NE BUSINESS BUREAU
AHMEDABAD, OCT 5
Hope floats for ArcelorMittal Nippon Steel (AMNS) as it has received a shot in the arm from a Surat commercial court in the prolonged legal battle with Essar Group over payment of cargo handling charges at Hazira port, says a company release.
The Surat court has allowed the 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 court order would help AMNS save approximately Rs 300 crore as Essar was asking for charges to be paid on 2013 exchange rates.
The court said: ‘’EBTL obtained (a) loan only in 2020 and whether the intention of EBTL was to hedge its loan of 2020 at the exchange rate of 2013. Answer to this would also certainly be in the negative…..There is a vast difference between onerous and absurdity…….However, given the situation like present, the whole exercise of enforcing exchange rate of 2013 in the year 2020, is clearly an absurdity’’.
The court has also asked Essar not to restrain the terminal draft at a ceiling of 10 metre and consequently at least 11.3 m depth at the terminal at all times.
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.
The commercial court stated that “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.”
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.
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.
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.
AMNS had also challenged EBTL’s decisions to unilaterally increase vessel-related levies without any corresponding upward revision of the terminal draft. The court has not ordered AMNS to deposit or pay any sum towards this.
Meanwhile, sources said that owing to the ongoing port related dispute, AM/NS India has been suffering business losses of $80 million annually.
After acquiring the steel plant in 2019, AMNS wrote to the government of Gujarat requesting the transfer of all licences held in favour of EBTL, to AMNS. For now, the jetty continues to be operated and managed by Essar Bulk Terminal Limited (EBTL), an SPV 76 percent owned by the Essar Group, with 26 percent held by AMNS, which came with the IBC completion.
