Grid
Corporation of Orissa Ltd. & ANR Vs. Balasore Technical School [1999] INSC
105 (30 March 1999)
S.R.Babu,
S.N.Phukun RAJENDRA BABU, J. :
On April 28, 1961, the respondent entered into an
agreement with the appellant for supply of electrical energy in which the
contract demand was specified at 68 KWs and unless a certain percentage of the
contract demand was utilised the respondent would be liable to pay minimum
charges as specified in the agreement. On July 18, 1966, the tariff specified in the agreement
was revised in terms of Section 49 of the Electricity Supply Act and such
tariff as prescribed for general purpose tariff was made applicable to the
respondent. However, no bill in terms of the revised rate as applicable to
general purpose tariff was issued and a bill for additional amount payable was
sent to the respondent. The respondent contended that the contract demand
should be reduced from 68 KWs to 31 KWs. With effect from July 25, 1973, the
respondent did not pay any amount to the appellant in respect of the energy
consumed either at the revised rate effective from 1966 or at the old rate as
specified in the agreement and continued to consume the energy without any
payment at all. On account of non-payment of the energy charges, supply was disconnected
to the respondent after due notice under Section 24 of the Indian Electricity
Act, 1910. The respondent challenged the disconnection and the demand raised by
the Board by invoking the arbitration clause of the original agreement of 1961
and filed O.S.No.127/77 under Sections 8 and 20 of the Arbitration Act for
reference of disputes to arbitration.
The
Subordinate Judge, who considered this matter, allowed the claim of the
respondent and an appeal was preferred to the High Court. In the appeal, a joint
memo was filed to the effect that the respondent shall enter into a fresh
agreement with the appellants and upon such agreement being executed the
appellants would resume supply to the respondent; the respondent shall pay the
charges from the date of reconnection at the new tariff rate applicable to the
respondent; and arrears alleged to be due and claimed by the appellants, if
ultimately accepted by the Arbitrator and made rule of the court shall be paid
by the respondent.
On February 1, 1980, the respondent executed a fresh
agreement which contained a recital in clause 27 thereof which provided that
the arrears under the old agreement shall be deemed to be arrears under the new
agreement. The Subordinate Judge appointed Justice H.Mohapatra, a retired Judge
of the High Court as the Arbitrator and referred five questions involving law
and facts for consideration of the Arbitrator. On February 19, 1983, the
Arbitrator made an award after perusing the claims and counter-statement of the
parties and material on record and answered all the five questions against the
appellants and further held that no amount was payable by the respondent
towards charges for consumption of electricity, although admittedly it had been
consumed until the date of disconnection, that is, December 30, 1976, and no
amount had been paid either at the revised rate or at the original rate with
effect from February 16, 1973. When objection was filed under Sections 30 read
with Section 33 of the Arbitration Act, the Subordinate Judge set aside the
award principally on the ground that the award runs contrary to the agreement.
On appeal by the respondent under Section 39 of the Arbitration Act, the High
Court set aside the order made by the Subordinate Judge and confirmed the award
made by the Arbitrator except in regard to one aspect, namely, that the Orissa
Sate Electricity Board is not entitled to be paid anything by the respondent in
respect of their claims in relation to the agreement. The High Court having
noticed that the observations was outside the reference confirmed the award on
all other questions.
Hence
this appeal. In this Court, on each of the question referred to the Arbitrator
answer is sought to be given by contending that the view taken by the
Arbitrator was wholly outside the scope of the contract and hence perverse or
award made was without jurisdiction. However, the learned counsel for the
respondent contended that the view taken by the High Court is in conformity
with several decisions of this Court including N.Chellappan vs. Secretary, Kerala
State Electricity Board & Anr., 1975 (1) SCC 289. It is submitted that even
if the Arbitrator had made a mistake either in law or in fact in determining
the matters referred and such mistake does not appear on the face of the award,
the award cannot be interferred notwithstanding the mistake.
It is
only when a proposition of law is stated in the award and which is the basis of
the award and that is erroneous can the award be set aside or remitted on the
ground of error of law apparent on the face of the record. The appellants,
however, contended that the Arbitrator cannot ignore the law or misapply it in
order to do what he thinks as just and reasonable even though it was a case of
non-speaking award. The courts are entitled to examine the contract even though
the contract was not incorporated into the award and an Arbitrator being a
creature of the contract must operate within the four corners of the contract
and cannot travel beyond it either by misinterpreting the contract or otherwise.
In this case, the High Court is of the view that a civil court does not sit on
appeal against the award and the power of the court when an award is challenged
is rather limited. The award of the Arbitrator is ordinarily final and
conclusive as long as the Arbitrator has acted within its authority and
according to the principle of fair play. An Arbitrators adjudication is
generally considered binding between the parties for he is a Tribunal selected
by the parties and the power of the court to set aside the award is restricted
to cases set out in Section 30 of the Arbitration Act. It is not open to the
Court to speculate where no reasons are given by the Arbitrator, as to what
impelled him to arrive at his conclusion. If the dispute is within the scope of
the arbitration clause it is no part of the province of the court to enter into
the merits of the dispute. If the award goes beyond the reference or there is
an error apparent on the face of the award it would certainly be open to the
court to interfere with such an award. In New India Civil Erectors (P) Ltd.vs.
Oil & Natural Gas Corporation, 1997 (11) SCC 75, this Court considered a
case of non-speaking award. In that case the Arbitrator had acted contrary to
the specific stipulation/condition contained in the agreement between the
parties. It was held that the Arbitrator being a creature of the contract must
operate within the four corners of the contract and cannot travel beyond it and
he cannot award any amount which is ruled out or prohibited by the terms of the
agreement. In that contract it was provided that for construction of housing
unit, in measuring the built-up area, balcony areas should be excluded.
However, the Arbitrator included the same which was held to be without
jurisdiction. In the same manner it was also held that the price would be firm
and not subject to any escalation under whatsoever ground till the completion
of the work and awarding any sum as a result of escalation was not permissible.
To the same effect is the decision in Associated Engineering Co. vs. Government
of Andhra Pradesh & Anr., 1991 (4) SCC 93. It was stated that if the
Arbitrator commits an error in the construction of the contract, that is an
error within his jurisdiction. But if he wanders outside the contract and deals
with matters not allotted to him, he commits a jurisdictional error and an
umpire or Arbitrator cannot widen his jurisdiction by deciding a question not
referred to him by the parties or by deciding a question otherwise than in
accordance with the contract. A conscious disregard of the law or the
provisions of the contract from which he has derived his authority vitiates the
award. The principle of law stated in N.Chellappans case (supra) on which a
strong reliance has been placed by the learned counsel for the respondent would
make it clear that except in cases of jurisdictional errors it is not open to
the court to interfere with an award. That proposition is unexceptionaable.
However, from a reading of the decisions of this Court referred to earlier it
is clear that when an award is made plainly contrary to the terms of the
contract not by misinterpretation but which are plainly contrary to the terms
of the contract would certainly lead to an inference that there is an error
apparent the award results in jurisdictional error in the award. In such a case
the courts can certainly interfere with the award made by the Arbitrator.
In the
present case, the view taken by the High Court as to the construction of
Section 3 of the Orissa Electricity Supply Act appears to us to be correct. In
that provision the proceedings which relate to a challenge to the power of the
Board to enhance the tariff are subject matter of arbitration. Such proceedings
would abate and not in other cases. The High Court, while considering the
question whether the Orissa Electricity Supply Board is not entitled to be paid
anything by the respondent in respect of their claims relating to the agreement
dated April 28, 1961 was outside the scope of arbitration but failed to see
that the amounts due under the agreement dated April 28, 1961 became part of
the agreement entered into subsequent to the joint memo filed before the High
Court. In the agreement dated February 1, 1980,
clause 27 provided that the arrears under the old agreement shall be deemed to
be arrears under the this agreement . Therefore, if the award made by the
Arbitrator was incorrect in regard to that aspect of the matter, other
questions referred to the Arbitrator formed integral part of the same and,
therefore, the entire award had to be set aside. Even otherwise in respect of
each of the question referred to the Arbitrator, the answers given by him would
indicate that the same has been given in utter disregard of the contract and,
therefore, the view taken by the Subordinate Judge in this case appears to be
correct and the High Court ought to have accepted the same.
In the
result, the order made by the High Court is set aside and the order made by the
Subordinate Judge stands restored and the matter shall stand remitted to the
Arbitrator for fresh consideration in accordance with the law and in the light
of this order. No order as to costs.
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