Litigation in Indian Courts is already taxing on the Parties’ resources, time, and energy. This is aggravated in specialised and complex disputes such as those related to Infrastructure, due to which the Parties resort to arbitration – one of the most sought-after alternatives for dispute settlement. However, specific issues arise when dealing with arbitration in highly technical disputes related to the Road, Electricity, and Telecommunication sectors. Thus, firstly, this blog post draws a timeline analysis of arbitration for the sectors mentioned above. Secondly, the authors analyse and address the contemporary or unresolved issues that pertain to arbitration in these sectors. And thirdly, this blog post briefly suggests the future way forward for these arbitration-related issues to be resolved.
1. Introduction: Intersection of Arbitration and Infrastructure Disputes
When we speak of infrastructure-related disputes, we comprehend that they have been rising daily due to their complexities involved where, in infrastructure contracts, the disputes range from claiming damages for the delay to the poor quality of the work executed. Further, this rising number should also be attributed to the increasing involvement by the Government and Private sectors. Thus, considering that infrastructure-related disputes are surfeit, complex, and rise with each passing day, the Parties cannot afford to go to litigation due to the time lag and resources drainage it may cause. In such situations, arbitration seems like an appropriate dispute settlement mechanism; however, the question arises about whether the arbitration-related provisions and jurisprudence for infrastructure-related disputes, especially in the Road, Electricity, and Telecommunication (RET) sectors, are adequate, effective, and efficient to resolve the disputes. In that regard, the growth and development of the arbitration regime in the RET sectors shall be analysed alongside briefly exploring the possibility of enhancing the arbitration regime for these sectors.
2. Arbitration in the RET Sectors: A Timeline of Growth and Contemporary Issues
Arbitration in India remains in its nascent stages in various sectors. Although it is widely known that the Indian arbitration regime has undergone various changes ranging from multiple amendments in the Arbitration and Conciliation Act, 1996 (1996 Act) to the development of domestic arbitration jurisprudence, it remains in its shell that is yet to be explored to its fullest potential. This is especially true in the RET sectors that have been analysed as follows.
2.1 Road Sector
In the road sector, we comprehend that since the advent of the COVID-19 pandemic, it has been one of the hardest affected sectors because there has been an estimated toll revenue loss of Rs. 3700 crores, delay in repayment of loan by developers wherein the interest has accrued up to approximately Rs. 3000 crores, and invocation of the “Force Majeure” clause to suspend obligations. Further, there has also been a massive delay in the various road-related construction projects, which, in turn, leads to issues such as breach of contract; contract becoming voidable “at the option of the non-defaulting party;” or invoking liquidated damages in specific situations. Thus, considering these disputes in the road sector, especially during the COVID-19 pandemic, it is imperative for us to analyse how the arbitration regime for this sector has grown and has the potential to grow further.
2.1.1 Statutory Provisions
When the dispute is between a contractor (for a road-related project) and the National Highway Authority of India (NHAI), the arbitration proceedings are governed under the 1996 Act. However, when the dispute is related to the acquisition of land by the Central Government for construction of national highways and compensation in these matters, then the dispute is arbitrated by Section 3G (5) of the National Highways Act, 1956 (1956 Act). This is because, in National Highways Authority of India v Sayedabad Tea Company, the Supreme Court held that: “The Act, 1956 is a comprehensive code in itself and a special legislation enacted by the Parliament for acquisition and for determining compensation and its disbursement where there are several claimants over the amount deposited towards compensation determined by the competent authority in accordance with the mechanism provided under Section 3G of the Act, 1956.” This means that the 1956 Act is a comprehensive and special statute for matters related to the acquisition of land, disbursement of compensation to landowners, and settlement of disputes related to these matters.
Under Section 3G (5) of the 1956 Act, statutory arbitration takes place with an arbitrator whom the Central Government solely appoints. In other words, this means that only the Central Government is empowered to appoint arbitrators in case of statutory arbitration under Section 3G (5). The Government usually appoints the arbitrator from a panel of arbitrators who are experts in land and revenue administration. They may also include retired State Officers from the Land Acquisition Division of the Ministry of Road Transport and Highways (MoRTH). After the passing of the arbitral award, if either of the Parties wants the award to be corrected or challenged, they can do the same under Section 33 and Section 34 of the 1996 Act, respectively.
Acknowledging that the disputes under the 1956 Act are restrictive that does not allow effective and efficient dispute settlement, in August 2013, the NHAI established a Society for Affordable Redressal of Disputes (SAROD) to conduct specialised arbitration in the road sector by arbitrators who are experts in this field. The SAROD Rules ensured that the arbitration conducted under them was not solely restricted to land acquisition and disbursement issues like statutory arbitration under the 1956 Act. This meant the arbitration under SAROD Rules had a broader scope which, in turn, ensured specialised arbitrations and removing of complexities because now, disputes related to the road sector can be arbitrated under the SAROD Rules rather than creating complex layers of dispute settlement by categorising them as disputes that may only fall either under the 1996 Act or the 1956 Act. Thus, the SAROD Rules weeded out the complexity of categorisation by streamlining and including all types of road sector-related disputes under it. It is also noteworthy to mention that SAROD has empanelled arbitrators that are experts in road sector-related matters. Additionally, SAROD Rules ensure that the arbitrators’ independence and neutrality are maintained as Rule 15 has a “Code of Ethics” for the arbitrators.
However, in 2020, the MoRTH established three Conciliation Committees of Independent Experts (CCIE). Each committee has three members that are “…headed by retired officials from the judiciary, senior experts from public administration, finance and from private sector.” The reason behind the formation of these Committees was that it was acknowledged by the Chairman of NHAI, Sukhbir Singh Sandhu, that approximately Rs. 70,000 crores worth of contractors’ money is stuck in litigation and arbitration, wherein it would take five to ten years for contractors to recover such money. To resolve this conundrum, the Conciliation Committees were set up.
Thus, this means that even after the setting up of SAROD, the efforts for speedy settlement of road sector-related arbitrations were inadequate as the MoRTH also acknowledged that the speedy settlement of arbitration disputes within twelve to eighteen months under the 1996 Act is highly unlikely due to the involvement of complex procedures and interests of various Parties. Although conciliation may seem like the future way forward, it does not mean that there should be no steps to fill the gaps in road sector-related arbitration. Therefore, considering that there is a gap between the statutory provisions and their practical consequences, it is imperative for the Indian Parliament to amend the 1956 Act in a manner that is consistent with the practical complexities involved, such as the likelihood of delays, lack of appropriate regulatory check in cases of non-compliance with the statutory deadline, and other related complexities. The same can be done by seeking suggestions and recommendations from the MoRTH, NHAI and other relevant stakeholders like contractors, landowners, and so on.
2.1.2 Jurisprudential Growth
Although the Central Government is vested with the absolute power to appoint an arbitrator in statutory arbitrations under the 1956 Act, there can be a situation wherein the Central Government fails to appoint an arbitrator. In such situations, the Supreme Court has already held that the 1996 Act will apply in places where the 1956 Act is absent, i.e., in cases where the Central Government fails to appoint an arbitrator. Further, it was also held by the Supreme Court that as the 1956 Act does not have any provision related to challenging the appointment of an arbitrator, Section 12 of the 1996 Act, read with the V and VII Schedule, would be applicable.
From the situation mentioned above, we comprehend that the Supreme Court resolved a particular jurisprudential dilemma. However, there are multiple other dilemmas (for road sector-related disputes) that remain in murky waters. One such example is Section 3G (5) of the 1956 Act. In TRF Limited v. Energo Engineering Projects Ltd., the Supreme Court held that if a Party is interested in the outcome of the arbitration, then such Party cannot unilaterally appoint an arbitrator. This principle was carried forward in Perkins Eastman Architects DPC v. HSCC (India) Ltd., wherein the Supreme Court restricted the right of the “executing agency” of the State to appoint an arbitrator unilaterally. This was done because the Court found that the executing agency was interested in the outcome of the arbitration. Further, in Pam Developments Private Ltd. v. State of West Bengal, the Supreme Court lucidly held that no “special treatment” could be given to the State in arbitration matters. Thus, the conundrum arises at the point that, in GMR infrastructure Ltd. v. National Highways Authority of India, the High Court of Delhi held that the NHAI is an implementing agency of the Central Government and acts on behalf of the Central Government in road sector-related matters.
This essentially shows that as NHAI is directly involved in road sector-related matters, it is interested in the outcome of the arbitration, and as NHAI is interested in the outcome, so is the Central Government. Through this logic, it remains unclear as to whether Section 3G (5) of the 1956 Act would still be applicable or not. The exact position is yet to be clarified by the Indian Courts, and only time will decide the trajectory of the statutory arbitrations under the 1956 Act.
2.2 Electricity Sector
In the electricity sector, we comprehend that the disputes are highly technical, complex, and time-sensitive, generally related to contractual disputes amongst the transmission companies, distributors, and electricity generators. These electricity sector-related disputes are further aggravated due to the COVID-19 pandemic wherein the Distribution Companies were hard hit, alongside predicted issues such as differences in project commissioning, delays in payment, initiation of bankruptcies, and curtailing the power purchased through long-term Power Purchase Agreements (PPAs). Thus, considering these disputes in the electricity sector, especially during the COVID-19 pandemic, it is imperative for us to analyse how the arbitration regime for this sector has grown and has the potential to grow further.
2.2.1 Statutory Provisions
Under Section 79 of the Electricity Act, 2003 (2003 Act), the Central Commission adjudicates the disputes between licensees (that are “electricity transmission, distribution and trading companies that must obtain licenses to operate”) and generating companies. Similarly, under Section 86 of the 2003 Act, the State Commission adjudicates the same types of disputes. Under these provisions of the 2003 Act, the Central and State Commission, also called the “Appropriate Commission” as per Section 2(4) of the 2003 Act, have an option to adjudicate the disputes either of their accord or refer the dispute to arbitration. In this regard, when the matter is referred to arbitration by the Appropriate Commission, the arbitrator(s) is appointed by the Appropriate Commission as per Section 158 of the 2003 Act. This will not be the case if the license of a licensee states a different mechanism for dispute settlement. However, the conundrum that arises herein is that under Section 11 of the 1996 Act, the Courts are empowered to appoint arbitrators. This Section is directly in conflict with Section 158 of the 2003 Act that has been discussed under “2.2.2. Jurisprudential growth.”
It is also noteworthy to mention that the Draft Electricity (Amendment) Bill, 2020 (Draft 2020 Bill) was introduced that established the Electricity Contract Enforcement Authority (ECEA). ECEA shall essentially have the absolute authority to adjudicate on matters related to “…performance of obligations under a contract related to sale, purchase or transmission of electricity, provided that it shall not have any jurisdiction over any matter related to regulation or determination of tariff or any dispute involving tariff.” This essentially means that the Appropriate Commissions will no longer have jurisdiction over ECEA-related matters, which, in turn, means that the Appropriate Commissions will not have the power to refer ECEA-related matters to arbitration. When we analyse the Draft 2020 Bill, we comprehend that it is entirely silent regarding arbitration-related amendments, especially regarding whether ECEA is empowered to refer matters to arbitration or not. This complexity is further increased because of the Electricity (Amendment) Bill, 2021 that is rumoured to be introduced in the Lok Sabha. To date, there is no information regarding changes in the arbitration-related mechanism under the 2003 Act. If the Draft 2021 Bill is also silent regarding arbitration and includes ECEA, it is imperative to note that the Draft 2021 Bill would be subjected to heavy judicial scrutiny due to the Parliament’s intentional silence. However, presently, no premature assumptions can be made as only the future parliamentary deliberations shall pave the future for arbitration in the electricity sector, especially for ECEA-related matters.
2.2.2 Jurisprudential Growth
In the electricity sector, the major jurisprudential dilemma existed for the conflict between the 2003 Act and the 1996 Act regarding the appointment of arbitrators. In Gujarat Urja Vikas Nigam Ltd. v. Essar Power Ltd., the dispute was between Gujarat Urja Vikas Nigam (generating company) and Essar Power Ltd. (licensee). To resolve the dispute while adhering to the arbitration agreement, neither Party agreed on a sole arbitrator. The generating company approached the electricity regulator to refer the dispute to arbitration under the 2003 Act, while the licensee approached the Gujarat High Court to appoint an arbitrator under the 1996 Act. The High Court appointed the licensee’s choice of arbitrator, due to which the case went to an appeal in the Supreme Court wherein it was held that the 2003 Act is a special law due to which it must override the general act, i.e., the 1996 Act. The Supreme Court also held that in all disputes between a distribution licensee and power generator, the Appropriate Commission has the exclusive jurisdiction to either adjudicate the matters of its accord or refer it to arbitration. Further, if the Parties mutually appointed the arbitrator for ongoing arbitrations that commenced before the Gujarat Urja case, it is already a settled position that such appointment is illegal.
Therefore, in terms of jurisprudential growth of the 2003 Act, we comprehend that the position has been primarily settled by the Supreme Court and through the decisions of the Appropriate Electricity Commissions. However, considering that the Draft 2020 Bill is in works that have included a specialised dispute settlement system, i.e., the ECEA, the future avenue of the 2003 Act read with the 1996 Act can be opened to broad judicial interpretation. The uncertainty further accentuates this judicial scrutiny as to whether ECEA would still be a part of the Draft 2021 Bill or not.
2.3 Telecommunication Sector
The Liberalisation, Privatisation, and Globalization Policy (LPG) of 1991 was a turn-of-change that affected the Telecommunication sector today. Before this, the rules, laws, regulations, players were limited. The development also occurred post the enactment of the Information Technology Act, 2000 (2000 Act), which gave a boom to the Information and Communication Technology (ICT) and later, developed the Internet Service Providers (ISPs). Today, the Telecommunication Sector governs both the communication and internet spheres.
2.3.1 Phases of Development
Focussing upon the Telecommunication sector in India, we achieved the present scenario of Telecommunication in three different phases. As mentioned, the first radical change was in 1992, after the LPG Policy in 1991. This stage later was followed by the National Telecom Policy of 1994 (NTP). This incentivised the private players into Telecommunication and further promoted consumer protection policies. The final stage was in 1999, when the NTP was amended. This brought global changes in the spheres of the internet, Telecommunication, and media.
2.3.2 Telecom Regulatory Authority of India
In India, we have the Telecom Regulatory Authority of India (TRAI), established in 1997 through the Telecom Regulatory Authority of India Act, 1997 (1997 Act). It aimed to regulate and fix the tariff for the Indian Telecom sector.
Through an Ordinance in 2000, the 1997 Act was amended to establish the Telecommunications Dispute Settlement and Appellant Tribunal (TDSAT). This means that TDSAT is a specialised Court, i.e., a Tribunal, established to take up TRAI’s adjudicatory and disputes functions under Section 14 of the 1997 Act. Moreover, according to this Ordinance, the TDSAT is eligible to resolve disputes between a licensor and licensee, between service providers, or between the service providers and the consumers.
2.3.3 Arbitration Clauses in Master Service Agreements
It is a common practice in today’s business era that the Parties have an arbitration clause in their contracts or their agreements. Such clauses give way for the Parties to resolve the disputes through dispute resolution, i.e., arbitration.
In the Telecommunication sector, the Master Service Agreements (MSAs) mostly contain the arbitration clause for adjudicating disputes. However, a clash arises between this arbitration clause and the dispute settlement mechanism under TDSAT that has been discussed as follows.
2.3.4 Dispute Resolution v. TDSAT
The question that is now to be investigated is the consequence of having an arbitration clause between the ISPs, Telecommunication players, and other Parties. As discussed above, TDSAT was established to resolve disputes, and the arbitration clause would mean that the disputes have to be settled as per the Parties’ choice in an Arbitral Tribunal. However, a dilemma existed in the earlier times as to where would the disputes be adjudicated: TDSAT or an Arbitral Tribunal constituted as per the arbitration clause and the 1996 Act. Presently, this has been resolved to a substantial extent by certain judgments as discussed below.
Firstly, in Star (India) Pvt Ltd. v. BSNL, the issue was where the disputes between Telecom operators and the infrastructure and service providers would be dealt in: TDSAT or Arbitral Tribunal. It was held that the Arbitral Tribunal has jurisdiction only if the disputes are not between the operators or the service providers. Further, this case extensively dealt with TRAI and the provisions of the Telegraph Act, 1885 (1885 Act) and, in finality, concluded that the TDSAT has exclusive jurisdiction in the specific areas mentioned in the 1997 Act.
Secondly, in Reliance Infra Ltd. v. Etilsat Telcom Pvt. Ltd., the dispute was between the Telecom operators and the infrastructure and service providers. The case revolved around whether these infrastructure and service providers be considered as services and will TDSAT have an amenable jurisdiction over the matter. The Tribunal, in this case, focussed upon the instances and records wherein the Parties approached forums with no jurisdiction. As per Order XIV Rule 2 of the Code of Civil Procedure, 1908, the Courts/Tribunals must decide upon the issue of jurisdiction. This means that the Courts/Tribunals must first deal with whether that forum has the jurisdiction to adjudicate the matter. In that regard, this case also revolved around a similar issue as the Tribunal’s jurisdiction was in question. The Tribunal investigated and held that the infrastructure and service providers fall under the ambit of TRAI. It essentially observed that when any person or an entity is registered and has a license of infrastructure and service providers provide infrastructure, they are considered to be providing services under the 1997 Act. Thus, TDSAT has an amenable jurisdiction notwithstanding (regardless) the arbitration clause.
Thirdly, in 2013, the Delhi High Court established certain principles for arbitrability of the disputes in the Telecommunication sector in Viom Network Ltd. v. S Tel Pvt Ltd. Viom Networks relied upon the Reliance Infratel case, and the Delhi High Court held that the disputes between the Telecom licensee and infrastructure providers must go to TDSAT and not be decided by an Arbitral Tribunal. However, when the Parties are neither licensees nor infrastructure providers, the arbitration clause can be invoked. This flows from the provisions of Section 2(1)(e) and (j) of the 1997 Act and Section 4 of the 1885 Act. These Sections conjointly explain who a service provider and a licensee are. Thus, the two cases mentioned above — the Viom Network case and the Reliance Infratel case — are the foundation for the arbitrability of Indian Telecommunication disputes.
On perusal of the cases mentioned above, it is prima facie evident that TDSAT has exclusive jurisdiction in certain areas where arbitration cannot be invoked. The 1996 Act was enacted with a vast jurisdiction; however, a special enactment like the 1997 Act curtails some of the features of the general act, i.e., the 1996 Act. This essentially hampers the main feature of “party autonomy” in arbitration because the Arbitral Tribunal’s jurisdiction, as agreed in the arbitration clause, is lost to the jurisdiction of TDSAT. There have been several cases distinguishing between the TDSAT and Arbitral Tribunal’s jurisdiction which have not discussed the concept of party autonomy. This is a significant setback to the process of arbitration because although arbitration has broad powers and jurisdiction under the 1996 Act, the Courts’ involvement through Section 9 and 17 of the 1996 Act makes it significantly tedious to stick to the concept of “out of the Court” dispute settlement mechanism. This is, in turn, capable of disincentivizing Parties to resort to Arbitration.
3. Conclusion: Perpetual Tussle Between the Issues and Advantages of Special Acts Presiding Over General Acts — What does the Future Hold?
Under the Interpretation of Statutes, a special Act prevails over a general Act. Further, an Act that has been enacted more recently prevails over the older Act. Combining these two principles, we can ascertain that special enactments like the Telecom Regulatory Authority of India Act, 1997, National Highways Act, 1956, and the Electricity Act, 2003 preside over the Arbitration and Conciliation Act, 1996. This is because the 1997 Act and the 2003 Act were enacted later, whereas the 1956 Act is a special enactment. The latter principle of special enactments also applies to the 1997 Act and the 2003 Act.
On the one hand, the issues of party autonomy, speedy disposal of cases, ease and place of dispute resolution remain to be out of the Parties’ control. Due to these issues being out of control, wherein such Parties are generally Corporations, they are stuck in the lacuna of law and suffer through such lacuna’s harsh effects. However, on the other hand, when there are Tribunals set up, such as the TDSAT, it is comprehended that the justice would be effectively and efficiently delivered with little to no irreparable loss to the Parties as these Judges (of the Tribunal) are experts in the concerned and relevant subject matter.
Therefore, this constant friction between the issues and advantages mentioned above remains perpetual, wherein this friction is likely to continue until there is an amendment in the 1996 Act or a robust judgment by the Supreme Court settling this conflict. Until then, it remains the decided position of law by the Indian Courts that special acts prevail over general acts alongside their provisions.
About the Authors
Ms. KS Manaswi is an Associate at Tatva Legal, Hyderabad.
Pushpit Singh is a 3rd year student at Symbiosis Law School, Hyderabad, and is an Associate Editor at IJPIEL.
Managing Editor: Naman Anand
Editors-in-Chief: Akanksha Goel and Aakaansha Arya
Senior Editor: Jhalak Srivastav
Associate Editor: Pushpit Singh
Junior Editor: Kshitij Pandey
Preferred Method of Citation
KS Manaswi and Pushpit Singh, “Timeline Analysis of Arbitration in the Road, Electricity, and Telecommunication Sectors: The Past, The Present, and The Future” (IJPIEL, 07 July 2021)
 Krrishan Singhania & Srishti Singhania, Dispute Resolution In The Road Construction Industry, Construction Times (July 23, 2020), https://constructiontimes.co.in/dispute-resolution-in-the-road-construction-industry/.
 National Highways Authority of India v. Sayedabad Tea Company, 2019 SCC OnLine SC 1102.
 NHAI expedites settlement of claims through Conciliation, PIB (Jun. 17, 2020), https://pib.gov.in/PressReleaseIframePage.aspx?PRID=1632105.
 Avishek G Dastidar, Aiming to boost road sector, NHAI drive looks to settle disputes with contractors, The Indian Express (Nov. 27, 2020), https://indianexpress.com/article/india/aiming-to-boost-road-sector-nhai-drive-looks-to-settle-disputes-with-contractors-7069846/.
 Supra note 4.
 National Highways Authority of India v. Sayedabad Tea Company, 2019 SCC OnLine SC 1102.
 TRF Limited v. Energo Engineering Projects Ltd., (2017) 8 SCC 377.
 Perkins Eastman Architects DPC v. HSCC (India) Ltd., Arbitration Application No. 32/2019.
 Pam Developments Private Ltd. v. State of West Bengal, (2019) 8 SCC 112.
 GMR infrastructure Ltd. v. National Highways Authority of India, 2008 SCC OnLine Del 1344.
 Kowtham Raj VS & Satwik Mishra, Covid-19: Will arbitration help India navigate legal wildfire expected in energy sector?, Live Mint (Apr. 20, 2020), https://www.livemint.com/industry/energy/covid-19-will-arbitration-help-india-navigate-legal-wildfire-expected-in-energy-sector-11587364501945.html.
 Pallav Shukla, Appointment of Arbitrators for Electricity Disputes in India, Kluwer Arbitration Blog (May 10, 2016), http://arbitrationblog.kluwerarbitration.com/2016/05/10/appointment-arbitrators-electricity-disputes-india/.
 The Electricity (Amendment) Bill, 2020, § 28.
 Prashant Singh, Electricity (Amendment) Bill 2021: Modi government to give more power to consumers – What you must know, ZeeBiz (Mar. 16, 2021), https://www.zeebiz.com/india/news-electricity-amendment-bill-2021-modi-government-to-give-more-power-to-consumers-what-you-must-know-152865; see also Electricity (Amendment) Bill likely to be introduced in Monsoon session: Power minister RK Singh, Economic Times (Jun. 29, 2021), https://economictimes.indiatimes.com/industry/energy/power/electricity-amendment-bill-likely-to-be-introduced-in-monsoon-session-power-minister-r-k-singh/articleshow/83956193.cms?from=mdr.
 Gujarat Urja Vikas Nigam Ltd. v. Essar Power Ltd., (2008) 4 SCC 755.
 Global Energy Private Limited v. Karnataka Electricity Regulatory Commission, 2014 ELR (APTEL) 539.
 Star (India) Pvt. Ltd. v. Bharat Sanchar Nigam Ltd.,  TDSAT 61.
 Reliance Infratel Ltd. v. Etisalat DB Telecom Pvt. Ltd.,  TDSAT 293.
 Viom Network Ltd. v. S Tel. Pvt. Ltd., AIR 2014 Del 31.