Arbitration vs. Regulatory Jurisdiction: APTEL’s February 2026 Ruling Draws A Line

On 25 February 2026, the Appellate Tribunal for Electricity (APTEL) delivered a landmark judgment in three appeals (Nos. 348, 371, and 400 of 2025) involving Gujarat Urja Vikas Nigam Limited (GUVNL), Punjab State Power Corporation Limited (PSPCL), Haryana’s distribution companies (HPPC), and Tata Power Company Limited. The dispute revolved around whether disagreements under a 2007 Power Purchase Agreement (PPA) should be referred to arbitration or adjudicated by the Central Electricity Regulatory Commission (CERC).

The Issue at Hand

The 2007 PPA required Tata Power to supply contracted capacities to multiple state discoms. The procurers alleged persistent shortfalls: 1805 MW for GUVNL, 475 MW for PSPCL, and 380 MW for HPPC. They sought damages, refunds, and resumption of supply. Tata Power countered by challenging penalties and deductions imposed by the procurers, claiming these were unlawful under the PPA and the Electricity Act.

CERC, in a common order dated 19 November 2025, held that the disputes were non‑tariff in nature and therefore outside its adjudicatory jurisdiction. It directed that they be referred to arbitration. This triggered the appeals before APTEL.

Contending Viewpoints

Procurers’ Position:

• Argued that the disputes were regulatory in nature, involving scheduling, despatch, and compliance with grid codes.

• Maintained that CERC had jurisdiction under Section 79(1)(f) of the Electricity Act.

• Relied on precedents such as BSES v. DERC and SECI v. KSERC to argue that supply obligations fall within the regulatory domain.

Tata Power’s Position:

• Asserted that the disputes were contractual and non‑tariff, hence arbitrable.

• Relied on the Damodar Valley Corporation (DVC) judgment (APTEL, 2024), upheld by the Supreme Court, which mandated arbitration for similar PPA disputes.

• Claimed CERC lacked jurisdiction to adjudicate.

The Tribunal’s Final Order

APTEL disagreed with CERC’s approach. The bench held that CERC’s decision to refer the disputes to legal arbitration was flawed on multiple counts. It clarified that while arbitration clauses exist in PPAs, the Electricity Act vests CERC with jurisdiction to adjudicate disputes between generating companies and procurers.

The Tribunal emphasized that the DVC precedent was not directly applicable here, as the disputes in question involved obligations under a regulated framework and had wider implications for grid discipline and contractual enforcement. By sending the matter back to CERC, APTEL restored regulatory oversight, ensuring that disputes with sectoral impact are not relegated to private arbitration.

Future Implications

This ruling reshapes the boundary between arbitration and regulatory adjudication in India’s power sector:

• Strengthened CERC’s role: The judgment reinforces that CERC cannot abdicate jurisdiction in disputes that affect sectoral regulation, even if arbitration clauses exist.

• Clarity for procurers: State utilities now have a clearer path to seek redress through CERC rather than lengthy arbitration.

• Contractual discipline: Generators must recognize that obligations under PPAs are subject to regulatory scrutiny, not just private dispute resolution.

• Sectoral precedent: Future disputes involving supply shortfalls, penalties, or enforcement of PPAs are more likely to be adjudicated by CERC, reducing uncertainty.