CERC's Powers To Refer Disputes To Arbitration Extends To Even Those Cases Which Fall Outside Its Jurisdiction: Delhi High Court

In a noteworthy judgment for the renewable energy sector, the Delhi High Court has observed that the power of Central Electricity Commission (“CERC”) under Section 79(1)(f), Electricity Act to refer parties to arbitration is wider than its power to adjudicate. A bench of Justice Purushaindra Kumar Kaurav observed that CERC in exercise of its adjudicatory powers can only adjudicate upon disputes connected with Section 79(1)(a)-(d). However, while exercising its referral powers, it can refer “any dispute” for arbitration, even those upon which it cannot adjudicate. Facts The Petitioner, Renew Wind Energy (Ap2) Pvt Ltd. (“Renew”) a power generating company, filed the present petition under Section 9, Arbitration and Conciliation Act, 1996 (“ACA”) praying for an order restraining/injuncting the Respondent, Solar Energy Power Corporation (“SECI”) from unilaterally deducting amounts from its monthly invoices. Renew was a successful bidder and the parties executed a Power Purchase Agreement (“PPA”) dated 23.05.2018 for the supply of 300 MW of power for 25 years. On 02.05.2025, SECI issued a notice Renew stating that Renew had failed to fulfil the minimum energy requirement for the financial year 2024-25 and demanded 75% of the cost of shortfall as compensation under the PPA, failing which the applicable amount would be deducted from the next month's invoice (“Impugned Notice”) Apprehending that SECI would take coercive measures before the constitution of the arbitral tribunal, Renew approached the Court seeking interim protection against the Impugned Notice and any consequential deductions. SECI filed a comprehensive reply, raising several objections, the main objection being the maintainability of the petition in light of Section 79(1)(f) of the Electricity Act, 2003 which provides the powers of Central Electricity Regulatory Commission (“CERC”) to adjudicate or refer disputes for arbitration. Contentions The Senior Counsel for the Respondent contended that disputes concerning tariffs must be adjudicated by the CERC. He further submitted that only the CERC can refer such disputes to arbitration, if at all it is necessary. It was also contended that Section 9, ACA is inapplicable in the instant case as Section 2(3), ACA excludes its application where another enactment such as Electricity Act applies. Further, Section 174, Electricity Act grants overriding effect to the Electricity Act over other laws, except those specified in Section 173, in case of inconsistency. Thus, the Electricity Act prevails over the Arbitration Act. The Senior Counsel for the Petitioner submitted that SECI's attempt to bring the present dispute under the jurisdiction of CERC by invoking the concept of tariff under Section 79(1)(f) was flawed. Mere reference to tariff-related clauses in the PPA does not transform all contractual disputes into regulatory ones. The claim in the present petition was for damages for non-supply and not for modification or determination of tariff. Further, the Counsel contended that there is a clear distinction between the adjudicatory powers conferred upon State Commissions and CERC. While the Electricity Act confers broad adjudicatory powers on State Commissions, the adjudicatory powers of CERC as provided in Section 79(1)(f) applies only to disputes that involve functions such as tariff regulation, scheduling and generation by central government- owned entities. Since the present dispute does not relate to these functions, the CERC has no jurisdiction. Observations The Court started its analysis by noting that a petitioner seeking interim measures/protections under Section 9 must establish a right to invoke arbitration proceedings. The Court also highlighted Section 2(3), ACA which considers the possibility of a special statute prevailing over ACA and providing for a different mechanism to deal with a particular category dispute. In the instant case, Section 79(1)(f) read with Section 174, Electricity Act makes ACA inapplicable to the present dispute. The Court also clarified the true import of Section 79(1)(f), Electricity Act. The Court observed that while from a plain reading of the section it would appear that CERC is to exercise its functions of adjudication of disputes and referring them from arbitration simultaneously. But such an interpretation would be anomalous and so the word “and” in the section should be read as “or” meaning thereby that the powers are to be exercised in the alternative. The Court further observed that Section 79(1)(f) is in two parts — the first part refers to the adjudicatory powers of the CERC and the second deals with the referral powers of the CERC. Importantly, the power to refer disputes for arbitration under the second part of the provision is broader than the power to adjudicate disputes. While the adjudicatory powers are restricted to disputes connected with...

CERC's Powers To Refer Disputes To Arbitration Extends To Even Those Cases Which Fall Outside Its Jurisdiction: Delhi High Court

Arpita Pande

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