The Electricity Act, 2003 ( “Electricity Act”) is a special act which governs the generation, distribution, transmission and trading of electricity among the stakeholders including the penalties, breach, payment, termination etc. 

Any dispute under the Electricity Act, CERC/ State Electricity Regulatory Commission(s) has been granted power for adjudication of disputes under the following provisions of Electricity Act:

1. U/s 79(1) (f): CERC has been empowered to adjudicate disputes relating to transmission licensee in case of inter-State transmission of electricity or determination of tariff and to refer such dispute for arbitration;
2. U/s 86(1)(f): State Electricity Regulatory Commissions to adjudicate the disputes between the licensees and generating companies over which the respective  State Electricity Regulatory Commission has jurisdiction and to refer any dispute for arbitration.
3. U/s 158: The dispute resolution clause that lays down the relevant authority for the resolution of the dispute by arbitration, where apart from the appointment of arbitrator by the relevant authority under the Electricity Act, the arbitration shall be governed by the provisions of the Arbitration and Conciliation Act, 1996 ( “Arbitration Act”).
4. U/s 174: The Electricity Act shall prevail over any other inconsistent law.

The conflict between Electricity Act and Arbitration Act w.r.t. appointment of arbitrator was been adjudicated  by the hon’ble Supreme Court in the matter of Gujarat Urja Vikas Nigam Ltd. v. Essar Power Ltd. (2008)4SCC755, while deciding the issue- “Whether an application for the appointment of an arbitrator under Section 11 of the Arbitration Act for adjudication of disputes between the licensee and the generating companies is maintainable in view of the provisions of the Electricity Act?

The hon’ble Supreme Court had the following observation while deciding the power of the appointment of the arbitrator:

1. Section 86(1)(f) of the Electricity Act, specifically provides for the manner of adjudication disputes between the licensee and generating companies, which can be adjudicated either by State Commissions or the person or persons to whom the matter is referred for arbitration.
2. Section 174 of the Electricity Act lays down that the Electricity Act will prevail over any other inconsistent law and since Section 86(1) (f) of the Electricity Act is a special provision, it will override the general provisions under the Arbitration Act.
3. Whenever there is dispute between a licensee and the generating companies only the State Commission or Central Commission (as the case may be) or arbitrator ( or arbitrators) nominated by it can resolve such a dispute, whereas all other disputes( unless there is some other provision in the Electricity Act) would be decided in accordance with Section 11 of the Arbitration Act.

In the matter of Chief General Manager (IPC) MP Power Trading Co. Ltd. and another v. Narmada Equipments Pvt. Ltd. (2021) SCC OnLine SC 255 , the principles laid down by hon’ble Supreme Court in Gujarat Urja Vikas Nigam Ltd. case has been upheld and have settled the issue for the appointment of the arbitrator.

However, the disputes which can be resolved through arbitration under the Electricity Act are yet to be crystallized.

Section 79 (1) (f) and 86(1) (f) of the Electricity Act do provides CERC and SERC respectively to refer the matter to arbitration

What disputes under Electricity Act can be resolved through arbitration?

In the matter of Madhya Pradesh Power Management Company Ltd. vs. Damodar Valley Corporation & Anr., APTEL has held the following disputes under the Electricity Act to be arbitrable, which has been upheld by the hon’ble Supreme Court, 2024 SCC OnLine SC 2936:

1. disputes relating to termination or breach of a contract, which do not impact the tariff directly/indirectly i.e. non-tariff disputes;
2. the disputes which are not covered under the regulatory functions of CERC;
3. when there is valid arbitration agreement among the parties and dispute is not related to tariff, directly or indirectly.

This article is for information purpose only and should not be taken as legal advice. To know further details, clarification, assistance or any advice on Arbitration, labour & employment claims under arbitration proceedings or any legal issues on arbitration, you may connect with us at admin@equicorplegal.com  / 08448824659 and visit www.equicorplegal.com