CERC can refer Non-Adjudicable Disputes to Arbitration: Delhi High Court Clarifies Scope of Section 79(1)(f)

Introduction

In Renew Wind Energy (Ap2) Pvt Ltd v. Solar Energy Corporation of India (SECI), the Delhi High Court considered the scope of the Central Electricity Regulatory Commission’s powers under Section 79(1)(f) of the Electricity Act, 2003. The Court examined whether a petition under Section 9 of the Arbitration and Conciliation Act, 1996 was maintainable when the dispute fell within the regulatory framework of the Electricity Act.

Issues

The primary issues before the Central Electricity Regulatory Commission were whether the recent reduction in GST on renewable-energy devices qualified as a “Change in Law” event under the PPAs executed by renewable-energy generators, and if so, whether generators were obligated to pass on the resulting financial benefit to the procurers.

Facts

Renew entered into a PPA with SECI to supply up to 300 MW for a duration of 25 years and had to provide a minimum level of annual energy under this PPA. On 02-May-2025, SECI notified Renew that it would be compensating SECI 75% on the short amount of power for 2024-25 as stated in the PPA, which would be deducted from Renew’s upcoming monthly invoice. Renew approached the High Court of Delhi under Section 9 of the Arbitration Act to prevent these deductions pending the constitution of an arbitral tribunal arguing that SECI’s action amounts to coercion and would happen prior to the forming of an arbitral tribunal. SECI opposed Renew’s application asserting that the dispute could not be resolved in arbitration due to Section 79(1)(f) of the Electricity Act granting exclusive jurisdiction to the CERC for resolving or referring such disputes to arbitration. The central question was whether the dispute is within the purview of the Arbitration Act or the Electricity Act.

Arguments

According to SECI, the CERC has exclusive jurisdiction over this matter because it falls under tariff-related obligations in the Power Purchase Agreement (PPA). SECI stated that based on Section 79(1)(f) of the Electricity Act, the CERC has full authority to resolve or perform arbitration on disputes regarding implementing tariff-related provisions in a PPA. SECI also pointed to Section 2(3) of the Arbitration and Conciliation Act 1996, which states that where there is a specific method for resolving disputes, the Arbitration and Conciliation Act is not applicable. SECI also referred to Section 174 of the Electricity Act, which states that the Electricity Act has priority and, therefore, SECI concluded that the Section 9 application before the High Court was invalid.

Conversely, Renew has argued that the present dispute arises from issues regarding contractual obligations, as opposed to issues regarding tariff determination or issues of a regulatory nature (Section 79(1)(a)-(d)). Renew has argued that not all disputes under the Power Purchase Agreement are considered to be regulatory disputes and that the authority of the CERC to rule on the claim is limited to adjudication of tariff cases, creating a situation in which the parties can proceed with arbitration. Therefore, Renew maintained that the Section 9 application remains a valid application.

Judgement

The Court found that the petition filed under Section 9 of the Arbitration Act could not be maintained because it concluded that Section 79(1)(f) of the Electricity Act includes generating companies as well as transmission licensees as parties to disputes, thereby creating separate authority for CERC. Specifically, CERC can adjudicate (decide) disputes that arise as a result of the functions listed in Sections 79(1)(a)-(d) of the Electricity Act, while also having authority to refer (send) disputes to arbitration.

The Court also contended that the word “and” in Section 79(1)(f) should be read as “or”, which gives rise to two alternate powers: Adjudication of specific types of disputes, or the power to send (refer) them to arbitration. When an arbitration agreement exists, the power to refer disputes extends to “any dispute” involving generating companies or transmission licensees, and that the adjudication power is limited to a defined number of categories.

In addition, it is provided by Section 94(2) of the Electricity Act that the parties may seek interim relief similar to what is available under Section 9 of the Arbitration Act prior to proceedings being conducted before CERC. Therefore, Renew would not be without a remedy. In view of this reasoning, the Court dismissed the petition filed under Section 9 of the Arbitration Act.

Analysis

The Court explains how the Electricity Act and the Arbitration Act relate to one another structurally, determining that the Electricity Act contains provisions unique to it which define how to resolve disputes in that sector under its own authority, and this is supported in Section 2(3) of the Arbitration Act, which states that where an alternative Act has a mechanism for resolving specific types of disputes, it is within the provisions of that Act, and not under the Arbitration Act, that disputes arising out of the provisions of electricity contracts or similar agreements shall be resolved. The Court’s decision interprets the phrase in Section 79(1)(f) as using “and” between “may refer” and “decide,” to provide for CERC to adjudicate in either capacity depending on the particular circumstances of a dispute.

Additionally, the Court’s reasoning indicated that regulatory and contractual variations exist, and thus, should not be considered as one and the same type of disputes; whereas all contractual types of disputes can be considered for CERC to refer to CERC’s jurisdiction if the parties are generating companies. The referral powers to CERC in connection to disputes do not relate to the categorization of a dispute but instead to the particular categories of the individuals involved in the disputes, and therefore there can be multiple categories for each dispute.

Conclusion

The ruling defines the limits of Section 9 of the Electricity Act in resolving disputes about the electricity industry and asserts the dominance of the Electricity Act. In addition, it differentiates between the authority of CERC to adjudicate disputes versus its broader capability to make referrals. Finally, the ruling clarifies that, where Section 79(1)(f) is in effect, all disputes between parties regarding the Electricity Act are required to be submitted to CERC.