SC issues notice on Tata Steel's plea

NEW DELHI: The Supreme Court on Monday stayed appointment of arbitrators in a matter of alleged contractual dispute between Tata Steel and Kazakhstan-based OJSC Ispat Karmet (now Mittal Steel Temirtau).

A bench headed by Justice A K Mathur, while staying the proceedings, also issued notice to a Kolkata company Lindsay International Pvt Ltd on Tata Steel's plea challenging appointment of an arbitrator by the Calcutta High Court.

While seeking stay of the High Court order, Tata said if it was not stayed then the arbitration between parties would commence on an issue where there was no dispute.

The alleged dispute pertained to faulty equipment supplied to Ispat. Lindsay, which had entered into a contract with Ispat in 2003 for supply of machinery, had contracted the job to Tata which in turn had let the job to ITL Industries.

Lindsay and Ispat were also directly corresponding with ITL Industries for repair and replacement work. After the equipment was found faulty and could not be commissioned, Ispat had discarded it and requested ITL and Tata Steel to take them back.

Tata contended that "there was no privity of contract between Tata and ITL... There is no arbitrable dispute between the parties, if any, it is between Ispat and ITL Industries."

Besides, it said: "Ispat to whom the machine was supplied has used the same for more than the warranty period and dispute cannot be arbitrated upon as the same is outside the scope of the agreement."

The High Court failed to appreciate that it's power to appoint an arbitrator was not an administrative power but a judicial power and it had to satisfy itself that there were conditions essential for a valid reference, the appeal stated, adding an ex-parte order was passed without giving an opportunity to it.