STATUTORY PROVISION
THE ELECTRICITY ACT, 2003 [No.36 of 2003]
Intention of the legislature- An Act to consolidate the laws relating to generation, transmission, distribution, trading and use of electricity and generally for taking measures conducive to development of electricity industry, promoting competition therein, protecting interest of consumers and supply of electricity to all areas, rationalization of electricity tariff, ensuring transparent policies regarding subsidies, promotion of efficient and environmentally benign policies, constitution of Central Electricity Authority, Regulatory Commissions and establishment of Appellate Tribunal and for matters connected therewith or incidental thereto.
Section 86. (Functions of State Commission): — (1) The State Commission shall discharge the following functions, namely: –
(f) adjudicate upon the disputes between the licensees, and generating companies and to refer any dispute for arbitration;
Section 174. (Act to have overriding effect):
Save as otherwise provided in section 173, the provisions of this Act shall have effect notwithstanding anything inconsistent therewith contained in any other law for the time being in force or in any instrument having effect by virtue of any law other than this Act.
JURISDICTION ISSUE CASES LAW
1. Dabhol Power Company v. Maharashtra State Electricity Board, WP No. 1205 of 2001, decided on 5th March, 2002. In that case, the provision of Section 22(2)(n) of ERC Act1998 fell for consideration of the Court. The provision, which is in pari materia with Section 86(1)(f), reads as follows :
“22. Functions of State Commission.- (2) Subject to the provisions of Chapter III and without prejudice to the provisions of sub-section (1), the State Government may, by notification in the Official Gazette confer any of the following functions upon the State Commission, namely:-
(n) to adjudicate upon the disputes and differences between the licensees and utilities and to refer the matter for arbitration.” The argument that Section 22(2)(n) covered only disputes between a licensee and a utility was repelled by the Court. The Court held as follows:
“37. Section 22(2)(n) confers power on the State Commission to adjudicate upon disputes and differences between the licensees and utilities as such disputes and differences can directly or indirectly have ramifications or implications on the matters statutorily entrusted to its exclusive jurisdiction. Such disputes can no longer be left to be resolved through private dispute resolution mechanisms and have to be adjudicated upon by the Commission in accordance with the provisions of the ERC Act. The word ‘adjudicate’ clearly denotes wide amplitude of power. The Legal Thesaurus (2nd Edition) defines adjudicate as “to deliver judgment, determine finally, exercise judicial authority”. The Blacks Law Dictionary (6th Edition) defines it as “to determine finally. Synonymous with adjudge in its strictest sense”. Mr. Chidambaram, however, urged that section 22(2)(n) would cover disputes only between the licensees and utilities and not between two utilities. In other words, there must be dispute between licensee on the one hand the utility on the other hand. The interpretation is based on complete misconceived reading of section 22(2) (n). The submission ignores the well settled meaning of the word “between” which means “among”. The Blacks Law Dictionary (6th Edition) states that sometimes it is used synonymous with among. In re:Cossentine(1933) CH 119 Maugham, J examined the article in the Oxford Dictionary on the word and pointed out that, today, with reference to a division and particularly to an equal division the words ‘between’ was not only the natural word to use, but was just and proper as the word ‘among’. (see also re: Alcock(1945) 1 Ch.264.)”
2. GUJARAT URJA VIKASH NIGAM LTD. Vs. ESSAR POWER LTD (2008) 4 SCC 755
“Para 25…… It may be noted that Section 86(1)(f) of the Act of 2003 is a special provision for adjudication of disputes between the licensee and the generating companies. Such disputes can be adjudicated upon either by the State Commission or the person or persons to whom it is referred for arbitration. In our opinion the word `and’ in Section 86(1)(f) between the words ‘generating companies’ and `to refer any dispute for arbitration’ means `or’. It is well settled that sometimes `and’ can mean `or’ and sometimes `or’ can mean `and’ (vide G.P. Singh’s `Principle of Statutory Interpretation’ 9th Edition, 2004 page 404.)
26. In our opinion in Section 86(1)(f) of the Electricity Act, 2003 the word `and’ between the words `generating companies’ and the words `refer any dispute’ means `or’, otherwise it will lead to an anomalous situation because obviously the State Commission cannot both decide a dispute itself and also refer it to some Arbitrator. Hence the word `and’ in Section 86(1)(f) means `or’.
27. Section 86(1)(f) is a special provision and hence will override the general provision in Section 11 of the Arbitration and Conciliation Act, 1996 for arbitration of disputes between the licensee and generating companies. It is well settled that the special law overrides the general law. Hence, in our opinion, Section 11 of the Arbitration and Conciliation Act, 1996 has no application to the question who can adjudicate/arbitrate disputes between licensees and generating companies, and only Section 86(1)(f) shall apply in such a situation.
28. This is also evident from Section 158 of the Electricity Act, 2003 which has been quoted above. We may clarify that the agreement dated 30.5.1996 is not a part of the licence of the licensee. An agreement is something prior to the issuance of a licence. Hence any provision for arbitration in the agreement cannot be deemed to be a provision for arbitration in the licence. Hence also it is the State Commission which alone has power to arbitrate/adjudicate the dispute either itself or by appointing an arbitrator.
29. Shri Jayant Bhushan, learned Counsel for one of the parties in the connected case submitted that Section 86(1)(f) is violative of Article 14 of the Constitution of India because it does not specify when the State Commission shall itself decide a dispute and when it will refer the matter to arbitration by some arbitrator. In our opinion there is no violation of Article 14 at all. It is in the discretion of the State Commission whether the dispute should be decided itself or it should be referred to an arbitrator. Some leeway has to be given to the legislature in such matters and there has to be judicial restraint in the matter of judicial review of constitutionality of a statute vide Government of Andhra Pradesh and Ors. v. Smt. P. Laxmi Devi JT 2008(2) 8 SC 639. There are various reasons why the State Commission may not decide the dispute itself and may refer it for arbitration by an arbitrator appointed by it. For example, the State Commission may be overburdened and may not have the time to decide certain disputes itself, and hence such cases can be referred to an arbitrator. Alternatively, the dispute may involve some highly technical point which even the State Commission may not have the expertise to decide, and such dispute in such a situation can be referred to an expert arbitrator. There may be various other considerations for which the State Commission may refer the dispute to an arbitrator instead of deciding it itself. Hence there is no violation of Article 14 of the Constitution of India.
30. We may now deal with the submission of Mr. Fali S. Nariman that in view of Section 175 of the Electricity Act, 2003, Section 11 of the Arbitration and Conciliation Act, 1996 is also available for arbitrating disputes between licensees and generating companies.
31. Section 175 of the Electricity Act, 2003 states that the provisions of the Act are in addition to and not in derogation of any other law. This would apparently imply that the Arbitration and Conciliation Act, 1996 will also apply to disputes such as the one with which we are concerned. However, in our opinion Section 175 has to be read along with Section 174 and not in isolation.
32. Section 174 provides that the Electricity Act, 2003 will prevail over anything inconsistent in any other law. In our opinion the inconsistency may be express or implied. Since Section 86(1)(f) is a special provision for adjudicating disputes between licensees and generating companies, in our opinion by implication Section 11 of the Arbitration and Conciliation Act, 1996 will not apply to such disputes i.e. disputes between licensees and generating companies. This is because of the principle that the special law overrides the general law. For adjudication of disputes between the licensees and generating companies there is a special law namely Section 86(1)(f) of the Electricity Act, 2003. Hence the general law in Section 11 of the Arbitration and Conciliation Act, 1996 will not apply to such disputes.
33. It is well settled that where a statute provides for a thing to be done in a particular manner, then it has to be done in that manner, and in no other manner, vide Chandra Kishore Jha Vs. Mahavir Prasad and Others, , Dhananjaya Reddy etc. Vs. State of Karnataka, , etc. Section 86(1)(f) provides a special manner of making references to an arbitrator in disputes between a licensee and a generating company. Hence by implication all other methods are barred.
34. At first glance there is an apparent inconsistency between Section 175 and Section 174 of the Electricity Act, 2003. While Section 174 says that the said Act will prevail over other laws, Section 175 says that the said Act is in addition and not in derogation of any other law (which would include Section 11 of the Arbitration and Conciliation Act, 1996.)
….Para 54. In our opinion the principle laid down in Section 174 of the Electricity Act, 2003 is the principal or primary whereas the principle laid down in Section 175 is the accessory or subordinate to the principal. Hence Section 174 will prevail over Section 175 in matters where there is any conflict (but no further).
55. In our opinion Section 174 and Section 175 of the Electricity Act, 2003 can be read harmoniously by utilizing the Samanjasya, Badha and Gunapradhana principles of Mimansa. This can be done by holding that when there is any express or implied conflict between the provisions of the Electricity Act, 2003 and any other Act then the provisions of the Electricity Act, 2003 will prevail, but when there is no conflict, express or implied, both the Acts are to be read together.
56. In the present case we have already noted that there an implied conflict between Section 86(1)(f) of the Electricity Act, 2003 and Section 11 of the Arbitration and Conciliation Act, 1996 since u/s 86(1)(f) the dispute between licensees and generating companies is to be decided by the State Commission or the arbitrator nominated by it, whereas u/s 11 of the Arbitrary and Conciliation Act, 1996, the Court can refer such disputes to an arbitrator appointed by it. Hence on harmonious construction of the provisions of the Electricity Act, 2003 and the Arbitration and Conciliation Act, 1996 we are of the opinion that whenever there is a dispute between a licensee and the generating companies only the State Commission or Central Commission (as the case may be) or arbitrator (or arbitrators) nominated by it can resolve such a dispute, whereas all other disputes (unless there is some other provision in the Electricity Act, 2003) would be decided in accordance with Section 11 of the Arbitration and Conciliation Act, 1996. This is also evident from Section 158 of the Electricity Act, 2003. However, except for Section 11 all other provisions of the Arbitration and Conciliation Act, 1996 will apply to arbitrations u/s 86(1)(f) of the Electricity Act, 2003 (unless there is a conflicting provision in the Electricity Act, 2003, in which case such provision will prevail.”
3. MAHARASHTRA STATE ELECTRICITY DISTRIBUTION CO. LTD.Vs. M/S. ADANI ENTERPRISES LTD. AND OTHERS (2016) 162 AIC 301
“6. A similar provision contained in Electricity Regulatory Commission Act, 1998 (“ERC Act”) was interpreted by this Court in the case of Dabhol Power Company v. Maharashtra State Electricity Board, WP No. 1205 of 2011, decided on 5th March, 2002. In that case, the provision of Section 22(2)(n) of ERC Act fell for consideration of the Court. The provision, which is in pari materia with Section 86(1)(f), reads as follows :
22. Functions of State Commission.- (2) Subject to the provisions of Chapter III and without prejudice to the provisions of sub-section (1), the State Government may, by notification in the Official Gazette confer any of the following functions upon the State Commission, namely:-
(n) to adjudicate upon the disputes and differences between the licensees and utilities and to refer the matter for arbitration.” The argument that Section 22(2)(n) covered only disputes between a licensee and a utility was repelled by the Court. The Court held as follows:
“37. Section 22(2)(n) confers power on the State Commission to adjudicate upon disputes and differences between the licensees and utilities as such disputes and differences can directly or indirectly have ramifications or implications on the matters statutorily entrusted to its exclusive jurisdiction. Such disputes can no longer be left to be resolved through private dispute resolution mechanisms and have to be adjudicated upon by the Commission in accordance with the provisions of the ERC Act. The word ‘adjudicate’ clearly denotes wide amplitude of power. The Legal Thesaurus (2nd Edition) defines adjudicate as “to deliver judgment, determine finally, exercise judicial authority”. The Blacks Law Dictionary (6th Edition) defines it as “to determine finally. Synonymous with adjudge in its strictest sense”. Mr. Chidambaram, however, urged that section 22(2)(n) would cover disputes only between the licensees and utilities and not between two utilities. In other words, there must be dispute between licensee on the one hand the utility on the other hand. The interpretation is based on complete misconceived reading of section 22(2) (n). The submission ignores the well settled meaning of the word “between” which means “among”. The Blacks Law Dictionary (6th Edition) states that sometimes it is used synonymous with among. In re:Cossentine(1933) CH 119 Maugham, J examined the article in the Oxford Dictionary on the word and pointed out that, today, with reference to a division and particularly to an equal division the words ‘between’ was not only the natural word to use, but was just and proper as the word ‘among’. (see also re: Alcock(1945) 1 Ch.264.)
(emphasis supplied).”. These observations apply with equal force even for interpretation of Section 86(1)(f) of the Act.
7. Learned Counsel for the Plaintiff relies on the judgment of Supreme Court in Gujarat Urja Vikas Nigam Ltd. v. Essar Power Ltd., (2008) 4 SCC 755. In that case, the Supreme Court did observe that Section 86(1)(f) of the Act was a “special provision for adjudication of disputes between the licensee and the generating companies” and would override the general provision “for arbitration of disputes between the licensee and generating companies.” Relying on these observations, it is submitted by Counsel that even according to the Supreme Court the scope of Section 86(1)(f) was limited to disputes between a licensee on one hand and a generating company on the other. At the outset, it must be noted that Supreme Court in that case was not considering which disputes were covered by Section 86(1)(f), but whether an application of Section 11 of the Arbitration and Conciliation Act, 1996 (“Arbitration Act”) was maintainable in view of Section 86(1)(f) of the Act insofar as disputes between licensees and generating companies were concerned. In that case, the dispute was between a generating company and a distribution licensee and this dispute was sought to be referred to arbitration by filing a petition under Section 11 of the Arbitration Act. The Supreme Court held that under Section 86(1)(f) of the Act, Electricity Regulatory Commission alone could adjudicate or arbitrate the dispute and that provision would prevail over Section 11 of the Arbitration Act. The order of Gujarat High Court appointing an arbitrator under Section 11 of the Arbitration Act was, accordingly, set aside by the Supreme Court. The judgment of Gujarat Urga Vikas Nigam is not an authority for understanding which disputes are covered by Section 86(1)(f) and which are not. It is an authority for the proposition that Section 86(1)(f) of the Act is a special provision which prevails over the general provision of Section 11 of the Arbitration Act and accordingly, as and when a dispute is covered by Section 86(1)(f) of the Act, it cannot be adjudicated through an arbitrator appointed under Section 11 of the Arbitration Act.
8. The Appellate Tribunal for Electricity has correctly interpreted the scope of Section 86(1)(f) of the Act insofar as the parties to disputes referred to therein are concerned in the case of PTC India Limited v. Gujarat Electricity Regulatory Commission, Central Power Distribution Company of A.P. Ltd. v. Tata Power Trading Company Ltd. and Pune Power Development Private Ltd. v. Karnataka Electricity Regulatory Commission on the same lines as proposed by me above.
9. Learned Counsel for the Plaintiff submits that there are other parties to the dispute, who are neither licensees nor generating companies. Relying on the judgment of Supreme Court in the case of Sukanya Holdings (P) Ltd. v. Jayesh H. Pandya, (2003) 5 SCC 531, he submits that neither the cause of action nor the parties can be split. He relies on other judgments to contend that at the stage of Order 7, Rule 11 , we must go by averments in the plaint alone and apply the provision for rejection of plaint only when the statements made in the plaint without any doubt or dispute show that the suit is barred by any law in force. These principles are firmly established and need no elaboration. The question is, whether these come into play and help the Plaintiff in the present case. The plaint unmistakenly establishes that the dispute is between two licensees, one a distribution licensee and the other a trading licensee with whom the former entered into a power purchase agreement. The breach of that power purchase agreement by the latter is the subject matter of dispute in the suit and what is claimed as relief is grant of compensation by way of damages for such breach. Merely because the Plaintiff has chosen to join some others, who are neither parties who ought to be joined nor necessary for proper adjudication of the suit, it cannot be said that Section 86(1)(f) does not cover the suit.
10. The Plaintiff’s reliance on the case of Dhulabhai v. State of Madhya Pradesh, AIR 1969 SC 78, does not take its case any further. Insofar as exclusion of jurisdiction of courts and other than Regulatory Commissions in the matter is concerned, the judgment of the Supreme Court in the case of Gujarat Urja Vikas Nigam clearly holds the field. In that case, the Supreme Court has made it clear that on a principle that a special law overrides the general law, Electricity Regulatory Commission alone can adjudicate the disputes or refer them to arbitration. Section 86(1)(f) provides for a special manner of adjudication of disputes referred to therein. Such disputes have to be decided by the Commission itself or referred to arbitrator. By implication all other methods are barred. Even on the principle of law laid down in Dhulabhai, where there is no express exclusion of jurisdiction, on an examination of the scheme of the particular Act, including remedies thereunder, it is necessary to find the intendment of the Act. If the intendment is to provide for finality to the adjudication of the statutory authority, the civil court’s jurisdiction must be held to be barred if there is adequate remedy to do what civil courts would normally do in a suit. There is an adequate adjudicatory machinery in the Act here; the commission can grant effective relief just a civil court would; and any adjudication by the Commission is subject to an appeal before the Appellate Tribunal. The intendment is clearly to provide for a final adjudication and there is an adequate remedy. The jurisdiction of ordinary civil courts may well be treated as ousted.”
4. T.N. GENERATION AND DISTBN. CORPN. LTD. Vs. PPN POWER GEN. . LTD. (2014) 11 SCC 53
“36. It was submitted on behalf of the Appellant (licensee) that by Virtue of Section 86(1)(f) of the Act of 2003, the dispute between the licensees and the generating companies can only be adjudicated upon by the State Commission either by itself or by an arbitrator to whom the Commission refers the dispute. Therefore, the High Court had no jurisdiction u/s 11(6) to refer the dispute between the licensees and the generating company to an arbitrator, since such power of adjudication of reference has been specifically vested in the State Commission. Since the Electricity Act is a special law, dealing with arbitrations of dispute between the licensees and the generating companies, the provision of Section 11 of the Arbitration and Conciliation Act would be inapplicable. The High Court has, therefore, committed an error of jurisdiction in allowing the application u/s 11(6) and referring the matter to arbitration to a Former Chief Justice of India. On the other hand, it was submitted on behalf of the generating companies that the provisions of the Electricity Act are in addition to and not in derogation of any other law for the time being in force. The provisions contained in Sections 173 and 174 would not affect the applicability of the Arbitration Act, 1996, in view of the provisions contained in Section 175 of the Electricity Act. Upon consideration of the aforesaid submission, this Court in Gujarat Urja (supra)has held as follows:
26. It may be noted that Section 86(1)(f) of the Act of 2003 is a special provision for adjudication of disputes between the licensee and the generating companies. Such disputes can be adjudicated upon either by the State Commission or the person or persons to whom it is referred for arbitration. In our opinion the word “and” in Section 86(1)(f) between the words “generating companies” and “to refer any dispute for arbitration” means “or”. It is well settled that sometimes “and” can mean “or” and sometimes “or” can mean “and” (vide G.P. Singh’s Principles of Statutory Interpretation, 9th Edn., 2004, p. 404).
27. In our opinion in Section 86(1)(f) of the Electricity Act, 2003 the word “and” between the words “generating companies” and the words “refer any dispute” means “or”, otherwise it will lead to an anomalous situation because obviously the State Commission cannot both decide a dispute itself and also refer it to some arbitrator. Hence the word “and” in Section 86(1)(f) means “or”.
28. Section 86(1)(f) is a special provision and hence will override the general provision in Section 11 of the Arbitration and Conciliation Act, 1996 for arbitration of disputes between the licensee and generating companies. It is well settled that the special law overrides the general law. Hence, in our opinion, Section 11 of the Arbitration and Conciliation Act, 1996 has no application to the question who can adjudicate/arbitrate disputes between licensees and generating companies, and only Section 86(1)(f) shall apply in such a situation.
37. This Court also negated the submission that the provision contained in Section 86(1)(f) would be violative of Article 14 (See Para 30-31).
38. Considering the provisions contained in Sections 173, 174 and 175 of the Electricity Act, this Court observed that since Section 86(1)(f) provides a special manner of making reference to an arbitrator in disputes between a licensee and a generating company, by implication all other methods are barred. Considering the applicability of Sections 174 and 175, this Court has held that Section 174 would prevail over Section 175 in matters where the where there is any conflict (but no further). In our opinion, the observations made by this Court in Paragraphs 59 and 60 are a complete answer to the submissions of Mr. Nariman that upon an application being made, the State Commission was bound to refer the matter to arbitration.
39. Section 86(1)(f) specifically confers jurisdiction on the State Commission to refer the dispute. Undoubtedly, the Commission is required to exercise its discretion reasonably and not arbitrarily. In the present case, the State Commission upon consideration of the entire matter has exercised its discretion. However, in our opinion, the APTEL ought not to have brushed aside the submissions of the Appellant with the observation that the State Commission having exercised its discretion, the issue need not be investigated by the APTEL. It would always be open to APTEL to examine as to whether the State Commission has exercised the discretion with regard to the question whether the dispute ought to have been referred to arbitration, in accordance with the well known norms for exercising such discretion. APTEL exercises jurisdiction over the State Commission by way of a First Appeal. Therefore, it is the bounden duty of the Appellate Tribunal to examine as to whether all the decisions rendered by the State Commission suffer from the vice of arbitrariness, unreasonableness or perversity. This would be apart from examining as to whether the State Commission has exercised powers in accordance with the statutory provisions contained in Electricity Act, 2003. Having said this, we are not inclined to interfere with the conclusions reached by APTEL, as in our opinion, the jurisdiction has not been exercised by the State Commission arbitrarily, whimsically or against the statutory provisions.”
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