Delhi High Court
Hindustan Vidyut Products Ltd. vs Delhi Power Company Ltd. & Anr. on 6 August, 2018
$~
* IN THE HIGH COURT OF DELHI AT NEW DELHI
% Date of decision : August 06, 2018
+ FAO (OS) 337/2007
HINDUSTAN VIDYUT PRODUCTS LTD. ..... Appellant
Through Mr. B. Mohan and Mr. Siddharth
Aggarwal, Advs.
versus
DELHI POWER COMPANY LTD. & ANR. ..... Respondents
Through Mrs. Avnish Ahlawat and
Ms.Palak Rohmetra, Advs. with
Mr.Gaurav Gupta, GM (Legal)
for R-1.
FAO (OS) 338/2007
HINDUSTAN VIDYUT PRODUCTS LTD. ..... Appellant
Through Mr. B. Mohan and Mr. Siddharth
Aggarwal, Advs.
versus
DELHI TRANSCO LTD. & ANR. ..... Respondents
Through Mrs. Avnish Ahlawat and
Ms.Palak Rohmetra, Advs. with
Mr.Gaurav Gupta, GM (Legal)
for R-1.
CORAM:
HON'BLE MR. JUSTICE S. RAVINDRA BHAT
HON'BLE MR. JUSTICE A. K. CHAWLA
JUDGMENT
A.K. CHAWLA, J.
Both the appeals in hand, preferred under Section 37 of the
Arbitration and Conciliation Act, 1996 (hereafter 'the Act'),
extend challenge to the judgment dated 25.07.2007 passed by the
learned Single Judge allowing the two petitions being OMP
No.114/2006 (Delhi Power Company Limited vs. Hindustan
Vidyut Products Ltd. and Anr.) and OMP No.115/2006 (Delhi
Transco Limited vs. Hindustan Vidyut Products Ltd. and Anr.)
under Section 34 of the Act, where-under, an award dated
22.12.2005 passed by the learned Arbitrator in favour of the
appellant and against the respondents; BSES Rajdhani Power
Ltd.; Delhi Power Co. Ltd. (D.P.C.L.); North Delhi Power Ltd.
(N.D.P.L.); and, BSES Yamuna Power Ltd., was set aside.
Objections against the award came to be filed by the respondents
only, claiming to be two independent entities other than as one,
as find mention in the award. Instant appeals are so preferred
against the order passed by the learned Single Judge on the
objections filed by them.
2. Concisely, the facts relevant for the disposal of the appeals
are that the appellant had entered into a contract for supply of
goods with DESU-the predecessor-in-interest of Delhi Vidyut
Board and the three DISCOMS i.e. Rajdhani Power Ltd.,
Yamuna Power Ltd. and North Delhi Power Ltd. in the year
1992. For the goods supplied by the appellant between 8th
October, 1992 and 18th February, 1993, the challans/bills no. 201
dated 08.12.1992; 202 dated 08.10.1992; 270 dated 10.12.1992;
307 dated 17.01.1993; 320 dated 05.02.1993 and 334 dated
18.02.1993 were raised upon DESU. Goods so supplied were
received by DESU without any objection. As per the terms of
payment, the appellant was to receive 100% payment with tax
through bank or direct cash, within three days from the date of
the receipt of the challan. At the time of release of the payment
against such bills, a sum of `10 lakh was withheld on the
premise that the appellant had supplied defective goods against
contract no. TE 1949 and a penalty in that regard was
contemplated. On the appellant making a representation dated
11.05.93, DESU vide its letter dated 24.05.1993 informed the
appellant that the amount of `10 lakh was being withheld and
rest of the amount was being released, on account of an earlier
contract, where-under, allegedly, defective goods were received
by it. Later, on the representations made by the appellant, vide
its letter dated 19/21.06.2001, DVB, since successor-in-interest
of DESU, informed the appellant that a penalty of `24,23,659.80
had been levied upon the appellant and the withheld amount of
`10 lakh stood already adjusted. For the balance payment
towards the penalty, demand was also raised. On this, the
appellant sent notice dated 08.03.2002 demanding payment of
the withheld amount of `10 lakh alongwith interest. It was not
responded and the appellant proceeded to invoke the arbitration
clause sending notice dated 08.03.2002. Arbitral proceedings so
ensued amongst the parties.
3. The pertinent question agitated in the appeals is with
regard to the question of limitation in invoking the arbitration
clause. According to the respondent, the arbitration clause was
invoked much beyond the prescribed time and the claim made
was therefore, time barred.
4. Undisputedly, the goods were delivered to and received by
DESU during the period from 8.10.1992 to 18.2.1993. All such
goods were supplied under one contract no. TE-45. It is also not
in dispute that as per the terms of payment under the subject
contract no.TE-45, 100% payment was payable within three
days from the date of the receipt of challan. There is also no
dispute to the fact that there was neither any defect in the goods
nor in the documents furnished alongwith the bill/challan at the
time of the delivery of the goods under contract no. TE-45.
Whether the respective payments against the different supplies
made under the subject contract no. TE-45 had come to be made
by DESU within three days of the receipt of the bills/challans or
not, equally has not been the question for consideration in the
claim made by the appellant. The claim made by the appellant
was solely founded on the premise that a sum total of `10 lakhs
had come to be withheld by DESU/DVB for the supply of goods
made by it under contract no. TE-45, the last of which supply
was made vide bill/challan dated 18.2.1993. Arbitration came to
be invoked by the appellant vide notice dated 8.3.2002 and it
was so invoked pertaining to subject contract no.TE-45 only.
Appellant asserts to have invoked the arbitration clause within
prescription on the premise that the withholding of the payment
and the release thereof has always been under consideration by
DVB without any denial/repudiation of the liability, till at least
19.6.2001, when DVB communicated adjustment of the said
amount by it against the liability arising out of the contract no.
TE-1949. Thus, according to the appellant, the invocation of the
arbitration clause vide notice dated 8.3.2002 was within time. In
support of such plea, the appellant placed reliance upon the
letters dated 24.5.1993, 24.11.1999 and 19.6.2001 written by
DESU/DVB to the appellant in response to the diverse
representations made by the appellant for the release of the
payment of `10 Lakh under contract no. TE-45.
5. Learned Arbitrator rejected the plea of prescription holding
that in the given facts and circumstances, the case of the
appellant was governed by Article 113 and not Article 14 of the
Limitation Act, 1963. The reasons given to conclude so, are as
follows :
"36. Arguments of the Counsel for claimant is that
limitation in respect of any 'with-held or retained amount'
does not start running till adjustment or appropriation of
the same amount is made finally towards any dues of the
party making adjustment. It is urged that the Claimant
never agreed for adjustment of the amount of Rs.10 lacs.
(It only suggested to retain some amount as an interim
measure so that rest of huge dues of Claimant towards this
and other supplies are released by Respondent Otherwise
it was causing financial jeopardy to the business of the
Claimant). It is urged that the 'retained amount', retained
that character so long as it is not appropriated (even if
illegally) against any penalty imposed in future. Further
arguments of the claimant is that, in the alternative the
letters dated 19th/21st June, 1993 read with letter dated
24.11.1999, are promise to pay the retained amount within
the meaning of Section 25 of Contract Act.
...............................................................................................
.............................................................................................
38. The just interference from reading of these
judgments is that when an amount due and payable to the
Contractor on a supply order is with-held by purchaser
because he claims that certain damages would be due to
him in respect of an earlier supply order, although those
damages have not been adjudicated in appropriate Forum
nor admitted by Contractor and the amount is 'with-held',
as interim measure till the final decision is taken about
levy of damages, then so long as purchaser does not take
such a final decision whether to levy a penalty or not and
if yes, how much, the status of 'with-held amount' due to
the Contractor on a letter supply order in the hands of the
purchaser, would be 'holding it on account of the
Contractor' till final decision on the levy of penalty is
taken in respect of the earlier supply order. 'With-
holding', is not an appropriation towards damages which
might be payable when assessed, by the purchaser about
the earlier supply order. The Purchaser, in such case, at
best, is asserting his lien and no more. There is an implied
promise or undertaking in such 'with-holding' and
'retaining' money of the contractor that it will be returned
to the contractor, if finally no damages or less damages
are payable. It is only when the final decision is taken by
the purchaser, whether to levy penalty or not and if yes
how much, (which in the present case is indicated by the
fact that penalty to the extent of 50% of the purchase price
was levied by the respondent in respect of earlier supply
order no. TE-1949, as informed vide letter dated
19/21.6.2001, (CW-1/7), that cause of action can arise to
the contractor to claim his amount finally arrived at and
limitation would start to run from that date because it is
only by such act of appropriation by the purchaser that the
contractor is told that money will not be paid to him.
Before such an event, he can keep on waiting for the
purchaser to release his money without risk of losing on
limitation. Limitation does not start running against him
before such an act of appropriation. Limitation will be
governed by Article 113 and not by Article 14 of the
Schedule to the Limitation Act. Cause of action arises
when appropriation of payable dues is made, after levy of
penalty.
...............................................................................................
.............................................................................................
40. In the present case there was no term of supply
order TE-45 that the price of goods supplied under this
order can be adjusted or with-held for money claimed by
purchaser as penalty which may be levied in respect of any
earlier supply. When the Respondent (DESU), at that
time, wrote to petitioner on 24.5.1993 that exact quantum
of penalty will be worked out and intimated, the
respondent was not sure about the penalty that would be
worked out and imposed in future or if at all any penalty
would be levied. It was at the best ' retaining' the amount
of the claimant. Even in letter dated 19th/21st June, 2001,
DESU was still writing with respect to that amount against
order TE-1949. It was by this letter that they intimated
about penalty of Rs.24,23,659.80 Ps. and claimant was
asked to deposit it within 7 days. So that is the time when
the recoverable amount was ascertained. It was then, at
best, that Respondent treated the 'with-held amount' of
Rs.10 lacs as appropriated to the penalty levied for earlier
supply order. Respondent invoked arbitration process by
letter dated 8th March, 2002 i.e. within 9 months of this
appropriation. In express terms this appropriation has
been pleaded by Respondent for the first time in the written
reply to the Petitioner's claim petition. Assuming that
appropriation was made on 19th June, 2001, invoking of
arbitration was within 3 years and so within limitation.
...............................................................................................
............................................................................................
43...........................................................................................
...............................................................................................
Even if it is taken that there was no implied from promise
to pay the money at the time when the decision whether to
levy penalty in respect of the supply order No.TE-1949 or
not, was taken by the Respondent, still the limitation in this
case would not be covered by the Article 14 of the
Schedule to the Limitation Act but by residuary Article 113
of that schedule, and limitation would start running when
right to sue accrues. In such a case when the money is
retained till a decision on penalty is taken, the right to sue
will arise when that decision is conveyed. In a case like
the present one, limitation would start running when the
appropriation towards penalty on earlier supply order is
made or is made by a particular letter. (In this case such
letter is exhibit CW-1/7 dated 19/21.6.2001). So the
limitation would start running at best from 21.6.2001
against the claimant. The arbitration in the present case
was invoked vide notice dated 8.3.2002. So the arbitration
proceedings were started within the period of three years
prescribed under Article 113 to the Schedule of the
Limitation Act. So the claim is within limitation.
6. Learned Single Judge of this Court did not find favour with
the conclusions arrived at by the learned Arbitrator and took the
view that the case in hand was not covered under Article 113 of
the Limitation Act. The observations of the learned Single Judge
in this regard are, as follows :
"10. It is settled law that question of limitation is mixed-
question of law and facts. The facts in this case are not in
dispute. It is to be seen whether the limitation in this case
would start running from 1993 or from 2001 as observed
by the learned Arbitrator.
11. It is undisputed that amount of Rs.10 lakh was
withheld by DESU in 1993. Despite protest of the
respondent, the amount was not paid to the respondent.
Rather vide its letter dated 24.5.1993 DESU confirmed
withholding of Rs.10 lakh against defective supplies made
by the respondent in contract no. TE 1949. There is no
letter written by the respondent protesting against
initiation of penalty proceedings in respect of supply order
no. TE 1949 under which the respondent had supplied
defective goods. At no stage, respondent wrote to the
petitioner that no penalty proceedings could be initiated or
the goods supplied were not defective and the amount
could not be withheld. This assumes importance for the
question of limitation. If the claimant had a grievance that
no amount could be withheld out of the bills of 17.1.1993
& 5.2.1993 or if he had any grievance that no penalty
could be imposed in respect of previous contract or no
amount could be recovered regarding previous contract he
was supposed to make a grievance of this and raise a
dispute in 1993 itself. The claimant did not raise a dispute
from May 1993 onward against wrongful withholding of
Rs.10 lakh. I consider that the period of limitation, in a
case where amount is payable against a specific contract
and is not paid, starts from the date when payment of the
amount is refused and no assurance is given that this
amount would be paid at any time in future. In the present
case, no assurance was given by DESU that this amount
would be paid to him. The learned Arbitrator came to the
conclusion that there was no consent of the respondent for
withholding this amount. In view of this finding Learned
Arbitrator's conclusion that limitation will start from
19.6.2001 is contrary to law. In either case whether there
was consent of the respondent to withhold the amount or
there was no consent, the limitation cannot be held to have
started from 19.6.2001. The limitation would start running
from the day amount is wrongfully withheld and not paid.
If the respondent had the stand that this amount could not
be withheld and could not be adjusted against any
contract, this stand need to have been taken immediately
and dispute need to have been raised in May 1993 itself or
within 3 years of it. The limitation would start running
when the amount was "wrongly" withheld. If, withholding
was bad, it was bad in 1993 it did not become bad in 2001.
The limitation would therefore start in 1993 and not in
2001. The judgment cited by the respondent is not
applicable to the facts of this case. In the cited case, the
dispute was between family members and the family
members had been corresponding with each other. It is
only when the dispute crystallized that it could be referred
to the arbitration. In the present case, the dispute is not
between family members and the dispute was purely of
commercial nature and parties were being governed by
commercial interest. The amount was withheld because of
defective supplies of material by the respondent and the
respondent was informed of this. If the claimant had
wanted to challenge the withholding as a wrongful
withholding, he need to have taken action within three
years of May 1993. I find that the decision of the
Arbitrator is contrary to the law and Public Policy that
state claims are required to be rested. The award is liable
to set aside on this ground.
12. The Arbitrator had not held how petitioner became
successor of Delhi Vidyut Board in respect of the claim.
The Arbitrator ought to have fixed the responsibility of
each of the respondent and could not have held that it had
no jurisdiction to decide the issue. The Arbitrator had
jurisdiction to fix the responsibility as to who was liable to
pay the amount. Since the award has been given by the
Learned Arbitrator in respect of time barred claim, it is a
patent illegality and the award is liable to be set aside in
view of the judgment of Supreme Court in Oil & Natural
Gas Corporation v. Saw Pipes Limited (2003) 5 SCC 705
and McDermott International Inc. v. Burn Standard Co.
Ltd. & Ors (2006) 11 SCC 181. The award is hereby set
aside. The petition is allowed."
The conclusions so arrived at by the learned Single Judge
are premised on the applicability of Article 14 or 15. The learned
Single Judge took the view that the withholding of the amount
took place in May, 1993, which according to the appellant was
unlawful and therefore, the action there-against was required to
be taken within three years of such withholding.
7. In the submissions of the learned counsel for the appellant,
no dispute could have been raised by the appellant on an earlier
point of time as there was a "live issue" and the dispute in that
context, for the first time, arose only on 19/21.6.2001, when the
claim was sought to be repudiated. In his submissions, the
conclusions arrived at by the learned Single Judge for the
amount having been wrongly withheld in the year 1993 was
based on surmises and the conjectures inasmuch as the material
on record would show that such an issue was always alive and
that, the amount was withheld by the respondent with the
consent of the appellant. Assailing the impugned judgment, it is
also contended that the learned Arbitrator had interpreted the
letter dated 11.5.1993 as not an admission of liability for `10
lakh towards the alleged defective supplies under some other
contract. In support of its submissions, reliance is placed upon
Hari Shankar Singhania & Ors. vs. Gaur Hari Singhania, 2006
(4) SCALE 74; Shree Ram Mills vs. Utility Premises (P) Ltd.,
2007 (4) SCALE 571; Associate Builders vs. Delhi Development
Authority, 2014 (13) SCALE 226; and, National Highways
Authority of India vs. M/s ITD Cementation India Ltd., 2015 (5)
SCALE 554.
8. In the submissions of the learned counsel for the
respondents, the claim made by the appellant was hopelessly
barred by time and the learned Arbitrator misconducted himself
by holding that the respondents were jointly and severally liable
to pay `20,26,000/- being successors-in-interest of Delhi Vidyut
Board for the purposes of claim as provided under Delhi
Electricity Reforms (Transfer Scheme) Rules, 2001. It is also the
plea of the respondents that the limitation for commencement of
arbitration runs from the date, when the cause for arbitration
arose and that, in the present case, it is to be reckoned from date
of expiry of the period of credit. In support of such plea,
reliance is placed upon 2006 (1) SCC 164, 1993(1) SCC 572,
1996 (2) SCC 216, 2003 (5) SCC 705, 1999 (8) SCC 122, 2006
(11) SCC 181. It was also contended that in the case in hand,
there were three distribution companies who were the successors
of DVB having utilized the cables in the distribution lines.
9. Article 113 is to be construed as an omnibus Article. This
Article can be invoked only if by a reasonable consideration no
other Article for the institution of suits is attracted. Be that as it
may, in our considered opinion, neither Article 113 nor Article
14 or 15 is attracted to the case in hand. These Articles apply to
suits. The case before us is however of making an application to
the Court for appointment of an Arbitrator and it is now well
settled that for making such applications, Article 137 is
attracted. Article 137 reads as follows :
"Any other application for Three years When the
which no period of limitation right to
is provided elsewhere in this apply
division. accrues."
This Article on its plain reading shows that it speaks of a
right accruing to a party to apply for, or, in other words, make an
application. When does such right to apply arise to a party under
a contract prescribing resolution of the disputes amongst them
through arbitration, would necessarily depend upon the facts and
circumstances of each case. It would be a mixed question of fact
and law. In the case in hand, the last supply of the goods under
the subject contract TE-45 was made vide challan/bill dated
18.02.1993 and the payment there-under was to be made by
DESU within three days of the receipt of the challan/bill. Can
then it be said that immediately on the expiry of the period of
credit, a right had accrued to the appellant to apply for
appointment of an Arbitrator? Answer thereto has to be in the
Negative, for the simple reason that the parties had agreed to
resolve the matter amicably through arbitration and as on that
day, no dispute or difference had arisen amongst the parties
which would have prompted the appellant to apply for making
an application to the Court for appointment of an Arbitrator. Can
then it be said that it arose on 24.05.1993, when the respondent
conveyed to the appellant that it was advising its accounts
department to release all its payments except `10 lakhs against
the defective supply against TE-1949 as the exact quantum of
penalty was being worked out to be intimated in due course?
This communication dated 24.05.1993, in our considered view,
by no means suggests that the instructions so issued by it and
communicated to the appellant were determinative of the
contract and/or determinative of full and final satisfaction of all
claims amongst the parties under the subject contract TE-45. On
a plain reading, this letter only suggests that the instructions
contained therein, were of temporary nature and the final
outcome, was to depend upon the outcome of the contemplated
action of imposition of penalty in relation to another contract i.e.
TE-1949. Seen from another perspective, the said
letter/communication does not suggest that the said instructions
were determinative even of the quantum of the amount(s)
against the contemplated action. When the contemplated action
had not yet concluded, at this stage, it could not be said that the
amount to be adjusted would be either `10 lakhs or beyond or it
could be a meagre sum of `50,000/- or `5,000/- or at all. This
leads to irresistible conclusion that the account in that regard
was kept open to be settled at a later stage. At the most, it can
therefore be said that on the appellant's accepting the stance of
DESU to withhold/retain the sum of `10 lakhs under the subject
contract, a consensus was arrived amongst the parties to settle
such accounts at a later stage, when the event of adjustments on
the imposition of the contemplated penalty comes to be imposed
and is sought to be recovered from the dues payable under the
subject contract TE-45. Right to apply for appointment of an
Arbitrator therefore cannot be said to have accrued to the
appellant on the issuance or the receipt of the letter dated
24.05.1993 as well. The acceptance of the terms contained in the
letter dated 24.05.1993 by the appellant is only suggestive of the
fact that there was a consensus amongst the parties to keep any
of their disputes and the differences in abeyance, till the time,
the contemplated action in relation to another contract fructifies.
It is matter of record that the parties from this time onwards
continued to represent each other on the similar lines till the time
the respondent vide its communication dated 19/21.6.2001
conveyed that it had adjusted the entire sum of `10 lakhs
towards its claim against another contract. The material on
record also leaves no doubt that the claim of the appellant was
all along kept alive. In other words, the parties had not
concluded their claims at least till around 19/21.6.2001. In
somewhat similar circumstances adverting to considerations
before the Chief Justice or the Court, when an application under
Section 11(6) for appointment of an Arbitrator is made, Supreme
Court in SBP & Co. v. Patel Engg. Ltd., (2005) 8 SCC 618
observed as under:
"39. It is necessary to define what exactly the Chief
Justice, approached with an application under Section 11
of the Act, is to decide at that stage. Obviously, he has to
decide his own jurisdiction in the sense whether the party
making the motion has approached the right High Court.
He has to decide whether there is an arbitration
agreement, as defined in the Act and whether the person
who has made the request before him, is a party to such an
agreement. It is necessary to indicate that he can also
decide the question whether the claim was a dead one; or
a long-barred claim that was sought to be resurrected and
whether the parties have concluded the transaction by
recording satisfaction of their mutual rights and
obligations or by receiving the final payment without
objection. It may not be possible at that stage, to decide
whether a live claim made, is one which comes within the
purview of the arbitration clause. It will be appropriate to
leave that question to be decided by the Arbitral Tribunal
on taking evidence, along with the merits of the claims
involved in the arbitration. The Chief Justice has to decide
whether the applicant has satisfied the conditions for
appointing an arbitrator under Section 11(6) of the Act.
For the purpose of taking a decision on these aspects, the
Chief Justice can either proceed on the basis of affidavits
and the documents produced or take such evidence or get
such evidence recorded, as may be necessary. We think
that adoption of this procedure in the context of the Act
would best serve the purpose sought to be achieved by the
Act of expediting the process of arbitration, without too
many approaches to the court at various stages of the
proceedings before the Arbitral Tribunal."
The above-said observations were re-iterated in the
subsequent judgment 2007 (4) SCALE 571, Shree Ram Mills Ltd.
vs. Utility Premises (P) Ltd. relied upon by the learned counsel
for the appellant. In Shree Ram Mills' case (supra), the Supreme
Court reiterated the ratio of the judgment delivered by it in Hari
Shankar Singhania & Ors. vs. Gaur Hari Singhania & Ors. 2006
(4) SCALE 74, with the observations, as follows :
"30. Once we have come to the conclusion that the
learned designated Judge was right in holding that there
was a live issue, the question of limitation automatically
gets resolved. This Court in Hari Shanker Singhania
case [(2006) 4 SCC 658] held that till such time as the
settlement talks are going on directly or by way of
correspondence no issue arises and with the result the
clock of limitation does not start ticking. This Court
observed:
"24. Where a settlement with or without conciliation is not
possible, then comes the stage of adjudication by way of
arbitration. Article 137, as construed in this sense, then as
long as parties are in dialogue and even the differences
would have surfaced it cannot be asserted that a limitation
under Article 137 has commenced. Such an interpretation
will compel the parties to resort to litigation/arbitration
even where there is serious hope of the parties themselves
resolving the issues ........................................................"
These observations would clearly suggest that where the
negotiations were still on, there would be no question of
starting of the limitation period."
10. In view of the afore-going, none of the judgments relied
upon by the learned counsel for the respondent are of any avail
to it. The State of Orissa's (supra) case, on a careful reading,
would show that it lays down that the cause of arbitration arises
when disputes or differences arise on the unequivocal denial of
the claim of one party by the other. In the case in hand however,
there was no unequivocal denial of the claim of the appellant by
the respondent till around 19/21.6.2001. HUDA's case (supra)
relates to a case where a claim for compensation had come to be
granted by the NCDRC in a complaint for deficiency of service
much beyond the period of limitation provided under the Act.
No parity with the provisions of Consumer Protection Act can be
drawn with the case in hand. Said case is outrightly
distinguishable on facts. ONGC's and Mcdermott International's
cases (supra) are the cases, which relate to a petition filed under
Section 34 of the Act and have equally no bearing to the case in
hand. SAIL's case (supra) interprets the misconduct attributable
to the Arbitrator, when he exceeds his jurisdiction or goes
beyond his jurisdiction. This case is also not applicable to the
case in hand.
11. Keeping in view the totality of the facts and circumstances
and the position of law enunciated in the judgments referred to
in para 9, we are of the considered view that the conclusions
arrived at by the learned Arbitrator that the claim of the
appellant was not hit by the limitation of time, cannot be said to
be either unfair or opposed to public policy. It was certainly
logical as well, in the given factual conspectus.
12. Besides the question of limitation, another question
attracting consideration is with respect to the liabilities of the
respondents under the award. The respondents-Delhi Transco
Ltd. and Delhi Power Company Ltd. are two separate
companies. These two companies came into existence in
pursuance of Delhi Electricity Reforms Act, 2000 in short
"DERA" and the Delhi Electricity Reforms Transfer Schemes
Rules, 2001 in short "the Rules". DERA had come to be enacted
for the constitution of an Electricity Commission, restructuring
of the electricity industry by rationalization of generation,
transmission, distribution and supply of electricity, increasing
avenues for participation for private sector in the electricity
industry and for taking measures conducive to development and
management of the electricity industry in an efficient,
commercial, economic and competitive manner in the National
Capital Territory of Delhi. To achieve this end, the Act and the
Scheme adopted a three step procedure whereby the Government
of NCT, after enforcement of DERA, in exercise of its
obligation and power under Section 14, incorporated separate
companies, segregating the different functions of electricity
generation, transmission and distribution. By operation of
Section 15, the Government was empowered to transfer rights
and liabilities immediately before the effective date of itself.
DERA came into force w.e.f. 03.11.2000 and in pursuance of the
objects thereof, the Govt. of NCT notified binding policy
directions, enabling restructuring of DVB and in relation to the
liabilities of the DISCOMS, provided for as under :
"8. Pending suits, proceedings--(1) All proceedings of
whatever nature by or against the Board pending on the
date of the transfer shall not abate or discontinue or
otherwise in any way prejudicially be affected and the
proceedings may be continued, prosecuted and enforced,
by or against the transferee to whom the same are
assigned in accordance with these rules.
...............................................................................................
...............................................................................................
(3) Notwithstanding anything contained in these rules
including the schedules, the liabilities arising out of
litigation, suits, claims, etc. pending on the date of the
transfer and/or arising due to events prior to the date of
the transfer shall be borne by the relevant distribution
company viz. DISCOM 1, DISCOM 2 and DISCOM 3
respectively, subject to a maximum of Rs. 1 crore per
annum. Any amount above this shall be to the account of
the Holding Company in the event for any reason the
Commission does not allow the amount to be included in
the revenue Requirement of the DISCOM."
It would thus be seen that the afore-going Rules, which
have the statutory force, fix the liabilities upon the DISCOMS
inter alia in relation to the subject matter of the award. Here, it
would suffice to say, while Delhi Transco Ltd. was incorporated
for procurement, transmission and supply of electricity to the
subsidiary companies i.e. the DISCOMS, Delhi Power Company
Ltd. was incorporated as a holding company of the shares in the
distributing companies i.e. the DISCOMS and Indraprastha
Power Generation Co. Ltd. Liability to make any payment in
relation to the subject award therefore, is not attracted as against
the instant respondents i.e. Delhi Transco Ltd. and Delhi Power
Ltd. Impugned award to that extent is therefore, not sustainable.
13. Since none of the DISCOMS have chosen to extend
challenge to the impugned award, it is not necessary to get into
their individual liabilities under such award.
14. In view of the foregoing, the impugned judgment of the
learned Single Judge dated 25.07.2007 is set aside and the award
dated 22.12.2005 is set aside as against the instant respondents
i.e. Delhi Transco Ltd. and Delhi Power Supply Co. Ltd. and is
consequently modified to that effect. Appeals stand disposed of
accordingly. No order as to costs.
A. K. CHAWLA, J
S. RAVINDRA BHAT, J
AUGUST 06, 2018
rc
