APTEL Sets Aside APERC’s Deduction of Variable Charges for Monthly Availability Shortfall: Energy Charges Cannot Be Penalised

The Appellate Tribunal for Electricity (“Appellate Tribunal”) in its judgment dated 03.07.2026, has ruled in favour of Hinduja National Power Corporation Limited (“HNPCL”), setting aside the order dated 30.12.2025 passed by the Andhra Pradesh Electricity Regulatory Commission (“APERC”), to the extent it directed deductions from HNPCL’s variable charges on account of shortfall in monthly plant availability.

By allowing Appeal No. 27 of 2026, the Appellate Tribunal has held that under the Central Electricity Regulatory Commission (Terms and Conditions of Tariff) Regulations, 2024, the APERC Regulations of 2008, and the Power Purchase Agreement (“PPA”) dated 16.07.2024 executed between the parties, only fixed/capacity charges are linked to plant availability, while energy charges are strictly linked to the scheduled energy actually supplied and cannot be reduced or penalised for a shortfall in monthly availability.

1. No Statutory or Contractual Basis for Deducting Variable Charges

APERC by way of the Impugned Order had directed the DISCOMs to apply graded deductions from the Variable Cost – 5paise per unit where the shortfall in actual monthly availability was up to 5% below the normative/target level, 10paise where the shortfall was between 5% and 15%, and 15paise where the shortfall exceeded 15%, with liberty to HNPCL to seek release of the withheld amounts by establishing that the underperformance was attributable to uncontrollable factors.

HNPCL contended that neither the Central Electricity Regulatory Commission (Terms and Conditions of Tariff) Regulations, 2024 (adopted by APERC), nor the APERC Regulations, 2008, nor the PPA provide for any reduction in energy charges on account of a shortfall in availability, and that the deductions were consequently without statutory or contractual authority. HNCPL contended that Rs. 12.26 Crore had already been withheld from HNPCL’s bills for the months of December 2025 to February 2026.

2. Fixed Charges, Not Energy Charges, are Linked to Availability

Examining Regulation 15 and 16 read with Chapter 11 of the CERC Regulations, 2024, Clause 1.2.2 and 1.2.3 of Schedule-F of the PPA, and Regulations 11 to 13 of the APERC Regulations, 2008, the Appellate Tribunal held that the governing framework, whether under the CERC Regulations, the APERC Regulations, or the PPA executed between the parties expressly and unambiguously stipulates that monthly fixed charges are linked to the Plant Availability Factor for the month vis-à-vis the normative annual plant availability, whereas energy charges are linked solely to the fuel cost/energy charge rate applied to the quantum of energy actually supplied during the month, irrespective of the plant availability achieved in that month.

The Appellate Tribunal held that once the Regulations stipulate the manner of recovery of fixed cost and computation of energy charge, APERC has no jurisdiction to interfere with or modify that scheme by way of adjudication or in a tariff order, any departure can only be effected by way of a formal amendment to the Regulations, and not otherwise.

3. APERC cannot invoke Casus Omissus to fill a regulatory gap that does not exist

APERCS had contended that while the PPA and Regulations focus on annual normative availability, they do not preclude monthly adjustments, and that APERC, as a statutory body, is empowered and obligated to fill contractual and regulatory gaps to ensure reliable supply.

The Appellate Tribunal rejected this submission, holding that both the CERC and APERC Regulations clearly stipulate the methodology for recovery of energy charges for a given month, and once such methodology is prescribed, the Commission is bound to apply it in its entirety. The doctrine of casus omissus was held to have no application, since the Regulations are complete in themselves and leave no vacuum for the Commission to legislate by way of adjudication.

4. Parity with other generators cannot justify an unlawful deduction

APERC had sought to justify the deductions by referring to similar reductions applied to other Intra-State generators such as APGENCO. The Appellate Tribunal held that the application of a similar reduction to other generators is of no relevance, since those orders were not under challenge and the Appellate Tribunal was not bound to extend the same treatment to HNPCL merely because it had been applied elsewhere. The doctrine of “negative equality” or parity cannot be invoked to perpetuate an illegality or justify a deviation from the Regulations, and each appeal must be adjudicated on the basis of the statutory framework and the specific impugned order under consideration.

Accordingly, the Appellate Tribunal set aside the Impugned Order on this issue and directed that recovery of energy charges be enforced strictly in accordance with the applicable CERC Regulations and the PPA, with the Respondents directed to refund the amount deducted/withheld from HNPCL’s energy bills along with applicable carrying cost within four weeks from the date of the judgment.

5. Part load compensation, remanded for quantification only

HNPCL had also claimed Part Load Compensation (“PLC”) in terms of Clause 1.2.5 of Schedule-F of the PPA read with Regulation 6.3B of the CERC [Indian Electricity Grid Code(IEGC)] (Fourth Amendment) Regulations, 2016, on which the Impugned Order contained no discussion, analysis or finding, despite APERC having recorded HNPCL’s claim. The DISCOMs admitted that the Revised Consolidated PPA explicitly provides for part load compensation, but contended that no separate determination was required as PLC for the previous Control Period had been claimed as part of the True-Up process on an actual basis.

Finding no dispute with regard to HNPCL’s entitlement to Part Load Compensation, and noting that the controversy, if any, was confined only to quantification and reconciliation, the Appellate Tribunal held that HNPCL is entitled to Part Load Compensation in terms of the PPA and Regulation 6.3B of the IEGC (Fourth Amendment), 2016, and remanded the matter to APERC for determination and finalisation of the amount payable towards PLC.

The judgment reaffirms that in a statutory tariff regime, the mechanism prescribed under the Regulations and the PPA for recovery of fixed and energy charges must be followed strictly. It further clarifies that the doctrine of casus omissus cannot be invoked to fill a gap where none exists, and that parity with the treatment accorded to unrelated generators cannot be used to sustain an otherwise unlawful deduction.

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APTEL upholds that Delay in Securing Long-Term Access (LTA) is not a valid Force Majeure and therefore, Scheduled Delivery Date under PPA cannot be unilaterally extended

In a judgment dated 03.07.2026 in Appeal No.183 of 2020, the Appellate Tribunal for Electricity (Appellate Tribunal) has dismissed the appeal filed by Maruti Clean Coal and Power Limited (MCCPL), thereby upholding the Order dated 27.11.2019 passed by the Central Electricity Regulatory Commission (Central Commission). The Appellate Tribunal has ruled in favour of the Rajasthan Discoms — Jaipur Vidyut Vitran Nigam Limited, Ajmer Vidyut Vitran Nigam Limited and Jodhpur Vidyut Vitran Nigam Limited and Rajasthan Urja Vikas Nigam Limited (RUVNL), rejecting MCCPL’s claim that the Scheduled Delivery Date (SDD) of 30.11.2016 fixed under the Power Purchase Agreement (PPA) stood revised to 01.04.2017, and that the first contract year for tariff purposes ought to be reckoned from the later date.

1. Delay of Two Years in seeking Long-Term Access cannot be termed as Force Majeure

MCCPL had attributed its inability to supply the full Aggregate Contracted Capacity of 250 MW by the SDD on the non-operationalization of Long-Term Access (LTA)/Medium-Term Open Access (MTOA), and sought to characterise this as a Force Majeure event under the PPA. The Appellate Tribunal rejected this contention. It noted that after submitting a LTA revision request, MCCPL “just adopted a wait and watch approach” and neither sent any reminder to PGCIL/CTU nor made any other effort to ensure that LTA for the full 250 MW was granted expeditiously, following up only on 13.08.2015, after its plant had already achieved Commercial Operation Date. The fresh LTA application, mandated because the change in target region exceeded 100 MW under the Connectivity Regulations, 2009, was filed over two years after the PPA was signed.

The Appellate Tribunal found no merit in MCCPL’s plea that this delay was attributable to “legal uncertainty and procedural ambiguity” on account of the methodology for calculating relinquishement charges pending before the Central Commission. It held that the fifth proviso to Regulation 12(1) of the Connectivity Regulations, 2009 “clearly provided that a fresh LTA application would be required” for a change exceeding 100 MW or a change of region, and the order on relinquishement charges passed by the Central Commission “only elaborates and explains” what the proviso already provided, without effecting any change in the regulatory position. Since Force Majeure grants relief only where the triggering event “could not have been avoided if the affected party had taken reasonable care or complied with prudent utility practices,” the Appellate Tribunal held that MCCPL “neither took reasonable care nor acted prudently” in pursuing its LTA request.

2. Commencement of supply “Upto” Aggregate Contracted Capacity does not require the entire quantum of electricity flowing

MCCPL’s case was that the SDD stood fulfilled only when the entire 250 MW commenced flowing, and that part supply of 45 MW alone on 30.11.2016 could not amount to commencement of supply under the PPA. The Appellate Tribunal disagreed, construing Article 4.1.1 and Article 4.2.1(b) together. It held that the expression “upto the Aggregated Contracted Capacity” indicates that “the seller may commence supply of power of any quantum, the maximum limit being the aggregated contracted capacity,” and that it was “not mandatory for the power generator i.e. the seller to supply the entire aggregated contracted capacity of power by the Scheduled Delivery Date i.e. 30.11.2016 in order to constitute commencement of supply of power.”

The Apellate Tribunal noted that MCCPL had itself served the advance preliminary notice (26.09.2016) and final written notice (27.10.2016) under Article 4.1.2 for commencement of supply “w.e.f 30.11.2016 i.e scheduled delivery date,” raised monthly invoices at the tariff payable for the first contract year, which were duly paid, and never conveyed to the Discoms that the SDD should be treated as suspended, split into phases, or held in abeyance pending availability of transmission capacity for the balance 205 MW. On this basis, the AppellateTribunal held that the supply of 45 MW from 30.11.2016 itself constituted “commencement of supply” under Article 4.1.1, and that the first Contract Year commenced from that date.

3. No Force Majeure event affected CTU, LTA was, in Fact, Operationalized ahead of Schedule

The Appellate Tribunal also rejected MCCPL’s reliance on Article 9.2.2, which deems a Force Majeure event affecting CTU/STU to be a Force Majeure event affecting the Seller. It observed that the 23rd Meeting of WR Constituents had recorded that the Champa-Kurukshetra HVDC Phase-I and Phase-II lines, and the Jabalpur-Orai line, were expected to be commissioned only in November 2016/March 2018 and April 2018 respectively, yet MCCPL’s LTA was in fact operationalized on 31.03.2017, “almost one year earlier” than the timeline earlier communicated by PGCIL. In these circumstances, the Appellate Tribunal held, “it cannot be said that there was any force majeure event affecting the PGCIL/CTU for providing transmission access to the appellant.”

4. Deliberate delay in Furnishing the Letter of Credit

The Appellate Tribunal found that even after the Champa-Kurukshetra line achieved Commercial Operation on 24.03.2017 and PGCIL/CTU called upon MCCPL on the same date to furnish a Letter of Credit (LC), MCCPL offered “no justification” for the delay in submitting the LC until 31.03.2017, resulting in commencement of the balance 205 MW supply only from 01.04.2017. The Appellate Tribunal held that this appeared to be a deliberate delay with an “ulterior motive,” observing that had supply commenced on any date between 24.03.2017 and 01.04.2017, the first contract year “would have been merely of a few days,” which MCCPL avoided so as to secure the higher first-contract-year tariff of Rs.1.633/kWh (as against Rs.1.558/kWh for the second Contract Year) for a full twelve-month period. The Appellate Tribunal termed such conduct “not acceptable.”

Conclusion

Holding that neither the delay in operationalization of LTA nor the timing of supply of the balance 205 MW was covered by Force Majeure under the PPA, and that commencement of supply of 45 MW on 30.11.2016 itself marked the beginning of the first contract year, the Appellate Tribunal answered both issues framed for its consideration against MCCPL. Finding no error or infirmity in the Impugned Order, the Appellate Tribunal dismissed Appeal No.183 of 2020, reaffirming that Scheduled Delivery Dates fixed under a PPA cannot be unilaterally shifted by a generator based on its own commercial convenience, and that claims of Force Majeure must be tested strictly against the diligence or lack thereof shown by the party invoking it.

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APTEL directs the Central Commission to exercise Power to Relax in relation O&M Norms for Sole North-Eastern Transmission Licensee

In a judgment dated 08.07.2026, the Appellate Tribunal for Electricity (“Appellate Tribunal”) has ruled in favour of North East Transmission Company Limited (“NETCL”), setting aside the Order dated 27.01.2021 passed by the Central Electricity Regulatory Commission (“Central Commission”) in Petition No. 191/MP/2019, whereby the Central Commission had declined to exercise its power to relax the normative Operation and Maintenance (“O&M”) expenses prescribed under the Tariff Regulations, 2014.

By allowing Appeal No. 296 of 2021, the Appellate Tribunal has remanded the matter to the Central Commission with a specific direction to exercise its power to relax under Regulation 54 of the Tariff Regulations, 2014, for the limited purpose of working out the O&M charges for NETCL’s transmission assets for the control period 2014-19.

Brief Background

NETCL, a single-project transmission licensee engaged in evacuating power from the 2 x 363.3 MW Palatana Gas Based Power Project of ONGC Tripura Power Company Limited across five transmission assets in the North-Eastern Region, had relied on the Central Commission’s ownearlier order dated 16.04.2019, wherein the Central Commission had observed that NETCL, being a single asset company operating in the North-Eastern Region, “required consideration distinct from transmission licensees having multiple assets” and had granted liberty to file a fresh petition. NETCL contended that the Impugned Order, passed pursuant to that very liberty, contradicted the Central Commission’s earlier observation.

The Appellate Tribunal in the Appeal has proceeded to decide the issue on merits rather than resting its decision on the earlier order passed by the Central Commission alone.

1. Pan-India Normative Benchmark cannot be considered for Higher O&M costs of the North-East

NETCL demonstrated, relying on POWERGRID’s region-wise O&M data for 2014-15 drawn from the Statement of Reasons to the Tariff Regulations, 2014, that the North-Eastern Regionconstituting merely 3.25% of POWERGRID’s pan-India network of over 1,53,635 circuit kilometres incurred O&M costs of Rs. 0.75 lakh per circuit kilometre, which is 127% higher than the Western Region, 32% higher than the Northern Region and 79% higher than the Southern Region. It was NETCL’s case that when such costs are aggregated at the national level to derive a single normative benchmark of Rs. 0.403 lakh per circuit kilometre, the distinctly higher costs of the North-East get diluted within the national average, even though NETCL operates entirely within that region.

The Appellate Tribunal held that for a transmission licensee operating on a pan-India basis, aberrations in regional O&M costs can be mitigated when evaluated at the company level, but “the same mitigation is not feasible for a licensee whose operations are confined solely to the North Eastern Region, such as the Appellant”. The Appellate Tribunal also took note of NETCL’s submission that the rates independently determined for State Commission-regulated utilities operating under identical conditions in the region Rs. 0.85 lakh per circuit kilometre for AEGCL (Assam) and Rs. 1.09 lakh per circuit kilometre for MEPTCL (Meghalaya) were approximately twice the normative rate applied to NETCL.

2. Finding on Non-Submission of Data

The Impugned Order had recorded that NETCL“failed to submit data regarding O&M expenses while the Central Commission was engaged in formulating the norms for the control period 2019-24”. NETCL disputed this finding, pointing out that it had, in fact, submitted detailed operational and financial data in response to the Central Commission’s Public Notice dated 10.11.2017 inviting stakeholder comments on the Draft Tariff Regulations, 2019.

On scrutiny of the record, the Appellate Tribunal found substance in NETCL’s contention and held that the observation in the Impugned Order that no data was submitted by NETCL for finalising the O&M norms for the control period 2019-24 is contrary to the record and cannot be sustained, and accordingly set aside the Central Commission’s finding on this aspect.

3. Subsequent recognition of the North-East’s Operational challenges in the Central Commission Tariff Regulations

The Appellate Tribunal noted that the Central Commission has taken cognizance of the difficulties faced by licensees operating in the North-Eastern and hilly regions. The Explanatory Memorandum to the Draft Tariff Regulations, 2024 records that “the actual expenses incurred in the NER region are higher than compared to other regions” on account of increased logistic, erection, labour and transportation costs, and proposes a multiplication factor of 1.5 to the O&M expenses for licensees whose transmission assets are located solely in the North-Eastern Region, Uttarakhand, Himachal Pradesh, and the Union Territories of Jammu and Kashmir and Ladakh, a dispensation since incorporated as a proviso to Regulation 36(3) of the Tariff Regulations, 2024.

The Appellate Tribunal directed that while working out the O&M charges for NETCL on remand, the Central Commission shall also take into account this special dispensation accorded in the subsequent regulations for hilly and similarly placed licensees in the North-Eastern Region.

4. Exceptional circumstances justify exercise of the Power to Relax under the Tariff Regulations

The Appellate Tribunal held that Regulation 54 of the Tariff Regulations, 2014 confers on the Central Commission the power to relax any provision of the Regulations in exceptional circumstances, to be exercised not lightly or routinely, but where the factual matrix discloses circumstances of such peculiar nature that strict adherence to the regulatory norm would result in manifest hardship or inequity. Finding that NETCL’s operations are confined exclusively to the North-Eastern Region, characterised by hilly terrain, difficult accessibility and operational challenges not ordinarily encountered elsewhere, the Appellate Tribunal held that these constitute exceptional circumstances within the meaning of Regulation 54, and that “to insist upon a rigid application of the normative O&M charges in such a situation would be inequitable and contrary to the statutory mandate of ensuring reasonable recovery of costs”.

Accordingly, the Impugned Order was set aside and the matter remanded to the Central Commission with a direction to exercise its power to relax under Regulation 54 for working out NETCL’s O&M charges for the control period 2014-19, subject to a prudence check ensuring that only expenditure which is demonstrably necessary and reasonable is factored into the determination.

The judgment reaffirms that normative benchmarks derived on a pan-India basis cannot be mechanically applied to licensees whose operations are confined to regions with demonstrably higher operating costs, and underscores the availability of the power to relax as a corrective mechanism for such licensees operating under peculiar geographical and operational constraints.

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Group Captive Power Plant in India: A Structuring Guide for C&I Consumers

A group captive power plant is a generating station, often solar or wind, shared by two or more commercial and industrial (C&I) consumers who collectively hold at least 26% of its equity and consume at least 51% of its annual generation. Structured correctly under the Electricity Rules, 2005 (amended 2026), it delivers electricity exempt from cross-subsidy surcharge and additional surcharges.

For India’s commercial and industrial consumers, the group captive power plant has become the most popular route to cheaper, greener, more predictable electricity. It lets several businesses pool into a single renewable project, qualify for captive status together, and lawfully sidestep the surcharges that ordinary open-access consumers pay.

This guide explains how the structure works, how to build it, what the 2026 changes mean, and the decisions that matter most to C&I buyers, developers and lenders.

• A group captive power plant lets multiple C&I consumers share one plant and each claim captive benefits.
• The eligibility test is collective: captive users together must hold ≥26% equity and consume ≥51% of annual generation.
• An SPV that owns the plant is treated as an association of persons (AoP) under the rules.
• Under the 2026 framework, the 51% consumption test is met collectively, not user-by-user.
• A user holding 26% or more equity is exempt from the individual proportionate-consumption cap (the “anchor tenant” advantage).
• The core commercial driver is exemption from cross-subsidy surcharge (CSS) and additional surcharge (AS).

What is a group captive power plant?

A group captive power plant is a generating station set up so that two or more consumers can use its electricity for their own consumption while together meeting the legal thresholds for captive status. Instead of one company building a plant solely for itself, a group of C&I consumers invests in a shared project, and each draws power for its own use.

The appeal of the group captive structure is that it spreads the capital cost and the consumption obligation across several users, making a renewable project viable for businesses that individually could not justify a captive plant. A well-designed group captive structure also lets each participant size its equity to its own demand. For the underlying definitions, our explainer on what a captive generating plant is sets out the basis in full.

Why C&I consumers choose group captive

Three forces have pushed the group captive to the front of the C&I procurement toolkit:

• Captive consumption is exempt from cross-subsidy surcharge and additional surcharge, which can be a substantial share of an industrial consumer’s landed power cost. That single exemption is usually the deciding factor.
• A group captive solar or wind project lets a business meet renewable-energy and ESG targets while procuring power that is cheaper than grid supply.
• Reliability and price certainty. A long-term equity stake in a generating plant gives more predictable tariffs than market-linked grid power.

The 2026 reforms have added a fourth: regulatory certainty. By codifying how group structures, fellow subsidiaries and SPVs are treated, the rules have made the financial model far easier to underwrite. This is why developers and lenders are now actively building associations of persons’ captive structures at scale.

Group captive vs open access

The most common question from a C&I buyer is group captive vs open access savings, which structure delivers more value?

Both use the open-access network to wheel power from a remote renewable plant to the consumer’s premises. The decisive difference is surcharge treatment. A pure open-access consumer buying from a third-party generator pays a cross-subsidy surcharge and, often, an an additional surcharge. A genuine captive user, including a member of a group captive open access arrangement, is exempt from both on its captive consumption. Because a group captive open access structure keeps the surcharge exemption intact while still using the grid to wheel power, it is, over a 20–25 year project life, the option that typically outweighs the equity commitment and the compliance overhead a group captive demands.

How to structure a group captive power project in India

At a high level, building a compliant group captive power plant follows a recognisable path. The steps below are the backbone of any structuring exercise:

1. Identify the participating C&I consumers and map their annual electricity demand against the plant’s expected generation, so the group can comfortably clear the 51% collective consumption threshold.
2. Decide between an SPV (treated as an AoP), a cooperative society, or a direct AoP. The SPV route dominates the market.
3. Allocate at least 26% of the plant’s ownership to the captive users, aligning each user’s equity with its intended consumption and deciding whether any user will take a 26%+ anchor stake.
4. Execute the share subscription and shareholders’ agreement, the power supply / usage agreements, and the EPC and O&M contracts.
5. Secure connectivity, open access and the wheeling / banking arrangements with the transmission utility and the relevant load despatch centre.
6. Put in place metering, generation and consumption tracking, and the annual declaration and verification process.

An equity allocation that ignores the proportionate-consumption rule, or a shareholders’ agreement that does not lock in the 26% discipline, can quietly disqualify the plant. This is the heart of what group captive structuring lawyers in India add, designing the equity-and-consumption architecture so it survives annual verification.

SPV vs AoP: choosing the ownership vehicle

The group captive AoP vs SPV question is now largely settled by the rules themselves. An SPV (a company set up solely to own, operate and maintain the generating station) is expressly treated as an association of persons for captive purposes. An SPV captive power vehicle is the most common choice precisely because the rules now tell you how it will be treated, removing years of interpretational doubt.

What follows from AoP treatment is the proportionate-consumption framework. For a plant set up by an AoP (including an SPV):

• The 26% ownership and 51% consumption conditions are tested collectively across all captive users.
• Each individual user’s recognised captive consumption is capped at 100% of its proportionate share (its ownership percentage of generation).
• A user holding 26% or more ownership is exempt from that individual cap and can consume any amount as captive power.
• Where ownership changes mid-year, each user’s proportionate entitlement is set on a weighted-average shareholding basis.

What the Electricity (Amendment) Rules, 2026 changed

The Electricity (Amendment) Rules, 2026 have fully substituted Rule 3, bringing key clarity for group captive power plants. Captive consumption will now be assessed collectively across all captive users, reducing the risk of disqualification due to an individual minority user’s shortfall. Users holding 26% or more ownership are exempt from the individual proportionate-consumption cap, enabling promoter and lead-subsidiary structures. Companies within the same group, including holding companies, subsidiaries and fellow subsidiaries, are treated as a single captive user, with lateral ownership recognition. The amendment also resolves the long-standing dispute on whether an SPV constitutes an association of persons and recognises electricity consumed through plant-connected energy storage systems as valid captive consumption. Verification will be handled by the State-designated nodal agency for intra-state plants and by NLDC for inter-state plants, with appeals before a Grievance Redressal Committee. Pending verification, CSS and AS will not apply if the prescribed declaration is filed, though failure in verification will trigger surcharge liability with carrying cost. The proportionate consumption and verification provisions apply from 1 April 2026, while the remaining provisions took effect from 13 March 2026.

Group captive solar and wind projects

Most new group captive capacity is renewable. A group captive solar project is the textbook modern structure: a developer builds the plant through an SPV, C&I consumers take at least 26% equity collectively, and each draws power under a usage agreement while the group clears the 51% collective consumption test.

The 2026 recognition of energy-storage consumption as captive consumption directly supports group captive solar project legal structure design, because it lets solar-plus-storage configurations count stored-then-consumed energy toward captive use. Wind and hybrid wind-solar-storage projects work on the same principles. The structuring discipline is identical to any group captive: align equity with consumption, decide on an anchor tenant, and build the annual compliance engine from day one.

Conclusion

A group captive power plant rewards careful design and punishes loose structuring. R Associates advises C&I consumers, developers and lenders on equity architecture, documentation, open access and annual compliance. To structure or review a project with our captive power lawyers in India, get in touch with our team.

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What Is a Captive Generating Plant in India? Meaning, Law and Compliance

A captive generating plant (CGP) is a power plant set up by a person to generate electricity primarily for that person’s own use, as defined in Section 2(8) of the Electricity Act, 2003. To qualify, captive users must hold at least 26% ownership and consume at least 51% of annual generation, under Rule 3 of the Electricity Rules, 2005 (as amended in 2026).

A captive generating plant is one of the most commercially important structures in Indian power. It is how large industrial and commercial consumers generate their own electricity, increasingly from solar or wind, to avoid the surcharges that ordinary grid consumers are lawfully required to pay.

Key terms:

• A captive generating plant is a plant set up primarily for the owner’s own use (Section 2(8), Electricity Act, 2003).
• “Captive generating plant” and “captive power plant” mean the same thing; the statute uses the former.
• A captive user is the end user of the power, a company, body corporate, cooperative society, or an association of persons, not just an individual.
• The 26/51 test (Rule 3): captive users must hold ≥26% ownership and consume ≥51% of annual generation.
• No generation license is needed (Section 9); captive open-access self-use is exempt from cross-subsidy and additional surcharge (Section 42(2)).
• The Electricity (Amendment) Rules, 2026 redefined the captive user, recognised energy-storage consumption, treated SPVs as associations of persons, and created a new NLDC / State nodal-agency verification regime.

What is a captive generating plant?

A captive generating plant is a power plant built mainly so the owner can use the electricity itself instead of buying all of its power from a distribution company. That is the legal idea in Section 2(8) of the Electricity Act, 2003, which defines a captive generating plant as a power plant set up by any person to generate electricity primarily for his own use. In India, that “person” can be a company, a body corporate, or a wider association of persons and not just an individual.

Many people believe that the captive power plant means it can only be a factory-owned generator inside an industrial campus. Legally, it is wider: a captive plant can be a single-user structure, or a shared structure built for several qualifying users acting together. While interpreting Section 2(8), the Supreme Court explained that the statute recognises both a single-user concept and a group-user concept and the present Rule 3 now expressly treats a special purpose vehicle (SPV) as an association of persons for captive purposes.

Where the law sits: Section 2(8) Electricity Act and beyond

These three provisions together explain captive generating plant. Section 2(8), Section 9 and Rule 3 of the Electricity Rules, 2005.

• Section 2(8) supplies the definition of the “primarily for own use” test.
• Section 9 supplies the rights: a person may construct, maintain or operate a captive generating plant and dedicated transmission lines, with a right to open access to carry that power to the point of use, subject to transmission availability.
• Rule 3 supplies the qualifying test — the 26% / 51% thresholds explained below.

Section 9 is also the source of the much-discussed position that captive power needs no license. The section expressly provides that no license is required to supply electricity generated from a captive generating plant to any licensee in accordance with the Act, or to any consumer subject to the regulations under Section 42(2). Reinforcing this, Section 7 confirms that a generating company may establish, operate and maintain a generating station without a license so long as it meets grid-connectivity standards.

Who qualifies as a captive user?

The current rules use the term captive user, which is more precise than the looser market shorthand “captive consumer.” Under the substituted Rule 3, a captive user is the end user of the electricity generated in a captive generating plant. The rule now expressly allows that electricity to be consumed either directly or through an energy storage system that stores energy generated from the captive plant.

The 2026 framework also expands the corporate meaning of who qualifies as a captive user. Where the captive user is a company, the rule deems it to include its subsidiary or subsidiaries, its holding company, and any other subsidiary of that holding company. All of these are collectively treated as a single captive user.

“Ownership” is correspondingly broadened to recognize voting equity or control held directly or through those group entities. For industrial groups operating through affiliates, holding companies or SPVs, this is one of the most valuable clarifications in current law, because it lets a group aggregate holdings and plan consumption across entities.

The 26% ownership and 51% consumption rule

The shorthand practitioners use is the 26/51 test. A power plant will not qualify as a captive generating plant unless at least 26% of its ownership is held by the captive user or users, and at least 51% of the aggregate electricity generated in the plant during the financial year is consumed for captive use. These two thresholds are the compliance spine of Rule 3, examined in our explainer on the 26% / 51% twin test for captive power.

For single-user structures, the logic is simple: if a company owns and uses the plant mainly for its own needs and the Rule 3 thresholds are met, the project stays captive. For group captive structures the logic is more technical, because ownership and consumption are measured collectively and, in some cases, proportionately.

The Supreme Court’s 2023 judgement in Dakshin Gujarat Vij Company Ltd. v. Gayatri Shakti Paper and Board Ltd. is essential here. The Court held that the ownership and consumption tests are linked and rejected the argument that the 26% threshold need only be satisfied at year-end, the minimum ownership must be maintained throughout the year.

It also explained the proportionality principle, the qualifying ratio is 51 divided by 26, or roughly 1.96, so the owner of every 1% shareholding should consume a minimum of about 1.96% of the electricity generated, within the permitted variation. Although the 2026 Rules redrafted Rule 3, that reasoning still explains why ownership and consumption have always been treated as linked tests rather than separate checkboxes.

Group captive, AoP and SPV structures

Many modern captive projects are not simple one-company, behind-the-meter arrangements. They are structured as group captive projects, commonly through an association of persons (AoP) or an SPV. The 2026 Rules now state expressly that an SPV shall be treated as an association of persons for captive purposes, since SPVs are widely used to own and operate the project assets while consumption happens across several participating users.

For a plant set up by an AoP, the 2026 Rules say the ownership and consumption conditions are satisfied collectively by all captive users, and aggregate consumption by all such users is considered when verifying compliance. The rules then layer in a proportionate-consumption concept for each individual user, with important exceptions: a captive user holding not less than 26% ownership is not subject to the individual proportionate-consumption cap, and the rules provide for weighted-average shareholding where ownership changes during the year.

Tribunals have worked to keep the test tied to the actual plant. In a 2024 decision, the Appellate Tribunal for Electricity (APTEL) emphasized that the 51% consumption test is power-plant-centric; you cannot aggregate consumption across multiple plants to rescue captive status for one plant that does not independently qualify. Each plant, or the identified captive unit, must meet the conditions applicable to it.

What happens if a captive plant fails compliance?

A captive plant is only as useful as its annual compliance. Rule 3 makes the consequence clear: if the captive users do not meet the minimum captive-consumption requirement during the financial year, the entire electricity generated by the plant is treated as supply by a generating company, and cross-subsidy surcharge and additional surcharge become leviable. In AoP structures, excess consumption by an individual user beyond its eligible proportionate entitlement is likewise treated as ordinary supply for that excess.

The 2026 amendment also rewired verification:

• Intra-State captive consumption — verified by the State-designated nodal agency.
• Inter-State captive consumption — verified by the National Load Despatch Centre (NLDC) under its approved procedure.
• Appeals — to a Grievance Redressal Committee constituted by the appropriate government.
• Transition — inter-State verification for electricity consumed up to FY 2025-26 stays with the Central Electricity Authority; FY 2026-27 onward shifts to the NLDC (inter-State) and State nodal agencies (intra-State).

Pending verification, the rules say CSS and AS should not be levied if the captive users furnish the prescribed declaration. But this is not a permanent shield: if the plant later fails verification for that year, the charges become payable along with carrying cost. That makes annual ownership tracking, generation metering, consumption mapping and clean documentation central to any serious captive strategy.

Conclusion

So, what is a captive generating plant? In India, it is not simply “a plant you own.” It is a power project that fits a specific statutory idea under Section 2(8), enjoys special rights under Section 9, and continues to qualify only while it passes the ownership-and-consumption tests in Rule 3. Designed properly and monitored annually, captive status can unlock open-access self-use without the ordinary surcharge burden. Designed or monitored poorly, the project can lose captive treatment and become, in law, ordinary supply from a generating company.

Captive projects are highly fact-sensitive: surcharge exposure often turns on annual data, ownership movement during the year, the units identified as captive, and the verification process. The definition is settled; the advice that flows from it depends on the facts.

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Arbitration Process in India: A Practical Guide to the Arbitration Act 1996

The arbitration process has become one of the most important tools for dispute resolution in India, relied upon for commercial contracts, construction matters, partnership disagreements, and cross-border business conflicts. Under the Arbitration Act 1996, formally the Arbitration and Conciliation Act, 1996, Indian law recognizes arbitration as a structured form of alternative dispute resolution designed to reduce court delay and give parties a faster private forum for deciding disputes. The Act extends across India and is built around the idea of party autonomy, limited court interference, and enforceable outcomes.

How does arbitration work in India?

So, how does arbitration work in India?

The answer begins with an arbitration clause drafting guide approach. The contract must contain a valid written arbitration agreement under Section 7, either as a clause in the contract or as a separate agreement. Once a dispute arises, the claimant usually sends an arbitration notice invoking the clause and asking the other side to refer the dispute to arbitration. That notice matters because, under Section 21, arbitral proceedings commence when the respondent receives the request for reference.

Stages of the arbitration proceeding and the process of appointing arbitrators

The stages of arbitration proceeding usually move from notice to constitution of the tribunal, pleadings, hearings, award, and enforcement. The appointing arbitrators process is governed mainly by Section 11 of the Arbitration Act. The parties may agree on the method of appointment; if they do not, the Act gives the fallback procedure, including appointment by each party in a three-member tribunal. The arbitration tribunal may be a sole arbitrator or a panel of arbitrators, and the tribunal also has the power under Section 16 to rule on its own jurisdiction. 

Arbitration hearing procedures, arbitration rules, and interim measures in arbitration

Once the tribunal is in place, the arbitration hearings procedure begins with the statement of claim and defence under Section 23. The parties submit their pleadings, documents, and any counterclaim or set-off within the time fixed by agreement or by the tribunal. Section 24 then governs arbitration hearings, and it gives the tribunal flexibility to decide whether the matter will be heard orally or mainly on documents. The Act also says the tribunal should, as far as possible, conduct hearings on a day-to-day basis and avoid unnecessary adjournments.

Interim relief is another critical part of the arbitration process. Under Section 9 arbitration, a party may ask the court for protective relief before the arbitration begins, during the proceedings, or even after the award is made but before enforcement. Section 17 also allows the tribunal itself to grant interim measures in arbitration, and after the 2015 reforms those tribunal orders are enforceable like court orders. As a result, businesses often use Section 9 for urgent relief and Section 17 for tribunal-driven protection. This combination makes Indian arbitration law more practical than a simple paper-based dispute process.

Arbitration timeline and timeline for the arbitration cases in India

A major advantage of arbitration is a more predictable arbitration timeline, though the speed still depends on the tribunal, the complexity of the dispute, and court support. 

Section 29A now gives a statutory framework: in matters other than international commercial arbitration, the award should be made within 12 months from the completion of pleadings under Section 23(4). In international commercial arbitration, the Act says the matter should be disposed of as expeditiously as possible, with an endeavour to complete it within 12 months from completion of pleadings. That is why the timeline for an arbitration case in India is often shorter than full civil litigation, even though delays can still occur in contested matters.

The real cost of arbitration process in India depends on the number of arbitrators, tribunal fees, counsel fees, expert evidence, filing costs, and the amount of hearing time required. Section 31A also gives the tribunal power to fix costs, so the losing party may ultimately bear a large part of the expense. 

Arbitration award and enforcement of the arbitration award in India

The arbitration award is the final decision of the tribunal. Section 31 requires it to be in writing, signed, reasoned unless reasons are waived, dated, and delivered to each party. Once the award is made, the next question is enforcement of arbitration award India. Section 36 provides that, after the time to challenge the award under Section 34 expires, the award is enforced like a civil court decree. If a Section 34 challenge is filed, that does not automatically stop enforcement; the court must grant a stay separately. This is one of the most important features of Indian arbitration law because it gives real force to the final award.

The challenge stage is also tightly controlled. Section 34 permits recourse to court only on limited grounds, and the application must ordinarily be filed within three months from receipt of the award, subject to the statutory extension allowed by the Act. That limited review is part of why the arbitration award is meant to be final and binding. A good arbitration process therefore does not end with the award alone; it ends when the award is either upheld, voluntarily complied with, or enforced through court.

Domestic arbitration, international arbitration, and Indian arbitration law

In domestic arbitration, the dispute is governed by Part I of the Act and usually does not qualify as international commercial arbitration under Section 2(1)(f). In international arbitration, or more precisely, international commercial arbitration, at least one party must be foreign as defined by the Act. 

The domestic arbitration procedure and the international arbitration in India process share many procedural features, but the Act treats them differently on timelines, court structure, and in some cases costs and institutional practice. That distinction is central to Indian arbitration law, and it also explains why contract lawyers pay close attention to the seat, governing law, and appointment mechanism while drafting an arbitration clause drafting guide.

Arbitration Amendment Act 2021 changes and NI Act vs Arbitration Act

The Arbitration Amendment Act 2021 changes are especially important on enforcement. The 2021 amendment added a fraud-or-corruption carve-out in Section 36, allowing courts to stay an award unconditionally where a prima facie case is made that the arbitration agreement, contract, or award was induced by fraud or corruption. That amendment is part of the ongoing effort to strengthen the system while preserving speed and legitimacy. It is also useful to compare NI Act vs Arbitration Act: cheque dishonour disputes under the Negotiable Instruments Act follow a criminal/statutory prosecution path, while arbitration is a private adjudicatory mechanism based on consent and contract. The two regimes may sometimes overlap in commercial relationships, but they are not the same remedy.

Conclusion

For businesses, the best way to think about the arbitration process is as a disciplined contract-based route to decision-making. A strong clause, a valid arbitration notice, a proper arbitration tribunal, well-managed arbitration hearings, and timely enforcement together make arbitration one of the most effective forms of alternative dispute resolution in India. When drafted and handled properly, the Arbitration Act 1996 offers a workable balance between speed, fairness, and finality. In that sense, the modern dispute resolution India system depends heavily on arbitration, and the practical Indian arbitration law framework is still built around efficiency, enforceability, and party autonomy.

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What Parties Need to Know Before a Dispute Escalates?

What Parties Need to Know Before a Dispute Escalates?

The appointment of arbitrator is one of the first and most important steps in any arbitration. It decides who will hear the dispute, how quickly the matter will move, and whether the process will stay fair. 

Under Indian arbitration law, parties are generally free to decide the method of arbitrator appointment, including whether the case will go before a sole arbitrator or a larger arbitral tribunal. When the parties do not agree, the court can step in through section 11 of the Arbitration and Conciliation Act, 1996. 

That is why questions such as who appoints the arbitrator in a dispute and how an arbitrator is appointed in India come up so often in commercial conflict.

What does appointment of arbitrator mean?

In simple terms, the appointment of arbitrator means selecting the neutral decision-maker who will conduct the arbitration and decide the dispute. Indian arbitration practice recognises different tribunal structures. A dispute may be heard by a sole arbitrator, or by a panel of three arbitrators, which is often described as an arbitral tribunal or arbitration panel. The basic idea is that the parties should have a fair and workable process for choosing the decision-maker, and if they have not agreed on one, the law supplies a fallback.

That is why the phrase arbitrator appointment is not just a technical term. It goes to the validity of the whole process. If the appointment is defective, the dispute can become more expensive and time-consuming than court litigation. In practice, many disputes in India begin with disagreement over the very first question: who appoints the arbitrator in a dispute.

How is an arbitrator appointed in India?

The answer depends first on the arbitration clause. If the contract contains a clear procedure, the parties must follow it. In many agreements, the clause says whether the dispute will go to a sole arbitrator or to an arbitration panel, and how the nomination must be made. If the clause is silent or the parties cannot cooperate, section 11 becomes relevant and the court can appoint the arbitrator. This is the core answer to how is an arbitrator appointed in India.

So, in a well-drafted contract, arbitrator appointment is meant to happen smoothly: notice is issued, the other side responds, and the agreed process is followed. When that does not happen, the appointment of arbitrator may need judicial support. The law’s purpose is not to delay the dispute, but to keep the tribunal’s constitution valid and neutral.

Can one party appoint an arbitrator unilaterally?

Indian courts have increasingly scrutinised appointments made by one side alone, especially where the other side had no meaningful say and the clause did not clearly authorise such a mechanism. A recent Karnataka High Court report said unilateral appointment without consent was impermissible where the agreement did not designate a named arbitrator, and it treated the sequence of events as an abuse of process.

That is why any business or individual dealing with an arbitration clause should be careful before assuming that one side can simply send a notice and name its own arbitrator. The appointment of arbitrator must match the contract and the law. If it does not, the appointment can be attacked later as invalid. This is a major reason the query challenge to arbitrator appointment in India keeps showing up in dispute-related searches.

What is section 11 and why does it matter?

Section 11 arbitration act India is the provision that allows court intervention in the appointment process when the parties fail to act according to their agreement or cannot agree on the sole arbitrator or the arbitration panel. In effect, section 11 is the safety valve of the system. It preserves party autonomy, but it also prevents deadlock. When a party asks who appoints the arbitrator in a dispute, section 11 is often the answer if the contract process breaks down.

This matters especially where the parties have clearly chosen arbitration, but one side delays, refuses to cooperate, or tries to control the process. A section 11 petition is not about deciding the dispute itself; it is about getting the tribunal properly constituted so the real hearing can begin. That is why the section 11 route is central to the appointment of arbitrator in India.

Sole arbitrator or arbitration panel?

A large number of commercial disputes are heard by a sole arbitrator because it is quicker, simpler, and usually less expensive. A more complex matter may use an arbitration panel or arbitral tribunal of three members, especially where the stakes are higher or the contract specifically requires it. The choice between a sole arbitrator and a panel often affects cost, pace, and the amount of procedure involved.

For businesses, the best drafting approach is to make the clause clear from the start. Say who appoints, how the appointment happens, what happens if one side does not cooperate, and whether the dispute will be handled by a sole arbitrator or an arbitration panel. Clarity at the contracting stage reduces later fights about arbitrator appointment and lowers the risk of a challenge to arbitrator appointment India.

Grounds for challenge to arbitrator appointment in India

A challenge to arbitrator appointment in India usually arises where the appointment departs from the agreed procedure, appears one-sided, or is made without lawful authority. The common issue is not the existence of arbitration itself, but whether the appointment of arbitrator was done properly. If the appointment is defective, the losing party may later argue that the tribunal was not validly constituted.

That is why lawyers often examine the clause before anything else. Was the arbitrator named in the contract? Did both parties agree? Was the notice valid? Was the section 11 route needed? These questions decide whether the tribunal can proceed or whether the appointment is vulnerable.

Appointment of sole arbitrator in Delhi

The same legal framework applies in Delhi. An appointment of sole arbitrator in Delhi still depends on the arbitration clause, the parties’ agreement, and the section 11 mechanism where agreement fails. For Delhi-based commercial disputes, a precise clause is especially important because the first fight is often not about the money, but about the validity of the arbitrator appointment itself.

Conclusion

The law on appointment of arbitrator is built on two ideas: party autonomy and neutrality. Parties can choose a sole arbitrator or an arbitral tribunal, but they must follow the contract and the statutory framework. If there is no agreement or if one party tries to control the process alone, section 11 may be used to secure a lawful appointment. For anyone searching how is an arbitrator appointed in India, can one party appoint an arbitrator unilaterally, or who appoints the arbitrator in a dispute, the practical answer is the same: the appointment must be valid, fair, and consistent with the arbitration clause.

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CERC Orders Refund of ₹711.44 Crore to Haryana Discoms in Transmission Charges Dispute; Recognises Entitlement to Interest

In an order dated 28.02.2026, the Central Electricity Regulatory Commission (CERC), on remand, has ruled in favour of the Haryana Discoms (UHBVNL and DHBVNL, through HPPC), directing refund of ₹711.44 crore along with applicable interest, in relation to transmission charges wrongly levied by Grid India.

This order marks the culmination of prolonged litigation spanning multiple rounds before the Appellate Tribunal for Electricity (APTEL) and the CERC, concerning the classification and charging of the 400 kV IGSTPS–Daulatabad transmission line.

1. Recognition of Intra-State Nature of Transmission Line

At the core of the dispute was whether the 400 kV transmission line from Indira Gandhi Super Thermal Power Station (IGSTPS) to Daulatabad constituted an   transmission system (ISTS) or an intra-state line.

Reaffirming its earlier findings, the CERC held that the line is an intra-state transmission line and therefore not subject to ISTS charges under the PoC (Point of Connection) mechanism.

This classification formed the legal basis for holding that the levy of interstate transmission charges on Haryana Discoms was not sustainable.

2. Refund Limited to Period Within Limitation

Following remand by APTEL, the CERC confined the relief to the legally permissible period from 03.06.2014 to 04.05.2018, in line with the application of limitation principles to adjudicatory proceedings.

The Tribunal had clarified that claims prior to June 2014 were time-barred, while claims within the three-year window were maintainable.

3. Quantification of Refund and Inclusion of April 2018

A key issue before the Commission was the computation of the refund amount.

• The parties reconciled a principal sum of ₹691.34 crore for June 2014 to March 2018
• The Petitioners claimed an additional amount for April 2018

Rejecting CTUIL’s objection, the CERC held that the Petitioners were entitled to refund for April 2018 as well, bringing the total principal refund to ₹711.44 crore.

The Commission specifically noted that billing for April 2018 continued to include LTA quantum attributable to Haryana’s share, thereby warranting refund.

4. Directions for Recovery and Adjustment Mechanism

The CERC permitted phased recovery of the refund amount by the Petitioners:

• ₹483.50 crore (already allowed earlier in instalments)
• ₹207.84 crore (balance recovery in further instalments)
• Additional ₹20.10 crore (pertaining to April 2018)

These recoveries are to be adjusted through charges collected under the applicable Sharing Regulations.

5. Entitlement to Interest and Restitution

In line with APTEL’s directions, the CERC recognised that the Petitioners are entitled to interest/carrying cost as a measure of restitution for amounts illegally recovered.

The Commission is required to determine:

• Whether interest should be simple or compound
• The applicable rate of interest
• The methodology of computation (including rests, if compound)

This stems from APTEL’s finding that recovery of ISTS charges on an intra-State line was unlawful, thereby triggering restitutionary principles.

6. Consumer Adjustment Through Tariff Mechanism

The Commission recorded that the Haryana Discoms had passed on these charges to consumers.

Accordingly, any refund (principal and interest) is required to be adjusted in future tariff determination, ensuring that the ultimate benefit flows to end consumers.

 

Judgement Link

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APTEL rules on Section 79(1)(f) of the Electricity Act, 2003: No Automatic Reference to Arbitration in Composite PPA Disputes

In a landmark judgment dated 25.02.2026, the Appellate Tribunal for Electricity (Appellate Tribunal) has ruled in favour of the Punjab State Power Corporation Limited (PSPCL) and the Haryana Discoms (UHBVNL and DHBVNL, through HPPC), setting aside the order passed by the Central Electricity Regulatory Commission (CERC).

The CERC, in its common order dated 19.11.2025, had directed that the disputes between the procurers and Tata Power Company Limited (TPCL) regarding the short-supply of contracted electricity be mandatorily resolved through arbitration. By allowing Appeal Nos. 371 and 400 of 2025 filed by the Haryana Utilities and PSPCL respectively, the Appellate Tribunal has reaffirmed the exclusive adjudicatory jurisdiction of the Regulatory Commissions over matters impacting public interest and tariff. 

1. Impermissibility of Splitting Causes of Action

One of the central issues in the appeals filed by PSPCL and HPPC was the CERC’s erroneous decision to bifurcate their petitions. Both utilities had sought compensation jointly and severally against TPCL and the Western Regional Load Despatch Centre (WRLDC), a statutory body. PSPCL and HPPC’s grievance was that while TPCL illegally ceased generating and supplying their contracted capacities (475 MW for PSPCL and 380 MW for HPPC), WRLDC failed in its statutory duty under Section 28 of the Electricity Act to ensure proportionate scheduling.

The CERC had attempted to refer the dispute against TPCL to arbitration, while leaving the procurers to file separate petitions against WRLDC.

Relying on the Supreme Court’s rulings in Sukanya Holdings and Vidya Drolia, the Appellate Tribunal held that Section 8 of the Arbitration & Conciliation Act, 1996 does not permit the bifurcation of a cause of action or the splitting of a suit between parties to an arbitration agreement (TPCL) and non-parties (WRLDC). Because WRLDC discharges statutory functions making disputes against it non-arbitrable, and since the monetary claims were joint and several against TPCL and WRLDC. 

2. Strict Compliance with Section 8 of the Arbitration & Conciliation Act, 1996

The Appellate Tribunal also ruled on the procedural mandates of the Arbitration & Conciliation Act, 1996 (the “1996 Act”). The Appellate Tribunal held that the provisions of Section 8(1) of the 1996 Act apply strictly to proceedings before the CERC.

Under Section 8(1), a party seeking to invoke arbitration must apply not later than the date of submitting its first statement on the substance of the dispute. In the present batch of cases, TPCL completely failed to make such an application before filing its reply to the petitions instituted by PSPCL and HPPC. Furthermore, TPCL had even filed its own independent petition before the CERC. The Appellate Tribunal held that non-compliance with the mandatory timeline under Section 8(1) vitiated the CERC’s decision to refer the dispute to arbitration.

3. CERC cannot refer a dispute to Arbitration if it lacks Adjudicatory Jurisdiction

The CERC had held that because the disputes were “non-tariff” contractual breaches, it lacked the jurisdiction to adjudicate them, and was therefore “bound” to refer them to arbitration under the second limb of Section 79(1)(f) of the Electricity Act.

The Appellate Tribunal rejected the CERC’s view that it could refer disputes to arbitration merely because it lacked jurisdiction to adjudicate them holding that the power to refer a dispute to arbitration is not independent of the power to adjudicate. Reaffirming the Hon’ble Supreme Court’s jurisprudence in GUVNL v. Essar, APTEL noted that the word “and” in Section 79(1)(f) must be read as “or”. This grants the CERC the discretion to eitheradjudicate a dispute or refer it to arbitration.

The Appellate Tribunal established that the CERC can only refer those disputes to arbitration which it is legally empowered to adjudicate under clauses (a) to (d) of Section 79(1). If the CERC lacks inherent jurisdiction to adjudicate a dispute, it simultaneously lacks the jurisdiction to refer that very dispute to arbitration.

4. Tariff and Regulatory Disputes are Non-Arbitrable

The Appellate Tribunal reiterated that the Electricity Act is a special enactment designed to protect public interest and consumers. Any dispute that concerns the regulatory functions of the Commission, or impacts the tariff of a generating company (either directly or indirectly), must be exclusively adjudicated by the Regulatory Commissions and cannot be relegated to a private Arbitral Tribunal.

By setting aside the CERC’s order dated 19.11.2025, the Appellate Tribunal has restored all petitions to CERC. The CERC is now directed to examine whether the subject matter of the disputes falls within the ambit of Section 79(1)(b) of the Electricity Act. If the disputes impact tariff or touch upon regulatory functions, the CERC is mandated to adjudicate them itself.

The judgment highlights the statutory limits on arbitral reference under Section 79(1)(f) of the Electricity Act, 2003 and clarifies the interface between the Arbitration and Conciliation Act, 1996 and the Electricity Act, 2003, reinforcing the primacy of regulatory adjudication in statutory disputes.

Judgment Link

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Types of Employment in India: How the Four Labour Codes Re-shape Work, Rights & Compliance

India’s employment framework has undergone a structural transformation with the enactment of the Labour Codes 2020. These Codes consolidate multiple legacy labour laws and redefine the types of employment in India, bringing clarity to traditional roles while formally recognising emerging work models such as fixed-term employment in India and gig/platform work.

For businesses, HR leaders, compliance professionals, and workers alike, understanding the interaction between the Code on Wages, Industrial Relations Code, OSH Code, and Code on Social Security is critical for lawful and sustainable workforce management.

The Four Labour Codes: The Foundation of Modern Employment Law

India’s labour reform rests on four central statutes:

• Code on Wages, 2019
  Standardizes wage definitions, minimum wages, and payment rules.
  
• Industrial Relations Code, 2020
  Governs trade unions, dispute resolution, standing orders, retrenchment, and recognizes fixed-term employment.
  
• Occupational Safety, Health and Working Conditions Code, 2020
  Consolidates workplace safety, welfare, and working condition laws.
  
• Code on Social Security, 2020
  Creates a unified framework for social security, including coverage for gig and platform workers.

Together, these laws redefine compliance obligations across all recognized employment structures in India.

1. Permanent Employment in India

Permanent employment continues to represent the traditional employer and employee relationship, characterized by open-ended service and long-term engagement.

Under the Code on Wages, 2019, all employees are entitled to statutory minimum wages and protection against unauthorized deductions. The OSH Code ensures workplace safety, regulated working hours, and welfare facilities. Meanwhile, the Code on Social Security, 2020 governs provident fund, employee state insurance, gratuity, and related social security contributions where thresholds are met.

Compliance focus in Permanent Employment aligns on uniform wage definition, timely payment of wages, statutory contributions (PF/ESI) and workplace safety documentation.

For employers, misclassification or wage structuring contrary to the statutory definition of “wages” can trigger compliance exposure under the Labour Codes 2020 framework.

2. Fixed-Term Employment in India: Parity and Pro-Rata Benefits

One of the most significant reforms introduced under the Industrial Relations Code, 2020 is the formal recognition of fixed-term employment in India.

A fixed-term employee is engaged through a written contract for a specified duration. However, unlike earlier contractual engagements that often resulted in benefit disparities, the IR Code mandates parity.

Key principles here align on equal wages and benefits for work of similar nature, eligibility for statutory benefits on par with permanent employees and pro-rata gratuity eligibility after one year of service under the Code on Social Security, 2020.

This development prevents the misuse of fixed-term contracts to dilute employee rights. Employers must ensure that fixed-term employees receive the same statutory protections as permanent staff performing comparable duties.

The introduction of pro-rata gratuity after one year significantly alters workforce cost calculations. Companies engaging seasonal, project-based, or industry-specific talent must now budget for gratuity liabilities from year one, marking a decisive shift in India’s labour law landscape.

3. Gig Workers and Platform Workers: Social Security Recognition

India’s digital economy has led to a rise in app-based and independent work arrangements. The Code on Social Security, 2020 is the first central legislation to formally define and recognise:

• Gig workers
• Platform workers

This reform directly addresses the growing demand for gig workers social security in India.

While gig workers are not automatically classified as traditional employees, the Code empowers the government to design welfare schemes covering life insurance, health benefits, maternity support, old-age protection, and other social security measures.

Implications for Businesses

Platforms facilitating work must anticipate; registration obligations, contribution requirements (as may be prescribed) and record-keeping mandates.

For workers, this marks the first statutory recognition of their role in India’s employment ecosystem.

4. Contract Labour in India

Contract labour arrangements remain prevalent across infrastructure, manufacturing, services, and logistics sectors.

Under the consolidated Labour Codes 2020 structure:

• Contractors remain primarily responsible for wage payments.
• Principal employers must ensure contractor compliance.
• Licensing and record-keeping obligations continue under unified regulatory mechanisms.

Failure to supervise contractor compliance may expose principal employers to secondary liability.

Cross-Cutting Protections Across All Employment Types in India

One of the most consequential outcomes of the Labour Codes 2020 is that statutory protections are no longer confined to rigid or traditional employer–employee relationships. Instead, the modern legal framework governing the types of employment in India adopts a universal, principle-based approach, ensuring that core rights and obligations apply across permanent, fixed-term, contract, and gig/platform work arrangements.

1. Universal Wage Protection under the Code on Wages, 2019

The Code on Wages establishes a uniform and expansive wage regime applicable to all employees, irrespective of the nature of employment or sector. It standardises the definition of “wages” to curb artificial wage structuring and ensures:

• Applicability of minimum wages across organised and unorganised sectors
• Statutory timelines for payment of wages
• Restrictions on unauthorised deductions
• Equal remuneration principles for work of similar nature

This universality is particularly significant for fixed-term employment in India and contract labour, where wage disparities were historically common. By anchoring wage protection to the status of being employed rather than the form of contract, the Code strengthens income security across employment categories.

2. Workplace Safety and Welfare under the Occupational Safety, Health and Working Conditions Code, 2020

The OSH Code consolidates multiple safety and welfare statutes into a single framework and applies broadly to establishments employing workers across different arrangements. Its cross-cutting impact includes:

• Uniform standards for workplace safety and health
• Regulation of working hours, leave, and rest intervals
• Mandatory welfare facilities (canteens, first aid, sanitation, etc., subject to thresholds)
• Employer duties extending to contract and fixed-term workers

Crucially, the OSH Code reinforces that safety obligations are non-negotiable, regardless of whether a worker is permanent, contractual, or engaged for a fixed duration. This ensures that flexibility in hiring does not dilute baseline occupational protections.

3. Dispute Resolution and Employment Stability under the Industrial Relations Code, 2020

The Industrial Relations Code provides a consolidated mechanism for resolving employment disputes across establishments and employment models. Its protections cut across employment types by:

• Standardising standing orders and service conditions
• Providing structured dispute resolution and conciliation mechanisms
• Regulating retrenchment, lay-off, and closure procedures
• Mandating parity of conditions for fixed-term employees

For employers, this means that workforce flexibility must operate within predictable legal boundaries. For employees, including those under fixed-term employment in India, it offers continuity of rights and access to formal redressal mechanisms in case of termination or service disputes.

4. Expanding Social Protection under the Code on Social Security, 2020

The Code on Social Security represents a paradigm shift by extending the idea of social protection beyond traditional employment. Its cross-cutting relevance lies in:

• Consolidation of provident fund, ESI, gratuity, and maternity benefits
• Introduction of pro-rata gratuity for fixed-term employees after one year
• Statutory recognition of gig and platform workers
• Enabling framework for gig workers social security in India through government-notified schemes

While coverage levels and contribution structures may vary by category, the Code establishes social security as a universal objective rather than a privilege tied only to permanent employment.

Taken together, these cross-cutting protections reduce legislative fragmentation that previously required employers to navigate dozens of overlapping statutes. For businesses, this demands careful workforce classification, wage structuring, and benefit planning. For workers, it ensures that changing modes of employment do not result in erosion of fundamental labour rights.

Key Compliance Considerations for Employers

To remain compliant under the Labour Codes 2020 regime, employers should:

1. Clearly classify employment types in written contracts.
2. Align wage structures with statutory definitions.
3. Ensure parity obligations for fixed-term employment in India.
4. Account for pro-rata gratuity liabilities.
5. Monitor evolving rules relating to gig workers social security India.
6. Conduct periodic compliance audits across all workforce categories.

Proactive legal structuring is now essential, particularly in industries relying on flexible or non-standard workforce models.

Conclusion

The evolution of the types of employment in India mirrors the country’s economic transformation and rapid digital expansion, with the Labour Codes 2020 fundamentally reshaping how work, rights, and compliance are understood. Through these reforms, India has standardised wage protection under a unified legal framework, strengthened workplace safety and welfare obligations, ensured statutory parity in fixed-term employment in India, and, for the first time, formally recognised gig and platform workers within an enabling social security regime.

For employers, this shift brings greater legal clarity alongside heightened accountability in workforce structuring and compliance, while for workers it marks a clear expansion of statutory protection across both traditional and emerging forms of employment. In this evolving labour regime, a clear understanding of permanent, fixed-term, gig/platform, and contract labour arrangements is now indispensable for lawful, sustainable, and future-ready workforce management in India.

 

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