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IN THE HIGH COURT OF DELHI AT NEW DELHI
VIBHU BAKHRU, J.
GAIL (India) Limited - Petitioner
Versus
M/s Rathi Steel and Power Ltd. - Respondent
Arb. P. No. 597 of 2021 & IA No. 8049 of 2021, IA No. 14329 of 2021
Decided On : 16-02-2022
Arbitration and Conciliation Act, 1996 - Section 11 - Appointment of Arbitrator - Petitioner’s case that respondent had not lifted minimum quantity of Regasified LNG as agreed; nonetheless, it was liable to pay the amount for said quantity under Clause 14.1 of GSA, which provides for “Pay For If Not Taken’ obligations - Petitioner had issued a letter dated raising a demand of Rs. 10.33 crores for dues payable under the said clause for year - Petitioner claims that similar demands were made for subsequent years as well - Respondent had not paid said invoices, as according to respondent, it was not liable to do so - It had not received supply of Gas for which invoices were raised - In view of above, petitioner had also suspended supply of gas from year onwards - Whether amounts claimed by petitioner, for period three years prior to issuance of notice, are barred by limitation.
Finding of the Court :
Court is inclined to accept contention as advanced by respondent - However, it is apparent that controversy as noted above falls outside standard of examination under Section 11 of A&C Act - Supreme Court in BSNL v. Nortel Networks Private Limited (supra) had after referring to observations made by Supreme Court in Vidya Drolia v. Durga Trading Corporation (supra) explained that it is only in cases where there is no vestige of doubt that claims are barred by limitation that Court would decline request for appointment of an Arbitrator - It is now well settled that unless the Court finds that ex-facie the dispute is barred by limitation and there is no issue to be adjudicated, Courts would relegate parties to remedy of their choice arbitration.
Result : Allowed and disposed of.
JUDGMENT :
Vibhu Bakhru, J.
[Hearing held through video conferencing]
1. The petitioner has filed the present petition under Section 11 of the Arbitration and Conciliation Act, 1996 (hereafter ‘the A&C Act’) praying that an Arbitrator be appointed to adjudicate the disputes that have arisen between the parties in connection with the Gas Supply Contract dated 26.12.2008 (hereafter ‘the GSA’) and the Supplementary Agreement dated 21.05.2009. The GSA includes an Arbitration Clause that reads as under:-
Any Dispute arising in connection with this Agreement which is not resolved by the Parties pursuant to Article 15.1 within sixty (60) Days of the notice of the Dispute or Article 15.3(c) and Article 15.3(d), shall:
** ** ** **
Alternative 2- where one Party to the Agreement is not a Government Company
(a) be finally settled by arbitration in accordance with the Indian Arbitration and Conciliation Act, 1996 and rules made there under, from time to time. The procedure for appointment of arbitrators shall be as follows:
(i) After the sixty 60 Days period described in Article 15.1, either Party may submit the Dispute to a single arbitrator (the “Sole Arbitrator”).
(ii) The Buyer shall select the Sole Arbitrator within thirty [30] Days of the expiration of such sixty 60 Days period from a panel of three (3) distinguished persons nominated by the Seller.
(iii) The decision(s) of the Sole Arbitrator, supported by reasons for such decision, shall be final and binding on the Parties.
(iv) The venue of the arbitration shall be New Delhi.
This Article 15.6 shall survive the termination or expiry of this Agreement.”
2. It is the petitioner’s case that the respondent had not lifted the minimum quantity of Regasified LNG (hereafter ‘Gas’) as agreed; nonetheless, it was liable to pay the amount for the said quantity under Clause 14.1 of the GSA, which provides for ‘Pay For If Not Taken’ obligations.
3. The petitioner had issued a letter dated 28.02.2015 raising a demand of Rs.10.33 crores for the dues payable under the said clause for the year 2014. The petitioner claims that similar demands were made for the subsequent years as well. The respondent had not paid the said invoices, as according to the respondent, it was not liable to do so. It had not received the supply of Gas for which the invoices were raised. In view of the above, the petitioner had also suspended the supply of gas from the year 2015 onwards.
4. Notwithstanding that the supplies had been suspended, the petitioner states that it continued to raise the invoices under the ‘Pay For If Not Taken’ quantity for the year 2015 as well as the years subsequent thereto.
5. Since the respondent had failed to pay the amounts as claimed by the petitioner, the petitioner issued a notice dated 27.11.2019 invoking the Arbitration Agreement, in terms of Clause 15.6 of the GSA claiming certain amounts, which according to the petitioner, were due under Clause 14.1 of the GSA (‘Pay For If Not Taken’ obligations).
6. Paragraphs 10 and 11 of the said notice issued under Section 21 of the A&C Act are relevant and are set out below:-
xi. That it was on your concer
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