Madras High Court Sets Aside Part Of Arbitral Award Against Tuticorin Port Trust Over Water Charges

The Madras High Court has partly set aside an arbitral award that held Tuticorin Port Trust (now V.O. Chidambaranar Port Trust) liable to pay water charges under the "Other Beneficiaries" category from December 1, 2002. The dispute arose between the Port Trust and the Tamil Nadu Water Supply and Drainage Board (TWAD Board).

A division bench of Justice P. Velmurugan and Justice K. Govindarajan Thilakavadi held that the award suffered from patent illegality. It found that the arbitrator failed to explain why the finding that 90% of the water supplied to the Port Trust was used for domestic purposes became irrelevant after the revised tariff classification came into force.

It observed, "The Award does not adequately explain why the finding regarding the domestic use of water was no longer relevant after the revised classification came into force."

The dispute stemmed from a 1991 agreement under which the TWAD Board supplied water to the residential quarters of Port Trust employees. In 1997, the Board revised its tariff structure.

It then treated the entire quantity of water supplied to the Port Trust as industrial consumption. The Port Trust disputed the classification, contending that most of the water was used for drinking and other domestic purposes.

The matter was referred to arbitration. The arbitrator found that 90% of the water was used for domestic purposes and the remaining 10% for industrial purposes. Even so, the arbitrator held that from December 1, 2002, the Port Trust would be liable to pay charges under the "Other Beneficiaries" category under a Government Order issued on October 3, 2002.

The Port Trust argued that this conclusion was inconsistent with the arbitrator's own finding on the actual use of the water. The TWAD Board maintained that the agreement permitted tariff revisions and that the Government Order had been correctly applied.

The court held that the arbitrator ought to have considered the effect of the finding on domestic use before fixing liability under the revised category. Holding that the inconsistency went to the root of the award, the court set aside Clause (C) of the arbitral award. It upheld the remaining findings. No costs were awarded..

For Appellant (Tuticorin Port Trust / V.O. Chidambaranar Port Trust): Senior Advocate R. Yashod Vardhan for Advocate S. Yashwanth.

For Respondent (Tamil Nadu Water Supply and Drainage Board): Senior Advocate A. Abdul Hameed for Standing Counsel S. Mekhala.