The business activities at the manufacturing unit at Hazira were irrelevant for assessing the loss suffered due to business interruption at the manufacturing unit at Dahej.

ORDER:

The National Insurance Company Limited has invoked Section 34 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as Arbitration Act), to challenge award dated 11/2/2020, passed by an arbitral tribunal consisting of three Members. The majority award of two Members of the tribunal has allowed the claim of the respondent Reliance Industries Ltd. and held that the respondent is entitled to an amount of Rs.435.82 Crores, which was wrongly deducted by the petitioner while paying amount for loss suffered by the respondent, as per the insurance policy issued by the petitioner. The minority award of one Member of the arbitral tribunal held that the proceeding initiated by the respondent suffered from non-joinder of necessary parties, as the insurance policy was issued by other insurance companies also, although the petitioner was indeed the lead insurer.

2. The brief facts leading up to filing of the present petition are that on 2/10/2012, the petitioner issued an insurance policy called a Mega Package Policy (2012-2013) to the respondent for insurance cover for the period between 2/10/2012 to 1/10/2013. The said policy covered risk in two parts i.e. Part A pertaining to property damage and Part B pertaining to business interruption, described as gross profits and increased cost of working due to reduction in turnover. The respondent, inter alia, is into the business of petrochemicals and it owns and operates a manufacturing unit at Dahej in Gujarat, which is an integrated complex. One of the primary raw materials utilized in the manufacturing unit at Dahej is Semi Rich Gas from which Ethane and Propane are extracted and used for the manufacturing of petrochemicals. As per the respondent, 80% of the demand of Semi Rich Gas is met by gas extracted from Panna Mukta Tapti field (PMT gas), which is transported by Gas Authority of India Ltd. (GAIL) to the manufacturing unit of the respondent at Dahej. The PMT gas is transported to the manufacturing unit at Dahej via Hazira – Dahej pipeline, which consists of 26” diam pipeline. A 24” diam pipeline also exists, used for return of lean gas i.e. the gas from which Ethane and Propane has been extracted, which is sent to the establishment of GAIL at Hazira.

3. The network of pipelines forming part of the Hazira – Dahej pipeline network included pipeline laid under the Narmada river at a depth of 20 meters below the river bed. It is stated that such network of pipelines is also laid by Gujarat State Petroleum Ltd. (GSPL), Oil and Natural Gas Corporation Ltd. (ONGC) and Indian Oil Corporation Ltd. (IOCL). In August 2013, due to heavy rain fall in the catchment area of Narmada river, about 14.5 Lakh cusec of water was discharged into Narmada river in one day, resulting in a deluge, as a consequence of which, it was found that the pressure of the Semi Rich gas had dropped in the 26” diam pipeline indicating possibility of rupture in the network of pipelines. Due to the unfavourable weather conditions, the personnel of the respondent could not approach the Narmada river during the night and when they visited the spot on 26/8/2013, it was found that the pipelines were exposed. On 27/8/2013, the respondent carried out aerial survey and it was found that the network of pipelines was extensively damaged due to the heavy deluge of water. Thereafter, on 30/8/2013, the personnel of the respondent could visit the affected spot to ascertain the extent of damage to both 26” and 24” diam pipelines. The repair and restoration was undertaken, which could be completed only by the end of December 2013 and beginning of January 2014. During this period, the supply of PMT gas to the manufacturing unit of the respondent at Dahej was interrupted for 154 days, between 25/8/2013 to 25/1/2014.

4. The respondent intimated the petitioner on 27/8/2013 about the said incident and stated that the extent of loss would be known only after the water receded. Subsequent email communications were sent and event