Bhusawal Borough Municipality vs Amalgamated Electricity Co. Ltd. and Anr

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

Court: supreme-court

Case Number: Civil Appeals Nos. 47 and 48 of 1961

Decision Date: 10 December 1963

Coram: J.R. Mudholkar, Bhuvneshwar P. Sinha, Raghubar Dayal, N. Rajagopala Ayyangar

In this case, the Supreme Court of India dealt with a dispute between Bhusawal Borough Municipality and Amalgamated Electricity Co. Ltd., together with another respondent. The judgment was delivered on 10 December 1963 by Justice J. R. Mudholkar, who was joined by Justices Bhuvneshwar P. Sinha, Raghubar Dayal, and N. Rajagopala Ayyangar. The matter arose from two separate suits filed by the municipality seeking recovery of two amounts that it had paid to the electricity company under protest, alleging that the payments represented electricity charges that were not due. The electricity company defended the claim by contending that the controversy had already been settled by the Government of Bombay, and that under the second proviso of clause five of the Bombay Electricity Supply (Licensed Undertakings War Costs) Order of 1944, the government’s determination was final and binding on both parties. The government had communicated its decision to the parties by a letter dated 22 May 1946. The municipality succeeded in both suits before the trial court and the district court. However, on second appeal, the Bombay High Court dismissed both suits, leading the municipality to obtain special leave to appeal to the Supreme Court. The Court examined whether the municipality was entitled to recover the sums claimed, whether the government’s letter of 22 May 1946 represented a final decision under the second proviso of clause five, and whether the language of that proviso required a reference by both parties or could be triggered by a reference from a single interested party. The Court held that the municipality was not entitled to the refund because the dispute had indeed been decided by the government under the applicable proviso, and the government’s communication constituted a final decision, not merely an opinion. The Court further observed that the second proviso does not demand a joint reference by both parties; the phrase “any party interested” indicates that a single interested party may invoke the government’s jurisdiction. Moreover, the Court found that the trial court and the district court had mis‑interpreted the 22 May 1946 document, treating it only as evidence rather than as the basis for the surcharge claim, and that such misinterpretation amounted to an error of law which the High Court was empowered to correct on second appeal.

With reference to second Appeal No. 1086 of 1954, counsel G.S. Pathak and Naunit Lal appeared for the appellant, while counsel I.N. Shroff represented respondent No. 1 and counsel M.S.K. Sastri together with R.H. Dhebar represented respondent No. 2. The judgment was pronounced on 10 December 1963 and was delivered by Justice Mudholkar. Justice Mudholkar clarified that the reasons given in this judgment would also apply to Civil Appeal No. 48 of 1961. Both appeals before the Supreme Court were filed by special leave against the orders of the Bombay High Court in a second appeal that had disposed of two separate suits filed by the appellant, the Borough Municipality of Bhusawal, against Bhusawal Electricity Co. Ltd., the first respondent. The State of Bombay was subsequently added as a defendant in each of those suits. In each suit the municipality sought the recovery of two amounts that it had paid to the electricity company under protest, asserting that those amounts were electricity charges that the company claimed to be entitled to collect pursuant to an order issued by the Government of Bombay under the Bombay Electricity Supply (Licensed Undertakings War Costs) Order, 1944, hereinafter called the Surcharge Order. The municipality succeeded in both actions before the trial court and again before the District Court. However, on second appeal the High Court reversed those decisions, set aside the decrees of the lower courts and dismissed the two suits. While passing that judgment, the High Court admitted certain documents as additional evidence. Before this Court, counsel for the appellant raised two principal objections: first, that the High Court lacked jurisdiction to admit additional evidence on a second appeal because Order XLI, rule 27 of the Code of Civil Procedure does not apply to such appeals; and second, that the provisions of that rule could not be invoked to fill any gaps in the evidence presented by a party. It is noteworthy that when the High Court, by its order dated 30 April 1958, decided to admit the extra documents, the appellant did not object at that stage. Accordingly, the Court considered it unnecessary to decide whether the High Court possessed the power to admit further evidence in a second appeal, or whether, assuming such power existed, its exercise in this case was appropriate. The appellant based its claim for refund on a specific interpretation of the agreements concerning the payment of electricity charges, contending that it was not liable to pay the surcharge imposed by the Surcharge Order, 1944 in respect of the electricity consumed. The principal defence of respondent No. 1 was that the dispute between the parties had been determined by the Government of Bombay and that, under the second proviso to clause 5 of the Surcharge Order, 1944, the Government’s decision was final and binding upon both the municipality and the electricity company. The relevant provision reads as follows: Clause 5:

In this case the Court reproduced the wording of Clause 5 of the Bombay Electricity Supply (Licensed Undertakings War Costs) Order, 1944, together with its second proviso. Clause 5 states that once the Provincial Government fixes the rate of the War Costs Surcharge, the licencee or sanction‑holder concerned shall not be lawful in supplying energy at charges other than those that include the surcharge fixed at that time. The second proviso adds that no War Costs Surcharge shall be effective upon the charges for the supply of energy under any contract entered into after 1 May 1942 unless such contract provides for the same charges for energy as have been contained in similar previous contracts for similar supply by the licencee or sanction‑holder concerned, a situation in which, in the event of dispute by any interested party, the decision of the Provincial Government shall be final, or unless and to such extent as such application may be expressly ordered by the Provincial Government. It is not disputed by counsel for the appellant, Mr Pathak, that the Government’s decision on the dispute is final and binding upon the parties. Nevertheless, Mr Pathak submitted that the trial court had not been shown any evidence that the dispute between the municipality and the electricity company had actually been referred to the Government, and that the communication produced as Exhibit 68 dated 22 May 1946, which the respondent relied upon, contained nothing more than the Government’s opinion. Mr Pathak further argued that the wording of the second proviso effectively makes the Government an arbitrator, and therefore there should have been a reference to an arbitrator under the Arbitration Act, 1940, a point that had not been taken up in the lower courts nor found in the statement of the case. Consequently the Court declined to permit Mr Pathak to rely on that argument before it. The communication of 22 May 1946, relied upon by the first respondent, reads as follows: “No 6404/36‑E1(1). Public Works Department, Bombay Castle, 22nd May, 1946. From the Secretary to the Government of Bombay, Public Works Department (Irrigation) to the President, The Borough Municipality, Bhusawal. Subject: War Costs Surcharge. Dear Sir, With reference to the correspondence ending with Government letter no 6404/36, dated 10th May 1946, I am to inform you that Government has fully considered your case under the second proviso to clause 5 of the Bombay Electricity Supply (Licensed Undertakings War Costs) Order, 1944, and has decided that you should pay the surcharge to the Bhusawal Electricity Co. Ltd., at the rate of 15 % fixed in Government Order No 6331/36 (IV) dated 15th August 1944, unless the Company raised its rate of supply of energy for street lighting to more than 4 annas per unit. Yours faithfully, Sd/ D.N. Daruwala for Secretary to the Government of Bombay. Copy forwarded for information to: Public Works Department, the Electrical Engineer to the Government.”

The record shows that a communication dated 8 March 1946 was issued with reference to document number LRM.57/5260; another communication dated 2 February 1946 was issued by the Accountant General of Bombay with reference to document number O.A. 2888; and a further communication from Messrs Bhusawat Electricity Co. Ltd., Bombay referred to correspondence ending with Government letter number 6404/36‑El dated 17 May 1946, which was copied to the Electrical Engineer of Bhusawal for information on 25 May 1946. From these communications it is evident that both the appellant and respondent No. 1 presented their respective positions before the Government, and that they could have done so only if each claimed to be acting under the second proviso to clause 5 of the Bombay Electricity Supply (Licensed Undertakings War Costs) Order, 1944. After examining the submissions of both parties, the Government, in the aforesaid communication, stated that it had decided that the municipality should pay the surcharge to the Electricity Company at the rate of fifteen per cent fixed in the relevant Government Order, unless the Company increased its rate for the supply of energy for street lighting to more than four annas per unit. There is no basis to regard this statement as a mere opinion, because if any part of the correspondence referred to in that letter or its endorsement demonstrated that the appellant did not intend to refer a dispute to the Government, the appellant bore the burden of producing such material; its failure to do so must be construed against it. Counsel for the appellant, Mr Pathak, argued that the Surcharge Order required both parties to refer the dispute, not just one. That argument is untenable, since the language of the proviso expressly provides that “in the event of dispute by any party interested” the decision of the Provincial Government shall be final. Consequently, the contention lacks merit. In the view of this Court, the trial court and the District Court misinterpreted the document, which is not merely evidentiary but forms the foundation of respondent No. 1’s claim for the surcharge. Such misinterpretation constitutes an error of law, and the High Court, on second appeal, was rightly entitled to correct it. Accordingly, the appeals are dismissed with costs.