On Tuesday the Supreme Court session commenced on a very serious allegation put down by Vedanta Ltd on National Aluminium Company Ltd (NALCO) the former pressing charges for non-compliance of the order dated January 14, 2020, due to which a three-judge bench allowed the plaintiff to bid for NALCO’s alumina tenders meant for export.
The three-judge bench consisted of some of the renowned Justices of India like DY Chandrachud, AS Bopanna and V Ramasubramanian who were left focusing on issues such as NALCO paying no heed to LET Export Order even though Vedanta had provided the bill of export and certification of goods already admitted into the Special Economic Zones (SEZ) in India as per the provisions led by SEZ with special reference to Rule 30, carried on under the concerned SEZ officials.
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Attorney General for India KK Venugopal was asked by the bench to give further suggestions to add to what they had concluded. Two years back on January 14th a bench was formed with the then Chief Justice SA Bobde, Justices BR Gavai and Surya Kant who by evaluating an SLP filed by NALCO against Odisha High Court’s order which had permitted Vedanta to take part in the tenders for the sale of its alumina. While considering the situation Supreme Court passed the following order:
The respondent(s) shall apply to the appellant viz National Aluminium Company Limited (NALCO), through any foreign subsidiary company. The appellant - NALCO shall register the respondent(s) if the application is following the requirements. The appellant – NALCO further accepts that it shall register Vedanta Resources Limited, a company incorporated in the United Kingdom, or any other foreign subsidiary of the respondent - M/s Vedanta Limited which is eligible to participate in its tenders for calcined alumina. However, the delivery of the consignment may be taken at Visakhapatnam Port on FOB basis, though the same will be for use in M/s Vedanta Limited SEZ at Jharsuguda, Odisha. As desired by NALCO in its affidavit dated 10.01.2020, the respondent – M/s Vedanta Limited undertakes to provide to NALCO the bill of export and certification of goods having been admitted into the SEZ by the concerned officer of the SEZ as per Rule 30 of the SEZ Rules.
After securing a verdict in their favour, Vedanta Resource Limited headquartered in the UK celebrated as a successful bidder for NALCO’s alumina tender but the latter refused to allow the firm to transfer the consignment to its SEZ unit and also insisted to end the transaction at the Visakhapatnam Port. Let Export Order (LET), a compulsory requirement to complete the transaction with the Customs authorities at Visakhapatnam Port was to be obtained by VRL Logistics as stated by the producers.
Vedanta made another petition to react to the above situation and called this ‘wilful disobedience of the January 14, 2020 regulation. Vedanta also complained that NALCO was not at all making deliveries at the Visakhapatnam Port under the Free on Board (FOB) guideline. In the first filled contempt, the Court had asked NALCO to take up the responsibility of delivering calcined alumina to Vedanta firm at Visakhapatnam on a FOB basis, in turn, to be used in Vedanta’s SEZ unit in Jharsuguda, Orissa.
NALCO’s Council had agreed to deliver the same if it was being used in M/S Vedanta Limited SEZ at Jharsuguda, Odisha, in fact, Vedanta Limited had nodded in agreement to provide the bill of export and necessary certification under Rule 30 of the SEZ Rules.
This is a ‘State Of Desperation Because If We Can't Get It From Here We'll Have To Get It From Abroad; Vedanta Situated In SEZ Which Is Equal To or Akin To Foreign Entity’, Senior Advocate Mukul Rohatgi exclaimed.
At the Court proceedings, senior Advocate Mukul Rohatgi branded the contempt as ‘gross’ and claimed Vedanta had preferred a second petition since one of the conditions imposed by NALCO in their tender was to sell alumina to a foreign body.
Moreover, he added, since Vedanta is a company situated in SEZ, Jharsuguda, Orissa, it can be easily recognised as a foreign entity and the transfer of goods from the Domestic Tariff Area to SEZ could be deemed as an export. "Petitioner is a company situated in SEZ in India and SEZ is in a place called Jharsuguda in Orissa and SEZ are huge industrial parts so the petitioner has a factory in SEZ for the manufacture of aluminium. The raw material is Alumina. NALCO has a virtual monopoly in India for selling and producing Alumina. They also manufacture aluminium but they have an excess of Alumina which they sell by tender and have the particular condition that they only sell to the foreign entity. Petitioner, though an Indian company, is situated in SEZ, by legal fiction, is situated in an area that is technically not called India. The rest of India - SEZ is called Domestic Tariff Area. Law creates a fiction that you are not in India- these areas which have more freedom to operate beyond the areas of India. So I'm in an SEZ which is not a domestic area and in fiction, it's not in India. They had this condition," submitted the Senior Counsel.
Commenting on NALCO’s adopted methods for selling alumina to Vedanta, Rohatgi said, "SEZ is at Jharsughua and plant of NACLO is at Damanjhodi- both are in Orissa and one simple way was it to go from one place in Orissa to another place in Orissa but they said that they'll transfer it through Vizag. So I had suggested that you transfer from Damanjhodi to Jharsuguda by me paying the cost with a certificate by the SEZ officer who wears 2 hats but they insisted that you will not get that way but this way. Their main concern was to get export benefits."
"How long is the tenure of the order? Is it for eternity?" taunted Justice Chandrachud and in response to the question posed by the judge, Senior Counsel said, "This is only for the tender and I've got 4/5 tenders but have not got goods for any. I have become successful in 3/ 4 but they haven't produced." "We are in a state of desperation because if we can't get it from here we'll have to get it from abroad because we manufacture aluminium," Rohatgi further said.
Vedanta will have a monopoly if foreign traders back out since it is a powerful opponent to NALCO: Attorney General KK Venugopal appearing for NALCO made the above statement adding that NALCO had 34 buys. Referring to the conditions noted in the tender, AG said that the supply of alumina was to be meant for foreign buyers and as for VRL’s involvement, though it was a foreign country, the petitioner was Indian and catering to Indian needs was not in the provision when it comes to alumina.
"We are a UK Company and it has opened an office in Jharsuguda. How are they concerned and they are getting dollars. There are consent orders," remarked Senior Advocate Mukul Rohatgi.
Responding to the quotations made by Rohatgi, AG said, "If we have to stand by it, we'll stand by it. He complains that I'm not delivering at FOB but I have spent huge amounts on setting up godowns at Vizag. I agreed that so far as this is cornered, I'm prepared."
At this moment, Justice DY Chandrachud, the presiding judge of the bench said, "You are conscious of the fact that goods will not be taken beyond Indian Territory but they will go to SEZ. You should have at that stage said that you wanted a LET Export Order. They will provide you with certification exactly in terms of the order and they will give you the benefits. Is the supply to SEZ for all purposes not deemed exports? What is the loss that NALCO is likely to suffer? This contempt is nothing but an issue where we need to find a way out. So long as you are willing to not insist on a LET Export order, that is the only thing. Our difficulty is 2 orders staring us in the face."
"All this fight is about past tenders and there is now a law that tender conditions that you are applying cannot be changed. Can you not change the future tenders to look over this problem?" the bench proposed at this juncture.
In response to the incantations made by the bench, AG concluded that Vedanta was one of the most powerful companies in the world and this would result in foreign buyers backing out.
Further speculating that this would result in Vedanta cornering the entire market, the AG said, "Vedanta is a powerful opponent to NACLO which produces Aluminium. They will be cornering the entire market. Vedanta is one of the most powerful companies in the world. They will treat it as a sale to rival Vedanta which is the biggest producer and one of the largest worldwide. They are trying to convert foreign export sales into the domestic market. If they export their aluminium outside India, then they'll be able to retain it. Once foreign trade backs out, they will have a monopoly. Market so far as competition is concerned can outbid and can corner the market. Foreigners will back out and this is a genuine fear which we have."
Aiming to reach a peaceful dissolution, the bench at this point suggested NALCO not insist on LET export orders while Vedanta was asked to provide the former with the bill of export and certification of goods shipped to SEZ by concerned SEZ officers under Rule 30 of the SEZ rules.
"Why do you think of this, you can tell us specifically they will provide bond certification to you, you will not insist on export order, over and above that, if there are requirements, please tell us. They have to give you certification in terms of rule 30 and once you get it you will get all the benefits. We're not saying that those are not germane conditions. For past contracts, we can say that you'll give them the benefits but for the future, you can put your conditions whatever you want," remarked Justice Chandrachud in the end.
The bench adjourned the session until next Tuesday, April 19, 2022, when the Attorney General for India pleaded for some time to take instructions.
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