Delhi High Court Reliance Industries Ltd vs Gail (India) Ltd on 17 February, 2020 * Reserved on: 08th January, 2020 Pronounced on: 17th February, 2020 + FAO(OS) (COMM) 301/2019, CM APPL. 47045/2019, CM APPL. 47046/2019, CM APPL. 47047/2019 RELIANCE INDUSTRIES LTD ..... Appellant Through: Mr. Paras Kuhad, Sr. Adv. with Mr. K.R. Sasiprabhu, Mr. Shubhranshu Padhi, Mr. Ajith Karunakaran, Mr. Jitin Chaturvedi Mr. Shuaib Hussain and Mr. Vishnu Sharma, Advs. versus GAIL (INDIA) LTD ..... Respondent Through: Mr. Dhruv Mehta, Sr. Adv. with Ms.Manmeet Arora, Mr. Harkirat Singh, Mr. Rishabh Surekha and Ms. Anupama, Advs. HON'BLE MR. JUSTICE VIPIN SANGHI HON'BLE MR. JUSTICE SANJEEV NARULA JUDGMENT SANJEEV NARULA, J 1. The present Appeal under Section 13 of the Commercial Courts Act, 2015 (hereinafter 'Commercial Courts Act') read with Section 37(1) of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as "Act") assails the judgment dated 16.07.2019 passed in O.M.P. 597/2012, whereby the learned Single Judge has upheld the Arbitral Award dated 25.05.2012 FAO(OS) (COMM) 301/2019 Page 1 of 44 passed by Hon‟ble Mr. Justice B. P. Jeevan Reddy (Retd.), Sole Arbitrator, and consequently dismissed the challenge under Section 34 of the Act. Factual Background: 2. The facts in brief leading to the filing of the present appeal are as follows: 2.1. Reliance Industries Limited (hereinafter "Appellant") is engaged in the business of manufacturing and sale of petrochemicals. 2.2 Gail (India) Limited (hereinafter "Respondent") is a PublicSector Undertaking under the administrative control of the Ministry of Petroleum & Natural Gas and is engaged inter alia, in the business of transportation and marketing of Natural Gas, LPG production and City Gas Distribution. 2.3. The parties entered into a Gas Supply Agreement (GSA) dated 30.03.2000 (hereinafter "Agreement") for sale of „natural gas‟ for the purpose of extraction of C2 (Ethane) and C3 (Propane) fractions, after removal of CO2 in Respondent‟s petrochemical plant located at Dahej (Gujarat). In terms of the Agreement, after processing the gas, the Appellant would return the balance lean gas to the Respondent. The Agreement also contained provisions for determining the quantity and price for payment of gas utilized/shrunk by the Appellant. The original term of the Agreement was to end on 01.01.2005, however, it was extended on a number of occasions and the last extension expired on 31.08.2008. As per Clause 4 of the Agreement, the supply of gas was to be made in two phases: (i) Phase1 from 01.01.2000 to 31.12.2000, and (ii) Phase2 from 01.01.2001 onwards. The dispute between the parties pertains to Phase2 viz. the period FAO(OS) (COMM) 301/2019 Page 2 of 44 commencing from 01.01.2001 and ending on 31.08.2008. 2.4. During the aforenoted period, Respondent started supplying gas to the Appellant from the gas Metering Station No. 4, in its LPG plant at Gandhar (hereinafter "Point of Onward Delivery"). The Appellant was to process the gas after removal of CO2 and deliver the balance quantity of Gas back to the Respondent at the Gas Metering Station No. 5 in the Respondent‟s LPG Plant (hereinafter "Point of Return Delivery"). 2.5. Respondent raised fortnightly invoices for the supply of gas, calculated on the basis of the difference between Gas supplied [recorded at the Point of Onward Delivery] and the Gas returned by the Appellant after extraction [recorded at the Point of Return Delivery]. This continued upto February 2008, when after a lapse of almost eight years, Respondent started raising Supplementary Invoices/ Debit Notes for the period April 2000 to February 2008. Respondent claimed the additional amounts on the basis of the difference between the shrinkable volume calculated as per the formula stipulated in the Agreement, and the consumption measured by noting the difference between gas supplied and gas returned. Appellant protested against the raising of debit notes, pointing out that for more than seven years of continuous operation of the contract, payment has been made strictly as per the Agreement. In the past, Respondent had not raised any debit note or even made a mention about it in its comm