Amalgamated Electricity Co., Ltd vs N. S. Bathena

Rewritten Version Notice: This is a rewritten version of the original judgment.

Court: Supreme Court of India

Case Number: Civil Appeal No. 361 of 1958

Decision Date: 13 February, 1959

Coram: A.K. Sarkar, Syed Jaffer Imam

In the case titled Amalgamated Electricity Co., Ltd versus N. S. Bathena, the Supreme Court delivered its judgment on 13 February 1959. The bench consisted of Justice A.K. Sarkar and Justice Syed Jaffer Imam, who heard the appeal together in the Supreme Court of India. The decision was reported in 1959 AIR 711 and in the 1959 Supreme Court Reports (Supplement), page 213. It also appears in the 1974 Supreme Court Cases, volume 16, page 314. The court held that the arbitration clause inserted by section 57(1) of the Electricity (Supply) Act, 1948, in a licence granted by the Government, could not be used to resolve a dispute between the licencee and a consumer. The licence, according to the court, created a contractual relationship only between the licence holder and the Government, and the arbitration provision applied solely to disagreements between those two parties. Section 57(1) therefore did not create a statutory arbitration mechanism that extended to every person who might have a grievance under the licence. Consequently, the clause could not be invoked to compel a consumer to submit his claim to arbitration.

The appeal, numbered Civil Appeal No. 361 of 1958, was filed by special leave against the judgment and order dated 11 December 1957 of the High Court at Bangalore. That High Court decision stemmed from a revision petition, Civil Revision No. 702 of 1956, which in turn challenged an order dated 10 August 1956 issued by the Second‑Extra Assistant Judge of Belgaum. The order of 10 August 1956 arose from the judgment of the First Joint Civil Judge, Junior Division, Belgaum, dated 1 September 1955, in Regular Civil Suit No. 197 of 1955. The appellant, Amalgamated Electricity Co., Ltd, conducted the business of supplying electrical energy in the Belgaum district. It had obtained a licence from the Government under section 3 of the Indian Electricity Act, 1910, which authorized it to supply electricity within the designated area. The respondent, identified as N. S. Bathena, was the plaintiff in the underlying suit and obtained his electricity supply from the appellant. Bathena alleged that the appellant had charged him an amount that exceeded the lawful rate for the electricity consumed. Acting on this belief, he instituted a suit before the Civil Judge of Belgaum on approximately 8 June 1955, seeking a refund of the alleged overpayment. The appellant subsequently filed an application under section 34 of the Arbitration Act, 1940, requesting that the civil suit be stayed on the ground that the dispute was referable to arbitration. The application argued that the arbitration clause contained in the licence, created under the Electricity (Supply) Act, 1948, mandated resolution of the matter through arbitration rather than through the courts. The Civil Judge dismissed the application, a decision that was affirmed by the Extra Assistant Sessions Judge on appeal, and later upheld by the High Court in its revision. The appellant therefore brought the present appeal before this Court, asserting that the matter, in the view of the appellant, fell within the scope of the arbitration provision.

The appellant had moved the Civil Judge to obtain a stay of the suit on the ground that the dispute was referable to arbitration under the Electricity (Supply) Act of 1948. The Civil Judge dismissed that application, a decision that was subsequently affirmed by the Extra Assistant Sessions Judge on appeal and finally upheld by the High Court in revision. Having been unsuccessful in the lower courts, the appellant now appealed to this Court, asserting that the matter fell within the arbitration provision contained in clause sixteen of the Sixth Schedule of the 1948 Act. To appreciate the appellant’s claim, it is necessary to refer to certain provisions of the two Acts involved. Under the Indian Electricity Act of 1910, the supply of electrical energy may be carried on only with governmental sanction, and section three of that Act authorises the government to grant licences for such supply. The appellant obtained its licence in the year 1932. The licence form prescribed in the rules made under the 1910 Act specifies the maximum amount that a licence holder may charge a consumer for the electricity supplied. The later Electricity (Supply) Act of 1948 introduced a different scheme for determining charges. Section fifty‑seven of that Act provides that the provisions of the Sixth Schedule and the table attached to the Seventh Schedule are deemed to be incorporated into the licence of every licence holder that is not a local authority, effective from the commencement of the licence holder’s next accounting year. From that date the licence holder must comply with those provisions, and any term of the licence, of the 1910 Act, or of any other law, agreement or instrument that is inconsistent with the Sixth Schedule, the table or section fifty‑seven is declared void to the extent of the inconsistency. Consequently, the effect of section fifty‑seven was to embed the terms of the Sixth Schedule and the table into the licence, giving them precedence over any earlier licence terms or provisions of the 1910 Act or any other conflicting law. Clause sixteen of the Sixth Schedule contains a specific arbitration clause, which reads: “Any dispute or difference as to the interpretation or any matter arising out of the provisions of this Schedule shall be referred to the arbitration of the Authority.” The appellant relies on this clause, contending that the dispute that gave rise to the respondent’s suit falls within the category of disputes enumerated in clause sixteen and therefore must be referred to arbitration pursuant to its terms. Assuming for argument’s sake that the dispute indeed falls within the scope of clause sixteen, the Court is nevertheless unable to conclude that it is a dispute capable of being referred to arbitration under that provision.

The Court observed that the appellant did not argue that clause XVI formed part of any contract between the appellant and the respondent. Accordingly, the only remaining basis on which the appellant could insist that the respondent was obligated to refer the dispute to arbitration under that clause was to demonstrate that clause XVI itself constituted a statutory provision for arbitration. The Court noted that, had clause XVI been a statutory arbitration provision, the appellant would, under section 46 of the Arbitration Act, be entitled to seek a stay of the suit pursuant to section 34 of that Act. However, the Court could not accept the proposition that clause XVI was such a statutory provision. The sole statutory reference identified by the Court was section 57, which provides that the terms of clause XVI and the other clauses in the Sixth Schedule are to be deemed incorporated into a licence granted by the Government under section 3 of the Act of 1910, and that the licencee must comply with the terms of that Schedule. From this, the Court concluded that the licence issued by the Government to an electricity supplier such as the appellant merely contains a clause providing that certain disputes shall be referred to arbitration. The licence represents an engagement between the Government and the licencee, binding the two parties to its provisions. The Court found it unnecessary to determine whether this engagement is contractual or statutory, because in either case it binds only the two parties involved. An arbitration clause in such an instrument can address only disputes between those parties; it does not contemplate a dispute between a party to the instrument and a person who is not a party. Consequently, the Court was unable to interpret section 57 as rendering clause XVI a statutory provision that obliges any person to refer every dispute to arbitration. The appellant’s assertion that the licence is a statutory document was described by the Court as a loosely phrased statement. The Court clarified that at most this description means the licence is issued under a statutory provision and must comply with that provision, but it does not transform the licence into a statutory mechanism for referring disputes to arbitration irrespective of the parties involved. Accordingly, the Court held that clause XVI of the Sixth Schedule of the Act of 1948 contains no arbitration provision, statutory or otherwise, that would apply to the present dispute between a licensed electricity supplier and a consumer. As a result, the appeal was dismissed with costs.