1996 (7) TMI 581 - SC - Indian Laws

Supreme Court sets aside lower court decrees, rules on arbitrability of damages under Electricity Act

The Supreme Court allowed the appeal, setting aside the decrees of the lower courts and decreeing the suit as prayed for by the appellant. The Court held ... Arbitrability of statutory disputes - statutory arbitration under the Electricity Act - statutory arbitration under the Supply Act - application of the Arbitration Act to statutory arbitrations - jurisdiction of civil court to determine existence or validity of arbitration agreementArbitrability of statutory disputes - statutory arbitration under the Electricity Act - statutory arbitration under the Supply Act - Dispute for damages arising from disconnection of electricity is arbitrable under Section 52 of the Electricity Act or Section 76(2) of the Supply Act. - HELD THAT: - The Court examined the scheme of Part II of the Electricity Act and the provisions under the Supply Act which make certain matters referable to arbitration. Section 52 applies only where a matter is by or under the Act directed to be determined by arbitration; likewise Section 76(2) of the Supply Act applies where that Act requires arbitration. The right to claim damages for disconnection does not fall within the class of disputes directed by those provisions to be resolved by statutory arbitration. The damages claimed for illegal disconnection are not disputes 'under' Section 19(1) in the sense that would attract the statutory arbitration machinery; Section 19(2) contemplates arbitration for compensation disputes arising in execution of works under Part II, but the present claim for disconnection-damages does not fall within that compass. Earlier decisions treating issues such as revision of tariff or disconnection damages as non-arbitrable were held applicable, and the High Court's conclusion that the matter must be referred to arbitration under Section 52 or Section 76(2) was held incorrect. [Paras 9, 10, 11, 13, 14]The dispute for damages caused by disconnection is not arbitrable under Section 52 of the Electricity Act or Section 76(2) of the Supply Act; those statutory arbitration provisions do not apply to the present claim.Application of the Arbitration Act to statutory arbitrations - jurisdiction of civil court to determine existence or validity of arbitration agreement - Whether, in absence of an arbitration agreement, Section 46 and Section 33 of the Arbitration Act empower an arbitrator to decide arbitrability and oust the civil court of jurisdiction. - HELD THAT: - Section 46 makes most provisions of the Arbitration Act applicable to statutory arbitrations, but only to the extent they are consistent with the other enactment. Sections expressly excluded by Section 46 remain inapplicable. Section 33 expressly vests the civil court with power to decide the existence or validity of an arbitration agreement; that jurisdiction is for the court and not to be conclusively assumed by an arbitrator as a jurisdictional matter. Where the underlying statute does not make the dispute referable to arbitration, and there is no arbitration agreement as defined in Section 2(a), the summary procedure under Section 33 (and the application of Section 46) cannot be invoked to transfer the merits to arbitration. If provisions of the relevant enactments are inconsistent with the Arbitration Act, Section 46 will not operate to convert non-consensual matters into arbitrable disputes. Consequently, the arbitrator cannot independently assume jurisdiction to decide that the matter is arbitrable where the statute does not so provide and no arbitration agreement exists. [Paras 11, 12, 13]Section 46 does not operate to make the dispute arbitrable where the statutory scheme is inconsistent; Section 33 leaves the question of existence or validity of an arbitration agreement to the civil court, and an arbitrator cannot supplant the court by deciding arbitrability as a jurisdictional fact in the present circumstances.Final Conclusion: Appeal allowed; decrees of the courts below set aside; the suit for relief against illegal disconnection is decreed as prayed for; no costs. Issues Involved:1. Arbitrability of the dispute under the Electricity Act and the Supply Act.2. Jurisdiction of the civil court to decide the existence or validity of the arbitration agreement.3. Applicability of Section 52 of the Electricity Act and Section 76(2) of the Supply Act.4. Applicability of Section 46 read with Section 33 of the Arbitration Act.Detailed Analysis:1. Arbitrability of the Dispute:The primary issue was whether the disconnection of electrical supply and the resultant damages claimed by the respondent are arbitrable under the provisions of the Electricity Act or the Supply Act. The appellant contended that these matters are not arbitrable under either Act. The Court noted that the right to claim damages for disconnection does not arise under Section 19(1) of the Electricity Act, which deals with compensation for damage caused during the execution of works. Therefore, the dispute over damages due to disconnection is not arbitrable under Section 52 of the Electricity Act or Section 76(2) of the Supply Act.2. Jurisdiction of Civil Court:The Court examined whether the civil court has jurisdiction to decide the existence or validity of the arbitration agreement. It was contended that by operation of Section 46 read with Section 33 of the Arbitration Act, the dispute would be arbitrable, and the civil court would lack jurisdiction. The Court clarified that Section 33 of the Arbitration Act gives power to the civil court to decide the existence or validity of the arbitration agreement. The arbitrator cannot conclusively decide this jurisdictional issue. Therefore, the civil court has jurisdiction to determine the existence and validity of the arbitration agreement.3. Applicability of Section 52 of the Electricity Act and Section 76(2) of the Supply Act:The Court analyzed whether the dispute falls under any provisions of the Electricity Act or the Supply Act that direct matters to be determined by arbitration. It was concluded that the damages claimed due to disconnection do not fall under the arbitrable disputes mentioned in Section 19(1) of the Electricity Act or the relevant sections of the Supply Act. Consequently, Section 52 of the Electricity Act and Section 76(2) of the Supply Act do not apply to this dispute.4. Applicability of Section 46 read with Section 33 of the Arbitration Act:The Court addressed the contention that Section 46 of the Arbitration Act, which applies to statutory arbitrations, would make the dispute arbitrable. Section 46 states that the provisions of the Arbitration Act apply to statutory arbitrations unless inconsistent with the other enactment. The Court found that the scheme under the Electricity Act and the Supply Act is inconsistent with the Arbitration Act regarding this dispute. Therefore, Section 46 does not apply, and the dispute is not arbitrable under the Arbitration Act.Conclusion:The Supreme Court allowed the appeal, setting aside the decrees of the lower courts and decreeing the suit as prayed for by the appellant. The Court held that the dispute over damages due to disconnection is not arbitrable under the Electricity Act or the Supply Act, and the civil court has jurisdiction to decide the existence and validity of the arbitration agreement. The appeal was allowed without costs.