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CASE NO.:

Appeal (civil) 7965 of 2001

PETITIONER:

U.P.S.E.B. & Anr.

RESPONDENT:

Sant Kabir Sahakari Katai Mills Ltd.

DATE OF JUDGMENT: 19/09/2005

BENCH:

ARIJIT PASAYAT & H.K. SEMA

JUDGMENT:

J U D G M E N T

WITH

CIVIL APPEAL NOS. 7966 to 7973 of 2001 and

7990 to 7991 of 2001

ARIJIT PASAYAT, J.

These appeals are directed against the judgments

rendered by a Division Bench of the Allahabad High Court.

The main judgment was rendered in Civil Misc. Writ Petition

no. 5859 of 1999 which is the subject-matter of challenge in

Civil Appeal No. 7965 of 2001. Following the judgment

rendered in the said case other writ petitions were disposed

of. In each of the writ petitions filed before the High

Court correctness of the electricity bills raised by the

appellant no.1-Uttar Pradesh State Electricity Board

(hereinafter referred to as the 'Board') was questioned.

The High Court by the impugned judgment held that the Board

was as authority under Article 12 of the Constitution of

India, 1950 (in short 'the Constitution') and similar was

the position so far as the writ petitioners are concerned

who according to the High Court were Public Sector

Undertakings. The High Court held that in cases where the

dispute involves the State Government and a Public Sector

Undertaking, Committee in the line indicated by this Court

in Oil and Natural Gas Commission and Another v. Collector

of Central Excise [1992 Supp(2) SCC 432] (for convenience

referred to as ONGC-I) should be set up. Accordingly it was

observed that the writ petitioners would move the State

through the Chief Secretary to constitute a Committee to

resolve the dispute. Further direction was given to the

effect that the power supply to the writ petitioners was not

to be discontinued.

According to the appellant-Board factual position is as

follows:-

State Government issued a notification under Section

22-B of the Indian Electricity Act, 1910 (in short

'Electricity Act') titled as Uttar Pradesh Electricity

(Regulation of Distribution, Consumption) Order 1972 (in

short the '1972 Order') which imposed certain restrictions

on various categories of consumers for using electricity

during certain periods. The 1972 Order was repealed and in

the year 1977 another Notification under Section 22-B, known

as Uttar Pradesh Electricity (Regulation of Supply,

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Distribution, Consumption and Use) Order 1977 (in short

'1977 Order') was issued. In this order consumers were

divided into several categories and so far as the Industrial

Consumers are concerned two categories were indicated. They

are "Continuous Process Industries Power Consumers" and

"Non-continuous Process Industries Power Consumers". List

of consumers belonging to the aforesaid category was annexed

as Annexure 2 of the said Order. It was provided in the

1977 Order that Non-continuous Process Industries Power

Consumers would not use electricity from 18.00 to 22.00

hours every day. It meant that the distinction between the

Continuous Process Industries Power Consumers and the Non-

Continuous Process Industries Power Consumers was that peak

hours restrictions, not to use electricity were not

applicable in case of Continuous Process Industries Power

Consumers. The spinning mills and textiles Mills were

exempted from observing power cutting during peak hours as

per clause 8 of the Order and thus these industries also

were covered by category "Continuous Process Industries".

The Writ Petitioners were co-operative societies

registered under Uttar Pradesh Co-operative Societies Act,

1965. Undisputedly they had entered into agreements with the

Board and one of the clauses in the agreement provided that

supply shall be available to the consumers continuously

during 24 hours of each day and throughout whole period of

agreement. This Clause was however, subject to the following

restrictions:

"Supplier shall not be responsible for the

damages or otherwise on account of accidental

interruption of supply or stoppage or

deficiency of energy caused by any order or

direction issued by the Government of U.P. or

resulting from fire, flood, temptest or any

accident or from any strike or lock out of

workers or from any other cause beyond the

control of the supplier but the supplier shall

make every effort to restore the supply as

soon as possible."

Clause 20 of the Agreement provided that in case of any

dispute between the consumer and the Board the matter was to

be decided by a person nominated by the Chairman of the

Board and the dispute can only be referred when the consumer

pays outstanding dues. The said clause reads as follows:

"If any question or dispute or difference

arises between the parties to this agreement

as to the interpretation or effect of any

provisions or clause herein contained or the

construction thereof or as to any other matter

thereof or the rights, duties or liabilities

of either party in connection therewith, such

question, dispute or difference shall be

referred to the arbitration of the Chairman,

U.P. State Electricity Board or the person

nominated by him and the award/decision of the

said arbitrator shall be final and binding

upon the parties.

Provided that if the question, dispute or

difference relates to or concerns any dues

chargeable to the Consumer in terms of this

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agreement, no reference to arbitration shall

at the instance of such consumer be made till

the consumer has either deposited with the

supplier the amount of dues in dispute or

difference or given a Bank Guarantee of such

amount in favour of the Supplier valid upto

the period of one year from the date in which

the award becomes final or the amount or dues

is cleared, whichever is earlier."

In the year 1984 in exercise of powers conferred under

Section 49 read with Section 79 of the Electricity Supply

Act, 1948 (in short the 'Supply Act') the Uttar Pradesh

Electricity Supply (Consumers Regulation) 1984 (in short the

'Regulations') was framed. The regulations have statutory

force and Regulation 14 has considerable significance so far

as the present cases are concerned. It reads as follows:

"Regulation 14 : Failure of supply

The supplier shall not be liable for

any claim for any loss, damage or

compensation, whatsoever arising out of any

accidental failure of supply or stoppage or

curtailment of diminution or variation in

supply or for failure restoring as a result

of any direct or indirect strike or order of

the Government or other competent Authority

in regard to distribution of power or due to

war, mutiny, commotion, Riot, strike,

lockout, fire flood, lighting earthquake or

other causes beyond the control of the

supplier."

In 1986 a Notification dated 28.1.1986 was issued

categorizing the industrial consumers into two categories

i.e. Continuous Process Industries and Non-Continuous

Process Industries. Challenging the different rates fixed

by the Board, writ petitions were filed which were dismissed

by the High Court upholding the validity. It was held that

it was a valid classification. Board felt that the language

of the Notification dated 28.1.1986 was not very clear and

therefore a corrigendum was issued clarifying the position

that Continuous Process Industries which are not observing

peak hours restrictions have to pay higher charges. Writ

Petitions were filed challenging the levy of higher charges.

The High Court allowed the levy from the date the

corrigendum was issued. The Board has filed appeals

questioning the High Court's view. During pendency of the

appeals, writ petitions were filed alleging that

uninterrupted power supply was not given though higher rates

were being charged. Therefore, it was claimed that amounts

paid, which were in excess of the amounts payable, should be

adjusted against the future bills along with interest. The

High Court by its impugned order held that the writ

petitioners and the Board were 'State' within Article 12 of

the Constitution, and directed a resolution of the dispute

by a person to be nominated by the Chief Secretary of State

of U.P. It held that writ petitioners were "Public Sector

Undertakings".

According to the learned counsel for the appellant \026

Board and its functionaries, the approach of the High Court

is clearly erroneous. Huge amounts have not been paid by

the respondents-writ petitioners. What was challenged before

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the High Court was the levy of higher charges on the

allegation that uninterrupted power supply was not given.

The decision in ONGC-I case (supra) has no application to

the facts of the present case. In any event, the High Court

should not have passed a blanket order of stay.

Learned counsel for the respondents on the other hand

submitted that the respondents are entitled to receive some

amount from the appellants. According to him, the payment

raised is absolutely unreasonable and without any basis. It

was also submitted that disputes between public sector

undertakings and the State should be resolved in the line

suggested by this Court in ONGC-I case (supra). There is

nothing wrong in the High Court's order granting interim

protection.

In ONGC-I case (supra) it was felt desirable that to

avoid unnecessary litigation, disputes between the

Governments and the Public Sector Undertakings should be

sorted out by a Committee to be constituted. It was pointed

out that most of the disputes between the Public Sector

undertakings and the Government get resolved by meeting of

minds.

It is certainly desirable that inter-departmental

disputes and disputes between Governments and Public Sector

Undertakings should be sorted out in the manner suggested by

this Court in ONGC-I case (supra).

The stand of the learned counsel for the Board is that

the operation of the High Court's order was stayed and,

therefore, the Committee as directed by this Court has not

been set up. The quantum of arrears in different cases has

been set out in the affidavit filed by the appellant-Board.

They are as follows:

1. CIVIL APPEAL NO. 7965 Rs. 1,65,49,000/-

2. CIVIL APPEAL NO. 7968 Rs. 6,26,73,485/-

3. CIVIL APPEAL NO. 7970 Rs. 16,62,497/-

4. CIVIL APPEAL NO. 7971 Rs. 1,04,11,681.02/-

5. CIVIL APPEAL NO. 7972 Rs. 1,88,85,823/-

6. CIVIL APPEAL NO. 7990 Rs. 4,98,42,000/-

High Court equated the Board with the State Government

and held that the writ petitioners who were co-operative

societies were public sector undertakings.

The High Court's view is clearly untenable. Board

cannot be equated with State Government. Section 80 of the

Code of Civil Procedure, 1908 (in short 'CPC') is a pointer

in that regard. Co-operative Societies and Pubic Sector

Undertakings are conceptually different. The Board is a

Public Sector Undertaking and not a State Government

department. It may be "State" for the purpose of Article

12 of the Constitution. There the similarity ends. Co-

operative Societies (writ petitioners) cannot be, without

examination of relevant factual aspects, equated with Public

Sector Undertaking. The High Court has come to abrupt

conclusion that they are Public Sector Undertakings without

indicating any reason for such conclusion. The High Court,

therefore, was wrong in applying ratio of ONGC-I case

(supra) to the facts of the present cases.

The view in ONGC-I case (supra) was further elaborated

in Oil and Natural Gas Commission v. C.C.E. 1995 (Supp.) 4

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SCC 541) (For sake of convenience described as ONGC-II). It

was noted in Oil and Natural Gas Commission v. C.C.E.

(2004(6) SCC 437) (for convenience described as ONGC-III)

that some doubts and problems arose in the working out of

the arrangements in terms of the order of this Court dated

11.10.1991 (ONGC-II case (supra). It was noted in ONGC-III

case (supra) as follows:

"There are some doubts and problems that

have arisen in the working out of these

arrangements which require to be clarified

and some creases ironed out. Some doubts

persist as to the precise import and

implications of the words "and recourse to

litigation should be avoided". It is clear

that the order of this Court is not to the

effect that \026 nor can that be done \026 so far

as the Union of India and its statutory

corporations are concerned, their statutory

remedies are effaced. Indeed, the purpose of

the constitution of the High-powered

Committee was not to take away those

remedies. The relevant portion of the order

reads: (SCC pp. 541-42 para 3)

"3. We direct that the Government

of India shall set up a committee

consisting of representatives from the

Ministry of Industry, the Bureau of

Public Enterprises and the Ministry of

Law, to monitor disputes between

Ministry and Ministry of the Government

of India, Ministry and public sector

undertakings of the Government of India

and public sector undertakings in

between themselves to ensure that no

litigation comes to court or to a

tribunal without the matter having been

first examined by the Committee and its

clearance for litigation. The

Government may include a representative

of the Ministry concerned in a specific

case and one from the Ministry of

Finance in the Committee. Senior

officers only should be nominated so

that the Committee would function with

status, control and discipline."

It is abundantly clear that the machinery

contemplated is only to ensure that no litigation

comes to court without the parties having had an

opportunity of conciliation before an in-house

committee."

The matter was again examined in the case of Chief

Conservator of Forest v. Collector (2003(3) SCC 472). In

Paras 14 and 15 it was noted as follows:

"Under the scheme of the Constitution,

Article 131 confers original jurisdiction on

the Supreme Court in regard to a dispute

between two States of the Union of India or

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between one or more States and the Union of

India. It was not contemplated by the framers

of the Constitution or the C.P.C. that two

departments of a State or the Union of India

will fight a litigation in a court of law. It

is neither appropriate nor permissible for

two departments of a State or the Union of

India to fight litigation in a court of law.

Indeed, such a course cannot but be

detrimental to the public interest as it also

entails avoidable wastage of public money and

time. Various departments of the Government

are its limbs and, therefore, they must act

in co-ordination and not in confrontation.

Filing of a writ petition by one department

against the other by invoking the

extraordinary jurisdiction of the High Court

is not only against the propriety and polity

as it smacks of indiscipline but is also

contrary to the basic concept of law which

requires that for suing or being sued, there

must be either a natural or a juristic

person. The States/Union of India must evolve

a mechanism to set at rest all inter-

departmental controversies at the level of

the Government and such matters should not be

carried to a court of law for resolution of

the controversy. In the case of disputes

between public sector undertakings and Union

of India, this Court in Oil and Natural Gas

Commission v. Collector of Central Excise

(1992 Suppl. (2) SCC 432) called upon the

Cabinet Secretary to handle such matters. In

Oil and Natural Gas Commission & Anr. v.

Collector of Central Excise (1995 Suppl. (4)

SCC 541), this Court directed the Central

Government to set up a Committee consisting

of representatives from the Ministry of

Industry, the Bureau of Public Enterprises

and the Ministry of Law, to monitor dispute

between Ministry and Ministry of the

Government of India, Ministry and public

sector undertakings of the Government of

India and public sector undertakings in

between themselves, to ensure that no

litigation comes to court or to a Tribunal

without the matter having been first examined

by the Committee and its clearance for

litigation. The Government may include a

representative of the Ministry concerned in a

specific case and one from the Ministry of

Finance in the Committee. Senior officers

only should be nominated so that the

Committee would function with status, control

and discipline.

The facts of this appeal, noticed above,

make out a strong case that there is a felt

need of setting up of similar committees by

the State Government also to resolve the

controversy arising between various

departments of the State or the State and any

of its undertakings. It would be appropriate

for the State Governments to set up a

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Committee consisting of the Chief Secretary

of the State, the Secretaries of the

concerned departments, the Secretary of Law

and where financial commitments are involved,

the Secretary of Finance. The decision taken

by such a committee shall be binding on all

the departments concerned and shall be the

stand of the Government. "

The directions as noted above were quoted in Mahanagar

Telephone Nigam Ltd. v. Chairman, Central Board, Direct

Taxes and another (2004(6) SCC 431) and were adopted in

paragraph 8. It was noted as follows :

"Undoubtedly, the right to enforce a

right in a court of law cannot be effaced.

However, it must be remembered that courts

are overburdened with a large number of

cases. The majority of such cases pertain to

Government Departments and/or public sector

undertakings. As is stated in Chief

Conservator of Forests' case [2003] 3 SCC 472

it was not contemplated by the framers of the

Constitution or the Civil Procedure Code that

two departments of a State or Union of India

and/or a department of the Government and a

public sector undertaking fight a litigation

in a court of law. Such a course is

detrimental to public interest as it entails

avoidable wastage of public money and time.

These are all limbs of the Government and

must act in co-ordination and not

confrontation. The mechanism set up by this

court is not, as suggested by Mr.

Andhyarujina, only to conciliate between

Government Departments. It is also set up for

purposes of ensuring that frivolous disputes

do not come before courts without clearance

from the High Powered Committee. If it can,

the High Powered Committee will resolve the

dispute. If the dispute is not resolved the

Committee would undoubtedly give clearance.

However, there could also be frivolous

litigation proposed by a department of the

Government or a public sector undertaking.

This could be prevented by the High Powered

Committee. In such cases there is no question

of resolving the dispute. The Committee only

has to refuse permission to litigate. No

right of the Department/public sector

undertaking is affected in such a case. The

litigation being of a frivolous nature must

not be brought to court. To be remembered

that in almost all cases one or the other

party will not be happy with the decision of

the High Powered Committee. The dissatisfied

party will always claim that its rights are

affected, when in fact, no right is affected.

The Committee is constituted of highly placed

officers of the Government, who do not have

an interest in the dispute, it is thus

expected that their decision will be fair and

honest. Even if the Department/public sector

undertaking finds the decision unpalatable,

discipline requires that they abide by it.

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Otherwise the whole purpose of this exercise

will be lost and every party against whom the

decision is given will claim that they have

been wronged and that their rights are

affected. This should not be allowed to be

done."

The ONGC I to III cases (supra), Chief Conservator's

case (supra) and Mahanagar Telephone's case (supra) deal

with disputes relating to Central Government, State

Government and Public Sector Undertakings. They have no

application to the facts of these cases as the High Court

has not indicated any reason for its abrupt conclusion that

the writ petitioners are Public Sector Undertakings. In the

absence of a factual determination in that regard, the

decisions can have no application.

Accordingly, we set aside the impugned judgments of the

High Court and remit the matter for fresh consideration of

the cases. As the matter is pending consideration for a long

time, it would be appropriate if the writ petitions are

disposed of early. It is made clear that if parties place

material to show that writ petitioners are Public Sector

Undertakings then the High Court can direct action in line

with Chief Conservator of Forest's case (supra) and not

otherwise.

The appeals are accordingly disposed of. No costs.