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Arcelor Mittal Nippon Steel Limited (AMNS) and Indian Oil Corporation Limited (IOC) informed the Supreme Court on February 9 that they had chosen to appoint arbitrators to resolve their dispute over Essar Steel India Limited (ESIL). AMNS acquired ESIL via the corporate insolvency resolution procedure.
The counsel for both parties pleaded with the highest court to refrain from rendering a decision because the Supreme Court had reserved orders regarding whether the dispute was arbitrable. Chief Justice of India (CJI) DY Chandrachud led a bench that declared the case will be formally listed and that the parties will receive instructions regarding it.
What is the dispute?
In October 2023, the Delhi High Court dismissed IOCL's plea to appoint an arbitrate to adjudicate a dispute emanating from a gas supply agreement (GSA) with ESIL in 2009. In 2017, ESIL terminated the agreement; however, IOC objected to the termination on the ground that it had not committed any breach of its contractual obligations. IOC alleged that the termination notice was liable to be viewed as ineffective.
Subsequently, IOC issued a demand notice asking ESIL to pay certain amounts for the abrupt termination of the GSA and calling upon ESIL to participate in the amicable settlement procedure per the GSA. Since ESIL did not respond, IOC invoked arbitration in terms of the Gas Supply Agreement.
However, amid this dispute, the National Company Law Tribunal (NCLT) bench at Ahmedabad admitted Essar to the insolvency resolution process and appointed a Resolution Professional (RP). IOC lodged over ₹3,500 crore with the RP, who admitted the claim for a notional value of ₹1. This notional value was featured in the resolution plan, which was given the go-ahead by the Supreme Court in 2019.
The resolution plan was implemented, and AMNS took over the company. However, in 2022, IOC approached the Delhi High Court for the appointment of an arbitrator to adjudicate its dispute, which had already been settled by the resolution plan.
The High Court concluded that the Supreme Court approved the resolution plan after hearing the parties; 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.
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