Arbitration | Delhi High Court Denies Interim Relief To Steel Manufacturer-Arcelormittal In Section 9 Petition Against GAIL, Says Prima Facie Case Not Made Out

The Delhi High Court recently denied urgent interim relief to leading steel manufacturer-ArcelorMittal Nippon Steel (petitioner) in a claim against GAIL India Ltd., observing that the scope of enquiry u/s 9 of A&C Act was limited to prima facie examination of the issue, which was not established in the petitioner’s favour.

The petitioner had approached the court seeking stay over a Notice issued by GAIL, statedly to terminate the LNG Sale and Purchase Agreement (LSPA) entered by the two. It further sought directions for GAIL to deliver LNG in accordance with the LSPA.

Disputes had arisen because GAIL had failed to supply LNG as scheduled under the LSPA during August and December, 2022.

During proceedings before the court, the issue pertaining to validity of LSPA’s termination was left to be agitated before the arbitral tribunal. The limited issue decided was whether GAIL could be directed to supply LNG to the petitioner for November, 2023.

In this regard, the petitioner pled that it relied heavily on GAIL and would suffer insurmountable losses if the supply of November, 2023 was not made by GAIL. It pressed that the obligation for supply of LNG in November, 2023 had been undertaken before the termination of the LSPA.

GAIL’s case was that its failure was on account of force majeure. Regardless, shortfall in the supply of 2022 was agreed to be fulfilled in 2023, pursuant to a revised ACQ which was accepted by the petitioner.

It averred that 15.44 TBtu (3.57 TBtu in excess of initial ACQ of 11.87 TBtu) of LNG had already been supplied under the revised ACQ. Having availed the benefit, the petitioner was now trying to renege from the agreement by pleading that it had acted under economic duress.

For this reason, GAIL contended, it could not be directed to continue with the supply of November, 2023. It added that the petitioner was taking undue advantage of its lower-priced LNG, as well as that the LSPA being a determinable contract could not be specifically enforced.

Analysing the facts, Justice Neena Bansal Krishna observed that the petitioner had taken contradictory stands. On one hand, it was claiming that the LSPA still existed, but on the other, it was seeking delivery of November, 2023 in terms of the revised ACQ for CY 2023.

Noting inter-alia that the petitioner had already received a supply of 15.44 TBTu, which was more than the contracted amount of LNG for CY 2023 (11.87 TBTu), the court held that no prima facie case was made out in the petitioner’s favour.

Regarding balance of convenience, it was observed that LNG was available in open market and the petitioner was not solely dependent on GAIL for its supply.

In this context, Justice Krishna considered that GAIL’s supply of LNG fulfilled only 15% of the petitioner’s needs and the latter’s manufacturing facilities kept running despite GAIL’s failure to supply LNG in two months of 2022.

Speaking of irreparable loss and injury to the petitioner, the court recorded that the petitioner could procure LNG from open market, without prejudice to its rights to claim damages. The same may be onerous, but there would be no irreparable loss following cessation of GAIL’s supply.

Mr. Mukul Rohatgi, Dr. A.M. Singhvi, Mr. Rajiv Nayyar, Sr. Advocates with Mr. Nitesh Jain, Mr. Rajat Jariwal, Mr. Atul Jain, Mr. Hridhay Khurana, Ms. Prerna Singh & Ms. Sanjana Mehta, Advocates appeared for petitioner

Mr. Balbir Singh, ASG; Mr. Vivek Kholi, Sr. Advocate; Mr. Susmit Pushkar, Mr. Kartikay Mahajan, Ms. Somiran Sharma, Mr. Bhavya Bhatia, Mr. Juvas Rawal, Mr. Raj Mohan Gupta, Ms. Prerna Jain, Mr. Satjit Singh Chhabra, Ms. Aayushi Singh, Ms. Aadya Malik & Mr. Dhrubajit Saibia, Advocates appeared for GAIL with Mr. Bhuwan Yadav & Mr. Deepak Barish, Representatives of GAIL

Case Title: ArcelorMittal Nippon Steel India Limited v. GAIL (India) Limited

Citation: 2023 LiveLaw (Del) 1130

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