will be justified in following
Taherakhatoon v. Salambin Mohd. wherein this Co!}rt declared that
even ifthe appellants' contention is right in law having regard to the
overall circumstances of the case, this Court would be justified in
declining to grant relief under Article 136 while declaring the law in
favour of the appellants."
B
[See also State of Punjab v. Savinderjit Kaur, (2004] 4 SCC 58]

The said principle was reiterated in N.K. Prasada v. Government of
India and Ors., [2004) 6 SCC 299 stating:

C ".. .It is trite that in a given case, the Court may refuse to exercise its
discretionary jurisdiction under Article 136 of the Constitution."

In /nder Parkash Gupta v. State of J&K and Ors., [2004) 6 SCC 786,
it was stated:

D "42. In ordinary course we would have allowed the appeal but we
cannot lose sight of the fact that the selections had been made in the
year 1994. A valuable period of IO years has elapsed. The private
respondents have been working in their posts for the last l 0 years.
It is trite that with a view to do complete justice between the parties,
this Court in a given case may not exercise its jurisdiction under
E Article 136 of the Constitution of India."

The same principle has been reiterated in State of Uttaranchal Through
Collector, Dehradun and Anr. v. Ajit Singh Bhola and Anr., (2004] 6 SCC 800
wherein it was stated:

F "9 ... Having regard to the manner in which the District Magistrate took
over possession of the premises, which appears to us as at present
advised, to be high-handed, arbitrary and without any legal sanction
we are not persuaded to exercise our discretion under Article 136 of
the Constitution of India to set aside the interim order passed by the
High Court. It is well settled that this Court will not exercise its
G
discretion and quash an order which appears to be illegal, if its effect
is to revive another illegal order."

We, therefore, are of the opinion that it is not a fit case where interference
with the High Court's judgment would be a proper exercise of jurisdiction
H under Article 136 of the Constitution of India.
TRANSMISSION CORPN. OF A.P. LTD. 1•. LANCO KONDAPALLI POWER PVT. LTD. [SINHA, J.) 811

We would, however, request the High Court to consider the desirability A
of hearing both the writ petition as also the petition under Section 11 of the
1996 Act tiled by the Respondent herein as expeditiously as possible and
preferably within a period of six weeks from the date of communication of this
order.

It goes without saying that all the contentions of the parties shall B
remain open and any observation made by the High Court in the impugned
order or by us herein must be considered to have been made for the purpose
of disposal of the interim prayer.

The appeal is dismissed. No costs.
c
S.K.S. Appeal dismissed.