Case Essar: Supreme Court permits AM/NS and Indian Oil to choose arbitrators

NEW DELHI On Monday, the Supreme Court made it possible for Arcelor Mittal Nippon Steel India Limited (AMNSIL) and Indian Oil Corporation Ltd (IOCL) to begin arbitration procedures in order to settle their disagreement over Essar Steel India Limited (ESIL).

2019 saw AMNSIL purchase ESIL via the corporate insolvency resolution procedure.

A court chaired by Chief Justice of India Dhananjaya Y Chandrachud recorded the joint agreement between AMNSIL and IOCL to designate an arbitrator within a week for each party.

“Within a week, the parties had decided to choose two arbitrators. The third arbitrator will be chosen by the two arbitrators who have been nominated. The Delhi High Court’s October 10, 2023 ruling is deemed infructuous due to the parties’ agreement, the bench, which also comprised Justices JB Pardiwala and Manoj Misra, declared.

The highest court ruled that both parties’ rights and arguments are maintained open and that both parties are free to debate whether or not the case was arbitrable.

Attorney general Tushar Mehta defended IOCL in the case; senior attorneys Abhishek Manu Singhvi and Harish Salve represented AMNSIL.

The Supreme Court postponed its decision on February 5 in the IOCL appeal of the Delhi High Court’s October 2023 ruling. In its decision, the high court rejected IOCL’s request for the appointment of an arbitrator to settle a disagreement arising from a 2009 gas supply contract it had with ESIL.

ESIL canceled the contract in 2017, but IOCL protested, claiming that the notice of termination should be deemed invalid as it had not violated any of the provisions of the agreement. IOCL successfully initiated arbitration after ESIL failed to reply to its demand notice for termination of the agreement.

The National Company Law Tribunal (NCLT) in Ahmedabad designated a Resolution Professional (RP) and entered ESIL into bankruptcy proceedings in August 2017. IOC filed a claim with the RP for more than ₹3,500 crore, and the RP accepted it at a notional value of ₹1. The Supreme Court ultimately authorized Arcelor Mittal’s settlement plan in November 2019 and it included this notional value. After the resolution plan was put into action, AMNSIL acquired the business.

But in 2022, IOC asked the Delhi High Court to appoint an arbitrator to settle its disagreement. The Supreme Court accepted the settlement plan after hearing from the parties, hence the top court rejected IOCL’s request. The high court also said that a settlement plan cannot be reopened after a party accepts its approval, which puts an end to their claims.