JUDGMENT

[Arising out of S.L.P. (Civil) No.24857 of 2004]

S.B. SINHA, J :

Leave granted.

Background facts The parties herein entered into a Power Purchase Agreement on 31.03.1997 for short gestation liquid fuel based power project of 355 MW.

The said agreement contained an arbitration clause in Article 14 thereof.

Dispute

The Plant was commissioned. In terms of the said agreement, the power generated in the Plant constructed by the Respondent herein was to be supplied to the Appellant Corporation. The price to be paid therefor by the Appellant included ’capacity charges’ and ’variable charges’. Upon commission of the Plant, various tests as regard capacity of the plant to generate electricity were carried out. The Appellant herein had been paying capacity charges on the output of the Plant which was fixed at 368.144 MW from 08.11.2001. A notice, however, was issued by the Appellant alleging that the capacity charges payable by it with reference to the installed capacity should have been fixed at 334.75 MW x Rh (relative humidity) factor with tolerance limit of + or \026 5% as per the agreement which works out at 351.49 MW and on that premise as to why future payments should not be made accordingly and why the previous bills should not be revised with reference thereto. The Respondent by a letter dated 17.12.2003 demanded withdrawal of the said notice from the Appellant.

Proceedings

In view of the threatened action on the part of the Appellant herein, an application purported to be under Section 9 of the Arbitration and Conciliation Act, 1996 (for short, ’the 1996 Act’) was filed before the City Civil Court praying for a permanent injunction restraining the Appellant herein from taking any unilateral decision pursuant to the said show cause notice. Evidently, the said application was filed relying on or on the basis of the arbitration clause contained in the said Power Purchase Agreement.

The Appellant, however, filed an application before the Andhra Pradesh Electricity Regulatory Commission (for short, ’the Commission’) originally constituted under the Andhra Pradesh Electricity Reform Act, 1998 (for short, ’1998 Act’), praying, inter alia, for fixing the installed capacity of the Plant and for consequential reliefs.

The said application before the Commission was filed by the Appellant herein on the premise that the Commission alone has the jurisdiction to arbitrate in respect of disputes and differences arising between the parties or to nominate an arbitrator therefor in terms of Section 37(1) of the 1998 Act corresponding to Section 86(1)(f) read with Section 174 of the Electricity Act, 2003 (for short, ’2003 Act’). However, in the meantime, as no arbitrator was appointed by the Appellant in terms of the arbitration agreement contained in Article 14 of the Power Purchase Agreement, an application purported to be under sub-sections (3) and (4) of Section 11 of the 1996 Act was filed before the Chief Justice of the Andhra Pradesh for appointment of an arbitrator. The said application is still pending.

A writ petition marked as Writ Petition No.7838 of 2004 was also filed by the Respondent before the Andhra Pradesh High Court on or about 22.04.2004 praying for issuance of a writ of prohibition against the Commission restraining it from proceeding to adjudicate the dispute between the parties on the premise that the constitution of the Commission was incomplete. In the said writ petition, an interim order was passed by the High Court directing "interim stay of the impugned proceedings purported to be taken by Respondent No.1 (Appellant herein) in terms of the impugned notice".

The Respondent’s application for grant of injunction in the proceedings initiated before the City Civil Court in the meanwhile was taken up for hearing and by an order dated 11.08.2004, the said Interlocutory Application was dismissed, holding that having regard to the provisions of the 1998 Act and the 2003 Act, the Commission alone had the jurisdiction to decide the