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Punjab State Electricity Board And Others v. Ludhiana Steels Private Ltd. .
Factual and Procedural Background
Ludhiana Steel Private Limited entered into an electricity-supply agreement with the Punjab State Electricity Board. On 6 April 1987 the meter at the consumer’s premises was discovered to be under-recording consumption. A check-meter was installed on 16 May 1988, and the consumer thereafter paid on the basis of that meter.
For the period 6 October 1986–16 May 1988 the Board issued a bill dated 16 August 1988 for Rs 28,56,854 representing alleged unrecorded consumption. The consumer filed a civil suit seeking a permanent injunction against recovery of that amount and obtained (but later lost) an interlocutory injunction.
While the suit was pending, the consumer invoked Section 26(6) of the Indian Electricity Act, 1910 and approached the Electrical Inspector to determine the meter’s correctness. The Inspector declined to act because of the pending suit. In revision, the High Court directed the Inspector to proceed, and dismissed a subsequent review petition. The Board sought special leave in the Supreme Court.
By consent order dated 14 November 1991, the Supreme Court referred “the dispute” to arbitration by Justice A.D. Koshal (retired). The arbitrator issued an award on 18 February 1992, allowing the consumer’s claim for the disputed period (Part A) and leaving Parts B and C—subsequent periods—outside the reference. The Board filed objections to the award, leading to the present Supreme Court decision.
Legal Issues Presented
- Whether the Supreme Court itself, rather than the trial court, should consider and make the arbitral award the rule of the court.
- Whether the consent order referred only procedural questions or the entire substantive dispute to the arbitrator.
- Whether the arbitrator failed to decide the dispute by deferring to the Electrical Inspector under Section 26(6) of the Indian Electricity Act, 1910.
- Whether an agreement between the parties displaced the statutory regime of Section 26(6).
Arguments of the Parties
Appellant (Board) Arguments
- The award should be transmitted to the trial court for confirmation; the Supreme Court lacks jurisdiction to make it the rule of the court.
- The consent order referred only the issue pending in the special-leave petition—not the main dispute in the suit—to arbitration.
- The arbitrator exceeded his mandate by sending the matter back to the Electrical Inspector instead of deciding it finally.
- Under Section 26(6), the Electrical Inspector can estimate consumption for six months prior to the meter check, validating the Board’s claim; moreover, the supply agreement overrides Section 26 because it is an “agreement to the contrary”.
Respondent (Consumer) Arguments
The opinion does not set out the respondent’s arguments in detail beyond its assertion before the arbitrator that the Board was not entitled to recover any amount beyond meter readings unless so determined by the Electrical Inspector.
Table of Precedents Cited
No precedents were cited in the provided opinion.
Court's Reasoning and Analysis
Jurisdiction to make the award rule of the court: The referral order expressly directed that the award be sent to the Registry of the Supreme Court. The Court therefore intended to retain competence to accept or reject the award; nothing in the order suggested remission to the trial court.
Scope of reference: The language “the dispute” and the parties’ conduct before the arbitrator showed that the entire controversy in the civil suit (Part A) was submitted. The Board had participated on the merits without objection; it could not later contend the reference was limited to a procedural point.
Alleged failure by arbitrator: The arbitrator’s task was to decide whether the Board could recover the billed amount before adjudication by the Electrical Inspector. He decided the Board could not, and clarified that any later decision by the Inspector would govern subject to appeal. This fulfilled, rather than avoided, the mandate; hence no ground existed to remit or set aside the award for error apparent.
Effect of Section 26(6): Because both the arbitrator and the statutory reference cover the identical period (6 October 1986–16 May 1988), the Court found it unnecessary to interpret the six-month limitation urged by the Board.
“Agreement to the contrary” contention: The Board failed to identify any contractual clause inconsistent with Section 26(6). Absent proof of such a clause, the statutory mechanism prevailed, rendering the argument misplaced.
Holding and Implications
HOLDING: The Supreme Court made the arbitral award dated 18 February 1992 the rule of the Court; the award is treated as the decree in the suit, which is accordingly disposed of. The Electrical Inspector is directed to decide the statutory reference expeditiously. No order as to costs.
Implications: The decision finally resolves the monetary dispute for the contested period between the parties, subject to the Electrical Inspector’s eventual determination under Section 26(6). It reinforces that a consent reference to arbitration before the Supreme Court vests that Court with exclusive authority to confirm or reject the award. No broader legal precedent is articulated beyond the parties.
B.P Jeevan Reddy, J.— Leave granted.
2. The respondent, Ludhiana Steel Private Limited is a consumer of electricity. It had entered into an agreement with the Punjab State Electricity Board for supply of energy and was availing it. The meter installed at the respondent's premises was checked on April 6, 1987. It was found that it was recording lower consumption than what was actually being consumed. Sometime later, a check-meter was installed (on May 16, 1988) and, we are told, the petitioner has been paying the charges on the basis of the readings recorded by the check-meter. For the period commencing October 6, 1986 (six months prior to the date of check) up to May 16, 1988 (the date on which the check-meter was installed) the Board sent a bill dated August 16, 1988 in a sum of Rs 28,56,854 towards the energy said to have been consumed by the plaintiff but not recorded by the meter. Contesting the said bill, the plaintiff instituted a suit asking for a permanent injunction restraining the Board and its officials from recovering the said amount or any part thereof on the basis of the said bill. In that suit, he applied for a temporary injunction which was granted initially but vacated later. Meanwhile, the respondent applied to the Electrical Inspector under sub-section (6) of Section 26 of the Indian Electricity Act requesting him to decide whether the meter was not correct and whether he is liable to pay any amount over and above that paid by him already with respect to the said period. The Electrical Inspector refused to proceed with the said application on the ground of pendency of the suit aforementioned.
3. Against the order vacating the temporary injunction, the respondent filed a revision before the High Court of Punjab and Haryana. The High Court disposed of the revision petition directing the Electrical Inspector to decide the matter referred to him in accordance with law as expeditiously as possible, preferably within four months. It clarified that the pendency of the suit is no ground for him not to proceed with the said application. The plaintiff/respondent filed a review petition which was dismissed on August 29, 1991. The present appeal is preferred against the order in the review petition.
4. When the special leave petition came up for orders before a Bench comprising Ranganath Misra, C.J and one of us, G.N Ray, J., the following order was passed:
“By the consent of parties we direct that the dispute be referred to the arbitration of Mr Justice A.D Koshal, a retired Judge of this Court. He may take the assistance of a technical assessor and may consult the Chief Inspector. We would suggest that the arbitrator may fix his terms and would try to make his award within four months from now. The award may be sent to the Registry of this Court. Expenses shall be apportioned fifty-fifty.”
5. In accordance with this order, Shri Justice A.D Koshal entered upon the reference and passed his award on February 18, 1992. Before the arbitrator, the plaintiff/respondent split up its claim into three parts, each relating to a specific period as stated in the table below: (extracted from the award)
Designation of Part Period Claim Part A 6-10-1986 to 16-5-1988 The Boards demand contained in Bill dated August 16, 1988 for Rs 28,56,854 and surcharge for non-payment of that amount must be rejected in full, subject only to the decision of C.E.I regarding the accuracy of the first meter under sub-section (6) of Section 26 of the 1910 Act. Part B 17-5-1988 to 10-8-1990 The Board has charged the Company in accordance with readings recorded by the second meter which is a very defective and wholly unreliable instrument. Part C 10-8-1990 onwards The Board claims that second meter is also running slow. This the Company denies and the dispute has been referred to C.E.I The Board can charge only in accordance with readings recorded by the first meter or, in any case, those by the second meter.
6. The learned arbitrator held that the suit in which reference to arbitration has been made pertains only to the period mentioned under Part A i.e from October 6, 1986 to May 16, 1988. He, therefore, refused to pronounce upon the plaintiff's claim with respect to periods mentioned under Parts B and C. So far as Part A is concerned, he rendered the following decision:
“14. In the result, the claim of the Company relating to period A succeeds in full and it is held that the Board is not entitled to any amount for supply of electrical energy to the Company over and above that computed in accordance with the readings recorded by the first meter except insofar as an Electrical Inspector may allow it in a decision given in conformity with the provisions of sub-section (6) above extracted. If and when such a decision is announced, it shall prevail subject to the result of any appeal therefrom.”
7. The Board has filed objections to the said award. We have heard both the counsel for the appellant-Board as well as counsel for the respondent/plaintiff.
8. The first objection urged by Shri Goel, learned counsel for the Board is that the award must be sent to the trial court which will consider and decide whether it should be made the rule of the Court. He submitted that it is not for this Court to consider whether the said award should be made the Rule of the Court. We are not prepared to agree. The order referring the dispute to the arbitrator expressly states that “the award may be sent to the Registry of this Court”. There is nothing in the order to show that this Court contemplated transmitting the award to the trial court for consideration. It is evident from a reading of the order that the acceptance or rejection of the award lies with this Court and this Court alone.
9. The second objection of the learned counsel for the appellant is that what could have been referred to the arbitrator was only the dispute which was involved in the special leave petition. The main dispute pending in the suit was never intended to be nor was it actually referred to the arbitrator. This again is an objection which we cannot countenance. It is rather ridiculous to suggest that what was referred to the arbitrator was whether the Electrical Inspector should be asked to proceed with the application under Section 26(6) pending the suit. It is evident from the order that the very dispute between the parties pending in the suit was referred and that is how the arbitrator and the parties understood it. At no stage before the arbitrator did the Board raise the objection that he had no authority to go into the main dispute and that he must confine himself to the correctness of the High Court's order directing the Electrical Inspector to proceed with the application under Section 26(6). Having consented to the order dated November 14, 1991 and having participated in the proceedings before the arbitrator on the merits of the main dispute, it is not now open to the Board to raise the said objection merely because the award has gone against it.
10. Shri Goel then submitted that the arbitrator has not decided the question which he was asked to decide, inasmuch as he has relegated the dispute over again to the Electrical Inspector. We cannot agree with this contention either. The case of the Board was that it is entitled to recover the said sum of Rs 28,56,854 straightaway even before the Electrical Inspector decides upon the correctness of the meter and the liability of the plaintiff to pay additional amount. And that dispute the arbitrator has now decided. This Court never intended that the arbitrator should substitute himself for the Electrical Inspector and render a decision under Section 26(6). The arbitrator has decided that the Board is not entitled to recover any amount for supply of electrical energy to the plaintiff over and above that computed in accordance with the readings recorded by the first meter except insofar as an Electrical Inspector may allow it in a decision given under sub-section (6) of Section 26. He has further clarified that if and when Electrical Inspector renders his decision, it shall prevail over his award subject, of course, to any appeal therefrom. We, therefore, see no warrant for remitting the award under Section 16 nor are we satisfied that the award suffers from any error apparent on the face of the record. The error apparent, according to the Board, is the very same failure to decide the issue of the plaintiff's liability fully and finally.
11. Yet another argument urged by Shri Goel pertains to the interpretation of sub-section (6) of Section 26. According to him, the said sub-section empowers the Electrical Inspector to estimate the amount of energy supplied to the consumer for a period six months prior to the check in addition to the period subsequent to the check. We need not pronounce upon this submission inasmuch as the arbitrator has proceeded to consider the Board's claim for the very same period. The reference to Electrical Inspector too is for the very same period i.e October 6, 1986 to May 16, 1988, the date on which the check-meter was installed.
12. Lastly, it was submitted by Shri Goel that the agreement between the parties provides to the contrary, as contemplated by sub-section (1) of Section 26 and that for that reason the agreement prevails over the provisions of the statute. He relies upon the opening words in sub-section (1) of Section 26 which reads as follows:
“(1) In the absence of an agreement to the contrary, the amount of energy supplied to a consumer or the electrical quantity contained in the supply shall be ascertained by means of a correct meter, and the licensee shall, if required by the consumer, cause the consumer to be supplied with such a meter:
Provided that the licensee may require the consumer to give him security for the price of a meter and enter into an agreement for the hire thereof, unless the consumer elects to purchase a meter.”
(emphasis supplied)
13. It is not brought to our notice that the agreement contains any provision inconsistent with the one contained in sub-section (6) of Section 26. It is not even shown that the agreement provides for a method (for ascertaining the amount of energy consumed by the respondent) different than the one provided in sub-section (1) of Section 26. In such a situation, the contention urged by the learned counsel must be held to be a misplaced one.
14. Accordingly, we make the award made by Shri Justice A.D Koshal (retired) on February 18, 1992, the Rule of the Court. It shall be treated as the decree in the suit. The suit is disposed of in terms of the said award. The Electrical Inspector shall decide the dispute referred to him expeditiously in accordance with law. There shall be no order as to costs.
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