The Supreme Court on Monday allowed Indian Oil Corporation (IOC) and ArcelorMittal Nippon Steel India Limited (AMNSIL) to initiate arbitration proceedings to resolve their dispute related to Essar Steel India Limited (ESIL).
A bench headed by Chief Justice DY Chandrachud, which had reserved judgment on the pleas on February 5, took note of the submissions of Solicitor General Tushar Mehta, appearing for the IOC, and senior advocates Harish Salve and Abhishek Singhvi, representing AMNSIL. who wanted to go to arbitration.
Clearing the way for arbitration, the court asked the IOC and the firm ArcelorMittal to appoint two arbitrators within a week. The two arbitrators will then appoint the third arbitrator to resolve the dispute.
The parties agreed to appoint two arbitrators within a week. The two arbitrators thus designated will appoint the third arbitrator. In view of the agreement of the parties, the judgment of the Delhi High Court dated October 10, 2023 remains infructuous, he stated.
The court said all of the parties’ arguments, including the arbitrability of the dispute, will remain open to resolution.
In 2009, the IOC and Essar Steel India Ltd signed a gas supply agreement. However, Essar Steel terminated the agreement in 2017.
The IOC challenged the termination. When Essar Steel did not respond to its notice of recovery of its dues, the IOC requested arbitration in July 2017.
Shortly after, Essar Steel declared bankruptcy and everything was put on hold.
After the corporate insolvency resolution process began and the resolution professional (RP) took over, the IOC filed a claim of Rs 3,762 crore with the RP.
The RP, however, admitted a notional amount of Re 1 to ensure its participation in the insolvency process.
ArcelorMittal won the bid to acquire Essar Steel in 2019. Its resolution plan included the IOC’s notional claim of Rs 1.
Once this resolution plan was implemented, the IOC issued a notice to ArcelorMittal, demanding various amounts totaling Rs 8,772 crore which it said were payable under the terms of the gas supply agreement for the period between 2014 and 2020.
These claims were rejected by ArcelorMittal, leading the IOC to invoke arbitration.
In 2022 he approached the Delhi High Court seeking appointment of an arbitrator, but the court held that the claims cannot be brought before an arbitral tribunal as the approval of the resolution plan had led to the extinction of all claims.
Taking the dispute to an arbitral tribunal would mean rewriting the terms under which ArcelorMittal acquired Essar Steel, which is against the law, the high court said.
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First published: February 12, 2024 | 22:44 IS