Vedanta-NALCO Dispute : Attorney General Seeks Time To Respond To Supreme Court's Suggestions For Settlement

During the course of hearing, the bench of Justices DY Chandrachud, AS Bopanna and V Ramasubramanian pondered on the solutions such as NALCO not insisting on LET Export Order, Vedanta providing to NALCO the bill of export and certification of goods having been admitted into the SEZ by the concerned officer of the SEZ as per Rule 30 of the SEZ Rules.

The bench further asked the Attorney General for India KK Venugopal to suggest further requirements which it could add over and above the conditions suggested by the bench.

On January 14, 2020, a bench comprising the then Chief Justice SA Bobde, Justices BR Gavai and Surya Kant  was considering a SLP filed by NALCO against Odisha High Court's order which had allowed Vedanta to take part in the tenders for the sale of its alumina. While considering the same, the Top Court had passed the following order:

• The respondent(s) shall apply to the appellant viz National Aluminium Company Limited (NALCO), through its any foreign subsidiary company. The appellant - NALCO shall register the respondent(s) if the application is in accordance with the requirements.
• The appellant – NALCO further accepts that it shall register Vedanta Resources Limited , a company incorporated in the United Kingdom, or any other foreign subsidiary of the respondent - M/s Vedanta Limited which is eligible to participate in its tenders for calcined alumina. However, the delivery of the consignment may be taken at Visakhapatnam Port on FOB basis, though the same will be for use in M/s Vedanta Limited SEZ at Jharsuguda, Odisha.
• As desired by NALCO in its affidavit dated 10.01.2020, the respondent – M/s Vedanta Limited undertakes to provide to NALCO the bill of export and certification of goods having been admitted into the SEZ by the concerned officer of the SEZ as per Rule 30 of the SEZ Rules.

After the Top Court's order, Vedanta Resource Limited had emerged as successful bidder for NALCO's alumina tender but NALCO had refused to allow the UK Firm to take the consignment to its SEZ unit and had insisted on terminating the transaction at Visakhapatnam Port. The producer also asked VRL to obtain Let Export Order (LET), a mandatory requirement for the purpose of completion of the transaction, from the Customs authorities at Visakhapatnam Port.

This had resulted in Vedanta preferring a contempt petition alleging "wilful disobedience" of the January 14, 2020 order. Vedanta had alleged that NALCO was not making delivery at Visakhapatnam Port on FOB basis.

In the first contempt preferred, the Top Court on August 19, 2020 had directed National Aluminium Company (NALCO) to ensure delivery calcined alumina to Vedanta firm at Visakhapatnam on FOB basis to be used in in Vedanta's SEZ unit at Jharsuguda, Orissa. Counsel for NALCO had agreed in effecting the delivery of the same if it was meant to be used in M/S Vedanta Limited SEZ at Jharsuguda, Odisha and even Vedanta Limited had agreed to provide the bill of export and necessary certification under Rule 30 of the SEZ Rules.

What Transpired In The Supreme Court Today?

State Of Desperation Because If We Can't Get It From Here We'll Have To Get It From Abroad; Vedanta Situated In SEZ Which Is Equal To Or Akin To Foreign Entity: Senior Advocate Mukul Rohatgi

When the matter was called for hearing, Senior Advocate Mukul Rohatgi appearing for Vedanta Limited submitted that Vedanta Limited had preferred a 2nd contempt petition. Terming the contempt as "gross", Senior Counsel contended that one of the condition imposed by NALCO in their tender was to only sell alumina to a foreign entity.

He further added that since Vedanta was a company situated in SEZ in Jharsuguda, Orissa, it was akin or equal to a foreign entity and transfer of goods from Domestic Tariff Area to SEZ was deemed to be export.

"Petitioner is a company situated in SEZ in India and SEZ is in a place called Jharsuguda in Orissa and SEZ are huge industrial parts so the petitioner has a factory in SEZ for manufacture of aluminium. Raw material is Alumina. NALCO has a virtual monopoly in India for selling and producing Alumina. They also manufacture aluminium but they have excess of Alumina which they sell by tender and have peculiar condition that they only sell to foreign entity. Petitioner, though an Indian company, being situated in SEZ, by legal fiction, is situated in an area which is technically not called India. Rest of India - SEZ is called Domestic Tariff Area. Law creates a fiction that you are not in India- these areas which have more freedom to operate beyond the areas of India. So I'm in an SEZ which is not a domestic area and in fiction it's not in India. They had this condition," submitted Senior Counsel.

Emphasising on the mode adopted by NALCO for selling alumina to Vedanta, Rohatgi said,

"SEZ is at Jharsughua and plant of NACLO is at Damanjhodi- both are in Orissa and one simple way was it to go from one place in Orissa to other place in Orissa but they said that they'll transfer it through Vizag. So I had suggested that you transfer from Damanjhodi to Jharsuguda by me paying the cost with a certificate by the SEZ officer who wears 2 hats but they insisted that you will not get that way but this way. Their main concern was to get export benefits."

"How long is the tenure of the order? Is it for eternity?" asked Justice Chandrachud at this juncture.

Responding to the question posed by the judge, Senior Counsel said, "This is only for the tender and I've got 4/5 tenders but have not got goods for any. I have become successful in 3/ 4 but they haven't produced."

"We are in a state of desperation because if we can't get it from here we'll have to get it from abroad because we manufacture aluminium," Rohatgi further said.

Vedanta Is Powerful Opponent To NALCO Which Produces Aluminium; Once Foreign Trade Backs Out, Vedanta Will Have Monopoly: AG KK Venugopal

Appearing for NALCO, Attorney General for India KK Venugopal submitted that NALCO had 34 buyers. Referring to the conditions in the tender, AG said that supply of alumina was purely meant for foreign buyers and as far as VRL was concerned, it was a foreign company but the petitioner was an Indian company and delivering to an Indian Company was not permissible as far as alumina was concerned.

"We are a UK Company and it has opened an office in Jharsuguda. How are they concerned and they are getting dollars. There are consent orders," submitted Senior Advocate Mukul Rohatgi.

Responding to the submissions made by Rohatgi, AG said, "If we have to stand by it, we'll stand by it. His complaint is that I'm not delivering at FOB but I have spent huge amounts in setting up godowns at Vizag. I agreed that so far as this is cornered, I'm prepared."

At this juncture, Justice DY Chandrachud, the presiding judge of the bench said, "You are conscious of the fact that goods will not be taken beyond Indian territory but they will go to SEZ. You should have at that stage said that you wanted a LET Export Order. They will provide you certification exactly in terms of the order and they will give you the benefits. Is the supply to SEZ for all purposes not deemed exports? What is the loss which NALCO is likely to suffer? This contempt is nothing but an issue where we need to find a way out. So long as you are willing to not insist on LET Export order, that is the only thing. Our difficulty is 2 orders staring us in the face."

"All this fight is about past tenders and there is now law that tender conditions that you are applying cannot be changed. Can you not change the future tenders to look over this problem?" the bench proposed at this juncture.

Responding to the remarks posed by the bench, AG submitted that Vedanta was one of the most powerful companies in the world and this would result in foreign buyers backing out. Further contending that this would result in Vedanta cornering the entire market, AG said,

"Vedanta is a powerful opponent to NACLO which produces Aluminium. They will be cornering the entire market. Vedanta is one of the most powerful companies in the world.

They will treat it as a sale to rival Vedanta which is the biggest producer and one of the largest worldwide. They are trying to convert foreign export sales into the domestic market. If they export their aluminium outside India, then they'll be able to retain it. Once foreign trade backs out, they will have monopoly. Market so far as competition is concerned can outbid and can corner the market. Foreigners will back out and this is a genuine fear which we have."

In order to aid the parties to arrive at a settlement, the bench at this juncture suggested NALCO for not insisting on LET Export Order, Vedanta providing to NALCO the bill of export and certification of goods having been admitted into the SEZ by the concerned officer of the SEZ as per Rule 30 of the SEZ Rules. The bench further asked AG to suggest further requirements which it could add over and above the conditions suggested by the bench.

"Why do you think of this, you can tell us specifically they will provide bond certification to you, you will not insist on export order, over and above that if there are requirements, please tell us. They have to give you certification in terms of rule 30 and once you get it you will get all the benefits. We're not saying that those are not germane conditions. For past contracts we can say that you'll give them the benefits but for the future you can put your conditions whatever you want," remarked Justice Chandrachud at this juncture.

On Attorney General for India seeking time to take instructions, the bench adjourned the matter for next Tuesday ie April 19, 2022.

Case Title: M/S Vedanta Ltd. Versus R. N. Mohapatra And Ors.| Conmt.Pet.(C) No. 691/2020 In C.A. No. 262/2020

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