Arbitral Tribunal Cant Go Outside Reference Order, Cannot Widen Its Jurisdiction By Dealing With Disputes Not Referred To It: Punjab And Haryana High Court

Brief Facts:

The matter pertained to a Power Purchase Agreement (PPA) dated 01.09.2008 between the Petitioner and the Respondent for the supply of 100% power from the Petitioner's thermal power plant at District Mansa. Subsequently, a petition under Section 86 (1) (f) of the Electricity Act, 2003, was filed by the Petitioner before the Punjab State Electricity Regulatory Commission (“PSERC”), leading to the arbitration of disputes arising from the PPA. The Arbitral Tribunal was constituted, pleadings were completed, and issues were framed for adjudication.

Challenges arose during the arbitration proceedings, including a rejected application for an extension of time, subsequent orders by the District Court and the Punjab and Haryana High Court (“High Court”), and the reconstitution of the Arbitral Tribunal by the Supreme Court. The Petitioner sought amendments to its statement of claim, which were contested by the Respondent, leading to several applications and orders by the Tribunal. The Tribunal disposed of various applications for amendment, rectification, and clarification/modification submitted during the arbitration proceedings. Feeling aggrieved, the Petitioner approached the High Court.

The Petitioner contended that orders passed by the Appellate Tribunal under the Electricity Act, 2003, during the arbitration proceedings have materially altered the circumstances which warranted amendments to the claim statement. It argued that such amendments were formal and should have been permitted by the Arbitral Tribunal to reflect the changed circumstances.

In opposition, the Respondent argued that since the matter was referred to arbitration under Section 86 (1) (f) of the Electricity Act, 2003, by the PSERC, the Arbitral Tribunal was bound by the scope of the reference order. Allowing amendments, it argued, would exceed the permissible scope of reference and enlarge the issues beyond what was intended.

Observations by the High Court:

The High Court noted the jurisdiction of the Arbitral Tribunal in the context of the reference made by the PSERC under Section 86(1)(f) of the Electricity Act, 2003. Referring to the Supreme Court's decision in Gujarat Urja Vikas Nigam Ltd. Versus Essar Power Ltd. (2008) 4 SCC 755 and the Tribunal held that disputes falling under Section 86(1)(f) must be resolved by the Electricity Regulatory Commission or arbitrators appointed by it. However, it held that disputes not falling within this category are to be decided under Section 11 of the Arbitration and Conciliation Act, 1996.

The High Court held that an Arbitral Tribunal is bound by the terms of the reference made to it and cannot go beyond the scope of the reference order. It reiterated that the Tribunal's jurisdiction is derived solely from the reference made to it, and it cannot entertain disputes outside the scope of the arbitration clause.

The High Court held that the Petitioner's attempt to broaden the scope of relief sought through the amendment application sought to enlarge and change the reference made to the Arbitral Tribunal, which was impermissible. Consequently, the High Court found no grounds for interference with the orders passed by the Arbitral Tribunal and dismissed the petition.

Case Title: Talwandi Sabo Power Limited vs Punjab State Power Corporation Limited

Case Number: CWP-7950 of 2024

Advocate for the Petitioner: Mr.Chetan Mittal, Senior Advocate with Mr. Kunal Mulwani, Advocate, Mr. Nitin Kaushal, Advocate, and Mr. Ritvik Garg, Advocate for the Petitioner.

Advocate for the Respondent: Mr. Gurminder Singh, Senior Advocate with Mr. Jatinder Singh Gill, Advocate for the caveator-respondent.

Click Here To Read/Download Order