Delhi High Court Dismisses Enerica Infra’s ₹52 Crore Bank Guarantee Injunction Plea, Rules State Electricity Regulatory Commission Alone Can Resolve Such Power Project Disputes
Delhi High Court Denies Section 9 Relief in Enerica Battery Storage Dispute, Finds ₹25 Crore Contractual Arbitration Limit Exceeded and State Electricity Regulator Exclusively Competent
Facts
Enerica Infra 3 Private Limited received a Letter of Award on 12 August 2025 for a 125 MW/500 MWh battery energy storage project at the Garautha Substation in Uttar Pradesh. Its Power Purchase Agreement (PPA) with NTPC Vidyut Vyapar Nigam Limited (NVVN), dated 26 August 2025, contemplated provision of 10 contiguous, encumbrance-free acres within 60 days. Enerica alleged that the full land was never delivered, notwithstanding a March 2026 right-of-use arrangement and subsequent demarcation. It furnished a performance bank guarantee of ₹27,96,25,000, a viability-gap-funding guarantee of ₹13,50,00,000 and connectivity guarantees of ₹10,74,00,000. After terminating the PPA on 14 August 2026, it invoked Section 9 of the Arbitration and Conciliation Act to restrain encashment and seek release of the guarantees.
Issues
Whether the Delhi High Court could entertain the Section 9 petition despite the special adjudicatory jurisdiction conferred on the State Electricity Regulatory Commission (SERC) by Section 86(1)(f) of the Electricity Act, 2003; whether the PPA’s arbitration mechanism applied to a dispute concerning guarantees aggregating ₹52,20,25,000 despite its ₹25 crore ceiling; and whether the Court should reach the contested allegations of breach, termination and bank-guarantee invocation.
Petitioner’s Arguments
Enerica contended that the respondents failed to provide the entire contracted 10-acre site within the stipulated period, frustrating project commencement and access to government viability-gap funding. It disputed the adequacy of the allegedly available land and asserted that proposed contractual amendments would materially change the agreed arrangement. It therefore maintained that termination was valid and that encashment of guarantees would unjustly reward the respondents’ own breach. On jurisdiction, Enerica argued that the approved PPA expressly contemplated arbitration and that its request for an injunction, rather than recovery of money, should not attract the ₹25 crore contractual arbitration bar. It also invoked special equities against encashment.
Respondent’s Arguments
NVVN and the other respondents objected that Section 86(1)(f) of the Electricity Act vested dispute resolution with the appropriate SERC, which could decide the controversy or refer it to arbitration. They further relied on Annexure A to Clause 16.3.1(ii) of the PPA, excluding arbitration where the disputed claim or counterclaim exceeded ₹25 crore. On the facts, they contested the petitioner’s account of land availability, referred to its correspondence over supplementary agreements and disputed the bona fides of termination and urgency. Uttar Pradesh Power Transmission Corporation Limited (UPPTCL) also stated that it was not a signatory to the PPA arbitration agreement and that connectivity guarantees were governed by separate electricity regulations.
Analysis of the Law
Section 86(1)(f) of the Electricity Act creates a specialised forum for disputes between licensees and generating companies, with the SERC empowered either to adjudicate or to refer disputes to arbitration. Sections 174 and 175 require the special electricity-law mechanism to prevail to the extent of inconsistency with general arbitration law. Section 94(2) authorises the Commission to grant interim orders, including protective relief analogous to Section 9. The Court additionally enforced the PPA’s express monetary restriction on arbitration: disputes exceeding ₹25 crore required recourse to other available legal remedies. A party cannot avoid that limit merely by framing relief as restraint against bank-guarantee encashment rather than monetary recovery.
Precedent Analysis
The Court applied Gujarat Urja Vikas Nigam Ltd. v. Essar Power Ltd., (2008) 4 SCC 755, which holds that Section 86(1)(f) is a special provision controlling the forum for adjudication or arbitration of qualifying electricity disputes, notwithstanding a contractual arbitration clause. It noted reaffirmation of that principle in Hindustan Zinc Ltd. v. Ajmer Vidyut Vitran Nigam Ltd., National Highways Authority of India v. Sayedabad Tea Company Ltd. and Chief General Manager (IPC), M. P. Power Trading Co. Ltd. v. Narmada Equipments Pvt. Ltd. The precedents were used to resolve forum competence, not to determine the underlying land-delivery or bank-guarantee merits.
Court’s Reasoning
Justice Tushar Rao Gedela held that the special statutory mechanism made the SERC the competent forum and displaced the Delhi High Court’s Section 9 jurisdiction in the present controversy. The SERC could itself provide urgent interim protection under Section 94(2), avoiding any remedial vacuum. Independently, the petition valued its requested protection at the combined guarantee amount of ₹52,20,25,000. The PPA expressly prohibited arbitration of disputes above ₹25 crore, and seeking an injunction plus return of the guarantees did not alter the value of the dispute. Having sustained both threshold objections, the Court declined to assess the competing allegations regarding contractual default, site delivery or entitlement to invoke the guarantees.
Conclusion
By judgment dated 14 October 2026, the Delhi High Court dismissed O.M.P.(I) (COMM.) 346/2026 for lack of jurisdiction. It recognised the SERC’s authority to adjudicate the electricity dispute, consider interim protective orders and, where legally permissible, decide whether to refer a matter to arbitration. No injunction restraining bank-guarantee invocation was granted. Importantly, the dismissal was jurisdictional rather than a finding that Enerica’s termination was invalid or that encashment was lawful; the Court expressly requested the SERC to disregard any apparent observations on merits.
Case: Enerica Infra 3 Private Limited v. NTPC Vidyut Vyapar Nigam Limited & Anr. (UPPCL subsequently impleaded)
Court: High Court of Delhi at New Delhi, Commercial Original Jurisdiction
Case Number: O.M.P.(I) (COMM.) 346/2026 and I.A. 27144/2026; CNR DLHC010381262026
Judge: Justice Tushar Rao Gedela
Date: 14 October 2026 (reserved on 7 October 2026)
Result: Section 9 petition dismissed for lack of jurisdiction; disputes fall within SERC’s competence; merits and bank-guarantee entitlement left undecided.
