From electricity tariff to arbitration clause, here're the key court orders

Electricity tariff differs for institutions

The Kerala State Electricity Regulatory Commission has the power to segregate self-financing educational institutions (SFEIs) from government-run and government-aided private educational institutions for the purpose of fixing tariff, subjecting SFEIs to a higher category of tariff. The tariff notification to that effect is legal, said the Supreme Court in its judgment, Kerala State Electricity Board vs principal, Sir Syed Institute. A single-judge Bench of the high court had earlier upheld different tariffs, but a division Bench set it aside, leading to the appeal. The division Bench explained its stand thus: “When the supply is to an educational institution, irrespective of whether it is self-financing or aided by the governmental, the tariff cannot be different, as education means to impart knowledge. Education in ancient times was not connected with earning. Free education is what was in accord with dharma.” The Supreme Court upheld the single-judge Bench judgment and added the student profile of state-run and state-aided institutions is different from those of SFEIs. Students from comparatively modest background go to state-run or state-funded institutions. Moreover, government-run institutions are maintained by taxpayers.

Maharashtra APTEL order quashed

The Supreme Court has set aside the order of the Maharashtra Electricity Regulatory Commission and the Appellate Tribunal for Electricity (APTEL), which had quashed five circulars issued before the formation of the commission. The circulars dealt with the captive power plant policy of the state government. In this appeal, Maharashtra State Electricity Distribution Co vs Union of India, the main issue was whether the commission could have quashed circulars issued by the distribution company before its formation. The commission was constituted under the Electricity Regulatory Act of 1998 and the circulars were issued before that by the electricity board. Allowing the appeal, the Supreme Court declared that the circulars and policy decisions issued before the establishment of the commission were illegally set aside. Consequently, the court also quashed the order concerning a refund, which had imposed a heavy burden on the distribution company.

Arbitration clause must be registered

An arbitration clause in a lease deed, which is not registered and insufficiently stamped, cannot be acted upon, the Supreme Court ruled in its judgment in Dharmaratnakara Charities vs M/s Bhaskara Raju. In this case, the trust gave a 38-year lease to the latter in 1996 for the renovation of the Samadhi of the founder. However, there was not much progress during the following years and allegations were made against each other. Ultimately, the lessee moved the Karnataka High Court for the appointment of an arbitrator under the Arbitration and Conciliation Act. The high court appointed a retired judge as arbitrator. The trust appealed to the Supreme Court arguing that the lease deed was not properly stamped and, therefore, invalid. The court held that the high court was in error and set aside the arbitration.

Pre-deposit for DRT appeal compulsory

The Supreme Court has reiterated that the borrower who moves an appeal before the Debt Recovery Tribunal must pre-deposit the amount claimed by the secured creditors or determined by the tribunal. It is not only the borrower who is under this obligation but also the guarantors and mortgagors, the Supreme Court stated in the appeal case, Union Bank of India vs Rajat Infrastructure. The judgment asserted that according to Section 18 of the Securitisation Act (SARFAESI Act), 50 per cent of the disputed amount should be deposited before taking up the appeal. It could be reduced to 25 per cent by the tribunal after recording adequate reasons for doing so. In any case, the condition of pre-deposit could not be waived. Earlier, the Bombay High Court had taken an opposite view and allowed the tribunal to hear the case without pre-deposit. It claimed it had discretionary power to do so. The Supreme Court denied this claim and emphasised that statutory provisions could not be bypassed by claiming discretionary powers, which the high court did not have in this case. The Supreme Court did not go into the allegation that the property worth Rs 160 crore was sold for Rs 65 crore with the connivance of the bank’s employees.

Award against MMTC set aside

The Delhi High Court last week set aside an arbitral award in a dispute between MMTC and Anglo American Metallurgical Coal, saving the public sector unit from liability of approximately Rs 748 crore. The judgment remarked that “in our view, such an award must rest on surer factual and legal footing than only to say that it has been rendered by an arbitral tribunal and is, therefore, sacrosanct. The award of damages, interest, and costs is a travesty of justice and the award suffers from perversity”. The majority in the arbitral tribunal allowed the claim of Anglo American for damages on account of non-lifting of 453,034 MT of coking coal by MMTC from Australia. The third arbitrator had dismissed the claim. The private firm had argued that MMTC was consistently requesting for a reduction in the price of coal, thereby declining to lift coal at the contractually agreed price. MMTC said that because of the worldwide financial crisis, prices of its products like pig iron had nose-dived in 2008 and it was asking for adjustment of price only with regard to the last consignment. The high court admitted that its jurisdiction to go into facts was limited. But analysing the communication between the two parties, the judgment observed that “we are at an utter loss to understand as to how the tribunal can read into commercial communication between educated and worldly-wise men of commerce, words that do not exist in the communications. If such imaginary interpolations are allowed into the e-mails, then the inferences and conclusions derived therefrom must be held to be perverse in law”.

Follow MSME Act procedure; no writ

A firm with a grievance should not rush to the high court when there is an efficacious remedy under the Micro, Small and Medium Enterprises Development Act. In the case, Fives Stein India Project vs State of MP, an award was passed by the MSME Facilitation Council against the firm, which is engaged in manufacturing nuclear and thermal components. It had bought goods from Mahakaushal Refractories which was alleged to be sub-standard. The dispute was taken to the council, which gave an award against Fives Stein. It challenged the award in the high court. The court rejected the writ petition, stating that MSME Developement Act had provided the procedure for appeal and it should be followed.