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.
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