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Debate continues over which disputes under the Electricity Act, 2003 (act), can be arbitrated and the inter se primacy between the act and the Arbitration and Conciliation Act, 1996 (arbitration act).

Such issues continue to be litigated, as in the decision of the Appellate Tribunal for Electricity (APTEL) in . The Supreme Court has declined to hear an appeal from that decision, affirming APTEL’s order. More will come from the Supreme Court in 2025 on the arbitrability of electricity disputes in Solar Energy Corporation of India v Continuum Power Trading (TN) Private Limited and certain other matters.

In (GUVNL), the Supreme Court held that the act, being a special legislation, has primacy over the arbitration act. Section 11 of the arbitration act, giving high courts power to appoint arbitrators, was held not to apply to disputes referred to arbitration under the act. The court also held that the arbitration act governed procedures unless they conflicted with the act. This is consistent with section 158 of the act.

It held that all disputes between licensees and generating companies, of whatever nature, would either be adjudicated by state or central electricity commissions or referred to arbitrators appointed by the commissions in accordance with sections 79 and 86 of the act.

GUVNL held good until APTEL issued directions in November 2022 in . APTEL found that despite having discretion, commissions rarely referred parties to arbitration, usually adjudicating disputes themselves. To increase speed and effectiveness, allowing state and central commissions to focus on core issues, APTEL directed them to hear the parties and determine if disputes were amenable to arbitration. A commission deciding to hear the case itself had to explain why it was not referring the dispute to arbitration.

APTEL held that cases not involving the exercise of any regulatory power must be referred to arbitration. Matters such as non-tariff-related disputes about money claims, including late payment surcharges, liquidated damages and termination or breach of contract, had to be referred to arbitration. Tariff-related disputes, such as those involving changes in the law that would directly impact tariffs or those forming an essential part of the commissions’ regulatory functions, could not be referred to arbitration. A prior arbitration agreement between parties was not mandatory for the dispute to be referred to arbitration under sections 86 and 79 of the act because the legislation was silent on the matter.

The Damodar Valley case saw APTEL further developing its observations and directions in Southern Power. APTEL relied on Delhi High Court’s decision of MB Power (Madhya Pradesh) Limited v State Bank of India and held that section 79(1)(a) to (d) of the act permitted only non-tariff disputes to be referred to arbitration. Disputes affecting the tariff for a generating company, or tariff disputes, such as those involving changes in the law, delayed project completions and the invocation of force majeure events, were not arbitrable. Disputes not affecting tariffs or their regulation, or non-tariff disputes, such as the termination of power purchase agreements, were arbitrable. The distinction drawn by APTEL in Damodar Valley accorded with the Supreme Court’s tests for arbitrability in Vidya Drolia.

APTEL also held that when a valid arbitration agreement existed between the parties, and the dispute did not concern a commission’s regulatory functions, the commission was required to refer the dispute to arbitration. This is consistent with the current promotion of alternative dispute resolution (ADR). By harmonising the act and the arbitration act, APTEL ensured that arbitration remains viable while preserving the jurisdiction of the electricity commissions in regulatory matters. The power sector has many developing opportunities for private players, leading to increasing referral to ADR. Courts must expand arbitrability by allowing more types of dispute under the act to be so resolved. This will not only increase dispute resolution efficiency but will also attract investors to 含羞草社区 power sector.

Mani Gupta is joint managing partner and head of litigation and insolvency, and Akshat Goyal is an associate at Sarthak Advocates and Solicitors.