No Special Status In Commercial Contracts: Delhi High Court Rejects SAIL's "State Entity" Defense In Arbitral Award Challenge
The Court also upheld arbitral tribunal's rejection of SAIL's COVID-19 force majeure defence, and noted that the award adequately reasoned in USD 500,000-plus shipping demurrage dispute.
The Delhi High Court held that a public sector company cannot claim special treatment just because it is a "State" entity under Article 12 of the Constitution of India. Rejecting Steel Authority of India's argument that its “State” status gave it extra force majeure protections, the Court held that when a State entity enters into a commercial contract with a private party, the relationship is strictly governed by the contract's terms, without any special constitutional privileges.
The Bench dismissed a petition filed by SAIL under Section 34 of the Arbitration and Conciliation Act, 1996, challenging an arbitral award in favour of Norvic Shipping North America Inc. The Court also upheld the tribunal's finding that COVID-19 pandemic conditions did not amount to force majeure under the contract, since Government of India orders had specifically declared port and cargo-handling operations to be essential services throughout the lockdown period, meaning the pandemic did not "prevent" discharge of cargo within the meaning of the force majeure clause.
A Single Judge Bench of Justice Avneesh Jhingan observed, “The submission that the petitioner is a ‘State’ within the meaning of Article 12 of the Constitution of India and should be covered by force majeure, lacks merit. When a State under Article 12 enters into a contract with a private party, the relationship shall be governed by the contractual terms and no special status in a commercial contractual matter can be granted to the limb of the State”.
Senior Advocate Siddharth Yadav appeared for the petitioner and Advocate Amitava Majumdar appeared for the respondent.
The dispute arose from a 2019 Contract of Affreightment under which Norvic Shipping was to transport 1.6 million metric tons of limestone from the UAE to India across multiple voyages. Disputes arose over calculation of laytime and demurrage at Indian discharge ports for seven vessels, with the shipping company invoking arbitration in 2020. The three-member tribunal awarded amounts ranging from roughly USD 39,000 to USD 154,000 across the vessels, along with interest and costs, prompting SAIL's challenge.
SAIL raised two principal categories of objection. First, concerning MV 'Pegasus' and MV 'Esperia', it argued that Notices of Readiness had been issued prematurely, before the vessels were genuinely ready to discharge, and that laytime should have commenced later, relying on shipping industry literature to argue an invalid NOR can never be cured by subsequent events.
Second, for five vessels arriving during the onset of the COVID-19 pandemic in 2020, SAIL argued that force majeure under Clauses 55 and 56 of the contract should have excused delay, relying on various government and port circulars that it claimed the tribunal had ignored. SAIL further contended that as a "State" entity under Article 12, it was entitled to invoke force majeure benefits, and that the award was a non-speaking one that ignored its submissions in violation of natural justice and public policy, relying on Vijay Karia and Ssangyong Engineering.
The Court found that the tribunal had, in fact, engaged with each vessel's factual matrix and returned reasoned findings: for MV 'Pegasus', the NOR issued on the relevant date was valid since no evidence showed the vessel was actually unready to discharge cargo, and a subsequent generator breakdown did not retroactively invalidate an already-valid notice. On the COVID-19 vessels, the Court held that the Ministry of Shipping's office order of March 23, 2020, which declared cargo-handling an essential service, together with subsequent circulars reaffirming that ports must remain operational, undermined SAIL's claim that the pandemic had "prevented" discharge as required by the force majeure clause; the circulars SAIL relied upon had, in fact, been placed on record by the shipping company itself to demonstrate that operations were never actually disrupted.
On the Article 12 argument, the Court held that entering a purely commercial contract does not transform the ordinary contractual relationship into one attracting constitutional protections. The Court also rejected the "non-speaking award" argument, holding that the tribunal's conclusions were backed by specific factual findings on each vessel, and that the grounds relied upon by SAIL, patent illegality and a McDermott-style reasoning requirement, do not apply to international commercial arbitrations following the 2015 amendment to Section 34.
Accordingly, the Court dismissed the petition, finding no ground made out under Section 34(2) of the Act warranting interference with the award, and disposed of all pending applications.
Cause Title: Steel Authority of India Limited v. Norvic Shipping North America Inc. (Neutral Citation: 2026:DHC:8140)
Appearances:
Petitioner: Siddharth Yadav, Senior Advocate, Ashish Rana, Gaurav Raj, Amitabh Yash Singh and Narendra, Advocates.
Respondent: Amitava Majumdar, Tripti Sharma, Abhiesumat Gupta and Ishan Parashar, Advocates.