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PETITIONER: GRID CORPORATION OF ORISSA LTD.  & ANR.

       Vs.

RESPONDENT: BALASORE TECHNICAL SCHOOL

DATE OF JUDGMENT:       30/03/1999

BENCH: S.R.Babu, S.N.Phukun

JUDGMENT:

     RAJENDRA BABU, J.  :

     On  April  28,  1961, the respondent entered  into  an agreement with the appellant for supply of electrical energy in  which  the contract demand was specified at 68  KWs  and unless  a  certain  percentage of the  contract  demand  was utilised  the  respondent  would be liable  to  pay  minimum charges  as  specified in the agreement.  On July 18,  1966, the  tariff specified in the agreement was revised in  terms of  Section 49 of the Electricity Supply Act and such tariff as prescribed for general purpose tariff was made applicable to the respondent.  However, no bill in terms of the revised rate  as applicable to general purpose tariff was issued and a  bill  for  additional  amount payable  was  sent  to  the respondent.   The  respondent  contended that  the  contract demand should be reduced from 68 KWs to 31 KWs.  With effect from July 25, 1973, the respondent did not pay any amount to the  appellant  in respect of the energy consumed either  at the  revised rate effective from 1966 or at the old rate  as specified  in  the  agreement and continued to  consume  the energy   without  any  payment  at   all.   On  account   of non-payment  of the energy charges, supply was  disconnected to  the respondent after due notice under Section 24 of  the Indian Electricity Act, 1910.  The respondent challenged the disconnection and the demand raised by the Board by invoking the arbitration clause of the original agreement of 1961 and filed   O.S.No.127/77  under  Sections  8  and  20  of   the Arbitration  Act  for reference of disputes to  arbitration. The  Subordinate Judge, who considered this matter,  allowed the  claim of the respondent and an appeal was preferred  to the  High  Court.  In the appeal, a joint memo was filed  to the  effect  that  the respondent shall enter into  a  fresh agreement  with the appellants and upon such agreement being executed   the  appellants  would   resume  supply  to   the respondent;   the respondent shall pay the charges from  the date  of  reconnection at the new tariff rate applicable  to the  respondent;  and arrears alleged to be due and  claimed by  the appellants, if ultimately accepted by the Arbitrator and  made rule of the court shall be paid by the respondent. On  February  1,  1980,  the  respondent  executed  a  fresh agreement  which  contained a recital in clause  27  thereof which  provided  that  the arrears under the  old  agreement shall  be deemed to be arrears under the new agreement.  The Subordinate  Judge appointed Justice H.Mohapatra, a  retired Judge  of the High Court as the Arbitrator and referred five questions  involving law and facts for consideration of  the

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Arbitrator.   On  February 19, 1983, the Arbitrator made  an award after perusing the claims and counter-statement of the parties  and  material on record and answered all  the  five questions  against  the appellants and further held that  no amount  was  payable by the respondent towards  charges  for consumption  of electricity, although admittedly it had been consumed  until the date of disconnection, that is, December 30,  1976, and no amount had been paid either at the revised rate  or at the original rate with effect from February  16, 1973.   When objection was filed under Sections 30 read with Section 33 of the Arbitration Act, the Subordinate Judge set aside  the  award principally on the ground that  the  award runs contrary to the agreement.  On appeal by the respondent under  Section 39 of the Arbitration Act, the High Court set aside  the order made by the Subordinate Judge and confirmed the  award  made by the Arbitrator except in regard  to  one aspect,  namely,  that the Orissa Sate Electricity Board  is not  entitled  to  be  paid anything by  the  respondent  in respect  of their claims in relation to the agreement.   The High  Court having noticed that the observations was outside the  reference  confirmed the award on all other  questions. Hence  this appeal.  In this Court, on each of the  question referred  to the Arbitrator answer is sought to be given  by contending  that the view taken by the Arbitrator was wholly outside  the  scope  of the contract and hence  perverse  or award  made was without jurisdiction.  However, the  learned counsel  for the respondent contended that the view taken by the  High  Court is in conformity with several decisions  of this  Court  including N.Chellappan vs.   Secretary,  Kerala State  Electricity  Board & Anr., 1975 (1) SCC 289.   It  is submitted  that  even if the Arbitrator had made  a  mistake either in law or in fact in determining the matters referred and  such mistake does not appear on the face of the  award, the award cannot be interferred notwithstanding the mistake. It  is only when a proposition of law is stated in the award and  which  is the basis of the award and that is  erroneous can  the  award  be set aside or remitted on the  ground  of error  of  law  apparent  on the face of  the  record.   The appellants,  however,  contended that the Arbitrator  cannot ignore  the law or misapply it in order to do what he thinks as  just  and  reasonable  even  though it  was  a  case  of non-speaking  award.  The courts are entitled to examine the contract  even though the contract was not incorporated into the award and an Arbitrator being a creature of the contract must  operate  within the four corners of the  contract  and cannot  travel  beyond  it  either  by  misinterpreting  the contract  or otherwise.  In this case, the High Court is  of the  view that a civil court does not sit on appeal  against the  award  and  the  power of the court when  an  award  is challenged  is rather limited.  The award of the  Arbitrator is ordinarily final and conclusive as long as the Arbitrator has  acted  within  its  authority   and  according  to  the principle  of  fair play.  An Arbitrators  adjudication  is generally considered binding between the parties for he is a Tribunal  selected by the parties and the power of the court to  set  aside the award is restricted to cases set  out  in Section  30  of the Arbitration Act.  It is not open to  the Court  to  speculate  where  no reasons  are  given  by  the Arbitrator,  as  to  what  impelled him  to  arrive  at  his conclusion.   If  the  dispute is within the  scope  of  the arbitration  clause  it  is no part of the province  of  the court to enter into the merits of the dispute.  If the award goes  beyond the reference or there is an error apparent  on the  face  of  the award it would certainly be open  to  the court  to interfere with such an award.  In New India  Civil

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Erectors  (P)  Ltd.vs.  Oil & Natural Gas Corporation,  1997 (11)  SCC  75, this Court considered a case of  non-speaking award.   In  that case the Arbitrator had acted contrary  to the   specific   stipulation/condition   contained  in   the agreement  between  the  parties.   It  was  held  that  the Arbitrator  being  a creature of the contract  must  operate within  the  four corners of the contract and cannot  travel beyond  it and he cannot award any amount which is ruled out or  prohibited  by  the  terms of the  agreement.   In  that contract  it  was provided that for construction of  housing unit,  in measuring the built-up area, balcony areas  should be  excluded.   However,  the Arbitrator included  the  same which  was  held  to be without jurisdiction.  In  the  same manner it was also held that the price would be firm and not subject  to any escalation under whatsoever ground till  the completion  of the work and awarding any sum as a result  of escalation  was not permissible.  To the same effect is  the decision  in Associated Engineering Co.  vs.  Government  of Andhra  Pradesh & Anr., 1991 (4) SCC 93.  It was stated that if  the  Arbitrator commits an error in the construction  of the contract, that is an error within his jurisdiction.  But if  he  wanders outside the contract and deals with  matters not  allotted to him, he commits a jurisdictional error  and an  umpire  or Arbitrator cannot widen his  jurisdiction  by deciding a question not referred to him by the parties or by deciding  a  question otherwise than in accordance with  the contract.   A  conscious  disregard  of   the  law  or   the provisions  of  the contract from which he has  derived  his authority  vitiates the award.  The principle of law  stated in  N.Chellappans  case (supra) on which a strong  reliance has  been  placed by the learned counsel for the  respondent would  make it clear that except in cases of  jurisdictional errors  it  is  not open to the court to interfere  with  an award.  That proposition is unexceptionaable.  However, from a reading of the decisions of this Court referred to earlier it  is clear that when an award is made plainly contrary  to the terms of the contract not by misinterpretation but which are  plainly  contrary  to the terms of the  contract  would certainly  lead  to  an  inference that there  is  an  error apparent  the  award results in jurisdictional error in  the award.   In  such a case the courts can certainly  interfere with the award made by the Arbitrator.

     In  the present case, the view taken by the High Court as   to  the  construction  of   Section  3  of  the  Orissa Electricity Supply Act appears to us to be correct.  In that provision the proceedings which relate to a challenge to the power  of the Board to enhance the tariff are subject matter of  arbitration.   Such proceedings would abate and  not  in other cases.  The High Court, while considering the question whether  the Orissa Electricity Supply Board is not entitled to  be  paid anything by the respondent in respect of  their claims  relating  to the agreement dated April 28, 1961  was outside  the scope of arbitration but failed to see that the amounts  due under the agreement dated April 28, 1961 became part  of the agreement entered into subsequent to the  joint memo  filed  before the High Court.  In the agreement  dated February 1, 1980, clause 27 provided that the arrears under the  old  agreement shall be deemed to be arrears under  the this  agreement  .   Therefore, if the award  made  by  the Arbitrator  was  incorrect in regard to that aspect  of  the matter,  other  questions referred to the Arbitrator  formed integral  part of the same and, therefore, the entire  award had  to be set aside.  Even otherwise in respect of each  of the  question referred to the Arbitrator, the answers  given

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by  him would indicate that the same has been given in utter disregard  of the contract and, therefore, the view taken by the Subordinate Judge in this case appears to be correct and the High Court ought to have accepted the same.

     In the result, the order made by the High Court is set aside  and  the order made by the Subordinate  Judge  stands restored  and  the  matter  shall   stand  remitted  to  the Arbitrator  for  fresh consideration in accordance with  the law and in the light of this order.  No order as to costs.