The Supreme Court’s decision to allow the appointment of arbitrators is a critical step towards resolving this dispute. The bench, led by Chief Justice of India Dhananjaya Y. Chandrachud and comprising justices JB Pardiwala and Manoj Misra.
The Supreme Court of India has paved the way for ArcelorMittal Nippon Steel (AMNS) and Indian Oil Corporation Ltd (IOCL) to initiate arbitration proceedings to resolve their longstanding dispute over Essar Steel India Limited (ESIL). This ruling marks a significant moment in the corporate insolvency landscape, highlighting the judiciary’s role in facilitating dispute resolution and ensuring justice in complex commercial matters.
The apex court’s decision comes as a reversal of the Delhi High Court’s October 2023 judgment, which had dismissed IOCL’s plea for the appointment of an arbitral tribunal to adjudicate the dispute arising from a gas supply agreement (GSA) entered into with ESIL in 2009. The Supreme Court’s directive now allows both AMNS and IOCL to nominate an arbitrator each within a week, with the appointed arbitrators tasked with selecting a third arbitrator to complete the formation of the arbitral tribunal.
This dispute traces its origins to a conflict over the GSA between IOCL and the then Essar Steel India (ESIL), which AMNS acquired following a corporate insolvency resolution process in 2019. IOCL had contested the termination of the agreement by Essar Steel in 2017, demanding dues, which led to the invocation of arbitration when Essar failed to respond.
The National Company Law Tribunal (NCLT) in Ahmedabad admitted ESIL into insolvency proceedings in August 2017, based on pleas by State Bank of India and Standard Chartered. Despite IOCL lodging a claim of over ₹3,500 crore with the appointed resolution professional (RP), the RP admitted the claim for a notional value of ₹1. The Committee of Creditors (CoC) of Essar Steel accepted Arcelor Mittal’s resolution plan, which was approved by the NCLT on March 8, 2019.
The legal dispute escalated when the NCLT disagreed with the RP’s decision regarding the admission of claims, including IOCL’s, at a nominal value of ₹1. Appeals were made in the National Company Law Appellate Tribunal (NCLAT), but similar decisions were reached. Eventually, the Supreme Court overturned the rulings of the NCLT and NCLAT, allowing the RP’s actions and approving AMNS’ resolution plan. ArcelorMittal acquired 100% of Essar Steel India’s shares on December 16, 2019.
After the implementation of the resolution plan, IOCL sought payment as per the terms of the GSA. ArcelorMittal denied IOCL’s claim, leading the oil company to invoke arbitration by serving notice to ArcelorMittal to appoint an arbitrator. However, AMNS remained unresponsive, prompting IOCL to approach the Delhi High Court.
The Supreme Court’s decision to allow the appointment of arbitrators is a critical step towards resolving this dispute. The bench, led by Chief Justice of India Dhananjaya Y. Chandrachud and comprising justices JB Pardiwala and Manoj Misra, noted,
“The parties have agreed to nominate two arbitrators within a week. The two arbitrators so appointed will nominate the third arbitrator. In view of the agreement of the parties, the Delhi high court’s judgment dated October 10, 2023, is rendered infructuous.”
This move underscores the Court’s commitment to ensuring that commercial disputes are resolved efficiently, maintaining the integrity of contractual agreements and the insolvency resolution process.
Furthermore, the Supreme Court held that both sides would have the liberty to argue on whether the dispute was arbitrable, keeping all rights and contentions of the parties open. This decision not only facilitates the arbitration process but also sets a precedent for how disputes related to insolvency resolutions can be approached, emphasizing the importance of arbitration as a means of dispute resolution in the corporate sector.
Represented by for IOCL and Senior lawyers Harish Salve and Abhishek Manu Singhvi for AMNSIL, the case highlights the intricate legal challenges and the pivotal role of arbitration in resolving commercial disputes. As the arbitration proceedings commence, the resolution of this dispute will be keenly watched by the corporate and legal communities, offering insights into the effectiveness of arbitration in the context of insolvency and corporate restructuring.
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