TMI Blog2015 (11) TMI 1287X X X X Extracts X X X X X X X X Extracts X X X X ..... d to the appellant by the delayed submission of annual invoice by the respondents. The late payment clause only captures the principle that a person denied the benefit of money, that ought to have been paid on due dates should get compensated on the same basis as his bank would charge him for funds lent together with a deterrent of 0.5% in order to prevent delays. It is submitted by Mr. Salve and Mr. Bhushan that bankers of the respondents have applied quarterly compounding or monthly compounding for cash credits during different periods on the basis of RBI norms. Article 10.6 of the PPA has followed the norms of the bank. This can not be said to be unfair as the same principle would also apply to the appellants. - CIVIL APPEAL NO. 4126 OF 2013 - - - Dated:- 4-4-2014 - NIJJAR, S.S. AND SIKRI, A.K., JJ. JUDGEMENT SURINDER SINGH NIJJAR, J. 1. This statutory appeal under Section 125 of the Electricity Act, 2003 (hereinafter referred to as the Act ) is directed against the final judgment and order dated 22nd February, 2013 passed by the Appellate Tribunal for Electricity (hereinafter referred to as APTEL or Appellate Tribunal ), at New Delhi in Appeal No. 176 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d, respondent adjusted the amount received by it in the following month against the unpaid amount of the previous month. The balance was carried forward by the respondent. Since June, 2001, the appellant had been making payments as noticed above, and the respondent had been adjusting the same on a FIFO basis. The appellant claims that the monthly invoices raised by the respondent were only estimated invoices. On the other hand, the respondent claims that the appellant, from inception only made adhoc payments periodically against the monthly invoices raised. Therefore, each side is claiming that the other did not provide any details with regard to the amounts due and the amounts paid. It is also the claim of the respondent that the appellant had unilaterally made several disallowances without informing the respondent of the same. 4. It appears that both the parties were dissatisfied with accounting details provided by the other. Ultimately, the respondent issued a notice of dispute resolution on 26th April, 2007 and appointed its Vice President, Shri B. Sundaramurthy as the representative. Continuous correspondence was exchanged between the parties from August, 2007 to March, 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n accordance with the rules of Conciliation and Arbitration of International Chamber of Commerce (ICC), in effect on the date of the agreement. The Arbitration Tribunal is to consist of three arbitrators, of whom each party should select one. The two arbitrators appointed by the parties shall select the third arbitrator, to act as the Chairman of the Tribunal. If the two arbitrators appointed by the parties, fail to agree on a third arbitrator, the ICC Court of Arbitration shall make the appointment. The arbitration shall be held in England. It is further provided that notwithstanding Article 16.8, the laws of England shall govern the validity, interpretation, construction, performance and enforcement of the provisions contained in Article 16.2. The arbitration proceedings shall be conducted and the award shall be rendered in English language. It is further provided that the rights and obligations of the parties shall remain in full force and effect pending the award in any arbitration proceedings. The costs of the arbitration shall be determined by the arbitral tribunal in accordance with the Rules. The arbitration clause specifically provides that the Indian Arbitration Act (Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment made by the appellant against the invoice of that month matches or if the appellant has made excess payment, the respondents were directed to redraw the annual invoice for 2001-2002, 2002-2003, 2003-2004, 2004-2005, 2005-2006 and 2006-2007, as at September of each year to capture the gains to the appellant on account of lower interest rates and gains to the respondent on account of higher floating rate. Certain other directions were also issued. The petition was accordingly disposed of. 11. Aggrieved by the aforesaid directions, the appellant filed Appeal No. 176 of 2011before the APTEL. Before the APTEL, in the appeal, the appellant raised the following issues:- (a) Entitlement of the Appellant to Rebate. (b) Jurisdiction of the State Commission u/s 86(1)(f) of the Act, 2003; (c) First in First Out method; for adjustment of payment. (d) Limitation, delay and laches; (e) Bar under Order 2 Rule 2 CPC; (f) Non filing of Annual Invoices; (g) Determination of capital cost; (h) Deduction on the monthly invoices; (i) Excess Claims in the monthly invoice unjust enrichment; (j) Interest on Late Payments. 12. After hearing the learned counsel for t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. The seventh issue related to determination of capital costs, the State Commission in its order under appeal had directed the appellant to pay the invoice in full as claimed by the respondent without determining the capital costs by getting the petition for finalization of capital costs, which was pending in the State Commission finally adjudicated. APTEL has approved the findings of the State Commission that the appellant had adopted delaying tactics by not cooperating in the finalization of the capital costs. 16. On issue No. 9, it has been held that as the respondent has given up the claim on account of capital costs incurred on Gas Boosting Station and Conditioning System and that the Power Company has been directed to redraw the monthly invoices by the State Commission, the issue would not survive. Finally, on issue No. 10, which related to interest on late payments, it has been held that the respondent company is entitled to interest on late payment of dues under the provisions of the PPA. 17. The present appeal is directed against the aforesaid directions issued by APTEL. 18. We have heard learned counsel for the parties. 19. Mr. R.F.Nariman, learned senior cou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation [(2010 (11) SCC 1)]. Learned senior counsel elaborated that by virtue of Section 94(1), the State Commission has been vested with the power of a Civil Court under the Code of Civil Procedure. Under sub-section (2) of Section 94, the State Commission has the power to issue interim orders. Section 55 provides that all proceedings before the State Commission shall be deemed to be judicial proceedings within Sections 193 and 228 of the IPC. It is further provided that appropriate commission shall be deemed to be a civil court for the purpose of Sections 345 and 346 of the Code of Criminal Procedure, 1903. (2 of 1974). By virtue of Section 146, the State Commission has been empowered to impose punishment including imprisonment, fine and additional fine. He further emphasized that the State Commission in deciding a lis, between the respondent and the appellant, discharged judicial functions and exercised judicial power of the State. Such exercise of judicial power can be either by the Civil Court or a Tribunal having atleast one Judicial Member. The State Commission exercises judicial functions of far reaching effect, therefore, it must have essential trappings of a court. In suppo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Appellate Tribunal are judicial in nature and ought to be performed only by the tribunal which has either a Chairman or a Member(s) who are or were Judges of the Supreme Court or a High Court. Mr. Nariman submitted that since the State Commission was not constituted in accordance with law and the order having been passed without any judicial member, is a nullity non-est in law. He submitted that the proceedings of the Commission are coram non judice and, therefore, liable to be set aside. 22. The next submission of Mr. Nariman is that the claim of the respondent would have been held to be time barred on reference to arbitration. The respondent made a money claim in the year 2009 for the alleged dues starting from the year 2001 onwards. Therefore, had the dispute been referred to arbitration in terms of dispute resolution clause, contained in Article 16 of the PPA, the proceeding of the arbitral tribunal would be governed by the Limitation Act, 1963. The State Commission has erred in law in holding that by virtue of Section 2(4) of the Arbitration Act, 1996, the applicability of Section 43 would be excluded. This, according to Mr. Nariman, is one more reason why the State Gove ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on from the appellant with respect to the payments made by the appellant and referred to in the said letters. The respondent was well aware that the appellant had been making the monthly payments against the respective monthly invoices. Therefore, the respondents can take no benefit of Sections 60 and 61 of the Contract Act. Therefore, the impugned order passed by the State Commission as well as APTEL being based on these two sections are unsustainable. 24. It is further submitted by Mr. Nariman that the respondents have failed to file annual invoices at the end of each year for the years 2001-2006. The invoices for these years were filed only on 18th July, 2007. This is in breach of Clause 10.2(b)(ii) of the PPA which required the respondents to submit annual invoices setting of the details of the amounts owed under the tariff and reconciliation of the actual amounts receivable from the appellant for the prior year against the sum of monthly estimated payments made by the appellant. Similarly, if payments are due by the respondent to the appellant, the stated amount has to be paid to the appellant and vice versa. The State Commission rejected the explanation given by the respon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent of India, in exercise of powers under sub-section (2) of Section 43 of the Electricity Supply Act, 1948. The aforesaid notification has been made part of the PPA as Schedule U thereof. Schedule A of the PPA deals with Tariff. Interest on the receivable equivalent to 2 months average billing for sale of electricity is loaded upfront on the monthly invoice. Part of this is refunded by way of rebate of 2.5 % if payment is made within 5 days and at 1% if it is made after 5 days but upto the 29th day from the presentation of the monthly invoice. Interest of the respondent upto the 30th day loaded upfront in the invoice. Thereafter the interest of the respondent is protected from the due date till payment is made in accordance with the Clause 10.6(e) of the PPA. Therefore, the appellant is entitled to rebate if payment is made within 5 days or within 29th day of the presentation of the invoice. Lastly, it is submitted by Mr. Nariman that the appellant has been made the payment within 5 days only to avail rebate of 2.5%. One such payment was made, the respondent had the use of money for a period of 25 days and correspondingly the appellant had been deprived of the use of such money f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... indings recorded by APTEL, Mr. Salve and Mr. Bhushan submit that all the issues raised by the appellant are without any merit as it cannot be supported either in facts or in law. 28. It is submitted by the learned senior counsel that even Article 16(2) provides for international arbitration under the ICC Rules. Article 16.2(h) specifically excludes the application of the Arbitration and Conciliation Act of 1996 and the Arbitration Act of 1940. Article 16.2(e) provides that the laws of England shall govern the arbitration agreement in contra- distinction to Indian law applying to the PPA. In any event, the appellant cannot be permitted to claim a reference of arbitration as a matter of right. He points out that at the initial stage, the appellant only referred to the existence of an informal dispute resolution provision and provision for arbitration under Article 16 of the PPA. Having taken such a preliminary objection, the appellant proceeded to subject itself to the jurisdiction of the State Commission. In fact the entire claim of the respondent was answered by the appellant on merit in the written statement, filed before the State Commission. Even if the written submissions be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e were being adjusted on FIFO basis. The appellant never refuted or rejected to such practice adopted by the respondent. The appellant submitted that it was undergoing temporary financial strain. It is also pointed out by Mr. Salve and Mr. Bhushan that the invoices were accepted in full. The statement was made by the appellant that part payment being made would not prejudice the right of respondent to receive the full payment against the invoices. The correspondence between the parties has been noticed by the APTEL in extenso. Coming to the legal position, Mr. Salve and Mr. Bhushan submit that APTEL having considered the statutory provisions as well as judicial precedents have come to the conclusion that the appellant was duly intimated that the payment made would be applied by the respondents on FIFO basis. Therefore, Section 59 of the Indian Contract Act would not be applicable. On the issue of limitation, it is submitted that neither the Limitation Act nor the principle of delay and laches would apply to the present case. It is submitted by Mr. Salve and Mr. Bhushan that the provision of Limitation Act, 1963 would not be applicable to the proceedings before the State Commission. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... respect of such portions of monthly invoices, which were calculated on the basis of the estimates. Mr. Salve and Mr. Bhushan then submit that interest on late payments have been rightly granted both by the State Commission as well as the APTEL. The interest has been calculated on the basis of Article 10.6 of the PPA. Since the loans taken by the respondent are payable at compounded interest rates, the later payment interest payable by the appellant would also be at the compounded interest rate as per Article 10.6 of the PPA. Mr. Salve and Mr. Bhushan relied on the judgment of this Court in Central Bank of India Vs. Ravindra Ors.[ (2002) 1 SCC 367] and Indian Council for Legal Action Vs. Union of India[(2011) 8 SCC 161] 31. During the course of hearing, the appellant had taken out I.A. No. 5 of 2013 and I.A. No. 6 of 2013. I.A. No. 6 is for the impleadment and I.A. No. 5 is for the direction. I.A. Nos. 5 and 6 of 2013 32. It is submitted by Mr. Salve and Mr. Bhushan that in I.A. No. 6, the appellant has made a prayer to implead IOCL as the respondent. This application can not be allowed as IOCL is not a party to the contract. The attempt to implead third party is only ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appellant (licensee) that by Virtue of Section 86(1)(f) of the Act of 2003, the dispute between the licensees and the generating companies can only be adjudicated upon by the State Commission either by itself or by an arbitrator to whom the Commission refers the dispute. Therefore, the High Court had no jurisdiction under Section 11(6) to refer the dispute between the licensees and the generating company to an arbitrator, since such power of adjudication of reference has been specifically vested in the State Commission. Since the Electricity Act is a special law, dealing with arbitrations of dispute between the licensees and the generating companies, the provision of Section 11 of the Arbitration and Conciliation Act would be inapplicable. The High Court has, therefore, committed an error of jurisdiction in allowing the application under Section 11(6) and referring the matter to arbitration to a Former Chief Justice of India. On the other hand, it was submitted on behalf of the generating companies that the provisions of the Electricity Act are in addition to and not in derogation of any other law for the time being in force. The provisions contained in Sections 173 and 174 would ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t (but no further). In our opinion, the observations made by this Court in Paragraphs 59 and 60 are a complete answer to the submissions of Mr. Nariman that upon an application being made, the State Commission was bound to refer the matter to arbitration. 39. Section 86(1)(f) specifically confers jurisdiction on the State Commission to refer the dispute. Undoubtedly, the Commission is required to exercise its discretion reasonably and not arbitrarily. In the present case, the State Commission upon consideration of the entire matter has exercised its discretion. However, in our opinion, the APTEL ought not to have brushed aside the submissions of the appellant with the observation that the State Commission having exercised its discretion, the issue need not be investigated by the APTEL. It would always be open to APTEL to examine as to whether the State Commission has exercised the discretion with regard to the question whether the dispute ought to have been referred to arbitration, in accordance with the well known norms for exercising such discretion. APTEL exercises jurisdiction over the State Commission by way of a First Appeal. Therefore, it is the bounden duty of the Appell ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s have an air of detachment . But this is more a matter of age and tradition and is not of the essence. Many tribunals, in recent years, have acquitted themselves so well and with such detachment as to make this test insufficient. Again in para 99, it is observed as follows : 99. Where there is a lis - an affirmation by one party and denial by another - and the dispute necessarily involves a decision on the rights and obligations of the parties to it and the authority is called upon to decide it, there is an exercise of judicial power. That authority is called a Tribunal, if it does not have all the trappings of a Court. In Associated Cement Companies Ltd. v. P.N. Sharma36 this Court said: (SCR pp. 386- 87) The main and the basic test however, is whether the adjudicating power which a particular authority is empowered to exercise, has been conferred on it by a statute and can be described as a part of the State s inherent power exercised in discharging its judicial function. Applying this test, there can be no doubt that the power which the State Government exercises under Rule 6(5) and Rule 6(6) is a part of the State s judicial power . There is, in that sense, a lis; ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ions, without encroaching upon the independence of the judiciary and keeping in view the principles of the rule of law and separation of powers. If tribunals are to be vested with judicial power hitherto vested in or exercised by courts, such tribunals should possess the independence, security and capacity associated with courts. If the tribunals are intended to serve an area which requires specialised knowledge or expertise, no doubt there can be technical members in addition to judicial members . 45. Keeping in view the aforesaid observations of this Court, in our opinion, the State of Tamil Nadu ought to make necessary appointments in terms of Section 84(2) of the Act. We have been informed that till date no judicial Member has been appointed in the Tamil Nadu State Commission. We are of the opinion that the matter needs to be considered, with some urgency, by the appropriate State authorities about the desirability and feasibility for making appointments, of any person, as the Chairperson from amongst persons who is, or has been, a Judge of a High Court. 46. We have noticed earlier that Section 113 of the Act mandates that the Chairman of APTEL shall be a person who i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... spondents were constrained to adopt FIFO method. Learned senior counsel also pointed out that there was no complaint or objection ever raised by the appellant. The objection to the method adopted by the respondents on the method of FIFO, was only raised in the counter affidavit to the petition filed by the appellant before the State Commission. According to learned senior counsel, the plea is an afterthought and has been rightly rejected by the State Commission as well as the APTEL. We also have no hesitation in rejecting the submission of Mr. Nariman on this issue. In any event, the Limitation Act is inapplicable to proceeding before the State Commission. 49. The submission of the appellant that the Limitation Act would be available in case the reference was to be made to arbitration, in our opinion, is also without merit. Firstly, the State Commission exercised its jurisdiction to decide the dispute itself. The matter was not referred to arbitration, therefore, the Limitation act would not be applicable. Secondly, Section 43 of the Arbitration and Conciliation Act would not be applicable even if the matter was referred to arbitration by virtue of Section 2(4) of the Arbitratio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... should be made at the earliest. Obviously, a party who willingly participates in the proceedings in the suit and subjects himself to the jurisdiction of the court cannot subsequently turn around and say that the parties should be referred to arbitration in view of the existence of an arbitration agreement. Whether a party has waived his right to seek arbitration and subjected himself to the jurisdiction of the court, depends upon the conduct of such party in the suit. These observations are squarely applicable to the facts in this case. 52. Even if the reference had been made under Article 16 of the PPA, the applicability of the Arbitration Act, 1996 and the Arbitration Act of 1940 have been specifically excepted under Article 16(2)(h). In the earlier part of the judgment, we have noticed that Article 16 indeed provides for informal resolution of disputes by way of arbitration. However, Article 16(2) mandates that the arbitration shall be conducted in accordance with the ICC Rules. Under those rules, ICC Court of arbitration is to make the appointment of the Arbitral Tribunal. To make the matters worst for the appellant, it has been provided in Article 16.2(e) that the seat of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... commercial arbitrations held out of India provisions of Part I would apply unless the parties by agreement, express or implied, exclude all or any of its provisions. In that case the laws or rules chosen by the parties would prevail. Any provision, in Part I, which is contrary to or excluded by that law or rules will not apply. The aforesaid observations will be fully applicable to the facts and circumstances of this case as the agreement is prior to 6th September, 2012. The declaration of law in Bharat Aluminium Company vs. Kaisar Aluminium Technical Services Inc.[ 2012 (9) SCC 552] that Part I of the arbitration would not be applicable to International Commercial Arbitration outside India applies to the Arbitration Agreements executed after 6th September, 2012. Though by virtue of the provisions contained in Article 16 of the PPA, the legal effect remains the same, that is applicability of 1996 Act is ruled out, therefore, the appellant cannot claim the benefit of Section 43 of the Arbitration Act, 1996. 53. We also do not find any merit in the submission of Mr. Nariman that the appellants have wrongly adopted the system of FIFO for adjustment of the payments made by the app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to (c) of the PPA, Letter of Credit is to be established covering three months estimated billing, one month prior to Commercial Operation Date. Under Article 10.3 (d) of the PPA, an Escrow Account is to be established by the appellant in favour of the Power Company into which collections from designated circles are to flow in and be available as collateral security. Under Article 10.4, the Government of Tamil Nadu has guaranteed all of the financial obligations of the appellant. Under Article 10.2 (e) of the PPA agreement, the right to dispute any invoice by the appellant is limited to one year from due date of such invoice. Thus it would be evident that even if the amount of invoice is disputed, the appellant is obliged to make full payments of the invoice when due and then raise the dispute. Undoubtedly, early payment is encouraged by offering rebate of 2.5% if paid within 5 days of the date of the invoice. Similarly, 1% rebate would be available if the payment of the entire invoice is made within 30 days. The rebate is in the form of incentive and is an exception to the general rule requiring payment in full on due date. Therefore, in our opinion, the appellant had no legal rig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... should have been made, in breach of his legal rights, and interest was a compensation whether the compensation was liquidated under an agreement or statute. A Division Bench of the High Court of Punjab speaking through Tek Chand, J. in CIT v. Dr Sham Lal Narula thus articulated the concept of interest the words interest and compensation are sometimes used interchangeably and on other occasions they have distinct connotation. Interest in general terms is the return or compensation for the use or retention by one person of a sum of money belonging to or owed to another. In its narrow sense, interest is understood to mean the amount which one has contracted to pay for use of borrowed money. In whatever category interest in a particular case may be put, it is a consideration paid either for the use of money or for forbearance in demanding it, after it has fallen due, and thus, it is a charge for the use or forbearance of money. In this sense, it is a compensation allowed by law or fixed by parties, or permitted by custom or usage, for use of money, belonging to another, or for the delay in paying money after it has become payable. 56. Similar observations have been mad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt from January 2001 till date It is pleaded that the respondents have failed to give details about the discounts and credits received the benefit of which ought to have been passed on to the appellant. Therefore, IOCL be made parties to respondent No.2 to the present appeal. I.A.No.5 of 2013 seeks direction to IOCL to furnish details of all the documents of the matter. Further directions are also sought on the respondent to refund a sum of ₹ 240 crores paid by the appellant under the order passed by the State Commission along with interest at the rate as mentioned in PPA. 59. The respondents in a common counter statement to the applications have submitted that the applications are not maintainable. The applications have been evidently preferred purely as dilatory tactics, to delay and deny substantial payments that are due and payable to the respondent pursuant to the orders passed by the State Commission which have been upheld by APTEL. We are not inclined to entertain either of the applications at this stage. The issue sought to be raised in both the applications ought to have been raised by the appellant at the relevant time. The applications are, therefore, accordingl ..... X X X X Extracts X X X X X X X X Extracts X X X X
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