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IN THE HIGH COURT OF DELHI AT NEW DELHI
JASMEET SINGH, J.
Gail (India) Limited - Petitioner
Versus
Focus energy ltd. And Ors. - Respondents
O.M.P.(I) (COMM.) 281 of 2024 & I.A. 39649 of 2024
Decided on : 07-01-2025
(A) Arbitration and Conciliation Act, 1996 - Section 9 - Interim measures - Petition for interim relief due to alleged failure of respondents to supply Make Up Gas as per Gas Sale and Purchase Agreement (GSPA) - Petitioner entitled to Make Up Gas valued at Rs. 156.75 crores during Restoration Period - Respondents' liability under GSPA disputed based on Force Majeure claims - Court refrains from adjudicating merits, focuses on prima facie case and balance of convenience. (Paras 42, 49, 58, 62)
Facts of the case:
The petitioner, a gas transmission company, entered into a GSPA with respondents for gas supply, which expired on 30.09.2024. The petitioner claims entitlement to Make Up Gas due to shortfalls in supply, while respondents assert Force Majeure excuses their obligations. (Paras 2, 10, 12)
Findings of Court:
Strong prima facie case in favor of petitioner established, with balance of convenience favoring interim relief to secure the amount in dispute. (Paras 58, 62)
Issues: Entitlement to Make Up Gas and implications of Force Majeure on contractual obligations. (Paras 49, 58)
Ratio Decidendi: The court determined that the petitioner has a strong prima facie case for entitlement to Make Up Gas and directed respondents to provide security for the amount in dispute, without adjudicating the merits of the case. (Paras 58, 62)
Result: Petition disposed of with directions for security provision. (Para 64)
JUDGMENT :
JASMEET SINGH, J.
1. This is a petition under Section 9 of the Arbitration and Conciliation Act, 1996 (“ 1996 Act ”) seeking the following substantial prayers:
“A. Pass an ex-parte ad interim Order directing the Respondents to maintain status quo and continue the supply of gas to the Petitioner in terms of the Gas Sale and Purchase Agreement (GSPA) till the make-up gas is supplied in its entirety.
B. Grant an interim measure extending the Restoration Period from 4 months to such additional period until all the Balance Make-up Gas is supplied by the Respondent No.1.
C. Pass an Order directing the Respondents to deposit the balance Annual Take or Pay (AToP) amount of Rs. 156.75 Crores with this Hon ’ ble Court or furnish adequate security in lieu thereof.
D. Pass an Order directing the Respondents to furnish the details its assets free from encumbrance, sufficient to secure the amount due to the Petitioner towards the make up gas.
E. Issue an order restraining the Respondents, from alienating, transferring, encumbering or otherwise disposing of their properties and assets until the final disposal of the arbitration proceedings….”
2. The parties entered into a Gas Sale and Purchase Agreement dated 07.08.2009 (“ GSPA ”) for the supply of gas from SGL fields in Block RJ - ON/6 in Langtala, Jaisalmer to Rajasthan Rajya Vidyut Utpadan Nigam Ltd. (“ RRVUNL ”) at Ramgarh, District Jaisalmer. The petitioner is a gas transmission and marketing company and is engaged in the supply of natural gas to various consumers by sourcing it from producers of natural gas. Respondent No. 1 is the Operator of Block RJ- ON/6 (“ the Block ”) and is the representative of respondent Nos. 2 to 4 in the GSPA.
3. The respondents are parties to Production Sharing Contract dated30.06.1998 (“ PSC ”) with the Government of India (“ GoI ”) in respect of the Block, and a Joint Operating Agreement dated 30.06.1998 is in operation. In terms of the GSPA, all the respondents have agreed to share their respective share of natural gas as per their participating interest specified in Schedule A of the GSPA. As per Clause 10.5 of the GSPA, the PSC remains in effect until 20.08.2024 and regulates the exploration and production activities in the Block.
4. The petitioner executed the GSPA with consortium of upstream respondent companies for purchase of gas supplied by the respondents and further sale of gas to downstream customer i.e. RRVUNL. For this, the petitioner entered into a downstream Gas Sales and Transmission Contract dated 07.08.2009 (“ GSTC ”) with RRVUNL for supply of natural gas produced from the E&P block RJ-ON/6.
5. The blocks are isolated fields and all the gas produced from these isolated fields is supplied solely to RRVUNL through a dedicated pipeline laid by the petitioner. The GSPA between the parties expired on 30.09.2024.
6. As per the GSPA, the agreed Daily Contract Quantity ( “ DCQ ” ) of natural gas was 0.2 Million Standard Cubic Meters per Day (“ MMSCMD ”) for the Initial Period. It was set to increase to between 0.62 to 0.95 MMSCMD from the subsequent start date till the competition of Commissioning Period. After the Commissioning Period, the DCQ was fixed at 0.95 MMSCMD until the GSPA term expires, at the agreed price under the terms of the GSPA.
7. As per Clause 4.1 of the GSPA, the petitioner was obligated to make a Quarterly Minimum Payment (“ QMP ”) to the respondent s at the contracted rate. This payment was subject to adjustments for the respondents ’ Shortfall, Force Majeure Volume, Planned Maintenance, and Off-Spec Gas Volume for the quarter. Further, in terms of Clauses 4.2 and 4.3, the petitioner was required to make an Annual Take or Pay (“ AToP ”) pay ment to the respondents, which was also subject to adjustments for the respondents ’ Shortfall, Force Majeure Volume, Planned Maintenance, Off-Spec Gas Volume, Quarterly Deficit Gas, and the Carry Forward Gas volume, limited to 1/3 rd of the AToP volume.
8. The petitioner paid a sum of
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