K.RAVIRAJA PANDIAN,J.
The Original Side Appeal Nos.57 and 58 of 2009 are filed against the order and decretal order passed by the learned single Judge dated 18.3.2009 made in O.A.No.1103 of 2008 and Application No.5331 of 2008 respectively in C.S.No.906 of 2008 on the file of this Court.
2. The appellant the power generating plant is the first defendant in the suit. The plaintiff and defendants No.2 and 3 are the captive consumers. Defendants No.4 to 7 are subsequent power supply agreement holders. Defendants No.8 and 9 are statutory authorities. For the sake of convenience, the parties are referred in this appeal as arrayed in the suit.
3. The plaintiff filed suit in C.S.No.906 of 2008 seeking for the decree and judgment for specific performance of the wheeling agreement signed by the first defendant on 25.5.2006 with the Tamilnadu Electricity Board and consequential permanent injunction against the first defendant from discontinuing power supply to the plaintiff during the subsistence of the wheeling permission granted by the Tamilnadu Electricity Board on 24.5.2006 and for a further relief of permanent injunction restraining the first defendant from effecting power supply to defendants No.4 to 7 beyond their share holding without supplying the guaranteed supply of units to the plaintiff as per the wheeling agreement.
4. Along with the suit, the plaintiff filed O.A.No.1103 of 2008 seeking for an order of interim injunction restraining the first defendant from effecting any supply of energy to defendants No.4 to 7 without exhausting the supply of energy at 12.5 lakh units per month on firm basis and 2.5 lakh units on non firm basis to the plaintiff. The first defendant filed application under
Section 8 of the Arbitration and Conciliation Act, 1996 in Application No.5331 of 2008 seeking for the relief to refer the plaintiff and first defendant to the arbitration as per the terms of the Power supply agreement dated 24.9.2005 to get the dispute resolved.
5. The learned single Judge held that the first defendant had not made out a case for referring the dispute between them and the plaintiff to arbitration and dismissed the application No.5331 of 2008 and allowed O.A.No.1103 of 2008 by directing the first defendant to restore the supply of energy to the plaintiff forthwith at 12.5 lakh units per month on firm basis and 2.5 lakh units per month on non-firm basis and further restrained the first defendant from effecting any supply of energy to defendants No.4 to 7 without exhausting the aforesaid supply of energy to the plaintiff. The correctness of the said orders are put in issue in these two appeals.
6. The facts in brief are as follows:
The plaintiff along with defendant Nos.1 to 3 decided to promote a joint venture captive power generating plant for generation of power for their requirements of the factories owned by them. The plaintiff and defendant No.2 and 3 signed power supply agreement with the first defendant. The power generated by the first defendant has to be supplied to the captive users in proportion to their share capital vis a vis the power production. The eighth defendant the statutory authority granted wheeling permission identifying the captive users of the first defendant. The wheeling permission dated 24.5.2006 was subject to several conditions.
7. The plaintiff and defendants No.2 and 3 are the beneficiaries of the wheeling agreement. The plaintiff contributed a sum of Rs.45 lakhs and in consideration of the same the first defendant allotted 4,50,000 equity shares to the plaintiff. The plaintiff is entitled to supply of 1.5 crore units per annum on firm basis and 0.30 crore units per annum on non firm basis. The first defendant conceived an idea of selling the electrical energy to third parties and obtained additional wheeling permission from the 8th defendant. Based on the additional wheeling permission, the first defendant reduced the supply to the plaintiff in the months of August and September 2007. Thereafter the first defendant resumed supply from January 2008, but from April 2008, the first defendant completely stopped the supply of power to the plaintiff in violation of the terms and conditions of the wheeling agreement. If the first defendant failed to supply its captive users, the eighth defendant has the right to revoke the wheeling permission. Likewise, if the contracted supply of energy is not consumed by the plaintiff it would be liable to penal charges for the unconsumed supply. The first defendant is now diverting the energy to defendants No.4 to 7 and thereby failed to make the assured supply to the plaintiff. Without supplying the agreed quantity of energy to the plaintiff, the first defendant has no right to supply any energy to defendants No.4 to 7. On that basis, the suit has been filed and interim relief is sought for pending suit.
8. The first defendant resisted the claim by filing application No.5331 of 2008 and contended that all disputes between the plaintiff and the first defendant have to be adjudicated by an arbitrator as per
Article 10 of the power supply agreement. The plaintiff is a chronic defaulter in making payment for the supply made. The suit itself is not maintainable as there is a prayer for specific performance of agreement between the first defendant and the Tamilnadu Electricity Board in which the plaintiff is not a party.
9. This application was resisted by the plaintiff by contending that the power supply agreement between the plaintiff and the first defendant was entered into for the purpose of obtaining wheeling permission from the Tamilnadu Electricity Board. The wheeling permission was granted by the Tamilnadu Electricity Board only for the benefit of the captive users i.e., the plaintiff and defendants No.2 and 3. In contravention of the wheeling agreement, the first defendant failed to supply power to the plaintiff and diverted the energy to defendants No.4 to 7. Any relief that may be granted in the suit would effect the interest of defendants No.4 to 7. Admittedly, they were not parties to the agreement covering the dispute. As such the dispute cannot be referred to arbitration. The subsequent wheeling permission obtained by the first defendant has virtually deprived the plaintiff of the agreed supply of energy. Thus, the scope of the suit is wider, which cannot be decided in the arbitration proceedings.
10. It is the stand of the statutory defendants that the captive users shall consume a minimum of 51% of energy generated proportionate to their shareholding in the company to satisfy the status as a captive generating plant. As per the request of the first defendant, the additional wheeling agreement was granted to the first defendant Company by including defendants No.4 to 7. It is well open to the plaintiff to initiate protective action against the first defendant.
11. On the aforesaid contentions of the rival parties, the learned single Judge formulated two points for determination i.e., (1) Whether the dispute arisen between the plaintiff and the first defendant requires reference to arbitration? And (2) Whether the plaintiff is entitled to an order of injunction as prayed for in O.A.No.1103 of 2008?.
12. In respect of the first point, taking note of the relief sought for by the plaintiff in the suit, which is not only against the first defendant, who is party to the wheeling agreement dated 25.5.2006, but also against defendants N0.4 to 7, who are not parties to the said agreement, but are the beneficiaries under the subsequent wheeling agreement obtained by the first defendant from the Tamilnadu Electricity Board, and the further prayer against the first defendant not to supply power to defendants NO.4 to 7 without exhausting the agreed supply of power to the plaintiff the learned single Judge found that the prayer in the suit does not emanate from the power supply agreement between the plaintiff and first defendant. The learned single Judge also differentiated the judgments cited on behalf of the first defendant in the case of KOTAK MAHINDRA BANK LTD. V. SUNDARAM BRAKE LINING LTD. (2008(4) CTC 1) and VIRENDER YADAV V. AEROSVIT AIRLINES AND OTHERS (2008(3) ARBLR 445 (DELHI) on facts and ultimately held that the first defendant had not made out a case for referring the dispute between them and the plaintiff to arbitration.
13. In respect of the second point formulated for decision, the learned single Judge found that except the disputed sum of peak hour charges and deemed demand charges, which are under challenge by way of writ petition, all the dues upto date have been promptly paid by the plaintiff. Thus the plaintiff has established a prima facie case for their entitlement for continued supply of energy and the plaintiffs are as per the wheeling agreement entitled to supply energy at 12.5 lakh units per month on firm basis and 2.5 lakh units per month on non-firm basis as per the power supply agreement.
14. Before us also, the only contention that has been raised on behalf of the first defendant was that the plaintiff had been consistently defaulting in making payment for the power supplied to them and also guilty of making delayed payment and not complying with the provisions of the power supply agreement. It is further contended that the appellant is only interested in enforcing the power supply agreement. However, the first respondent is not paying the peak hour charges and deemed demand charges. As per the agreement, the benefits that are passed on to consumers by the Tamilnadu Electricity Board have to be shared between the appellant and the first respondent in the ratio of 60:40, which the plaintiffs are not adhering to.
15. On behalf of the plaintiff, it was contended that the plaintiff effected payment promptly for the supply of energy made by the appellant. The regulatory authority has directed the Tamilnadu Electricity Board to pass on the peak hour charges and deemed demand charges to the consumers, but the Tamilnadu Electricity Board has claimed the same from the plaintiff, which compelled the plaintiff to approach the High Court by filing writ petition and obtained stay of the demand made by the Tamilnadu Electricity Board. As per the agreement, the benefits that are passed on to the consumers by the Tamilnadu Electricity Board have to be shared between the plaintiff and the first defendant in the ratio of 60:40. The first defendant raised a supplementary invoice claiming the benefit from the plaintiff when it had not been passed on to the plaintiff by the Tamilnadu Electricity Board till this date. Except the disputed amount, the plaintiff had paid all the amounts to the appellant and there is no due.
16. It is brought to the notice of this Court that the Tamilnadu Electricity Regulatory Commission (hereinafter referred to as "TNERC") in order Nos.2 and 4 dated 15.5.2006 has resolved the issue as to the payment of peak hour charges and demand charges. On pointing out this issue, the plaintiff filed memo dated 3.7.2009 wherein the plaintiff undertakes to pay 60% of the peak hour and demand charges as per the letter of the appellant dated 15.5.2009 amounting to Rs.14,54,818/- as on 15.5.2009 in view of the TNERC Order Nos.2 and 4 dated 15.5.2006. In the said memo, it is further stated that as per the TNERC Order No.2 dated 15.5.2006, the Tamilnadu Electricity Board had issued an audit slip dated 20.8.2008 for recovering a sum of RS.7,06,569/- from the plaintiff, which had been paid by then. That amount represents the backup power charges which have to be paid only by the first defendant as per Clause 11-2-20 of the Power Supply Agreement and prayed that the plaintiff may be permitted to deduct the said sum from the amount due towards peak hour charges and pay the balance amount.
17. On behalf of the first defendant, by way of reply, a memo has been filed on 6.7.2009, wherein it is stated that the appellant is only interested in enforcing the terms of the power supply agreement dated 24.9.2005 entered into between the first defendant and the plaintiff. With a view to settle the disputes arising in the present appeals, the first defendant had agreed to receive a sum of Rs.17,18,053/- (excluding interest) towards the "peak hour charges" and "demand charges" payable by the plaintiff on such payment to resume supply of power to the first respondent as per the terms of the power supply agreement dated 24.9.2005. The amount payable by the respondent as on June 2009 towards peak hour charges and demand charges is Rs.17,18,053/-. Further it is stated that the plaintiff for the first time raised an issue regarding the "back up power charges". The issue has not been raised earlier either in the plaint or affidavit or even during the course of proceedings before the single Judge, but raised for the first time in the memo dated 3.7.2009. It is further stated that as early as 3.12.2007, the first defendant had a meeting with all its consumers including the plaintiff and in the said meeting it was decided and accepted by all consumers including the plaintiff that back up charges as claimed by Tamilnadu Electricity Board due to the implementation of order Nos.2 and 4 of 2006 of the TNERC have to be borne by the consumers. Accordingly, the plaintiff and all consumers of the first defendant have paid the backup power charges to the Tamilnadu Electricity Board. The back up charges are nothing but the charges payable for the power consumed from TNEB directly by a captive consumer when such power is not available from the captive generation plant. As per the agreement between parties all demand charges levied by the TNEB for the Electricity dispatched to the consumer are directly payable by the consumer to the TNEB. Therefore, the first defendant as per Article III.1.3 and Article VIII.2.4 of the Power Supply Agreement, is not liable to pay any charges imposed by the TNEB towards Electricity supplied to the consumer.
18. From the above, it is evident that the scope of the dispute in the appeals is limited to the payment. When the matter was taken up on 9.7.2009, it was argued for some time and after hearing the learned counsel on either side with reference to the memos i.e., two memos dated 3.7.2009 and 9.7.2009 filed by the plaintiff and one memo dated 6.7.2009 filed by the first defendant, it is much clear that the issue in dispute in this case has become very thin. The first defendant is only interested in enforcing the power supply agreement dated 24.9.2005 entered into between the first defendant and the plaintiff. As a matter of fact, the main relief sought for in the suit is for enforcing the terms of the power supply agreement. It is agreed that except the peak hour charges and deemed demand charges, all other charges are being regularly paid as and when invoices are raised on the plaintiff. The dispute as to the payment of peak hour charges is also now stated to be settled as per the memo. The plaintiff undertakes to pay 60 percent of the peak hour and demand charges as demanded by the first defendant by its letter dated 15.5.2007 in view of the order of the TNERC dated 15.5.2006 made in Order Nos.2 and 4. Hence, the issue is now resolved. The amount quoted in the memo cannot be regarded as an issue because the share of the peak hour charges at the ratio of 60:40 is known to the parties concerned and the plaintiff also undertakes to pay 60% of the charges. As per the agreement and undertaking given by the memo, the plaintiff has to pay 60 percent of the peak hour charges and demand charges. Then, what remains is the minor issue raised by the first defendant that the letter of credit furnished by the plaintiff is a conditional one but as per the power supply agreement dated 24.9.2005 the plaintiff has to furnish an unconditional confirmed revolving letter of credit.
19. In paragraph No.6 of the memo dated 9.7.2009 filed by the plaintif, it is stated that the letter of credit was opened as early as 27.3.2006 and the terms of letter of credit were finalised with the concurrence of the appellant. The appellant had not questioned the nature of letter of credit vide letters dated 5.3.2007, 25.6.2007 and 12.10.2007 till disputes arose between the parties in October 2007. The letter of credit furnished is in consonance with normal banking practice and is not a conditional one.
20. The above said averments that the letter of credit furnished is in consonance with the normal banking practice cannot be accepted. When the plaintiff comes forward with a suit to enforce the terms of contract, without harping upon the normal banking practice, the plaintiff has to give letter of credit as envisaged in the agreement and it should be an unconditional one.
21. The issue as to the back up charges, as rightly submitted by the learned counsel for the first defendant, was not a subject matter of the application before the trial Court and no issue has been raised and finding, what so ever, has been rendered by the single Judge. Hence, that issue is left open for consideration by the learned single Judge at appropriate stage. Till it is resolved, it is the plaintiff to pay the charges.
22. So far as the finding rendered by the learned single Judge in application N0.5331 of 2008 to refer the matter for arbitration, no argument, worth mentioning, has been advanced by the appellant, though the order has been appealed against.
23. The findings recorded by the learned single Judge that the benefit conferred on the plaintiff by virtue of the Wheeling agreement entered into between the first defendant and the Tamilnadu Electricity Board has been canvassed in the pleadings that the alleged guaranteed right of the plaintiff could not be decided in the absence of defendants NO.4 to 7 as they were conferred with a right to draw supply of energy under the subsequent wheeling agreement entered into between the first defendant and the Tamilnadu Electricity Board. Defendants No.4 to 7 are not formal parties; that their effective participation during the course of trial would only determine the issue arising under the wheeling agreement; that the dispute between the plaintiff and the first defendant in the suit is beyond the scope of arbitration under power supply agreement and as such, it cannot be referred to arbitration are in our view based on reasons and well founded findings. Hence, in our view, that finding has to be confirmed and the same is confirmed.
24. In respect of the appeal arising out of the order made in injunction petition, in view of the discussion made above, the following order is passed:
(1) The plaintiff is entitled to supply of energy at 12.5 lakh units per month on firm basis and 2.5 lakh units per month on non-firm basis and the first defendant is directed to restore the above supply.
(2) The first defendant is also restrained from effecting any supply of energy to defendants NO.4 to 7 without exhausting the aforesaid supply of energy to the plaintiff.
(3) The peak hour charges and demand charges have to be shared by the plaintiff and the first defendant at the rate of 60:40 as per the agreement.
(4) The letter of credit given by the respondent must be in conformity with Article IV.2. Now the dispute about the payment is resolved, the original letter of credit for Rs.60 lakhs would revive, however, as pointed out in earlier paragraph.
25. With this observation, the O.S.A.No.57 of 2008 is disposed of and the other O.S.A.No.58 of 2009 is dismissed. However, there is no order as to costs. Consequently, the connected miscellaneous petitions are closed.
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