Andhra Pradesh High Court - Amravati
Nagarjuna Fertilizers And Chemicals ... vs Indian Oil Corporation Limited on 11 May, 2023
HIGH COURT OF ANDHRA PRADESH :: AMARAVATHI
MAIN CASE NO: Writ Petition No.12579 of 2023
PROCEEDING SHEET
Sl. OFFICE
DATE ORDER
No. NOTE
02 11-05-2023 RC, J:
Notice before admission.
Sri Durga Rao, learned Standing
counsel, takes notice for the 1st respondent.
For filing counter, post on 04.07.2023.
____________ RC, J I.A.No. 1 of 2023 Heard Sri Avinash Reddy, learned senior counsel, for Sri D.S.Siva Darshan, learned counsel for the petitioner and Sri S.V.V.S.Siva Ram, learned counsel, representing the learned Standing counsel for the 1st respondent.
The learned counsel for the petitioner submits that the petitioner is a public limited company, engaged in the business of manufacturing fertilizers and the same is operating two Ammonia urea plants at Kakinada and the total requirement of natural gas for the purpose of operating those plants is about 3.25 MMSCMD. In order to diminish cost of production of urea, it is imperative to procure High Pressure, High Temperature (HPHT) gas instead of LNG. The Government of India appointed the 2 respondent (IOCL) as aggregator for procurement of HPHT gas for urea units. The petitioner has expressed interest to purchase HPHT gas through the respondent- aggregator, in response to the request for proposal inviting bids issued by Reliance Industries Limited and BP Exploration (Alpha) Limited (RIL-BP).
Accordingly, the petitioner entered into a memorandum of agreement dated 11.04.2023 with IOCL and submitted its parameters required for the purpose of bidding vide its letter dated 11.04.2023, duly incorporating therein that the said offer would be subject to approval from bank, which is lender of the petitioner, and the Department of Fertilizers.. Based on the said conditional offer, the IOCL, being the aggregator, participated in the e-auction and later informed the petitioner that 1.5 MMSCMD volume of natural gas was allotted to the petitioner company for a period of 5 years.
The learned counsel for the petitioner would further submit that even before sending out parameters to IOCL, the petitioner has approached its lendor i.e. Assets Care and Reconstruction Enterprise Limited and sought its approval to purchase 3 HPHT gas, but, as the said approval was awaited and the end date to participate in the auction was fast approaching, the petitioner company submitted parameters by making the offer subject to approval of the banks and the Department of Fertilizers.
The learned counsel for the petitioner would further submit that, despite multiple efforts made by the petitioner company to persuade its lendor to give approval for purchase of HPHT gas, the petitioner could not get approval and thus the petitioner could not go ahead with the purchase of HPHT gas from the suppliers. Therefore, the petitioner company sent a representation dated 25.04.2023 to the respondent intimating that the company cannot off take the HPHT gas, since the bank has not approved the arrangement of purchasing HPHT gas and requested the respondent- aggregator to invoke clause 6(e) of the MOA and allot the gas to other urea manufacturing units. However, the respondent sent a letter dated 02.05.2023 intimating the petitioner company that in case the off take does not start by 10.05.2023, TOP & SOP charges will be imposed on the petitioner.
4The learned counsel for the petitioner would further submit that, in view of the clear parameter contained in the offer letter that the offer would be subject to approval from the bank, the respondent cannot force or coerce the petitioner company to purchase HPHT gas simply because IOCL executed a gas supply agreement with RIL- BP.
On the other hand, Sri SVVS Siva Kumar, learned Standing counsel for the respondent, would submit that the Memorandum of Agreement entered into between the petitioner and the respondent in clear and unequivocal terms says that the disputes arise between the parties are to be resolved through Administrative Mechanism. Further, the Gas sale and purchase agreement executed between the respondent and RIL-BP that the disputes between the parties by referring the matter to Arbitrators or by referring the matter to an expert. Without resorting to the same, the petitioner has straight away filed this writ petition. Hence, the same is not maintainable.
The learned Standing counsel would further submit that, the petitioner issued offer letter to the respondent for the purpose 5 of bidding specifying the quantity, Price "V" and tenure and accordingly the respondent has secured HPHT gas in the e-auction conducted on 12.04.2023 by RIL-BP. Therefore, the petitioner cannot turn around and say that the offer letter is subject to approval from the Banks and the Department of Fertilizers. Hence, the respondent is justified in imposing penalties in the nature of Take or Pay and or Ship or Pay charges, if the petitioner fails to start off-take of the gas.
In reply, the learned counsel for the petitioner submitted that the respondent is at fault in not intimating the RIL-BP that the e-auction is subject to approval from banks and Department of Fertilizers. Having committed a mistake in not bringing it to the notice of the Seller, the respondent now wants to penalize the petitioner for no fault on its part.
A perusal of the parameters submitted by the petitioner to the respondent for the purpose of bidding vide letter dated 11.04.2023, which is not in dispute, shows that, the same contained that the bidding 'is subject to approval from banks and the Department of Fertilizers', as contended by the learned counsel for the petitioner.
6Whether the respondent aggregator has brought to the notice of the sellers regarding the condition contained in the parameters furnished by the petitioner is not forthcoming.
In view of the above, this Court is inclined to direct the respondent corporation not to take any coercive steps against the petitioner company including imposition of TOP of SOP charges, until further orders.
____________ RC, J RR