# CG Power & Indus. Solutions Ltd v. U.P. Power Transmission Corp. Ltd. Opp. Party

- **Citation:** (2022) 1 ILRA 832
- **Court:** High Court of Judicature at Allahabad
- **Decided:** 2022-01-17
- **Case number:** Civil Misc. Arbitration Appl. No. 12 of 2021
- **Bench:** Mrs. Sangeeta Chandra
- **Source:** https://unisonlegal.in/judgment/allahabad-high-court/cg-power-indus-solutions-ltd-v-u-p-power-transmission-corp-ltd-opp-party-48063
- **Pages:** 20

## Headnote

Electricity Act, 2003 -Section 67 -
Applicant
served
notice
proposing
three persons for appointment as
Arbitrator-respondent refused to give
consent-insisted that under clause 38
only chairman of UPPTCL could from
Arbitral
tribunal-upon
failure
to
agree
upon
appointment
of
Arbitrator-present Application filed-
Applicant neither a licensee nor a
generating
company-neither
generated electricity nor supplied to
the Respondent-Supply Agreement is
for
supply
of
materials
and
equipment-dispute-Reliance
upon
section 67 of Electricity Act, 2003
misconceived.

Application allowed. (E-9)

List of Cases cited:

## Text

_Characters 0–39,630 of 68,249. This is a partial read: ask again with offset=39630 for what follows._

832 INDIAN LAW REPORTS ALLAHABAD SERIES
respondents feel aggrieved, it will be open
to them to make an application in the
decided petition.

6. In the circumstances, the learned
Civil Judge (Senior Division), Mathura is
directed to dispose of the pending interim
injunction application in Original Suit No.
1088 of 2021 Prem Singh vs. Brij Bhushan
Parashar, positively on the next date fixed
i.e. 01.02.2022, after hearing all parties to
the suit. If for some reason, the temporary
injunction application cannot be disposed
of on the next date fixed, it shall be
disposed of within the next 15 days.

7. It is made clear that the case will
not be adjourned because of any strike or
other resolution from the Bar Association
asking their members not to abstain from
judicial work. Learned Counsel appearing
in this case or those who desire to appear at
the hearing of the temporary injunction
application will assist the Court irrespective
of any Bar resolution.

8. This petition is disposed of in
terms of the aforesaid orders.

9. Let this order be communicated to the
learned Civil Judge (Junior Division), Mathura
through the learned District Judge, Mathura by
Monday, the 24th January, 2022.
----------
(2022)01ILR A832
ORIGINAL JURISDICTION
CIVIL SIDE
DATED: LUCKNOW 17.01.2022

BEFORE

THE HON'BLE MRS. SANGEETA CHANDRA, J.

Civil Misc. Arbitration Appl. No. 12 of 2021

CG Power & Indus. Solutions Ltd.
 ...Applicant
Versus
U.P. Power Transmission Corp. Ltd.
 ...Opp. Party

Counsel for the Applicant:
Gantavya, Meha Rashmi

Counsel for the Opp. Party:
Karuna Thareja, Romit Seth, Shishir Prakash

Electricity Act, 2003 -Section 67 -
Applicant
served
notice
proposing
three persons for appointment as
Arbitrator-respondent refused to give
consent-insisted that under clause 38
only chairman of UPPTCL could from
Arbitral
tribunal-upon
failure
to
agree
upon
appointment
of
Arbitrator-present Application filed-
Applicant neither a licensee nor a
generating
company-neither
generated electricity nor supplied to
the Respondent-Supply Agreement is
for
supply
of
materials
and
equipment-dispute-Reliance
upon
section 67 of Electricity Act, 2003
misconceived.

Application allowed. (E-9)

List of Cases cited:

1. Haryana Space Application Centre Vs Pan
India Consultants Private Limited (Civil appeal
No.131 (8) of 2021 decided on 20.01.202
Ltd.2017(4) SCC 665

2. TRF Ltd. Vs Aniruddha Engineering Projects
Ltd. 2017 (8) SCC 377

3. Gujarat Urja Vikas Nigam Ltd. Vs Essar
Power Ltd. 2008 (4) SCC 755

4. Tamil Nadu Generation & Distributiotd. 2014
(11) SCC 53

5. Hindustan Zinc, 2019 (17) SCC 882

6. Writ-C No.11295 of 2019 (Akhilesh Kumar Vs
St. of U.P.)

7. Duro Felguera S.A. Vs Gangavaran Port
Limited 2017 (9) SCC 729
1 All. CG Power & Indus. Solutions Ltd. Vs. U.P. Power Transmission Corp. Ltd.
833
8. Vidya Drolia Vs Durga Trading Corporation
reported in (2021) 2 SCC 1

9. Babita Lila Vs U.O.I. & ors. reported in 2016
(9) SCC 647

10. Dharmendra Textiles Processors reported in
2008 (13) SCC 369

11. Suresh Shah Vs Hipad Technology reported
in 2021 (1) SCC 529

12.
Enzen
Global
Solutions
Vs
Central
Electricity Supply Utility Odisha, 2018 (4)
ARBLR 250

13. Messers Technical Associates Vs U.P. Power
Transmission Corporation Limited Arbitration
Application No.66 of 2019

14. Perkins Eastman Architects DPC & ors.Vs
HSCC India Ltd. 2019 SCC Online Supreme
Court 1517

15. Stock Vs Frank Jones (Tipton). Ltd. 1978 (1)
All England Reporter 948

16. Crawford Vs Spooner 1846 (6) Moo PC 1

17. Nirmala J. Jhala Vs St. of Gujarat 2013 (4)
SCC 301

18. Shin Etsu chemical Co Ltd. Vs Akash
Optifibre Ltd. 2005 (7) SCC 234

19. Vimal Kishor Shah Vs Jayesh Dinesh Shah
2016 (8) SCC 788

20. Silver Dry Bulk Co. Ltd. Vs Hometd.Vs
Pradyuat
Deb
Burman
2019
SCC
Online
Supreme Court 1164

21. Trading Engineers International Ltd. Vs U.P.
Power
Transmission
Corporation
Limited
Arbitration Application No.5 of 2020

22. SBP and Co. Vs Patel Engineering Ltd. & anr.
2005 (8) SCC 618

23. ONGC Mangalore Petrochemicals Ltd. Vs
A.N.S. Constructions 2018 (3) SCC 373
24. National Insurance Company Ltd. Vs
Bogra Polyfab 2009 (1) SCC 267
(Delivered by Hon'ble Mrs. Sangeeta
Chandra, J.)

1. This Application has been filed by
the Applicant under Section 11(6) of the
Arbitration and Conciliation Act, 1996 as
amended, saying that the Applicant is a
public limited company duly incorporated
under
the
Companies
Act
and
the
Respondent
U.P.
Power
Transmission
Corporation Limited (here in after referred
to as UPPTCL) is a State Transmission
Utility notified under Section 39 of the
Electricity Act, 2003.

2. It has been argued by the learned
counsel for the Applicant that a Tender was
floated by the Respondent Corporation in
2010-11 bearing Specification No.ESD8/48 for construction of a 400/220 kW
Substation at Banda on turnkey basis. The
contract was awarded to the Applicant on
28.12.2011, in furtherance whereof three
separate
Agreements
were
executed
between the parties, the first one being for
supply of equipment and materials for
construction of the Substation, that is, the
Supply Agreement. In between January
2013, and March 2013, the Applicant
manufactured certain equipment and the
same was inspected by the Respondent.
The Applicant wanted to supply the
equipment two months earlier to the
initially agreed date of supply. A letter was
written in this regard by the Applicant to
the Respondent saying that it wished to
supply equipment in June 2013 before the
scheduled date of delivery i.e. August
2013. The Respondent refused to accept
delivery prior to the due date citing
procedural issues. After correspondence
834 INDIAN LAW REPORTS ALLAHABAD SERIES
and discussion, when the Applicant agreed
to bear the interest towards pre-ponement
of the delivery and payment towards the
equipment for the period of two months on
the total cost of the equipment, the
Respondent agreed to take the delivery
before time. However, the Respondent
instead of releasing Rs.11 Crore 76 lakhs,
released only a sum of Rs.10 crores on an
ad-hoc basis. It also indicated that interest
at the rate of 12% per annum on the
payment of Rs.10 crores shall have to be be
paid by the Applicant until the date of
erecting of the equipments.

3. The Applicant addressed several
letters to the Respondent objecting to the
unilateral levy of interest up to the date of
erecting of the equipment and calling upon
the Respondent to pay balance outstanding
dues of Rs.1.76 crores towards delivery of
equipment under the Supply Agreement.
This correspondence continued all through
2016 and 2017. The Applicant thereafter
supplied the second set of Transformers
and Reactors in accordance with the terms
of the Supply Agreement. On 06.02.2018
the Respondent unilaterally deducted a sum
of Rs.3 Crores and 24 lacs as interest on the
amount paid in advance towards supply of
equipment in July 2013. In effect, the
Respondent had withheld Rs.5 crores and
the Applicant objected to unwarranted
deductions being made by the Respondent
in its various correspondence in 2018. On 4
May
2019
the
entire
project
was
successfully completed by the Applicant
and it requested for inspection, finally the
Respondent took over the Banda Substation
on 29.11.2018.

4. The Applicant served a legal notice
on 25.01.2020 calling upon the Respondent
to clear outstanding principal amount of
Rs.5 crores along with interest at the rate of
18% per annum from the date of delivery
of equipment till the date of making
payment aggregating to an amount of
Rs.10.91 crores and to further pay a sum of
Rs.50 lakhs as token damages and Rs.50
lakhs for indulging in illegal enrichment in
violation of the terms of the agreement.
The Respondent refused to pay and the
Applicant
invoked
Arbitration
Under
Clause 38 of Form A of the Supply
Agreement
(General
Conditions
of
Contract) subject to modification in the
said Clause on account of Statutory
amendment
to
the
Arbitration
and
Conciliation Act, 1996.

5. On such a notice being delivered to
the Respondent on 17.12.2020 alongwith
Applicant's proposed panel of three persons
for
appointment
as
Arbitrator,
the
Respondent refused to give its consent for
the appointment of any of the persons
proposed by the Applicant as the Arbitral
Tribunal and insisted that under Clause 38
only the Chairman UPPTCL could form the
Arbitral Tribunal to adjudicate upon the
disputes which have arisen between the
parties.
The
Applicant
replied
on
31.12.2020 pointing out the Statutory
amendment
to
the
Arbitration
and
Conciliation Act 1996 with effect from
23.10.2015, by which a Departmental
Authority cannot be appointed as an
Arbitration Tribunal or nominate someone
in his behalf, nor can any person known to
either of the parties be appointed as
Arbitrator and requesting the Respondent to
give its consent for appointment of
Arbitrator in terms of the legal notice dated
14 December 2020.

6. In its letter of 6.1.2021, the
Respondent maintained its stand regarding
the power of the Chairman UPPPTCL to
appoint an Arbitrator. The parties having
1 All. CG Power & Indus. Solutions Ltd. Vs. U.P. Power Transmission Corp. Ltd.
835
failed to agree upon a procedure for
appointment of Arbitrator within 30 days
from the date of the initial notice, the
present Application for appointment of a
sole Arbitrator to Act as Arbitral Tribunal
to adjudicate upon the disputes which have
arisen between the parties has been filed on
03.02.2021.

7. Clause 38 of the Supply Agreement
which is the Arbitration Clause provides
that "..if any dispute or difference or
controversy shall at any time arise between
the bidder on the one hand and the U.P.
Power Transmission Corporation Limited
and the engineer of the contract or other
issues touching the contract, or as to the
true construction meaning and intent of any
part of condition of the same ...... or as to
any other matter or thing whatsoever
connected with or arising out of the
contract, and whether before or during the
progress or after the completion of the
contract, such question, difference or
dispute shall be referred for adjudication to
the Chairman UPPTCL, or any other
person nominated by him in this behalf,
and his decision in writing shall be final,
binding and conclusive. This submission
shall be deemed to be a such submission
within the meaning of Indian Arbitration
Act 1940 or any statutory modification
thereof......."

8. It has been argued by Miss Meha
Rashmi the counsel for the Applicant that
on account of statutory modification to the
Arbitration and Conciliation Act, 1996 by
the
Arbitration
and
Conciliation
Amendment Act, 2015 with effect from
23.10.2015, a Departmental Authority
cannot be appointed as an Arbitrator nor
can he nominate someone in his behalf nor
can any person known to either of the
parties be appointed as Arbitrator. The
learned counsel for the Applicant has
referred to judgements rendered by the
Supreme
Court
in
Haryana
Space
Application Centre versus Pan India
Consultants
Private
Limited
(Civil
appeal No.131 of 2021 decided on
20.01.2021), and Voestalpine Schienen
GMBH v. Delhi Metro Rail Corporation
Limited 2017(4) SCC 665;

9. It has been argued by the learned
counsel for the Applicant that in the
judgement of TRF Ltd. versus Aniruddha
Engineering Projects Ltd. 2017 (8) SCC
377, the Supreme Court was considering
the
question
"Whether
an
ineligible
Arbitrator, like the Managing Director,
could nominate an Arbitrator, who may be
otherwise eligible and a respectable
person, after the amendment came into
effect in 2015?"

10. Counsel for the applicant has
referred to paragraphs 12 to 16 of the
judgement in TRF Ltd. (Supra) where the
Supreme Court had considered Section 12
(5) of the Act along with the Fifth and the
Seventh Schedule. It referred with approval
to the argument raised by raised by the
learned
counsel
appearing
for
the
appellants that the Arbitrator could not
have been nominated by the Managing
Director as the said authority had been
statutorily disqualified. It rejected the
argument raised by the Respondent that the
Managing Director may be disqualified to
Act as an arbitrator, but he is not deprived
of his right to nominate an arbitrator who
has no relationship with the respondent or
that if the appointment is hit by the Fifth,
Sixth or the Seventh Schedule, the same
has to be raised before the Arbitral Tribunal
during the arbitration proceedings but not
836 INDIAN LAW REPORTS ALLAHABAD SERIES
in an Application under Section 11 (6) of
the Act. The Supreme Court considered
several judgements rendered by it earlier in
the subsequent paragraphs and observed
that the purpose of referring to the said
judgement was that the courts in certain
circumstances
have
exercised
the
jurisdiction to nullify the appointments
made by the authorities as there had been
failure of procedure or ex facie in
contravention of the inherent facet of the
arbitration clause. It referred to the Seven
Judges Bench in SBP and Co in paragraph
41 of judgment, and the conclusion given
by the Constitution Bench in Paragraph-47,
and observed that if there is a clause
requiring the parties to nominate the
respective arbitrator, their authority to
nominate cannot be questioned. What
really in that circumstance can be called in
question is the procedural compliance and
the eligibility of their arbitrator depending
upon the norms provided under the Act and
the Schedule appended there too. But in the
case before it where the Managing
Director is the named sole arbitrator and
he has also been conferred with the power
to nominate one who can be arbitrator in
his place, and in such a case if the
nomination of an arbitrator by ineligible
arbitrator is allowed, it would tantamount
to
carrying
on
the
proceeding
of
arbitration by himself. Ineligibility strikes
at the root of his power to arbitrate or get
it our treated upon by a nominee.

11. It was observed by the Supreme
Court in paragraph 57 that:- "... by our
analysis, we are obliged to arrive at the
conclusion that once the Arbitrator has
become ineligible by operation of law, he
cannot nominate another as an Arbitrator.
The Arbitrator becomes ineligible as per
prescription contained in Section 12 (5) of
the Act. It is inconceivable in law that a
person who is statutorily ineligible can
nominate a person. Needless to say, once
the
infrastructure
collapses,
the
superstructure is bound to collapse. One
cannot have a building without the plinth.
Or to put it differently, once the identity of
the Managing Director as a sole Arbitrator
is lost, the power to nominate someone else
as an Arbitrator is obliterated. Therefore,
the view expressed by the High Court is not
sustainable and we say so..."

12.

In
response
to
the
said
submissions made by the learned counsel
for the Applicant, Shri Shishir Prakash
appearing for the Respondent has argued
that the Arbitration Application has been
cleverly drafted only to invoke the
jurisdiction of this Court in a highly timebarred dispute. The agreement between the
parties was signed in 2011 and supply of
equipment for which the Applicant alleges
unwarranted deductions being made in
payment, was made in the year 2013-14.
Once the payment having been made
against
the
Supply
Agreement
the
Applicant wishes to extract more from the
Respondent than permissible under the
contract. The Learned counsel for the
Respondent has pointed out that the
Arbitration and Conciliation Act, 1996 is a
''general law'. All disputes relating to
licensees and generating companies are to
be referred to the U.P. State Electricity
Regulatory
Commission
or
to
an
Adjudicator nominated by it. Reference has
been made to the Preamble of the
Electricity Act, 2003, that it is "... an Act to
consolidate the laws relating to generation,
transmission, distribution, of Electricity
and
generally
for
taking
measures
conducive to development of Electricity
industry, promoting competition there in,
protecting interest of consumers and supply
of Electricity to all areas, rationalisation of
1 All. CG Power & Indus. Solutions Ltd. Vs. U.P. Power Transmission Corp. Ltd.
837
Electricity tariff, ensuring transparent
policies regarding subsidies, promotion of
efficient
and
environmentally
benign
policies, constitution of Central Electricity
Authority Regulatory Commission and
Establishment of Appellate Tribunal and
for matters connected there with or
incidental thereto."

13. "Great Emphasis has been placed
by the learned counsel for the Respondent
on the phrase ''Matters connected therewith
or incidental thereto'. It has been argued
that the Applicant agreed to supply
equipment,
and
construct
a
Power
Substation at Banda for the supply and
transmission of Electricity. There were
three contracts signed between the parties:-
1) for supply of equipment and materials
that is, the Supply Agreement; 2) Erection,
Testing and Commissioning and Operation
and
Maintenance
of
the
Power
Substation;3) Civil works. The specific
timeline and procedure as well as terms of
payment was decided between the parties
in all these agreements. The Company
requested the preponement of supply of
materials
and
equipment
without
constructing the supporting civil works like
laying down the plinth on which such
equipment was to be placed. The firm
delivered the equipment in the month of
June 2013, two months prior to the
stipulated schedule of supply in August
2013 at its own risk and cost. The
Respondent had to taken a loan from the
Power Finance Corporation. The liability to
pay interest had been specifically agreed
upon by the Applicant in its letter dated
24.06.2013, and due to the laxity in the
construction of the Power Substation the
Respondent
had
to
suffer
losses.
Nevertheless, it released a sum of Rs.10
Crores which was already much more then
what was due under Paragraphs 4.2 and
.4.3 of the Agreement.

14. It has also been pointed out by the
learned counsel for the Respondent that
Section 86(1)(F) of the Electricity Act
2003, mandates that any dispute between
the licensee and the generating company
can
be
referred
to
the
Regulatory
Commission for appointment of an expert
to adjudicate the dispute. Since the
Electricity Act is a special Act by
implication Section 11 of the Arbitration
and Conciliation Act will not apply to
disputes between licensees and generating
companies. This is because of the principle
that "special law overrides the general
law". In the matter of Gujarat Urja Vikas
Nigam Limited versus Essar Power Ltd
2008 (4) SCC 755, the Supreme Court
observed in Paragraph-28 that Section
86(1)(F) is a special provision and hence
will override the general provision in
Section
11
of
the
Arbitration
and
Conciliation Act 1996, for Arbitration of
dispute between the licensee and the
generating company. The learned counsel
for the Respondent has read out the
relevant Paragrah which observes thus:-
"...it is well settled that the special override
the general law. Hence, in our opinion
Section
11
of
the
Arbitration
and
Conciliation Act 1996 has no application to
the question who can adjudicate/arbitrate
disputes between licensees and generating
companies and only Section 86(1)(F) shall
apply in such a situation. ..."

15. Under Paragraph-61 of the same
judgement it was observed that "..,we make
it clear that it is only with regard to
authority which can adjudicate or arbitrate
the dispute that the Electricity Act 2003
will prevail over Section 11 of the
838 INDIAN LAW REPORTS ALLAHABAD SERIES
Arbitration Conciliation Act. 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 conflict with the provisions 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.
Procedure and other matters relating to
such proceedings will of course be
governed
by
the
Arbitration
and
Conciliation Act 1996, unless there is a
conflicting provision in the Act of 2003."

16. In Paragraph-64 it was further
observed:- "this appeal is filed regarding
deduction of Rs.5crores. The appellant may
file an application under Section 94(2) of
the Electricity Act 2003 before the
appropriate Commission, to pass such an
interim
order,
as
it
may
consider
appropriate. This appeal is accordingly
dismissed"

17. The learned counsel for the
Respondent
has
referred
to
various
paragraphs
in
the
Counter
Affidavit
wherein it has been stated that the
Applicant was responsible for creating
hurdles in the smooth execution of the
contract. It requested for preponement of
supply of equipment and to ignore the
terms and conditions of the Agreement. It
supplied the equipment in June 2013 two
months prior to the stipulated time of
August 2013, at its own risk and cost. The
Applicant company had not constructed the
plinth, knowing fully well that they were
required to be completed prior to the
delivery of the said equipments and
equipments were to be unloaded on the
respective plinths exclusively. For the
Construction of the Banda Substation the
Respondent had taken a loan from Power
Finance Corporation and interest on the
loan had to be borne by the Public Sector
Undertaking
on
making
payment
as
demanded by the Applicant. The contract
had provided for payment of only 70% of
the cost of the material and equipment and
hundred percent cost of transportation and
insurance and of the tax and duties levied
on such equipment , subject as to their due
dates
as
per
approved
Delivery/
Completion
Schedule.
However,
the
insistence of the Applicant for delivery of
equipment before time and for making of
payment before time had led to the
Corporation suffering losses as it resulted
in preponement of liability to pay interest.

18. The learned counsel for the
Respondent has referred to another decision
of the Supreme Court in Tamil Nadu
Generation
and
Distribution
Corporation Limited versus PPN Power
Generation Company (Private) Limited
2014 (11) SCC 53, to emphasize that in
respect of disputes relating to generation,
transmission and distribution of Electricity,
dispute resolution should be done only
under the Electricity Act 2003.

19. The learned counsel for the
Respondent has referred to Section 2 (17)
of the Definition Section of the Electricity
Act 2003, which defines a "distribution
licensee" and also Section 2 (28) which
defines the "generating company" and
Section 2(29) and 2(38). He has referred to
Section 14 of the Electricity Act of 2003
and Paragraphs 13 to 24 and 59 of the
judgement
rendered
in
Gujarat
Urja
(supra). The learned counsel for the
Respondent has also referred to paragraphs
13 and Para 26 of the Hindustan Zinc,
1 All. CG Power & Indus. Solutions Ltd. Vs. U.P. Power Transmission Corp. Ltd.
839
2019 (17) SCC 882 and the Statement of
Objects and Reasons of the Electricity Act
of 2003. It has been argued that the Banda
Substation was a Transmission Station and
construction of a transmission station is as
much a part of a distribution licensees'
work as any other. Like laying of power
lines it is a technical matter which is a
function that is incidental to the supply of
Electricity, and it would always be better
that this adjudication is dealt with by some
person who has special knowledge of the
domain.

20. The learned counsel for the
Respondent has also referred to Section
2(22) and Section 2(25) of the Act 2003
and argued that the Electricity supply
system is an integrated whole. It has also
been
pointed
out
that
instead
of
approaching the Chairman of UPPTCL
invoking
the
Arbitration
Clause,
the
Applicant repeatedly addressed all its
correspondence to the Managing Director
U.P.P.T.C.L.

21.

Learned
counsel
for
the
Respondent has also pointed out paragraphs
from the contract which provided that "the
Substation has to be constructed, erected,
tested, commissioned and completed in all
respects within 24 months from the date of
issue of letter of intent or from the date of
handing over of land which ever is later.
The progress shall be monitored as per the
approved project implementation schedule
and PERT chart to be submitted by the
contractor."

22. It has been argued by the learned
counsel for the Respondent that any
deductions that have been made from the
payments of the Applicant have been
because of the various clauses of the
Contract which required that entire
construction and running of the Substation
was
to
take
place
as
per
Schedule/timetable, which was not adhered
to by the Applicant. The Project was finally
commissioned in May 2018, that is, after
inordinate delay of more than four years, as
per the terms and condition of the
Agreement. Because of delay in charging
the
said
substation,
the
Respondent
suffered huge losses in terms of tariffs and
Electricity supply which was mainly due to
the Applicant company. The Learned
counsel for the Respondent has referred to
the Special Conditions which were attached
to the sanction letter for loan by the Power
Finance Corpn. Ltd. and has pointed out
Paragraph-23.1 wherein the UPPTCL had
to submit an undertaking that it would not
make any investment in a Scheme for
which approval had been denied by the
UPERC. The UPPTCL had to submit
evidence that the investment in the
Project/Scheme has been intimated to the
UPERC, indicating the financing plan and
repayment
obligation
in
tariff.
The
argument of the learned counsel for the
Respondent is that since the Power Finance
Corporation Ltd. while approving loan to
be given to the Respondent had laid down a
condition that all progress, stage wise, had
to be duly intimated to the UPERC, it
meant that the UPERC had effective
control over the project i.e. erecting of the
Substation at Banda. The UPERC being
closely associated was entitled to nominate
an Arbitrator for adjudication of any
dispute arising in the performance of such
contract.

23.

Learned
counsel
for
the
Respondent referred to Sub Sections 22,
25, 30, 36, 50, 72 and 77 of Section 2 of the
Electricity Act, to buttress his argument
840 INDIAN LAW REPORTS ALLAHABAD SERIES
that although the word "transmission" has
not been included, it is intended that
"transmission" shall also be dealt with in
the same manner as in Section 86 (1)(f). He
also referred to Section 174 of the
Electricity Act which gave it overriding
effect over all other laws and argued that
the Electricity Act and the provision there
in for settlement of disputes shall override
the provisions of the Arbitration Act
insofar as Disputes relating to Electricity
are concerned. The learned counsel for the
Respondent referred to judgment rendered
by a Division Bench in Writ-C No.11295
of 2019 (Akhilesh Kumar versus State of
U.P.) and paragraph 23 thereof, to say that
''casus omissus' should be supplied by the
Court in certain cases where it is necessary
to give full effect to the provisions of the
Statute.
He
argued
that
the
word
"transmission" although was not mentioned
along with "distribution" in sub Section (5)
of Section 2, distribution would include
transmission also.

24. The learned counsel for the
Respondent also referred to Section 150
and Section 174 of the Electricity Act, and
to the judgement rendered by the Supreme
Court in the case of Mayavti Trading
Private Limited, 2019 SCC Online SC
1164, during the course of his arguments.
He referred to Sections 39 and 40 of the
Act and argued that this Court will have to
see
whether
''generation'
includes
''transmission' as all are interrelated and
"power
system"
includes
generation,
transmission and distribution. All are
technical. Only generation cannot be said to
be
technical,
transmission
lines
and
substations that facilitate transmission are
also technical matters, that need to be
referred to an expert in the field for
adjudication. The Applicants are suppliers
of components and build substations to
facilitate transmission and therefore they
are also covered by the Electricity Act and
the learned counsel for the Respondent also
referred to page 29 of the Contract and
argued that the aggregate value of the first
contract of Rs.92,71,72,000 is related to the
second, and the third contract the learned
counsel for the Respondent also referred to
the Statement of Objects and Reasons of
the Act and paragraph 1.1 and argued that
transmission comes within "works relating
to the supply of Electricity."

25. In rejoinder to the arguments
raised by the learned counsel for the
Respondent, the learned counsel for the
Applicant has said that the reliance placed
upon the provisions of the Electricity Act
2003, is erroneous and misconceived. The
Electricity Act 2003 has no application in
the facts of the present case which arise out
of a purely commercial dispute between the
parties. The parties are governed by the
Indian Contract Act and the Arbitration and
Conciliation Act alone. The Electricity Act
2003 deals with generation, transmission
distribution and trading of Electricity and
governs contracts in relation thereto. In this
case there is no generation, distribution or
trading of Electricity whatsoever. The
dispute has arisen out of the provisions of
the Supply Agreement dated 28.11.2011.
The Supply Agreement was a contract for
supply of equipment and material for
construction of a Substation and the
Applicant has simply sold the equipment
and materials such as Transformers and
Reactors to the Respondent for construction
of the Substation. The State Electricity
Regulatory Commission is a body set up
under Section 86 of the Electricity Act
2003
to
regulate
the
process
of
procurement of Electricity by distribution
companies from a generating company
under the agreement for purchase of power.
1 All. CG Power & Indus. Solutions Ltd. Vs. U.P. Power Transmission Corp. Ltd.
841
Under Section 86(1)(F) of the Act, the
State Electricity Regulatory Commission
has jurisdiction only over those disputes
which arise under these agreements for
purchase
of
power
between
the
licensees/distribution companies and the
generating companies. It has been argued
that the Applicant is neither a licensee nor a
generating
company.
It
has
neither
generated Electricity nor supplied it to the
Respondent. The Supply Agreement is a
contract for supply of construction material
and
equipment
simpliciter.
In
the
performance of the Supply Agreement the
Applicant has not undertaken any work of
transmission, distribution or trading of
Electricity
as
a
licensee,
and
the
Respondents' reliance on Section 67 of the
Electricity Act 2003 is also misconceived.
The
judgement
relied
upon
by
the
Respondents reported in 2002 (8) SCC 715,
has no application to the present case. Also,
the judgement reported in 2008 (4) SCC
755 is exclusively in respect of Electricity
disputes between distribution companies
and generating companies and the Power
Purchase Agreement. It has been argued
that this Court has been approached for
appointment of Arbitrator as there was
failure of both the parties to agree upon the
same under Section 11 (6) of the Act of
1996. It has further been argued that the
Respondents' claim that the loan taken from
the Power Finance Corpn. was to facilitate
the Applicant company, was inappropriate
and false. The loan document filed as
Annexure to the Counter Affidavit shows
that the Respondent raised a loan of Rs.640
crores from the Power Finance Corpn to
finance the project.

26. Miss Meha Rashmi has also
argued that the learned counsel for the
Respondent
fairly
admitted
that
the
Applicant is neither a licensee nor a
generating company and therefore not
covered under Section 86(1)(f), but should
be read as covered under the said Section
by this Court and the definition of
generating company should be extended to
include the Applicant as well. Such a
power is not given to the Court under
Section 11 (6) of the Act where the
jurisdiction is limited only to see whether
there was a contract, and in the said
contract there was an Arbitration Clause
providing
for
settlement
of
disputes
through an Arbitral Tribunal. It was also
argued that there were three contracts
signed between the Applicant and the
Respondent. Dispute has arisen only with
respect to the first contract which relates to
supply of equipments and does not include
construction of the Substation. It is an
incorrect
submission
made
by
the
Respondent
that
the
Applicant
is
constructing the power Substation and
laying down the power lines as well. The
learned counsel for the Applicant referred
to Duro Felguera S.A. V. Gangavaran
Port Limited 2017 (9) SCC 729, and
paragraphs 38 and 42 thereof. The contract
between the Applicant and the Respondent
is purely commercial and not a technical
contract. The equipment has to be delivered
tested on the site by the officials of the
Respondent, and delivery has to be taken
thereafter. It also requires replacement of
defective equipment or material but it is not
the case of the Respondent that defect was
found in the equipment and materials that
was supplied. Therefore no technical
experience is required to adjudicate the
dispute of holding back nearly 10 crores of
rupees from the dues of the Applicant.

27. It has also been argued that the
intention of the legislature in framing the
842 INDIAN LAW REPORTS ALLAHABAD SERIES
Arbitration Act is clear as also in framing
the Electricity Act. When the intention of
the legislature is clear and the language is
unambiguous the court should not read a
''casus omissus' in the language and supply
the
same
while
sitting
in
limited
jurisdiction under Section 11 (6) of the
Arbitration Act. Miss Meha Rashmi,
further contended that the argument of the
Respondent is misplaced in so far as he has
communicated
the
anxiety
of
the
Respondent regarding technical difficulties
being
discovered
in
the
equipment
supplied. Such is not the case. The case is
that Applicant had preponed the supply of
certain equipment and material and also
had asked for preponement of payment and
was willing to pay the interest calculated on
preponement of payment by two months by
the Respondent, to the Bank. In such a
dispute only terms which would have to be
in interpreted are commercial terms. The
question to be decided by the Arbitrator
was whether the deductions made by the
Respondent was justified at the time of
final payment. Moreover, it has been
argued that while framing the Electricity
Act, nothing prevented the Legislature
from saying that any dispute of a licensee
shall be referred to the Commission.
Instead the words used are "any dispute
relating to generation" shall be referred to
the Commission. The judgements that have
been relied upon by the learned counsel for
the Respondent relate to power Purchase
Agreements. The legislature did not intend
that all the disputes relating to a licensee or
a generating company be referred to the
Commission. It intended that some disputes
relating to generation could also be referred
to the Arbitrator.

28. It has been argued further by the
learned counsel for the Applicant that the
State Electricity Commission is a body
set up under Section 86 of the Electricity
Act 2003, to regulate the process of
procurement of Electricity by distribution
companies and generating companies
under an agreement for purchase of
power. Under Section 86(1)(F) of the Act
the State Electricity Commission has
jurisdiction only over those disputes
which arise under these agreements for
purchase
of
power
between
the
distribution companies and the generating
companies.

29. Learned counsel for the Applicant
argued that the scope of judicial enquiry is
limited and reference was made to para
132, 150 to 153 154 and 233 of the
judgement rendered in Vidya Drolia Vs.
Durga Trading Corporation reported in
(2021) 2 SCC 1. The learned counsel for
the Applicant also referred to Babita Lila
Vs. Union of India and Others reported
in 2016 (9) SCC 647 and Para-63 thereof,
and argued that this Court has to consider
whether in the monitory claim it is
necessary to add words which are not
relevant for decision of the dispute. Where
there is no ambiguity in the statute, the
Court should not interpret the words in
such a manner as to create confusion.
Learned counsel for the Applicant referred
to Paragraphs 64, 65 and 66 of 2016 (9)
SCC 647 Babita Lila Vs. Union of India
& Others and of Dharmendra Textiles
Processors reported in 2008 (13) SCC
369, and argued that similar matter had
come up before this Court and the
Designated Judge had referred the dispute
to a retired judge of this Court. Learned
counsel for the Applicant referred to
judgements in Hindustan Zinc Limited
Vs.
Ajmer
Vidyut
Vitran
Nigam
reported in 2019 (17) SCC 82, Suresh
Shah Vs. Hipad Technology reported in
2021 (1) SCC 529 and Gujarat Urja
1 All. CG Power & Indus. Solutions Ltd. Vs. U.P. Power Transmission Corp. Ltd.
843
Vikas Nigam Vs. Essar Power reported
in 2008 (4) SCC 755.

30. In Suresh Shah versus Hipad
Technology
India
Private
Limited
2021(1) SCC 529, in paragraph 19 the
Supreme Court had observed in a dispute
relating to tenancy/ lease agreement which
was not covered under the Rent Control
Act that "in so far as eviction or tenancy
relating to matters governed by special
statutes, where the tenant enjoys statutory
protection against the eviction, whereunder
the court/forum is specified and conferred
jurisdiction under the statute alone can
adjudicate such matters. Hence, in such
cases the dispute is non-arbitrable. If the
special statutes do not apply to the
premises/property
under
lease/tenancy
created thereunder as on the date when the
cause of action arises, to seek eviction or
such other relief and in such transaction if
the parties are governed by an arbitration
clause; the dispute between the parties is
arbitrable
and
there
shall
be
no
impediment whatsoever to invoke the
arbitration clause." The Supreme Court in
the
said
judgement
relied
upon
observations made in Vidya Drolia versus
Durga Trading 2021 (2) SCC 1.

31. The learned counsel for the
Applicant has also placed reliance upon
and Enzen Global Solutions versus
Central
Electricity
Supply
Utility
Odisha, 2018 (4) ARBLR 250; and
paragraphs 10 to 15 where a single judge of
the Odisha High Court observed, after
referring
to
various
communication
between the parties that a commercial
agreement between the parties with regard
to arbitration clause is not to be interpreted
by the strict rules of interpretation, as may
be applicable to formal documents or
conveyances but by gathering the
intention of the parties to the agreement. A
common sense meaning of the agreement is
to be taken as to what was the intention of
the parties with regard to the settlement of
disputes.
From
the
perusal
of
communication between the parties the
clear intention of the parties had emerged
that they were in agreement to first settle
the dispute amicably and if not then by
referring to Odisha Electricity Regulatory
Commission, the parties and also agreed
that 0ERC would not be obliged to Act as
arbitrator. The Court looking into the
reluctance of OERC to Act as Arbitator
directed the parties to suggest an agreed
name of a person to be appointed as
arbitrator, and on failure to do so the court
would appoint an arbitrator.

32.