CERC Holds Exclusive Power to Refer Energy Sector Disputes to Arbitration, Ousting Court's Role: Delhi High Court

New Delhi: In a significant ruling clarifying the jurisdictional boundaries between judicial courts and regulatory bodies in the energy sector, the Delhi High Court has held that the Central Electricity Regulatory Commission (CERC) possesses the exclusive authority to refer disputes involving electricity generating companies to arbitration. The court, presided over by Justice Purushaindra Kumar Kaurav , dismissed a petition filed under Section 9 of the Arbitration and Conciliation Act , 1996, establishing that the special procedure under the Electricity Act , 2003, prevails over the general provisions of the Arbitration Act.

The court declared the petition filed by Renew Wind Energy (AP2) Pvt. Ltd. seeking an injunction against the Solar Energy Corporation of India (SECI) as "not maintainable," directing the petitioner to approach the CERC as the appropriate forum.

Background of the Dispute

The case originated from a dispute between Renew Wind Energy, which operates a 300 MW wind power project, and SECI, a central government agency. SECI had issued a notice to Renew Wind Energy demanding compensation for an alleged shortfall in the minimum energy supply for the financial year 2024-25, as stipulated in their Power Purchase Agreement (PPA). SECI threatened to deduct the claimed amount from the petitioner's monthly invoices.

Renew Wind Energy contended that the shortfall was due to force majeure events, which absolved them of liability under the PPA. Apprehending coercive deductions before an arbitral tribunal could be formed, the company approached the High Court under Section 9 of the Arbitration Act for interim protection.

Arguments of the Parties

Respondent's Stance (SECI): SECI, represented by Senior Advocate M.G. Ramachandran, raised a primary objection to the maintainability of the petition. They argued that: - The dispute, being connected to energy supply and potential compensation, implicitly involves tariff-related matters, bringing it under the CERC's jurisdiction as per Section 79(1)(f) of the Electricity Act . - The Electricity Act , being a special law, overrides the general provisions of the Arbitration Act, particularly Sections 9 and 11, due to its overriding effect under Section 174. - Only the CERC has the power to either adjudicate such disputes or refer them to arbitration, as established in precedents like * Gujarat Urja Vikas Nigam Ltd. v. Essar Power Ltd.

Petitioner's Stance (Renew Wind Energy): Senior Advocate Jayant Mehta, appearing for the petitioner, countered that: - The dispute was purely contractual, relating to damages for non-supply, and did not involve the determination or modification of tariffs. - The CERC's adjudicatory power under Section 79(1)(f) is limited to matters specified in clauses (a) to (d) of Section 79(1), which do not cover the present dispute. - If the CERC lacks jurisdiction to adjudicate the dispute, it consequently cannot have the power to refer it to arbitration. - The existence of a valid arbitration clause in the PPA entitled the parties to invoke the mechanism under the Arbitration Act directly.

Court's Detailed Analysis and Ruling

Justice Kaurav conducted an in-depth analysis of the statutory framework, particularly Section 79(1)(f) of the Electricity Act , which empowers the CERC "to adjudicate upon disputes... and to refer any dispute for arbitration."

Dual Powers of CERC: The court interpreted Section 79(1)(f) as granting the CERC two distinct powers: 1. Adjudicatory Power: Limited to disputes connected with tariff regulation and inter-state transmission (matters under Sec 79(1)(a)-(d)). 2. Referral Power: A broader, unqualified power "to refer any dispute for arbitration" involving generating companies or transmission licensees.

The court held that the legislature consciously expanded the CERC's referral power beyond its adjudicatory limits, a departure from the narrower provision in the erstwhile Electricity Regulatory Commissions Act, 1998.

Exclusivity of CERC's Referral Power: The judgment firmly established that this referral power is exclusive to the CERC. The court reasoned that the Electricity Act provides a "special statutory route to reach the destination, which is arbitration." Allowing courts to use the general route under Sections 8 or 11 of the Arbitration Act would "displace the forum chosen by the special law and render Parliament’s wisdom nugatory."

Drawing heavily on the Supreme Court's decision in Gujarat Urja Vikas Nigam Ltd. (GUVNL) , which interpreted the parallel provision for State Commissions (Section 86(1)(f)), the court concluded:

> "Applying the ratio of the GUVNL to the issue at hand would lead to the inexorable conclusion that the referral powers of the CERC under Section 79(1)(f) would preclude any other Court/authority, other than the CERC, from referring disputes involving generating companies or transmission licensee for arbitration."

Petitioner Not Left Remediless: Addressing the petitioner's concern about being left without a remedy for urgent interim relief, the court pointed to ** Section 9 4(2) of the Electricity Act **. This provision empowers the CERC to "pass such interim order in any proceeding... as that Commission may consider appropriate." The court clarified that this section acts as a statutory substitute for Section 9 of the Arbitration Act, allowing parties to seek interim protection from the CERC pending referral to arbitration.

Final Decision and Implications

The High Court concluded that the petition was not maintainable and dismissed it, granting the petitioner liberty to approach the CERC.

The judgment has significant implications for dispute resolution in the electricity sector. It solidifies the CERC's role as the sole gatekeeper for arbitration involving generating companies and transmission licensees, reinforcing the primacy of the special law ( Electricity Act ) over the general law (Arbitration Act). Stakeholders in the energy sector must now first approach the CERC to initiate arbitration, even for disputes that may appear purely contractual.