2008 (3) TMI 654 - SC - Companies Law

Appeal allows State Commission or its arbitrator(s) to exclusively adjudicate licensee-generator disputes under Section 86(1)(f) of Electricity Act

GUJARAT URJA VIKASH NIGAM LTD. Versus ESSAR POWER LTD.

SC allowed the appeal and set aside the High Court judgment, holding that after enactment of the Electricity Act, 2003 (w.e.f. 10.6.2003) all adjudication ... Allocation of power to the Essar Group of Companies - business of generation of electrical energy - maxim Generalia specialibus non derogant - violation of Article 14 of the Constitution of India - Mimansa principles of interpretation - Whether the application u/s 11 of the Act of 1996 is maintainable in view of the statutory specific provisions contained in the Electricity Act of 2003 providing for adjudication of disputes between the licensee and the generating companies? Held that:- In the present case, it is true that there is a provision for arbitration in the agreement between the parties dtd. 30.5.1996. Had the Electricity Act, 2003 not been enacted, there could be no doubt that the arbitration would have to be done in accordance with the Arbitration and Conciliation Act, 1996. However, since the Electricity Act, 2003 has come into force w.e.f. 10.6.2003, after this date all adjudication of disputes between licensees and generating companies can only be done by the State Commission or the arbitrator (or arbitrators) appointed by it. After 10.6.2003 there can be no adjudication of dispute between licensees and generating companies by anyone other than the State Commission or the arbitrator (or arbitrators) nominated by it. We further clarify that all disputes, and not merely those pertaining to matters referred to in clauses (a) to (e) and (g) to (k) in Section 86(1), between the licensee and generating companies can only be resolved by the Commission or an arbitrator appointed by it. This is because there is no restriction in Section 86(1)(f) about the nature of the dispute. it is only with regard to the authority which can adjudicate or arbitrate disputes that the Electricity Act, 2003 will prevail over Section 11 of the Arbitration and Conciliation Act, 1996. However, as regards, the procedure to be followed by the State Commission (or the arbitrator nominated by it) and other matters related to arbitration (other than appointment of the arbitrator) the Arbitration and Conciliation Act, 1996 will apply (except if there is a conflicting provision in the Act of 2003). In other words, Section 86(1)(f) is only restricted to the authority which is to adjudicate or arbitrate between licensees and generating companies. Procedural and other matters relating to such proceedings will of course be governed by Arbitration and Conciliation Act, 1996, unless there is a conflicting provision in the Act of 2003. Since the High Court has appointed an arbitrator for deciding the dispute between the licensee and the generating company, in our opinion, the judgment of the High Court has to be set aside. Only the State Commission or the arbitrator (or arbitrators) appointed by it could resolve such a dispute. We, therefore, set aside the impugned judgment of the High Court but leave it open to the State Commission or the Arbitrator (or Arbitrators) nominated by it to adjudicate/arbitrate the dispute. between the parties expeditiously. Appeal allowed. The impugned judgment set aside. Issues Involved:1. Jurisdiction for arbitration under the Arbitration and Conciliation Act, 1996 versus the Electricity Act, 2003.2. Interpretation of Sections 174 and 175 of the Electricity Act, 2003.3. Validity of the High Court's appointment of an arbitrator.4. Constitutionality of Section 86(1)(f) of the Electricity Act, 2003 under Article 14 of the Constitution of India.5. Applicability of the Arbitration and Conciliation Act, 1996 to disputes under the Electricity Act, 2003.Detailed Analysis:1. Jurisdiction for Arbitration:The main issue was whether the High Court could appoint an arbitrator under Section 11 of the Arbitration and Conciliation Act, 1996, for disputes between licensees and generating companies, or if such disputes fall exclusively under the jurisdiction of the State Commission as per Section 86(1)(f) of the Electricity Act, 2003. The Court held that Section 86(1)(f) is a special provision that overrides the general provision in Section 11 of the Arbitration and Conciliation Act, 1996. Hence, disputes between licensees and generating companies must be adjudicated by the State Commission or an arbitrator nominated by it.2. Interpretation of Sections 174 and 175 of the Electricity Act, 2003:The Court emphasized the need to harmonize Sections 174 and 175 of the Electricity Act, 2003. Section 174 states that the Act will prevail over other laws in case of inconsistency, while Section 175 states that the provisions are in addition to and not in derogation of other laws. The Court reconciled these sections using the Mimansa principles of interpretation, particularly the Gunapradhan Axiom, holding that Section 174 is the principal provision and Section 175 is subordinate. Thus, Section 174 will prevail in case of any conflict.3. Validity of the High Court's Appointment of an Arbitrator:The High Court had appointed Mr. Justice A.M. Ahmadi as the sole arbitrator. The Supreme Court set aside this appointment, stating that only the State Commission or an arbitrator nominated by it could resolve disputes between licensees and generating companies as per Section 86(1)(f) of the Electricity Act, 2003.4. Constitutionality of Section 86(1)(f) under Article 14:The Court addressed the argument that Section 86(1)(f) violates Article 14 of the Constitution of India because it does not specify when the State Commission should decide a dispute itself or refer it to arbitration. The Court found no violation of Article 14, stating that the discretion given to the State Commission is reasonable and necessary, considering factors like workload and technical expertise required for certain disputes.5. Applicability of the Arbitration and Conciliation Act, 1996:The Court clarified that while Section 11 of the Arbitration and Conciliation Act, 1996 does not apply to disputes between licensees and generating companies due to Section 86(1)(f) of the Electricity Act, 2003, other provisions of the Arbitration and Conciliation Act, 1996 would still apply to such arbitrations unless there is a conflicting provision in the Electricity Act, 2003.Conclusion:The Supreme Court allowed the appeal, set aside the High Court's judgment, and directed that the dispute be resolved by the State Commission or an arbitrator nominated by it. The Court also directed the Gujarat Electricity Regulatory Commission to dispose of the pending petition expeditiously, preferably within six months. The appeal regarding the deduction of Rs.5 crores was dismissed, directing the appellant to file an application under Section 94(2) of the Electricity Act, 2003 before the appropriate Commission for interim relief.