Delhi HC rules in favour of Arcelor Mittal Nippon Steel in arbitration dispute with IOCL

Delhi High Court

The Delhi High Court on October 10 dismissed a petition by Indian Oil Corporation Limited (IOCL) against Arcelor Mittal Nippon Steel Limited (AMNS) to appoint an arbitrator to adjudicate a claim, which pertained to Essar Steel India Limited (ESIL).

ESIL was taken over by AMNS through the corporate insolvency resolution process.

The dispute emanated from a Gas Supply Agreement (GSA) entered into by the parties in 2009.  In 2017, ESIL terminated the agreement, however, IOCL objected to the termination on the ground that it had not committed any breach of its contractual obligations. IOCL alleged that the termination notice was liable to be viewed as ineffective.

Subsequently, IOCL also issued a demand notice asking ESIL to pay certain amounts for the abrupt termination of the GSA. It also called upon ESIL to participate in the amicable settlement procedure as per the GSA. Since ESIL did not respond, IOCL  invoked arbitration in terms of the Gas Supply Agreement.

However, in the midst of this dispute, the National Company Law Tribunal (NCLT) at Ahmedabad admitted Essar to the insolvency resolution process and appointed a Resolution Professional (RP). IOCL lodged a claim of over Rs 3,500 crore with the RP, the RP admitted the claim for a notional value of Rs 1. This notional value featured in the resolution plan, which was given a go ahead by the Supreme Court in 2019.

The resolution plan was implemented and AMNS took over the company.  However, IOCL approached the Delhi High Court in 2022 for the appointment of an arbitrator to adjudicate its dispute, which had already been put to rest by the resolution plan.

The High Court concluded that the resolution plan was approved by the Supreme Court after hearing the parties and hence it lends an evident quietus to the entire controversy. The HC further held that once a party accepts the approval of the Resolution Plan, which results in the extinguishment of their claims, it cannot be reopened.

Further, the court held that the dispute, which is now sought to be canvassed by IOCL cannot be permitted to be urged again before any arbitral tribunal. Thus the court refused to appoint an arbitrator to hear the dispute between the two and held that the issue is not arbitrable.

AMNS was represented by senior advocates Abhishek Manu Singhvi and Arun Kathpalia along with the team of advocates from Karanjawala & Co led by its partner Ruby Singh Ahuja.