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CASE NO.: Appeal (civil)  7965 of 2001

PETITIONER: U.P.S.E.B. & Anr.                                                

RESPONDENT: Sant Kabir Sahakari Katai Mills Ltd.             

DATE OF JUDGMENT: 19/09/2005

BENCH: ARIJIT PASAYAT & H.K. SEMA

JUDGMENT: J U D G M E N T WITH CIVIL APPEAL NOS. 7966 to 7973 of 2001 and 7990 to 7991 of 2001

ARIJIT PASAYAT, J.

       These appeals are directed against the judgments  rendered by a Division Bench of the Allahabad High Court.   The main judgment was rendered in Civil Misc. Writ Petition  no. 5859 of 1999 which is the subject-matter of challenge in  Civil Appeal No. 7965 of 2001. Following the judgment  rendered in the said case other writ petitions were disposed  of.  In each of the writ petitions filed before the High  Court correctness of the electricity bills raised by the  appellant no.1-Uttar Pradesh State Electricity Board  (hereinafter referred to as the ’Board’) was questioned.   The High Court by the impugned judgment held that the Board  was as authority under Article 12 of the Constitution of  India, 1950 (in short ’the Constitution’) and similar was  the position so far as the writ petitioners are concerned  who according to the High Court were Public Sector  Undertakings.  The High Court held that in cases where the  dispute involves the State Government and a Public Sector  Undertaking, Committee in the line indicated by this Court  in Oil and Natural Gas Commission and Another v. Collector  of Central Excise [1992 Supp(2) SCC 432] (for convenience  referred to as ONGC-I) should be set up. Accordingly it was  observed that the writ petitioners would move the State  through the Chief Secretary to constitute a Committee to  resolve the dispute. Further direction was given to the  effect that the power supply to the writ petitioners was not  to be discontinued.   

       According to the appellant-Board factual position is as  follows:-  

       State Government issued a notification under Section  22-B of the Indian Electricity Act, 1910 (in short  ’Electricity Act’) titled as Uttar Pradesh Electricity  (Regulation of Distribution, Consumption) Order 1972 (in  short the ’1972 Order’) which imposed certain restrictions  on various categories of consumers for using electricity  during certain periods.  The 1972 Order was repealed and in  the year 1977 another Notification under Section 22-B, known  as Uttar Pradesh Electricity (Regulation of Supply,

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Distribution, Consumption and Use) Order 1977 (in short  ’1977 Order’) was issued.  In this order consumers were  divided into several categories and so far as the Industrial  Consumers are concerned two categories were indicated. They  are "Continuous Process Industries Power Consumers" and  "Non-continuous Process Industries Power Consumers".  List  of consumers belonging to the aforesaid category was annexed  as Annexure 2 of the said Order.  It was provided in the  1977 Order that Non-continuous Process Industries Power  Consumers would not use electricity from 18.00 to 22.00  hours every day.  It meant that the distinction between the  Continuous Process Industries Power Consumers and the Non- Continuous Process Industries Power Consumers was that peak  hours restrictions, not to use electricity were not  applicable in case of Continuous Process Industries Power  Consumers.  The spinning mills and textiles Mills were  exempted from observing power cutting during peak hours as  per clause 8 of the Order and thus these industries also  were covered by category "Continuous Process Industries".

       The Writ Petitioners were co-operative societies  registered under Uttar Pradesh Co-operative Societies Act,  1965. Undisputedly they had entered into agreements with the  Board and one of the clauses in the agreement provided that  supply shall be available to the consumers continuously  during 24 hours of each day and throughout whole period of  agreement. This Clause was however, subject to the following  restrictions:

       "Supplier shall not be responsible for the  damages or otherwise on account of accidental  interruption of supply or stoppage or  deficiency of energy caused by any order or  direction issued by the Government of U.P. or  resulting from fire, flood, temptest or any  accident or from any strike or lock out of  workers or from any other cause beyond the  control of the supplier but the supplier shall  make every effort to restore the supply as  soon as possible."

       Clause 20 of the Agreement provided that in case of any  dispute between the consumer and the Board the matter was to  be decided by a person nominated by the Chairman of the  Board and the dispute can only be referred when the consumer  pays outstanding dues. The said clause reads as follows:

       "If any question or dispute or difference  arises between the parties to this agreement  as to the interpretation or effect of any  provisions or clause herein contained or the  construction thereof or as to any other matter  thereof or the rights, duties or liabilities  of either party in connection therewith, such  question, dispute or difference shall be  referred to the arbitration of the Chairman,  U.P. State Electricity Board or the person  nominated by him and the award/decision of the  said arbitrator shall be final and binding  upon the parties.

       Provided that if the question, dispute or  difference relates to or concerns any dues  chargeable to the Consumer in terms of this

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agreement, no reference to arbitration shall  at the instance of such consumer be made till  the consumer has either deposited with the  supplier the amount of dues in dispute or  difference or given a Bank Guarantee of such  amount in favour of the Supplier valid upto  the period of one year from the date in which  the award becomes final or the amount or dues  is cleared, whichever is earlier."

       In the year 1984 in exercise of powers conferred under  Section 49 read with Section 79 of the Electricity Supply  Act, 1948 (in short the ’Supply Act’) the Uttar Pradesh  Electricity Supply (Consumers Regulation) 1984 (in short the  ’Regulations’) was framed.  The regulations have statutory  force and Regulation 14 has considerable significance so far  as the present cases are concerned. It reads as follows:

       "Regulation 14 : Failure of supply

        The supplier shall not be liable for  any claim for any loss, damage or  compensation, whatsoever arising out of any  accidental failure of supply or stoppage or  curtailment of diminution or variation in  supply or for failure restoring as a result  of any direct or indirect strike or order of  the Government or other competent Authority  in regard to distribution of power or due to  war, mutiny, commotion, Riot, strike,  lockout, fire flood, lighting earthquake or  other causes  beyond the control of the  supplier."

       In 1986 a Notification dated 28.1.1986 was issued  categorizing the industrial consumers into two categories  i.e. Continuous Process Industries and Non-Continuous  Process Industries.  Challenging the different rates fixed  by the Board, writ petitions were filed which were dismissed  by the High Court upholding the validity. It was held that  it was a valid classification.  Board felt that the language  of the Notification dated 28.1.1986 was not very clear and  therefore a corrigendum was issued clarifying the position  that Continuous Process Industries which are not observing  peak hours restrictions have to pay higher charges.     Writ  Petitions were filed challenging the levy of higher charges.   The High Court allowed the levy from the date the  corrigendum was issued. The Board has filed appeals  questioning the High Court’s view.  During pendency of the  appeals, writ petitions were filed alleging that  uninterrupted power supply was not given though higher rates  were being charged.  Therefore, it was claimed that amounts  paid, which were in excess of the amounts payable, should be  adjusted against the future bills along with interest.  The  High Court by its impugned order held that the writ  petitioners and the Board were ’State’ within Article 12 of  the Constitution, and directed a resolution of the dispute  by a person to be nominated by the Chief Secretary of State  of U.P.  It held that writ petitioners were "Public Sector  Undertakings".            According to the learned counsel for the appellant \026  Board and its functionaries, the approach of the High Court  is clearly erroneous.  Huge amounts have not been paid by  the respondents-writ petitioners. What was challenged before

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the High Court was the levy of higher charges on the  allegation that uninterrupted power supply was not given.   The decision in ONGC-I case (supra) has no application to  the facts of the present case.  In any event, the High Court  should not have passed a blanket order of stay.

       Learned counsel for the respondents on the other hand   submitted that the respondents are entitled to receive some  amount from the appellants.  According to him, the payment  raised is absolutely unreasonable and without any basis.  It  was also submitted that disputes between public sector  undertakings and the State should be resolved in the line  suggested by this Court in ONGC-I case (supra). There is  nothing wrong in the High Court’s order granting interim  protection.  

       In ONGC-I case (supra) it was felt desirable that to  avoid unnecessary litigation, disputes between the  Governments and the Public Sector Undertakings should be  sorted out by a Committee to be constituted. It was pointed  out that most of the disputes between the Public Sector  undertakings and the Government get resolved by meeting of  minds.   

       It is certainly desirable that inter-departmental  disputes and disputes between Governments and Public Sector  Undertakings should be sorted out in the manner suggested by  this Court in ONGC-I case (supra).  

       The stand of the learned counsel for the Board is that  the operation of the High Court’s order was stayed and,  therefore, the Committee as directed by this Court has not  been set up. The quantum of arrears in different cases has  been set out in the affidavit filed by the appellant-Board.  They are as follows:

1.      CIVIL APPEAL NO. 7965           Rs. 1,65,49,000/- 2.      CIVIL APPEAL NO. 7968           Rs. 6,26,73,485/- 3.      CIVIL APPEAL NO. 7970           Rs.   16,62,497/- 4.      CIVIL APPEAL NO. 7971           Rs.     1,04,11,681.02/- 5.      CIVIL APPEAL NO. 7972           Rs.     1,88,85,823/- 6.      CIVIL APPEAL NO. 7990           Rs.  4,98,42,000/-

       High Court equated the Board with the State Government  and held that the writ petitioners who were co-operative  societies were public sector undertakings.   

       The High Court’s view is clearly untenable. Board  cannot be equated with State Government.  Section 80 of the  Code of Civil Procedure, 1908 (in short ’CPC’) is a pointer  in that regard. Co-operative Societies and Pubic Sector  Undertakings are conceptually different. The Board is a  Public Sector Undertaking and not a State Government  department. It may be "State" for the purpose of Article  12 of the Constitution. There the similarity ends. Co- operative Societies (writ petitioners) cannot be, without  examination of relevant factual aspects, equated with Public  Sector Undertaking. The High Court has come to abrupt  conclusion that they are Public Sector Undertakings without  indicating any reason for such conclusion. The High Court,  therefore, was wrong in applying ratio of ONGC-I case  (supra) to the facts of the present cases.

       The view in ONGC-I case (supra) was further elaborated  in Oil and Natural Gas Commission v. C.C.E. 1995 (Supp.) 4

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SCC 541) (For sake of convenience described as ONGC-II).  It  was noted in Oil and Natural Gas Commission v. C.C.E.  (2004(6) SCC 437) (for convenience described as ONGC-III)  that some doubts and problems arose in the working out of  the arrangements in terms of the order of this Court dated  11.10.1991 (ONGC-II case (supra). It was noted in ONGC-III  case (supra) as follows:

"There are some doubts and problems that  have arisen in the working out of these  arrangements which require to be clarified  and some creases ironed out.  Some doubts  persist as to the precise import and  implications of the words "and recourse to  litigation should be avoided".  It is clear  that the order of this Court is not to the  effect that \026 nor can that be done \026 so far  as the Union of India and its statutory  corporations are concerned, their statutory  remedies are effaced. Indeed, the purpose of  the constitution of the High-powered  Committee was not to take away those  remedies.  The relevant portion of the order  reads: (SCC pp. 541-42 para 3)

       "3.     We direct that the Government  of India shall set up a committee  consisting of representatives from the  Ministry of Industry, the Bureau of  Public Enterprises and the Ministry of  Law, to monitor disputes between  Ministry and Ministry of the Government  of India, Ministry and public sector  undertakings of the Government of India  and public sector undertakings in  between themselves to ensure that no  litigation comes to court or to a  tribunal without the matter having been  first examined by the Committee and its  clearance for litigation.  The  Government may include a representative  of the Ministry concerned in a specific  case and one from the Ministry of  Finance in the Committee.  Senior  officers only should be nominated so  that the Committee would function with  status, control and discipline."

It is abundantly clear that the machinery  contemplated is only to ensure that no litigation  comes to court without the parties having had an  opportunity of conciliation before an in-house  committee."

       The matter was again examined in the case of Chief  Conservator of Forest v. Collector (2003(3) SCC 472). In  Paras 14 and 15 it was noted as follows:

"Under the scheme of the Constitution,  Article 131 confers original jurisdiction on  the Supreme Court in regard to a dispute  between two States of the Union of India or

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between one or more States and the Union of  India. It was not contemplated by the framers  of the Constitution or the C.P.C. that two  departments of a State or the Union of India  will fight a litigation in a court of law. It  is neither appropriate nor permissible for  two departments of a State or the Union of  India to fight litigation in a court of law.  Indeed, such a course cannot but be  detrimental to the public interest as it also  entails avoidable wastage of public money and  time. Various departments of the Government  are its limbs and, therefore, they must act  in co-ordination and not in confrontation.  Filing of a writ petition by one department  against the other by invoking the  extraordinary jurisdiction of the High Court  is not only against the propriety and polity  as it smacks of indiscipline but is also  contrary to the basic concept of law which  requires that for suing or being sued, there  must be either a natural or a juristic  person. The States/Union of India must evolve  a mechanism to set at rest all inter- departmental controversies at the level of  the Government and such matters should not be  carried to a court of law for resolution of  the controversy. In the case of disputes  between public sector undertakings and Union  of India, this Court in Oil and Natural Gas  Commission v. Collector of Central Excise  (1992 Suppl. (2) SCC 432) called upon the  Cabinet Secretary to handle such matters. In  Oil and Natural Gas Commission & Anr. v.  Collector of Central Excise (1995 Suppl. (4)  SCC 541), this Court directed the Central  Government to set up a Committee consisting  of representatives from the Ministry of  Industry, the Bureau of Public Enterprises  and the Ministry of Law, to monitor dispute  between Ministry and Ministry of the  Government of India, Ministry and public  sector undertakings of the Government of  India and public sector undertakings in  between themselves, to ensure that no  litigation comes to court or to a Tribunal  without the matter having been first examined  by the Committee and its clearance for  litigation. The Government may include a  representative of the Ministry concerned in a  specific case and one from the Ministry of  Finance in the Committee. Senior officers  only should be nominated so that the  Committee would function with status, control  and discipline.

       The facts of this appeal, noticed above,  make out a strong case that there is a felt  need of setting up of similar committees by  the State Government also to resolve the  controversy arising between various  departments of the State or the State and any  of its undertakings. It would be appropriate  for the State Governments to set up a

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Committee consisting of the Chief Secretary  of the State, the Secretaries of the  concerned departments, the Secretary of Law  and where financial commitments are involved,  the Secretary of Finance. The decision taken  by such a committee shall be binding on all  the departments concerned and shall be the  stand of the Government. "

       The directions as noted above were quoted in Mahanagar  Telephone Nigam Ltd. v. Chairman, Central Board, Direct  Taxes and another (2004(6) SCC 431) and were adopted in  paragraph 8. It was noted as follows :

       "Undoubtedly, the right to enforce a  right in a court of law cannot be effaced.  However, it must be remembered that courts  are overburdened with a large number of  cases. The majority of such cases pertain to  Government Departments and/or public sector  undertakings. As is stated in Chief  Conservator of Forests’ case [2003] 3 SCC 472  it was not contemplated by the framers of the  Constitution or the Civil Procedure Code that  two departments of a State or Union of India  and/or a department of the Government and a  public sector undertaking fight a litigation  in a court of law. Such a course is  detrimental to public interest as it entails  avoidable wastage of public money and time.  These are all limbs of the Government and  must act in co-ordination and not  confrontation. The mechanism set up by this  court is not, as suggested by Mr.  Andhyarujina, only to conciliate between  Government Departments. It is also set up for  purposes of ensuring that frivolous disputes  do not come before courts without clearance  from the High Powered Committee. If it can,  the High Powered Committee will resolve the  dispute. If the dispute is not resolved the  Committee would undoubtedly give clearance.  However, there could also be frivolous  litigation proposed by a department of the  Government or a public sector undertaking.  This could be prevented by the High Powered  Committee. In such cases there is no question  of resolving the dispute. The Committee only  has to refuse permission to litigate. No  right of the Department/public sector  undertaking is affected in such a case. The  litigation being of a frivolous nature must  not be brought to court. To be remembered  that in almost all cases one or the other  party will not be happy with the decision of  the High Powered Committee. The dissatisfied  party will always claim that its rights are  affected, when in fact, no right is affected.  The Committee is constituted of highly placed  officers of the Government, who do not have  an interest in the dispute, it is thus  expected that their decision will be fair and  honest. Even if the Department/public sector  undertaking finds the decision unpalatable,  discipline requires that they abide by it.

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Otherwise the whole purpose of this exercise  will be lost and every party against whom the  decision is given will claim that they have  been wronged and that their rights are  affected. This should not be allowed to be  done."

       The ONGC I to III cases (supra), Chief Conservator’s  case (supra) and Mahanagar Telephone’s case (supra) deal  with disputes relating to Central Government, State  Government and Public Sector Undertakings. They have no  application to the facts of these cases as the High Court  has not indicated any reason for its abrupt conclusion that  the writ petitioners are Public Sector Undertakings. In the  absence of a factual determination in that regard, the  decisions can have no application.   

       Accordingly, we set aside the impugned judgments of the  High Court and remit the matter for fresh consideration of  the cases. As the matter is pending consideration for a long  time, it would be appropriate if the writ petitions are  disposed of early. It is made clear that if parties place  material to show that writ petitioners are Public Sector  Undertakings then the High Court can direct action in line  with Chief Conservator of Forest’s case (supra) and not  otherwise.  

       The appeals are accordingly disposed of. No costs.