Delhi High Court: Enerica Infra Electricity Act Disputes Under CERC/SERC

• The Delhi High Court ruled that interim relief in electricity disputes should be sought from Electricity Regulatory Commissions under Section 94(2) of the Electricity Act, 2003, not courts under Section 9 of the Arbitration Act, 1996.
• This decision aligns with previous rulings establishing Section 94(2) as a statutory substitute for Section 9 in the power sector.
• The Supreme Court previously held that the Electricity Act, as a special statute, overrides the Arbitration Act regarding arbitrator appointment, allowing Commissions to adjudicate or refer disputes.
• The Appellate Tribunal for Electricity distinguished between 'tariff disputes' (for Commissions) and 'non-tariff disputes' (for arbitration) based on their impact on tariff.
• A civil appeal against the *Tata Power* judgment is currently pending before the Supreme Court, highlighting ongoing legal debate regarding the discretionary nature and scope of dispute referral by regulatory commissions.

The Delhi High Court determined that such disputes fall under the purview of the Central or State Electricity Regulatory Commission (CERC or SERC) as per Section 86(1)(f) of the Electricity Act, 2003.

The Delhi High Court recently declined to intervene in a petition filed by Enerica Infra 3 (P) Ltd. against NTPC Vidyut Vyapar Nigam Ltd., which sought to prevent the encashment of bank guarantees following the termination of a power purchase agreement. The petition had been brought under Section 9 of the Arbitration and Conciliation Act, 1996, which allows courts to grant interim measures before or during arbitral proceedings. However, the High Court determined that such disputes fall under the purview of the Central or State Electricity Regulatory Commission (CERC or SERC) as per Section 86(1)(f) of the Electricity Act, 2003.

The court emphasized that these Commissions possess the sole authority to decide whether a dispute should proceed to arbitration. Furthermore, it highlighted that the Commissions' power to issue interim orders under Section 94(2) of the Electricity Act, 2003, serves a function analogous to that of Section 9 of the Arbitration Act. This decision aligns with the High Court's prior ruling in *Renew Wind Energy (AP2) (P) Ltd. v. Solar Energy Corpn. of India*, which established Section 94(2) of the Electricity Act as a statutory substitute for the interim relief provisions found in the Arbitration Act.

Both the *Enerica* and *Renew* judgments are rooted in the Supreme Court's landmark decision in *Gujarat Urja Vikas Nigam Ltd. v. Essar Power Ltd.* (GUVNL). This pivotal case addressed the critical question of which authority is competent to appoint an arbitrator in disputes between a licensee and a generating company: either the competent court under Section 11 of the Arbitration Act or the Commission under Section 86(1)(f) of the Electricity Act. The Supreme Court, interpreting the conjunction 'and' in Section 86(1)(f) as 'or,' concluded that the SERC has the discretion to either adjudicate the dispute itself or refer it for arbitration.

The GUVNL ruling firmly established that the Electricity Act, being a specialized statute, takes precedence over Section 11 of the Arbitration Act. Nevertheless, the Supreme Court clarified that all other provisions of the Arbitration Act would remain applicable unless the Electricity Act contained a directly conflicting provision. This principle was subsequently reaffirmed by a three-Judge Bench of the Supreme Court, which underscored that Section 174 grants the Electricity Act overriding effect only in instances where there is an inconsistency with other laws.

While the *GUVNL* judgment clarified the authority responsible for referring disputes to arbitration, it did not delineate which specific types of disputes were eligible for such referral. This gap was addressed by the Appellate Tribunal for Electricity (Tribunal) in *M.P. Power Management Co. Ltd. v. Damodar Valley Corpn.* (DVC). In a case concerning the termination of power purchase agreements, the Tribunal drew a crucial distinction: all matters directly influencing the tariff were categorized as 'tariff disputes' and mandated for adjudication by the Commission.

Conversely, disputes related to contract termination or breach that did not have an impact on the tariff were classified as 'non-tariff disputes' and were deemed suitable for referral to arbitration. The Supreme Court later upheld the *DVC* judgment by rejecting a challenge to its findings, solidifying this framework for categorizing electricity disputes.

The Tribunal revisited the issues raised in the *DVC* judgment in the subsequent case of *Gujarat Urja Vikas Nigam Ltd. v. Tata Power Co. Ltd.* (Tata Power). Following the precedent set by *DVC*, the Tribunal reiterated that disputes concerning tariff and regulatory matters are non-arbitrable, even when an arbitration agreement exists between the parties. It further affirmed that disputes connected to clauses (a) to (d) of Section 79(1) of the Electricity Act, which neither pertain to regulatory functions nor affect the tariff, could either be adjudicated by the CERC or referred to arbitration at its discretion.

However, the *Tata Power* judgment, while acknowledging the binding nature of *DVC*, introduced two notable departures. Firstly, it restricted the CERC's ability to refer disputes to arbitration only to those falling under clauses (a) to (d) of Section 79(1), whereas *DVC* had indicated that non-tariff disputes between a generating company and a distribution licensee were entirely outside the scope of Section 79(1)(f). Secondly, *Tata Power* characterized the referral of disputes as discretionary for the Commission, in contrast to *DVC*'s stance that the Commission was bound to refer such disputes for arbitration. The Tribunal subsequently rejected Tata Power's request for a review of this judgment on September 17, 2026, and a civil appeal against the *Tata Power* decision is currently pending.

Lawyers and compliance officers advising entities in the power sector must note that the Delhi High Court has affirmed that interim relief applications in electricity disputes should be filed with the Central or State Electricity Regulatory Commission under Section 94(2) of the Electricity Act, 2003, rather than courts under Section 9 of the Arbitration Act. This necessitates a careful assessment of dispute resolution forums and the nature of the dispute (tariff vs. non-tariff) when drafting PPAs or strategizing litigation.

Source: Original reporting via legal analysis.