JUDGMENT :

ROHINTON FALI NARIMAN, J.

1. Leave granted.

2. The present appeal raises an important question as to the scope of arbitration proceedings under the Electricity Act, 2003 (hereinafter referred to as ‘Electricity Act’ for brevity), in particular, Section 86(1)(f) thereto read with Section 158.

3. The skeletal facts necessary to decide this case are as follows:

The appellant before us, Hindustan Zinc Limited, has four high tension electricity connections for its units at Chanderiya, Debari, Aghucha and Dariba, for which four contracts with the respondent were entered into for purchase of electricity.

4. The appellant also set up a captive power plant of 154 MW at Chanderiya, which was commissioned in February, 2005, and synchronized with the Rajasthan Vidyut Prasarran Nigam Limited Grid. Short term open access to transmission and distribution systems of this Grid was sought under the Regulations and requisite permission was obtained. Thereafter, the appellant entered into three open access agreements with the respondent on 10.03.2005 for wheeling of power from its captive power plant on the respondent’s distribution system to the three units that were owned by it which were the units at Aghucha, Debari and Dariba respectively. Open access commenced on 24.03.2005 and the power generated at its captive power plant was injected at 132 KV and 220 KV at the grid substations at Chittorgarh from where it was transmitted on the respondent’s transmission system and then supplied to the appellant’s three units.

5. The dispute that arose between the parties was as to the unscheduled interchange charges which become payable under Clauses 8 and 9 of the three agreements dated 10.03.3005:

Clauses 8 and 9 read as follows:

“(8) Scheduling:

The following procedure is agreed upon by the parties for scheduling open access power at generation and drawl at the receiving point by Open Access Consumer:

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(c) The Open Access Consumer at 10 AM each day shall furnish to Ajmer Discom schedule of drawl on 15 minute block basis which it intent to draw against the open access and on 15 minute block basis schedule against contract demand of existing connections, if any, separately. The drawl schedule of open access power shall be limited to the availability shown by the supplying generator in its schedule.

9. Settlement

(a) The parties agree that the settlement of mismatch between the schedule injection and actual injection by the generating station injecting open access power into State Transmission System of by the generating station embedded in the Distribution System for each 15 minute block shall be done in following manner:

(i) Un-Schedule generation not exceeding 5% of the generation/injection scheduled in any 15 minute block at UI price specified by the Commission for the state from time to time.

(ii) Generation exceeding 5% of the generation/injection scheduled in any 15 minute block shall be considered as zero and no UI charges shall be receivable by the generating station for such excess generation.

(iii) The mismatch between the schedule generation and actual generation shall be determined from the meter data down loaded through MRI and 15 minute block-wise schedule furnished for each day during the billing month.

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(c) The mismatch in total drawl scheduled by consumer against open access and against existing contract demand and total actual drawl in each 15 minute block shall be done in following manner:

(i) Un-schedule drawl not exceeding 5% of the total schedule made by the consumer against open access and existing Discom connections in any 15 minutes block shall be priced at UI rate and payable/receivable by the Open Access Consumer.

(ii) The balance mismatch in scheduled and actual drawl shall be paid by the Open Access Consumer to the Ajmer Discom at the mutually agreed rates and in absence of any agreeme