{"id":29360,"date":"1988-10-28T00:00:00","date_gmt":"1988-10-27T18:30:00","guid":{"rendered":"https:\/\/www.legalindia.com\/judgments\/u-p-hotels-etc-vs-u-p-state-electricity-board-on-28-october-1988"},"modified":"2015-11-06T06:30:26","modified_gmt":"2015-11-06T01:00:26","slug":"u-p-hotels-etc-vs-u-p-state-electricity-board-on-28-october-1988","status":"publish","type":"post","link":"https:\/\/www.legalindia.com\/judgments\/u-p-hotels-etc-vs-u-p-state-electricity-board-on-28-october-1988","title":{"rendered":"U.P. Hotels Etc vs U.P. State Electricity Board on 28 October, 1988"},"content":{"rendered":"
Supreme Court of India<\/div>\n
U.P. Hotels Etc vs U.P. State Electricity Board on 28 October, 1988<\/div>\n
Equivalent citations: 1989 AIR 268, \t\t 1988 SCR Supl. (3) 670<\/div>\n
Author: S Mukharji<\/div>\n
Bench: Mukharji, Sabyasachi (J)<\/div>\n
           PETITIONER:\nU.P. HOTELS ETC.\n\n\tVs.\n\nRESPONDENT:\nU.P. STATE ELECTRICITY BOARD\n\nDATE OF JUDGMENT28\/10\/1988\n\nBENCH:\nMUKHARJI, SABYASACHI (J)\nBENCH:\nMUKHARJI, SABYASACHI (J)\nRANGNATHAN, S.\n\nCITATION:\n 1989 AIR  268\t\t  1988 SCR  Supl. (3) 670\n 1989 SCC  (1) 359\t  JT 1988 (4)\t478\n 1988 SCALE  (2)1235\n\n\nACT:\n   Arbitration\tAct,  1940:  Sections 14, 17,  30  and\t33-\nAward- Setting aside of- Wrong proposition of law laid\tdown\nin award as basis of award.\n\n\n\nHEADNOTE:\n    On taking over the Agra Electric Supply Co. in  December\n1973,\tthe  respondent-  U.P.\tState\tElectricity   Board-\nintimated  to  the  appellant- U.P. Hotels-  that  the\tBulk\nSupply Agreement between the appellant and the Agra Electric\nSupply Co. would continue to be in force until such time the\nagreement  was\tdetermined in accordance with  its  relevant\nprovisions.   The  agreement  contained\t terms\t of   rates,\ndiscounts, minimum sum payable and increase in the rates and\nsums  payable once a year on account of increase in cost  of\nproduction and distribution of electrical energy (clause  9)\nand also contained an arbitration clause (clause 18).\n    In November 1976, the appellant received a communication\nfrom the respondent informing that the uniform tariff  rates\nissued under section 49 of the Electricity Supply Act,\t1949\nwould  be  applicable to them. The Board also  withdrew\t the\ncontractual discount and rebates. While sub-sections (1) and\n(2)  of section 49, stipulate a uniform tariff for  electric\nsupply,\t  sub-section  (3)  authorises\tthe  Board  to\t fix\ndifferent tariffs for the supply of electricity.\n    The\t  appellant   protested\t against   this\t  unilateral\nincreases and withdrawal, but without success. The appellant\nthen  informed\tthe  respondent that it\t was  referring\t the\ndisputes  for  decision by the arbitrator  and\tappointed  a\nretired\t High Court Judge as its arbitrator. The  respondent\nin  turn  appointed another retired High Court\tJudge  as  a\njoint arbitrator. The joint arbitrators appointed Justice V.\nBhargava,  a  retired  Judge of the Supreme  Court,  as\t the\nUmpire.\t The  arbitrators  having  failed,  the\t proceedings\nstarted before the Umpire.\n    The Umpire gave his award in June 1983 and held that the\nBoard  having accepted the agreement, it became\t binding  on\nthe  Board  and once the agreement was\tbinding,  its  terms\nunder  sub-section (3) of section 49 could not be varied  by\n\t\t\t\t\t\t  PG NO 670\n\t\t\t\t\t\t  PG NO 671\nfixation of uniform tariff under sub-sections (1) and (2).\nThe  Umpire  further held that the present  case  was  fully\ncovered\t by  the  decision of the Supreme  Court  in  Indian\nAluminium  Co. wherein it was held that where a\t stipulation\nin  a  contract was entered into by a  public  authority  in\nexercise  of  a\t statutory  power  then,  even\tthough\tsuch\nstipulation   fettered\tsubsequent  exercise  of  the\tsame\nstatutory power, it would be valid and the exercise of\tsuch\nstatutory  power would pro tanto stand restricted.  In\tthat\nview of the matter the Umpire held that in terms of clause 9\nthe increase in unit rate was permissible and the fuel\tcost\nvariation  charges  which  were\t variable  every  month\t was\ncontrary to clause 9 as increase was permitted only once  in\na  year\t of  accounts, and further that\t the  appellant\t was\nentitled  to discount of 50% of the charges for\t electricity\nand also to discount for prompt payment of bills.\n    Objections were filed by the respondent before the\tIInd\nAdditional  District Judge during the proceedings  initiated\nfor  making  the  award\t the Rule of  the  Court.  The\tIInd\nAdditional  Distt. Judge set aside the award on\t the  ground\nthat  the reference made to arbitration was  unilateral.  In\nappeal,\t the  High Court, while holding\t against  the  above\nfinding of the IInd Addl. Judge, set aside the award on\t the\nground\tthat the Indian Aluminium Co. case was\tinapplicable\nto the present case, and the mistake committed by the Umpire\nin this regard was error of law apparent on the face of\t the\naward. The High Court held that even if the stipulation\t  as\nto  the tariff structure in the agreement be taken  to\thave\nbeen  Continued in existence in view of sub-section  (3)  of\nsection\t 49 of the Act, the same was not  unrestricted,\t and\nthat  the stipulation was expressly made subject to  certain\nreservations as would be clear from the opening sentence  of\nclause\t9 of the agreement the main clause was\t\"subject  to\nthe  provisions hereinafter contained\". It was further\theld\nthat  in drawing distinction between `rates' and  `discount'\nand  upholding\tthe right of the Board to  tamper  with\t the\nformer and negating similar right in respect of the  latter,\nthe Umpire had committed an error.\n    Before  this  Court it was contended on  behalf  of\t the\nappellant  that a specific question of law being a  question\nof  construction had been referred to the Umpire and  hence,\nhis decision, right or wrong, had to be accepted.\n    On behalf of the respondent it was contended that  there\nwas  no specific question of law referred to the Umpire\t but\nit was a general reference in which a question of law arose,\nand  that  it  was a question in  the  proceedings  and\t the\nquestion of law, as such, did not arise.\n\t\t\t\t\t\t  PG NO. 672\n    Allowing the appeal, it was,\n    HELD:  (1)\tEven  assuming that there was  an  error  of\nconstruction  of  the agreement or even that  there  was  an\nerror  of a law in arriving at a conclusion, such  an  error\nwas not an error which was amenable to correction even in  a\nreasoned award under the law. [683B]\n    (2)\t Where\tthe question referred for arbitration  is  a\nquestion  of  construction, which is, generally\t speaking  a\nquestion  of law, the arbitrator's decision can not  be\t set\naside  only  because the court would itself have come  to  a\ndifferent  conclusion, but if it appears on the face of\t the\naward  that the arbitrator has proceeded illegally, as,\t for\ninstance, by deciding on evidence which was not\t admissible,\nor  on\tprinciples of construction which the  law  does\t not\ncountenance,  there is error in law which may be ground\t for\nsetting aside the award. [683G-H; 684A]\n    (3)\t In  order to set aside an award, there\t must  be  a\nwrong proposition of law laid down in the award as the basis\nof the award. [684D]\n    (4)\t In  the  instant  case, a  question  of  law  arose\ncertainly  during  the\tcourse of the  proceedings.  Such  a\nquestion has been decided by the Umpire on a view which is a\npossible  one  to  take.  Even\tif  there  was\tno  specific\nreference of a question referred to the Umpire, there was  a\nquestion of law involved. Even on the assumption that such a\nview is not right, the award is not amenable to interference\nor  correction\tby  the\t Courts\t of  law  as  there  was  no\nproposition  of law which could be said to be the  basis  of\nthe award of the Umpire, and which was erroneous. [689B-Cl\n    (5) The Umpire in his award stated that the decision  of\nthis Court covered and supported the claim of the  claimant.\nIn  the present case the only difference was that there\t was\nonly  an  agreement  which was held by the  Umpire  to\thave\nbecome\toperative.  Once that agreement was binding  on\t the\nBoard,\tits terms could not be vaired from the uniform\trate\nunder sub-sections (1) and (2) of section 49. The Umpire was\nright.\tThe  Umpire committed no error in arriving  at\tsuch\nconclusion. Further-more, such a conclusion was certainly  a\npossible view of the interpretation of the decision of\tthis\nCourt in Indian Aluminium Co.'s case, if not the only  view.\n[688G-H; 689A]\n    Indian  Aluminium Co. Ltd. v. Kerala Electricity  Board,\n[1976]\t1  SCR\t70; Coimbatore Distt. P.T.  Sangam  v.\tBala\n\t\t\t\t\t\t  PG NO 673\nSubramania  Foundry,  AIR (1987) SC  2045;  Delhi  Municipal\ncorpn.\tv. M\/s Jagan Nath Ashok Kumar, AIR (1987)  SC  2316;\nM\/s. Hindustan Tea Co. v. M\/s. K. Sashikant & Co., AIR<\/a>\t1987\nSC 81; Kanpur Nagar Mahapalika v. M\/s. Narain Das Haribansh,<\/a>\n[1970]\t2  SCR\t28; Champsey Bhara & Co.  v.  Jivraj  Balloo\nSpinning & Weaving Co. Ltd., [1923] AC 480; Dr. S.B. Dutt v.\nUniversity of Delhi,<\/a> [1959] SCR 1236; M\/s. Kapoor  Nilokheri\nCo-op.\tDairy Farm Society Ltd. v. Union of<\/a> lndia, [1973]  1\nSCC  708;  Tarapore & Co. v. Cochin  Shipyard  Ltd.  Cochin,<\/a>\n[1984] 3 SCR 118; Hitchins & Anr. v. British Coal  Refining,\n[1936] 2 A.E.R. Reprint 191; Pioneer Shipping Ltd. & Ors. v.\nETP Tioxide Ltd., [1981] 2 AER 1030, referred to.\n\n\n\nJUDGMENT:\n<\/pre>\n
    CIVIL  APPELLATE JURISDICTION: Civil Appeal No.  756  of
\n1988.\n<\/p>\n
    From the Judgment and Order dated 21.7.1987 of the\tHigh
\nCourt of Allahabad in F.A.F.O. No. 106 of 1984.
\n    F.S. Nariman, M.L. Verma, Jeet Mahajan and Ranjit  Kumar
\nfor the Appellats.\n<\/p>\n
    B.\tSen, Gopal Subramanium and Mrs. Shobha\tDikshit\t for
\nthe Respondent.\n<\/p>\n
    The Judgment of the Court was delivered by
\n    SABYASACHI MUKHARJI, J. This appeal by special leave  is
\nfrom  the judgment and order of he High Court of  Allahabad,
\ndated  21st  July, 1987. The High Court has  set  aside\t the
\naward  of  the Umpire. To appreciate the  decision  and\t the
\ncontentions urged, a few facts are necessary.
\n    On\tor about 20th October, 1962 there was a Bulk  Supply
\nAgreement entered into between Agra Electric Supply Co. Ltd.
\nand the appellant herein, for supply of electrical energy to
\nthe  latter’s hotel, inter alia, containing terms of  rates,
\ndiscounts, minimum sum payable and increase in the rates and
\nsums  payable once a year on account of increase in cost  of
\nproduction  and distribution of electrical energy. Clause  9
\nof the said agreement contained terms of the rate of  supply
\nand   the  contingencies  in  which  such  rates  could\t  be
\nincreased. The said Clause provided as follows:\n<\/p>\n
\t\t\t\t\t\t  PG NO. 674<\/span><\/p>\n
    “The   consumer   shall,  subject  to   the\t  provisions
\nhereinafter contained, pay to the Company for all electrical
\nenergy\tsupplied  and  registered  or  estimated  as  herein
\nprovided  at  the rate of Rs.0.20 (Rupees zero\tdecimal\t two
\nzero)  per  unit per month for all energy  so  supplied\t and
\nregistered and\/or estimated in the case of a defective meter
\ninstallation  in  accordance with the proviso  to  clause  6
\nthereof.  The charge for all energy shall be subject to\t the
\nscale  of special discounts in accordance with the  schedule
\nannexed thereto.\n<\/p>\n
    Provided that, (without regard to the quantity of units
\nsupplied)  if  the payment made or to be made  for  any\t one
\nEnglish\t Calendar year ending 31st March in respect  of\t the
\nelectricity  consumed shall fall short of a minimum  sum  of
\nRs. 38640 (Rs. Thirty eight thousand six hundred and  forty)
\nthe  consumer  shall nevertheless pay to  the  Company\tsuch
\namount\tin addition to the payments already made in  respect
\nof the electricity consumed for such Calendar year as  will,
\nbeing  the  total payment made in this respect to  the\tsaid
\nminimum\t of Rs.38640 (Rs. Thirty eight thousand six  hundred
\nand forty).\n<\/p>\n
    Provided  Further  that, in the event of the  first\t and
\nlast  years  of this Agreement not being  complete  calendar
\nyear  as  aforesaid the Company shall make  a  proportionate
\nreduction on the aforesaid annual Maximum Demand and Minimum
\ncharges\t in respect of the period for which the\t said  first
\nand  last  year\t as the case may be shall  be  less  than  a
\ncomplete calendar year.\n<\/p>\n
    Provided   also  that.  if\tand  whenever\tduring\t the
\nsubsistence of this Agreement the Company is satisfied\tthat
\nthere  has  been an increase in the cost of  production\t and
\ndistribution  of  electrical energy it shall be\t at  liberty
\n(but not more than once in any year of accounts) to increase
\nthe  rates  and\t sums  payable by  the\tConsumer  under\t the
\nforegoing provision of this present clause 9 by such  amount
\nas it shall in its sole and absolute discretion decide.”\n<\/p>\n
    There was a clause providing for arbitration i.e. clause
\n18 which read as follows:\n<\/p>\n
    “If\t any question or difference whatsoever\tshall  arise
\nbetween\t  the\tparties\t to  these  presents   as   to\t the
\n\t\t\t\t\t\t  PG NO 675
\ninterpretation\tor effect of any provision or clause  herein
\ncontained  or  the construction thereof or as to  any  other
\nmatter\tin  anyway connected with or arising  out  of  these
\npresents  or the operation thereof or the rights, duties  or
\nliabilities  of either party in connection  therewith,\twhen
\nunless\t the  means  for  deciding  any\t such  question\t  or
\ndifference  is provided for by the Indian  Electricity\tAct,
\n1910  or the Electricity (Supply) Act, 1948 as the case\t may
\nbe, or by the rules made respectively under the said Acts or
\nby  a  specific provision of this Agreement, in\t every\tsuch
\ncase  the  matter  in difference shall be  referred  to\t the
\nArbitration of two Arbitrators, one to be appointed by\teach
\nparty  hereto,\tand  an\t Umpire\t to  be\t appointed  by\t the
\nArbitrators  before  entering  upon the\t reference  and\t the
\ndecision or award of the said Arbitrators or Umpire shall be
\nfinal  and binding on the parties hereto and  any  reference
\nmade under this clause shall be deemed to be a submission to
\narbitration under the Indian Arbitration Act, 1940 (Act X of
\n1940) or any statutory modification or re-enactment  thereof
\nfor the time being in force.\n<\/p>\n
    The\t Arbitrators  or  the Umpire  giving  their  or\t his
\ndecisions  shall also decide by which party the cost of\t the
\nArbitration  and award shall be paid and if by both  parties
\nin what proportion.”\n<\/p>\n
    On or from 26th September, 1973 the Agra Electric Supply
\nCo. Ltd. increased per unit rate of electricity from 0.20  P
\nto  21.5  P  in terms of clause 9  of  the  said  agreement.
\nThereafter,  the  bills were sent @ 21.5 P per\tunit,  after
\ngiving\tdiscounts  and rebates as per the agreement.  On  or
\nabout  17\/18th\tDecember, 1973, the respondent\therein\ttook
\nover the undertaking of the Agra Electric Supply Co. Ltd. On
\nor  about  16th January, 1974, the respondent  informed\t the
\nappellant  by a written communication that  consequent\tupon
\nthe  expiry of licence granted to Agra Electric\t Supply\t Co.
\nLtd.  to generate and supply electricity the respondent\t had
\ntaken it over and would supply electric energy to the  hotel
\nand that the Bulk Supply Agreement with Agra Electric Supply
\nCo.  Ltd. will continue to be in force with  the  respondent
\nuntil  such time the agreement is determined  in  accordance
\nwith its relevant provisions. All bills received  subsequent
\nto  the\t take over were billed at the agreed  rate  allowing
\ndiscounts and rebates.\n<\/p>\n
    On or about 23rd November, 1974, the appellant  received
\na  communication from the respondent informing that  uniform
\n\t\t\t\t\t\t  PG NO 676
\ntariff\trates  issued under section 49\tof  the\t Electricity
\nSupply Act, 1949 will be applicable to the electrical energy
\nsupplied  to the hotel w.e.f. 12.10.1974. Section 49 of\t the
\nElectricity  (Supply)  Act, 1948  (hereinafter\tcalled\t`the
\nAct’), is to the following effect:\n<\/p>\n
    “49. Provision for the sale of electricity by the  Board
\nto  persons  other  than  licensees.  -(1)  Subject  to\t the
\nprovisions  of this Act and of regulations, if any, made  in
\nthis behalf, the Board may supply electricity to any  person
\nnot  being a licensee upon such terms and conditions as\t the
\nBoard  thinks  fit and may for the purposes of\tsuch  supply
\nframe uniform tariff.\n<\/p>\n
    (2) In fixing the uniform tariffs, the Board shall\thave
\nregard to all or any of the following factors, namely:\n<\/p>\n
    (a)\t the nature of supply and the purposes for which  it
\nis required:\n<\/p>\n
    (b)\t the  co-ordinated  development of  the\t supply\t and
\ndistribution  of  electricity within the State in  the\tmost
\nefficient  and economical manner, with particular  reference
\nto  such development in areas not for the time being  served
\nor adequately served by the licensee:\n<\/p>\n
    (c)\t the simplification and standardisation\t of  methods
\nand rates of charge for such supplies;\n<\/p>\n
    (d)\t  the  extension  and  cheapening  of  supplies\t  of
\nelectricity to sparsely developed areas.
\n    (3) Nothing in the foregoing provisions of this  section
\nshall derogate from the power of the Board, if it  considers
\nit  necessary or expedient to fix different tariffs for\t the
\nsupply\tof electricity to any person not being\ta  licensee,
\nhaving regard to the geographical position or any area,\t the
\nnature\tof  the\t supply, and purpose  for  which  supply  is
\nrequired and any other relevant factors.\n<\/p>\n
    (4)\t In fixing the tariff and terms and  conditions\t for
\nthe  supply of electricity, the Board shall not\t show  undue
\npreference to any person.”\n<\/p>\n
\t\t\t\t\t\t  PG NO. 677<\/span><\/p>\n
    After the said date the bills were sent at the  enhanced
\nrate of 0.30 P per unit, adding fuel cost variation  charges
\nand  without  allowing any discount or rebate. On  or  about
\n28th  November,\t 1974,\tthe  appellant,\t however,  protested
\nagainst\t the unilateral withdrawal of  contractual  discount
\nand  rebates  and  enhancement in the  rates  and  drew\t the
\nattention  of the respondent to the existing and  subsisting
\nbulk supply agreement, but the respondent took no action. On
\nor  about  31st August, 1976, a Circular was issued  by\t the
\nChief Engineer of the respondent advising all  Engineers-in-
\ncharge\tof  the undertakings to bill  the  consumers  having
\nspecial\t agreements  with  the\tex-licensees  as  per  those
\nagreements   and  steps\t be  taken  to\tterminate  the\t old
\nagreements with new agreements providing for application  of
\ntariff.\n<\/p>\n
    On\t7th  October, 1977, vide written  communication\t the
\nappellant informed the respondent that upon latter’s failure
\nto resolve the disputes and differences arising between them
\nconsequent  to\tthe  illegal  increase\tin  the\t rates\t and
\ndiscontinuation of discounts and rebates w.e.f.\t 12.10.1974,
\nthe appellant was referring the disputes for decision by the
\narbitrator and appointed Justice Manchanda, a retired  Judge
\nof  the\t Allahabad  High Court, as the\tarbitrator  and\t the
\nrespondent appointed Justice Nigam, another retired Judge of
\nthe  same  High Court, as its arbitrator. On  or  about\t 8th
\nApril,\t1977,  the joint arbitrators  appointed\t Justice  V.
\nBhargava, a retired Judge of this Court, as an Umpire.
\n    Between 3rd November, 1979 and 4th March, 1980,  several
\nsittings  were held before the arbitrators but\tthe  parties
\nwere  unable  to  agree\t and  upon  their  disagreement\t the
\ndisputes  were referred to the learned Umpire for  decision.
\nFrom 4th March, 1980 onwards, proceedings started before the
\nUmpire\tand  there  was a plea for de novo  hearing  of\t the
\nproceedings  before  the  Umpire,  by  the  respondent.\t The
\nlearned\t Umpire started de novo proceedings taking  evidence
\nof the parties. On 21st March, 1980, the respondent filed an
\napplication,  being Case No. 59 of 1980 under section 33  of
\nthe  Arbitration  Act,\t1940  before  the  District   Judge,
\nLucknow,  denying the existence of the agreement dated\t20th
\nOctober, 1962. The respondent also denied the acceptance and
\nadoption of the agreement consequent upon the take over\t and
\nsought\ta  declaration from the Court that  the\t arbitration
\nagreement did not exist. The Vth Addl. District Judge by his
\norder  dated  27.5.1983\t held that the\tagreement  was\tduly
\nexecuted,  accepted  and adopted by the respondent  and\t was
\nbinding\t on  it and that the  arbitration  proceedings\twere
\npursuant  to  the  arbitration\tclause\tand,  as  such,\t the
\napplication  under  section 33 of the Arbitration  Act,\t was
\nrejected.\n<\/p>\n
\t\t\t\t\t\t  PG NO. 678<\/span><\/p>\n
    On\t1st  June, 1983, the award was made by\tthe  learned
\nUmpire holding that in terms of clause 9 the increase in the
\nunit  rate  was\t permissible and  the  fuel  cost  variation
\ncharges\t which\twere variable every month  was\tcontrary  to
\nclause\t9 as increase was permitted only once in a  year  of
\naccounts,  and further held that the appellant was  entitled
\nto  discount of 50% on the charges for electricity; and\t was
\nalso entitled to 0.03 paise per rupee for prompt payment  of
\nbills. The learned Umpire in his award set out the facts and
\ntherein recited these as follows:\n<\/p>\n
    “The main terms of the agreement were that in respect of
\nthe bulk electric supply to the petitioner the Hotel was  to
\nbe  charged at the rate of twenty paise per unit per  month.
\nThere  was also a clause for granting a special discount  to
\nthe  petitioner to the extent of 50% and in addition a\tcash
\ndiscount of three paise per whole rupee was to be allowed to
\nthe petitioner in case the petitioner paid the bills of\t the
\nCompany\t within\t the stipulated period. The  bills  for\t the
\nelectric energy supplied by the Supply Company continued  on
\nthese  contractual rates till October 1974, even  after\t the
\nSupply\tCompany\t was  acquired\tby  the\t opposite  party  in
\nDecember 1973, and the bills were accordingly paid.
\n    However, in October 1974, the opposite party under s. 49
\nof the Electricity (Supply) Act, 1948 (hereinafter  referred
\nto as the Act) unilaterally and according to the  petitioner
\nillegally and arbitrarily purported to replace the  original
\nterms  in the agreement and revised the charges with  effect
\nfrom 12th October, 1974. The Board, under this notification,
\nincreased  the rate of electricity supplied to 30 paise\t per
\nunit and further refused to grant the discount to which\t the
\npetitioner  was entitled under the agreement as well as\t the
\ncash  discount of three paise per rupee. The opposite  party
\nfurther\t  levied   a  fuel  cost  adjustment   charges\t and
\nsubsequently  the rate was raised to 31 paise per unit\twith
\neffect from June 1976.”\n<\/p>\n
    Thereafter,\t the learned Umpire set out the\t history  of
\nthe  negotiations  between  the\t parties  resulting  in\t the
\nagreement  dated  20.10.1962. After referring  to  the\tbulk
\nsupply\tagreement the learned arbitrator set out  the  terms
\nupon  which supply was made to the appellant. The  appellant
\nwas to make an initial payment of Rs.35,326 towards  service
\nconnection for the purpose of supply, though irrespective of
\n\t\t\t\t\t\t  PG NO 679
\nthe payment the service connection was to continue to be the
\nproperty  of the Supply Company. The Supply Company  was  to
\nmake  provision in the appellant’s monthly bill\t granting  a
\nrebate\tof  Rs.\t 147.20 for each month\tthat  the  agreement
\nremained inforce upto a maximum of 20 years. Under para 9 of
\nthe  agreement the appellant was to pay the Company for\t all
\nelectric  energy supplied, registered, and estimated at\t the
\nrate  of 20 paise p.m. The charges for energy consumed\twere
\nsubject\t to special discount according to the scale  in\t the
\nschedule which permitted a maximum discount of 50% in case a
\nminimum\t of  41,000 units were consumed in each\t month.\t The
\nconsumption  as\t shown\tby the record was  never  less\tthan
\n41,000\tunits p.m. In addition, there was a provision  under
\nclause\t(ii) of the agreement for cash discount of  3  paise
\nper  whole  rupee  in  case  payment  was  made\t within\t the
\nstipulated  period. Under the first proviso to para  9,\t the
\nappellant  had\tto  pay\t a  minimum  sum  of  Rs.38,640\t for
\nelectricity  consumed  in  any English\tcalendar  year.\t The
\nprovision  made was that in addition to the amount  paid  in
\naccordance with the bills, the appellant was to make payment
\nin  such  cases\t so  as\t to make  up  the  said\t minimum  of
\nRs.38,640. The second proviso laid down that if and whenever
\nduring\tthe subsistence of the agreement the Supply  Company
\nwas  satisfied\tthat there was an increase in  the  cost  of
\nproduction  and distribution of electric energy it shall  be
\nat  liberty (but not more than once a year) to increase\t the
\nrates and sums payable by the consumer under the  provisions
\nof clause 9 by such amount as the Company shall, in its sole
\nand  absolute discretion, decide. Hence, it was held by\t the
\nUmpire on the oral and documentary evidence that the payment
\nwas made at the enhanced rate under protest.
\n    Challenging the Award, several contentions were  raised,
\nnamely,\t (i)  that there was no agreement in  existence\t and
\nthat   neither\tthe  Umpire  nor  the  arbitrator  had\t any
\njurisdiction to make the award. This contention was rejected
\nand  no\t argument was advanced before  us  challenging\tthis
\nfinding of the Umpire, (ii) that the appellant should  prove
\nthe  terms and conditions upon which the Supply Company\t was
\nsupplying the electricity to the appellant. This the  Umpire
\nheld,  had  been duty proved and there was no  challenge  to
\neither\tof the findings of the Umpire. (iii) it was  thirdly
\ncontended  that the agreement even if in existence, was\t not
\nbinding\t upon the respondent. and that while admitting\tthat
\nthe   respondent  under\t section  49  of  the  Act,   issued
\nNotification  under  which  the tariff\twas  revised  w.e.f.
\n12.10.1974, it was claimed that the opposite party had\tnot,
\nin any way, failed to fulfil its obligations on the  alleged
\nagreement  and that the opposite party was  fully  competent
\nunder  law  to fix a uniform tariff and also  to  levy\tfuel
\n\t\t\t\t\t\t  PG NO 680
\nadjustment  charges.  This  is\tthe  main  and\t substantial
\nquestion involved in this matter.\n<\/p>\n
    It\twas then contended that the respondent was  entitled
\neven  under  the agreement and under its second\t proviso  to
\nclause\t9  to revise the tariff and the\t appellant  was\t not
\nentitled  to  any  relief. It was  further  urged  that\t the
\npayments  were\tmade  after coming  into  operation  of\t the
\nElectricity (Supply) Act, under protest. In respect of these
\ncontentions  the learned Umpire held that the plea was\tthat
\neven  if the agreement was in existence, it was not  binding
\non  the\t opposite  party and that  the\topposite  party\t was
\ncompetent under section 49 of the Electricity Supply Act, to
\nfix  revised charges w.e.f. 12.10.1974 and had not  violated
\nany terms of the agreement. The appellant had also relied on
\nthe alternative provisions of section 49(3) of the Act,\t set
\nout  hereinbefore.  The said sub-section (3)  provides\tthat
\nnothing\t contained in sub-sections (1) & (2) of\t section  49
\nshall derogate from the power of the Board, if it happens to
\nenter  into an agreement at different rates of\ttariff\twith
\nany  person other than a licensee. It appears that when\t the
\nSupply Company was taken over on l7\/18.12.1973, the resident
\nEngineer  wrote a letter on 16.1.1974 in which\the  informed
\nthe appellant that the licence of M\/s. Agra Electric  Supply
\nCo. Ltd. having expired and the U.P. State Electricity Board
\nhaving taken over the supply, it was to supply energy to the
\nappellant  at the aforesaid date. Their\t further  contention
\nwas  that the bulk supply agreement which the appellant\t had
\nwith  M\/s. Agra Electric Supply Co. Ltd., would continue  to
\nbe in force with the State Electricity Board until such time
\nas  the\t agreement  was determined in  accordance  with\t the
\nrelevant  provisions thereof. The learned Umpire  held\tthat
\nthe letter clearly laid down that the U.P. Electricity Board
\nhad  accepted the agreement which was in  existence  between
\nthe  Supply  Company  and  the\tappellant,  and\t the  Umpire
\nproceeded  on that basis. The learned Umpire further  stated
\nas follows:\n<\/p>\n
    “The  Board thus having accepted the agreement with\t the
\nclaimant,  it  became binding on the Board  and\t under\tsub-
\nsection\t (3)  of s. 49 of the Electric\tSupply\tAct  nothing
\ncontained  in  sub-sections (1) & (2) of s. 49\tof  the\t Act
\ncould  have any bearing on the terms of the  agreement.\t The
\nresult\twas that the uniform tariff fixed by the Board\twith
\neffect from 12th October, 1974 did not apply to the claimant
\nand the claimant had to be granted the various rebates\tlaid
\ndown in the agreement. The decision of the Supreme Court  in
\nIndian\tAluminium  Co.\tLtd. v.\t Kerala\t Electricity  Board,
\n\t\t\t\t\t\t  PG NO 681
\n[1976]\t1 SCR pa. 70 fully covers the case and supports\t the
\nclaim of the claimant. In the case before the Supreme  Court
\nan  agreement had been entered into by the State  Government
\nand  it was held that under s. 60 of the Electricity  Supply
\nAct, 1940 it became binding on the Kerala State\t Electricity
\nBoard and further that that agreement was enforceable  under
\nsub-section  (3)  of s 49 irrespective of  the\tfixation  of
\nuniform\t tariff under sub-sections (I) and (2) of s. 49.  In
\nthe present case the only difference is that instead of\t the
\nagreement  being first binding between the consumer and\t the
\nState  Government,  the\t agreement  became  binding  on\t the
\nElectricity  Board,  because it accepted the  agreement\t and
\nbecame a party to it by letter dated 16th January 1974\t(Ex.
\nR).”\n<\/p>\n
    The\t aforesaid basis of the decision, it was  contended,
\nwas the error of law which vitiated the award. This question
\nwill  require further consideration later. It was held\tthat
\nthe decision in Indian Aluminium Co., (supra) fully  covered
\nthe dispute on this aspect in the instant case. The  learned
\nUmpire further held as follows:\n<\/p>\n
    “Once  the agreement was binding on the Board its  terms
\nunder  sub-section  (3)\t of s. 49 could\t not  be  varied  by
\nfixation of uniform tariff under sub-sections (1) and (2) of
\nS.  49.\t The opposite party in these circumstances  must  be
\nheld  to  have failed to fulfil its  obligations  under\t the
\nagreement”.\n<\/p>\n
    On 1st July, 1983. an application was made under section
\n12  [2] of the Arbitration Act before the  learned  District
\nJudge, Lucknow, for filing of the award and making the\tsame
\nRule  of the Court. Objections were filed by the  respondent
\nagainst the said award. The learned kind Addl. Distt. Judge,
\nLucknow, held that the award was legal, valid and binding on
\nthe parties and the alleged grounds of\tmisconduct were\t not
\nmaintainable.  The  award  was. however, set  aside  on\t the
\nground\t that\tthe  reference\tmade  to   arbitration\t was
\nunilateral. The appellant filed an appeal. The Lucknow Bench
\nof the Allahahad High Court held against the finding of\t the
\nIlnd Additional Distt. Judge Lucknow that the reference\t was
\nunilateral. but set-aside the award on the ground that there
\nwas  an error of law apparent on the face of it in  view  of
\nthe  agreement\tdated  20.10.  1962 and\t the  ratio  of\t the
\ndecision of this Court in Indian Aluminium Co., (supra). The
\nrevision filed by the respondent against the judgment of the
\nVth  Addl.  Distt  Judge, Lucknow was  also  rejected.\tThis
\nappeal\tis from the aforesaid decision of the High Court  by
\nspecial leave.\n<\/p>\n
\t\t\t\t\t\t  PG NO 682
\n    The\t two learned Judges of the High Court gave  separate
\njudgments.  The High Court was of the view that the  instant
\ncase  was  distinct  from the facts in the  case  of  Indian
\nAluminium  Co.,\t (supra).  There it was held  that  where  a
\nstipulation  in\t a  contract is entered\t into  by  a  public
\nauthority in exercise of a statutory power then, even though
\nsuch  stipulation  fetters subsequent exercise of  the\tsame
\nstatutory power, it would be valid and the exercise of\tsuch
\nstatutory power would pro tanto stand restricted. Mr Justice
\nLoomba was of the view that in the instant case even if\t the
\nstipulation  as to the tariff structure in the agreement  by
\ntaken  to have been continued to be in existence in view  of
\nsub-section  (3) of section 49 of the Act, the same was\t not
\nunrestricted. The stipulation was expressly made subject  to
\ncertain\t  reservations\tas would be clear from\tthe  opening
\nsentence  of clause 9 of the agreement, the main clause\t was
\n“subject to the provisions hereinafter contained”.
\n    Mr\tJustice Loomba was of the view that the decision  of
\nthe  Indian Aluminium Co., (supra) case was inapplicable  to
\nthe  present   case.  According to the\tlearned\t Judge,\t the
\nmistake committed by the Umpire was a manifest error. It was
\nfurther\t stated that it is well-settled proposition  of\t law
\nthat  if  the reasons are stated on the basis of  which\t the
\naward  was made and such reasons are found to be  erroneous,
\nthe  errors  become apparent on the face of  the  award\t and
\nconstitute  legal  misconduct  on the  part  of\t the  Umpire
\nvitiating  the\taward. The other  learned Judge\t Mr  Justice
\nMathur also held that there was error of law apparent on the
\nface of the award of the Umpire. He was of the opinion\tthat
\nthe  expression\t “sum  payable by  the\tconsumer  under\t the
\nforegoing provision of this present clause 9” was subject to
\nthe  discounts\tmentioned in the subsequent clauses  of\t the
\nagreement.  In view of the discounts, the sum payable  under
\nclause 9 was altered and the altered amount becomes the\t sum
\npayable\t under\tclause 9. According to\tthe  learned  Judge,
\nsince the amount determined after allowing discounts is also
\nsum payable under clause 9, it followed that in exercise  of
\nthe  power conferred under the third proviso,  the  discount
\ncould only be tampered with in the same way the unit  charge
\ncould be tampered with. Beyond this it was not\tpermissible.
\nIn permitting this the Umpire committed an error in  drawing
\ndistinction between ‘rates’ and ‘discount’ and upholding the
\nright  of the Board to tamper with the former  and  negating
\nsimilar\t right\tin respect of the latter. According  to\t the
\nlearned\t Judge,\t this  was  a  wrong  understanding  of\t the
\ndecision  of  the Indian Aluminium’s case  (supra).  In\t the
\naforesaid view of the matter, the learned Judge agreed\twith
\nthe  other  learned  Judge  and\t held  that  the  award\t was
\nvitiated.\n<\/p>\n
\t\t\t\t\t\t  PG NO 683
\n    It\tappears\t that  the main\t question  that\t arises\t is:
\nwhether\t the  decision of this Court in\t Indian\t Aluminium’s
\ncase (supra) was properly understood and appreciated by\t the
\nlearned Umpire and whether he properly applied the agreement
\nbetween the parties in the light of the aforesaid  decision.
\nIt  was\t contended that the question was  whether  the\tsums
\npayable under clause 9 included discounts. On the  aforesaid
\nbasis  it was contended that there was an error of  law\t and
\nsuch  error  was  manifest on the face of  the\taward.\tEven
\nassuming,  however, that there was an error of\tconstruction
\nof  the agreement or even that there was an error of law  in
\narriving  at  a conclusion, such an error is  not  an  error
\nwhich  is  amenable to correction even in a  reasoned  award
\nunder the law. Reference may be made to the observations  of
\nthis  Court  in\t Coimbatore  Distt.  P.T.  Sangam  v.\tBala
\nSubramania   Foundry,  AlR<\/a>  1987  SC  2045,  where  it\t was
\nreiterated  that an award can only be set aside if there  is
\nan error on its face. Further, it is an error of law and not
\nmistake\t of  fact  committed  by  the  arbitrator  which  is
\njusticiable  in the application before the Court. Where\t the
\nalleged mistakes or errors, if any, of which grievances were
\nmade were mistakes of facts if at all, and did not amount to
\nerror  of  law\tapparent  on the face  of  the\trecord,\t the
\nobjections  were not sustainable and the award could not  be
\nset aside. See also the observations of this Court in  Delhi
\nMunicipal Corpn. v. M\/S. Jagan Nath Ashok Kumar, AIR<\/a> 1987 SC
\n2316, where this Court reiterated that reasonableness of the
\nreasons given by an arbitrator in making his award cannot be
\nchallenged.  In\t that case before this Court, there  was  no
\nevidence  of violation of any principle of natural  justice,
\nand  in\t this  case  also  there  is  no  violation  of\t the
\nprinciples  of natural justice. It may be possible  that  on
\nthe  same  evidence some court might have  arrived  at\tsome
\ndifferent  conclusion  than  the  one  arrived\tat  by\t the
\narbitrator but that by itself is no ground for setting aside
\nthe  award  of an arbitrator. Also see the  observations  of
\nHalsbury’s Laws of England, 4th Edn., Vol. 2, at pages 334 &
\n335, para 624, where it was reiterated that an\tarbitrator’s
\naward  may  be set aside for error of law appearing  on\t the
\nface  of it, though that jurisdiction is not lightly  to  be
\nexercised. If a specific question of law is submitted to the
\narbitrator for his decision and he decides it, the fact that
\nthe decision is erroneous does not make the award bad on its
\nface  so  as  to permit it being set aside;  and  where\t the
\nquestion   referred  for  arbitration  is  a   question\t  of
\nconstruction,  which is, generally speaking, a\tquestion  of
\nlaw,  the  arbitrator’s decision cannot be  set\t aside\tonly
\nbecause\t the  court would itself have come  to\ta  different
\nconclusion; but if it appears on the face of the award\tthat
\nthe arbitrator has proceeded illegally, as, for instance, by
\ndeciding  on  evidence\twhich  was  not\t admissible,  or  on
\nprinciples   of\t  construction\twhich  the  law\t  does\t not
\n\t\t\t\t\t\t  PG NO 684
\ncountenance, there is error in law which may be ground for
\nsetting aside the award.\n<\/p>\n
    It\twas  contended by Mr F.S. Nariman, counsel  for\t the
\nappellant, that a specific question of law being a  question
\nof construction had been referred to the Umpire and,  hence,
\nhis decision, right or wrong, had to be accepted. In view of
\nclause\t18,  it was submitted that in this case\t a  specific
\nreference  had\tbeen  made  in\tthe  interpretation  of\t the
\nagreement between the parties, hence, the parties were bound
\nby  the decision of the Umpire. Our attention was  drawn  to
\nthe observations of this Court in M\/s. Hindustan Tea Co.  v.
\nM\/s.  K. Sashikant &  Co., AIR<\/a> 1987 SC 81, where this  Court
\nheld  that under the law, the  arbitrator is made the  final
\narbiter of the dispute between the parties, referred to him.
\nThe  award is not open to challenge on the ground  that\t the
\narbitrator  has reached a wrong conclusion or has failed  to
\nappreciate  facts. Where the award which was a reasoned\t one
\nwas  challenged on the ground that the arbitrator had  acted
\ncontrary to the provisions of s. 70 of the Contract Act,  it
\nwas held that the same could  not be set aside.
\n    In\torder to set aside an award, there must be  a  wrong
\nproposition  of law laid down in the award as the  basis  of
\nthe  award. For this see the observations of this  Court  in
\nKanpur Nagar Mahapalika v. M\/s. Narain Das Haribansh,<\/a> [1970]
\n2  SCR\t28. In that case the appellant had  entered  into  a
\ncontract with the respondent for certain construction  work.
\nThe contract contained an arbitration agreement between\t the
\nparties.  The  respondent  filed a  suit  in  1946  claiming
\ncertain\t moneys\t due  against its final bills  but,  at\t the
\ninstance  of  the  appellant, the suit was  stayed  and\t the
\nmatter referred to arbitration. The arbitrator made an award
\nin  March 1960 in favour of the plaintiffs  determining\t the
\namount\tpayable by the appellant. Thereafter  the  appellant
\nmade  an  application  for setting aside the  award  on\t the
\nground\tthat the arbitrator had misconducted himself in\t not
\nproperly  considering that the claim of the  respondent\t was
\nbarred by limitation under section 326 of the U.P. Act 2  of
\n1916. Although the trial court set aside the award, the High
\nCourt, in appeal, reversed this decision. In appeal to\tthis
\nCourt it was contended for the appellant that the award\t was
\nbad by reason of an error apparent on its face.
\n    Dismissing the appeal, it was held that there could\t not
\nbe predicated of the award that there was any proposition of
\nlaw forming the basis of the award, and, therefore, it could
\nnot be said that there was any error apparent on the face of
\nthe award.\n<\/p>\n
\t\t\t\t\t\t  PG NO 685
\n    The\t Judicial  Committee  in  the  famous  decision\t  of
\nChampsey Bhara & Co. v. Jivraj Balloo Spinning & Weaving Co.
\nLtd., [ 1923] AC 480 held that the error of law on the\tface
\nof  the\t award means that one can find in the  award  or  in
\ndocument  incorporated\tthereto\t as, for  instance,  a\tnote
\nappended  by  the  arbitrator stating the  reasons  for\t his
\njudgment,  some legal proposition which is the basis of\t the
\naward  and which is erroneous. The same view was  reiterated
\nby  this  Court\t in Dr. S.B. Dutt v.  University  of  Delhi,<\/a>
\n[1959] SCR 1236.\n<\/p>\n
    In\tthis case. Mr. Nariman appearing for  the  appellant
\ncontended  that\t there\twas no proposition of  law  as\tsuch
\nstated by the Umpire which could be said to be the basis  of
\nhis   decision.\t Hence,\t the  award  was  not  amenable\t  to
\ncorrections  on\t the ground that there was an error  of\t law
\napparent on its face. Mr. Nariman further submitted that the
\nUmpire\thad decided the specific question of law and such  a
\ndecision, right or wrong, is binding on the parties. In\t aid
\nof  his submission Mr. Nariman referred to the\tdecision  of
\nthis  Court  in\t M\/s. Kapoor  Nilokheri\t Co-op.\t Dairy\tFarm
\nSociety\t Ltd. v. Union of India & Ors.,<\/a> [ 1973] 1  SCC\t708,
\nwhere  it was held that in a case of arbitration  where\t the
\nappellants  had sepcifically stated that their\tclaims\twere
\nbased on the agreement and on nothing else and all that\t the
\narbitrator  had\t to  decide  was as  to\t the  effect  of  an
\nagreement  between  the appellant and  the  respondent,\t the
\narbitrator  had really to decide a question of law  i.e.  of
\ninterpreting  the document, the agreement. Such\t a  decision
\nhis, is not open to challenge.\n<\/p>\n
    Our\t attention  was drawn to the  observations  of\tthis
\nCourt  in  Tarapore & Co. v. Cochin Shipyard Lld.  Cochin  &
\nAnr.,<\/a> [l984] 3 SCR 118, where Desai J., spoke for the  Court
\nand  Justice Chinnappa Reddy agreed with him. It was  stated
\nthat a question of law might figure before an arbitrator  in
\ntwo ways. It may arise as an incidental point while deciding
\nthe  main dispute referred to the arbitrator or in  a  given
\ncase  parties  may refer a specific question of law  to\t the
\narbitrator for his decision. This Court reiterated that\t the
\narbitration has been considered a civilised way of resolving
\ndisputes avoiding court proceedings. There was no reason why
\nthe  parties should be precluded from referring\t a  specific
\nquestion of law to an arbitrator for his decision and  agree
\nto  be bound by the same. This approach manifests  faith  of
\nparties\t in the capacity of the tribunal of their choice  to
\ndecide even a pure question of law. If they do so, with eyes
\nwide  open,  there is nothing to preclude the  parties\tfrom
\ndoing so. If a question of law is specifically referred\t and
\nit  becomes  evident  that the parties\tdesired\t to  have  a
\ndecision on the specific question from the arbitrator rather
\nthan  one from the Court, then the court will not  interfere
\n\t\t\t\t\t\t  PG NO 686
\nwith  the award of the arbitrator on the ground\t that  there
\nwas  an error or law apparent on the face of the award\teven
\nif  the view of law taken by the arbitrator did\t not  accord
\nwith  the  view of the court. A long line of  decisions\t was
\nrelied upon by this Court for that proposition.
\n    Mr. B. Sen, learned counsel for the respondent, however,
\ncontended  that in the present case, there was\tno  specific
\nquestion of law\t\treferred to the Umpire. He submitted
\nthat  it was a general reference in which a question of\t law
\narose.\tIt  was\t any question in  the  proceedings  and\t the
\nquestion  of law, as such, did not arise. According  to\t Mr.
\nSen,  the  mistake that the Umpire, has committed  is  clear
\nfrom his following statement:\n<\/p>\n
    “The  Board thus having accepted the agreement with\t the
\nclaimant,  it  became binding on the Board  and\t under\tsub-
\nsection\t [3] of s. 49 of the Electricity Supply Act  nothing
\ncontained  in  sub-section ( 1) & (2) of s. 49\tof  the\t Act
\ncould  have any bearing on the terms of the  agreement.\t The
\nresult\twas that the uniform tariff fixed by the Board\twith
\neffect from 12th October, 1974 did not apply”.
\n    It\twas  stated that no specific  question\thaving\tbeen
\nreferred to, this mistake was fatal.\n<\/p>\n
    We are unable to accept this submission. Our   attention
\nwas  drawn  by Mr. Nariman to the  observations\t of  Justice
\nMacnaghten  in\tHitchins  & Anr. v.  British  Coal  Refining
\nProcesses  Ltd., [1936] 2 A.E.R. Reprint 191. Ihere,  by  an
\nagreement the applicants were to act as consulting Engineers
\nin connection with a certain coal refining process owned  by
\nthe  respondents.  While the plant for the  working  of\t the
\nprocess was being erected, a dispute arose. the\t respondents
\nwanting\t the applicants to attend every day at the  site  of
\nthe plant and the applicants considering this to be no\tpart
\nof  their  duty. The respondents  thereupon  terminated\t the
\nagreement  and the matter was referred to  arbitration.\t The
\napplicants pleaded that the termination of the agreement was
\nunjustified;  the  respondents pleaded that  the  applicants
\nshould have attended every day and that they had been quilty
\nof  negligence in respect of certain matters set out in\t the
\ncounterclaim.  The arbitrator found the termination  of\t the
\nagreement to be unjustified and also negligence on the\tpart
\nof  the appellants in respect of the matters set out in\t the
\ncounterclaim,  and he awarded the appellants  damages  after
\nsetting\t  off\tan  unspecified\t amount\t for   damages\t for
\nnegligence. The respondents moved to set aside the award  on
\n\t\t\t\t\t\t  PG NO 687
\nthe  ground of error of law apparent on the face of  it.  At
\nthe hearing the respondents contended that the whole of\t the
\npleadings   in\t the  arbitration   were   admissible.\t The
\nrespondents  contended\tthat  for the  purpose\tof  deciding
\nwhether\t there was an error of law apparent on the  face  of
\nthe  award, the court could not look at any document  except
\nthe award itself. The respondents further contended that the
\narbitrator  had committed an error of law in  deciding\tthat
\nthe  negligence found did not afford sufficient\t ground\t for
\nthe  termination of the agreement, and further that  on\t the
\ntrue  consideration of the agreement, the refusal to  attend
\ndaily  was  as a matter of law a sufficient ground  for\t the
\ntermination  of the agreement. It was held that inasmuch  as
\nthe  arbitrator in his award referred to certain  paragraphs
\nin  the\t counterclaim,\tsuch  paras  ought,  in\t considering
\nwhether\t there was an error on the face of the award, to  be
\nregarded  as forming part of the award.\t Whether  misconduct
\njustifies   dismissal  is  a  question\tof  fact,  and\t the
\narbitrator’s  decision was final. It was further  held\tthat
\nthe light to terminate the agreement because the  applicants
\nrefused\t  to  attend  daily  was  a  question\tspecifically
\nsubmitted  to  the  arbitrator\tand  the  court\t could\t not
\ninterfere  with\t his decision, even if the  question  was  a
\nquestion  of law. Mr. Justice Macnaghten at page 195 of\t the
\nreport observed that it was permissible to look at the whole
\nof  the\t pleadings  delivered in  the  arbitration,  and  it
\nappears\t therein  that\tthe  respondents  affirmed  and\t the
\napplicants  denied  that the respondents  were\tentitled  to
\nterminate the agreement as the applicants refused to  attend
\ndaily  at  the site, and that this was a  specific  question
\nsubmitted  to the decision of the arbitrator. Our  attention
\nwas  also  drawn to the observations of House  of  Lords  in
\nPioneer Shipping Ltd. and Ors. v. ETP Tioxide Ltd., [1981] 2
\nAER 1030. In that case by a charterparty dated 2nd November,
\n197 the owners of a vessel chartered her to the\t charterers.
\nIt was held by the House of Lords that having regard to\t the
\npurpose\t the Arbitration Act, 1970 of England which  was  to
\npromote greater finality in arbitration awards then had been
\nthe   case  under  the\tspecial\t case\tprocedure   judicial
\ninterference with the arbitrator’s award was only  justified
\nif it was shown that the arbitrator had misdirected  himself
\nin  law\t or  had  reached a  decision  which  no  reasonable
\narbitrator could have.\n<\/p>\n
    In the instant case, the view taken by the Umpire on the
\ninterpretation\tof the agreement between the parties in\t the
\nlight of the observations of this Court in Indian  Aluminium
\nCo.’s  case (supra) was at best a possible view to take,  if
\nnot  the correct view. If that was the position then such  a
\nview,  even if wrong, cannot be corrected by this  Court  on
\nthe basis6is of long line of decisions of this Court. In the
\n\t\t\t\t\t\t  PG NO 688
\naforesaid view of the matter it is necessary to examine\t the
\naforesaid  decision  in\t the  Indian  Aluminium\t Co’s\tcase
\n(supra). There under section 49(1) & (2) of the\t Electricity
\nSupply\tAct, 1948, the Legislature had empowered  the  State
\nElectricity  Board  to frame uniform tariffs  and  had\talso
\nindicated  the\tfactors to be taken into account  in  fixing
\nuniform\t tariffs.  Under  sub-section  (3),  the  Board\t was
\nempowered,  in the special circumstances mentioned  therein,
\nto fix different tariffs for the supply of electricity,\t but
\nin doing so, sub-section (4) directed that the Board was not
\nto  show undue preference to any person. Under s. 59 it\t was
\nstipulated that the Board shall not, as far as\tpracticable,
\ncarry  on  its\toperations at a loss and  shall\t adjust\t its
\ncharges accordingly from time to time. Certain consumers  of
\nelectricity  had entered into  agreements for the supply  of
\nelectricity  for their manufacturing purposes  at  specified
\nrates  for  specified period. Some of  the  agreements\twere
\nentered into with the State Governments and the others\twith
\nthe State Electricity Boards. In one of the agreements there
\nwas an arbitration clause. On account of the increase in the
\noperation and maintenance cost, due to various causes  which
\ncaused\tloss  to the State  Electricity Boards,\t the  Boards
\nwanted\tto  increase  the  charges in  all  the\t cases.\t The
\nconsumers  challenged the competency of the Boards to do  so
\nby  petitions in the respective High Courts. The High  Court
\nsustained  the Board’s claim, in some cases, under  sections
\n49 & 59, and in others, held that the Board was\t incompetent
\nto  do so. In the case of the consumer where there  was\t the
\narbitration clause. the High Court refused to entertain\t the
\npetition  on  account of the clause. This  Court  held\tthat
\nfixation  of  special  tariffs\tunder s. 49  (3)  can  be  a
\nunilateral Act on the part of the Board but more often it is
\nthe  result  of\t negotiations  between\tthe  Board  and\t the
\nconsumer  and  hence  a matter of  agreement  between  them.
\nTherefore, the Board can, in exercise of the power conferred
\nunder  the  sub-section,  enter into  an  agreement  with  a
\nconsumer  stipulating  for  special  tariff  for  supply  of
\nelectricity  for a specific period of time.  The  agreements
\nfor supply of electricity to the consumers must therefore he
\nregarded  as  having  been  entered into by  the  Boards  in
\nexercise  of  the statutory power  conferred  under  section
\n49(3).\tThe Umpire in his award stated that the decision  of
\nthis Court covered and supported the claim of the  claimant.
\nIn  the present case the only difference is that  there\t was
\nonly  an agreement by which the Electricity  Board  accepted
\nthe  agreement which was held by the Umpire to\thave  become
\noperative. Once that agreement was binding on the Board, its
\nterms  could not be varied from the uniform rate under\tsub-
\nsections (1) and (2) of s. 49. The Umpire was right. In\t our
\nopinion,  the Umpire committed no error in arriving at\tsuch
\nconclusion.  Furthermore, such a conclusion is\tcertainly  a
\npossible view of the  interpretation of the decision of this
\n\t\t\t\t\t\t  PG NO 689
\nCourt  in Indian Aluminium Co’s case, if not the only  view.
\nWe need go no further than that.\n<\/p>\n
    We,\t are, therefore, of the opinion that the view  taken
\nby the Umpire on section 49 was a possible view in the light
\nof the decision of this Court in Indian Aluminium’s case. In
\nthe  premises, a question of law arose certainly during\t the
\ncourse of the proceedings. Such a question has been  decided
\nby  the\t Umpire on a view which is a possible one  to  take.
\nEven if there was no specific reference of a question of law
\nreferred  to  the  Umpire,  there  was\ta  question  of\t law
\ninvolved.  Even\t on the assumption that such a view  is\t not
\nright,\tthe  award  is\tnot  amenable  to  interference\t  or
\ncorrection  by the courts of law as there is no\t proposition
\nof  law which could be said to be the basis of the award  of
\nthe Umpire, and which is erroneous.\n<\/p>\n
    In\tthe  premises, we are of the opinion that  the\tHigh
\nCourt and the learned IInd Additional District Judge were in
\nerror in the view they took of the award of the Umpire.\t The
\nappeal\tmust, therefore, be allowed and the decision of\t the
\nHigh  Court, dated 21st July, 1987 as well as the  order  of
\nthe IInd Additional Judge, Lucknow, dated 30th May, 1984 are
\nset aside. No other point was urged challenging the award of
\nthe Umpire. The award of the Umpire is confirmed and let the
\naward  be made Rule of the Court under section 14(2) of\t the
\nAct. The appeal is allowed with costs.\n<\/p>\n
R.S.S.\t\t\t\t\t     Appeal allowed.\n\n\n\n<\/pre>\n","protected":false},"excerpt":{"rendered":"
Supreme Court of India U.P. Hotels Etc vs U.P. State Electricity Board on 28 October, 1988 Equivalent citations: 1989 AIR 268, 1988 SCR Supl. (3) 670 Author: S Mukharji Bench: Mukharji, Sabyasachi (J) PETITIONER: U.P. HOTELS ETC. Vs. RESPONDENT: U.P. STATE ELECTRICITY BOARD DATE OF JUDGMENT28\/10\/1988 BENCH: MUKHARJI, SABYASACHI (J) BENCH: MUKHARJI, SABYASACHI (J) RANGNATHAN, […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_lmt_disableupdate":"","_lmt_disable":"","_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[30],"tags":[],"class_list":["post-29360","post","type-post","status-publish","format-standard","hentry","category-supreme-court-of-india"],"yoast_head":"\nU.P. Hotels Etc vs U.P. 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