Kansai Steamship Co. Ltd. v. Union of India — 1983 DIGILAW 244 (CAL)

JUDGMENT Under a contract of charter-party entered into by and between Kansai Steamship Company Ltd. of Japan and the Union of India on, the 13th November, 1981, the sea going vessel M. "V. Maresol" (hereinafter referred to as, the said vessel) owned by Kansai Steamship Company Ltd. was chartered to the Union of India for carriage of an, agreed quantity of Muriate of Potash (Trimmed) in bulk from the port of Vancouver, Canada to the ports of Haldia and Calcutta in the east coast of India or other ports in the west coast of India for agreed freight payable by the Union of India. The charter-party contained, inter alia the following clauses:- "Clause 11. The ship-owners in all matters arising under or affecting this contract (including matters before loading or after discharge) shall be entitled to the like privileges and rights and immunities are contained in sections 2 and 5 of the Carriage of Good by Sea Act, 1924, and in Article IV of the Schedule- thereto, (see back) as being agreed terms of this contract. This, charter-party shall be deemed to be a contract for the carriage of goods by sea to which the said sections and the said Article apply." "Clause 17. Any dispute arising under this charter shall be settled in accordance with the provisions of the Arbitration Act, 1950 in, London each party appointing an Arbitrator, and the two Arbitrators in the event of disagreement appointing an Umpire whose decision, shall be final and binding upon both parties hereto, The Arbitrators shall be commercial men. 2. A cargo of Muriate of Potash in bulk was loaded on the said vessel at Vancouver against Bill of Lading issued on behalf of the Master of the said vessel. It was recorded in the Bill of Lading that the goods would be delivered in India to the order of the Ministry of Agriculture, Government of India and the party to be notified was the Minerals and Metals, Trading Corporation of India Limited. The Bill of Lading also contained the following endorsement:- "All terms, conditions and exceptions of charter-party currently in effect shall be deemed to be incorporated in this Bill of Lading in the event of any conflict between any terms and conditions of the charter-party and this Bill of Lading, terms and conditions of the charter-party will prevail". 3. The Bill of Lading also contained the following endorsement:- "All terms, conditions and exceptions of charter-party currently in effect shall be deemed to be incorporated in this Bill of Lading in the event of any conflict between any terms and conditions of the charter-party and this Bill of Lading, terms and conditions of the charter-party will prevail". 3. The said vessel arrived at the port of Cuddalore in India on or about the 30th December, 1981 where a portion of the said cargo was discharged. The balance of the cargo was discharged at Calcutta in January, 1982. On or about the 7th January, 1983 the Union of India and one India Potash Ltd. filed a suit against Kansai Steamship Company Limited in this Court being Admiralty Suit No. 2 of 1983 claiming, inter alia, a decree for Rs. 3,59,193,61p. alleging that 301.138 tonnes of the said cargo was delivered short by the said vessel and the owners of the vessel as carriers failed and neglected to carry and deliver the cargo in terms of the contract of carriage. 4. In the present application made on a notice dated the 5th May, 1983, by Kansai Steamship Company Limited prays that the said Admiralty Suit No. 2 of 1983 and all proceedings thereunder be stayed. The defendant contends that the disputes sough to the raided in the suit have arisen in respect of the contact contained in the said charter-party and are covered by the arbitration agreement contained therein. The Foreign Awards (Recognition & Enforcement) Act, 1961, it is contended is applicable to the said arbitration agreement and, accordingly, the said suit should be stayed under the provisions of section 3 of the said Act. It is contended in the alternative that the suit should be stayed under the Arbitration Act, 1940. 5. It is alleged that the defendant at all material times and when the suit was filed, was ready and willing to have the disputes referred to arbitration and there is no reason why the said disputes should not be adjudicated in arbitration as agreed. It is alleged that the entered appearance therein. 6. At the hearing the learned Counsel for the defendant cited the case of (1) Brennan Corporation & Anr. v. The State Trading Corporation of India Ltd., reported in 1981 (2) CLJ 185 . It is alleged that the entered appearance therein. 6. At the hearing the learned Counsel for the defendant cited the case of (1) Brennan Corporation & Anr. v. The State Trading Corporation of India Ltd., reported in 1981 (2) CLJ 185 . In that case, the arbitration clause in the charter-party did not refer to disputes under the Bill of Lading and the words of incorporation of the clauses of the charter party in the Bill of Lading were general and did not specifically include the arbitration clause in the charter-party. It was held in the facts of that case that the disputes covered by the arbitration clause would be those which would arise under the performance of the charter-party between the parties to he charter and a party to the Bill of Lading not a party to he charter would not be bound thereby. The decisions of (2) The Merak, reported in (1965) 1 All Eng. Rep. 230 and (3) The Annefield, reported in (1971) 1 All Eng. Rep. 394 were cited and considered in the judgment. 7. The learned Counsel for petitioner also cited the case of (4) President of India v. Metcalfe Shipping Company Limited, reported in (1969) 2 QB 123. In this case, the charter-party contained an arbitration clause to the effect that any dispute arising under the charter should be settled in accordance with the provisions of the Arbitration Act, 1940 in London. The charter-party further provided that Bills of Lading were to be issued without prejudice to the charter-party. A dispute arose between the charterer, the Union of India and the ship-owners over an alleged shortage of cargo was referred to arbitration. By consent the further question viz., whether the dispute was covered by the arbitration clause was also referred to be adjudicated in arbitration. 8. A dispute arose between the charterer, the Union of India and the ship-owners over an alleged shortage of cargo was referred to arbitration. By consent the further question viz., whether the dispute was covered by the arbitration clause was also referred to be adjudicated in arbitration. 8. A special case was stated to the English Commercial Court which held that though the Bill of Lading issued had achieved a contractual status in the hands of the shippers and had subsequently been endorsed by them to the charterers yet in respect of the carriage of the goods, the charter-party was the primary contract between the parties and the issue of a Bill of Lading by a charterer whether or not he was the shipper would not in the absence of any inconsistency between it and the charter-party, lead to a cancellation of the contract under lying the charter-party. It was held that the arbitration clause in the charter-party continued to bind the parties and the dispute as to short delivery fell to be determined under it. The decision of (5) Rodocanachi Sons and Co. v. Milburn Brothers, reported in Aspinall’s Reports on Maritime Cases, Vol. 6, page 100, was also cited by learned Counsel for the petitioner. It was observed in this case by Lindley, L J. as follows:- “That the charter-party is the contract between the parties in he absence any showing of contrary intention, is settled by authority. Unless there is some express provision to the contrary to be found in the charter-party, the Bill of Lading as between the charterers and the ship-owners is to be looked upon as a mere receipt for the goods”. 9. In the fact of that case it was held that the charter-party was the contract between the owner and the charterer of the ship and the ship-owners was not relieved from his liability under the charterer by an exception contained in the Bill of Lading. 10. Learned Counsel for the plaintiff contended on the other hand that the arbitration clause in the charter-party did not refer to or cover the disputes which might arise under the Bill of Lading. He submitted that the words of incorporation in the Bill of Landing were general and did not incorporate the arbitration clause specifically. 10. Learned Counsel for the plaintiff contended on the other hand that the arbitration clause in the charter-party did not refer to or cover the disputes which might arise under the Bill of Lading. He submitted that the words of incorporation in the Bill of Landing were general and did not incorporate the arbitration clause specifically. It was submitted that the Bill of Landing should be held to be the contract of carriage between the parties and that it should be further held that the dispute arising out of this contract were not covered by the arbitration agreement in the charter-party. 11. It appears to me that the arbitration clause in the charter-party in this case which is also a contract of affreightment and carriage is directly germane to the subject-matter of the Bill of Lading as observed by Lord Denning in The Annefield (supra). It is recorded in the Bill of Lading that the cargo was to be delivered to the order of the Ministry of Agriculture of the Government of India, the charterer. In the suit, the Union of India along with the other plaintiff claim to be the owners of the cargo and also the endorses of the Bill of Lading. The plaintiffs also claim to be the holders of the Bill of Lading, for value. 12. The Union of India, one of the plaintiffs is a party to the charter and as such the arbitration clause in the charter-party is binding on it. The contract of carriage as between the Union and the defendant is primarily the charter party and the Bill of Lading would be deemed to be a mere receipt of the goods shipped. The disputes between the Union of India and the defendant are covered by the arbitration clause in the charter-party. For the reasons above, the Union of India one of the plaintiffs in the suit comes within the mischief of the arbitration clause. The defendant, therefore, succeeds in the application. There will be an order in terms of prayer (a). Costs will be costs in the arbitration proceedings.