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IN THE HIGH COURT OF DELHI AT NEW DELHI
Neena Bansal Krishna, J.
Arcelormittal Nippon Steel India Limited - Appellant
Versus
Gail (India) Limited - Respondent
O.M.P.(I) (COMM.) 353 of 2023 & CAV. 573 of 2023 IA 21714 of 2023
Decided On : 10-11-2023
Arbitration & Conciliation Act, 1996 - Urgent Interim Stay - LNG Sale and Purchase Agreement - 9
Fact of the Case:
The petitioner sought urgent interim stay on the respondent's Notice to terminate the Contract and to restrain the respondent from acting on the said Notice, in addition to directing the respondent to deliver LNG in accordance with the terms of LNG Sale and Purchase Agreement.
Finding of the Court:
The court found that the respondent had already supplied more LNG than the contracted quantity for the Contract Year-2023, and the petitioner had accepted the supply without prejudice. The court held that the petitioner was not entitled to mandatory interim relief of directing the respondent to supply the LNG for the month of November, 2023.
Issues: The issues included the validity of the termination of the Agreement, the obligation of the respondent to supply LNG, and the petitioner's claim for irreparable loss and injury.
Ratio Decidendi: The court's decision was based on the prima facie case, balance of convenience, and irreparable loss and injury to the petitioner.
Final Decision: The court dismissed the petition and held that the petitioner was not entitled to mandatory interim relief of directing the respondent to supply the LNG for the month of November, 2023.
JUDGMENT
Neena Bansal Krishna, J. - A petition under Section 9 of the Arbitration & Conciliation Act, 1996 has been filed on behalf of the petitioner seeking urgent interim stay on the Notice dated 21st October, 2023 issued by the respondent purportedly to terminate the Contract and to restrain the respondent from acting on the said Notice in addition to directing the respondent to deliver LNG in accordance with the terms of LNG Sale and Purchase Agreement.
2. The petitioner, a Public unlisted Company having its registered Office at Bandra, Mumbai is a leading manufacturer of steel and has its main operations in largest plant in Hazira, Surat for manufacturing integrated flat carbon steel.
3. The respondent a government Company registered at New Delhi, is primarily engaged in the distribution and marketing of gas and other aspects of gas chain including exploration, production, transmission, sourcing, extraction, processing of natural gas and related process, products and services.
4. The parties entered into a LNG Sale and Purchase Agreement dated 02.06.2022 (LSPA) to secure the supply of LNG at the petitioner's steel manufacturing plant. Pursuant to LSPA, the parties executed a Term Sheet dated 30th October, 2020, whereby the respondent agreed to sell and deliver pre-determined quantities of LNG to the petitioner on "a take or pay basis" from February, 2021 till December 2025. The LSPA provided an Annual Contracted Quantity (ACQ) of LNG i.e. 11.87 TBtu, to be delivered during each Contract Year. Consecutive period of 12 calendar months from 1st January was considered as the Contract Year. The ACQ was to be delivered 100% on a `take or pay' basis through 3 Cargo Lots (each amounting to 3.4 TBtu) and 1 partial Cargo Lot (comprising of the remaining quantity of ACQ for the Contract Year). The LSPA also provided for an Annual Delivery Program (ADP) reflecting the scheduled months of delivery of each Contract Year. As per the agreed ADP for the Contract Year 2022, the respondent was to supply LNG in the months of January 2022, May 2022, August 2022 and December 2022. However, disputes arose on account of respondent's failure to supply LNG in August, 2022 and December, 2022 as per the Schedule. The respondent vide its return email dated 11th July, 2022 informed the petitioner that it would not be able to supply the LNG in August, 2022 allegedly due to operational constraints and claimed "one of our major LNG suppliers has informed that they will not be delivering LNG Cargoes to GAIL which has adversely impacted GAIL's LNG portfolio with respect to cargo positions". The petitioner being in dire need of LNG kept requesting the respondent for supplies.
5. The respondent vide its letter dated 02nd November, 2022 for the first time sent a letter stating that "it is only on account of the Force Majeure event under Clause 13.1(f) (v) that GAIL could not make the supplies scheduled for August 2022 on a high seas basis...". It belatedly and wrongfully invoked the provisions of Force Majeure and also failed to provide any particulars to substantiate its claim of Force Majeure as mandated under Clause 13.3 of LSPA. Likewise, vide Notice dated 07th December, 2022 the respondent again invoked Force Majeure in respect of remaining Partial Cargo Lot that was to be supplied in December 2022. Owing to the respondent's continuous breach of the provisions of LSPA under the guise of purported Force Majeure, the petitioner wrote various letters claiming that the respondent cannot refuse to delivery of LNG on account of Force Majeure merely because one single upstream supplier had allegedly defaulted in supply of LNG to the respondent. Since, the petitioner was not willing to accept the unsubstantiated claim of the respondent, it tried to intimidate the petitioner by alleging "Material Breach" on part of the petitioner for the alleged onward sale of the LNG procured under the LSPA to third party. Various correspondences were exchanged between the parties an
The court's decision emphasized the importance of prima facie case, balance of convenience, and irreparable loss and injury in determining the entitlement to mandatory interim relief.
The court granted interim relief under Section 9 of the Arbitration Act, emphasizing a strong prima facie case and balance of convenience for securing the disputed amount in arbitration.
The court upheld the invocation of the force majeure clause by the first respondent, ruling that the applicant had accepted the contract's termination and had no grounds for an injunction.
The court emphasized that under Section 9 of the Arbitration Act, it can grant mandatory injunctions when there is a strong prima facie case and balance of convenience favors the petitioner, especial....
The court emphasized the importance of fulfilling payment obligations in a contract and upheld the principle that breach of payment obligations justifies refusal to make further deliveries.
The court clarified that the relief sought would amount to directing specific performance of the contract as an interim measure of protection, which is not permissible under section 9 of the a&C act.
The words 'Arbitral Tribunal' in Section 9(3) of Act have to take colour from all said provisions and thus have to be interpreted as Arbitral Tribunal constituted to adjudicate disputes which have ar....
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