‘No Arbitration Clause, No Arbitrator’: Orissa High Court Dismisses Power Firm’s Plea, Rules OERC Reference Cannot Substitute Arbitration — ‘There Does Not Exist Arbitration Agreement’
Sanchayita Lahkar
The High Court of Orissa, Single Bench of Acting Chief Justice Arindam Sinha, delivered a judgment on March 19, 2025, rejecting an arbitration petition filed by M/s. Andhavarapu Power Projects (P) Limited, Andhra Pradesh, against the Odisha Renewable Development Agency, Khurda. The Court determined that the agreement between the parties did not constitute an arbitration agreement under the Arbitration and Conciliation Act, 1996, and dismissed the petition for the appointment of an arbitrator.
The dispute arose from an agreement dated January 22, 2010, between the parties, wherein M/s. Andhavarapu Power Projects (P) Limited entered into a contractual arrangement with the Odisha Renewable Development Agency (OREDA) for the execution of a renewable energy project. Under the agreement, various obligations and performance benchmarks were established for both parties. The agreement also contained Clause 19, which outlined the dispute resolution mechanism.
The applicant issued a commencement notice on July 25, 2023, indicating its intent to proceed with arbitration. According to the applicant, there was no response from OREDA, leading it to invoke Clause 19, which stated:
"In case of any dispute regarding any clause in this agreement, the matter shall be referred to OERC and the decision of OERC shall be binding on both the parties."
The applicant relied on a previous judgment in ARBP No. 19 of 2016 (M/s. Enzen Global Solutions Pvt. Ltd. v. Central Electricity Supply Utility of Odisha), wherein a coordinate bench of the High Court had interpreted a similar clause as an arbitration agreement and appointed an arbitrator. The applicant contended that since the OERC had refused to adjudicate on the matter, the High Court should intervene and appoint an arbitrator under the Arbitration and Conciliation Act, 1996.
The opposite party, OREDA, argued that Clause 19 did not constitute an arbitration agreement. It stated that the clause merely provided for reference of disputes to the Orissa Electricity Regulatory Commission (OERC) and that OERC had already refused to enter into the reference by an order dated June 3, 2023. The opposite party maintained that as a result of this refusal, Clause 19 was rendered ineffective, and the petition should be dismissed.
OREDA further submitted that arbitration requires a clear and unequivocal agreement between the parties to refer disputes to arbitration. It was contended that Clause 19 did not specify arbitration as the sole dispute resolution mechanism but instead referred disputes to OERC, an authority with statutory functions distinct from arbitration. The opposite party argued that since OERC had declined to entertain the dispute, the clause could not be repurposed to invoke arbitration under the Arbitration and Conciliation Act, 1996.
The Court examined the validity of Clause 19 as an arbitration agreement. It noted that under Section 7 of the Arbitration and Conciliation Act, 1996, an arbitration agreement must be in writing and indicate the parties' intent to resolve disputes through arbitration. The Court stated:
"Reference to arbitration can only be compelled when there is existence of an arbitration agreement."
The Court referred to the decision of OERC dated June 3, 2023, which categorically stated that it lacked the statutory mandate to adjudicate contractual disputes of the nature presented by the applicant. The Court observed:
"Capacity of OERC to adjudicate was not mentioned in the agreement. The authority considered the question of reference by its said order dated 3rd June, 2023 and concluded that the statute does not permit it to enter into the reference."
The Court considered the precedent cited by the applicant in M/s. Enzen Global Solutions Pvt. Ltd. but distinguished it on factual and legal grounds. It noted that in the Enzen case, the conduct of the parties demonstrated their mutual understanding that unresolved disputes would ultimately be resolved through arbitration. The Court examined the communications exchanged between the parties in the present case and found no such indication. The Court stated:
"In this case, there does not exist arbitration agreement. As such, there cannot be appointment of arbitrator by Court."
Additionally, the Court examined the statutory framework governing OERC and found that the commission's jurisdiction did not extend to contractual disputes of this nature. Since OERC had declined to entertain the dispute, the Court stated that Clause 19 could not be construed as an arbitration agreement under the Arbitration and Conciliation Act, 1996.
The Court also examined the broader principles governing arbitration agreements, stating that courts must ascertain the real intent of the parties when interpreting dispute resolution clauses. It noted that an arbitration agreement must be clear, definite, and enforceable within the framework of the Arbitration and Conciliation Act, 1996. The Court stated that Clause 19, by referring disputes to OERC rather than an arbitrator, did not satisfy these legal requirements.
Having determined that Clause 19 did not constitute an arbitration agreement, the Court dismissed the arbitration petition. The order stated:
"In this case, there does not exist arbitration agreement. As such, there cannot be appointment of arbitrator by Court."
The Court clarified that the dismissal of the arbitration petition would not preclude the applicant from seeking other legal remedies, including exclusion of the time spent in pursuing arbitration proceedings.
Advocates Representing the Parties
For the Applicant: Mr. Avijit Pal, Advocate
For the Opposite Party: Mr. Bijay Kumar Dash, Advocate
Case Title: M/s. Andhavarapu Power Projects (P) Limited, Andhra Pradesh v. Odisha Renewable Development Agency, Khurda
Case Number: ARBP No. 61 of 2023
Bench: Acting Chief Justice Arindam Sinha
[Read/Download order]
