Sasan Power loses plea to avoid international arbitration

Division bench upholds district court's decision, rules in favour of North America Coal Corporation

A division bench of the Madhya Pradesh High Court has upheld the district court's order dismissing Sasan Power's plea for an injunction against international arbitration with the Indian subsidiary of US-based North America Coal Corporation (NACC).

Sasan Power argued that the dispute between the two Indian companies should be decided by the Indian judicial system and not the arbitral tribunal in London under the auspices of the International Council for Arbitration (ICC).

North America Coal Corporation, on the other hand, argued that it has to be heard at the ICC.

Hearing both sides, Justice Rajendra Menon and Justice Sushil Kumar Gupta observed that when parties have agreed to resolve all their disputes by arbitration, they can't be permitted to avoid arbitration. 

"Accordingly, in the facts and circumstances, we find no error in the order passed by the learned district judge, warranting reconsideration," said the Bench.

Responding to an e-mail seeking the company's response on the division bench order, Reliance spokesperson said, "We cannot comment as the matter is sub-judice".

Sasan Power has been incorporated to set up 3,960 MW ultra mega project near Sasan in Singrauli district of Madhya Pradesh. 

It had executed a Memorandum of Understanding with NACC-US for technical consultancy related to coal mining and related activities. Based on this, in April 2011, the US firm assigned its rights, liabilities and obligations under the agreement to its Indian subsidiary. However, disputes started arising between the parties and NACC-India issued a letter of termination in respect of the associate agreement. Acting through its foreign law advisers Jones Day, it filed a request for arbitration with the ICC, claiming a compensation of over $17 million along with compound interest.

Sasan Power challenged this and filed a petition with the district court, Singrauli, which initially issued an ex-parte stay against ICC intervention. However, after hearing both the parties, by an order dated March 19, 2015, Sasan Power's petition was dismissed. Sasan Power then filed an appeal before the division bench.

Anirudh Krishnan, counsel for NACC India submitted that it was permissible for two Indian parties to have a foreign seat and this is was contemplated within the scheme of the Arbitration and Conciliation Act, 1996. 

Sasan Power is a fully owned subsidiary of Anil Ambani-led Reliance Power Ltd.