The Calcutta High Court has directed Bengal-based secondary steel maker SRMB Srijan Ltd to deposit Rs 70 crore with the court in an arbitration case involving coal bed methane (CBM) producer Great Eastern Energy Corporation Ltd (GEECL).

Justice Moushumi Bhattacharya rejected the petition filed by SRMB which sought a stay on an arbitral award handed out to GEECL linked to a commercial dispute over gas sales and purchase agreement.

SRMB, which manufactures TMT bars which are used in the construction industry, has been directed to deposit 50 per cent of the amount by way of a bank guarantee and the remaining by way of cash to the Registrar, Original Side of Calcutta HC.

GEECL, which produces CBM from the Ranigunj field in the Burdwan district, had invoked arbitration proceedings after SRMB terminated the contract, seeking specific performance of the Gas Supply and Purchase Agreement (GSPA) and damages.

The arbitral tribunal held the termination of the GSPA to be wrongful and illegal and awarded a sum of Rs 58.5 crore to GEECL along with damages. The Y.K. Modi family owned-GEECL claims an amount of Rs 101.39 crore as the outstanding amount due to it at present.

SRMB was one of the customers of GEECL which signed GSPA with the TMT maker in 2011, which was valid till April 30, 2034. A dispute arose between the parties about the commercial terms of the GSPA in 2014 and the company had initiated arbitration proceedings after that.

GEECL received the arbitral award in its favour on June 21, 2022.

Justice Bhattacharya rejected SRMB’s petition on February 29 and directed the TMT maker to deposit the money within 5 weeks, i.e. April 2.

Commenting on the court order, SRMB director Asish Beriwala said the company was exploring legal options. “Since the matter is sub-juice, I cannot comment on it,” Beriwala said.

SRMB had prayed for an unconditional stay under the second proviso to section 36(3) of The Arbitration and Conciliation Act, 1996 on the ground that the arbitration agreement was induced by fraud.

Observing that ‘‘fraud must be spelt out and must be obvious to the eye, at least for an unconditional stay of the award’’, Justice Bhattacharya in her order said, “the petitioner has made vague and omnibus allegations without any particulars of the fraud committed on the part of the respondent”.

“It is evident from the records that the petitioner’s only intention for filing the present application is to avoid making any deposit for securing the award,” the order read.

“Since the court has recorded its lack of satisfaction on the prima facie case made out by the petitioner/award-debtor on the arbitration agreement being induced/effected by fraud, the prayer for unconditional stay of the award is rejected,” the order further noted.

Earlier this year, GEECL also received a favourable order in a similar GSPA dispute with fertiliser maker Matix Ltd.