Appeal No. 3 of 2016. Case: Gujarat Industries Power Company Limited Vs Competition Commission of India and Ors.. COMPAT (Competition Appellate Tribunal)
| Case Number | Appeal No. 3 of 2016 |
| Counsel | For Appellant: Vikas Singh, Senior Advocate assisted by Varun Singh, Venkatesh, Deepeika Kalia and Srijan Sinha, Advocates |
| Judges | G.S. Singhvi, J. (Chairman), Rajeev Kher and Anita Kapur, Members |
| Issue | Arbitration And Conciliation Act, 1996 - Sections 17, 26(1), 9; Competition Act, 2002 - Sections 17, 18, 19, 19(1), 19(1)(a), 19(6), 19(7), 26, 26(1), 26(2), 26(3), 3, 3(1), 36(2), 4, 4(1), 4(2), 4(2)(a), 41, 41(1), 53B(1), 53B(2) |
| Judgement Date | November 28, 2016 |
| Court | COMPAT (Competition Appellate Tribunal) |
Order:
G.S. Singhvi, J. (Chairman), (New Delhi)
-
Appellant-Gujarat Industries Power Company Limited has filed this appeal under Section 53B(2) read with Section 53B(1) of the Competition Act, 2002 (for short, 'the Act') for setting aside order dated 08.09.2015 passed by the Competition Commission of India (for short, 'the Commission') under Section 26(2), whereby Cases No. 55 and 56 of 2015 registered on the basis of an information's filed by the appellant and M/s. Gujarat State Fertilizers and Chemicals Limited under Section 19(1)(a) of the Act alleging contravention of Section 4 by Respondent No. 2 - GAIL (India) Ltd. were closed.
-
The appellant was incorporated in 1985 under the Companies Act, 1956 as a Public Limited Company. It is engaged in the business of power generation and is the first Independent Power Producer in India to have installed GE Frame VI and Frame IX Gas Turbine manufactured by BHEL. The appellant is operating on 310 (145+165) MW gas based Power Plant at Vadodara.
-
Respondent No. 2 is a Government of India Undertaking. It was also incorporated under the Companies Act, 1956. Respondent No. 2 is engaged in the distribution and marketing of gas in India and also other activities relating to gas including exploration, production, transmission, extraction, processing of natural gas and its related process, products and services. Respondent No. 2 has the longest pipelines for supply of gas in India and it has contributed to the growth and development of natural gas pipelines infrastructure and natural gas market in India. Its area of operation covers 16 States and two Union Territories. Respondent No. 2 buys Re-Liquefied Natural Gas (RLNG) from Petronet NLG Limited (PLL), which in turn purchases RLNG from Ras Laffan Liquefied Natural Gas Company Limited (II), Qatar (RasGas).
-
For running its plants, the appellant requires a continuous supply of gas of 1065 MMSCMD. It executed Gas Sales Agreement (GSA) with Respondent No. 2 on 12.02.2004. Duration of that agreement was five years with a provision for extension at the instance of either party. Articles 3, 7.4 to 7.7 and Articles 9.3 of GSA dated 12.02.2004, which have some bearing on the decision of this appeal, read as under:
"ARTICLE 3 DURATION OF AGREEMENT:
3.1 Subject to Article 17, this Agreement shall come into force on the date it is signed and shall remain in force till 0600 Hours of 01/01/2009 (Basic Period).
3.2 Either party may propose to extend the Agreement beyond the Basic Period by giving notice to the other party one year prior to expiry of this Agreement and shall be mutually discussed and amended accordingly. (Extension Period).
3.3 The term of this Agreement shall be extended beyond the Basic Period or the Extension Period, as the case may be, by a further period of 6 months (Recovery Period) in the event there is any Recovery Period Gas as per clause 7.2.2(vi) that may remain outstanding. Recovery Period will commence on the day immediately following eh last day of Basic Period or Extension Period as the case may be.
3.4 Following execution of this Agreement, the parties shall in accordance with article 17 use all reasonable endeavour to obtain satisfaction of any remaining conditions precedent to the effectiveness of the rights and obligations set out in this Agreement.
7.4 Delivery Rates
The Seller shall deliver and Buyer shall take during each Day at the Delivery Point the quantity of Gas at uniform hourly rates spread over a period of 24 Hours.
7.5 Annual Take or Pay Quantity (ATOPQ)
For each Contract Year, there shall be an Annual Take or Pay Quantity (ATOPQ), which shall be taken and paid for or paid for if not taken by the Buyer. The Annual Take or Pay Quantity shall be calculated as follows: The ATOPQ shall be 80% of the AACQ in accordance with 7.11.1 (iii) for the Contract Year or part thereof less:
"Aggregated DCQ for all days or part thereof on which the Buyer was prevented from taking Gas by Force Majeure of Buyer or Seller;
"Aggregated 75% of lower of DCQ or PNDCQ or their part thereof which Seller were unable to supply as per this Agreement for any reason;
All about deductions shall be converted into MMBTU by the weighted average of GCV at the Delivery Point during the Contract Years.
7.6 Annual Payment Obligation
The Buyer shall during each Contract Year, pay for the Actual Quantity of Gas taken or for ATOPQ referred to in Article 7.5. If the actual quantity is less than the ATOPQ, the Buyer shall pay for between the ATOPQ for the relevant Contract Year and the quantity of Gas actually taken by the Buyer during the Contract Year ("Take or Pay Deficiency Quantity") at a price equal to the weighted average of the applicable price of all the Gas supplied during the Contract Year calculated in accordance with Article 9. For the purpose of such calculation GCV of the Take or Pay Deficiency Quantity shall be deemed to be the volume weighted average of the Gross Calorific Values of Gas delivered during such Contract Year. Foreign Exchange Component shall be converted to Rupees at the prevalent TT selling rate as per State Bank of India (SBI) Card rate applicable on a business day of SBI New Delhi immediately preceding the date of Invoice.
7.7 Make-up Gas
The Buyer may elect to draw Make Up Gas during the succeeding years subject to the conditions that Buyer first takes delivery of the Annual Take or Pay Quantity for the Contract Year in which the Buyer wishes to draw Make Up Gas.
ARTICLE 9 PRICE:..............
9.3 Buyer and Seller shall mutually discuss for the Price of
Gas to be effective from 1st January, 2009. The Seller shall inform not later than 30.06.2008, the revised Price and parties agree to discuss in good faith and finalize the new prices effective from 1.1.2009 not later than 30.09.2008."
-
About one year and two months prior to the expiry of the term of GSA dated 12.02.2004, the appellant wrote letters dated 21.11.2007 to Respondent No. 2 for extension/renewal of GSA. This request was reiterated vide letter dated 31.05.2008. Respondent No. 2 sent reply dated 30.06.2008 stating that on receipt of intimation from PLL, it will inform the appellant about the pooled price of RLNG to be effective from the month of January, 2009.
-
After five months, Respondent No. 2 forwarded draft GSA to the appellant, who then sought clarifications vide letter dated 05.12.2008 in regard to some of the Articles of the draft agreement. The parties also held discussion on 10.12.2008. Finally, they executed fresh GSA on 26.12.2008, whereby Respondent No. 2 agreed to supply RLNG to the appellant for 20 years subject to the terms and conditions contained in various Articles of the agreement. Article 14 of GSA dated 26.12.2008 contains Take or Pay Clause which is substantially similar to the one contained in GSA dated 12.02.2004.
-
After seven years of the execution of GSA dated 26.12.2008, Respondent No. 2 sent letter dated 27.02.2015 to the appellant requiring it to pay Rs. 49.81 Crores towards 'Annual Take or Pay Deficiency'. That letter reads as under:
"GAIL/MKTG/RLNG/ToP/2015
Without Prejudice
Dated: 27/02/2015To,
Shri Y J Bhatt,
M/s. Gujrat Industries Power Company Limited
P.O. Petrochemical
District: Baroda - 391 346
GujaratSubject: Annual Take or Pay claim for the Contract Year 2014 under the Long Term RLNG GSA.
Dear Sir
This has reference to the Gas Sales Agreement dated 26.12.2008 between GAIL (India) Limited as "Seller" and Gujarat Industries Power Company Limited as "Buyer" for supply of 3917000 MMBTU (approx. 0.3 MMSCMD) of RLNG by the Seller to the Buyer at Delivery Point, hereinafter referred to as "Agreement". The Agreement provides for the terms and conditions upon which the Buyer shall purchase and the Seller shall sell Gas.
As per clause No. 14.1 of the Agreement, in respect of each Contract Year, the Buyer shall be liable to pay to the Seller pursuant to the Annual Statement of Settlement, an amount (in addition to the amounts for the quantity of gas taken) for the quantity of gas, if any, equal to the difference of the Eighty Five (85%) of the AACO, minus the adjusted quantity taken for such Contract Year,
In line with the above, for the Contract Year 2014, the total Annual Take or Pay Deficiency in respect of the Buyer works out to 2547442 MMTBU and the Pay For If Not Taken liability of Rs. 237.93 Cr.
Further, in line with the Clause 14.1(c), the Seller demands from the Buyer a sum of Rs. 49.81 Cr. Against the aforesaid Pay for If Not Taken liability. Notwithstanding the above demand, the Seller reserves the right and claim over the total Pay For If Not Taken for the Contract Year 2014 which may be exercised by the Seller at its discretion.
It is clarified that the option exercised by the Seller for Contract 2014 shall not be construed as setting a precedent or an implied consent by the Seller to exercise such option in subsequent contract Year in relation to any Take or Pay Deficiency. Further, rights exercised by the Seller under Article 14.1(c) shall not act as a waiver of other rights of the Seller against the Buyer for any failure to off take Gas under this Agreement.
Thanking you
Yours truly
(Shamasundara)
Zonal General Manager" -
In its reply dated 07.03.2015, the appellant requested Respondent No. 2 to waive-off the claim against 'Take or Pay' clause. The appellant also sent letter dated 06.04.2015 proposing to surrender the contracted quantity of long term RLNG for a period of 12 months. That letter reads thus:
GUJARAT INDUSTRIES POWER COMPANY LTD.
P.O. Petrochemical, Dist. -Vadodara 391 346, Gujarat - INDIARef.: GIPCL/AGM(TS)/GAIL-RLNG/2015/43
6th April, 2015
Mr. Shama Sundara
Zonal General Manager (Gas Mktg.)
M/s. GAIL (India) Limited,
Ahmedabad Zonal Office,
809, Sakar - II, Opp. Town Hall,
Near Ellisbridge,
Ahmedabad 380 006.Sub: GIPCL - Proposal for Surrendering Contracted Quantity of long term R-LNG.
Dear Sir,
GIPCL and GAIL have signed Gas Sales Agreement (GSA) dated...
To continue reading
Request your trial