HC asks Aussie coal firms to pay USD 159 million to SAIL

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The Delhi High Court has dismissed the plea of two Australian coal firms, Vale Australia Pty Ltd (Vale) and AMCI Pty Ltd, against an International Court of Arbitration's (ICA) order to them for payment of about USD 159 million as damages to the SAIL.

Justice S. Muralidhar upheld the March 10, 2011 ICA's arbitral award for payment of over USD 152 million as damages to the Steel Authority of India Ltd (SAIL) with an interest of over USD 6.8 million over it.

The ICA had also asked the two firms to pay additionally 80 per cent of the SAIL's legal costs, including USD 320,000 as expenses and USD 160,000 as costs paid by the Indian public sector company to the tribunal.

"While it may be possible to argue that another view is also possible, that by itself does not constitute a valid ground for a court to interfere (in a foreign award) under section 34 of the Arbitration and Conciliation Act.''

"Consequently, this court is unable to find any error in the quantification of damages by the tribunal. All objections by Vale and AMCI to the award of March 10, 2011 passed by the tribunal (ICA) are rejected with costs of Rs one lakh each to be paid by them to SAIL within four weeks," the court said.

The dispute between the parties arose when Vale and AMCI failed to meet the SAIL demand of total one million metric tonnes (MT) of coking coal in 2007, under a long-term agreement (LTA) of April 23, 2007 between them.

The two companies managed to supply only 246,539 MT and a balance of 753,461 MT of coking coal remained to be supplied.

The matter was presented for dispute resolution in March 2009 before the ICA, which agreed with SAIL's contention that there was a breach of the LTA by the two Australian companies.

"The court (high court) finds no error in the tribunal's determination that Vale and AMCI were in breach of the LTA of April 23, 2007," Justice Muralidhar said while holding the two companies guilty of the breach of contract.

SAIL had contended before the ICA that it had to procure the balance quantity of coking coal from other sources at a price much higher than the market price, due to the two Australian firms' failure to supply the same as per the deal.

In their defence, the two firms contended that SAIL had agreed to accept supply of coal from alternate sources and had discharged both Vale and AMCI from further obligation to supply the same.

They also denied they breached the contract, saying SAIL itself had granted extension of time for performance of the contract without reserving its rights.

On the basis of the documents and witnesses examined, the ICA had concluded that while SAIL gave due consideration to the proposals of Vale and AMCI to fulfil their contractual commitments, none of them came to fruition and the time for the performance of contract was never extended.

The ICA held the Australian firms guilty of the breach of contract as the balance of 753,461 MT of coal to be supplied under the LTA had not been delivered to SAIL in time.

It had also held that SAIL suffered losses and directed the firms to pay USD 152 million as damages with interest of over USD 6.8 million along with 80 per cent of SAIL's legal costs, USD 320,000 as expenses and USD 160,000 as costs paid by the Indian public sector company to ICA.

AMCI and Vale then filed separate petitions in the high court challenging the March 2011 award of the ICA.

Vale, a company incorporated in Australia with registered office at Brisbane was formerly known as AMCI Australia Pty Ltd.

It was renamed as CVRD Australia Pty Ltd and then as Vale in February 2007, after the CVRD Group acquired the shares of AMCI Holding Australia Pty Ltd, the parent company of AMCI Australia Pty Ltd.

After CVRD Group's acquisition of Vale it acted as the coal producer and AMCI Pty Ltd, the newly formed subsidiary of AMCI Australia Pty Ltd, as the seller.