Arbitration and Conciliation Act, 1996 not applicable to arbitrate disputes between licensees and generating companies #indianlaws

The Supreme Court relying on the settled principle held that the special law overrides the general law and accordingly, Section 11 of the Arbitration and Conciliation Act, 1996 would have no application to the question who can adjudicate/arbitrate disputes between licensees and generating companies, and only Section 86(1)(f) shall apply in such a situation.

An important question that arose before the Court while adjudicating the maintainability of claims made by parties was scope of Section 86(1)(f) of the Electricity Act vis-à-vis applicability of Section 11 of the of the Arbitration and Conciliation Act, 1996 for arbitration of disputes between the licensee and generating companies and also what APTEL (Appellate Tribunal for Electricity) has to see while acting as appellate body.

Respondent in the present matter, a generating company, had entered into a Power Purchase Agreement (PPA) with the Appellant for the supply of the entire Electricity to be generated by the Respondent for a specified period. Dispute arose between the Parties in regard to payment of Respondent’s invoices. Some amount against the invoice was cleared while some was withheld. In between, the Appellant also on its own deducted the rebate amount by referring to Government of India policy. It was the claim of Appellant that the monthly invoices raised by the Respondent were only estimated invoices whereas the Respondent claimed that the Appellant, from inception only made ad-hoc payments periodically against the monthly invoices raised. Therefore, each side claimed that the other did not provide any details with regard to the amounts due and the amounts paid. Respondent claimed that the Appellant had unilaterally made several disallowances without informing the Respondent of the same. The State Commission (for Electricity) vide its impugned finding upheld that the Respondent’s claim seeking refund of the excess rebate availed by the Appellant on the ground of same being contrary to the terms of PPA, besides further directions. Thereafter the matter went up in appeal before the APTEL which while confirming the State Commission’s findings passed certain other directions leading to present appeal before the Supreme Court.

The Court relying on the settled principle held that the special law overrides the general law and accordingly, Section 11 of the Arbitration and Conciliation Act, 1996 would have no application to the question who can adjudicate/arbitrate disputes between licensees and generating companies, and only Section 86(1)(f) shall apply in such a situation. In view of the provisions laid down in Sections 173, 174 and 175 of the Electricity Act, it was observed that since Section 86(1)(f) provides a special manner of making reference to an arbitrator in disputes between a licensee and a generating company, by implication all other methods are barred. Section 86(1)(f) specifically confers jurisdiction on the State Commission to refer the dispute. The Commission is required to exercise its discretion reasonably and not arbitrarily. However, the APTEL can examine as to whether the State Commission has exercised the discretion with regard to the question whether the dispute ought to have been referred to arbitration, in accordance with the well known norms for exercising such discretion. APTEL exercises jurisdiction over the State Commission by way of a First Appeal. Therefore, it is the bounden duty of the Appellate Tribunal to examine as to whether all the decisions rendered by the State Commission suffer from the vice of arbitrariness, unreasonableness or perversity. This would be apart from examining as to whether the State Commission has exercised powers in accordance with the statutory provisions contained in Electricity Act, 2003.

[T.N. Generation and Distbn. Corpn. Ltd. vs. PPN Power Gen. Co. Pvt. Ltd.]
(SC, 04.04.2014)