THE LEGAL POSITION

The Electricity Act provides that disputes between licensees need to be necessarily adjudicated upon by the Regulatory Commissions onlyand the same may be referred toarbitrationby the Commission if deemed proper. A question that may arise is whether there isany scope where the parties (licensees) to a dispute can refer the dispute to an independent Arbitrator without referring the same to the Regulatory Commission. There had been several judicial pronouncements by the APTEL and the Hon’ble Supreme Court, which point towards the interpretation that all disputes need to be referred only to the Regulatory Commissions for adjudication. The APTELhas mandated that under Section 86 (1) (f) of the Act, adjudicatory function of the State Regulatory Commission are not restricted to the disputes between the licensees and the generating companies, but also cover disputes between licensees.

Even the Hon’ble Supreme Court,in the case of GUVNL v.Essar Power (2008)4 SCC755,has held that all disputes arising between the licensees and generating companies are to be decided by appropriate Commission or by an arbitrator appointed by them. However, it must be borne in mind that the findingwas given of the issue involved therein i.e. whether an Arbitrator can be appointed under Section 11(6) of the Arbitration and Conciliation Act, 1996, and the Hon’ble Supreme Court held that in case of a dispute between licensees, only the Regulatory Commission has got the authority to appoint the Arbitrator. This is also to be considered in light of the fact that in any dispute, if the issue of tariff is involved or if the dispute affects the consumers, the regulatory functions of the Electricity Regulatory Commissions assume greater relevance and such disputes are to be adjudicated upon by Commissions only. This becomes more significant in light of the Hon’ble Supreme Court’s judgment in the case of Booz Allenvrs SBI Home Finance (2011)5 SCC 532,wherein it has been held that where rights in rem are involved, private arbitration is not suitable and public foralike courts, should decide such disputes. This judgment deals with the cases where rights in rem are involved which are distinguishable from the rights in persona. TheDelhi High Court has also adopted the ratio of this case while adjudicating the dispute between PTC India Ltd (an inter-state trader) and Jai Prakash Venture (a generating company) ( OMP 677 of 2011)

The next question which arises pertains to regulatory commission, which will have the jurisdiction. The APTEL, in a series of judgments, the latest being PTC vrsUttarakhand ERC & Ors (Appeal No 168 of 2014),has focused on the concept of “nexus” and held that the Commission in whose jurisdiction the power is likely to be consumed through the concerned distribution licensees in terms of Section 64 (5) of the Act would be the Commission having jurisdiction. The APTEL, in the judgment, also laid down the role of a trader and held that “A trader is treated as an intermediary. When the trader deals with the distribution company for re-sale of electricity, he is doing so as a conduit between the generating company and distribution licensee. When the trader is not functioning as merchant trader i.e. without taking upon itself the financial and commercial risks but passing on allthe risks to purchaser under re-sale, there is clearly a link between the ultimate distribution company and the generator with trader acting as only an intermediary linking company”. However some, of the orders of the APTEL on the issue of jurisdiction, have been challenged before the Hon’ble Supreme Court and the final decision is pending.

As regards the jurisdiction of the Central Commission, the Hon’ble Supreme Court in the matter of Energy Watchdog (C A 5399- 400 of 2016) had clarified the issue of the “Composite Scheme” as mentioned in Section 79 of the Act. The Hon’ble Supreme Court held that,

“This makes it clear that the expression “composite scheme” does not have some special meaning – it is enough that generating companies have, in any manner, a scheme for generation and sale of electricity which must be in more than one State. 25. We must also hasten to add that the appellant’s argument that there must be commonality and uniformity in tariff for a “composite scheme” does not follow from the Section. 2”

From the above discussion, it thus becomes clear that pursuant to the enactment of the Electricity Act, there have emerged various issues relating to the jurisdictions of the Central as well as State Commissions. While several of those issues have been clarified by way of judicial pronouncements, grey areas still remain especially when the dispute is purely contractual in nature and without any nexus to a distribution licensee.