CERC Cannot Refer Disputes to Arbitration Beyond Its Adjudicatory Jurisdiction: APTEL

The Appellate Tribunal for Electricity (APTEL), in Appeal Nos. 348, 371 and 400 of 2025, decided on February 25, 2026, held that the Central Electricity Regulatory Commission (CERC) cannot refer disputes to arbitration under Section 79(1)(f) of the Electricity Act, 2003 unless such disputes fall within its adjudicatory jurisdiction and that bifurcating disputes between arbitrable and non-arbitrable components is impermissible.

The disputes arose out of a Power Purchase Agreement (PPA) dated 22.04.2007, between Coastal Gujarat Power Limited (now Tata Power Company Limited) and multiple procurers. The procurers alleged the non-supply of electricity and diversion of contracted capacity and sought directions for the resumption of electricity supply along with compensation for what was lost. Claims were also raised against the Western Regional Load Dispatch Centre (WRLDC) for failure to discharge its statutory obligations in scheduling and dispatch.

The CERC, by its impugned order, held that the disputes were non-tariff in nature and referred them to arbitration under Section 79(1)(f) of the Electricity Act, 2003. It also bifurcated the disputes by referring claims against the generator to arbitration while permitting the procurers to pursue separate proceedings against WRLDC.

Before APTEL, the procurers contended that the disputes were regulatory in nature and fell within the jurisdiction of the CERC, and that reference to arbitration was impermissible, particularly in view of the involvement of WRLDC, non-compliance with Section 8 of the Arbitration and Conciliation Act, 1996 (1996 Act), and the impermissibility of bifurcating the disputes.

APTEL held that the power of the CERC under Section 79(1)(f) of the Electricity Act, 2003 to adjudicate disputes or refer them to arbitration is confined to disputes connected with clauses (a) to (d) of Section 79(1) of the Electricity Act, 2003. It observed that the power to refer disputes to arbitration is not independent of its adjudicatory jurisdiction, and that if the CERC lacks jurisdiction to adjudicate a dispute, it equally lacks jurisdiction to refer such dispute to arbitration.

Reiterating the principles laid down in Gujarat Urja Vikas Nigam Ltd. v. Essar Power Ltd. (2008 4 SCC 755) and its earlier decision in DVC v. MPPMCL (Order dated 23.07.2019 passed in Petition No. 236/MP/2017 by the CERC), the APTEL held that disputes relating to regulatory functions or having a direct or indirect impact on tariff are non-arbitrable and must be adjudicated by the CERC. Such disputes, involving public law elements, cannot be referred to a private forum.

The APTEL further held that compliance with Section 8 of the 1996 Act is mandatory for reference to arbitration. In the present case, as the generator had not sought reference to arbitration prior to filing its first substantive response, the statutory preconditions were not satisfied.

On the issue of bifurcation, the APTEL held that splitting of the cause of action or separating disputes between parties to the arbitration agreement and third parties is not permissible. It observed that the claims against the generator and WRLDC were integrally connected, and that referring one part of the dispute to arbitration while retaining the other would lead to inconsistent outcomes and is contrary to settled law.

In view of the above, the APTEL set aside the impugned order of the CERC and held that the disputes could not have been referred to arbitration. It directed the CERC to examine whether the disputes fall within its jurisdiction under Section 79(1)(b) read with Section 79(1)(f) of the Electricity Act, 2003, and to adjudicate them if jurisdiction exists, or otherwise decline to entertain the petitions on the ground of lack of jurisdiction. The appeals were accordingly allowed and the matters remanded to the CERC for fresh consideration.