In a rare instance of arbitration over the ‘force Majeure clause of a contract agreement due to the Covid-19 pandemic, Adani Vizag Coal Terminal Private Limited has initiated proceedings against Visakhapatnam Port Trust. AVCTPL commenced the arbitration against VPT after the latter disputed the ‘force Majeure clause of the contract invoked by it and terminated their deal (30- year concession) citing a breach of contract that guaranteed a volume of cargo stipulated in the concession agreement.
‘Force Majeure is a clause in a contract allocating the risk of loss if performance becomes impossible or impracticable, especially as a result of an event that the parties could not have anticipated or controlled. Going by the timeline of the event, the VPT had in October 2020, served a termination notice on Adani Vizag Coal Terminal Pvt. Ltd., a unit of APSEZ, for failing to get the minimum guaranteed cargo stipulated in the concession agreement. Replying to the notice, AVCTPL contended that since the force majeure event (Covid-19 pandemic) has exceeded 120 days, it would seek termination of the deal on mutual consent as per the clauses of the agreement.
Invoking the force majeure clause due to the Covid-19 pandemic, AVCTPL had sought termination of the Coal Terminal deal with VPT with mutual consent. When VPT did not buy its argument, AVCTPL commenced arbitration in the context of the force majeure clause.
Speaking to Hello Vizag, Law officer at Visakhapatnam Port Trust, Krishna Bapi Raju said “Visakhapatnam Port Trust disputed Adani Vizag Coal Terminal Private Limited’s invocation of force majeure clause and issued a termination notice as the latter committed breach of contract,” Consequently, AVCTPL initiated arbitration and VPT is contesting it, he added. It may be mentioned here that in March 2011, APSEZ won the rights in an auction to build a 6.4 MT a year capacity steam coal import terminal by placing the highest revenue share of 40.10 percent. The deal was APSEZ’s first facility on India’s eastern coast.
The Port giant built the terminal with an investment of over Rs 400 crore and started commercial operations in 2014 with a 100 percent mechanised facility. After stopping its operation for two years from 2016, Adani Vizag Coal Terminal had resumed services in 2018. VPT, confident of winning the arbitration against AVCTPL, is planning to convert the berth allocated to Adani earlier into a multi-purpose cargo berth.