SC rules in favour of arbitration in Gail, GPSC case

GAIL had entered into long-term contract for 15 years in 2004 with GSPC to provide natural gas till 2019

The Supreme Court ruled today that the dispute between public sector Gas Authority of India Ltd (GAIL) and Gujarat State Petroleum Corporation (GSPC) on price of gas imported from Qatar should be decided by arbitration, which is an effective alternative remedy.

The Gujarat high court’s intervention at the instance of the GSPC was wrong, the judgment said, while setting aside the high court judgment in favour of GSPC.

GAIL had entered into a long-term contract for 15 years in 2004 with GSPC to provide natural gas till 2019. The price renewal for the gas was to be provided from January 1, 2014 onwards . Disputes broke out two years ago over pricing and the GSPC moved the high court which quashed the termination of contract by Gail.

The Supreme Court judgment said: “The contents of the sales agreement, the Price Side Letters and the correspondence exchanged between Gail and GSPC give a clue of the complex nature of the price fixation mechanism. Therefore, the High Court should have relegated GSPC to the remedy of arbitration and the Arbitral Tribunal could have decided complicated dispute between the parties by availing the services of experts.”