Energy DRM adds more confusion than clarity

The Ministry of New and Renewable Energy (MNRE) has introduced a dispute resolution mechanism (DRM) to resolve disputes between the Solar Energy Corporation of India (SECI) and the NTPC (formerly known as National Thermal Power Corporation) on one side, and developers on the other. This has produced more confusion than clarity. It is a well-intentioned move but it is unclear how the DRM fits into existing dispute resolution mechanisms in contracts, and under the Electricity Act, 2003.

The DRM allows appeals against the decisions of NTPC and SECI in solar and wind power schemes administered by them. It covers three categories of dispute, namely: Extensions of time due to force majeure; other extensions of time; and all other disputes. A dispute resolution committee (DRC), consisting of three retired Indian administrative service officers, will administer the mechanism. A developer must apply to the DRC within 21 days of the decision of the SECI or NTPC, and the DRC must give its recommendation within 21 days of the reference. The MNRE then has to approve that recommendation. The developer must strictly adhere to these time limits, and failure to comply is a ground for summary dismissal.

Power purchase agreements (PPAs) between the SECI, NTPC and developers provide for resolution of disputes through the electricity regulatory commission (ERC) and arbitration. In the case of existing PPAs, which do not incorporate a DRM in the contract, the DRM is another means of adjudication open to the developer, but in the absence of an amendment to the PPA it will be difficult to argue that the DRM must automatically apply. The DRM may form part of newer PPA, although it is unlikely that it will replace arbitration clauses.

The DRM is a process outside PPAs and therefore subject to the jurisdiction of the high and supreme courts, especially as the DRC does not have final adjudication. The minister for the MNRE makes the final decision. This is likely to result in much litigation, particularly if the PPAs also incorporate arbitration clauses. While the contractual dispute may be resolved by the ERC and through arbitration, a pending suit against the minister’s decision based on the recommendation of the DRC may create an obstacle to the arbitral process.

Abhishek Tripathi is the managing partner of Sarthak Advocates & Solicitors. Mani Gupta is a senior partner at the firm.

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