In a significant development, the Appellate Tribunal for Electricity (APTEL) vide its order dated 28 August 2024 in Appeal 309 of 2019: Madhya Pradesh Power Management Company Ltd. vs. Damodar Valley Corporation & Anr., has clarified that:
(a) disputes relating to termination or breach of a contract, which do not impact the tariff directly/indirectly, are non-tariff disputes; and
(b) the non-tariff disputes do not fall within the jurisdiction of the Central Electricity Regulatory Commission (CERC) under Section 79(1)(f) of the Electricity Act, 2003 and are therefore, arbitrable.
The afore-mentioned order of APTEL has also been upheld by the Supreme Court vide its order dated 23 September 2024 in Civil Appeal No. 10480 of 2024: Damodar Valley Corporation vs. Madhya Pradesh Power Management Company Ltd. & Anr.
Interestingly, the Supreme Court has also emphasised that the powers conferred on the CERC under the statute differ from the discretion exercised by the State Electricity Regulatory Commissions (SERCs).
Key observation of APTEL:
(a) Arbitration in Electricity Disputes: The concept of arbitration is not foreign to the disputes arising under the Electricity Act, 2003 and in appropriate cases, where valid arbitration agreement exists between the parties and the dispute does not concern the regulatory functions of the CERC, CERC is not only justified but obligated to refer the dispute for arbitration.
(b) Definition of Tariff Disputes: Tariff disputes include matters such as change in law, delayed completion of projects or force majeure events, which directly affect the tariff of the generating companies. These disputes fall exclusively under the jurisdiction of CERC as per Section 79(1) of the Electricity Act, 2003.
(c) Non-Tariff Disputes: Disputes related to termination and breach of Power Purchase Agreements (PPAs), which do not directly or indirectly affect the tariff, qualify as non-tariff related disputes and can be referred to arbitration.
(d) Alignment with Arbitration Law: There is no conflict or inconsistency between Section 8(1)(c) of the Arbitration and Conciliation Act, 1996 (A&C Act) and the Electricity Act, 2003. Section 8(1) makes it mandatory for a judicial authority to refer the parties for arbitration where it finds that a valid arbitration agreement exists between parties and a party to such agreement, so applies. The Electricity Act, 2003 also empowers the CERC to refer any disputes for arbitration, apart from adjudicating those involving generating companies and distribution companies.
