The Delhi High Court dismissed the petitions challenging the arbitral award dated 29 July 2023, thereby upholding the learned Sole Arbitrator’s decision rejecting the Petitioner’s claims and allowing the Respondent’s counter-claims related to natural gas pricing and usage for fertilizer manufacturing.
The parties had entered into five contracts for supply of natural gas sourced from various fields, used primarily for fertilizer manufacturing. Government of India, through Ministry of Petroleum and Natural Gas (MoPNG), was responsible for regulating allocation, pricing, and restricted usage of Administered Price Mechanism (APM) gas primarily for urea production.
MoPNG issued letters directing differential pricing for APM gas used for non-fertilizer products and mandated quarterly certified returns by the Fertilizer Industry Coordination Committee (FICC). GAIL issued demand notices for additional payments based on the differential pricing and FICC certificates.
The Petitioner challenged these demand notices via petitions under Section 9 of the Arbitration and Conciliation (“A&C”) Act, which were disposed of with stay orders and appointment of a Sole Arbitrator. The Sole Arbitrator issued awards dismissing the Petitioner’s claims and allowing the Respondent’s counter-claims. The Petitioner then challenged these awards before the Delhi High Court under Section 34 of the A&C Act.
The Petitioner challenged the arbitral award by alleging that the demand for differential gas pricing based on end-use was illegal and beyond contract terms. It also contended that provisional bills raised on assumptions were unlawful, and argued that the learned Sole Arbitrator erred in interpreting contracts and government directives. It also contended that the Respondent’s counter-claims were barred by limitation.
On the other hand, the Respondent argued that these contracts incorporated government pricing directives and usage restrictions. In the present factual matrix, GAIL had acted as government nominee and pool operator without profit motive.
The Bench comprising Justice Subramonium Prasad recognized the Sole Arbitrator’s role as master of evidence and fact-finder, thereby emphasizing the limited scope for judicial interference and consistent practice of deference to the arbitrator’s factual conclusions. The Court also noted consistency with government policies, CAG audit findings on under-recovery issues, and the binding nature of FICC certificates.
The Court rejected the Petitioner’s reliance on Sections 15, 17, and Article 112 of the Limitation Act as inapplicable, affirming that limitation runs from issuance of FICC certificates, which were delayed due to Petitioner’s own tardiness.
The Court ruled that the usage of APM gas was restricted pursuant to government orders, and held that differential pricing for non-urea use was lawful and contractually enforceable. Provisional bills, followed by adjustments based on FICC certificates, were held as appropriate per government-sanctioned mechanism.
The Court’s relied on jurisprudence to hold that judicial review under Section 34 is limited to patent illegality, perversity, or violation of natural justice. Since the Sole Arbitrator’s award was based on extensive evidence, government directives, and contract terms binding the parties, no ground of a Section 34 challenge was satisfied.
In result, the Delhi High Court dismissed all challenges to the arbitral awards across the five petitions. The Petitioner’s claims regarding contract interpretation, improper billing, and limitation were rejected on merit and procedural grounds. The Court severed irrelevant limitation findings relying on Sections 15, 17, and Article 112 of the Limitation Act, and sustained the rest of the award.
Cases relied on:
1. OPG Power Generation (P) Ltd. v. Enexio Power Cooling Solutions (India) (P) Ltd., (2025) 2 SCC 417
2. Associate Builders v. DDA, (2015) 3 SCC 49 and Ssangyong Engg. v. NHAI, (2019) 15 SCC 131
3. Maharashtra State Electricity Distribution Co. Ltd. v. Datar Switchgear Ltd., (2018) 3 SCC 133
4. State of Jharkhand v. HSS Integrated Sdn. And Anr., (2019) 9 SCC 798
5. Gayatri Balasamy v. ISG Novasoft Technologies Ltd., 2025 SCC OnLine SC 986
Appearances:
For the Petitioners: Mr. Dayan Krishnan, Sr. Advocate with Mr. Kunal Vyas, Mr. Pratham Vir Agarwal, Mr. Sukrit Seth, Ms Niyati Kohli, Advocates
For the Respondents: Mr. Vivek Kohli, Sr. Advocate with Mr. Somiran Sharma, Mr.Yashweer Hooda, Advocates
