Introduction
Matix Fertilizers & Chemicals Limited, a company that operates West Bengal’s only large integrated fertilizer plant at Panagarh near Durgapur, is facing a legal dispute with Great Eastern Energy Corporation Limited (GEECL), a natural gas producer. GEECL has claimed more than Rs 100 crore from Matix for allegedly not honouring the terms of the Gas Sale and Purchase Agreement (GSPA) that they signed in July 2017.
Background
The GSPA between GEECL and Matix was valid till August 31, 2018. It contained a Minimum Guarantee Offtake clause, which required Matix to purchase a certain quantity of coal-bed methane gas from GEECL. However, GEECL claimed that Matix did not fulfil this obligation and defaulted on the payments. According to the latest accounts notes, GEECL had then claimed Rs 148 crore including interest from Matix.
Arbitration and Litigation
GEECL initiated arbitration proceedings against Matix to recover the dues. The arbitrator passed an award in favour of GEECL in December 2020, ordering Matix to pay nearly Rs 113 crore including interest. GEECL then approached a commercial court in Rajarhat, Kolkata, to execute the arbitration award. The court passed an order on January 8, 2024, attaching Matix’s property and bank accounts and directing them to leave aside a sum of Rs 112.79 crore.
Matix challenged the execution order in the Delhi High Court, seeking a stay on the grounds that the arbitration award was erroneous and contrary to law. The high court granted a conditional stay on January 11, 2024, subject to Matix depositing the entire award amount along with 50 per cent of the interest within three weeks. The money was to be deposited in a fixed deposit receipt.
Current Status and Future Implications
As of now, it is not clear whether Matix has deposited the amount as per the high court’s order to operationalise the stay. A spokesperson for Matix said that the matter is sub-judice and declined to comment further. A spokesperson for GEECL said that the execution order passed by the commercial court still holds good and is not stayed by the high court.
The legal dispute between GEECL and Matix may have significant implications for both parties as well as the fertilizer industry in eastern India. Matix, which claims to have a 20 per cent market share in the region, may face financial difficulties if it has to pay the hefty amount to GEECL. On the other hand, GEECL may benefit from recovering its dues and securing its gas supply contract with Matix. The outcome of the case may also affect the prospects of other coal-bed methane gas producers and consumers in India.