Holding

Section 86(1)(f) of the Electricity Act, 2003, being a special provision, overrides Section 11 of the Arbitration and Conciliation Act, 1996, so the High Court could not appoint an arbitrator under s.11(6).

Summary

The Madhya Pradesh Electricity Board entered into a Power Purchase Agreement (PPA) with Narmada Equipments in 1999, which was terminated in 2001. The PPA contained an arbitration clause. In 2011 Narmada invoked the clause and, after receiving no response, filed an application under Section 11(6) of the Arbitration and Conciliation Act, 1996 for the appointment of an arbitrator. The High Court appointed an arbitrator, holding that the arbitration provision was independent of Section 86(1)(f) of the Electricity Act, 2003, which vests exclusive jurisdiction in the State Electricity Commission for disputes between licensees and generating companies. The Supreme Court held that the special provision of Section 86(1)(f) overrides the general arbitration provision of the 1996 Act, rendering the High Court’s appointment of an arbitrator untenable. It also affirmed that a lack of jurisdiction cannot be cured by party consent and may be raised at any stage. Consequently, the appeal was allowed and the High Court’s order set aside.

Issues considered

Whether Section 86(1)(f) of the Electricity Act, 2003 overrides Section 11 of the Arbitration and Conciliation Act, 1996 for disputes between licensees and generating companies.
Whether the High Court had jurisdiction to appoint an arbitrator under Section 11(6) of the 1996 Act despite the special provision in the 2003 Act.
Whether a jurisdictional objection can be raised in subsequent or collateral proceedings.
Determination of the commencement date of arbitral proceedings under the PPA.

Legislation cited

Arbitration and Conciliation Act, 1996s. 11(6), s. 21
Electricity Act, 2003s. 174, s. 86(1)(f)

Subjects

ArbitrationElectricity Act 2003Arbitration and Conciliation Act 1996JurisdictionSpecial law vs general lawPower Purchase AgreementState Electricity CommissionSection 86(1)(f)Section 11Appointment of arbitratorInherent jurisdiction

Judgment

430 [2021]
SUPREME COURT 4 S.C.R. 430
REPORTS [2021] 4 S.C.R.

A CHIEF GENERAL MANAGER (IPC)
MP POWER TRADING CO LTD & ANR.
v.
NARMADA EQUIPMENTS PVT LTD
(Civil Appeal No. 1051 of 2021)
B
MARCH 23, 2021
[DR. DHANANJAYA Y CHANDRACHUD, M. R. SHAH
AND SANJIV KHANNA, JJ.]
Arbitration: Appointment of arbitrator – Madhya Pradesh
C Electricity Board entered into a Power Purchase Agreement (PPA)
in 1999 with the respondent – PPA was terminated in 2001 – High
Court declined the writ petition filed by respondent in view of
arbitration clause contained in the PPA – In 2011, respondent issued
notice to the Board invoking arbitration as contained in the PPA –
D As no reply was received, respondent filed application under s.11(6)
of AC Act seeking appointment of arbitrator – High Court allowed
the application declining the plea of appellant that in view of the
provisions of s.86(1)(f) of the Electricity Act, 2003, it was the State
Electricity Commission which was vested with the exclusive
jurisdiction to adjudicate upon disputes between licencees and
E generating companies – On appeal, held: It is well settled that the
special law overrides the general law – s.86(1)(f) of 2003 Act is a
special provision and hence will override the general provision in
s.11 of the AC Act for arbitration of disputes between the licensee
and generating companies – Hence, s.11 of the AC Act has no
F application to the question as to who can adjudicate/arbitrate
disputes between licensees and generating companies, and only
s.86(1)(f) shall apply in such a situation – Arbitration and
Conciliation Act, 1996 – s.11(6) – Electricity Act, 2003 – s.86(1)(f).
Jurisdiction: Jurisdiction cannot be assumed by consent of
G parties – If there is inherent lack of jurisdiction, the plea can be
taken at any stage and also in collateral proceedings.
Allowing the appeal, the Court
HELD: 1. In the present case, the notice for the initiation
of arbitration under Clause 12.3 of the PPA was issued by the
H
430
C. G. M. (IPC) MP POWER TRADING CO LTD v. NARMADA 431
EQUIPMENTS PVT LTD

respondent on 30 May 2011. The commencement of the arbitral A
proceedings by the invocation of the arbitration agreement would,
therefore, relate to 30 May 2011, when the notice invoking Clause
12.3 was issued. Hence, the fact that the PPA and the notice of
termination predate the 2003 Act would not constitute material
circumstances. Section 21 of the 1996 Act specifies that unless
B
otherwise agreed by the parties, the arbitral proceedings in
respect of a particular dispute would commence on the date on
which a request for that dispute to be referred to arbitration is
received by the respondent. Hence, there can be no manner of
doubt that 30 May 2011 would be the material date, since it is on
this date that the notice invoking Clause 12.3 was issued by the C
respondent to the appellant. [Para 9][434-G-H; 435-A-C]
2. In Hindustan Zinc Limited v. Ajmer Vidyut Vitran Nigam
Limited and NHAI v. Sayedabad Tea Company Limited, it was held
that Section 86(1)(f) of the 2003 Act is a special provision which
overrides the general provisions contained in Section 11 of the D
1996 Act. Section 86(1)(f) vests a statutory jurisdiction with the
State Electricity Commission to adjudicate upon disputes between
licensees and generating companies and to refer any dispute for
arbitration. The “and” between “generating companies” and “to
refer any dispute for arbitration” is to be read as an “or”, since
the State Electricity Commission cannot obviously resolve the E
dispute itself and also refer it to arbitration. Section 174 of the
2003 Act provides overriding effect to the 2003 Act
notwithstanding anything inconsistent contained in any other law
for the time being in force or in any instrument having effect by
virtue of any law other than the 2003 Act itself. [Paras 10, 11 and F
12][436-D-F; 437-A-B]
3. It was held in Hindustan Zinc Limited v. Ajmer Vidyut
Vitran Nigam Limited that if there is inherent lack of jurisdiction,
the plea can be taken at any stage and also in collateral
proceedings. A decree passed by a court without subject matter G
jurisdiction is a nullity, and that its invalidity could be set up
whenever and wherever it is sought to be enforced or relied upon.
Such a defect of jurisdiction cannot be cured even by the consent

H
432 SUPREME COURT REPORTS [2021] 4 S.C.R.

A of the parties. This dictum would apply to the present case.
The order of the High Court appointing an arbitrator under
Section 11(6) of the 1996 Act is unsustainable. [Paras 14 and
15][438-B-D]
Hindustan Zinc Limited v. Ajmer Vidyut Vitran Nigam
B Limited (2019) 17 SCC 82 : [2019] 15 SCR 113; NHAI
v. Sayedabad Tea Company Limited (2020) 15 SCC 161
: [2019] 11 SCR 725 – followed.
Case Law Reference
[2019] 15 SCR 113 followed Para 10
C
[2019] 11 SCR 725 followed Para 10
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 1051
of 2021.
From the Judgment and Order dated 30.11.2016 of the High Court
D of Madhya Pradesh at Jabalpur in A.C. No. 1 of 2015.
Varun K Chopra, Gurtejpal Singh, M/S. Vkc Law Offices, Advs.
for the appellants.
Sanjay K. Agrawal, Sarthak Nema, Ms. Ankita Khare, J.K. Pillai,
Advs. for the respondent.
E
The Judgment of the Court was delivered by
DR. DHANANJAYA Y CHANDRACHUD, J.
1. Leave granted.

F 2. This appeal arises from a judgment and order of a learned
Single Judge of the High Court of Madhya Pradesh dated 30 November
2016 where it appointed an Arbitrator in the dispute between the parties,
in an application1 filed by the respondent under Section 11(6) of the
Arbitration and Conciliation Act 19962.
3. The genesis of the matter is from when the Madhya Pradesh
G
Electricity Board3, entered into a Power Purchase Agreement4 on 20
May 1999 with the respondent. Under the PPA, the respondent was to
1
“AC No 1 of 2015"
2
“1996 Act”
3
“Board”
4
H “PPA”
C. G. M. (IPC) MP POWER TRADING CO LTD v. NARMADA 433
EQUIPMENTS PVT LTD [DR. DHANANJAYA Y CHANDRACHUD, J.]

establish a mini hydro-electric project on a built and operate basis. A
However, the PPA was terminated on 27 September 2001 by the Board.
The respondent initially filed a writ petition5 challenging the termination
of the PPA. The High Court, by its order dated 4 November 2009,
declined to entertain the petition in view of an arbitration agreement
contained in Clause 12.36 of the PPA. Thereafter, the respondent filed a
B
review petition7 which was dismissed by the High Court by an order
dated 10 December 2009.
4. As a consequence of the orders dated 4 November 2009 and
10 December 2009, on 28 December 2009, the respondent issued a
notice to the Board under Clause 12.1 of the PPA, seeking to resolve
the dispute by mutual discussion. Since the respondent did not receive a C
reply to the notice dated 28 December 2009 from the Board, on 30 May
2011, the respondent issued another notice to the Board invoking
arbitration under Clause 12.3 of the PPA. In the notice, the respondent
stated that if the Board did not act upon the notice within 30 days of its
receipt, it would approach the High Court under Section 11(6) of the D
1996 Act.
5. Having received no reply from the Board, an application8 was
filed under Section 11(6) of the 1996 Act by the respondent seeking the
appointment of an arbitrator. The High Court, by its order dated 21 January
2014, recorded that the respondent and the appellant had agreed to E
nominate their arbitrators, and observed that the two arbitrators would
proceed to appoint a third arbitrator, in accordance with the procedure in
Clause 12.3(a) of the PPA. The nominated Arbitrators fixed their first

5
“WP No 2642 of 2002"
6
“12.3 Arbitration: F
(a) If dispute cannot be salted within Thirty (30)days mutual discussions as (sic) by
section 12.1 and (sic) to Conciliation is not elected by the Parties pursuant to Section
12.2 of if a Parties so requests in accordance with Section 12.2 the Dispute shall in dally
be settled by an Umpire to be appointed by two arbitrators one to be appointed by the
Board and other by the Company Provisions of the Indian Arbitration and Conciliation
Act 1996 9or any enactment that replaces the said Act) shall apply in such arbitrator.
The arbitration proceedings shall be held at head Quarter of the Board i.e. at Jabalpur.
G
(b) The award rendered shall apportion the costs of the arbitration.
(c) The award rendered in any arbitration commended here under shall be final
conclusive and binding upon the Parties and award may be entered in any Court
havingjurisdiction as darned under article 15.1.”
7
“Review Petition No 716 of 2009”
8
“AC No 76 of 2011” H
434 SUPREME COURT REPORTS [2021] 4 S.C.R.

A meeting on 7 May 2014, when both parties appeared and the Arbitrators’
fee was fixed. However, the Arbitrators, by a letter dated 7 July 2014,
highlighted their inability to proceed with the arbitration proceedings on
the ground that their fees had not been paid.
6. Thereafter, the respondent filed AC No 1 of 2015 on 8 December
B 2014, seeking the appointment of an arbitrator under Section 11(6) of
the 1996 Act. This application was opposed by the appellant on the ground
that, in view of the provisions of Section 86(1)(f) of the Electricity Act
20039, it was the State Electricity Commission which was vested with
the exclusive jurisdiction to adjudicate upon disputes between licensees
and generating companies. By the impugned judgment and order dated
C 30 November 2016, the Single Judge of the High Court allowed the
application filed by the respondent under Section 11(6) of the 1996 Act.
The Single Judge held that the remedies under Section 86(1)(f) of the
2003 Act and under Section 11(6) of the 1996 Act are independent of
each other, and it was open to the High Court to exercise its jurisdiction
D under Section 11(6). The appellant now comes before this Court in appeal.
7. The submission of the appellant, which has been urged before
this Court by MrVarun Chopra, learned counsel, is that the view which
has been taken by the High Court is contrary to the law which has been
laid down by a two-Judge Bench of this Court in Gujarat Urja Vikas
E Nigam Limited v Essar Power Limited10.
8. Controverting the submissions, Mr Sanjay K Agrawal, learned
counsel appearing on behalf of the respondent, however, urged that the
decision in Gujarat UrjaVikas Nigam Limited (supra) would not apply
to the facts of the present case since the PPA was executed on 20 May
F 1999 and the termination by the Board was on 27 September 2001; both
of these events have taken place before the enforcement of the 2003
Act on 10 June 2003. It was further urged that the appellant did not raise
its objection stemming from Section 86(1)(f) of the 2003 Act when the
High Court appointed Arbitrators by the consent of both parties in its
order dated 21 January 2014 in AC No 76 of 2011 and also before the
G Arbitrators so appointed, and hence it cannot be raised at this stage.
9. In the present case, the notice for the initiation of arbitration
under Clause 12.3 of the PPA was issued by the respondent on 30 May
9
“2003 Act”
10
H (2008) 4 SCC 755, hereinafter referred to as “Gujarat UrjaVikas Nigam Limited”
C. G. M. (IPC) MP POWER TRADING CO LTD v. NARMADA 435
EQUIPMENTS PVT LTD [DR. DHANANJAYA Y CHANDRACHUD, J.]

2011. The commencement of the arbitral proceedings by the invocation A
of the arbitration agreement would, therefore, relate to 30 May 2011,
when the notice invoking Clause 12.3 was issued. Hence, the fact that
the PPA and the notice of termination predate the 2003 Act would not
constitute material circumstances.Section 2111 of the 1996 Act specifies
that unless otherwise agreed by the parties, the arbitral proceedings in
B
respect of a particular dispute would commence on the date on which a
request for that dispute to be referred to arbitration is received by the
respondent. Hence, there can be no manner of doubt that 30 May 2011
would be the material date, since it is on this date that the notice invoking
Clause 12.3 was issued by the respondent to the appellant.
10. The first issue which is raised in this appeal is governed by C
Gujarat Urja Vikas Nigam Limited (supra). In that case, the power
purchase agreement between the parties was entered into on 30 May
1996, and the notice for referring the dispute to arbitration was sent by
one of the parties on 14 November 2005. The other party opposed the
notice by stating that the State Electricity Commission had exclusive D
jurisdiction in accordance with Section 86(1)(f) of the 2003 Act.The
Gujarat High Court thereafter appointed an Arbitrator in an application
under Section 11(6) of the 1996 Act, which was impugned before this
Court. Speaking for the two-Judge bench, Justice Markandey Katju settled
the position of law in paragraphs 26, 27 and 28 of the judgment, which
are extracted below for convenience of reference: E

“26. It may be noted that Section 86(1)(f) of the Act of 2003 is a
special provision for adjudication of disputes between the licensee
and the generating companies. Such disputes can be adjudicated
upon either by the State Commission or the person or persons to
whom it is referred for arbitration. In our opinion the word “and” F
in Section 86(1)(f) between the words “generating companies”
and “to refer any dispute for arbitration” means “or”. It is well
settled that sometimes “and” can mean “or” and sometimes “or”
can mean “and” (vide G.P. Singh’s Principles of Statutory
Interpretation, 9th Edn., 2004, p. 404). G
27. In our opinion in Section 86(1)(f) of the Electricity Act, 2003
11
“21. Commencement of arbitral proceedings.—Unless otherwise agreed by the
parties, the arbitral proceedings in respect of a particular dispute commence on the date
on which a request for that dispute to be referred to arbitration is received by the
respondent.” H
436 SUPREME COURT REPORTS [2021] 4 S.C.R.

A the word “and” between the words “generating companies” and
the words “refer any dispute” means “or”, otherwise it will lead
to an anomalous situation because obviously the State Commission
cannot both decide a dispute itself and also refer it to some
arbitrator. Hence the word “and” in Section 86(1)(f) means “or”.
B 28. Section 86(1)(f) is a special provision and hence will override
the general provision in Section 11 of the Arbitration and
Conciliation Act, 1996 for arbitration of disputes between the
licensee and generating companies. It is well settled that the special
law overrides the general law. Hence, in our opinion, Section 11
of the Arbitration and Conciliation Act, 1996 has no application to
C the question who can adjudicate/arbitrate disputes between
licensees and generating companies, and only Section 86(1)(f)
shall apply in such a situation.”
This position has subsequently also been approved by two three-
Judge benches of this Court in Hindustan Zinc Limited v Ajmer Vidyut
D Vitran Nigam Limited 12 and NHAI v Sayedabad Tea Company
Limited13.
11. From the above judgment, it is evident that this Court has held
that Section 86(1)(f) of the 2003 Act is a special provision which overrides
the general provisions contained in Section 11 of the 1996 Act. Section
E 86(1)(f) vests a statutory jurisdiction with the State Electricity Commission
to adjudicate upon disputes between licensees and generating companies
and to refer any dispute for arbitration. The “and” between “generating
companies” and “to refer any dispute for arbitration” is to be read as an
“or”, since the State Electricity Commission cannot obviously resolve
F the dispute itself and also refer it to arbitration. Section 86(1)(f) is
extracted below:
“86.Functions of State Commission.—(1) The State
Commission shall discharge the following functions, namely:-
*** *** ***
G
(f) adjudicate upon the disputes between the licensees and
generating companies and to refer any dispute for
arbitration;”

12
(2019) 17 SCC 82; hereinafter, referred to as “Hindustan Zinc Limited“
13
H (2020) 15 SCC 161
C. G. M. (IPC) MP POWER TRADING CO LTD v. NARMADA 437
EQUIPMENTS PVT LTD [DR. DHANANJAYA Y CHANDRACHUD, J.]

12. Section 174 of the 2003 Act provides overriding effect to the A
2003 Act notwithstanding anything inconsistent contained in any other
law for the time being in force or in any instrument having effect by
virtue of any law other than the 2003Act itself. Section 174 provides
thus:
“174. Act to have overriding effect. — Save as otherwise B
provided in Section 173, the provisions of this Act shall have effect
notwithstanding anything inconsistent therewith contained in any
other law for the time being in force or in any instrument having
effect by virtue of any law other than this Act.”
13. We refer now to the second argument raised on behalf of the C
respondent, that the appellant cannot raise an objection relying on Section
86(1)(f) of the 2003 Act in the second application filed by it under Section
11(6) of the 1996 Act, when it had not raised the same objection in the
first application under Section 11(6) of the 1996 Act or before the
Arbitrators so appointed. It is pertinent to note that this argument was
rejected by the Single Judge of the High Court in the impugned judgment D
and order dated 30 November 2016 in the following terms”
“9. I will be failing in my duty if the basic objection raised by Shri
Manoj Dubey about maintainability of this application is not dealt
with. Merely because in earlier round of litigation, the objection of
maintainability was not taken, it will not preclude the other side to E
raise such objection if it goes to the root of the matter. This is trite
law that jurisdiction cannot be assumed by consent of the parties.
If a statute does not provide jurisdiction to entertain an application/
petition, the petition cannot be entertained for any reason
whatsoever. Thus, I am not inclined to hold that since for the F
reason that in the earlier round of litigation i.e. A.C. No.76/2011
parties reached to a consensus for appointment of Arbitrators,
this application is also maintainable. I deem it proper to examine
whether because of operation of Section 174 of the Act of 2003,
the present application under the Act of 1996 is not maintainable.”
G
14. A similar issue was raised before a three-Judge bench of this
Court in Hindustan Zinc Limited (supra), where an arbitrator was
appointed by the State Electricity Commission under Section 86(1)(f) of
the 2003 Act with the consent of the parties. Subsequently, the arbitral

H
438 SUPREME COURT REPORTS [2021] 4 S.C.R.

A award was challenged under Section 34 of the 1996 Act before a
Commercial Court, and the Commercial Court’s decision was challenged
in an appeal under Section 37 of the 1996 Act where it was held that the
State Electricity Commission had no jurisdiction to appoint the arbitrator
since Section 86(1)(f) refers to disputes only between licensees and
generating companies, and not licensees and consumers. When the matter
B
reached this Court, the contention was that the objection to jurisdiction
could not have been raised in a proceeding under Section 37 of the 1996
Act once the parties had consented to arbitration earlier. Speaking for
the Court, Justice Rohinton F Nariman held that if there is inherent lack
of jurisdiction, the plea can be taken at any stage and also in collateral
C proceedings. He highlighted the well-established principle that a decree
passed by a court without subject matter jurisdiction is a nullity, and that
its invalidity could be set up whenever and wherever it is sought to be
enforced or relied upon. Such a defect of jurisdiction cannot be cured
even by the consent of the parties. The above dictum would apply to the
present case.
D
15. In the above view of the matter, the order of the High Court
appointing an arbitrator under Section 11(6) of the 1996 Act is
unsustainable. We accordingly allow the appeal and set aside the
impugned judgment and order of the High Court dated 30 November
2016 in AC No 1 of 2015. However, this will not come in the way of the
E respondent in taking recourse to such remedies as are available in law.
However, we have expressed no opinion either on the merits or the
objections of the appellant which, when urged, would be considered by
the appropriate forum. There shall be no order as to costs.
16. Pending application, if any, stands disposed of.
F
Devika Gujral Appeal allowed.

G

H