Holding

The arbitral award is within the scope of the agreement and cannot be interfered with; the appeal is dismissed.

Summary

The Uttar Pradesh State Electricity Board entered into a contract with Searsole Chemicals Ltd for continuous 24‑hour electricity supply, with a proviso exempting the Board from liability for interruptions caused by accidents, government orders, strikes, etc. A dispute arose and, under the contract’s arbitration clause, an arbitral tribunal awarded the respondent a refund and compensation for loss due to power interruptions. The award was made a decree of the civil court and upheld by the Allahabad High Court. On special leave, the Board appealed to the Supreme Court, contending that the award exceeded the arbitrators’ jurisdiction because the contract’s proviso barred damages for such interruptions. The Supreme Court held that the arbitrators had duly considered the pleadings, evidence and contract terms, and that their view fell within the scope of the agreement; consequently, the court could not re‑appraise the award. The appeal was dismissed and the award affirmed.

Issues considered

Whether the arbitral award granting damages for interruption of electricity supply was beyond the scope of the contract’s liability‑exemption proviso.
Whether the Supreme Court may interfere with an arbitral award under Section 30 of the Arbitration Act, 1940.
Whether the evidence placed before the arbitrators (log books, correspondence) justified the award of compensation.

Legislation cited

Arbitration Act, 1940s. 30

Subjects

ArbitrationArbitral awardSection 30Electricity supply contractLiability for interruptionSupreme CourtContract interpretationAward interference

Judgment

U.P. STATE ELECTRICITY BOARD A
v.
1 SEARSOLE CHEMICALS LTD.

FEBRUARY 21, 2001

[S. RAJENDRA BABU AND S.N. PHUKAN, JJ.] B

Arbitration Act 1940 : Section 30.

Award-Appeal against-Interference with-Supply of electricity-In-

.. ""' terruption ofpower supply-ArbitraJor, on the basis of material placed by the
parties, made an award in favour ofthe industrial consumer and granted refund
c
and also compensation for loss on account of interruption of power supply-
Award made mle of cour1 and decree passed-High Court upheld decree-
Correctness of-Held: When arbitraJor has applied his mind to the pleadings,
the evidence adduced before him and the terms of contract, there is no scope
~
of re-appraisal of the malter-When two views are possible the view taken by D
the arbitrator prevails-Hence, no interference called for.
g The appellant and the respondent entered into an agreement for
supply of electrical energy. Disputes arose between the appellant and the
Q respondent and the matter was referred to arbitration. The arbitrators, on
the basis of material produced by the parties, made an award in favour of E
..... the respondent and granted refund and also compensation for loss on
account of interruption in the power supply. The award was made a rule of
the court and a decree in terms of the award was passed, which was upheld
by the High Court. Hence this appeal.
F
Dismissing the appeal, the Court

HELD : 1. The view taken by the arbitrators cannot be characterised
as not emanating from the agreement. When the arbitrators have applied
their minds to the pleadings, the evidence adduced before them and the
terms of the contract, it is not within the seope of this Court to re-appraise G
the matter as if this were an appeal, and it is clear that where two views are
possible, the view taken by the arbitrators would prevail.[16-C-D]

__.,-· 2. The High Court is justified in having dismissed the appeal r.Ied by
the appellant, and there is no justification for this Court to interfere with
the award, which was made decree of the civil court and in appeal affirmed H
13
14 SUPREME COURT REPORTS [2001] 2 S.C.R.
A by the High Court. [17-G]

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 10014of 1995.

From the Judgment and Order dated 1.3.95 of \he Allahabad High Court
in F.A.F.0. No. 448 of 1993.
B
Ranjit Kumar, Pradeep Misra and T. Mahipal for the Appellant.

P.B. Menon, Rohit Choudhary and Ms. B. Vijay Lakshmi Menon for the
Respondent.

The Judgment of the Court was delivered by
c
RAJENDRA BABU, J. An agreement was entered into between the
appellant and the respondent for supply of electrical energy and by virtue of
clause I of the agreement, the supply of electrical energy shall be "in form
of a three-phase alternating current at a pressure of approximately 400 Volts
D between phases, a frequency of approximately 80 cycles per second and a
power not exceeding 744.12 KVA and the supply shall be available continu-
ously during the 24 hours of each day and throughout the whole period of this
agreement, provided always that the supplier shall not be responsible for
damages or otherwise on account of accidental interruption of supply or
stoppage or deficiency of energy caused by any order or direction issued by
E the Government of Uttar Pradesh or resulting from fire, flood, tempest or any
accident or from any strike or lock out of workman 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". On the ground that disputes arose
between the appellant and the respondent, the matter was referred to the
F arbitration as provided in the agreement. The respondent in the claim state-
ment made various claims for refund of the amounts paid under various bills
and for various losses suffered on account of various acts of commission and
omission of the appellant, details of which are set out therein. By their written
statement the appellant refuted the various claims of the respondent.

G On April 6, 1990 the arbitrators made an award for a sum of Rs.
1,74,338.98 by way of refund, while in regard to losses suffered on account
of interruption in the power supply as a result of the negligence and acts of
omission and commission by the appellant a sum of Rs. 24,00,000 was
awarded with interest at 12% with effect from 12.11.1986 up to the date of the
H award and interest @· 6% per annum from the date of the award till the date
U.P. STATE ELEC1R!Cl!Y BOARD v. SEARSOLE CHEMICALS LID. fR. BABU, !.] 15
of payment. ln the Court of the Civil Judge the award Was filed. Over-ruling A
the objections of the appellant, the Civil Judge made a decree in terms of the
I
award against which an appeal was preferred to the High Court and which

- appeal having been dismissed, this appeal by special leave is filed.

Shri Ranjit Kumar, the learned Senior Advocate appearing for the appel-
lant, submitted that the award made by the arbitrators is not within the scope B
of the agreement entered into between the parties inasmuch as the claim for
damages would arise except in the circumstances arising in the proviso to
clause 1 of the terms of agreement, to which we have adverted to at the very
outset. Damages would not arise on account of interruptions, stoppage and

'
deficiency caused by (i) accident, or (ii) by any order or direction issued by c
the Goverrnnent of Uttar Pradesh, or (iii) resulting from fire, flood, tempest or
any accident or from any strike or lock out of workmen or from any other cause
beyond the control of the supplier. Thus the principal contention addressed
before us is that there is a guarantee of supply of electricity for 24 hours of
a day but under the circumstances set out in the proviso supply could be
interrupted without liability of paying damages and this aspect was not con- D
sidered by the arbitrators. When this point was raised before the High Court,
the High Court noticed the finding of the arbitrators that all log books were not
made available and even where they were made available by the appellant were
not complete and even did not give any reasons and, where they contained
reasons, the san1e were not tenable. While recording findings in respect of E
issues Nos. 1 and 2 after assessing the evidence, the arbitrators came to this
conclusion.

Before us the extracts of the logbooks have been produced and the
reasons noted therein, for instance, are "Trippi:ig, Shut down, Grid failure,
Break down". The respondent wrote to the appellant seeking for clarification F
regarding the interruption in the power supply and there was no response to
.A such correspondence at .all. Taking this circumstance into consideration and
after going through the documents produced by the parties, it was noticed by
the arbitrators as follows :-
G
"The opposite party failed to produce log books for the period
6.12.1978 to 3.12.1980 and also admitted vide their letter dated
4.7.1987 that these log books were not traceable. ln these circum-
stances we are of the opinion that had the opposite party filed the said
log books it would have gone against them. The opposite party has
not filed the best evidence available. Besides, the log books which H
16 SUPREME COURT REPORTS · [2001] 2 S.C.R.

A the opposite party produced, did not give any reasons or where
reasons were given, they were untenable."

Shri Ranjit Kumar very strenuously contended that the wlevant documents
have been placed before the arbitrators and stated that except in regard to one
station for some period, rest of the documents of the log books had been made
B available. However, as noticed by us, there were reasons set out in the log
books or, as noticed earlier, those reasons, in the opinion of the arbitrators,
were either not relevant or where they were relevant, they were untenable.
Therefore, the view taken by the arbitrators cannot be characterised as not .~
emanating from the agreement and falls squarely within the excepted part of

c the proviso to clause I of the agreement. When the arbitrators bave applied
their mind to the pleadings, the evidence adduced before them and the terms
of the contract, we do not think, it is within our scope to re-appraise the matter
as if this were an appeal, and it is clear that where two views are possible
- in this case there is no such scope - the view taken by the arbitrators would
prevail.
D
Shri Ranjit Kumar further pointed out that the interruptions in the
power supply, if any, were on account of the Uttar Pradesh Electricity (Regu-
lation of Supply Distribution, Consumption and Use) Order issued from time

-
to time and, therefore, if there is any power cut effect at any time or staggering
of the power supply, it was the result of such order which falls within the
E scope of the proviso to clause 1 of the agreement. Clause 6 of the Order, which
regulated the supply, reads as follows :-

"6. (i) In respect of electrical energy consumer by all large and heavy
power industrial consumers receiving power at 33 KV and above
from Uttar Pradesh State Electricity Board, a cut of 33-1/3 per cent
F
in their highest maximum demand recorded in any month during the
twelve months from August, 1978 to July, 1979 shall be exercised :

Provided that where any such industrial consumer has bis own
source of generation of energy which alone enables him to obtain 66-
G 2/3 per cent or more of his aforesaid highest maximum demand then
a cut of 100 per cent in the power supplied by the Board shall be
exercised.

(ii) All Arc Furnaces, Induction Furnaces, Rolling and
Re-Rolling mills receiving power below 33 KV from U.P. State
H Electricity Board shall use energy for 10 hours only every day during
U.P. STATE ELEClRICITY BOARD v. SEARSOLE CHEMICALS LID. [R. BABU, J.) 17
such hours as may be specified by the Board from time to time A
anything contained in Clause 8(a) notwithstanding.
?
(iii) All other continuous process industrial power consumers
(listed in Annexure 2) as well as Textile Mills and non-continuous
- industrial power consumers having loads above 110 BHP/IOOKVN
75 KW billed on large and heavy power tariffs receiving power from B
the U.P. .State Electricity Board shall exercise 33-1/3 per cent cut in
their highest maximum demand recorded in any month during the
..., twelve months from August, 1978 to July, 1979:

Provided that any such consumer or Mill may for reasons of
technical difficulty instead of observing the aforesaid cut avail supply
c
for such 20 days in a month as may be dete1mined with the approval
of the Executive Engineer concerned and may observe block closure
during the remaining days of the month so, however, that consump-
tion up to 5 per cent of such highest maximum demand shall be
"', allowed during the block closure to meet the requirements of light, D
fan, tube-well and repair workshops."

The log books should have indicated or other materials should have
been placed before the arbitrators to indicate that the heavy power tariffs
.-
-~
received from the U.P. State Electricity Board should exercise 33-1/3 per cent
cut in the highest maximum demand recorded in any month during the 12 E
.....,.
months from August 1978 to July 1979 and the manner in which the same
should be regulated. Whether that amount of electricity was supplied to the
respondent or not is also not clear from the records. In the absence of such
material placed before the arbitrators, we cannot embark upon an investiga-
lion on the basis of this order of the U.P. Government. F
Therefore, we think, the High Court is justified in having dismissed the
appeal filed by the appellant, and we do not think that there is any justification
for us to interfere with the award which was made the decree of the civil court

- and in appeal affirmed by the High Court.

The appeal, therefore, stands dismissed. However, in the circumstances
of the case, the parties shall bear their respective costs.
G

V.S.S. Appeal dismissed.