Delhi High Court: CERC’s Power To Refer Dispute Involving Generating Companies Or Transmission Licensee For Arbitration Prevails Over Court’s Referral Powers

The Delhi High Court held that the power of the Central Electricity Regulatory Commission (CERC) to refer a dispute involving generating companies or transmission licensee for arbitration prevails over the referral powers of a Court/authority other than the CERC, under Sections 8 or 11 of the Arbitration and Conciliation Act, 1996 (A&C Act).

The Court held thus in a Petition filed under Section 9 of A&C Act, praying for an Order restraining/injuncting the licensee within the meaning of Section 2(39) of the Electricity Act, 2003 from unilaterally deducting amounts from the Petitioner’s monthly invoices.

A Single Bench of Justice Purushaindra Kumar Kaurav observed, “Section 79(1)(f) of the Electricity Act vests two distinct powers with the CERC, them being, adjudicatory powers and referral powers. The CERC in exercise of its adjudicatory powers can only adjudicate upon disputes connected with Section 79(1)(a) (d). However, while exercising its referral powers, it can refer “any” dispute for arbitration. … The power of the CERC to refer a dispute involving generating companies or transmission licensee for arbitration prevails over the referral powers of a Court/authority other than the CERC, under Sections 8 or 11 of the Arbitration Act.”

The Bench further held that the CERC has the exclusive power and prerogative under Section 79(1)(f) of the Electricity Act to refer disputes concerning generating companies or transmission licensee for arbitration.

Senior Advocate Jayant Mehta represented the Petitioner, while Senior Advocate M.G. Ramachandran represented the Respondent.

Factual Background

The Petitioner company namely Renew Wind Energy (AP2) Pvt. Ltd. was operating a 300 MW wind power project in Kutch, Gujarat. Whereas, the Respondent company namely Solar Energy Corporation of India (SECI) was a Renewable Energy Implementing Agency (REIA) designated by the Ministry of New and Renewable Energy (MNRE). The Petitioner was selected by the Respondent through a Request for Selection (RFS) process and had executed a Power Purchase Agreement (PPA) for the supply of 300 MW of power for 25 years from the Scheduled Commissioning Date (SCD). In May 2025, SECI issued a notice to the Petitioner alleging non-fulfilment of minimum energy requirement of 946.08 MUs and demanded, as compensation under Article 4.4.1 of the PPA, 75% of the cost of shortfall in energy terms, failing which, it claimed, the applicable amount would be deducted from the next month’s energy invoice of the Petitioner.

The Petitioner stated that such shortfall occurred solely on account of force majeure events, which under Article 4.4.3 of the PPA, absolve the Petitioner from liability of compensation. Apprehending coercive recovery before the constitution of the Arbitral Tribunal, the Petitioner approached the High Court under Section 9 of the A&C Act, seeking urgent interim protection by way of restraint against the operation of the impugned letter and any consequential deductions.

Court’s Observations

The High Court in the above context of the case, said, “The power of CERC, qua the first facet, is discretionary in nature, thereby allowing the Commission to choose whether to adjudicate upon the dispute or to refer it for arbitration. … Thus, in a case before the CERC involving generating companies or transmission licensee, where the dispute is connected with matters listed under Section 79(1)(a)-(d), the CERC may choose to itself adjudicate upon the dispute or refer the same for arbitration.”

The Court enunciated that mere existence of an arbitration clause in the agreement between the parties would not have a determinative effect on the CERC’s decision while exercising its discretionary power under the provision and the insistence of the parties to seek a mandatory referral for arbitration on the strength of the arbitration clause would conflict with the discretionary powers of the CERC under Section 79(1)(f).

“Significantly, the CERC is bound to refer a dispute for arbitration if there exists an arbitration clause in the agreement relied upon by the parties before it, and the dispute which is agitated does not relate to matters connected with Section 79(1)(a)-(d). There is, in this context, no discretion vested with the CERC. Thus, once it is ascertained that the nature of dispute falls beyond the matters enumerated in Section 79(1)(a)-(d) and there exists an arbitration clause in the agreement entered into between the parties, the CERC is bound to refer the same for arbitration”, it noted.

The Court emphasised that the Legislature’s choice of words must be presumed deliberate and cannot be disregarded unless it produces absurd results and where the language has been consciously altered, Courts cannot interpret the provision so as to nullify that change.

“The interpretation advanced by the petitioner runs contrary to the plain wording of the statute. … Even otherwise, in principle, it may be seen that if an authority has the power to decide upon its jurisdiction, a party cannot claim before a separate forum that the requirements for conferring jurisdiction upon the said authority have not been fulfilled and, therefore, a given dispute should not be referred to that authority. If such an argument were to be accepted, all statutory provisions empowering authorities/bodies to decide upon their jurisdiction shall become otiose and redundant”, it remarked.

The Court further said that it does not expect Senior Counsels to personally investigate each Judgment which they would cite before a Court of law, and to check whether a Review, Appeal or Revision is pending against the same, as that duty rests upon the counsel or firm instructing the senior counsels.

“The instructing and briefing counsels/law firms, are expected to diligently and sincerely verify authorities before they cite them in a Court. Reliance upon a decision that is under review or appeal, without disclosing such pendency, amounts to lack of candour to the Court and may mislead the adjudicatory process. Such conduct falls short of the standard of fairness and completeness that is expected from officers of the Court”, it added.

The Court observed that the CERC has the power to refer a dispute, which falls outside the scope of Section 79(1)(a)-(d), for arbitration when there exists an arbitration clause in the agreement involving generating companies or transmission licensee and this power needs to be mandatorily exercised, and the party seeking the referral has, in such a situation, a right to be referred for arbitration.

“… the CERC’s referral power, as also the act of referring parties for arbitration, is effectively a trigger mechanism for invoking the provisions of the Arbitration Act. In other words, it is through Section 79(1)(f) that the Arbitration Act gets operationalised”, it clarified.

The Court also noted that the adjudicatory powers may be different, however, the referral powers are similarly worded.

“Thus, qua referral powers, neither the CERC nor the State Commission is bound by the nature of dispute before them. To that extent, the scope of powers is the same”, it elucidated.

Conclusion

Furthermore, the Court said that the referral power of the CERC is evidently without a subject matter bar and any such bar cannot be carved out by way of a judicial construction.

“A respondent seeking a matter to be referred to CERC for adjudication under Section 79(1)(f) must satisfy the Court under which sub clause of Section 79(1) the dispute falls. This obligation falls upon the respondent as the adjudicatory powers of the CERC are neither as broad those of the State Commission, nor as broad as its referral powers. The said decision perfectly aligns with the conclusions reached by this Court”, it added.

The Court observed that merely because a dispute has arisen from a breach of contract would not necessarily be determinative of the nature of dispute.

“The Commission’s role is not to monopolise adjudication but to ensure that each dispute is resolved before the most appropriate forum— whether regulatory or arbitral—depending upon the character of the dispute, the need for regulatory oversight, and the imperative of timely, specialised, and efficacious adjudication”, it concluded.

Accordingly, the High Court dismissed the Petition.

Cause Title- Renew Wind Energy (AP2) Pvt. Ltd. v. Solar Energy Corporation of India (Neutral Citation: 2025:DHC:9650)

Appearance:

Petitioner: Senior Advocate Jayant Mehta, Advocates Mukherjee, Girik Bhalla, Sai Snigdha Nittala, Juhi Senguttuvan, Priyanka Vyas, Yashaswi Kant, Prayush Singh, and Pallavi Arora.

Respondent: Senior Advocate M.G. Ramachandran, Advocates Anushree Bardhan, Srishti Khindaria, Somya Sahni, Ritika Singh, and Aneesh Bajaj.

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