Holding

A dispute concerning the escalated project cost of a generating station is within the scope of Section 44(2) and thus arbitrable under Section 44(3); the arbitral award is not without jurisdiction.

Summary

The West Bengal State Electricity Board (the Board) had initially consented to the establishment of a new thermal generating station at Budge Budge, but the project cost later escalated. The licensee, Calcutta Electric Supply Corporation Ltd., sought further Board consent for the revised cost, which the Board approved at Rs.1853 crores under Section 44(2) of the Electricity (Supply) Act, 1948. Disagreeing over the reasonableness of this figure, the licensee referred the dispute to the Central Electricity Authority for arbitration under Section 44(3). The Board challenged the arbitrator’s jurisdiction, arguing that project‑cost disputes were outside Section 44. The Supreme Court held that a dispute over escalated project cost is a matter within Section 44(2) and therefore arbitrable under Section 44(3), rendering the award jurisdictionally valid. Consequently, the appeal was dismissed, upholding the Division Bench’s decision.

Issues considered

Whether a dispute relating to the escalated project cost of a thermal generating station falls within the ambit of Section 44(3) of the Electricity (Supply) Act, 1948 and is arbitrable
Whether the Board's approval of the revised project cost was exercised under Section 44(2) of the Act
Whether the arbitral award is void for lack of jurisdiction

Legislation cited

Arbitration & Conciliation Act, 1996s. 13(2), s. 16(2), s. 16(3)
Electricity Regulatory Commissions Act, 1998
Electricity (Supply) Act, 1948s. 44(1), s. 44(2), s. 44(3)

Subjects

Electricity lawArbitrationProject cost escalationSection 44Generating stationDispute resolutionArbitrabilitySupreme Court of India

Judgment

WEST BENGAL STATE ELECTRICITY BOARD A
v.
CALCUTTA ELECTRIC SUPPLY CORPN. LTD.

DECEMBER4, 2001

[G.B. PATTANAIK AND RUMA PAL, JJ.] B

Electricity Laws :

Electricity (Supply) Act, 1948-Section 44(2) and (3)-Dispute regard-
ing escalated project cost of new thermal generating system-Maintainability
~f-When Board approves the reasonable revised project cost at a particular
c
.figure in exercise o,f its prnver under Section 44, such a dispute arises within the
ambit of Sec/ion 44(3) and is arbiirable under Sec/ion 44(3).

Respondent-licensee sought consent from appellant Board for estab·
lishment of new thermal generating station. The appellant accorded sanc- D
tion. However, the project cost got escalated. The respondent applied for
further consent for revised project cost. The appellants did not approve
the entire revised cost. Then the respondent requested the Central Elec-
tricity Authority to refer the dispute to arbitration under Section 44(3) of
the Electricity Supply Act which was allowed. Appellants challenged the
appointment of the Arbitration Tribunal. However, Arbitrator passed an E
award dismissing the applications. Thereafter the Arbitrator determined
the revised project cost and then passed an award. Aggrieved, appellants
filed objections before the Single Judge against the award. The Single
Judge held that the subject matter of the arbitration was beyond the scope
of the statutory provisions under Section 44(3) and thus the award was F
without jurisdiction and was liable to be set aside. Division Bench set aside
the findings of the Single Judge. Hence the present appeal.

On appeal, appellants contended that as approval of the project cost
of a generating station would not come within the ambit of Section 44 of
the Act, the dispute on project costs is not arbitrable under Section 44(3) of
G
the Act.

The respondents contende,1 that the appellant having approved the
project cost and exercised power under Section 44 was not entitled to raise
the question that the cost of the project would not come within the purview H
447
448 SUPREME COURT REPORTS (2001] SUPP. 5 S.C.R.
A of Section 44 of the Act.
·~
Dismissing the appeal, the Court

HELD : 1. A dispnte relating to escalated project cost of the thermal
generating station would come within the pnrv.iew of Section 44(2) of the
B Electricity (Supply) Act, 1948 and as such is arbitrable under Section 44(3)
thereof and the award cannot be held to be withoutjnrisdiction.(454-B; CJ /!!
~

2. It is necessary for every applicant while invoking power of the
Board under Section 44(1) to obtain the previous consent in writing for I•
establishment of a generating station to indicate the cost of the project.
c Where consent is received on the basis of the project cost indicated in the ,,
)

application, while acting in pursuance of such consent, if the project cost
varies, then it would be a material variation of an important particular
and consequently, a further consent of the Board would be necessary
nuder Section 44(2). [356-F-H]
D
3. In the instant case the original consent of the Board had been
obtained and while acting in pursuance of such consent, it was found that
the project cost has got escalated and application for further consent was
made to the Board and the Board also did accord its further consent at a
particular figure which was communicated to the applicant licensee. While
E the af1plicant·licensee had indicated the revised project cost at a mnch
higher figure, the Board approved the revised cost at a particular figure
and this further consent on the basis of revised cost can only be under
Section 44(2) and in fact the Board also communicated the same in the
purported exercise of power under Section 44(2). The further consent in
F respect of the revised project cost having been given nuder Section 44(2), a
dispute did arise within the ambit of Section 44(3) and, therefore, the
authority con~>erned contemplated under Section 44(3) get• jurisdiction to
arbitrate upon the rlispnte between the parties. [356-H; 357-A·C]

4. On facts of the case the Board not only understood that the project
G cost is required to be approved under Section 44, hut did take a decision
approving the reasonable revised project cost at a particular figure in
..
exercise of its power under Section 44. The Board having exercised power
nnder Section 44 and having approved the revised cost at a particular
figure, cannot take a stand when the dispute regarding the project cost was
H referred to the authority for arbitration that the project cost does not
-
WEST BENGN. STATE EIJ:CTRICrIY BOARD v. CAl.ClfITA r:LECTil.IC SVPPLY CORPN. l.lU. !PATIANAIK. I.I 449
come within the purview of Section 44. Further the conduct of the Board A
itself disentitled it to take a stand that the revised project cost would not
come within the ambit of Section 44 of the Act. Thus there is no merit in
the contention of the appellants challenging the jurisdiction of the arbitra·
tor to entertain the dispute regarding the reasonableness of the revised
project cost. [458-C-E]
B
5. With regard to the ambit of the revised project cost on the tariff, it
was not necessary for the High Court to make any observation as to what
would be the effect of the reasonable project cost on the tariff structure
and any observations made in respect of the same are set aside.
[458-G-H; 459-A] C
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 8261of2001.

From the Judgment and Order dated 15.6.2001 of the Calcutta High
Court in A.P.O.T. No. 251 of 2001.

V.R. Reddy, Bhaskar Mitra, H.K. Puri, S.K. Puri, Ms. Anindita Gupta D
and Ujjawal Banerjee for the Appellant.

Shanti Bhushan, Dipanker P. Gupta, Jayant Das, Dr. A.M. Singhvi, Sr.
Advs. Sanjay Kumar Pathak, Semran Mehta, Ms. Gouri Rasgotra and Suman
Jyoti Khaitan for the Respondent.
E
The Judgment of the Court was delivered by

PATTANAIK, J. Leave Granted.

The West Bengal State Electricity Board is in appeal against the Judg-
ment of the Division Bench of Calcutta High Court. The respondent is the F
licensee. The licensee, on 27th of December, 1989 submitted an application to
the Board for getting its consent for establishment of new Thermal Generating
Station at Budge Budge and a Project Report was enclosed with the said
application. Under Section 44 of the Electricity (Supply) Act, 1948, [herein-
after referred to as 'the Supply Act'], no licensee can establish a new generating
station without the previous consent in writing of the Board. Under Sub-section G
2A of Section 44, the Board before giving consent to a licensee for establishing
a new generating station, shall consu!r the Authority. The expression "Author-
ity" has been defined in Section 2(1) of the Supply Act to mean the Central
Electricity Authority constituted under Section 3 of the Act. On 23.2.1990, the
Board accorded sanction under Section 44 of the Supply Act for setting up a H
450 SUPREME COURT REPORTS [2001] SUPP. 5 S.C.R.
A new generating station i~ Budge Budge with an installed capacity of 2 x 250
M,W. Units, operating on pulverised fuel fired boilers. The Board forwarded
the Project Report to the CEA, requesting the authority to consider the proposal
in the light of likely gap in system demand that would exist in the year 1995,
after taking into account the plans of the Board to set up the Sagardighi
Thermal Project, which was at that point of time awaiting techno-economic
B
clearance from CEA. The CEA. replied to the Board that issues may be
resolved through Government of West Bengal and intimated that the techno-
economic examination of the proposal was being withheld by CEA till the final
views on the matter is conveyed by the Board. The Board in its letter dated 23rd
of April, 1990, informed the CEA that the issues raised had been resolved and
c the consent already given may be treated as final and, therefore, CEA may take
up the techno-economic examination. On 29th of January, 1991, CEA commu-
nicated its 'in principle' clearance to the Budge Budge Project, subject to
certain conditions mentioned therein. It also informed that any clearance re-
quired uuder Section 44 of the Supply Act would be made after the Department
of Power, Ministry of Energy, Govt. of India, clears the project. Finally on 11th
D
of November, 1991, CEA intimated its clearance of the Budge Budge Project
under Section 44 of the Act at a total cost of Rs. 1285.70 crores, subject to the
conditions mentioned in the letter. The licensee informed the CEA by its letter
dated 23rd April, 1992, indicating that there has been an enhancement of
Project cost which stands revised to Rs. 2220 crores and requested the CEA
E to convey its approval, after examining the estimates and other required par-
ticulars. On 24th of April, 1992, a revised breakup of the Project cost was
furnished to the CEA. The Government of India, Ministry of Power by its letter
dated 21st October, 1992 intimated its approval of the revised financial plan
for the project at Rs. 1638 crores, with certain conditions mentioned in the said
F letter. The CEA then wrote a letter to the Government of West Bengal on 26th
of September, 1996 regarding escalation of the Budge Budge Project cost to
Rs. 2220 crores and it was stated therein that the CEA has not received any
revised cost estimates from the Board though the same was required under
Section 44 of the Supply Act. The Board then called upon the licensee by its
letter dated 4th of December, 1996 to furnish !he detailed break-up of the cost
G estimates as well as the revised cost of the Project which was then at Rs. 2220
crores. The Government of West Bengal, through its Power Department also
made correspondence with the licensee, seeking information as to whether the
licensee has submitted the detailed proposal for revision of the Project cost, as
required under Section 44 of the Supply Act and also further requested that the
H copies of the Project cost be furnished to the Government. On 17th of January,
WEST BENGAL STATE F.LECTRICITY BOARDv. CALCUTTA ELF.CTRIC SUPPLY COll.PN. LTD. [PATTANAIK,J.] 451
1997, the licensee wrote to the petitioner Board, giving groupwise break-up of A
the escalated project cost as in July, 1996, amounting to Rs. 2220 crores and
also intimated that the cost is being revised by the Financial Institution I.C.I.C.l.
The licensee then informed the Board by letter dated 24 of February, 1997 that
the revised cost which has been approved by the financial institution in January,
1997 work out at Rs. 2308 crores. On 30th of July, 1997, the Board sought for
B
clarification, details and reasonings from the licensee, regarding the revised
cost and those clarifications were duly communicated by the licensee to the
Board. Unit I of the Project was commissioned on 15th of September, 1997 and
on 20th of February, 1998, the licensee requested the Board to give its consent
to the revised project cost at Rs. 2460 crores, as in the interregnum, the project
cost had further got escalated. The Board then constituted a Committee for c
determining the quantum as to what would be the reasonable cost of the Budge
Budge Project and the said Committee arrived at a figure at Rs.1853 crores.
On 22nd of May, 1998, West Bengal State Electricity Board approved the
revised cost by Resolution at Rs. 1853 crores and the same was intimated to
the licensee. Along with the Resolution, the Committee's Report also had been
D
appended. On 4th of June, 1998, the Government of West Bengal, Department
of Power, directed the Board to communicate the decision of the Board,
approving the revised project cost under Section 44 of the Supply Act to the
licensee. Finally on 11th of June, 1998, the Board intimated the licensee with
regard to its approval of the revised project cost of Budge Budge Project at Rs.
1853 crores under Section 44 of the Supply Act and along with it forwarded E
the copy of the Report of the Committee and the Minutes of the Board's
Resolution. Since entire project cost furnished by the licensee had not been
approved by the Board, as stated earlier, the licensee wrote a letter to the CEA,
requesting him to refer the dispute to the Arbitration under Section 44(3) of
the Supply Act. Before the CEA, the licensee also filed his Statement of claims F
on 16th of December, 1998. The Board, on the other hand, filed an application
under Section 16(2) and 16(3) of the Arbitration & Conciliation Act, 1996
against the appointment of CEA as arbitrator, contending inter alia that the
approval of the revised project cost was not contemplated under Section 44 of
the Supply Act and, therefore, CEA had no authority to arbitrate on the dispute,
if any. Board then filed an application under Section 13(2) of the Arbitration
G
& Conciliation Act, 1996, challenging the appointment of the Arbitral Tribu-
nal. The arbitrator passed an Award on 13th of July, 1999, dismissing the
applications filed by the Board under Section 13 and Section 16 of the Act. The
Board then filed a writ petition in Delhi High Court, but that was withdrawn
with liberty to file in the appropriate forum. Arbitrator then passed an award, H
452 SUPREME COURT REPORTS [2001] SUPP. 5 S.C.R.
A determining the revised project cost at Rs.2295.57 crores on 12th of January,
2000. Against the Award, an objection was filed by the Board, which was heard
by a learned Single Judge of the Calcutta High Court. The objection was
essentially on the ground that the dispute regarding escalated project cost
would not be a dispute under Section 44 of the Supply Act and·, therefore,
provisions contained in Section 44(3) will not apply and consequently, the
B
Award is without jurisdiction and a nullity. The licensee, on the other hand
reiterated before the Single Judge that the project cost as well as the revised ,.
project cost would be a matter coming u.1der Section 44 of the Supply Act and,
therefore, any dispute in relation to the same would be arbitrable under Section
44(3). It was also contended that all the parties namely the licensee, the Board,
c the State Government, as well as the Electricity Authority have understood that
the project cost was the matter covered under Section 44 and, therefore, it
would not be open for the Board to take a stand that such project cost is outside
the purview of Section 44 and as such is not arbitrable under Sub-section (3)
of Section 44 of the Supply Act. The learned Single Judge on an analysis of
Section 44 of the Supply Act, was persuaded to accept the contention of the
D
Board and held that the subject matter of arbitration was beyond the scope of
the statutory provision under Sub-section (3) of Section 44 and as such the
award passed by the Electricity Authority is without jurisdiction and is liable
to be set aside. The licensee being aggrieved by the aforesaid order of the
learned Single Judge, filed an appeal before the Division Bench and the
E Division Bench of Calcutta High Court by the impugned judgment, having
allowed the appeal, on setting aside the conclusions and finding of the Single
Judge, the present appeal by grant of special leave has been filed in this Court
by the Board.

Mr. V.R. Reddy, the learned senior counsel, appearing for the appellant-
F
Board, contended that on a plain reading of Section 44 of the Supply Act, it
is difficult to comprehend that the approval of the project cost comes within
the purview of the said Act and as such any dispute relating to the project cost,
will not be a dispute arising out of the provisions contained in Section 44 and
as such is not arbitrable under Sub-section (3) of Section 44 of the Supply Act.
G Mr. Reddy further contended that it is true that the Board itself has approved
and given its consent to the revised cost to the tune of Rs. 1853 crores, but that
was under the pressure from the State Government and such decision of the
Board cannot be construed to bring within the sweep of Section 44 of the Act,
any dispute on the project cost. Mr. Reddy also urged that Section 44 of the
H Supply Act, confers power on the Board to give consent in writing for estab-
WEST HENGALSTATh ELF.CTRlClTY BOAll.Di·. CALCUTIA ELEC'Tll.IC SUPPLY COll.PN. LTI1. [PATIANATK. J.\ 453
lishment of a new generating station or to extend or replace any major unit of A
plant or works pertaining to the generation of electricity in a generating station
and under the proviso to Sub-section (l) of Section 44, such a consent can be

- withheld within three months from the date of receipt of an application only
under two contingencies, as provided in Clauses (a)(i) & (ii). According to Mr.
Reddy, on a fair reading of the provisions contained in Section 44 of the Supply
B
Act, the question of approval of the project cost of a generating station, would

. not come within the ambit of Section 44 and as such, the Division Bench of
Calcutta High Court committed serious error in holding that the dispute relating
to the project cost is an arbitrable dispute under Section 44(3) of the said Act.

Mr. Shanti Bhushan, the learned senior counsel, appearing for the licen- c
see-respondent, on the other hand contended that all the parties namely the
CEA, the Government of West Bengal and the Board have all along understood
that the project cost comes within the purview of Section 44 of the Act and
various documents would establish the aforesaid understanding of the provi-
sions of the Act. That being the position and parties having acted on the said
understanding and the Board itself having approved the project cost on 22.5.1998 D
at Rs. 1853 crores, and thereby having exercised power under Section 44, is
not entitled to raise the question that the cost of the project would not come
within the purview of Section 44 and, therefore, the dispute in relation to the
project cost, cannot be an arbitrable dispute under Section 44(3) and conse-
quently, challenging the jurisdiction of the arbitrator. Mr. Shanti Bhushan also E
contended that Board's power to withhold consent in the event the Board can
show to the applicant that the electricity required by him could be more
economically obtained within a reasonable time from another appropriate source,
as provided in Section 44(1) proviso (b)(ii) indicate that the Board must know
the project cost of the applicant or else .it will not be possible for the Board to
F
find out whether the required electricity could be economically obtained from
any other appropriate source. That being tl1e position, the project cost would
be a matter witllin the ambit of Section 44 and consequently, any dispute
relating to the project cost will be an arbitrable dispute under Section 44(3).
Mr. Shanti Bhushan further urged that the cost of the project being an essential
particular, required to be furnished in every application filed under sub-section G
(I) of Section 44, on the basis of which, the Board has given a consent, any
escalated revised cost will be a material variation to the said particular for
which a further consent of the Board would be necessary under sub-section (2)
of Section 44. In the case in hand, the Board in fact has given its further consent
to tlle revised cost of Rs. 1853 crores, and thus the dispute arises between the H
454 SUPREME COURT REPORTS [2001] SUPP. 5 S.C.R.
A Board and the licensee with regard to the said revised cost in respect of which,
further consent has been given by tte Board and in lhis view of the matter, the
Division Bench of the Calcutta High Court was fully justified in holding that

B
the dispute is in relation to the provisions contained in Section 44 and as such
arbitrable and the Award cannot be held to be without jurisdiction.

In view of the rival submissions, the sole question that arises for con-
-
sideration is whether a dispute relating to escalated project cost of a generating
station would come within the purview of sub-section (3) of Section 44 of the
Supply Act? The Ministry of Power, Government of India is primarily respon-
sible for development of electrical energy in the country. It is concerned with
c perspective planning, policy formulation, processing of projects for investment
decisions, monitoring of the projects, training and manpower development and

-
the administration and enactment of legislation with regard to power genera-
tion, transmission and distribution. It is also responsible for tl1e administration
of the Supply Act as well as the Indian Electricity Act, 1910. Government of
India, under the Ministry of Power, constituted the Investment Promotion Cell
D as a nodal agency to provide information and assistance to prospective entre-
preneurs in the electricity sector. Setting up of the aforesaid Cell provided
initiative to involve the private sector in power generation in a much bigger
way. It provides information on the policy regarding private sector participa-
tion and provides guidance on the clearances lo be obtained and the modalities
E for obtaining these. Under Section 3 of the Supply Act, 1948, a statutory body
has been constituted, c.alled the Central Electricity Authority [for short 'CEA'].
This authority is charged with the responsibilities to develop a sound, adequate
·and uniform National Policy in relation to the control and utilization of national
power resources. The said authority also conducts the techno-economic ap-
praiEal of the Project reports in respect of setting up of generating stations in
F the country. Under the aforesaid Supply Act of 1948, the Board is constituted
by the State Government and the main functions of the Board are to generate,
transmit a.nd distribute electricity in coordination with the generating compa-
nies, if any, operating in the State and with the Central Government or any other
Board or agency having control over a power system; transmission and distri-
G bution of electricity within the State; and exercise of control in relation to
generation, distribution and utilization of electricity within the State. A Licen-
see is one, who has been granted a license by the State Government, in
consultation with the State Electricity Board to supply energy in any specified
area, under Section 3 of the Indian Electricity Act, 1910 as well as Supply Act
H of 1948. Generating company i:; set-up under Section !SA of the Supply Act.
\VEST BENGAL ST ATE ELECTRICITY BOARD~·. CALCUlTA F.LECTll:lC SUPPLY CORPN. LTD. IPA TIANAIK. J. l 455
The Parliament has enacted the Electricity Regulatory Commissions Act of A
1998, under which the Central Electricity Regulatory Commission has been set
up, the main functions of which are to regulate the tariff of generating com-
panies owned or controlled by the Central Government, to regulate the tariff
of generating companies other than those owned or controlled by the Central
Government and to regulate the inter-State transmission of energy including
B
tariff of the transmission utilities. Besides, it regulates inter-State bulk sale of
power and to aid and advise the Central Government in formulation of tariff
policy. This Regulatory Commission has been constituted since 24th of July,
1998. Under Section 17(1) of the Regulatory Commissions Act of 1998, even
the State Electricity Regulatory Commission is envisaged. Jn the case in hand,
we are not concerned with the Regulatory Commission or its role. The respond- c
ent, admittedly is the licensee. Under the Electricity (Supply) Act, 1948,
Chapter V deals with the preparation and sanctioning of scheme. Ordinarily,
the Board or a generating company may prepare a scheme relating to the
establishment or acquisition of generating stations, sub-stations or transmission
lines and such scheme estimated to involve a capital expenditure exceeding
D
such sum, as may be fixed by the Central Government by notification in the
official Gazette, must get the concurrence of the authority. Section 29 occurring
in Chapter V, provides the procedure to be adopted and Section 30 deals with
the matters required to be considered by the authority before concurring to a
scheme, submitted to it under sub-section (I) of Section 29. Apart from the
Board or a generating company being the author for production of power, any E
licensee also has a right to establish new generating stations, as provided in
Section 44 of the Supply Act. The provision contained in Section 44 is an
independent one and has nothing to do with the general scheme, contemplated
in Chapter V and the pr?visions of Section 44 start with a non obstante clause.
Under Sub-section (I) of Section 44, it shall not be lawful for a licensee, except F
with the previous consent in writing of the Board to establish or acquire a new
generating station, but such a consent being sought for, the Board has a limited
right within the prescribed period to withhold the consent, if the Board gives
an undertaking to the licensee that it is competent to, and will, within twenty
four months from the said date, afford to the licensee, a supply of electricity
sufficient for his requirements, pursuant to his application or if the Board shows
G
to the applicant that the electricity required, could be more economically
obtained within a reasonable time from another appropriate source, then it can
withhold the consent, required under Section 44(1 ), but that again has to be
done within three months from the date of receipt of the application. It would
thus appear that the Board can withhold the consent under two clauses of H
456 SUPREME COURT REPORTS [2001] SUPP. 5 S.C.R.
A Section 44(1) proviso {a), but that has to be within three months from the
receipt of the application. Section 44(2) of the Supply Act is materials for our
purpose and the same may be extracted he~einbelow in extenso:

"Sec. 44(2). There shall be stated in every application under this
section such particulars as the Board may reasonably require of the
B station plant or works, as the case may be, in respect of which it is
made, and where consent is given thereto, in acting in pursuance of
such consent, the applicant shall not, without the further consent of the
Board, make any material variation in the particulars as stated."

c A plain reading of the aforesaid sub-section would indicate that an applicant
is bound to furnish all such particulars which the Board may reasonably require
to enable the Board to give its consent and where a consent is given, then while
acting in pursuance of that consent, the applicant shall not without further
consent of the Board, make any material variation in the particulars, so stated.
If the project cost is one of the particulars required to be given by an applicant,
D while making an application under sub-section (I) of Section 44, then in the
event, Board gives the consent and while acting in pursuance of that consent,
the project cost varies, then for such variation, further consent of the Board
would be necessary, as provided under sub-scction(2) of Section 44. Since the
Board could withheld the consent, if it shows to the applicant that the electricity
E required by him could be more economically obtained within a reasonable time
from another appropriate source, to arrive at such conclusion, it would be
reasonable to infer that the applicant must indicate the project cost in its
application for consent. If the project cost is not indicated in the application
for consent, then the Board will not be in a position to find out whether the
electricity required by the applicant could be more economically obtained from
F
another appropriate source within a reasonable time and, therefore, in our view
it is necessary for every applicant while invoking power of the Board under
sub-section (I) of Section 44 to obtain the previous consent in writing for

-
establishment of a generating station to indicate the cost of the project. This
being the position, where consent is received on the basis of the project cost
G indicated in the application, while acting in pursuance of such consent, if the
project cost varies, then it would be a material variation of an important
particular and consequently, a further consent of the Board would be necessary
under sub"section (2) of Section 44. In the case i,n hand, the original consent
of the Board had been obtained and while acting in pursuance of such consent,
H it was found that the project cost has got escalated and application for further
WEST BENGAL STATE ELECTRICITY BOARD•·. CALCUTTA ELECTRIC SUPl'LY CORPN. LTD. IPAlTANAlK. J.] 457
consent was made to the Board and the Board also did accord its further consent A
at Rs. 1853 crorcs, which was communicated to the applicant-licensee. While
the applicant-licensee had indicated the revised project cost at a much higher
figure but the Board approved the revised cost at Rs.1853 crores and this
further consent on the basis of revised cost can only be under sub-section (2)
of Section 44 and in fact the Board· also communicated the same in the
B
purported exercise of power under sub-section (2) of Section 44. The further
consent in respect of the revised project cost having been given under sub-
section (2) of Section 44, a dispute did arise within the ambit of sub-section
(3) of Section 44 and, therefore, the authority concerned contemplated under
sub-section (3) of Section 44, gets jurisdiction to arbitrate upon the dispute
between the parties and in the case in hand, the said authority ultimately passed c
an award. In view of our analysis, as stated above, it is difficult for us to sustain
the argument of Mr. Reddy, appearing for the Board that the so-called dispute
regarding the project cost, cannot be a dispute arising out of the provision of
Section 44 and as such would not be arbitrable under sub-section (3) of the said
Section. We, therefore, are in agreement with the conclusion of the Division D
Bench of Calcutta High Court and hold that the dispute in question did come
within the purview of sub-section (2) of Section 44 and as such was arbitrable
under sub-section (3) thereof and the award cannot be held to be without
jurisdiction, as contended by the Board.

There is yet another facet in the case in hand, namely how the Board E
itself as well as the authority have themselves understood the provisions of the
Act. The concerned authority, who was the statutory arbitrator under sub-
section (3) of Section 44, while deciding the question of jurisdiction, unequivo-
cally came to the conclusion that Section 44(l)(a)(ii) brings within its sweep
the cost aspect of the project which is important for taking decision regarding
F
establishment or acquisition of a generating station and the revision of cost is
also being done under said section 44. With this conclusion it rejected the
prayer of the Board, challenging the jurisdiction of the arbitrator. When the
question of revision of project cost cropped up, the Chief Engineer of the Board
by its letter dated 4.12.1996 called upon the licensee to furnish the detailed
break up of the cost estimate, while it furnished the application originally in G
the year 1991 and the revised cost claimed by the licensee to the tune of
Rs.2220 crores. On 18th of December, 1996, the Joint Secretary to the Gov-
ernment of West Bengal also called upon the licensee to submit a detailed
proposal for revision of the project cost, as required under Section 44 of the
Supply Act. Again on 4th June, 1998, the Government wrote to the Board, H
458 SUPREME COURT REPORTS [200 I] SUPP. 5 S.C.R.
A requiring the approval of the Board to the revised project cost under Section
44 of the Act. On the very same date, that is on 4th June, 1998, the Government
also wrote to the licensee that under the provisions of the Electricity Supply
Act , the revised cost of the project of the licensee has to be worked out and
approved by the State Electricity Board under Section 44 of the said Act and
in the event the licensee is not satisfied with the decision of the Board, then
B
the relief is available in the Supply Act itself, obviously referring to an arbi-
trator under sub-section (3) of Section 44. On I Ith June, 1998, the Board wrote
to the licensee that after careful and detailed examination of all data and records
furnished by the licensee, the Board in its 505th meeting held on 22nd May,
1998, resolved that the reasonable project cost would be Rs. 1853 crores and
c as such the Board approves the revised project cost at Rs. 1853 crores under
Section 44 of the Electricity (Supply) Act. The Board, therefore not only
understood that the project cost is required to be approved under Section 44,
but did take a decision, approving the reasonable revised project cost at a
particular figure in exercise of its power under Section 44. The Board having
exercised power under Section 44 and having approved the revised cost at a
D
particular figure, cannot take a stand when the dispute regarding the project
cost was referred to the authority for arbitration that the project cost does not.
come within the purview of Section 44. Thus, apart from our conclusion on
interpreting the provisions of Seer.ion 44 of the Electricity (Supply) Act, the
conduct of the Board itself disentir.les it to take a stand that the revised project
E cost would not come within the ambit of Section 44 of the Supply Act. In the
aforesaid premises, we do not find any merits in the contention of Mr. Reddy,
challenging Lhe jurisdiction of the arbitrator to entertain the dispute regarding
the reasonability of the revised project cost. In our considered opinion, the
dispute is one, which comes within the ambit of Section 44 and as such
F arbitrable under sub-section (3) of Section 44 and the Award cannot be held
to be without jurisdiction. The conclusion of the Division Bench of the Calcutta
High Court on this score remains unassailable.

Mr. Reddy, then contended that the High Court was not justified in
making any observations with regard to the impact of the revised project cost
G on the tariff, as the same was not a subject matter and the only question that
had been raised before the High Court was whether the arbitrator had the
jurisdiction or not. We find sufficient force in the aforesaid contention of
Mr. Reddy and Mr. Shanti Bhushan, the learned senior counsel, appearing for
-
the licensee also fairly stated that it was not necessary for the High Court to
make any' observation as to what would be the effect of the reasonable project
,H
WEST BF.NG AL STATE ELECTRICITY BOARD v. CALCUTIA ELECTRIC SUPPLY CORPN. LTD. (PAITANAIK, J.\ 459
cost on the tariff structure. While, therefore, upholding the Division Bench A
Judgment of the Calcutta High Court, we further observe that it was not at all
necessary for the High Court to go into the question of impact of the project
cost upon the tariff structure and any observations made in respect of the same
are set aside.

This appeal is accordingly dismissed with the aforesaid observations. B
There will be no order as to costs.

N.J. Appeal dismissed.

_,,