Tribunal rules against NTPC in shipping dispute

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In a recent judgment, an arbitral tribunal constituted of Justice Vikramajit Sen (retired), Justice B P Singh (retired) and Justice Anil Kumar (retired) passed an arbitration award on 27 January 2019 in favour of offshore logistics company Jindal ITF (JITF), a PR Jindal group company, against the NTPC state power company.

The arbitration related to a dispute over a trans-shipment of coal in high seas, deep draft locations (Sandheads and Kanika Sands) from ocean-going vessels to trans-shipper/barges, and transportation of such unloaded coal in barges via National Waterway no. 1 to NTPC’s Farakka power plant situated at Farakka, West Bengal state. This was a unique and innovative project, which was introduced for the first time in India.

The arbitral tribunal held that NTPC contributed in large parts towards the delay in the construction of phase I and phase II of the project due to which JITF could not complete its work on time and, therefore, NTPC was liable to compensate JITF. The tribunal awarded the minimum guaranteed amount for the entire agreement period including interest and cost to JITF. It dismissed NTPC’s counter claim in its entirety. Accordingly, the tribunal awarded an amount of ₹20.1 billion (US$283 million) plus interest and applicable taxes to JITF.

Also, while arbitral proceedings were in place, JITF filed two interim applications under section 17 of the Arbitration and Conciliation Act, 1996, seeking that NTPC be directed to make payment of the minimum guarantees quantity (MGQ) amount of ₹1.5 billion (for the first year of the operation period) and ₹1.9 billion (for the second year operation period) as NTPC had failed to provide minimum guaranteed coal to JITF at the transfer points. The arbitral tribunal allowed JITF’s interim applications and directed NTPC to pay the MGQ amount. The orders made by arbitral tribunal were upheld by Delhi High Court and the Supreme Court.

The award is the first of its kind and will help contractors working in the infrastructure and shipping industries in addition to being significant for matters relating to unlawful termination and adherence to contract terms. Singh & Associates led by managing partner Manoj K Singh advised and represented JITF before the arbitral tribunal.

The dispute digest is compiled by Bhasin & Co, Advocates, a corporate law firm based in New Delhi. The authors can be contacted at lbhasin@bhasinco.in or lbhasin@gmail.com. Readers should not act on the basis of this information without seeking professional legal advice.