CERC cannot refer disputes to arbitration under Section 79(1)(f) if it lacks jurisdiction to adjudicate them.

The Appellants (State Discoms of Gujarat, Punjab, and Haryana) filed petitions before the Central Electricity Regulatory Commission (CERC) seeking specific performance of Power Purchase Agreements (PPAs) dated 22.04.2007, and compensation for short-supply of electricity.

The Respondent (Tata Power/TPCL) filed a cross-petition challenging the legality of penalties and deductions made by the Discoms.

TPCL argued that the disputes were "non-tariff" contractual breaches and should be referred to arbitration per the PPA’s arbitration clause.

Although parties had already filed pleadings on merits, the CERC passed an order on 19.11.2025 holding that it lacked adjudicatory jurisdiction over non-tariff disputes and mandatorily referred the matters to arbitration under the second limb of Section 79(1)(f) of the Electricity Act, 2003.

The Appellants challenged this reference, arguing the disputes were regulatory and impacted tariff.

1. Whether the CERC has the power to refer a dispute to arbitration under Section 79(1)(f) if it lacks inherent jurisdiction to adjudicate the subject matter under clauses (a) to (d) of Section 79(1).

2. Whether the filing of an application under Section 8 of the Arbitration and Conciliation Act, 1996, at the earliest stage, is a mandatory pre-condition for the Commission to refer a dispute to arbitration.

3. Whether the CERC can bifurcate a cause of action to refer contractual disputes to arbitration while keeping statutory/regulatory claims (against WRLDC) for its own adjudication.

The court applied Section 79(1)(f) of the Electricity Act, 2003, which grants CERC the power to adjudicate disputes involving generating companies regarding matters connected to "regulation of tariff" or to refer them to arbitration.

It relied on *GUVNL v. Essar Power Ltd.* (2008) 4 SCC 755, which established that the word "and" in the referral clause should be read as "or," giving the Commission discretion to choose between adjudication or arbitration.

The "jurisdictional fact" doctrine from *Arun Kumar v. Union of India* (2007) 1 SCC 732 was applied to hold that CERC must first have subject-matter competence before exercising referral powers.

The court also followed *Hindustan Zinc Ltd. v. Ajmer VVN Ltd.* (2019) 17 SCC 82, clarifying that only disputes capable of being adjudicated by the Commission can be referred to arbitration.

Finally, it applied *Sukanya Holdings (P) Ltd. v. Jayesh H. Pandya* (2003) 5 SCC 531, which prohibits the bifurcation of a single suit or cause of action into arbitration and court proceedings.

The Tribunal reasoned that the CERC’s power under Section 79(1)(f) is not two independent powers but a single discretionary choice: it can only refer to arbitration what it is otherwise empowered to adjudicate.

Therefore, if a dispute does NOT fall under Section 79(1)(a)-(d) (regulation of tariff), the CERC has no power to refer it elsewhere; it must simply dismiss it for lack of jurisdiction.

On the application of the 1996 Act, the Tribunal held that Section 8(1) requirements are mandatory; since TPCL filed its own petition and responded to others on merits without a timely Section 8 application, the right to seek arbitration was waived.

Regarding bifurcation, the Tribunal found the claims against TPCL and the statutory body WRLDC (for scheduling failures under Section 28) were "integrally connected".

Since WRLDC is not a party to the arbitration agreement and the dispute involves statutory functions (non-arbitrable), splitting the case would lead to conflicting judgments and is legally impermissible.

(i) CERC cannot refer a dispute to arbitration if it lacks the competence to adjudicate it.

(ii) TPCL failed to comply with Section 8(1) of the 1996 Act, rendering the reference invalid.

(iii) the bifurcation of the cause of action involving WRLDC was illegal.

The CERC is directed to restore the petitions and first determine if the disputes relate to the "regulation of tariff" under Section 79(1)(b); if they do, CERC must adjudicate them on merits; if not, it must dismiss them for lack of jurisdiction.