Gujarat High Court Upholds Refusal To Enforce $109.95 Million Foreign Arbitral Award Against Adani Energy

The Gujarat High Court has upheld an order refusing to enforce a foreign arbitral award that had directed Adani Energy Ltd. to pay USD 109.95 million to Asean LNG Trading Co. Ltd. (now Petronas LNG Ltd.) on the basis that Adani had triggered the 'Take or Pay' clause by failing to accept contracted LNG cargoes.

Under a 'Take or Pay' clause, a buyer must either accept and pay for the contracted quantity of goods or compensate the seller even if it does not take delivery, subject to the terms of the contract.

Holding that the arbitral tribunal had wrongly proceeded on the premise that a concluded contract had come into existence despite the parties never agreeing on essential commercial terms, the Court found that fastening 'Take or Pay' liability on Adani was contrary to the fundamental and substratal principles of Indian contract law.

Dismissing Petronas LNG's appeal against a single-judge bench order, the Division Bench comprising Chief Justice Sunita Agarwal and Justice D.N. Ray held,

"With the above, we reach at an irresistible conclusion that none of the reasonings given by the enforcement Court for refusal would violate Explanation 2 of Section 48(2)(b) of the Act' 1996 and that the liability of Take or Pay triggered in the facts of the present case defies all logic."

The dispute arose from a Master LNG Sale and Purchase Agreement dated August 2, 2006 between Malaysia LNG Companies, represented through Petronas LNG, and Adani Energy Ltd. for the supply of LNG over three years.

On March 12, 2007, the parties executed a Confirmation Notice covering four cargoes scheduled for April, May, June and August 2007. Alleging that Adani failed to accept delivery, Petronas invoked arbitration.

The arbitral tribunal held that the Confirmation Notice constituted a concluded contract, found Adani liable under Clause 12.2 of the agreement for the April, May and June cargoes, awarded damages for the August cargo, and ultimately directed it to pay USD 109,949,528.

However, the April cargo was resold on April 6, 2007 before reaching the Hazira terminal, the May cargo was sold before loading, and the June and August cargoes were never loaded.

Petronas then sought enforcement of the foreign arbitral award before the Gujarat High Court under Section 48 of the Arbitration and Conciliation Act, 1996.

By a judgment dated July 5, 2018, the Single Judge refused enforcement, holding that the award conflicted with the fundamental policy of Indian law.

Petronas challenged that decision under Section 50, arguing that the enforcement court had exceeded the limited scope of review by reassessing the award on its merits.

Adani, on the other hand, contended that the tribunal had imposed contractual liability despite the absence of consensus on essential contractual terms.

Rejecting the appeal, the Division Bench reiterated that an enforcement court cannot undertake a review of the merits of a foreign arbitral award.

It observed, "The test laid down therein is that a foreign award must be read as a whole, fairly, and without nit-picking."

The court nevertheless held that the enforcement court had correctly examined whether the award offended the fundamental policy of Indian law.

It found that the Henry Hub price remained only an alternative pricing mechanism, the final contract price and receiving terminal were never agreed, the delivery notices were unilateral and unsigned, no standby letter of credit was furnished, and the arbitral tribunal had not found that any cargo had physically reached Adani's receiving terminal and been refused.

Holding that it was commercially inconceivable to impose a 'Take or Pay' obligation when even the destination of the cargo remained unsettled, the court concluded that the tribunal's finding that there was a concluded contract was perverse and irrational.

Holding that these deficiencies went to the very foundation of the fundamental policy of Indian contract law, the bench observed:

"All the above noted issues go to the very core value of the fundamental policy of the Indian law that in absence of a concluded contract, there was no question of breach."

Accordingly, by its judgment dated June 24, 2026, the High Court dismissed Petronas LNG's appeal and upheld the refusal to enforce the foreign arbitral award.

For Appellant (Asean LNG Trading Co. Ltd.): Senior Advocate Devang Nanavati with Advocates Parinay Vasandani, Kartik Yadav, Meghesh Khandelwal, Vinayak Goswami and Manav Shroff.

For Respondent (Adani Energy Ltd.): Senior Advocate Mihir Joshi with Advocates Ayan Patel and Ayushri M. Thakkar