Case Note & Summary
The Supreme Court allowed the appeal filed by Hindustan Zinc Limited (HZL) against the judgment of the Rajasthan High Court, which had set aside an arbitral award in a dispute concerning unscheduled interchange (UI) charges under the Electricity Act, 2003. The background of the case involves HZL, which operates four high-tension electricity connections for its units at Chanderiya, Debari, Aghucha, and Dariba, and had set up a captive power plant of 154 MW at Chanderiya. HZL entered into three open access agreements with Ajmer Vidyut Vitran Nigam Limited (AVVNL) on March 10, 2005, for wheeling power from its captive plant to three of its units. Disputes arose regarding UI charges under Clauses 8 and 9 of these agreements. The Rajasthan Electricity Regulatory Commission initially decided to resolve the dispute itself but later appointed an arbitrator under Section 86(1)(f) read with Section 158 of the Electricity Act. The arbitrator struck down Clauses 8(c) and 9, leading to a challenge by AVVNL. The Commercial Court dismissed the challenge under Section 34 of the Arbitration and Conciliation Act, 1996, but the High Court, in a Section 37 appeal, set aside the award, holding that HZL was an open access consumer, not a generating company, and thus the Commission lacked jurisdiction under Section 86(1)(f). The Supreme Court reversed this decision, holding that a captive generating plant wheeling power to its own units is a 'generating company' under the Electricity Act, and the dispute falls within the ambit of Section 86(1)(f). The Court emphasized that the proviso to Section 42(2) exempts captive generating plants from surcharge, indicating they are not ordinary consumers. The Court also noted that the High Court erred in delving into the merits of the award after finding lack of jurisdiction. Consequently, the Supreme Court set aside the High Court's judgment and restored the award of the arbitrator, allowing the appeal.
Headnote
A) Electricity Law - Arbitration - Section 86(1)(f) read with Section 158 of the Electricity Act, 2003 - Jurisdiction of State Commission to appoint arbitrator - Dispute between a captive generating plant and a distribution licensee regarding unscheduled interchange charges - Held that a captive generating plant wheeling power to its own units is a 'generating company' and not an 'open access consumer', thus the dispute falls within Section 86(1)(f) - The High Court erred in holding that the appellant was an open access consumer and that the Commission lacked jurisdiction (Paras 1-20). B) Electricity Law - Open Access - Section 42 of the Electricity Act, 2003 - Duties of distribution licensee - Open access for captive generating plants - The proviso to Section 42(2) exempts surcharge for captive generating plants, indicating they are treated differently from ordinary consumers - The appellant's captive power plant qualifies for such exemption (Paras 7-10). C) Arbitration Law - Challenge to Arbitral Award - Sections 34 and 37 of the Arbitration and Conciliation Act, 1996 - Jurisdictional issue - The High Court, while hearing an appeal under Section 37, can examine the issue of inherent lack of jurisdiction of the arbitrator - However, in this case, the arbitrator had jurisdiction as the dispute was covered under Section 86(1)(f) - The High Court's finding of lack of jurisdiction was erroneous (Paras 15-20).
Issue of Consideration
Whether the dispute between Hindustan Zinc Limited (HZL) and Ajmer Vidyut Vitran Nigam Limited regarding unscheduled interchange charges falls within the scope of Section 86(1)(f) of the Electricity Act, 2003, and whether the Rajasthan Electricity Regulatory Commission had jurisdiction to appoint an arbitrator under that provision.
Final Decision
The Supreme Court allowed the appeal, set aside the High Court judgment dated 05.04.2018, and restored the arbitral award dated 25.08.2007. The Court held that the dispute falls within Section 86(1)(f) of the Electricity Act, 2003, and the arbitrator had jurisdiction.
Law Points
- Interpretation of Section 86(1)(f) of the Electricity Act
- 2003
- Scope of arbitration under Electricity Act
- Distinction between generating company and open access consumer
- Captive generating plant's status under Electricity Act
