- (1.) This appeal by special leave arises out of an application made by the State of Bihar against the Gaya Electric supply Co. Ltd., under S. 34, Arbitration Act, for stay of proceedings in a suit filed by the company on 28-9-1950. The facts relevant to this enquiry are these : A licence for the supply of electric energy in the town of Gaya was obtained by one Khandelwal in the year 1928 under the Electricity Act, 1910. With the required sanction of the Government the licence was transferred to the company In 1932. By a notification dated 23-6-1949 the licence was revoked by the Government with effect from 9-7-1949. Thereupon, the Company filed a suit against the State for a declaration that the revocation of the licence was arbitrary, mala fide and ultra vires. During the pendency of the suit, negotiations started between the company and the State for a settlement of the dispute and ultimately on 28-10-1949 a deed of agreement was arrived at between them. The effect of the agreement and the correspondence referred to therein was substantially as follows : (a) That the Company would withdraw the suit No. 58 of 1949 unconditionally on 25-10-1949. (b) That within three days of the withdrawal of the suit the State of Bihar would make an advance payment of rupees five lakhs to the Company, and simultaneously the company would formally hand over the possession of the undertaking to an authorized Officer of the Government. (c) That both parties will make their respective valuations within three months of taking over the undertaking and any balance of money found due to the Company as per Government valuation will be paid to the company and in case of over payment, the excess paid to the Company on account of the "on account payment" of rupees five lakhs will be refunded to the Government. (d) That in the case of any difference or dispute between the parties over the payment of the balance which may be found due after valuation such dispute shall be submitted to the sole arbitration of a single arbitrator who should be a high government officer of the provincial government of rank equal to or higher than a Divisional Commissioner and his award shall be binding and final on both parties.
(2.) The arbitration clause is contained in a letter dated 13-10-1949 and was substantially accepted by the company in its letter dated 17-10-1949. As set out by the State Government in its application under S. 34, it runs as follows : "In the case of any difference or dispute between the parties over the valuation as arrived at by the Government and that arrived at by the company, such difference or dispute, including the claim for additional compensation of 20 per cent. shall be referred to arbitration. . . . . . . .". In pursuance of the agreement the respondent took over the undertaking on 28-10-1949 and also made a payment of rupees five lakhs to the company.
(3.) On 19-1-1950 the Company sent a statement of valuation of the assets amounting to Rupees 22,06,072 to the Chief Electrical Engineer, Bihar. The Chief Electrical Engineer characterized the valuation of 22 lakhs by the company as fantastic and stated that according" to a rough valuation the amount would be approximately five lakhs and that the final valuation would be settled after the company had furnished a detailed history of the plants and machineries. The company declined to give any further details and stated that time was of the essence of the contract and it would be extended from 28-1 to 15-2-1950.On 6-4-1950 the Chief Electrical Engineer intimated that the valuation amounted to Rs. 5,56, 221. No reply to this letter was received and the State Government intimated to the company that as difference and dispute had arisen relating to valuation, Mr. M.S. Rao, I.C.S., was being appointed as sole arbitrator to decide the dispute.;