WHO DECIDES THE DECISION-MAKER? THE CONFLICT OF JURISDICTION OVER REFERRAL POWER OF CERC UNDER THE ELECTRICITY ACT, 2003

The interaction of the Electricity Act, 2003 [“Electricity Act”] and the Arbitration and Conciliation Act, 1996 [“A&C Act”] has generated considerable uncertainty. For close to two decades, courts and arbitral tribunals have been struggling with a cluster of questions that arise when disputes emerge between parties to a Power Purchase Agreement [“PPA”]. The first among the many questions is whether the subject matter of the dispute is legally arbitrable in sense contemplated by the Supreme Court in Vidya Drolia v. Durga Trading Corporation, [“Vidya Drolia”] particularly, whether the nature of right asserted excludes arbitration altogether. The second concerns whether the relevant regulatory commission, whether State or Central, possesses adjudicatory jurisdiction over the dispute. The third addresses which authority is competent to refer the parties to the arbitration or appoint an arbitrator. The fourth requires an examination of whether a party has waived its right to arbitrate by failing to invoke Section 8 of the A&C Act, 1996 [“Section 8”]. 

The answer to these, as can be seen from the above record, depends upon the parties to the dispute, the nature of the dispute itself, and the provision of the Electricity Act under which the parties stand, including the conduct of the parties in invoking Section 8.

The pending question before the Supreme Court [“SC”] in Tata Power Company Limited v. Gujarat Urja Vikas Nigam Limited, Diary No. – 37812 of 2026, is regarding the extent of power to regulate held by the electricity commissions, i.e., the point at which a dispute becomes one that needs to be adjudicated by the commission and cannot be referred to arbitration. The SC has provided some guidance via an order in the case of Damodar Valley Corporation v. M.P. Power Management Co. Ltd.[“Damodar Valley”] in this regard. While the order is not a detailed ruling on the merits, the Court declined to interfere with APTEL’s judgment on the ground of “the difference of language in Section 79(1)(f) from Section 86(1)(f)” of the Electricity Act, observing that the power of CERC under Section 79(1)(f) is “different from the discretion exercised by the State Electricity Regulatory Commission under Section 86(1)(f).”

Until the Apex Court delivers its verdict, there exists an uncertainty within the realm of law regarding electricity disputes. The two recent cases of Renew Wind Energy (AP2) Pvt. Ltd. v. Solar Energy Corporation of India [“Renew Wind Energy”], decided by the Delhi High Court [“DHC”], and the Appellate Tribunal for Electricity’s [“APTEL”] ruling in Gujarat Urja Vikas Nigam Ltd. v. Tata Power Ltd. [“GUVNL”] illuminate the current state of law in this regard.

I.              The Starting Point: GUVNL And The Special Law Framework

Any discussion of arbitrability in electricity disputes must begin with the SC’s judgment in Gujarat Urja Vikas Nigam Ltd. v. Essar Power Ltd. [“Essar Ltd”] wherein the court held that disputes between licensees and generating companies cannot be referred to a privately constituted arbitral tribunal under Section 11 of the A&C Act [“Section 11”]. Unlike Vidya Drolia framework that is focused on arbitrability of the matter itself, the landmark ruling of Essar Ltd. is primarily concerned with the questions of appropriate forum and adjudicatory authority to decide the dispute.

The Electricity Act is a special law, and its mechanism for dispute resolution overrides the general provisions of the A&C Act to the extent of any inconsistency. However, the Hon’ble SC did not hold that disputes arising under the Electricity Act are inherently non-arbitrable. Instead, it held that Section 86(1)(f) of the Electricity Act [“Section 86(1)(f)”] applies, the State Commission alone is competent to decide whether to adjudicate the dispute or refer it to arbitration. The Apex court relied on the wordings of Section 86(1)(f), which empowers the State Commission to adjudicate disputes between licensees and generating companies, or to refer any such dispute for arbitration.

The SC read the word “and” in that provision as “or” and accordingly held that the Commission either adjudicates the dispute by itself or refers it to arbitration, it cannot do both simultaneously. It consequently held that whenever there is a dispute between a licensee and a generating company, only the State Commission or an Arbitral tribunal constituted pursuant to its reference can resolve the dispute. This is a statutory mechanism and cannot be bypassed by invoking Section 11 to constitute a private arbitral tribunal.

The pending conundrum that has occupied courts and tribunals ever since is how far this logic extends, and how it applies to the Central Commission under Section 79(1)(f) of the Electricity Act [“Section 79(1)(f)”], which is worded differently and is narrower in scope.

II.            Section 79(1)(f): The Adjudication-Referral Structure

Section 79(1)(f) confers a two-fold power on the Central Electricity Regulatory Commission [“CERC”]. First, it empowers the CERC to adjudicate disputes involving generating companies or transmission licensees regarding matters connected with clauses (a) to (d) of Section 79(1). Second, it empowers the CERC to refer any dispute for arbitration. The notable feature of the provision is the internal asymmetry between these two limbs as the adjudicatory power is expressly qualified by subject matter concerning with clauses (a) to (d) of Section 79(1), while the referral power uses the unqualified phrase “any dispute” without that subject-matter constraint. This asymmetry has been read in two opposing ways, and that divergence is the heart of the current uncertainty.

The DHC in Renew Wind Energy held that the asymmetry is deliberate. It held that CERC’s referral power has two facets. The first covers disputes that the CERC can itself adjudicate viz, tariff-connected disputes within clauses (a) to (d) of Section 79(1). Here, the CERC has discretion to adjudicate the dispute itself, or refer it to an arbitrator. The mere existence of an arbitration clause in the PPA does not compel the CERC to refer, that would cut across the CERC’s discretionary power. The second facet covers disputes that fall outside clauses (a) to (d) of Section 79(1) but have a valid arbitration clause. The CERC is bound to refer the dispute to arbitration, even though it cannot itself adjudicate it. The court drew support from the APTEL judgment in MP Power Management Company Ltd. v. Damodar Valley Corporation [“MP Power Management Co.”] and from the change in statutory language between the Electricity Regulatory Commissions Act, 1998 and the present Electricity Act – under the old provision, the scope of arbitration and adjudication were co-extensive; but the parliament consciously departed from that with the Electricity Act.

In the GUVNL case, the APTEL rejected this approach where it by holding that the Commission is not entitled to refer the dispute for arbitration if it falls outside the adjudicatory jurisdiction of the commission. To interpret the term “any dispute” to be completely free of the limitations set out in clauses (a) to (d) of Section 79(1) will amount to an unrestricted referral power – one did not envisage under the Electricity Act. However, this must be read alongside the position adopted by the DHC in Renew Wind Energy that the term “any dispute” mentioned in Section 79(1)(f) operated independently of the clauses (a) to (d) of Section 79(1). This extends the referral power of the CERC to dispute which carry a valid arbitration clause but it cannot itself adjudicate.

The APTEL drew support from the Hindustan Zinc Ltd. v. Ajmer Vidyut Vitran Nigam Ltd. [“Hindustan Zinc”], wherein the SC held that referral of a dispute under the Electricity Act must be limited to those disputes which the Commission had jurisdiction to decide. However, Hindustan Zinc, arose under Section 86(1)(f) in the specific context of a dispute involving an open access consumer who did not fall within the statutory classification of licensee or generating company. Moreover, Section 79(1)(f) carries a materially different structure from Section 86(1)(f). It provides a distinct internal bifurcation as its adjudicatory limb is expressly qualified by subject matter, being confined to matters connected with clauses (a) to (d) of Section 79 (1) f, while its referral limb employs the unqualified phrase “any dispute”. The APTEL extracts a general proposition from that holding and transposes it to Section 79(1)(f), a question the Hindustan Zinc was not called upon to address.

The variance in the two decisions leads to competing construction of the phrase “any dispute”. As per Renew Wind Energy, the phrase operates independently of the clauses (a) to (d) of Section 79(1). Such reading expands the CERC’s referral power beyond its jurisdiction to adjudicate the case. On the other hand, APTEL in GUVNL held that “any dispute” refers only to disputes falling within that jurisdiction, making the power of reference coterminous with the power of adjudication.

Both interpretations encounter their own difficulties. The APTEL’s coterminous construction must account for the independent use of the term “any”. If the referral power is indeed coterminous with the adjudicatory power, the term “any” adds nothing to the provision. On the other hand, the DHC’s broader construction leaves unclear as to what limiting principle governs the apparent expansion of CERC's referral power beyond clauses (a) to (d) of Section 79(1), and raises the institutional question of why Parliament would vest in CERC the role of arbitral gatekeeper in respect of disputes that fall entirely outside its adjudicatory jurisdiction.

Until the Apex Court delivers a final word on this matter, the question remains live. But the textual and structural case for coterminous referral and adjudicatory powers under Section 79(1)(f) is the stronger of the two positions.

III.          What Constitutes a Tariff Dispute

Both APTEL and the DHC agree that “the scope of the term’s ‘tariff’ and ‘regulation of tariff’ is wide.” The definition of a tariff is not limited to the rate itself. It includes all the terms and conditions which necessarily impact the regulation of tariff, including conditions subsequent, claim for extension due to force majeure events, etc.

In GUVNL case, APTEL applied this broad understanding to disputes arising out of a competitively bid PPA – involving short-supply and non-supply claims, availability declarations, scheduling and dispatch, capacity charge deductions, and levy of penalties. It held that such disputes bear a sufficient connection to tariff regulation to fall within Section 79(1)(f)’s adjudicatory reach.

Earlier in MP Power Management Co., APTEL had formulated a working test that all matters which would have a bearing upon the tariff of a generating company are tariff disputes. This included Change in Law claims, force majeure events, and delayed commissioning, i.e., matters that have a direct bearing upon the tariff. However, the test cannot mean that every dispute arising under a PPA becomes a tariff dispute merely because its eventual financial consequences may affect the costs, revenues, or recovery of one of the parties. Such an interpretation would leave little room for a genuinely contractual dispute to be referred to arbitration.

The relevant inquiry must therefore be whether the right asserted, and the relief sought have a direct and proximate nexus with the regulation or determination of tariff. In making this assessment, regard must be had to the source of the right being asserted, the nature of the relief sought, and whether the adjudication of the claim would require an alteration of, or have a direct bearing upon, an adopted tariff or another regulatory determination. A dispute may also fall within the regulatory domain where its resolution affects matters extending beyond the bilateral contractual relationship, such as scheduling, dispatch, availability, or other obligations having implications for the functioning of the grid or the regulatory framework. Conversely, a mere financial consequence for the generating company is insufficient where the connection with tariff is only incidental.

Thus, a claim for Change in Law compensation, force majeure relief affecting the period of supply, or delayed commissioning may be tariff-connected because the determination of such claims directly affects the tariff or the regulatory assumptions underlying it. On the other hand, a dispute concerning, for instance, a purely contractual representation or warranty, confidentiality obligation, or another bilateral obligation whose determination neither alters nor directly bears upon the tariff or any regulatory determination, would remain a purely contractual dispute even if its breach ultimately results in financial loss to one of the parties.

The distinction, therefore, is not between disputes which have financial consequences and those which do not. The question is whether the dispute concerns a right or obligation whose adjudication requires the exercise of the Commission’s regulatory jurisdiction over tariff, or whether tariff is merely an incidental economic consequence of resolving an otherwise contractual dispute.

The Renew Wind Energy ruling adopted a nexus test: by looking for a meaningful connection between the dispute and the regulation of tariff, including disputes that affect considerations which fed into the fixation of tariff, or entitlements and obligations whose determination uses tariff as an input. Such disputes fell within CERC’s adjudicatory jurisdiction.

IV.          The Unresolved Doctrinal Tension

Two tensions remain open before the SC. First, whether CERC’s referral power extends to disputes it cannot adjudicate or is co-extensive with its adjudicatory jurisdiction. The DHC and APTEL have taken opposing positions, and the SC has not yet spoken directly to Section 79(1)(f) on this point.

Second, a separate issue concerns the relationship between CERC’s statutory jurisdiction under Section 79(1)(f) and the procedural requirement under Section 8. These are distinct inquiries. The first is jurisdictional: whether the dispute falls within the matters over which CERC is empowered to adjudicate under Section 79(1)(f). If the dispute falls outside that statutory jurisdiction, the failure to invoke Section 8 at the appropriate stage cannot, by itself, confer jurisdiction upon CERC which the Electricity Act does not otherwise provide. The second is procedural: where a dispute is otherwise referable to arbitration and a party seeks to rely upon the arbitration agreement before the judicial authority seized of the matter, Section 8 requires the request to be made before the submission of the first statement on the substance of the dispute. GUVNL is relevant to this latter question, as it demonstrates the consequences of participating in proceedings before the Commission without raising the arbitration plea at the stage contemplated by Section 8. The Section 8 requirement therefore operates within the existing jurisdictional framework; it does not substitute for, or determine, the threshold question of whether CERC possesses statutory jurisdiction over the dispute.

V.             The Practical Position

The position emerging from the above discussion is that the question of whether a dispute under a PPA can be referred to arbitration cannot be answered merely by looking at the existence of an arbitration clause. The inquiry must proceed in sequence. The first question is whether the parties fall within the framework of Section 79(1)(f). The second, is whether the dispute concerns a matter connected with the functions specified under Section 79(1)(a)-(d). The third is the nature of the right asserted and the relief sought. Only after these questions are answered does the issue of referral to arbitration arise. Even then, it must be separately examined which authority is competent to make the reference, whether the right to invoke arbitration has been preserved in accordance with Section 8, and whether separating the claims would result in inconsistent findings or multiplicity of proceedings.

First, the parties to the dispute must be identified. Section 79(1)(f) operates within the jurisdictional framework created by Section 79(1). Thus, where the dispute involves generating companies or transmission licensees falling within the Central Commission’s jurisdiction, the question of CERC’s role under Section 79(1)(f) arises. Where the dispute instead falls within the intra-State framework involving a licensee and a generating company, the position must be examined under Section 86(1)(f). The distinction is significant because the language of the two provisions is different and the reasoning adopted in relation to one cannot automatically be extended to the other.

Second, the nature of the dispute must be examined to determine whether it is connected with the matters under Section 79(1)(a)-(d), particularly the regulation of tariff. The scope of tariff, as seen above, is wide and is not confined to the rate of electricity alone. Claims concerning Change in Law, force majeure, delayed commissioning, availability, scheduling, dispatch and capacity charges may have a sufficient connection with tariff or the regulatory framework to fall within CERC’s adjudicatory jurisdiction. At the same time, the mere fact that a dispute has financial consequences cannot make it a tariff dispute. Almost every breach of a PPA may eventually affect the revenue or costs of one of the parties. The relevant question is whether the connection with tariff is direct or merely incidental.

Third, the right being asserted and the relief sought must be identified. Where the resolution of the claim would require a determination affecting an adopted tariff, the assumptions underlying a tariff determination, or another regulatory determination, the dispute would have a stronger claim to fall within the Commission’s jurisdiction. Similarly, matters concerning obligations that have implications beyond the bilateral contractual relationship, such as availability, scheduling or dispatch, may engage the regulatory framework. On the other hand, a claim concerning a purely bilateral contractual obligation, the determination of which neither affects tariff nor requires the exercise of any regulatory power, cannot be brought within the jurisdiction of the Commission merely because its breach results in financial loss. The distinction, therefore, is not between disputes which have financial consequences and those which do not, but between disputes having a direct regulatory nexus and those where the connection with regulation or tariff is only incidental.

Fourth, once the position of the dispute within the statutory framework has been determined, the question is when and before which authority arbitration was invoked. This question is distinct from whether the subject matter of the dispute is capable of arbitration. As Renew Wind Energy demonstrates, the existence of an arbitration clause does not necessarily permit the parties to directly invoke the appointment or referral mechanisms under the A&C Act where the Electricity Act assigns a specific role to the Commission. Equally, Section 8 must be invoked at the appropriate stage. A party which participates in proceedings before the Commission by making submissions on the substance of the dispute without raising the arbitration plea may, as GUVNL demonstrates, lose the right to subsequently insist on arbitration. The availability of arbitration, the authority competent to make the reference, and the procedural preservation of the right to invoke arbitration are therefore separate inquiries.

Finally, it must be considered whether the claims can be separated without creating inconsistent findings or multiplicity of proceedings. A PPA dispute may contain issues that appear to have different character. Certain claims may involve matters connected with tariff or regulation, while others may arise from purely contractual obligations. However, the possibility of attaching different labels to different claims does not necessarily justify bifurcation. Where the claims arise from the same transaction and their factual or legal determination substantially overlaps, dividing them between the Commission and an arbitral tribunal may result in conflicting findings. This was one of the concerns underlying the decision in GUVNL. The practical inquiry must therefore examine whether the claims are genuinely severable and capable of independent determination.

The framework, therefore, provides a way of addressing the present uncertainty without treating every electricity dispute as necessarily non-arbitrable or every PPA dispute as one that can proceed directly to arbitration. The starting point must be the statutory jurisdiction of the Commission, followed by the nature of the dispute and the right and relief involved. The question of arbitration then arises at a separate stage, involving both the authority competent to make the reference and the way the right to arbitration has been invoked.

This is also the substantive position that emerges from the competing interpretations of Section 79(1)(f). The textual and structural difficulty with the broader construction adopted in Renew Wind Energy is that it permits CERC to act as the arbitral gatekeeper for disputes over which it has no adjudicatory jurisdiction under Section 79(1)(f). Such an interpretation separates the referral function from the statutory jurisdiction within which that function is situated. The coterminous construction adopted by APTEL in GUVNL, on the other hand, gives effect to the statutory scheme by treating CERC’s power to refer as operating within the limits of its jurisdiction under Section 79(1)(f). Although this construction requires the independent significance of the words “any dispute” to be addressed, that difficulty is more appropriately resolved through the statutory context than by reading the referral limb as conferring an unrestricted jurisdiction upon CERC.

This reading also finds support in the Supreme Court’s order in Damodar Valley, where the Court declined to interfere with APTEL’s judgment, specifically noting the difference in language between Section 79(1)(f) and 86(1)(f) and observing that the power of CERC under Section 79(1)(f) is different from the discretion exercised by the State Commission under Section 86(1)(f). While the order does not conclusively determine the scope of Section 79(1)(f), the Court’s recognition of the textual distinction between the two provisions reinforces the need to construe Section 79(1)(f) based on its own language and statutory structure.

Accordingly, the more coherent approach is to first identify the statutory jurisdiction of CERC under Section 79(1)(f), determine whether the particular dispute falls within matters connected with clauses (a) to (d), and thereafter examine whether the dispute is capable of being referred to arbitration and whether the procedural requirements for invoking arbitration have been satisfied. The words “any dispute” cannot be disregarded, but neither should they be read as creating a standalone referral jurisdiction detached from the statutory framework of Section 79(1) . On this construction, the referral power remains distinct from the adjudicatory power in its statutory formulation but is not independent of the jurisdiction within which Section 79(1)(f) operates.

Until the scope of Section 79(1)(f) is conclusively settled, this sequential approach provides the clearest practical position. It keeps separate the questions that have often been conflated: whether the dispute falls within the Commission’s jurisdiction, whether its subject matter can be resolved through arbitration, who is competent to refer it to arbitration, and whether the right to arbitration has been preserved. The answer to an electricity dispute, therefore, does not lie in treating the Commission as the inevitable first forum in every case, or in treating an arbitration clause as sufficient to bypass the statutory framework. It lies in determining, in that sequence, the statutory position of the parties, the regulatory character of the dispute, the right and relief asserted, the way arbitration has been invoked, and the consequences of separating interconnected claims.