Delhi High Court
Gail (India) Limited vs M/S Rathi Steel And Power Ltd. on 16 February, 2022
$~1(2021)
* IN THE HIGH COURT OF DELHI AT NEW DELHI
% Date of Decision: 16.02.2022
+ ARB.P. 597/2021 & IA 8049/2021, IA 14329/2021
GAIL (INDIA) LIMITED ..... Petitioner
Through Mr Junior Luwang, Advocate.
versus
M/S RATHI STEEL AND POWER LTD. ..... Respondent
Through Mr Sanjoy Ghose, Senior Advocate
with Mr anand Shankar Jha, Mr Arpit Gupta, Mr
Rhishabh Jetley, Mr Girish Bhardwajf, Ms
Meenakshi Devgan, Mr Shubham Tripathi,
Advocates.
CORAM:
HON'BLE MR. JUSTICE VIBHU BAKHRU
[Hearing held through videoconferencing]
VIBHU BAKHRU, J. (ORAL)
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:-
Signature Not Verified
Digitally Signed
By:Dushyant Rawal
"15.6 Arbitration
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.
Signature Not Verified
Digitally Signed
By:Dushyant Rawal
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 ₹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:-
Signature Not Verified
Digitally Signed
By:Dushyant Rawal
"x. That since your concern was not
lifting "Pay For If Not Taken" quantity, my
Client vide its letter of February 28, 2015
raised a demand of INR.10.33 Cr towards
the same for the year 2014. So did my
Client raised a demand of INR 35.04 Crores
vide its letter of February 29, 2016, INR
20.48 vide letter of February 28, 2017, INR
23.87 Crores vide its letter of February 26,
2018, INR 31.46 Crores vide letter dated
February 26, 2019 towards your concern's
"Pay For If Not Taken" contractual
liability. Similarly, my Client also raised
various demands for different amounts
towards your "LC Encashment postage and
Advice Charges", Interest payment on
delayed payment etc. for the period of 2014
to 2019 i.e. till date. As you must be aware,
the total amount of Rs. 122.19 crores,
detailed calculation was enclosed with my
Client's letter of July 30, 2019.
xi. That it was on your concern's failure
to clear my Client's invoices that my Client
on April 28, 2015 had no option but to
suspend gas supply. The same position
continues till today for reasons solely
attributable to you, more specifically your
concern's failure to clear our Client's dues,
maintain letter of credit of the required
amount etc. "
Signature Not Verified
Digitally Signed
By:Dushyant Rawal
7. Mr Ghose, learned senior counsel appearing for the respondent,
does not dispute that the parties had entered into the GSA. He also does
not dispute that an agreement exists between the parties for reference of
the disputes to arbitration. He, however, states that the claims made by
the petitioner are ex-facie barred by limitation. He referred to the
decision of the Supreme Court in Vidya Drolia v. Durga Trading
Corporation: (2021) 2 SCC 1 and Bharat Sanchar Nigam Ltd. And
Anr. v. M/s Nortel Networks India Private Limited: (2021) 5 SCC 738,
in support of his contention that the Court would not relegate the parties
to arbitration in respect of the disputes that are ex-facie barred by
limitation.
8. Mr Luwang, learned counsel appearing for the petitioner,
countered the aforesaid submissions. He submits that the liability of the
respondent to pay under Clause 14.1 of the GSA ('Pay For If Not
Taken' obligations) continued even after the supply of Gas was
suspended. He states that notwithstanding that the invoices raised in
respect of the period three years prior to 27.11.2019 (the date of notice
of invocation of arbitration) are considered as barred by limitation; the
petitioner is, nonetheless, entitled to recover the amounts due under
Clause 14.1 of the GSA for the period of three years prior to the notice
invoking arbitration.
9. Mr Luwang also referred to the letter dated 08.06.2021, whereby
the respondent had evinced its interest to settle the disputes by payment
of a one-time settlement amount of ₹1.61 crores. He contended that the
said letter constitutes an acknowledgement of liability as the respondent
had sought waiver of liabilities in respect of the dues demanded for the
Signature Not Verified
Digitally Signed
By:Dushyant Rawal
years 2015 to 2020. He also referred to an email dated 28.04.2015 and
submitted that the said email sent by the respondent in respect of the
notice for disconnection of Gas supply also indicates that the respondent
had acknowledged its liability.
10. Undoubtedly, the contention that the claims raised by the
respondents are barred by limitation is a substantial one. In the notice
invoking arbitration, the petitioner had expressly stated that it had
terminated the gas supply on 20.04.2015 and "the same position
continues till today". This, according to the petitioner, was on account
of the respondent's failure to clear the dues. The failure to pay the
amount claimed does not extend the period of limitation.
11. The email dated 28.04.2015 also does not appear to be an
acknowledgement of the liability against the 'Pay For If Not Taken'
obligations under the GSA. Further, the letter dated 08.06.2021, which
is relied upon by the petitioner, is a letter evincing interest for a one-
time settlement, which was issued by the respondent without prejudice
to all rights and contentions. It is difficult to accept that this letter
constitutes an acknowledgement of liability for two reasons. First, that
the letter was written "without prejudice" and does not unequivocally
acknowledge any liability. Second, that it was not sent within the period
of limitation of three years.
12. Having stated the above, there is a contentious issue, whether the
amounts claimed by the petitioner, for the period three years prior to the
issuance of notice, are barred by limitation. According to the petitioner,
the liability to pay under Clause 14.1 of the GSA continues,
notwithstanding, the discontinuation/suspension of the supply of Gas.
Signature Not Verified
Digitally Signed
By:Dushyant Rawal
The respondent claims that the entire claim is barred by limitation as it
had declined to pay the amount under Clause 14.1 of the GSA and had
not done so since 2015. Thus, it had repudiated any alleged
liability/obligation for making any payment for Gas not received by it
and more particularly after it was suspended.
13. The respondent also claims that the petitioner has not claimed
such amounts against the 'Pay For If Not Taken' obligations under the
GSA from certain other establishments and had entered into a one-time
settlement with them.
14. Although, this Court is inclined to accept the contention as
advanced by the respondent. However, it is apparent that the
controversy as noted above falls outside the standard of examination
under Section 11 of the A&C Act. The Supreme Court in BSNL v.
Nortel Networks Private Limited (supra) had after referring to the
observations made by the 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 the claims are barred by limitation that
the Court would decline the 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, the Courts
would relegate the parties to the remedy of their choice - arbitration.
15. In view of the above, this Court considers it apposite to allow the
present petition. Accordingly, Justice (Retired) Badar Durrez Ahmed, a
former Chief Justice of Jammu and Kashmir High Court (Mobile No.
7042205786) is appointed as the Sole Arbitrator to adjudicate the
disputes between the parties. This is subject to the learned Arbitrator
Signature Not Verified
Digitally Signed
By:Dushyant Rawal
making the necessary disclosure as required under Section 12(1) of the
A&C Act and not being ineligible under Section 12(5) of the A&C Act.
16. The learned counsel for the parties further request that the
arbitration be conducted under the aegis of the Delhi International
Arbitration Centre (DIAC) and in accordance with its Rules. Thus, with
the consent of the parties, it is directed that the arbitration would be
conducted under the aegis of DIAC and in accordance with its Rules.
17. The parties are at liberty to approach the Coordinator, DIAC for
further proceedings.
18. The petition is allowed in the aforesaid terms. All pending
applications are also disposed of.
VIBHU BAKHRU, J
FEBRUARY 16, 2022
pkv
Click here to check corrigendum, if any
Signature Not Verified
Digitally Signed
By:Dushyant Rawal
