Enzen Global Solutions Pvt. Ltd. v. Central Electricity Supply Utility of Odisha
2017-08-11
VINEET SARAN
body2017
DigiLaw.ai
JUDGMENT : Vineet Saran, J. This is a petition filed under Section 11 of the Arbitration and Conciliation Act, 1996 (for short “Act, 1996”) for appointment of an arbitrator. 2. The brief facts of this case are that a distribution franchise agreement for "Talcher Electrical Division, Chainpal" was entered into between the licencee-opposite party-Central Electricity Supply Utility of Odisha (for short, ‘CESU’) and the franchise-petitioner-M/s. Enzen Global Solutions Pvt. Ltd. (for short ‘Enzen’). Such agreement was executed on 27.09.2012, which was for a period of five years. A dispute arose between the parties with regard to clause-18 of the agreement relating to “Force Majeure”. 3. The contention of the learned counsel for the petitioner is that since the distribution work could not be commenced by the petitioner between 01.11.2012 and 31.03.2013, which was on account of reasons beyond the control of the petitioner, the petitioner would not be liable to pay the requisite charges under the agreement for the said period. The first communication in this regard was sent by the petitioner to the opposite party on 29.11.2012, which was initially rejected by the opposite party on 13.12.2012. Thereafter, when finally the opposite party-CESU did not agree for waiving the charges for the aforesaid period, the petitioner invoked the dispute resolution clause-17 of the agreement relating to “Governing Law and Dispute Resolution”. When the dispute was not resolved, the parties approached the Odisha Electricity Regulatory Commission (for short, “OERC”). Such claim for resolution of dispute was filed by the petitioner before the OERC on 05.08.2013 under Clause-17.2.4 of the agreement, as well as Section 86(1)(f) and (k) of the Electricity Act, 2003. 4. By order dated 27.08.2013, the OERC refused to entertain the dispute between the petitioner and the opposite party, primarily on the ground that Section 86(1)(f) of the Electricity Act, 2003 relates to the dispute between the licencee and the generating company and not between the licencee and the franchise. Further, OERC opined that even though clause-17.2.4 of the agreement provides for resolution of dispute by the OERC, yet since OERC was not a party to the agreement, it refused to exercise such power of resolution of dispute between the parties, as it lacked such statutory jurisdiction. 5. After the OERC refused to decide the dispute between the parties, Enzen and CESU continued to communicate with each other with regard to amicable settlement of the dispute.
5. After the OERC refused to decide the dispute between the parties, Enzen and CESU continued to communicate with each other with regard to amicable settlement of the dispute. Then on 29.12.2015, the opposite party-CESU rejected the claim of the petitioner for “Force Majeure” and demanded payment of the outstanding dues. It was thereafter on 04.01.2016 that the petitioner invoked the arbitration clause and sent notice under Section 21 of the Act, 1996 to the opposite party-CESU. The said notice was responded by the CESU on 22.01.2016, whereby they denied the existence of the arbitration clause and consequently the appointment of an arbitrator. This Arbitration petition has thus been filed under Section 11 of the Act. 6. Heard Shri D.P. Nanda, learned counsel for the petitioner, as well as Shri S.K. Padhi, Senior Counsel appearing along with Shri B.K. Nayak, learned counsel for the opposite party, and perused the record. Pleadings between the parties have been exchanged and by consent of learned counsel for the parties, the petition is taken up for final disposal at the admission stage. 7. The submission of Shri S.K. Padhi, learned Senior Counsel for the opposite party is that since the petitioner distributes electricity, it would be a licencee under the Electricity Act, 2003, and even though there may be no licence granted in favour of the petitioner, yet because it is carrying on the work of distribution of electricity under the agreement, it would automatically be a licencee; thus, the dispute between the petitioner and the opposite party ought to have been treated as a dispute between the two licencees, which the OERC would be obliged to decide. It is contended that if the same does not attract the provisions of Section 86 of the Electricity Act, 2003, it would certainly attract the provisions of Section 37 of the Orissa Electricity Reforms Act, 1995, which according to Shri Padhi, provides that where there is dispute arisen between the licencees, the same shall be referred to the Commission, i.e. the OERC. It is on this strength, the learned counsel for the opposite party has vehemently argued that the dispute should, in any case, be referred to the OERC and not to an arbitrator. 8. For proper appraisal of the case, the relevant sub-clauses of Clause 17 and 18 of the agreement are reproduced below: “17.
It is on this strength, the learned counsel for the opposite party has vehemently argued that the dispute should, in any case, be referred to the OERC and not to an arbitrator. 8. For proper appraisal of the case, the relevant sub-clauses of Clause 17 and 18 of the agreement are reproduced below: “17. Governing Law and Dispute-Resolution: 17.1 xx xx xx 17.2 Amicable Settlement 17.2.1 xx xx xx 17.2.2 Both the parties shall constitute a Permanent Dispute Resolution Body having equal representation from each of the parties. The disputes or differences arising under this Agreement shall be referred for resolution to this body, which shall communicate its decision within Thirty (30) days. Engineer-in-Charge of the Electrical Circle and Project Head for Engineer-in-Charge by whatever name called) of the Distribution Franchise shall be part of this Permanent Dispute Resolution Body. 17.2.3 xx xx xx 17.2.4. Dispute remains still unresolved either party may approach the OERC. The parties agree that the award of OERC shall be final and binding upon the parties. 17.2.5 xx xx xx 17.2.6 xx xx xx 17.3. xx xx xx 17.3.1 xx xx xx 17.3.2 xx xx xx 17.3.3 xx xx xx 17.3.4 xx xx xx 17.4 xx xx xx 18. FORCE MAJEURE 18.1.1. No Party shall be liable to the other Parties if, and to the extent, that the performance or delay in performance of any of its obligations under this Agreement is prevented, restricted, delayed or interfered with due to occurrence of any event of force Majeure, including acts of God, acts of any Government (de jure or de facto) or regulatory body or public enemy, war, riots, embargoes, industry-wide strikes, the reduction in supply due to outage of generation facilities/transmission lines or any other causes, circumstances, or contingencies, whether of a similar or dissimilar nature to the foregoing, beyond the parties control, which cannot be reasonably forecast or prevented, thereby, hindering the performance by the parties of any of their obligations hereunder. The Party claiming an event of force majeure shall promptly notify the other Parties in writing, and provide full particulars of the cause or event and the date of first occurrence thereof as soon as possible after the event and also keep the other Parties informed of any further developments.
The Party claiming an event of force majeure shall promptly notify the other Parties in writing, and provide full particulars of the cause or event and the date of first occurrence thereof as soon as possible after the event and also keep the other Parties informed of any further developments. The Party so affected shall use its best efforts to remove the cause of nonperformance, and the Parties shall resume performance hereunder with the utmost dispatch when such cause is removed. For the purpose of clarity, the Parties agree that the failure of a Party to adhere to any statutory or regulatory requirement or to obtain necessary approvals shall not be deemed to be a force majeure situation. 18.1.2. A condition of force majeure shall not relieve any Party of any obligation due under this Agreement prior to the event of force majeure." 9. From a reading of Clause 17 of the agreement, it is clear that the parties had agreed to first negotiate between themselves, through negotiators, for resolution of the disputes. It was only after such dispute could not be resolved amicably, that the OERC was to be approached, whose decision was to be final and binding upon the parties. 10. From the above, it is clear that the parties had agreed for an independent person or body to resolve the disputes, which as per the agreement was the OERC. In view of the fact that the OERC has refused to act as arbitrator, as it was not its statutory duty to do so, which was by order dated 27.08.2013, which has not been challenged by either party, I am of the opinion that it would neither be appropriate for this Court to direct the OERC to resolve the dispute, nor has any such prayer been made in this petition. Even Section 37 of the Electricity Reforms Act, 1995 would not be applicable in the present case, as the same also requires the OERC to decide any such disputes which arises between the licencees, etc. and the present case is of a dispute between the licencee and franchise. 11. From a plain reading of Sub-sections (27) and (39) of Section 2 of the Electricity Act, 2003, which define 'franchise' and 'licencee' respectively, it would be clear that the 'franchise' is distinct from the 'licencee', which alone is authorized to distribute electricity.
and the present case is of a dispute between the licencee and franchise. 11. From a plain reading of Sub-sections (27) and (39) of Section 2 of the Electricity Act, 2003, which define 'franchise' and 'licencee' respectively, it would be clear that the 'franchise' is distinct from the 'licencee', which alone is authorized to distribute electricity. Seventh proviso to Section 14 of the Electricity Act, 2003 also makes it clear that though the licencee may appoint another person for distribution of electricity on its behalf, but it is the licencee which shall be responsible for distribution, meaning thereby that franchise (even when it distributes electricity on behalf of the licencee) would not automatically become a licencee. Thus the submission of the learned counsel for the opposite party that the matter should be referred to the OERC for arbitration, is not justified in law, as the present dispute cannot be said to be between two licencees. 12. Since the parties have through their conduct and various communications (dated 05.04.2014, 22.02.2014, 11.02.2016 and 30.06.2015) clearly admitted that in case the dispute cannot be resolved amicably, as a last resort an Arbitrator is to be appointed, I am of the opinion that in the facts of the case, the dispute resolution clause-17 of the agreement would actually amount to arbitration clause. The same would also be clear from the office order dated 22.04.2014 issued by the Chief Executive Officer, CESU, wherein, with regard to the dispute with the petitioner-Enzen, it has been stated that the settlement of this dispute through “The arbitration and Reconciliation Act” should be the last option. This would amount to own admission on the part of the CESU that if the matter cannot be resolved amicably, the provisions of the Arbitration and Conciliation Act, 1996 would come into force. 13. 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 settlement of disputes. 14. In the present case, the clear intention of the parties to the agreement was to first settle the dispute amicably, and if not, then by referring it to OERC.
A common sense meaning of the agreement is to be taken as to what was the intention of the parties with regard to settlement of disputes. 14. In the present case, the clear intention of the parties to the agreement was to first settle the dispute amicably, and if not, then by referring it to OERC. Parties agree that OERC would not be obliged to act as arbitrator, regarding which it has passed an order dated 27.08.2012, which has become final. Coupled with this is the admission of CESU that arbitration should be the last option, only when the dispute cannot be resolved amicably. The agreement also provides for resolution of dispute by an independent body, which was OERC. 15. As such, from perusal of the agreement as well as the conduct of the parties, as also the communications exchanged with regard to resolution of the dispute, which are admitted by the learned counsel for the parties, this Court is of the firm view that the provision under the agreement for settlement of dispute includes reference to an arbitrator. Even though there may not be a specific clause for arbitration, yet if the conduct of the parties makes it clear that they had agreed for arbitration, the same would be implied, and thus be enforceable. 16. Accordingly, I direct that both the parties may suggest an agreed name of a person to be appointed as Arbitrator and if they do not so agree, they may suggest their respective names by the next date of listing, so as to enable this Court to appoint an Arbitrator for resolution of the dispute between the parties. List this matter after two weeks.