Holding

The High Court erred in treating the cooperative societies as public sector undertakings and in applying the ONGC‑I ratio; the judgment is set aside and the matter remitted for fresh consideration.

Summary

The Uttar Pradesh State Electricity Board (UPSEB), a public sector undertaking, entered into supply agreements with several cooperative societies registered under the Uttar Pradesh Co-operative Societies Act, 1965. Disputes arose over the rates charged and alleged failure to provide uninterrupted power, leading the Allahabad High Court to hold that both UPSEB and the cooperative societies were "State" entities within Article 12 and "Public Sector Undertakings", and to direct the formation of a committee by the Chief Secretary under the ONGC‑I scheme to resolve the disputes. The Board appealed, contending that cooperative societies cannot be equated with public sector undertakings without factual analysis and that the ONGC‑I ratio was inapplicable. The Supreme Court held that the High Court’s classification of the cooperative societies as public sector undertakings was untenable, that Section 80 of the CPC indicates the distinction between a State department and a PSU, and that the ONGC‑I precedent could not be applied. Consequently, the Court set aside the High Court judgment, remitted the matters for fresh consideration, and disposed of the appeals without costs.

Issues considered

The correct classification of cooperative societies under Article 12 of the Constitution – whether they are "Public Sector Undertakings" for the purpose of applying the ONGC‑I scheme.
Whether a committee under the Chief Secretary, as directed in Oil and Natural Gas Commission v. Collector (ONGC‑I), must be constituted to resolve disputes between a PSU and cooperative societies.
The applicability of the ratio laid down in Oil and Natural Gas Commission and Anr. v. Collector of Central Excise (1992) to the present facts.
The interpretation of Section 80 of the Code of Civil Procedure, 1908 as a pointer to distinguish a State department from a public sector undertaking.

Legislation cited

Code of Civil Procedure, 1908s. Section 80
Constitution of Indias. Article 12
Electricity Act, 1910s. Section 22-B
Electricity (Supply) Act, 1948s. Section 49, s. Section 79
Uttar Pradesh Co-operative Societies Act, 1965

Subjects

Public Sector UndertakingCooperative SocietyArticle 12Section 80 CPCElectricity Bill DisputeCommittee under Chief SecretaryONGC‑I caseUttar Pradesh State Electricity BoardCivil Appeal

Judgment

U.P.S.E.B. AND ANR. A
v.
SANT KABIR SAHAKARI KATA! MILLS LTD.

SEPTEMBER 19, 2005

[ARIJIT PASAYAT AND H.K. SEMA, JJ.] B

Cooperative Society-Dispute with State Electricity-Board Held:
Formation of Committee by State Chief Secretary for resolution of the dispute
was not required as Cooperative Society could not be equated with Public C
Sector Undertaking-Ratio of Oil and Natural Gas Commission and Anr. v.
Collector of Central Excise, [1992} Supp 2 SCC 432, found inapplicable.

Constitution of1ndia, 1950-Article 12-State Electricity Board may be
a 'State' but it is not a State Government department-Section 80 of the Code
of Civil Procedure, 1908 is a pointer in that regard D
Respondent is a co-operative society registered under Uttar Pradesh
Co-operative Societies Act, 1965. During pendency of certain disputes
regarding rate of payment for power supplied by appellant, a State
Electricity Board, the High Court held that respondent was a public sector
undertaking, and since it as well as the appellant were 'State' within E
Article 12 of the Constitution, a committee should be formed by State Chief
Secretary to resolve the dispute, on the lines indicated in Oil and Natural
Gas Commission and Anr. v. Collector ofCentral Excise, (1992) Supp 2 SCC
432. Aggrieved by this order, appellant filed the present appeal contending
that the above decision was not applicable to the facts of the case.
F
Disposing of the appeal, the Court

HELD: I. The High Court's view is clearly untenable. Board cannot
be equated with State Government. Section 80 of the Code of Civil
Procedure, 1908 is a pointer in that regard. Co-operative Societies and G
Public Sector Undertakings are conceptually different. The Board is a
Public Sector Undertaking and not a State Government department. It
may be 'State' for the purpose of Article 12 of the Constitution. There
the similarity ends. Co-operative Societies cannot be, without examination

- of relevant factual aspects, equated with Public Sector Undertakings. The
293 II
294 SUPREME COURT REPORTS [2005] SUPP. 3 S.C.R.

A High Court has come to abrupt conclusion that they are Public Sector
Undertakings without indicating any reason for such conclusion. The High
Court, therefore, was wrong in applying the ratio of Oil and Natural Gas
Commission and Anr. v. Collector a/Central Excise, (1992( Supp 2 SCC 432,
to the facts of the present case. [298-G-H; 299-A-B]

B Oil and Natural Gas Commission and Anr. v. C.C.E., [1992) Supp 2
SCC 432, Oil and Natural Gas Commission v. C.C.E., [1995( Supp 4 SCC
541, Oil and Natural Gas Commission v. C.C.E., (2000) 6 SCC 437, Chief
Conservator of Forest v. Collector, [2003( 3 SCC 472 and Mahanagar
Telephone Nigam Ltd. v. Chairman, Central Board, Direct Taxes and Anr.,
C (2004] 6 SCC 431 Held inapplicable.

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 7965 of2001.

From the Judgment and Order dated 21.4.99 of the Allahabad High
Court in C.M.W.P. No. 5863 of 1999.
D WITH

C.A. Nos. 7966-7973 and 7990-7991 of 200 I.

Ranjit Kumar and Pradeep Misra with him for the Appellants.

E B.B. Singh, Ms. Niranjana Singh and Vishwajit Singh for the
Respondent.

The Judgment of the Court was delivered by

ARIJIT PASAYAT, J. These appeals are directed against the judgments
F rendered by a Division Bench of the Allahabad High Court. The main judgment
was rendered in Civil Misc. Writ Petition no. 5859 of 1999 which is the
subject-matter of challenge in Civil Appeal No. 7965 of2001. Following the
judgment rendered in the said case other writ petitions were disposed of. In
each of the writ petitions filed before the High Court correctness of the
G electricity bills raised by the appellant no. 1-Uttar Pradesh State Electricity
Board (hereinafter referred to as the 'Board') was questioned. The High
Court by the impugned judgment held that the Board was as authority under
Article 12 of the Constitution of India, 1950 (in short 'the Constitution') and
similar was the position so far as the writ petitioners are concerned who

-
according to the High Court were Public Sector Undertakings. The High
H Court held that in cases where the dispute involves the State Government and
U.P.S.E.B. v. SANTKABIRSAHAKARIKATAI MILLS LTD. [PASAYAT, J.] 295
a Public Sector Undertaking, Committee in the line indicated by this Court A
in Oil and Natural Gas Commission and Anr. v. Collector of Central Excise,
[ 1992) Supit 2 SCC 432 for convenience referred to as ONGC-I) should be
set up. Accordingly it was observed that the writ petitioners would move the
State through the Chief Secretary to constitute a Committee to resolve the
dispute. Further direction was given to the effect that the power supply to the
writ petitioners was not to be discontinued.
B

According to the appellant-Board factual position is as follows:-

State Government issued a notification under Section 22-B of the Indian
Electricity Act, 1910 (in short 'Electricity Act') titled as Uttar Pradesh
Electricity (Regulation of Distribution, Consumption) Order 1972 (in short C
the '1972 Order') which imposed certain restrictions on various categories of
consumers for using electricity during certain periods. The 1972 Order was
repealed and in the year 1977 another Notification under Section 22-B, known
as Uttar Pradesh Electricity (Regulation of Supply, Distribution, Consumption
and Use) Order 1977 (in short '1977 Order') was i:.sued. in this order D
consumers were divided into several categories and so far as the Industrial
Consumers are concerned two categories were indicated. They are "Continuous
Process Industries Power Consumers" and "Non-continuous Process Industries
Power Consumers''. List of consumers belonging to the aforesaid category
was annexed as Annexure 2 of the said Order. It was provided in the 1977
Order that Non-continuous Process Industries Power Consumers would not E
use electricity from 18.00 to 22.00 hours every day. It meant that the distinction
between the Continuous Process Industries Power Consumers and the Non-
Continuous Process Industries Power Consumers was that peak hours
restrictions, not to use electricity were not applicable in case of Continuous
Process Industries Power Consumers. The spinning mills and textiles Mills p
were exempted from observing power cutting during peak hours as per clause
8 of the Order and thus these industries also were covered by category
"Continuous Process Industries".

The Writ Petitioners were co-operative societies registered under Uttar
Pradesh Co-operative Societies Act, 1965. Undisputedly they had entered G
into agreements with the Board and one of the clauses in the agreement
provided that supply shall be available to the consumers continuously during
24 hours of each day and throughout whole period of agreement. This Clause
was however, subject to the following restrictions:

"Supplier shall not be responsible for the damages or otherwise H
296 SUPREME COURT REPORTS [2005] SUPP. 3 S.C.R.

A on account of accidental interruption of supply or stoppage or
deficiency of energy caused by any order or direction issued by the
Government of U.P. or resulting from fire, flood, tempest or any
accident or from any strike or lock out of workers or from any other
cause beyond the control of the supplier but the supplier shall make
every effort to restore the supply as soon as possible."
B
Clause 20 of the Agreement provided that in case of any dispute between
the consumer and the Board the matter was to be decided by a person
nominated by the Chairman of the Board and the dispute can only be referred
when the consumer pays outstanding dues. The said clause reads as follows:

C "If any question or dispute or difference arises between the parties
to this agreement as to the interpretation or effect of any provisions
or clause herein contained or the construction thereof or as to any
other matter thereof or the rights, duties or liabilities of either party
in connection therewith, such question, dispute or difference shall be
D referred to the arbitration of the Chairman, U.P. State Electricity
Board or the person nominated by him and the award/decision of the
said arbitrator shall be final and binding upon the parties.

Provided that if the question, dispute or difference relates to or
concerns any dues chargeable to the Consumer in terms of this
E agreement, no reference to arbitration shall at the insiance of such
consumer be made till the consumer has either deposited with the
supplier the amount of dues in dispute or difference or given a Bank
Guarantee of such amount in favour of the Supplier valid upto the
period of one year from the date in which the award becomes final
or the amount or dues is cleared, whichever is earlier."
F
In the year 1984 in exercise of powers conferred under Section 49 read
with Section 79 of the Electricity Supply Act, 1948 (in short the 'Supply
Act') the Uttar Pradesh Electricity Supply (Consumers Regulation) 1984 (in
short the 'Regulations') was framed. The regulations have statutory force and
G Regulation 14 has considerable significance so far as the present cases are
concerned. It reads as follows:

"Regulation 14: Failure of supply

The supplier shall not be liable for any claim for any loss, damage
or compensation, whatsoever arising out of any accidental failure of
H
U.P.S.E.B. r. SANT KABIR SAHAKARI KA TAI MILLS LTD. [PASAYAT, J.J 297
supply or stoppage or curtailment of diminution or variation in supply A
or for failure restoring as a result of any direct or indirect strike or
order of the Government or other competent Authority in regard to
distribution of power or due to war, mutiny, commotion, Riot, strike,
lockout, fire flood, lighting earthquake or other causes beyond the
control of the supplier."
B
In 1986 a Notification dated 28.1.1986 was issued categorizing the
industrial consumers into two categories i.e. Continuous Process Industries
and Non-Continuous Process Industries. Challenging the different rates fixed
by the Board, writ petitions were filed which were dismissed by the High
Court upholding the validity. It was held that it was a valid classification. C
Board felt that the language of the Notification dated 28.1.1986 was not very
clear and therefore a corrigendum was issued clarifying the position that
Continuous Process Industries which are not observing peak hours restrictions
have to pay higher charges. Writ Petitions were filed challenging the levy of
higher charges. The High Court allowed the levy from the date the corrigendum
was issued. The Board has filed appeals questioning the High Court's view. D
During pendency of the appeals, writ petitions were filed alleging that
uninterrupted power supply was not given though higher rates were being
charged. Therefore, it was claimed that amounts paid, which were in excess
of the amounts payable, should be adjusted against the future bills along with
interest. The High Court by its impugned order held that the writ petitioners E
and the Board were 'State' within Article 12 of the Constitution, and directed
a resolution of the dispute by a person to be nominated by the Chief Secretary
of State ofU.P. It held that writ petitioners were "Public Sector Undertakings".

According to the learned counsel for the appellant Board and its
functionaries, the approach of the High Court is clearly erroneous. Huge p
amounts have not been paid by the respondents-writ petitioners. What was
challenged before the High Court was the levy of higher charges on the
allegation that uninterrupted power supply was not given. The decision in
ONGC-1 case (supra) has no application to the facts of the present case. In
any event, the High Court should not have passed a blanket order of stay.
G
Learned counsel for the respondents on the other hand submitted that
the respondents are entitled to receive some amount from the appellants.
According to him, the payment raised is absolutely unreasonable and without
any basis. It was also submitted that disputes between public sector
undertakings and the State should be resolved in the line suggested by this H
298 SUPREME COURT REPORTS (2005] SUPP. 3 S.C.R.

A Court in ONGC-1 case (supra). There is nothing wrong in the High Court's
order granting interim protection.
,.
In ONGC-I case (supra) it was felt desirable that to avoid unnecessary
litigation, disputes between the Governments and the Public Sector
Undertakings should be sorted out by a Committee to be constituted. It was
B pointed out that most of the disputes between the Public Sector undertakings
and the Government get resolved by meeting of minds.

It is certainly desirable that inter-departmental disputes and disputes
between Governments and Public Sector Undertakings should be sorted out
C in the manner suggested by this Court in ONGC-I case (supra).

The stand of the learned counsel for the Board is that the operation of
the High Court's order was stayed and, therefore, the Committee as directed
by this Court has not been set up. The quantum of arrears in different cases
has been set out in the affidavit filed by the appellant-Board. They are as
D follows:

I. CIVIL APPEAL NO. 7965 Rs. 1,65,49,000

2. CIVIL APPEAL NO. 7968 Rs. 6,26, 73,485

3. CIVIL APPEAL NO. 7970 Rs. 16,62,497
E
4. CIVIL APPEAL NO. 7971 Rs. 1,04, 11,681.02

5. CIVIL APPEAL NO. 7972 Rs. 1,88,85,823

6. CIVIL APPEAL NO. 7990 Rs. 4,98,42,000
F
High Court equated the Board with the State Government and held that
the writ petitioners who were co-operative societies were public sector
undertakings.

The High Court's view is clearly untenable. Board cannot be equated
G with State Government. Section 80 of the Code of Civil Procedure, 1908 (in
short 'CPC') is a pointer in that regard. Co-operative Societies and Pubic
Sector Undertakings are conceptually different. The Board is a Public Sector
Undertaking and not a State Government department. It may be "State" for
the purpose of Article 12 of the Constitution. There the similarity ends. Co-
H operative Societies (writ petitioners) cannot be, without examination of relevant
U.P.S.E.B. r. SANTKABIRSAHAKARI KATA! MILLS LTD. (PASAYAT,J.] 299

- factual aspects, equated with Public Sector Undertaking. The High Court has A
come to abrupt conclusion that they are Public Sector Undertakings without
indicating any reason for such conclusion. The High Court, therefore, was
wrong in applying ratio of ONGC-1 case (supra) to the facts of the present
cases.

The view in ONGC-1 case (supra) was further elaborated in Oil and B
Natural Gas Commission v. C.C.E. [1995] Supp. 4 SCC 541 (For sake of
convenience described as ONGC-Il). It was noted in Oil and Natural Gas
Commission v. C.C.E., [2004] 6 SCC 437 (for convenience described as
ONGC-111) that some doubts and problems arose in the working out of the
arrangements in terms of the order of this Court dated 11.10.1991 (ONGC- C
JI case (supra). It was noted in ONGC-111 case (supra) as follows:

"There are some doubts and problems that have arisen in the
working out of these arrangements which require to be clarified
and some creases ironed out. Some doubts persist as to the precise
import and implications of the words "and recourse to litigation D
should be avoided". It is clear that the order of this Court is not
to the effect that - nor can that be done - so far as the Union of
India and its statutory corporations are concerned, their statutory
remedies are effaced. Indeed, the purpose of the constitution of
the High-powered Committee was not to take away those
remedies. The relevant portion of the order reads: (SCC pp. 541- E
42 para 3)

"3. We direct that the Government of India shall set up a committee
consisting ofrepresentatives from the Ministry of Industry, the Bureau
of Public Enterprises and the Ministry of Law, to monitor disputes
between Ministry and Ministry of the Government of India, Ministry F
and public sector undertakings of the Government of India and public
sector undertakings in between themselves to ensure that no litigation
comes to court or to a tribunal without the matter having been first
examined by the Committee and its clearance for litigation. The
Government may include a representative of the Ministry concerned G
in a specific case and one from the Ministry of Finance in the
Committee. Senior officers only should be nominated so that the
Committee would function with status, control and discipline."

It is abundantly clear that the machinery contemplated is only to
ensure that no litigation comes to court without the parties having H
300 SUPREME COURT REPORTS [2005) SUPP. 3 S.C.R.

A had an opportunity of conciliation before an in-house committee."

The matter was again examined in the case of Chief Conservator of
-
Forest v. Collector, [2003] 3 SCC 472. In Paras 14 and 15 it was noted as
follows:

B "Under the scheme of the Constitution, Article 131 confers original
jurisdiction on the Supreme Court in regard to a dispute between two
States of the Union of India or between one or more States and the
Union of India. It was not contemplated by the framers of the
Constitution or the C.P.C. that two departments of a State or the
Union of India will fight a litigation in a court of law. It is neither
c appropriate nor permissible for two departments of a State or the
Union of India to fight litigation in a court of law. Indeed, such a
course cannot but be detrimental to the public interest as it also
entails avoidable wastage of public money and time. Various
departments of the Government are its limbs and, therefore, they
D must act in co-ordination and not in confrontation. Filing of a writ
petition by one department against the other by invoking the
extraordinary jurisdiction of the High Court is not only against the
propriety and polity as it smacks of indiscipline but is also contrary
to the basic concept of law which requires that for suing or being
sued, there must be either a natural or a juristic person. The States/
E Union of India must evolve a mechanism to set at rest all inter-
departmental controversies at the level of the Government and such
matters should not be carried to a court of law for resolution of the
controversy. In the case of disputes between public sector undertakings
and Union of India, this Court in Oil and Natural Gas Commission
F v. Collector of Central Excise, [1992] Suppl. 2 sec 432 called upon
the Cabinet Secretary to handle such matters. In Oil and Natural Gas
Commission and Anr. v. Collector of Central Excise, [1995] Suppl.
4 SCC 541, this Court directed the Central Government to set up a
Committee consisting of representatives from the Ministry of Industry,
the Bureau of Public Enterprises and the Ministry of Law, to monitor
G dispute between Ministry and Ministry of the Government of India,
Ministry and public sector undertakings of the Government of India
and public sector undertakings in between themselves, to ensure that
no litigation comes to court or to a Tribunal without the matter having
been first examined by the Committee and its clearance for litigation.
The Government may include a representative of the Ministry
H
U.P.S.E.B. v. SANTKABIRSAHAKARI KATA! MILLS LTD. [PASAYAT,J] 301
concerned in a specific case and one from the Ministry of Finance in A
the Committee. Senior officers only should be nominated so that the
Committee would function with status, control and discipline.

The facts of this appeal, noticed above, make out a strong case
that there is a felt need of setting up of similar committees by the
State Government also to resolve the controversy arising between B
various departments of the State or the State and any of its
undertakings. It would be appropriate for the State Governments to
set up a Committee consisting of the Chief Secretary of the State, the
Secretaries of the concerned departments, the Secretary of Law and
where financial commitments are involved, the Secretary of Finance. C
The decision taken by such a committee shall be binding on all the
departments concerned and shall be the stand of the Government."

The directions as noted above were quoted in Mahanagar Telephone
Nigam ltd v. Chairman, Central Board, Direct Taxes and Anr., [2004] 6
SCC 431 and were adopted in paragraph 8. It was noted as follows : D
"Undoubtedly, the right to enforce a right in a court of law cannot
be effaced. However, it must be remembered that courts are
overburdened with a large number of cases. The majority of such
cases pertain to Government Departments and/or public sector
undertakings. As is stated in Chief Conservator of Fores ts' case [2003] E
3 SCC 472 it was not contemplated by the framers of the Constitution
or the Civil Procedure Code that two departments of a State or Union
of India and/or a department of the Government and a public sector
undertaking fight a litigation in a court of law. Such a course is
detrimental to public interest as it entails avoidable wastage of public
money and time. These are all limbs of the Government and must act F
in co-ordination and not confrontation. The mechanism set up by this
court is not, as suggested by Mr. Andhyarujina, only to conciliate
between Government Departments. It is also set up for purposes of
ensuring that frivolous disputes do not come before courts without
clearance from the High Powere Committee. If it can, the High Powere G
Committee will resolve the dispute. If the dispute is not resolved the
Committee would undoubtedly give clearance. However, there could
also be frivolous litigation proposed by a department of the
Government or a public sector undertaking. This could be prevented
by the High Powere Committee. In such cases there is no question of
resolving the dispute. The Committee only has to refuse permiss.ion H
302 SUPREME COURT REPORTS (2005] SUPP. 3 S.C.R.

A to litigate. No right of the Department/public sector undertaking is
affected in such a case. The litigation being of a frivolous nature must
not be brought to court. To be remembered that in almost all cases
one or the other party will not be happy with the decision of the High
Powere Committee. The dissatisfied party will always claim that its
rights are affected, when in fact, no right is affected. The Committee
B is constituted of highly placed officers of the Government, who do not
have an interest in the dispute, it is thus expected that their decision
will be fair and honest. Even if the Department/public sector
undertaking finds the decision unpalatable, discipline requires that
they abide by it. Otherwise the whole purpose of this exercise will be
c lost and every party against whom the decision is given will claim
that they have been wronged and that their rights are affected. This
should not be allowed to be done."

The ONGC I to lll cases (supra), Chief Conservator's case (supra) and
Mahanagar Telephone's case (supra) deal with disputes relating to Central
D Government, State Government and Public Sector Undertakings. They have
no application to the facts of these cases as the High Court has not indicated
any reason for its abrupt conclusion that the writ petitioners are Public Sector
Undertakings. In the absence of a factual determination in that regard, the
decisions can have no application.

E Accordingly, we set aside the impugned judgments of the High Court
and remit the matter for fresh consideration of the cases. As the matter is
pending· consideration for a long time, it would be appropriate if the writ
petition~ are disposed of early. It is made clear that if parties place material
to show that writ petitioners are Public Sector Undertakings then the High
F Court can direct action in line with Chief Conservator of Forest's case (supra)
and not otherwise.

The appeals are accordingly disposed of. No costs.

v.s. Appeal disposed of.