Essar Vs ArcelorMittal: Surat court allows AMNS to pay cargo handling charges as per 2020 exchange rate

Suresh P Iyengar Mumbai | Updated on October 05, 2021


Says Essar cannot restrain the terminal draft at 10 metre

The ongoing dispute between Essar group and ArcelorMittal over the control of a bulk cargo terminal at Hazira has taken a new turn with a Surat court allowing ArcelorMittal Nippon Steel (AMNS) to pay cargo handling charges to Essar Bulk Terminal (EBTL) from January, 2021 based on the dollar rate prevailing on December 30, 2020. This would help AMNS save about ₹300 crore as Essar was asking for charges to be paid on 2013 exchange rates.

The court has also asked Essar not to restrain the terminal draft at a ceiling of 10 metre.

The dispute started when ArcelorMittal acquired Essar’s steel business through the insolvency process in 2019. Essar Steel (ESI) had also set up a captive jetty to cater to the cargo requirement of its steel business. The jetty was renamed EBTL and all licences to administer, maintain and use the jetty was transferred by Essar Steel in 2007. In 2011, a Cargo Handling Agreement (CHA) was entered and executed between ESI and EBTL for use of the Cardo Handling Facility of EBTL at the jetty. The agreement is the heart of the dispute between Essar and AMNS.

Essar Steel was put under the insolvency process in 2018 after which several disputes and differences started to crop up with respect to vessel related charges levied by EBTL.

“It appears that there was a unilateral steep hike in the Vessel Related charges levied by EBTL and accordingly invoices were issued by EBTL to ESI. It appears from the record that the monitoring Committee of ESI did record and objected to such unilateral steep increase in its Vessel Related charges pending the insolvency resolution process,” Commercial Court at Surat observed.

Resolution plan

Thereafter, once the resolution plan was finally approved and the entire management of ESI was taken over by AMNS, the latter wrote to the Government to transfer all the licences which were issued in favour of EBTL to AMNS. The proceeding is pending before the Gujarat High Court.

At the same time, AMNS invoked force majeure clause under the CHA and intimated EBTL that AMNS obligation to MGT would be suspended till the period of force majeure. The invocation of force majeure was countered by EBTL stating that obligation of AMNS to pay MGT will continue even during the force majeure period, subject to 5 per cent downward flexibility.

EBTL further made a claim that AMNS has to pay cargo handling charges in US dollars based on 2013 exchange rate as it has obtained a loan at that exchange rate. AMNS has argued that EBTL had taken a loan only in 2020, and whether it wants to hedge its loan of 2020 at the exchange rate of 2013.

Reacting to the development an EBTL spokesperson said: “The court has issued directions upholding the payment terms under the contract and directed AMNS to make payments to EBTL. The final adjudication of the issues will be subject to further appeals in High Court and/or determination by arbitral tribunal.”

Depth of channel

On the issue of depth of the channel, the Surat court said EBTL is obliged to permit the vessels having draft of 10 meter and above to enter and berth at the terminal, per available draft. “CHA specifically provides a declaration of the terminal draft. Such declaration has to be based on tidal forecast and other weather conditions. Hence, it is required that EBTL shall, based upon the tidal forecast as published by GMB, determine and declare the available terminal draft for every month and accordingly shall service the vessels of the AMNS as per the CHA. EBTL shall also be obliged to maintain the Channel Depth at 10 meter,” the court said.




Published on October 05, 2021

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