Special statute prevails over general arbitration law in electricity disputes; statutory forum controls reference to arbitration.

A special dispute-resolution mechanism under the Electricity Act, 2003 was treated as overriding the general appointment power under the Arbitration and Conciliation Act, 1996 where disputes arise between a licensee and a generating company. The State Commission was held to have exclusive authority to decide whether the matter should be adjudicated by itself or referred to an arbitrator nominated by it, and prior contractual arrangements could not displace that statutory scheme. The Act was harmonised by giving overriding effect to the Electricity Act where conflict existed, while Article 14 challenge to the discretion vested in the State Commission was rejected as not arbitrary.

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Issues: (i) Whether disputes between a licensee and a generating company could be referred to arbitration by the Court under Section 11 of the Arbitration and Conciliation Act, 1996, despite Section 86(1)(f) of the Electricity Act, 2003. (ii) Whether Sections 174 and 175 of the Electricity Act, 2003 could be harmoniously construed so as to permit Section 11 of the Arbitration and Conciliation Act, 1996 to operate in such disputes. (iii) Whether Section 86(1)(f) of the Electricity Act, 2003 was violative of Article 14 of the Constitution of India.

Issue (i): Whether disputes between a licensee and a generating company could be referred to arbitration by the Court under Section 11 of the Arbitration and Conciliation Act, 1996, despite Section 86(1)(f) of the Electricity Act, 2003.

Analysis: Section 86(1)(f) is a special provision dealing specifically with adjudication of disputes between licensees and generating companies. The expression that the State Commission shall adjudicate and refer disputes for arbitration was treated as conferring the exclusive authority on the Commission to decide whether the matter should be decided by itself or by an arbitrator nominated by it. The general power under Section 11 of the Arbitration and Conciliation Act, 1996 was held to give way because a special law prevails over a general law. Section 158 was read consistently with this interpretation, and the pre-existing agreement could not displace the statutory mechanism introduced by the Electricity Act, 2003.

Conclusion: The Court held that Section 11 of the Arbitration and Conciliation Act, 1996 had no application to such disputes and that only the State Commission or an arbitrator nominated by it could adjudicate them.

Issue (ii): Whether Sections 174 and 175 of the Electricity Act, 2003 could be harmoniously construed so as to permit Section 11 of the Arbitration and Conciliation Act, 1996 to operate in such disputes.

Analysis: Section 175, which states that the Act is in addition to other laws, was read with Section 174, which gives overriding effect to the Electricity Act, 2003 in case of inconsistency. The provisions were harmonised by treating Section 174 as the principal rule and Section 175 as subordinate to it. On that construction, whenever there is an express or implied conflict, the Electricity Act prevails; otherwise, both enactments operate together. Applying that principle, the Court found an implied conflict between Section 86(1)(f) of the Electricity Act, 2003 and Section 11 of the Arbitration and Conciliation Act, 1996 in relation to the forum competent to arbitrate such disputes.

Conclusion: The Court held that the Electricity Act, 2003 prevails to the extent of the conflict and that Section 11 of the Arbitration and Conciliation Act, 1996 stands excluded for disputes covered by Section 86(1)(f).

Issue (iii): Whether Section 86(1)(f) of the Electricity Act, 2003 was violative of Article 14 of the Constitution of India.

Analysis: The discretion given to the State Commission to decide the dispute itself or refer it to arbitration was held not to be arbitrary. The Court accepted that the legislature may confer such discretion for practical reasons, including workload and technical complexity, and that judicial restraint is required in testing such classifications and administrative choices. The provision was therefore found to have a rational basis and not to create unconstitutional discrimination.

Conclusion: The Court held that Section 86(1)(f) of the Electricity Act, 2003 was not violative of Article 14 of the Constitution of India.

Final Conclusion: The impugned High Court order appointing an arbitrator was set aside, and the dispute was left to be dealt with by the statutory forum under the Electricity Act, 2003. In the connected matter, the challenge was rejected and the party was directed to move the appropriate Commission for interim relief.

Ratio Decidendi: Where a special statute creates an exclusive mechanism for adjudication or reference to arbitration, that mechanism overrides the general appointment power under the Arbitration and Conciliation Act, 1996 to the extent of any express or implied conflict.

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