Arbitral Tribunal Cannot Go Outside Reference Order & Widen Its Jurisdiction By Dealing With Disputes Not Referred To It: Punjab & Haryana HC

The Punjab and Haryana High Court held that an Arbitral Tribunal cannot go outside the reference order and cannot widen its jurisdiction by dealing with disputes not referred to it.

The Court held thus in a writ petition preferred by a company for an issuance of a writ of certiorari for quashing the orders of the Arbitral Tribunal by which the amendment, rectification as well as clarificatory/modification applications were disposed of.

A Single Bench of Justice Suvir Sehgal observed, “An Arbitral Tribunal cannot go outside the reference order and cannot widen its jurisdiction by dealing with disputes not referred to it. It has been held by the Supreme Court in MSK Project’s case (supra) that Arbitral Tribunal being a special Tribunal, gets its jurisdiction to proceed with the case only from the reference made to it and it is impermissible for it to surpass the terms of the reference. Supreme Court observed that if the dispute is not within the scope of the arbitration clause, it is not within in the jurisdiction of the Tribunal to entertain it. By the addition of the new prayers, petitioner is seeking to enlarge and change the reference made to the Arbitral Tribunal, which is not permissible.”

Senior Advocate Chetan Mittal appeared on behalf of the petitioner while Senior Advocate Gurminder Singh appeared on behalf of the respondent.

In this case, a Power Purchase Agreement (PPA) was executed between the petitioner company and respondent company for supply of 100% power from petitioner’s thermal power plant at District Mansa. A petition under Section 86 (1) (f) of the Electricity Act, 2003, was filed by the petitioner before the Punjab State Electricity Regulatory Commission (PSERC), raising some claims which was contested by the respondent by filing a reply. By a reference order, PSERC referred the matter for arbitration and constituted an Arbitral Tribunal comprising of three members. Thereafter, since the period for conclusion of the arbitration proceedings expired, the petitioner filed an application under Section 29-A (5) of the Arbitration and Conciliation Act, 1996 (A&C Act) for extension of time, which was rejected by the District Court.

The petitioner, therefore, approached the High Court via revision petition and the court remanded the matter to the District Court. Hence, a fresh order was passed allowing the application and extending the time for conclusion of arbitration proceedings by six months. Revision petition filed by the respondent was dismissed by the High Court and in Special Leave Petition (SLP), the Supreme Court re-constituted the Arbitral Tribunal. An application was preferred by the petitioner to which the respondent submitted reply and the Tribunal disposed of the applications by modifying its order. As a result, the petitioner was before the High Court.

The High Court in view of the above facts noted, “The application was disposed of by the Arbitral Tribunal vide order, Annexure P-1, by permitting the petitioner to introduce additional grounds, however, the additional reliefs sought to be introduced were declined holding that they were already covered in the reliefs prayed. Tribunal was of the view that it was not necessary for the petitioner to seek introduction of any new relief and it did not have the jurisdiction to alter/amend the reference made by the PSERC.”

The Court further noted that on a harmonious construction of the provisions of the Electricity Act and the A&C Act, the Supreme Court held that whenever there is a dispute between a licensee and a generating company, only the Electricity Regulatory Commission or Arbitrator(s) nominated by it can resolve such a dispute, whereas all other disputes would be decided in accordance with Section 11 of the A&C Act.

“It was clarified by the Supreme Court that all disputes, not merely those pertaining to the matters referred to in Section 86 (1) between the licensee and generating company, can be resolved by the Commission or an Arbitrator appointed by it as there is no restriction in this Section regarding the nature of the disputes. Supreme Court has held that the word “and” in Section 86 (1) (f) has to be read as “or” since the Electricity Commission cannot resolve the dispute itself as also refer it to Arbitration”, it added.

The Court also observed that an Arbitral Tribunal is bound to act and decide the dispute within the terms of the reference made to it and it can neither add nor incorporate a new prayer in the claim, without reference by the PSERC.

Accordingly, the High Court dismissed the writ petition.

Cause Title- Talwandi Sabo Power Limited v. Punjab State Power Corporation Limited (Neutral Citation: 2024:PHHC:057870)

Appearance:

Petitioner: Senior Advocate Chetan Mittal, Advocates Kunal Mulwani, Nitin Kaushal, and Ritvik Garg.

Respondent: Senior Advocate Gurminder Singh and Advocate Jatinder Singh Gill.

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