Synopsis
ArcelorMittal Nippon Steels India was denied an interim order by the Delhi High Court in its conflict with GAIL over a terminated LNG contract. The court ruled that AMNS could source LNG from elsewhere, and the non-supply would not halt its operations, though it may incur extra costs.
Article:
The Delhi High Court has recently made a significant ruling in the ongoing dispute between ArcelorMittal Nippon Steels (AMNS India) and the public sector enterprise GAIL over the termination of a Liquified Natural Gas (LNG) supply contract. AMNS India sought the court's intervention to ensure LNG supply for November, arguing that a disruption would cause irreparable damage to their operations. However, the court decided against granting this interim relief.
Justice Neena Bansal Krishna, who authored the judgment, expressed that while the discontinuation of LNG supply from GAIL would not cease AMNS' manufacturing activities, it could result in additional expenditure for the steel manufacturer. The court also pointed out that since LNG is available in the open market, AMNS has the option to procure it from other suppliers, thus GAIL is not its sole recourse.
The roots of the dispute lie in a contractual agreement between AMNS and GAIL, which was supposed to ensure the annual delivery of a certain quantity of LNG from 2021 to 2025. However, GAIL ceased supplying LNG in October 2023 following a failure to supply in 2022 and ensuing disputes. AMNS contends that GAIL's claim of force majeure from August to December 2022 is not valid, stating that GAIL had other sources to fulfill its obligations.
Subsequently, AMNS invoked arbitration to resolve the dispute, which led to GAIL terminating the agreement altogether. AMNS then approached the Delhi High Court to seek a mandate for GAIL to resume LNG supplies to its steel plant in Hazira, Gujarat.
GAIL, in its response, stood firm on its decision to terminate the contract and recommended that the petition filed by AMNS be dismissed without any interim relief being granted. Complicating the matter, GAIL itself had faced supply disruptions when Russia's GMTS stopped natural gas supplies due to the war in Ukraine, affecting its ability to serve downstream clients like AMNS.
Conclusion
The Delhi High Court's ruling underscores the challenges businesses face in supply chain disruptions and contractual disputes. While AMNS sought legal recourse to ensure continuity of its operations, the court's decision to deny interim relief emphasizes the presence of alternative market solutions and the necessity for companies to adapt to unforeseen circumstances. This case illustrates the complex interplay between contractual obligations, market dependencies, and legal interventions in the corporate world.
