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2017 DIGILAW 47 (KER)

KERALA STATE ELECTRICITY BOARD v. WESTERN INDIA COTTONS LIMITED

2017-01-09

ANTONY DOMINIC, SHIRCY V.

body2017
JUDGMENT : SHIRCY V., J. 1. These two Arbitration Appeals have been filed against the common Judgment dated 21.7.2007 in O.P. No. 3/2006 and O.P. No. 8/2005 on the files of the Subordinate Judge, Thalassery. Hence these two appeals are disposed of by this common judgment. 2. The material facts required for disposal of these appeals in brief are as follows: The appellant is the Kerala State Electricity Board represented by its Secretary (for short the Board). The respondent in both the appeals is Western India Cottons Limited (for short the Company). The respondent is a manufacturing company engaged in production of cotton yarn and cloth in its mill which is being run by electricity. The Board admittedly agreed to supply the required electricity continuously to the Company on the terms and conditions in the agreement executed between them on 1.9.1973. The Company has a case that the Board has failed to supply electricity as agreed to from January 1980 to July 1982 hence claimed compensation from the Board for the loss sustained in production of their products which led to an arbitration. The case of the company was that as per clause 26 of the agreement entered into, the disputes between them have to be decided in arbitration and therefore, the company filed O.S. No. 3/1983 to refer the dispute for arbitration under the Arbitration Act 1940 (for brevity 'Arbitration Act') as there was interruption in supply of electricity, resulting heavy loss in production. The Board has contended that the dispute would not come within the purview of the Arbitration Act. But O.S. No. 3/1983 was decreed by the Sub court by a judgment and decree dated 17.3.1984. In O.S. No. 3/1983, the two agreements executed between the parties dated 1.9.1973 were produced and marked as Exts.A1 and A2. It is not in dispute that O.P. No. 78/1984 was filed by the Company for appointing an umpire to decide the dispute before this Court and by an order dated 17.12.1984 Justice George Vadakkel (retired) was appointed as Umpire and an award was passed on 13.7.1987. The subject matter of the dispute in that award pertains to the period, January 1980 to July 1982. 3. The subject matter of the dispute in that award pertains to the period, January 1980 to July 1982. 3. The further case of the Company is that even after the said period, there was failure to supply electricity resulting in loss of production to the Company and so for the subsequent period also, the Company claimed compensation and sought for reference to arbitration. Both the Company as well the Board named its Arbitrators respectively. Thereafter the Company filed O.P. No. 115/1987 before the Sub Court, for extension of time for arbitration. The Board also filed O.P. No. 120/1987 to declare that the agreements (Exts. C1 and C1(a) as referred in O.P) are illegal and void. Subsequently the learned Sub Judge dismissed the O.P filed by the Board, holding that the Board is not entitled to question the validity of the agreements in view of the decision in O.S. No. 3/1983 and the application is barred by res judicata. But the learned Sub Judge has also held that the O.P is barred by limitation under Article 137 of the Limitation Act. The said order was challenged by the Board before this Court in C.R.P. No. 1699/89. The same was also disposed of by a Division Bench of this Court by an order dated 28.2.2001 appointing Justice B.M. Thulasidas (retired) as the Arbitrator to adjudicate the dispute relating to the period, from August 1982 to July 1985 (the subsequent period). 4. The sole Arbitrator on 21.1.2004 has passed an award in favour of the Company (the claimant) for a sum of Rs.1,21,26,942/- with 12% interest. The said award was then questioned in O.P. (Arbitration) No. 3/2006 by the Board. O.P. No. 8/05 was filed by the company for passing a decree in terms of the award. O.P. (Arbitration) Nos. 3/2006 and 8/2005 were jointly tried by the learned Sub Judge and O.P. (Arbitration) No. 3/2006 was dismissed and O.P. (Arbitration) No. 8/2005 was allowed. The Board aggrieved by the Common Judgment dated 21st July 2007 of the learned Subordinate Judge Thalassery have preferred these appeals. 5. We heard the learned senior counsel for the Board and the learned Senior Counsel for the Company. 6. The Board aggrieved by the Common Judgment dated 21st July 2007 of the learned Subordinate Judge Thalassery have preferred these appeals. 5. We heard the learned senior counsel for the Board and the learned Senior Counsel for the Company. 6. As we have mentioned above the Company has a case that even though the Board has agreed to supply electricity continuously without interruption, there was interruption during the period from January 1980 to July 1982 on several occasions and due to the interruption in power supply as well supply at low voltage in violation of the terms and conditions of Exts.C1 and C1(a) agreements, the Company suffered huge loss. For the period from January 1980 to July 1982 a claim for Rs.56,92,248.46 was raised by the Company and the Company approached the Sub court with O.S. No. 3/1983 under Section 20 of the Arbitration Act. Admittedly O.S. No. 3/1983 was decreed on 17.3.1984 directing the Board to file the agreements executed between them. The judgment of the learned Subordinate Judge was challenged in Arbitration Appeal No. 29/20044 before this Court. The appeals filed by the Board as Arbitration Appeal No. 29/2004 was dismissed by a judgment dated 22.2.2005 (2005 (2) ILR 525). The agreements executed between the parties were marked in O.S. No. 3/1983 as Exts.A76 and A76(a). This Court has observed in the Appeal No. 29/04 (supra) that the Board cannot dispute the agreements marked as Exts.A76 and 76(a). (Exts. C1 and C1 (a) in the appeals under challenge) It is further observed that clause 26 of Ext.A76(a) contained the Arbitration clause. The arbitration clause 26 in the agreement reads as follows: "Any dispute or difference arising between the consumer and the supplier or his respective electrical engineer as to the supply of electrical energy hereunder of the pressure thereof or as to the rates of supply or as to interpretation of this agreement or the right of the supplier or the consumer respectively to determine the same or any other question, matter or thing arising here under shall be referred to arbitration as provided under Section 76 of the Electricity (Supply) Act, 1948. The arbitrator's decision thereon shall be final and the provisions of the Arbitration Act of 1940 or any other statutory modification thereof for the time being in force shall apply to any such reference." 7. The arbitrator's decision thereon shall be final and the provisions of the Arbitration Act of 1940 or any other statutory modification thereof for the time being in force shall apply to any such reference." 7. The legality of the judgment was challenged by the Board before the Hon'ble Supreme Court in SLP No. C.C. 9205/05. But the SLP preferred by the Board was also dismissed by an order dated 7.10.2005. The claim for compensation by the company due to interruption in power supply or low voltage during the period January 1980 to July 1982 was found in favour of the company and compensation had been awarded in arbitration. 7. Now the second arbitration was with respect to the subsequent period, i.e. from August 1982 to July 1985.The Company filed the Arbitration O.P. No. 115/1987 for extension of time for passing award after appointment of the arbitrators suggested by both the company as well the Board. Then Arbitration O.P. No. 120/1987 was filed by the Board for terminating the arbitration contending that the agreement executed between the parties was illegal and void. But O.P. No. 115/1987 filed by the company was allowed and the O.P. filed by the Board alleging that arbitration clause was illegal and void was dismissed. Again the Board filed O.P. No. 78/1988 before the Sub Court with a prayer to declare agreement as illegal and void. The Company resisted the petition contending that the agreement had already been accepted and acted upon. Another contention was also raised that the petition is barred by limitation under Article 137 of the Limitation Act. The learned Sub Judge on 8.7.1988 accepted the contentions raised by the Company that the agreement was accepted and acted upon and observed that the application filed by the Board is barred by res judicata. But the question of limitation was found against the Company. This order was challenged by the Board before this Court in C.R.P. No. 1699/1989. A Division Bench of this Court by an order dated 28.2.2001 disposed of the revision petition appointing Justice B.S. Thulasidas (Retd.) as the Arbitrator to decide the dispute pending between the parties for the period from August 1982 to July 1985. It is significant to note that this order has not been challenged by either of the parties and it has become final. 8. It is significant to note that this order has not been challenged by either of the parties and it has become final. 8. In C.R.P. No. 1699/89 also the Division Bench had held that the Board cannot question the validity of the Arbitration Clause. The relevant portion of the order is follows: "9. The contention of the Board is that there is no arbitration clause and hence the dispute could not be referred to Arbitration. Even in a case where there is no arbitration clause in the contract between the parties and a dispute as arising between them by one contracting party making a claim and the other contracting party denying that claim, it is open to the parties to have recourse to arbitration. They could always take recourse to have an adjudication of the dispute between them extra cursom curiae. If they so agree to have the dispute arbitrated upon, and the arbitration commences, thereafter, one of the parties cannot turn round and say that the contract between the parties did not contain an arbitration clause. Therefore when the claim relating to the period August 1982 to July 1985 was made by the company which sought an arbitration of that claim, it was open to the Board to invoke Section 33 of the Arbitration Act to say that Ext.A1 agreement was invalid not being properly stamped or that there was no arbitration clause in the biding agreement between the parties or that the arbitration clause contained therein does not embrace the dispute now sought arbitration of. But in the present case, what the Board did was to name its own arbitrator and to proceed with the arbitration. 10. In the present case, when an identical claim relating to an earlier period was raised by the company and the company approached the court under Section 20 of the Arbitration Act, 1940 for filing of the agreement and for referring the dispute to the arbitrators appointed by the parties, the Board did not take up the stand that there existed no valid arbitration clause. The Board filed not only Ext.A2 but also Ext.A1 agreement on the basis that they together formed the complete whole. The only argument raised was regarding the scope of the arbitration clause and the contention was that the claim sought to be raised by the company was outside the arbitration clause. The Board filed not only Ext.A2 but also Ext.A1 agreement on the basis that they together formed the complete whole. The only argument raised was regarding the scope of the arbitration clause and the contention was that the claim sought to be raised by the company was outside the arbitration clause. The court held that the arbitration clause embraced the claim made by the company and referred the dispute to arbitration. When the claim was raised by the company for the subsequent period August 1982 to July 1985 on the identical lines and the company sought appointment of an arbitrator by the Board and named its own arbitrator, the Board accepted the position adopted by the company that an arbitration was available and named its own arbitrator. Thereafter the Board participated in the arbitration proceeding. It also agreed to the extension of time for passing the award by the arbitrators on more than one occasion. Only after the arbitration had made considerable progress did the Board attempt to resile from the arbitration and took up the position that the arbitration was not possible. Meanwhile the court had intervened and extended the time for passing the award. The Court had also dismissed the application made by the Board for removal of the arbitrators. In such a situation we are of the view that the Board is disentitled to approach the court under section 33 of the Arbitration Act with a prayer that it be declared that there is no arbitration clause in the agreement between the parties. The Board is clearly estopped from taking up such a stand at this belated stage and in approaching the court under Section 33 of the Arbitration Act, 1940. 12. Learned counsel for the company argued that the prayer of the Board for a declaration that there was no arbitration clause in the contract between the parties was barred by res judicata by virtue of the decision in O.S.3 of 1983. Learned counsel for the Board submitted that the fact that on the earlier occasion the Board did not take up the contention that there subsisted no arbitration clause in respect of a claim relating to an earlier period would not preclude the Board from raising that contention when an arbitration is sought by the company in respect of a cause of action, that the company claims, has accrued subsequently. It is not disputed by learned Senior Counsel for the Board that the general principles of res-judicata may be applicable and the principle of 'might and ought' might also be applicable especially in the light of the decision of the Supreme Court in State of U.P. vs. Nawab Jussain, AIR 1977 SC 1680 . But what is contended by learned counsel is that the question of existence or otherwise of an arbitration clause relating to a particular claim is something that goes to the jurisdiction of the arbitrator to arbitrate upon the dispute and when the question relates to the jurisdiction of the arbitrator, the fact that the Board did not raise the question of the objection in relation to a claim relating to an earlier period could not stand in the way of the Board raising that question when a claim is sought to be made regarding a subsequent period, though based on the same contract. There is substance in the contention of learned counsel for the company that in O.S. No. 3 of 1983 no arbitration could have been directed as sought for by the company unless the court had found that there subsisted a valid arbitration clause and that the dispute sought to be raised by the company was one coming within the arbitration clause and a decision, express or implied on the existence and scope of the arbitration clause, was a condition precedent for the passing of a decree or order as was done in O.S. No. 3 of 1983. The question of existence of the arbitration clause and the claim being within the purview of the arbitration clause were fundamental to the question that was ultimately decided by the court in O.S. No. 3 of 1983. The question whether an arbitration clause existed and if it existed, what was the scope of that clause, are not questions purely of jurisdiction unrelated to the facts of a particular case. The existence of an arbitration clause and the scope of that clause, essentially depended upon the facts of a particular case and hence a decision on the existence of an arbitration clause and that clause embracing the dispute sought to be raised, are questions connected with the facts of the case. What is not res judicata is only a question relating to jurisdiction related to the facts of a particular case. What is not res judicata is only a question relating to jurisdiction related to the facts of a particular case. When once it is seen to be not a question not unrelated to the facts of a particular case, the earlier adjudication will operate as res judicata. By applying this principle, we find that the finding, express or implied, by the court in O.S. No. 3 of 1983 that there was in existence a valid arbitration clause in the agreement between the parties and that arbitration clause embraced the claim now made by the company and resisted by the Board would necessarily bar the Board from seeking to raise the contention that there existed no arbitration clause at all in the particular agreement between the parties and that clause did not embrace the claim now put forward by the company. We are therefore of the view that the contention of the Board that there is no arbitration clause as vehemently argued by learned Senior counsel for the Board is barred by res judicata. This is a plea which might and ought to have been raised by the Board in O.S. No. 3 of 1983 and it is not having been raised and the Board having acquiesced in the order or decree passed by the court, the Board is now precluded from resurrecting that plea.'' 9. In the light of the findings in Arbitration Appeal No. 29/2004 as well in C.R.P. No. 1699/89, the Board cannot now question the validity of the arbitration clause in the agreements (Exts.C1 and C1(a)) executed between the parties in the subsequent petitions. The judgment in Arbitration Appeal No. 29/2004 even though challenged before the Hon'ble Supreme Court, the SLP was dismissed and there was no interference to the decision taken by this Court in the Arbitration Appeal which has been preferred against the judgment in O.S. No. 3/1983. It is well settled that when a higher court has rendered a particular decision, the decision must be followed by a Subordinate or a lower court. It is also to be noted that the order in C.R.P. No. 1699/89 has not been challenged by the Board and the existence of a valid arbitration clause is found again in this revision and it has become final. It is also to be noted that the order in C.R.P. No. 1699/89 has not been challenged by the Board and the existence of a valid arbitration clause is found again in this revision and it has become final. Hence the principles of res judicata is applicable and the Board cannot challenge the validity or legality of the agreements executed by the parties on the basis of any of the provisions of the Electricity Act. 10. The Board filed O.P. No. 3/06 under Section 30 and 33 of the Arbitration Act 1940. Section 30 deals with the grounds for setting aside an award which reads as follows: "30. Grounds for setting aside award. An award shall not be set aside except on one or more of the following grounds, namely:- (a) that an arbitrator or umpire has misconducted himself or the proceedings. (b) that an award has been made after the issue of an order by the Court superseding the arbitration or after arbitration proceedings have become invalid under Section 35. (c) that an award has been improperly procured or is otherwise invalid." Section 33 of the Act 1940 reads as follows: "33. Arbitration agreement or award to be contested by application. Any party to an arbitration agreement or any person claiming under him desiring to challenge the existence or validity of an arbitration agreement or an award or to have the effect of either determined shall apply to the Court and the Court shall decide the question on affidavits." 11. It is well settled that an Arbitration Court is not supposed to re-appreciate the evidence before the Arbitrator in a petition filed under Section 30 of the Act. Only if it is satisfied that the Arbitrator has proceeded illegally, the court can set-aside an award. The Board has contended that the findings of the Arbitrator that the Company has suffered loss on account of the interruption of power supply and power supply at lower voltage, are not correct and hence the award is liable to be set aside. It is significant to note that all those matters are not coming within the purview of what is enumerated as clause (a) to (c) to Section 30 of the Arbitration Act. It is significant to note that all those matters are not coming within the purview of what is enumerated as clause (a) to (c) to Section 30 of the Arbitration Act. The learned Senior Counsel for the Board has further contended that as per clause 23 of the Conditions of Supply of Electric Energy the Board cannot be made liable for any claim or damages arising out of the failure to supply unless otherwise agreed to the contrary. Clause 23 of the Conditions of Supply of Electrical Energy reads as follows: "That the Board shall not be liable for any claim for loss, damage or compensation whatsoever arising out of failure of supply, unless or otherwise agreed to the contrary but in no case will this agreement be extended to causes when such failure is attributable to orders of civil or military authorities, break down of machinery and plant or causes directly or indirectly due to war, mutiny, civil commotion, riots, insurrection, strike, lock out, fire, flood, tempest, lightning, earthquake or other forces, accidents, or causes beyond the control of the Board." 12. While passing the award the Arbitrator has observed that the regulations had not been made as part of the agreement which operated as an agreement to the contrary as the respondent (Board) had undertaken to supply electricity continuously by executing the agreements. On going through the judgment under challenge, it could be seen that the Court has considered the reasons stated by the Arbitrator and that the award had been passed on the basis of the materials made available to the Arbitrator. There is nothing on record to indicate that there was any kind of misconduct on the part of the Arbitrator or the Arbitrator had acted in violation of the general principles of fair play or travelled beyond the reference. 13. Only if the Arbitrator has misconducted himself or has gone superseding the arbitration clause or the award purports to decide matters not referred, an award can be set aside. When the existence of the valid agreement is proved, the burden is upon the party challenging the award to prove that the award is liable to be set aside on any of the grounds enumerated in Section 30 of the Act. Here there is absolutely no valid ground to interfere with the award passed by the Arbitrator. When the existence of the valid agreement is proved, the burden is upon the party challenging the award to prove that the award is liable to be set aside on any of the grounds enumerated in Section 30 of the Act. Here there is absolutely no valid ground to interfere with the award passed by the Arbitrator. Even though there is an allegation that the award is vitiated by fraud played by the company, absolutely no materials are available so as to infer that fraud has been played on the Arbitrator by the company as alleged. The Arbitrator has considered the view taken by the Justice Geroge Vadakkeyil (Retd.) for fixing the compensation for the earlier period and following the precedent compensation has been fixed for period in question. On a meticulous evaluation of all these matters, we find absolutely no reason to interfere with the findings of the learned Sub Judge rejecting the claim of the Board to set aside the award as well the findings accepting the award and passing of a decree in terms of the award in O.P. No. 8/2005 in favour of the Company. Since these appeals are without any merits we dismiss the same. In the result, Arbitration Appeal Nos. 16/2008 and 23/2008 are dismissed. The parties shall bear their respective costs.