In a significant ruling on 18.11.2024 in Review Petition No. 3 of 2024, the Appellate Tribunal for Electricity has upheld the rights of Haryana Discoms in their prolonged legal battle over unjustly levied Point of Connection (‘POC’) charges. The Tribunal directed a refund of these charges, along with applicable interest, to be passed on to consumers through tariff adjustments. This judgment not only rectifies the financial burden on Haryana Discoms but also sets a precedent for equitable resolution in disputes involving transmission charges. By emphasizing practical and consumer-centric methodologies, the Tribunal’s decision ensures fairness while addressing logistical challenges in refund disbursements.

Haryana Discoms has been paying the Transmission Charges for the 400 kV Transmission Line from Aravali Power Station to Daulatabad (‘Transmission Line’) as decided by the Haryana Electricity Regulatory Commission since the commissioning of the transmission line in March 2011. Thereafter, the Central Electricity Regulatory Commission (‘Central Commission’) notified the Central Electricity Regulatory Commission (Sharing of Inter State Transmission Charges and Losses) Regulations, 2010 (‘Sharing Regulations’), which came into effect from 01.07.2011. 

The aforementioned Regulations are applicable to Inter-State Transmission system (‘ISTS’) customers who use the ISTS or are connected to the ISTS only. Power System Operation Corporation Limited (‘POSOCO’) and Central Transmission Utility (‘CTU’) (then forming part of POWERGRID) started including the above Transmission Line in the bills raised on Haryana Discoms for payment of transmission charges, under the Sharing Regulations notified by the Central Commission.

Haryana Discoms after being made aware that the Transmission Line was being treated as an ISTS Line, approached the Central Commission by way of Petition No. 126/MP/2017. The Central Commission, after examining the provisions of Section 2(36) of the Electricity Act, 2003; Connectivity Regulations; Sharing Regulations as well as the Grid Code unequivocally vide its Order dated 04.05.2008 held that no inter-state transmission charges are payable by Haryana Discoms for the use of the Transmission Line as the same is an Intra State Line and not an ISTS, as claimed by POSOCO/CTU. However, the Central Commission only granted prospective relief with effect from the date of passing of the Order 04.05.2018.

Aggrieved by the restrictive prospective application of the Order dated 04.05.2018, Haryana Discoms filed an Appeal being No. 240 of 2018 before this Hon’ble Appellate Tribunal claiming a refund from July 2011 onwards along with carrying cost. The Hon’ble Appellate Tribunal passed an Order dated 04.02.2020 remanding the matter to the Central Commission for re-consideration. Thereafter the Central Commission passed the Order dated 30.07.2022 in Petition 126/MP/2017 upholding the stand taken in its earlier Order dated 04.05.2018. 

Aggrieved by the decision of the Central Commission, Haryana Discoms filed Appeal 383 of 2023 before the Hon’ble Appellate Tribunal seeking the setting aside of the Order dated 30.07.2022 and the refund of POC charges along with carrying cost.

The Hon’ble Appellate Tribunal vide Order dated 02.02.204, set aside the Order of the Central Commission dated 30.07.2022 and remanded the matter to the Central Commission for the refund to be initiated after quantification while granting the relief to Haryana Discoms until 3 years prior to the filing of the Petition. While passing the aforesaid Order, the Appellate Tribunal had further directed the Central Commission to refund the POC charges to the identified individual consumers in the State of Haryana and no finding on the claim for interest/carrying cost as prayed for by the Appellants was rendered.

Aggrieved of the aforesaid, the Haryana Discomsfiled a Review Petition before the Hon’ble Appellate Tribunal on the  following two aspects:

Haryana Discoms highlighted the difficulty in identifying and refunding individual consumers from past years due to the large and dynamic consumer base, which has grown from approximately 53.81 lakh in 2014 to 78.57 lakh in 2024. Many past consumers may no longer be part of the current consumer body, making direct refunds impractical. Reference was made to Regulation 67 of the HERC Tariff Regulations, which provides a methodology for adjusting prior period income. Given this, they proposed that the quantified refund amount be incorporated into the revenue requirements of the current year. Haryana Discoms emphasized that this approach ensures that the refund benefits are automatically passed on to the existing consumer base through a reduction in retail tariffs. Haryana Discoms argued that this established methodology is consistent with regulatory practices and addresses the logistical challenges of tracing individual past consumers while ensuring fairness to all current consumers in the State of Haryana.

Haryana Discoms contended that they should be restored to their original economic position and emphasized that any amount realized, including interest, would not be retained but adjusted in favour of Haryana’s consumers. Haryana Discoms argued that several judgments have established that interest is a natural consequence of granting relief.

In light of the above-challenged aspects, the Hon’ble Appellate Tribunal has been pleased to allow the Review Petition filed by Haryana Discoms to make the following determinations regarding the refund of POC charges to Haryana Discoms:

1. Refund to Consumers via Tariff Adjustment: The Hon’ble Appellate Tribunal has held that, since Haryana Discoms were required to pass on both the costs and benefits of the POC charges to their consumers, the Central Commission should not attempt to refund individual customers. Instead, the benefits of the refund should be passed on to consumers via a lower tariff through the ARR to be determined by the HERC, post receipt of the monies from POSOCO. 
2. Admissibility of Interest/Carrying Costs: The Hon’ble Appellate Tribunal was pleased to hold that since there was both a plea and a prayer for interest/carrying costs in all of the proceedings after the initial Petition and the same was nowhere disputed by CTU/POSCO, the relief towards the same was admissible to Haryana Discoms. The Hon’ble Tribunal also concluded that having illegally levied charges, POSOCO/CTU have to refund the amount with applicable interest
3. Entitlement to Interest: The Hon’ble Appellate Tribunal then discussed whether the Haryana Discoms were entitled to interest/carrying costs. It further held that Haryana Discoms were indeed entitled to interest on the amount to be refunded because they had been deprived of the use of that money while the case proceeded.
4. Determination of Principal and Interest: The Hon’ble Appellate Tribunal has now remanded the case to the Central Commission to determine the principal amount to be refunded along with the appropriate rate of interest on a simple or compound basis within a stipulated time period of four months.
5. Directives to CTU and POSOCO: In addition to determining the interest rate, the Hon’ble Appellate Tribunal directed the Central Commission to issue appropriate directions to CTU and POSOCO to pay the refund along with interest to Haryana Discoms.
6. Tariff Adjustment: Finally, the Hon’ble Appellate Tribunal ordered Haryana Discoms to adjust their tariff in the next tariff determination to pass on the benefits of the refund and interest to consumers.

The Hon’ble Appellate Tribunal for Electricity has held that POSOCO/CTU acted unlawfully in raising and collecting Inter-State Transmission Charges from Haryana Discoms in relation to an Intra-State Transmission Line. Furthermore, the Tribunal prescribed a methodology for adjusting past refunds in the forthcoming ARR, noting that it is impractical to allocate the costs and benefits of POC charges to individual consumers. This approach is not only time- and cost-efficient but also more pragmatic and conclusive.

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In India, the Insolvency and Bankruptcy Code (IBC) is designed to aid the resolution of insolvency, not debt recovery. Under Section 9 of IBC, an operational creditor can initiate the corporate insolvency resolution process (CIRP) if they meet specific criteria. 

However, recent legal interpretations have made it clear that applications under Section 9 of IBC cannot be filed solely for the recovery of dues. The focus is on insolvency resolution, not as a tool for creditors looking to recover money, which falls under a different judicial framework.

The IBC was enacted to provide a systematic approach to insolvency and bankruptcy in India, aiming to assist creditors by ensuring timely resolution of insolvency cases. Section 9 of IBC is primarily directed at the initiation of the Corporate Insolvency Resolution Process (CIRP) by operational creditors against a corporate debtor for non-payment of “operational debts” like those for goods or services. Its role is thus confined to insolvency resolution, not as a mechanism for simple debt recovery.

In several landmark cases, such as Mobilox Innovations Pvt. Ltd. v. Kirusa Software Pvt. Ltd., the adjudicating authority clarified that Section 9 of IBC is not meant to serve as a “recovery forum” for unpaid dues. Instead, it is intended for situations where the corporate debtor is genuinely insolvent and incapable of paying its operational debts. 

The authority underscored that the objective of IBC is to safeguard the overall financial stability of corporations rather than allow creditors to employ it as a tool to extract payments, often described as “debt collection” attempts, which could disrupt corporate stability​.

On September 10, 2024, the National Company Law Appellate Tribunal (NCLAT) in M/s Agarwal Foundries Pvt. Ltd. v. POSCO E&C India Pvt. Ltd. reaffirmed that applications under Section 9 of IBC cannot be utilized for recovery actions. This case reiterates the intention of Section 9 of IBC to address insolvency, not as a method for operational creditors to recover dues.

In this case, the appellant, M/s Agarwal Foundries Pvt. Ltd., supplied TMT bars to a contractor on the instruction of POSCO E&C India Pvt. Ltd. However, the payment remained unpaid, and M/s Agarwal sought to recover these dues by filing an application under Section 9 of IBC against POSCO, arguing that POSCO acted as a guarantor for the contractor. 

The National Company Law Tribunal (NCLT) initially rejected the application, which led the appellant to file an appeal before the NCLAT.

The NCLAT examined the following issues:

1. Operational Creditor Status: The appellant claimed it was an operational creditor due to POSCO’s alleged guarantee. However, NCLAT found no direct privity of contract or acknowledgment of such a guarantee from POSCO’s side.
2. Nature of Debt: The tribunal reiterated that an operational debt must be connected directly to the provision of goods or services. The invoices supporting the appellant’s claim were raised by third parties, weakening the argument that it was an operational debt owed by POSCO.
3. Limitation Period: NCLAT clarified that the limitation period begins from the date of default, not from the demand notice date, rendering the appellant’s claim time-barred.
4. Abuse of IBC Provisions: NCLAT criticized the appellant for misusing Section 9 of IBC provisions, noting a pattern of withdrawn applications filed under the guise of recovery rather than insolvency resolution.

The case serves as a strong example of how Section 9 of IBC is intended solely for genuine insolvency issues, not as an alternative to debt recovery and clarifies the boundaries of operational debt under IBC provisions​.

The Section 9 of IBC framework remains a crucial tool for operational creditors genuinely seeking resolution to insolvency issues. However, recent rulings have firmly set boundaries to ensure it is not misused for mere debt recovery:

Courts and tribunals have consistently held that Section 9 of IBC is intended to facilitate insolvency resolution rather than to serve as a substitute for civil remedies or debt recovery actions. Applications with recovery as the sole objective misuse the IBC framework, as underscored in the recent M/s Agarwal Foundries Pvt. Ltd. v. POSCO E&C India Pvt. Ltd. ruling​.

For a creditor to qualify as an operational creditor under Section 9 of IBC, the debt must arise directly from transactions between the creditor and the debtor, such as the direct supply of goods or services, as reiterated in NCLAT’s observations. Attempts to leverage indirect transactions or unverifiable guarantees do not satisfy this requirement​.

The limitation period under the Limitation Act, counted from the default date, is strictly applied in IBC cases. Applications falling outside this period are generally dismissed, barring any exceptions sanctioned by the court​.

The judiciary’s strict interpretation helps prevent operational creditors from filing multiple applications solely to exert pressure on corporate debtors. This approach ensures that the IBC mechanism remains true to its primary goal: aiding in the resolution of genuine insolvency situations rather than facilitating recoveries.

By reinforcing these principles, the judiciary safeguards the purpose of the IBC and maintains the integrity of the insolvency framework. For creditors seeking recovery, the proper avenue lies in civil courts or other specified legal channels, rather than attempting to bend the scope of Section 9 of IBC.

On 17.10.2024, the  Central Electricity Regulatory Commission (‘Central Commission’)directed Tamil Nadu Transmission Corporation Limited (‘TANTRANSCO’) to pay its outstanding transmission charges along with applicable Late Payment Surcharge to Power Grid Corporation of India Limited (‘POWERGRID’).

POWERGRID had been entrusted with the responsibility of setting up certain elements that are part of the transmission system associated with the Kalpakkam PFBR 500 MW project. Consequently, POWERGRID approached the Central Commission seeking approval of the transmission tariff for three assets associated with the said system that was being set up by it.

The Central Commission vide its Tariff Order dated 04.03.2021, approved the date of commercial operation of the said asset as 01.04.2014. It was further directed that the Transmission Charges from the said date would be borne by the generating company – BHAVINI and the transmission licensee – TANTRANSCO in equal proportion until either the generation by BHAVINI or the transmission system set up by TANTRANSCO is commissioned.

Pursuant to the above-mentioned Order dated 04.03.2021, bilateral invoices were raised on TANTRANSCO.

Thereafter, POWERGRID approached the Central Commission for truing up of the transmission tariff for the 2014-19 period and determination of the transmission tariff for the 2019-24 period. The Central Commission vide its order dated 05.12.2021 trued up the transmission tariff for the 2014-19 period. Subsequent to the passing of the aforementioned True-UpOrder, the final invoice was raised on TANTRANSCO.

As TANTRANSCO failed to make the payment within the stipulated time in terms of the final invoice raised, POWERGRID filed a Petition before the Central Commission under Section 79 of the Electricity Act, 2003 for the execution of the Tariff Order dated 04.03.2021.

1. TANTRANSCO has continuously defaulted in complying with the Tariff Order. Subsequent to the Tariff Order, bilateral invoices were raised on TANTRANSCO. However, even after several notices, TANTRANSCO has not paid the outstanding dues.
2. No Appeal or Review has been preferred against the Tariff Order by TANTRANSCO.
3. POWERGRID has no contractual mechanism to enforce the recoveries against TANTRANSCO. There is no bank guarantee or Letter of Credit available with PGCIL for encashment to recover the outstanding dues.
4. The Central Commission is vested with the powers of civil courts and therefore, it can execute its own orders under Regulation 119 of the Conduct of Business Regulations, 1999.
5. The Central Commission exercises regulatory powers under Section 79 of the Act which includes within its scope the power to enforce and implement its orders and can initiate suo-moto action under Section 142 of the Electricity Act, 2003 in the event of any non-compliance of regulation or the orders of  Commission.

The Central Commission observed in its Order that although Section 79 of the Electricity Act, 2003 does not specifically elaborate on the execution of orders passed by the Commission, it nevertheless enables the Commission to regulate the Inter-State Transmission of Electricity, to determine its tariff and also to adjudicate upon the disputes in connection therewith. 

Relying upon the judgement of the Hon’ble Supreme Court in Central Power Distribution Co. & Ors. v. Central Electricity Regulatory Commission &Ors., (2007) 8 SCC 197the Central Commission observed that the power to regulate also includes within it the power to enforce. 

Reliance was also placed upon the decision of the Hon’ble Supreme Court in Maharashtra State Electricity Distribution Company Ltd. v. Maharashtra State Electricity Regulation Commission & Ors. (2022) 4 SCC 657wherein it was observed that the Electricity Regulatory Commissions constituted under the Electricity Act, 2003 are to be seen as substitutes for civil courts in relation to disputes between the licensees and the generating companies. Therefore, the Commissions would have the power to execute their own orders.

The Central Commission rejected the contention of TANTRANSCO that POWERGRID failed to avail appropriate remedies under Section 142 of the Electricity Act, 2003. The Central Commission observed that invoking the provisions of Section 142 for non-compliance of an order is not the sine qua non in enforcement proceedings and is simply one of the means of ensuring compliance.

Further, the Central Commission has also observed that the truing-up exercise is not an independent exercise but is in furtherance to the determination of tariff under the tariff order. Merely because the applicable transmission charges for the said asset have undergone revision due to the truing-up exercise, it does not render the tariff order, especially the directions issued thereunder, non-executable or unenforceable.

Gender pay disparity remains one of the most persistent issues plaguing India’s construction sector. Although the construction industry is one of the largest employers of labour in India, it continues to display significant gender-based wage inequalities. Women working in construction often earn much less than their male counterparts for the same or similar roles, with some estimates suggesting that women earn between 30-40% less than men in this industry[1].

This inequality persists despite a robust legal framework designed to ensure equal pay for equal work. The wage gap is rooted in deep-seated societal norms, lack of awareness, and insufficient enforcement of existing laws. Understanding the extent of this disparity, the legal framework surrounding it, and the challenges involved in implementing equitable solutions are vital in addressing the gender pay gap in India’s construction industry.

India’s legal framework provides clear directives regarding gender pay equality. The Constitution of India lays the groundwork for wage parity by promoting gender equality in all spheres of life. Article 39(d) of the Constitution specifically mandates the State to ensure that men and women receive equal pay for equal work. This constitutional principle aims to eliminate any discrimination based on gender in the workplace, particularly with regard to remuneration.

To operationalize this constitutional directive, the Equal Remuneration Act of 1976 was enacted. The Act aims to prevent gender-based discrimination in matters relating to wages and recruitment. It provides a legal basis for ensuring that employers pay equal remuneration to men and women performing the same work or work of a similar nature. 

However, despite these provisions, the Act has faced criticism for its weak implementation and limited scope. Employers often bypass the law by categorizing jobs in a way that undervalues roles typically filled by women.

Recognizing these limitations, the Indian government introduced the Code on Wages in 2019, which consolidated four labour laws, including the Equal Remuneration Act. This Code extends the principle of equal remuneration to all genders and emphasizes “equal pay for equal work”. However, critics argue that while this may appear to be a step forward, it doesn’t fully address the complexities of wage disparities, particularly those stemming from occupational segregation and the undervaluation of roles traditionally held by women.

Despite the existence of a legal framework aimed at ensuring equal pay, several challenges hinder the realization of wage parity between men and women in India’s construction industry. These challenges are multifaceted and range from deep-rooted societal norms to structural issues within the industry itself. Below are some key challenges:

• Occupational Segregation:

One of the most significant barriers to wage equality is occupational segregation. Women in the construction sector are often confined to lower-paying jobs such as manual labour, while men dominate higher-paying skilled positions such as masons or carpenters. This segregation is both a cause and effect of societal norms, which often assign specific roles to women based on perceived physical or intellectual limitations. As a result, women are paid less even when performing the same type of work.

According to the World Bank’s report on Women’s Work and Employment (2021), women’s participation in lower-skilled, lower-paid jobs is a global issue, with India’s construction sector reflecting this trend. Women are generally underrepresented in higher-paying technical roles, contributing to the persistent wage gap.

• Weak Enforcement of Existing Laws:

Although India’s Equal Remuneration Act and the Code on Wages 2019 provide legal safeguards, enforcement remains a significant challenge. Many employers are either unaware of or deliberately ignore these laws, exploiting loopholes or categorizing jobs in ways that allow them to justify pay disparities.

A study by the International Labour Organization (ILO) in 2020 pointed out that while India has made progress in enacting gender equality laws, enforcement mechanisms are often under-resourced and ineffective, particularly in informal and unregulated sectors like construction.

• Prevalence of Informal Employment:

A large portion of women in India’s construction sector are employed informally, with little to no access to legal protections or benefits. Informal employment allows for significant wage flexibility, which often results in lower wages for women. Furthermore, without formal contracts, it becomes difficult for women to claim equal pay or challenge discriminatory practices.

The National Sample Survey Office (NSSO) 2019 report on the informal workforce in India highlighted that women in informal employment, particularly in construction, are often paid less than men, with the wage gap being exacerbated by the lack of formal employment contracts.

To reduce and eventually eliminate the gender-based pay gap in India’s construction sector, a multifaceted approach is required. This approach should involve legislative reforms, better enforcement of existing laws, and societal changes in how women’s labour is valued. Below are some strategies that can be adopted:

One key step is to reevaluate how “equal work” is legally defined. The current focus on “same or similar work” often fails to address the fact that jobs traditionally held by women may be undervalued, despite their equivalent contribution to productivity. A broader definition that focuses on “work of equal value” could help address wage disparities more effectively.

International standards, such as those set by the International Labour Organization (ILO), advocate for the principle of “equal pay for work of equal value.” This approach has been successful in several countries in closing the wage gap by recognizing that even if the tasks performed by men and women are different, they may contribute equally to the workplace. India could adopt similar legal reforms to better address wage disparities.

Enforcement of wage equality laws needs to be strengthened. Government agencies should conduct more frequent inspections, especially in industries like construction where wage discrimination is rampant. Employers who violate the law should face stricter penalties, including fines or other sanctions.

According to the ILO’s Global Wage Report 2020-2021, countries that have implemented stronger enforcement mechanisms for wage equality laws have seen a marked decrease in gender wage gaps. Strengthening India’s enforcement capacity, particularly in the informal sector, could lead to better compliance with existing laws.

Since a large number of women in construction are informally employed, extending legal protections to the informal workforce is crucial. This could involve introducing stricter regulations around informal labour, providing social security benefits, and ensuring that wage parity laws apply to both formal and informal employment.

The National Commission for Enterprises in the Unorganised Sector (NCEUS) Report 2020 highlights the need for better protections for informal workers, particularly women, to address gender-based wage discrimination in sectors like construction.

Women in India’s construction sector earn 30-40% less than their male counterparts. This gap is largely due to occupational segregation, societal norms, and informal employment, which lead to women being confined to lower-paying jobs.

India’s legal framework includes the Constitution’s Article 39(d), the Equal Remuneration Act of 1976, and the Code on Wages, 2019. These laws mandate equal pay for equal work, but enforcement remains weak in the construction sector.

The persistence of the gender pay gap is due to several factors: weak enforcement of wage equality laws, deep-rooted societal biases, and the high prevalence of informal employment, which offers little legal protection to women.

Women are often relegated to lower-paying, labour-intensive roles such as bricklaying or carrying materials, while men dominate higher-paying skilled jobs like masonry and carpentry. This segregation reinforces the pay disparity.

Effective solutions include stronger enforcement of existing laws, broader definitions of equal work to include the value of women’s contributions, and formalizing employment for women in the construction industry to ensure they receive proper wages and legal protections.

The rapid growth of India’s construction industry, fuelled by extensive infrastructure developments and real estate projects, has inevitably led to a corresponding increase in construction disputes in India. 

These disputes typically arise from breaches of contract, project delays, cost overruns and mismanagement. With the sector becoming more intricate, these disputes often require deep legal intervention, making them a focal point of litigation and arbitration proceedings.

The complexities of construction disputes in India extend beyond simple contract disagreements. These conflicts often touch upon multifaceted legal, regulatory and execution issues. The contracts that govern construction projects—whether involving large-scale infrastructure developments or private real estate ventures—are extensive and involve multiple stakeholders. 

Misinterpretation of contractual obligations, ambiguous provisions regarding performance and unclear terms around timelines and cost estimates frequently give rise to disputes.

Construction contracts in India are notorious for their complexity and disputes commonly arise at the contract formation stage. Ambiguities in letters of intent, tenders and pre-construction negotiations often lead to conflicts. 

Disputes over whether a valid contract has been executed or over unclear terms, cause significant project delays, ultimately leading to financial liabilities. These disputes are typically escalated to litigation or arbitration, where parties contest their responsibilities under poorly drafted agreements.

Project delays are one of the most significant contributors to construction disputes in India. Delays in completion are almost endemic in the construction sector, with many projects running far beyond their scheduled timelines. The reasons for delays are numerous, including land acquisition issues, financing challenges, government approvals and unforeseen circumstances like strikes or adverse weather conditions.

Determining which party is responsible for delays is a recurring issue in Indian courts. Delays often lead to claims for liquidated damages, as stipulated under Section 55 of the Indian Contract Act, 1872. Time is typically considered of the essence in construction contracts, meaning any unjustifiable delay could trigger penalty clauses. However, disputes arise when the responsible party contests these penalties, particularly in cases of concurrent delays.

Extensions of Time (EOT) claims are another contentious area. Contractors are entitled to seek EOTs when delays occur due to factors beyond their control, such as force majeure events or changes in project scope initiated by the employer. 

However, the failure to properly notify the employer within the contractual timelines often leads to disputes. These claims frequently escalate into arbitration or litigation, further compounding project costs.

Another significant driver of construction disputes in India is variation in the project scope. Construction projects are rarely executed exactly as originally planned. Changes in design, material availability and site conditions often necessitate modifications to the original contract. These “variations” in project scope are commonplace but often lead to substantial financial and legal conflicts.

Disputes related to variations arise when these changes are not formally documented or agreed upon by both parties. The Indian Contract Act, 1872, mandates that any alteration to the scope of work must be mutually agreed upon and duly documented. 

Failure to do so can lead to contested claims, particularly when the variation leads to increased costs or extended timelines. 

Given the length and complexity of construction disputes in India, the dispute resolution mechanism employed plays a critical role in determining project outcomes. 

Traditional litigation is often not a practical solution due to the chronic backlog of cases in Indian courts, where disputes can take an average of 7.5 years to resolve. As a result, parties involved in construction contracts are increasingly turning to arbitration as the preferred mode of resolving disputes.

The Arbitration and Conciliation Act, 1996, which follows the UNCITRAL Model Law, governs both domestic and international arbitration in India. It offers a faster, less formal and more flexible route for resolving construction disputes in India. 

Most major construction contracts now include arbitration clauses, ensuring that disputes can be referred to arbitration instead of being dragged into the courts.

A significant advantage of arbitration is that it allows the parties to appoint arbitrators with specific expertise in construction law. 

As India’s construction sector continues its rapid expansion, construction disputes in India will inevitably rise. The legal landscape is evolving to address these challenges, with legislative reforms and alternative dispute resolution mechanisms paving the way for faster, more efficient dispute resolution. 

However, the effectiveness of these reforms will depend on their implementation and the willingness of stakeholders to adopt dispute-avoidance strategies, clearer contractual terms, and proactive project management practices.

For India’s construction sector to sustain its growth, the resolution of disputes must be as efficient and effective as the engineering feats it seeks to achieve. 

Construction disputes in India commonly arise from breaches of contract, project delays, cost overruns, mismanagement and ambiguities in contractual obligations. Other factors may include variations in project scope and issues related to land acquisition or government approvals.

Arbitration, in construction disputes in India, serves as an alternative dispute resolution mechanism governed by the Arbitration and Conciliation Act, 1996. It allows parties to resolve disputes outside of court, often through the appointment of specialized arbitrators. Arbitration is generally preferred due to its faster and more flexible process compared to traditional litigation.

Delays are a significant contributor to construction disputes in India. They can lead to claims for liquidated damages and trigger penalty clauses if unjustifiable. Determining responsibility for delays can often result in contentious disputes requiring resolution through arbitration or litigation.

Proper documentation of variations in project scope is crucial to prevent disputes. The Indian Contract Act, 1872 mandates that any alterations to the original contract must be mutually agreed upon and documented to avoid contested claims related to increased costs or extended timelines.

To minimize construction disputes in India, stakeholders can adopt clearer contractual terms, proactive project management practices and effective communication among all parties involved. Additionally, employing dispute-avoidance strategies such as regular progress reviews and risk management can help prevent conflicts from escalating.

In recent years, the discourse surrounding workplace harassment in India has intensified, particularly concerning the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 (POSH Act). This legislation was designed to protect women from harassment in professional settings. However, its implementation and effectiveness have faced significant scrutiny. 

The law often falls short of addressing the complexities of social imbalances and power dynamics inherent in various professional environments where people face workplace harassment in India. This necessitates a critical examination of the law and its transformative capacity in promoting gender equality and workplace safety.

The backdrop of workplace harassment in India reveals a systemic issue that transcends mere individual incidents. The POSH Act was enacted following the Vishaka Guidelines, which emerged from the Supreme Court’s response to the gang rape of Bhanwari Devi, a social worker. 

Despite this legislative framework, numerous incidents, such as the protests by employees of the Karnataka State IT/ITeS Employees Union (KITU) in March 2024 and the accusations against Brij Bhushan Sharan Singh, underscore the persistent inadequacies in the law’s implementation.

These events illuminate the failures of organizations to establish Internal Complaints Committees (ICCs) effectively and to address grievances adequately. The absence of such committees creates an environment where workplace harassment in India goes unchecked, leaving many women without recourse or protection. Reports indicate that a considerable percentage of women choose not to report harassment due to fear of retaliation or disbelief, further perpetuating a culture of silence.

The POSH Act provides a broad definition of sexual harassment, encompassing various forms of unwelcome behaviour, including physical contact, sexual advances and suggestive remarks. This definition is crucial in framing the legal context of workplace harassment in India. However, the subjective nature of harassment and the unequal power dynamics in workplaces complicate the adjudication of complaints.

The Act’s framework builds on the insights provided by the Vishaka Guidelines, which highlighted that sexual harassment is not merely an issue of individual misconduct but is deeply rooted in societal power dynamics that disadvantage women. 

For instance, the Ministry of Women and Child Development’s handbook emphasizes that many women face a hostile work environment that affects their performance and productivity. It is essential to understand that the impact of workplace harassment in India extends beyond individual incidents and contributes to broader economic and social inequalities.

Despite the comprehensive definitions provided, challenges remain in translating these legal concepts into actionable protections. The subjective nature of complaints often leads to scepticism about the authenticity of experiences, thereby undermining the transformative potential of the law.

One of the primary critiques of the POSH Act is its limited scope regarding workplace harassment in India. While it aims to cover formal workplaces, many sectors, particularly agriculture and informal employment, remain unprotected. This exclusion leaves a significant number of women vulnerable to harassment without any legal recourse.

Although amendments have included domestic workers, the Act has not adequately addressed the needs of those in less structured employment environments. 

Furthermore, the exclusion of journeys to and from the workplace restricts the Act’s applicability. This gap in coverage means that women who face harassment during their commutes, such as those using carpool services, are left without protections under the law.

A more inclusive approach is necessary to ensure that all women, regardless of their employment type, have access to protections against harassment. Expanding the definition of “workplace” to encompass all environments where women are vulnerable to harassment would be a significant step toward addressing these shortcomings.

The POSH Act, while a progressive step in addressing workplace harassment in India, contains ambiguities that hinder its effectiveness. These ambiguities often leave room for varied interpretations, which can undermine the pursuit of justice for victims.

One significant area of concern is the definition of harassment itself. The Act specifies various forms of sexual harassment but does not adequately address the complexities of consent and mutual relationships. The subjective nature of what constitutes harassment can lead to disputes regarding the intent and impact of actions. 

For example, a case may arise where one party perceives a gesture as friendly while another views it as inappropriate. This discrepancy can complicate the adjudication process, leaving victims feeling unsupported and vulnerable.

The burden of proof rests heavily on the complainant, which can deter women from filing complaints. The requirement for victims to substantiate their claims with evidence places an unfair expectation on those already experiencing emotional and psychological distress. This burden can often feel insurmountable, particularly in environments where power dynamics favor the accused.

The establishment of Internal Complaints Committees (ICCs) is a cornerstone of the POSH Act, designed to provide a structured mechanism for addressing complaints of workplace harassment in India. However, the effectiveness of these committees is often compromised by several factors.

Composition and Training

Many ICCs lack adequate training and awareness regarding the nuances of Workplace Harassment in India. Members may not fully understand the psychological and emotional dimensions of harassment, leading to biased investigations. 

The Act mandates that ICCs include women, but it does not specify the qualifications or training necessary to handle such sensitive cases effectively. This gap can result in the perpetuation of workplace hierarchies and power dynamics that hinder fair assessments.

Informal Influences

In practice, the functioning of ICCs can be influenced by informal networks within organizations. As noted by various stakeholders, there can be a tendency for committees to protect the organization’s reputation over the rights of the complainant, especially in workplace harassment in India cases. 

For instance, instances have been reported where members of ICCs demonstrated favoritism towards accused individuals, particularly if they held senior positions. Such biases create an environment where victims may feel pressured to withdraw their complaints, fearing retaliation or disbelief.

Transparency and Accountability

The lack of transparency in ICC proceedings can deter women from reporting incidents. A perceived lack of confidentiality and fear of public scrutiny often result in women choosing to remain silent about their experiences. Reports indicate that many employees are unaware of their rights under the POSH Act, which further exacerbates the situation.

To enhance the effectiveness of ICCs, it is crucial to implement regular training sessions that emphasize the legal framework and sensitivity required to handle complaints. Ensuring that ICC members are educated about gender issues and the intricacies of workplace harassment in India can foster a more supportive environment for victims.

The informal nature of ICC proceedings, likened to civil court processes, may create further challenges. Victims might feel that their experiences are trivialized in a setting that lacks the formal protections afforded by traditional legal avenues. The risk of retaliation, coupled with the fear of not being believed, can discourage many women from seeking redress, thereby perpetuating a culture of silence around workplace harassment in India.

To address these issues, specifying clearer guidelines on consent, revisiting the burden of proof and ensuring that legal proceedings are conducted with the gravity and sensitivity that such matters demand become necessary.

The POSH Act includes provisions aimed at deterring false complaints, notably under Section 14, which penalizes those who file malicious or false charges. 

While the intention behind this clause is to prevent misuse of the law, it inadvertently shifts the burden onto the complainant, often creating an environment of fear and skepticism around genuine reports of workplace harassment in India.

This legal framework poses a significant risk to women who may already be hesitant to report harassment. The threat of punitive action for filing a false complaint can discourage victims from coming forward, leading to a culture where women may feel compelled to remain silent about their experiences. 

Such a deterrent effect undermines the very purpose of the POSH Act, which is to empower women to seek justice without fear of retribution.

Societal perceptions regarding false accusations contribute to the stigma surrounding complaints of sexual harassment. The narrative that women may use the law for personal vendettas or to gain undue advantages further complicates the landscape. 

This skepticism can be detrimental, as it diminishes the credibility of genuine victims and creates an atmosphere where harassment is tolerated.

Advocates for women’s rights argue that the Act must be revised to mitigate the chilling effect of potential penalties for false complaints. For instance, enhancing support mechanisms for victims, such as legal aid and counseling services, could empower women to come forward with greater confidence.

Furthermore, fostering a cultural shift that prioritizes the importance of listening to and believing survivors is essential in combating the stigma associated with reporting harassment. Ensuring that the legal consequences for false complaints are balanced with protections for genuine victims is crucial for the Act to achieve its intended transformative potential in addressing workplace harassment in India.

The impact of workplace harassment in India extends beyond individual cases; it has far-reaching societal and economic implications. Sexual harassment affects not only the victims but also the overall workplace environment and productivity, leading to broader consequences for organizations and society at large.

Numerous studies indicate that sexual harassment significantly reduces workplace productivity. When employees experience harassment often results in absenteeism, decreased morale and high turnover rates. 

According to the International Labour Organization (ILO), violence and harassment in the workplace can lead to substantial economic losses, not just for individuals but for businesses and the economy as a whole. A 2022 survey reported that over 23% of employees had experienced some form of violence or harassment at work, which directly impacts economic efficiency and growth.

The psychological toll of harassment cannot be underestimated. Victims often experience anxiety, depression and a loss of self-esteem, which can hinder their professional development and overall well-being. The emotional scars left by harassment can lead to long-term mental health issues, making it challenging for victims to re-enter the workforce or perform at their optimal levels.

Addressing workplace harassment in India requires a cultural shift that prioritizes gender equality and safety in professional environments. Organizations must foster a culture of respect and accountability, where harassment is not tolerated and victims feel safe to report incidents. 

This cultural change can only be achieved through comprehensive training programs, awareness campaigns, and strong leadership commitment to enforce anti-harassment policies effectively.

For the POSH Act to fulfill its transformative potential, it must be accompanied by legal and institutional reforms that address the socio-economic context of harassment. This includes promoting gender-sensitive training for ICC members, providing better resources for reporting mechanisms, and ensuring that the law evolves in line with societal changes.

By recognizing the broader implications of workplace harassment, policymakers and organizations can work together to create safer, more equitable workplaces, thereby enhancing not just individual lives but also societal welfare and economic productivity.

To address the persistent challenges of workplace harassment in India, several reforms are necessary to enhance the effectiveness of the POSH Act and ensure that it truly serves its purpose. 

Expanding the Scope of the Act

First and foremost, the scope of the POSH Act should be broadened to include all types of workplaces, including informal sectors and agricultural environments. This would provide protection to a larger demographic of women who currently lack recourse against harassment. Additionally, the definition of “workplace” should be expanded to encompass incidents occurring during commutes or off-site work-related activities.

Training and Capacity Building

Internal Complaints Committees (ICCs) require rigorous training and capacity building to effectively address the complexities of harassment cases. Training should encompass not only legal provisions but also psychological and social aspects of harassment, emphasizing sensitivity and fairness. Regular workshops and refresher courses can equip ICC members with the necessary skills to navigate investigations impartially.

Streamlined Reporting Mechanisms

To encourage reporting, organizations must establish streamlined and confidential reporting mechanisms that allow victims to voice their concerns without fear of retribution. Anonymity should be guaranteed, and organizations should commit to protecting whistleblowers. This can create a safer environment for women to come forward with their experiences.

Public Awareness Campaigns

Public awareness campaigns can play a crucial role in changing societal attitudes towards workplace harassment in India. These campaigns should focus on educating employees about their rights and the resources available to them. Empowering women through knowledge and awareness can help dismantle the stigma associated with reporting harassment.

Legal Clarity and Protection

Lastly, the law must be revisited to clarify the definitions of harassment and the standards for evidence required in complaints. Legal reforms should seek to balance the concerns of false complaints with robust protections for genuine victims, ensuring that the process is not a deterrent to those seeking justice.

By implementing these recommendations, India can take significant strides toward creating a safer, more equitable workplace for all women, ultimately enhancing both social justice and economic productivity.

The issue of workplace harassment in India is complex and multifaceted, requiring a comprehensive approach that encompasses legal, institutional and societal dimensions. While the POSH Act represents a significant step forward in addressing the challenges faced by women in the workplace, its limitations and the persistent cultural stigma surrounding harassment necessitate urgent reforms.

To transform the landscape of workplace safety, it is crucial to not only strengthen the legal framework but also to foster a cultural shift that prioritizes respect and equality. Women must feel empowered to report incidents of harassment without fear of stigma or retaliation.

Reforming the POSH Act and its implementation can pave the way for a transformative change, helping to dismantle the existing power imbalances and fostering an environment where all women can thrive professionally and personally.

The Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 (POSH Act) is a legislative framework in India designed to protect women from sexual harassment in professional settings. It aims to create a safe working environment by establishing mechanisms for prevention, prohibition, and redressal of complaints related to sexual harassment.

Key challenges include limited scope regarding informal and agricultural sectors, ambiguities in the definitions of harassment, a heavy burden of proof on complainants, inadequate training of Internal Complaints Committees (ICCs) and societal stigma surrounding reporting incidents. These issues often result in victims feeling unsupported and deterred from seeking justice.

Workplace harassment can lead to decreased morale, increased absenteeism and high turnover rates, which ultimately reduce workplace productivity. Studies, including those from the International Labour Organization (ILO), indicate that such incidents can result in substantial economic losses for both businesses and the overall economy.

Organizations should foster a culture of respect and accountability by implementing comprehensive training programs for ICC members, establishing clear and confidential reporting mechanisms, promoting public awareness campaigns about rights and resources, and ensuring legal clarity and protection for genuine victims.

Necessary reforms include expanding the Act’s scope to cover all workplaces, including informal sectors; enhancing training for ICC members; creating streamlined reporting mechanisms; raising public awareness about workplace harassment; and clarifying legal definitions and evidence standards to protect genuine victims while addressing concerns about false complaints.

The National Company Law Appellate Tribunal (NCLAT) continues to play a critical role in shaping the implementation of the Insolvency and Bankruptcy Code (IBC). In a recent NCLAT ruling, the Delhi Bench of NCLAT, led by Justice Ashok Bhushan, addressed a significant issue regarding the payment of electricity dues incurred by the Corporate Debtor during the moratorium period of the Corporate Insolvency Resolution Process (CIRP). This case involved Earthcon Infracon Pvt. Ltd., which was under CIRP, and Noida Power Company Ltd. (NPCL), raising concerns about whether current dues must be settled even during the protective moratorium phase provided by Section 14(1) of the IBC.

The NCLAT ruling sheds light on the responsibilities of the Resolution Professional (RP) in managing ongoing dues during insolvency proceedings, ensuring that essential utilities like electricity are not disrupted, provided there is no default in the payment of current dues.

The case arose when Earthcon Infracon Pvt. Ltd. (Corporate Debtor) entered into the Corporate Insolvency Resolution Process (CIRP), and a Resolution Professional (RP) was appointed to manage its affairs during the moratorium period. During this time, Noida Power Company Ltd. (NPCL) issued multiple notices regarding the non-payment of post-CIRP electricity dues. The RP initially sought relief from the Adjudicating Authority, requesting that the electricity not be disconnected and proposing an instalment plan for the dues.

Despite the interim orders passed by the Adjudicating Authority, preventing NPCL from disconnecting the electricity, the issue escalated as no resolution for the payment schedule was reached. NPCL filed further applications to vacate the interim orders, and the RP filed applications to permanently stay NPCL’s disconnection notices.

Eventually, the NCLAT ruling ordered that the RP should collect electricity dues from the homebuyers and remit them to NPCL. It was also directed that the RP could take necessary steps in case of non-payment. However, the issue of electricity disconnection for common areas such as lifts and corridors remained under dispute, leading to additional hearings and orders from the Adjudicating Authority.

The core issue before the Tribunal was whether the Appellant, Noida Power Company Ltd. (NPCL), was lawfully entitled to demand payment of current electricity dues incurred by the Corporate Debtor during the moratorium period. Additionally, NPCL sought to determine whether it had the right to disconnect the electricity connection if the dues remained unpaid.

The NCLAT ruling clarified that while the Corporate Debtor is under the protective shield of the moratorium as outlined in Section 14(1) of the Insolvency and Bankruptcy Code (IBC), this protection does not absolve the debtor from paying current dues. The Tribunal highlighted that the benefit of continued electricity supply, or any essential utility, is contingent upon there being no default in the payment of current dues. Therefore, the Resolution Professional (RP) has an obligation to ensure these payments are made to avoid disruptions.

In this specific NCLAT ruling, the Tribunal referred to previous judgements, including Shailesh Verma vs Maharashtra State Electricity Distribution Company and Sanskriti Allottee Welfare Association & Ors vs Gaurav Katiyar, both of which established that the RP is responsible for the settlement of such dues. These cases underscored the importance of ensuring that utilities remain functional while the Corporate Debtor undergoes insolvency resolution, but only when current dues are settled.

This NCLAT ruling has significant implications for both Resolution Professionals (RP) and creditors, particularly utility providers like electricity companies. It reinforces the principle that while the moratorium under Section 14(1) of the IBC protects the Corporate Debtor from legal actions during the insolvency process, this protection is conditional upon the payment of ongoing dues.

For Resolution Professionals, the NCLAT ruling serves as a reminder of their duty to manage not only the debtor’s assets but also to ensure that essential services like electricity, which are critical to the operation of the Corporate Debtor, are maintained. Failing to pay such dues can lead to the discontinuation of services, which could further complicate the Corporate Insolvency Resolution Process (CIRP). Moreover, the Tribunal’s reliance on past rulings reaffirms the obligation of the RP to collect dues from residents or other stakeholders when needed, as seen in this case with the homebuyers.

On the other hand, utility companies are assured that they are entitled to receive payments for services rendered during the CIRP. The NCLAT ruling makes it clear that utility providers are not obligated to continue offering their services free of charge, even when the Corporate Debtor is under moratorium protection, provided there are unpaid current dues.

The recent NCLAT ruling involving Noida Power Company Ltd. and Earthcon Infracon Pvt. Ltd. highlights the delicate balance between protecting the interests of the Corporate Debtor during insolvency and ensuring that current dues, such as electricity payments, are not neglected. By directing the Resolution Professional to pay the outstanding electricity dues or arrange a phased payment plan, the Tribunal has emphasized the importance of maintaining essential services while ensuring that obligations are met.

This NCLAT ruling serves as a precedent for future cases involving utility dues during the Corporate Insolvency Resolution Process (CIRP). It underscores the role of the Resolution Professional in safeguarding the debtor’s operations while simultaneously addressing the rights of creditors, including utility providers. Ultimately, the decision provides clarity on how Section 14(1) of the Insolvency and Bankruptcy Code (IBC) should be interpreted in relation to ongoing financial obligations during the moratorium period.

In a recent case, the Appellate Tribunal for Electricity vide its Judgement dated 24.09.2024 has upheld the decision passed by the Rajasthan Electricity Regulatory Commission (‘State Commission’) holding that in the absence of requisite mandatory Notices under the Power Purchase Agreement (‘PPA’), the Generator was responsible for the delay in commissioning the Project.

Arjun Green Power Private Limited (‘Arjun Green’), a Solar developer in the State of Rajasthan, challenged the Order passed by the State Commission, wherein, the State Commission rejected the prayer made by Arjun Green to extend the SCOD and increase in Tariff.

Arjun Green and Rajasthan Renewable Energy Corporation Limited (‘RREC’) entered into a PPA on the term that the SCOD was to be achieved within 12 months of the signing of the PPA.

The SCOD was extended from time to time till 21.02.2018. After the expiry of final extension, Arjun Green requested the Rajasthan Utilities to commission the Project. Rajasthan Utilities rejected the request on the ground that the extension period has expired and advised Arjun Green to approach the State Commission for the same.

Accordingly, Arjun Green approached the State Commission pursuant to which directions were given to the Rajasthan Utilities to form a committee for commissioning of the Project, and thereafter, the Project was commissioned after a delay of 3 months from the SCOD.

Since, there was a delay in commissioning of the Project, the Rajasthan Utilities imposed Liquidated Damages on Arjun Green on account of delay in commissioning of the Project. The said project got commissioned in the next financial year and Article 9 of the PPA stipulated that consequence of delay in commissioning of the project shall change the tariff and the tariff applicable at the time of commissioning of the project shall apply. In accordance with Article 9 of the PPA and the Tariff Order passed by the State Commission, the tariff for power generated and supplied by Arjun Green to Rajasthan Utilities was also reduced.

Consequently, Arjun Green approached the State Commission seeking extension of SCOD and claiming increase in the Tariff.

The State Commission dismissed the Petition filed by Arjun Green on the grounds that delay was attributable to Arjun Green and the reduction in Tariff is in accordance with the provisions of the PPA.

Arjun Green challenged the Order passed by the State Commission before the Appellate Tribunal for Electricity on the ground that Arjun Green had intimated the Rajasthan Utilities before the SCOD and the delay caused thereafter is not attributable to Arjun Green.

Rajasthan Utilities contended that issuance of Notice in the present case to the concerned authority is a mandatory requisite. In terms of the PPA, Arjun Green had to give a preliminary written notice at least 60 days in advance and final written notice of at least 30 days in advance of the date on which it intends to synchronize the Plant to the Grid, whereas, in the present case, Arjun Green has failed to issue any such notices.

Further, Article 9 of the PPA clearly stipulates that in case of delay in commissioning of the Project, agreed tariff or the applicable tariff in terms of the State Commission’s regulation for that year, whichever is lower will be paid to the power producer. The above Article does not make any distinction for the reasons for which the Project is delayed, namely, whether the same is on account of reasons attributable to Arjun Green or otherwise. Therefore, irrespective of the reasons for delay, Arjun Green would only be entitled to the tariff for the year in which the Project is actually commissioned.

The Appellate Tribunal observed that the present issue is no longer res-integra and has been held by the Hon’ble Supreme Court in its various judgements wherein it was held that PPA is a sacrosanct document and binding upon the parties. All the rights and obligations of the parties flow from the provisions of the PPA and the timelines given therein are to be adhered to. The Appellate Tribunal has made it absolute that the timelines given in a PPA have a purpose and are not a mere empty formality. Therefore, the parties cannot be given any liberty to bypass such mandatory provisions. In view of the delay, the Appellate Tribunal has also upheld the imposition of liquidated damages on the Developer. 

R Associates represented Rajasthan Urja Vikas Nigam Limited through Adv. Poorva Saigal and Adv. Shubha Arya.

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The hydrocarbon sector, integral to the global energy market, spans across exploration, extraction, refining, and distribution. Foreign investment rules, which regulate capital flow into this sector, focus primarily on aliphatic hydrocarbons such as methane, propane, and butane, as well as aromatic hydrocarbons like benzene, toluene, and xylene. Recent technological advancements in shale gas extraction, liquefied natural gas (LNG), and offshore drilling have unlocked reserves that were previously considered inaccessible, reshaping the landscape of hydrocarbon investments.

India’s hydrocarbon sector plays a crucial role in its energy security, with foreign investment rules shaping how international capital can flow into this critical industry. While the United States, Russia, and the Middle East have traditionally dominated global hydrocarbon production, India’s growing energy needs have made it an attractive market for foreign direct investment (FDI). The country’s LNG market, in particular, has seen rapid expansion, and the government has implemented policies encouraging infrastructure development for refineries and LNG terminals.

Foreign direct investment (FDI) in the hydrocarbon sector has steadily increased over the past few decades, particularly in emerging markets like India. Foreign investment rules in India play a critical role in regulating how international companies participate in exploration, extraction, and infrastructure projects within the country. India’s Foreign Direct Investment (FDI) policy, governed by the Ministry of Commerce and Industry, permits up to 100% FDI in several segments of the hydrocarbon sector, including exploration, refining, and pipeline infrastructure, subject to approval by relevant authorities.

India’s growing need for energy resources has made the country an attractive destination for foreign investors. The country’s energy consumption is expected to increase by more than 3% annually, outpacing the global average, and foreign investment in this sector is vital for sustaining growth. 

Multinational oil companies bring essential technology, financial strength, and managerial expertise, making it possible for India to explore new reserves and expand its refining capacity. However, foreign investment rules are also designed to mitigate risks such as the nationalization of assets, stringent regulations, and fluctuating tax regimes.

For foreign investors, entering the Indian hydrocarbon market often requires forming joint ventures with state-owned enterprises like ONGC or private sector players such as Reliance Industries. 

These partnerships allow international companies to navigate India’s complex regulatory landscape while tapping into significant opportunities. Foreign investment rules further regulate environmental compliance, taxation, and labour regulations, ensuring that foreign participation aligns with national objectives.

In India, the hydrocarbon sector offers several lucrative opportunities for foreign investors:

• New Exploration Zones:  India has untapped reserves in areas like the Krishna-Godavari and Rajasthan Basins, which present significant opportunities for new investments.
• Infrastructure Development: India’s demand for refining and transportation infrastructure, including pipelines and LNG terminals, has led to foreign involvement in building and upgrading such facilities.
• Energy Transition Projects: India’s push toward a green economy has opened doors for hybrid projects combining traditional hydrocarbons with renewable energy solutions, incentivized through government policies.

India has become a significant recipient of foreign investment in its hydrocarbon sector, driven by its substantial oil and natural gas reserves. The Foreign Investment Rules in India mandate compliance with the Foreign Direct Investment (FDI) policy, overseen by the Directorate General of Hydrocarbons (DGH) and the Ministry of Petroleum and Natural Gas. 

Under these regulations, foreign investors are required to obtain prior approval for investments in hydrocarbon exploration and production activities. This oversight ensures that foreign investments align with national interests and regulatory standards.

Several high-profile foreign investments highlight the attractiveness of India’s hydrocarbon sector:

• British Petroleum (BP): BP has invested heavily in India through its collaboration with Reliance Industries. This partnership has expanded into various segments, including retail gasoline distribution and aviation fuel marketing, reflecting BP’s strategic interest in the Indian market.
• Saudi Aramco: As one of the world’s largest oil companies, Saudi Aramco has made a notable investment in India’s downstream sector. The company’s joint venture with Indian Oil Corporation, Bharat Petroleum, and Hindustan Petroleum aims to develop a $44 billion mega refinery and petrochemical complex on India’s west coast, underscoring Saudi Aramco’s commitment to expanding its footprint in India.
• Rosneft: In 2017, Rosneft, Russia’s state-controlled oil giant, acquired a 49% stake in Essar Oil, a prominent Indian private refiner, for $12.9 billion. This acquisition provided Rosneft access to Essar’s extensive refinery in Gujarat and its widespread network of fuel retail locations, enhancing its market presence in India.
• Shell: Shell has significantly invested in India’s liquefied natural gas (LNG) sector, operating an LNG import terminal at Hazira, Gujarat. This facility plays a crucial role in addressing India’s increasing energy demand and supports the country’s transition to cleaner energy sources.

These investments reflect India’s strategic importance in the global hydrocarbon market and the effectiveness of its Foreign Investment Rules in attracting substantial foreign capital.

The regulatory framework governing foreign investments in India’s hydrocarbon sector is multifaceted, involving a combination of local legislation, Foreign Investment Rules, and international agreements. 

Hydrocarbon resources in India are considered state-owned, and firms seeking to exploit these resources must negotiate extraction rights with the government. This is typically done through concession agreements, production-sharing agreements (PSAs), or service contracts, which are essential for securing the legal basis for exploration and production activities.

Foreign investment rules in India are designed to ensure that international investors comply with stringent requirements related to licensing, taxation, environmental protection, and operational standards. These regulations are enforced by various agencies, including the DGH and the Ministry of Petroleum and Natural Gas.

In India, foreign investments in hydrocarbons generally face several regulatory requirements:

• Licensing and Approvals: Foreign investors must obtain licenses and approvals for exploration and production activities, which involves detailed scrutiny by regulatory bodies to ensure compliance with national laws and policies.
• Environmental Regulations: Investment projects must adhere to strict environmental compliance standards. This includes conducting Environmental Impact Assessments (EIAs) to evaluate the potential environmental impacts of hydrocarbon projects and implementing mitigation strategies.
• Taxation and Financial Compliance: Foreign investors are subject to specific taxation rules and financial compliance requirements, which are designed to ensure transparency and adherence to Indian tax laws.

In contrast to India’s more open investment environment, other regions, such as the Middle East, often have stricter foreign investment policies, with significant control retained by state-owned enterprises. This difference highlights the need for foreign investors to navigate a complex array of regulations and agreements to effectively engage in the Indian hydrocarbon sector.

International treaties and agreements play a crucial role in shaping foreign investment rules for the hydrocarbon sector. In India, the Foreign Direct Investment (FDI) policy outlines specific conditions for foreign participation in hydrocarbon projects. 

Key to this policy is the New Exploration Licensing Policy (NELP), which was introduced by the Government of India in 1997 to foster a competitive environment for both public and private sector companies involved in hydrocarbon exploration and production.

NELP was designed to enhance domestic oil and gas production by attracting foreign and private investment. The policy encourages competition between National Oil Companies (NOCs) and private firms, aiming to stimulate technological advancements and efficient resource utilization. NELP has facilitated numerous investments by providing a transparent and competitive framework for awarding exploration and production contracts.

Key Aspects of NELP and Foreign Investment Rules:

• Competitive Bidding: NELP employs a transparent bidding process for awarding exploration blocks, allowing foreign investors to compete on equal terms with domestic companies.
• Revenue Sharing: Under NELP, production-sharing agreements (PSAs) are utilized, where investors share the production with the government based on agreed terms, promoting equitable resource distribution.
• Regulatory Oversight: The Directorate General of Hydrocarbons (DGH) plays a pivotal role in implementing NELP and overseeing compliance with regulatory standards.

The commitment to liberalizing the hydrocarbon sector is further reflected in India’s bilateral investment treaties (BITs) with various countries, which provide additional protections for foreign investors. These treaties typically include provisions for fair and equitable treatment, protection against expropriation, and mechanisms for resolving investment disputes.

Investing in the hydrocarbon sector presents significant opportunities, but it also comes with a set of complex challenges, especially for cross-border investments. For countries like India, which relies heavily on imported hydrocarbons, securing a stable and affordable energy supply is crucial for economic growth and development.

Key Challenges in Cross-Border Hydrocarbon Investments:

• Geopolitical Risks: Geopolitical instability in major hydrocarbon-producing regions can disrupt supply chains and affect global oil and gas prices. Events such as geopolitical tensions, conflicts, and sanctions can create uncertainties for foreign investors. For example, geopolitical unrest in the Middle East has historically impacted global hydrocarbon markets, including India’s energy imports.
• Supply Chain Vulnerabilities: The hydrocarbon supply chain is susceptible to disruptions from various factors, including natural disasters, political instability, and infrastructural limitations. Ensuring a reliable supply of hydrocarbons involves navigating these risks and establishing resilient supply chains.
• Regulatory and Legal Risks: Foreign investors must navigate diverse regulatory environments across different countries. Variations in local laws, regulatory frameworks, and investment conditions can pose challenges. For instance, India’s regulatory landscape, while open to foreign investment, requires compliance with a range of legal and environmental requirements that can be complex and evolving.
• Economic and Market Fluctuations: Fluctuations in global oil and gas prices can impact the profitability of hydrocarbon investments. Market volatility, driven by supply and demand dynamics, can affect investment returns and project feasibility. Recent economic downturns and price fluctuations have highlighted the need for investors to adopt risk management strategies.
• Energy Security Concerns: Energy security is a strategic priority for India, given its dependence on hydrocarbon imports to meet approximately three-fourths of its energy needs. The country’s efforts to enhance domestic production and diversify energy sources are essential to reducing reliance on imports and mitigating risks associated with energy security.

Despite these challenges, the hydrocarbon sector offers substantial opportunities for foreign investors, especially in regions with underdeveloped resources and growing energy demands. Strategic planning, risk management, and adherence to legal and regulatory requirements are critical for navigating the complexities of cross-border investments.

The hydrocarbon sector represents a vital area for international investment, offering both substantial opportunities and considerable challenges. For investors, understanding and navigating the Foreign Investment Rules and regulatory frameworks are essential to successfully engaging in the Indian hydrocarbon market.

As India continues to evolve its regulatory landscape and enhance its investment climate, the hydrocarbon sector will remain a dynamic and promising field for international investors. By leveraging the opportunities and mitigating risks, foreign investors can contribute significantly to India’s energy security and economic growth, while achieving substantial returns on their investments.

In conclusion, the interplay of strategic investment, regulatory adherence, and effective management of challenges will determine the success of foreign investments in India’s hydrocarbon sector. With the right approach, investors can navigate this complex landscape and capitalize on the vast potential offered by one of the world’s largest and fastest-growing energy markets.

India allows up to 100% FDI in key segments of the hydrocarbon sector, including exploration, refining and pipeline infrastructure. However, foreign investors need approval from regulatory bodies such as the Directorate General of Hydrocarbons (DGH) and the Ministry of Petroleum and Natural Gas to ensure compliance with national policies and environmental standards.

India offers multiple investment opportunities, such as exploration of untapped reserves in regions like the Krishna-Godavari Basin, development of critical infrastructure like LNG terminals and pipelines, and projects combining hydrocarbons with renewable energy, which are incentivized by government policies promoting a greener economy.

Leading global companies such as British Petroleum (BP), Saudi Aramco, Rosneft and Shell have made significant investments in India. BP has partnered with Reliance Industries, Saudi Aramco is developing a mega refinery, Rosneft holds a stake in Essar Oil, and Shell operates an LNG terminal, all aiming to capitalize on India’s growing energy market.

Foreign investors must obtain various approvals, including exploration and production licenses, from agencies like the DGH and the Ministry of Petroleum and Natural Gas. Additionally, environmental clearances and compliance with Indian tax and labor laws are required to ensure the projects align with national interests and regulatory standards.

Challenges include geopolitical risks, especially in volatile regions like the Middle East, supply chain disruptions, regulatory complexities and fluctuating global oil and gas prices. Investors also need to navigate India’s detailed legal and environmental regulations, which can complicate project timelines and costs.

On 25.09.2024, the Hon’ble Appellate Tribunal of Electricity (‘Hon’ble Tribunal’) pronounced the judgment in the matter between Adani Power Limited (formerly Udupi Power) (‘Adani Power’) and Punjab State Electricity Regulatory Commission (‘Punjab Commission’) wherein it was held that the approval of a Power Purchase Agreements (‘PPA’) by the Punjab Commission is not only a statutory requirement but also a condition precedent to the enforceability of the contract, irrespective of whether the same is not mentioned specifically in the PPA. While doing so, the Hon’ble Tribunal ruled in the favour of Punjab State Power Corporation Limited (‘PSPCL’) and observed that while the PPA continues to exist since it has not been terminated, however it cannot be acted upon/be enforceable until the same is approved by the State commission. The cases analyses the regulatory framework governing PPA in India, particularly under Section 86(1)(b) of the Electricity Act, 2003.

Adani Power entered into PPA dated 26.12.2005 with Karnataka Distribution Licensees for sale of 90% of the power generated from its 2 X 600 MW imported coal based power project in Udupi District, Karnataka and with PSPCL on 29.06.2006 for the remaining 10%. The two units of the Project were commissioned on 11.10.2010 and 19.08.2012. PSPCL had not entered into any Transmission Service Agreement for evacuation of power and the entire 1200 MW was being sold to the Karnataka Discoms. 

In 2015, PSPCL sought to opt out of the PPA. In response, Adani agreed to sell power to third parties for a period of three years without any financial implications to PSPCL. In 2018, PSPCL requested that Adani continue to sell power to third parties, but Adani refused.

Thereafter, PSPCL filed Petition No. 41 of 2018 before the Punjab Commission seeking approval of the PPA dated 29.09.2006. The contention of Adani was that the parties are bound to discharge their respective obligation under the PPA irrespective of the date of approval of the PPA and the lack of approval of the PPA by the Punjab Commission does not affect the validity of the PPA. On the other hand, PSPCL’s main contention was that PPA is a contingent contract and it cannot be enforced until approved by the Punjab Commission in terms of the Electricity Act, 2003 and the applicable Rules/Regulations and the settled law.

 The Punjab Commission vide its Order dated 07.08.2020, rejected Adani Power’s arguments in Petition No. 41 of 2018. It concluded that there was no necessity for PSPCL to procure power from Adani on a long-term basis, as doing so would not be economically viable. The Punjab Commission highlighted that cheaper power was available in the market, and approving the PPA would not be in the best interest of consumers in Punjab.

Adani Power asserted that the Punjab Commission’s decision that the PPA becomes effective only upon its approval is contrary to the settled position of law that parties are bound to discharge their respective obligations under the PPA, irrespective of approval of the same. That as per the settled position of law whenever a contracting party is obligated to obtain approval/permission to give effect to the agreement, the contract cannot be construed as being contingent upon such obligation being complied with. It was argued that Section 32 of Contract Act, 1872 applies only where the contract itself provides for the contingencies upon happening of which contract cannot be carried out and provides the consequences. 

PSPCL’s main contention revolved around the fact that PPA becomes enforceable only upon the approval of the Punjab Commission which cannot be waived by the parties to the PPA either expressly or by conduct.  PSPCL, also contended that the tariff order passed for Average Revenue Requirement (‘ARR’) and determination of tariff under the relevant Tariff Regulations, are distinct from the ‘Conduct of Business Regulations 2005’. Further, the information in respect of power procurement submitted by PSPCL in the ARR petition is considered only for the purpose of Energy balance and determination of cost of power for the relevant year, and therefore, it cannot be considered as approval of the power procurement on long term basis as intended in Section 86(1)(b) of the Electricity Act.

The Hon’ble Tribunal while appreciating the submissions of PSPCL held that the “We, therefore, reiterate the basic legal proposition that the approval of Power Purchase agreement by the State Commission is mandatory, condition precedent without which the PPA executed between a generating company and Distribution Licensee cannot become enforceable or effective. The rights and obligations under the PPA would flow only after it is approved or consented to by the State Commission.”

In addition to the above, the Hon’ble Tribunal, after examining the scope of Section 86(1)(b) of the Act, Rule 8 of the Electricity Rules, 2005, Power procurement Regulations notified by the State Commission and the decisions of the Hon’ble Supreme Court/Hon’ble Tribunal held that “Since the approval of the PPA by the State Commission is a mandatory statutory requirement under Section 86(1)(b) of the Electricity Act, 2003 before it would be enforceable, it logically follows that such a requirement cannot be waived off by any of the parties to the PPA. It is for the reason that there can be no waiver, either by conduct or expressly, on the part of any of the parties to the PPA to such statutory requirement. We may note that the basic object of the requirement of approval of PPA by the State Commission under Section 86(1)(b) of the Electricity Act, 2003 is to safeguard the public interest by ascertaining whether the projected need for power by the Distribution Licensee is genuine and the rate quoted in the PPA is reasonable as well as economical. Therefore, waiver of the requirement of approval of PPA by the State Commission would certainly go against the public interest and for that reason also, waiver is not permissible.”

The Hon’ble Tribunal delineated the role of the State Commission, namely that it for the Commission to determine whether the Distribution Licensee actually requires the power for supply to its consumers and whether the rate quoted in. the PPA is reasonable or in consonance with the market conditions. The Hon’ble Tribunal further concluded that the basic object of the PPA approval is to safeguard public interest.

The Hon’ble Tribunal further held that the provisional approval of projections in the Annual tariff Orders cannot be construed as approval of PPA which has to be done in accordance with the provisions of Section 86(1)(b) of the Electricity Act, 2003.

Thereafter, Hon’ble Tribunal rejected Adani Power’s argument regarding the delay by PSPCL in seeking approval of the PPA and held that although the PPA was signed in 2006, Adani Power did not sell any power to PSPCL until 2018. Instead, they sold all its power to Karnataka Discoms until 2015 and they continued to sell the power to third parties. This conduct indicates that the Adani Power was satisfied with this arrangement, possibly finding it commercially advantageous.

 The Hon’ble Tribunal noted that the PPA dated 29.09.2006 still exists as none of the parties terminated or proceeded to terminate the same and that ‘it cannot be acted upon till it is approved by the State Commission.’ 

Thus, the Hon’ble Tribunal upheld the Impugned Order and dismissed the Appeal holding that the same is devoid of any merits.

Therefore, the case of Adani Power Limited v. Punjab State Electricity Regulatory Commission and Ors. emphasizes the fundamental principle that the approval of a PPA by the State Commission is not only a statutory requirement but also a condition precedent to the enforceability of the contract. Both the Punjab Commission and the Hon’ble Tribunal have unequivocally held the view that, without this approval, the rights and obligations under the PPA cannot take effect. This case reinforces the need for strict compliance with regulatory approvals to uphold the integrity and fairness of power purchase agreements.

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