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2004 DIGILAW 103 (CAL)

DAMODAR VALLEY CORPORATION v. CESC LTD

2004-02-13

J.K.BISWAS

body2004
( 1 ) THIS execution proceeding (E. G. 37 of 2003) has been initiated by an application dated July 16th, 2003. ( 2 ) DISPUTES and differences between damodar Valley Corporation (in short DVC) and Calcutta Electric: Supply Company Limited (in short CESC) were referred to arbitration. The arbitrators made the award dated June 27th, 2001 under the Arbitration and Conciliation Act, 1996 (hereinafter referred to as "the Act" ). Issue No. 3 was decided in favour of DVC, while the chief issue, that is issue No. 1, was decided against it. ( 3 ) THE disputes arose between the parties regarding the payment of charges for supplying electrical energy by DVC to CESC during the period from January 1st, 1995 to October 19th, 1998. During this period energy was supplied without there being any written contract between the parties. The previous written agreement dated April 30th, 1990 had expired on December 31st, 1994. DVC claimed that on account of change in the tariff rates, in the absence of a written agreement between the parties, it would be entitled to payment to be determined on the basis of Section 73 of the Indian Contract act, 1872. CESC took the stand that it was liable to make such payment only in terms of Section 70 of the Indian Contract Act, 1872. The Arbitral Tribunal held that CESC would be liable to pay on the basis of calculation to be made by applying the provisions of Section 70 and not Section 73. Directions were given by the Arbitral Tribunal to pay the amount with interest after obtaining necessary permission from the West Bengal electricity Regulatory Commission. CESC was directed to obtain such permission. Being aggrieved by the decision of the Tribunal on the chief issue, DVC filed an application under Section 34 of the Act. Such application was filed on September 26th, 2001, and it is pending decision. During pendency of Section 34 application, this execution proceeding has been started by filing the application dated July 16th, 2003. This execution application has been filed for enforcing the award insofar as the decision of the Tribunal on issue No. 3 is concerned. Such application was filed on September 26th, 2001, and it is pending decision. During pendency of Section 34 application, this execution proceeding has been started by filing the application dated July 16th, 2003. This execution application has been filed for enforcing the award insofar as the decision of the Tribunal on issue No. 3 is concerned. ( 4 ) THE Arbitral Tribunal framed the following issues :-"a. (Issue 1)Whether after expiry on 31-12-94 the agreement dated 30-4-90 between DVC and cesc along with terms and conditions contained therein can be treated as subsisting for governance of supply of energy to CESC by DVC on and from January 95 and whether the present arbitral proceedings under the 1996 Act' is pursuant to Clause 25 of the agreement dated 30-4-90 executed by the parties earlier. B. (Issue II)Whether the State Government is empowered to approve and if necessary modify, as and when required, the effective dates of enhanced tariffs of DVC from time to time for supply of energy to CESC, engaged in public utility service in the State, as a matter of policy. C. (Issue III)In absence of a formally executed agreement (or binding oral agreement) how the energy transaction from DVC to CESC continued beyond 31-12-1994 and what are the terms and conditions governing the transactions in the resultant situation. D. (Issue IV)In the event A (Issue I) is answered in the negative, whether delayed payment surcharge can be levied on CESC as per terms stipulated in Clause 21 (e) of the agreement dated 30-4-90 for supply of energy by DVC from January 95 to October 98 in case no express agreement of concluded oral agreement between parties for energy transaction for the said period can be proven and whether interest on surcharge is legally admissible. E. (Issue V)Whether Interim interest and interest on award @ 24% p. a. , as claimed by DVC, is admissible or not. " ( 5 ) MR. Sen, learned Senior Counsel appearing for DVC, contends that the award is severable and the pendency of Section 34 application does not impede his client's proceeding with the present execution proceeding under Section 36 of the Act. His contention is that the decision given by the Arbitral tribunal on issue No. 3 can be executed, though Section 34 application filed by his client is pending regarding the decision given by the Arbitral Tribunal on the chief issue. His contention is that the decision given by the Arbitral tribunal on issue No. 3 can be executed, though Section 34 application filed by his client is pending regarding the decision given by the Arbitral Tribunal on the chief issue. His submission is that a favourable part of an award, if severable from the other unfavourable parts thereof, can be executed during pendency of an application for setting aside the unfavourable parts. For this proposition he relies on the decisions in the cases of :- (1) Mt. Amir Begam v. Syed badriiddin Husain, AIR 1914 PC 105; (2)U. G. V. Electricity Supply Co. Ltd. v. U. P. Electricity Board, (1973) 1 SCC 254 : ( AIR 1973 SC 683 ); (3) Union of India v. M. L. Dalmiya and Co. Ltd. , AIR 1977 Cal 266 . ( 6 ) MR. Chakraborty, learned Senior counsel appearing for CESC, submits that during pendency of Section 34 application, wherein DVC has challenged the award, the present execution application is not maintainable. He submits that under the Act, once a Section 34 application is filed to challenge the validity of an award, the award simply becomes unexecutable and no part thereof can be executed. In support of his contention he relies on the decision in the case of National Aluminium Co. Ltd. v. Pressteel and Fabrications (P) Ltd. , (2004) 1 scc 540 . ( 7 ) AFTER hearing the learned counsel for the parties and after considering the decisions cited, I am of the view that DVC is not entitled to enforce any part of the award during pendency of the Section 34 application, which it has filed to challenge those parts of the award that have gone against it. ( 8 ) THE question of severability of the award, in my considered view, will not be relevant in the present case, because here the question has not arisen whether some part of the award can be enforced as valid, though it is partially unsustainable. The decisions cited by Mr. Sen were given in cases in which it was found that a portion of the award was bad. In such context, in the cases relied on by him it was held that an award would not become invalid as a whole if its valid part is severable from its invalid part, ( 9 ) I find that Mr. Sen were given in cases in which it was found that a portion of the award was bad. In such context, in the cases relied on by him it was held that an award would not become invalid as a whole if its valid part is severable from its invalid part, ( 9 ) I find that Mr. Chakraborty is right when he submits that during pendency of a section 34 application a part of the award cannot be enforced under Section 36. The supreme Court decision cited by him supports his contention. It has been held by their Lordships in the decision that once a section 34 application is filed, under the Act, an award simply becomes unexecutable. ( 10 ) IN my opinion, Mr. Chakraborty's contention has substantial force also for the reason that an award under the Act becomes an executable decree by fiction, in terms of section 36 of the Act, only when it is not challenged by either of the parties by filing a Section 34 application or a Section 34 application is rejected. Once a Section 34 applications is filed, the activation of the fiction contemplated in Section 36 of the Act stops, and hence the award does not become an executable decree at all. Since the award cannot become an executable decree, because of pendency of the Section 34 application, no execution proceeding can be initiated to enforce any part of such an award. The provisions of the Act have not contemplated that a part of a final award, if remains unchallenged, would be deemed to be an executable decree by fiction of law and hence executable. ( 11 ) THEREFORE I agree with the submission made by Mr. Chakraborty that so long as its Section 34 application remains pending, dvc is not entitled to initiate any proceeding to enforce any part of the award. ( 12 ) FOR the aforestated reasons, I find that this execution proceeding is not maintainable at the present moment. Hence the execution application is hereby dismissed. This, however, will not prevent DVC from initiating a fresh execution proceeding, in accordance with law, after the decision in the Section 34 application that it has filed. ( 13 ) IN the facts and circumstances of the case, I am not inclined to make any order for costs in favour of CESC. Hence the execution application is hereby dismissed. This, however, will not prevent DVC from initiating a fresh execution proceeding, in accordance with law, after the decision in the Section 34 application that it has filed. ( 13 ) IN the facts and circumstances of the case, I am not inclined to make any order for costs in favour of CESC. Hence there will be no order for costs in this proceeding. ( 14 ) ALL parties are to act on a signed xeroxed copy of this dictated order on the usual undertaking. Petition dismissed.