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1995 DIGILAW 40 (CAL)

ESSAR OIL LIMITED v. OWNERS

1995-01-27

BABOO LALL JAIN

body1995
BABOO LALL JAIN, J. ( 1 ) THE Court: This suit was instituted by Essar Oil Limited and another against the Owners man Parties interested in the Barge 'pegah' on September 17, 1993 and was marked as Admiralty Suit No. 3, 1993. ( 2 ) PURSUANT to the application made by the plaintiff in this suit an interim order was made by this Court on September 17, 1993 which was to the following effect:"there will be an order in terms of prayer (a) upon the undertaking of Mr. Roy Chowdhury's clients to indemnify the parties affected, in case it appears subsequently that the order of arrest has been obtained wrongfully by Mr. Roy Chowdhury's clients. " ( 3 ) THE facts of the case may be stated slimily as follows : on January 25, 1993, a Charterparty Agreement was arrived at between the plaintiff no. 2 Scindia Essar (ME.) Limited and Iraq Marine Services, the owners of Barge 'pegah'. The said Charterparty Agreement contained an Arbitration clause. It is not disputed that there was such a Charterparty Agreement between the plaintiff no. 2 and the said owners of Barge 'pegah'. ( 4 ) ON March 2, 1993 the said Barge 'pegah' arrived at Jellingham Yard of Burn Standard Company Limited on the River Hooghly. ( 5 ) ON September 6, 1993 the owners of the said Barge 'pegah' appointed Mr. Christopher Moss as arbitrator to adjudicate the disputes. By the said letter, the plaintiff no. 2 was called upon to appoint its own arbitrator in accordance with Cl. 26 (i) of the Charterparty Agreement failing which Mr. Moss was be Sole Arbitrator. ( 6 ) ON September 14, 1993 Mr. Bruce Haris was appointed as Arbitrator for and on behalf of the plaintiff no. 2 without prejudice to the rights and contentions of the plaintiff no. 2 and under protest challenging the jurisdiction of the learned arbitrators. ( 7 ) IT was after the appointment of the arbitrator by the plaintiff no. 2 that the instant suit was filed on September 17, 1993. ( 8 ) ON December 6, 1993, the plaintiff No. 2 forwarded written submissions to the said Arbitrators in London challenging the jurisdiction of the Arbitrators. ( 7 ) IT was after the appointment of the arbitrator by the plaintiff no. 2 that the instant suit was filed on September 17, 1993. ( 8 ) ON December 6, 1993, the plaintiff No. 2 forwarded written submissions to the said Arbitrators in London challenging the jurisdiction of the Arbitrators. ( 9 ) ON January 26, 1994 written submissions were forwarded to the Arbitrators for and on behalf of Iran Marine Services on the question of existence of contract and the jurisdiction of the Arbitrators. ( 10 ) ON February 23, 1994 an application was made before the Court for sale of the said barge. The said application was made on behalf of the plaintiff and directions were given to file affidavits. On February 23, 1994 the instant application was filed inter alia for stay of the suit under the provisions of the Foreign Awards (Recognition and Enforcement) Act, 1961, for dismissal of the suit and for vacating the order dated September 17, 1993. ( 11 ) THE Charterputy Agreement copy whereof is annexed to the petition shows that the place for entering upon agreement was London. The Agreement also provides as follows:"law and Arbitration. 26. 1. This Charter shall be governed by English Law and any dispute arising out of the Charter shall be referred to arbitration, in London, one arbitrator being appointed by each party, in accordance with the Arbitration Acts, 1950 and 1970 or any statutory modification or re-enactment thereof for the time being in force. On the receipt by one party of the nomination in writing of the other party's arbitrator, that party shall appoint their arbitrator within fourteen days, failing which the decision of the single Arbitrator appointed shall apply. If two Arbitrators properly appointed shall not agree they will appoint an Umpire whose decision shall be final. " ( 12 ) ON March 8, 1994 the Arbitrators in London, heard objections regarding jurisdiction as a preliminary issue and an order was passed rejecting the contentions of the plaintiff no. 2 and it was hell that the Arbitrators had jurisdiction to proceed with the arbitration proceedings. ( 13 ) ON April 12, 1994 Counter-statement and Counter-claim were filed on behalf of the plaintiff no. 2 in the said arbitration proceedings in London. 2 and it was hell that the Arbitrators had jurisdiction to proceed with the arbitration proceedings. ( 13 ) ON April 12, 1994 Counter-statement and Counter-claim were filed on behalf of the plaintiff no. 2 in the said arbitration proceedings in London. ( 14 ) THE first question that arises is as to whether the Foreign Award (Recognition and Enforcement) Act, 1961 has any application to the facts of this case. In the Foreign Awards (Recognition and Enforcement) Act, 1961 (Act 45 of 1961) (hereinafter referred to as the said Act of 1961), a Foreign Award has been defined as hereunder :"2. In this Act, unless the context otherwise requires 'foreign award' means an award on differences between persons arising out of legal relationships, whether contractual or not, considered as commercial under the law in force in India, made on or after the 11th day of October, 1960- (a)in pursuance of an agreement in writing for arbitration to which the Convention set forth in the Schedule applies, and (b)in one of such territories as the Central Government, being satisfied that reciprocal provisions have been made, may, by notification in the Official Gazette, declare to be territories to which the said Convention applies. "section 3 of the said Act provides as follows :"notwithstanding anything contained in the Arbitration Act, 1940, or in the Code of Civil Procedure, 1908, if any party to an agreement to which Article II of the Convention set forth in the Schedule applies, or any person claiming through or under him commences any legal proceedings in any court against any other party to the arbitration agreement or any person claiming through or under him in respect of any matter agreed to be referred to arbitration in such agreement, any party to such legal proceedings may, at any time after appearance and before filing a written statement or taking any other step in the proceedings, apply to the Court to stay the proceedings and the Court, unless satisfied that the agreement is null and void, inoperative or incapable of being performed or that there is not, in fact, any dispute between the parties with regard to the matter agreed to be referred, shall make an order staying the proceedings. " ( 15 ) THE Schedule of the said Act of 1961 which shows the Convention of the Recognition and Enforcement of Foreign Arbitral Awards provides, inter alia, as follows :"article I" 1. This Convention shall apply to the recognition and enforcement of arbitral awards made in the territory of a State other than the State where the recognition and enforcement of such awards are sought, and arising out of differences between persons, whether physical or legal. It shall also apply to arbitral awards not considered as domestic awards in the State where their recognition and enforcement are sought"article II of the said Convention provides as hereunder : "1. Each Contracting State shall recognise an agreement in writing under which the parties undertake to submit to arbitration all or any differences which have arisen or which may arise between them in respect of a defined legal relationship, whether contractual or not, concerning a subject-matter capable of settlement by arbitration. 2. The term "agreement in writing" shall include an arbitral clause in a contract or an arbitration agreement, signed by the parties or contained in an exchange of letters or telegrams. 3. The Court of a Contracting State, when seized of an action in a matter in respect of which the parties have made an agreement within the meaning of this article, shall, at the request of one of the parties, refer the parties to arbitration, unless it finds that the said agreement is null and void, inoperative or incapable of being performed. " ( 16 ) IT has been submitted on behalf of the plaintiff respondent that the application which has been made in the suit is not in the form. No prescribed form has been shown to me so far as the said Act of 1961 is concerned and as such there is no question of non-compliance with any form. In any event, the application does mention the said Act, of 1961 and the prayer is also under the said Act and I do not think that the said application can be or should be rejected on the ground of alleged non-compliance of form, particularly when no such form is prescribed. Furthermore form is a rule of procedure, which are in essence the hand-maids of justice. Such rules of procedure if any should not be allowed to defeat justice for which the same are made. Furthermore form is a rule of procedure, which are in essence the hand-maids of justice. Such rules of procedure if any should not be allowed to defeat justice for which the same are made. ( 17 ) IT was also submitted on behalf of the plaintiffs/respondents, that the parries to the arbitration agreement have their offices in United Arab Emirates and in Iran. The applicant is a Company incorporated and having its registered office at Iran and the plaintiff No. 2, has its office at United Arab Emirates. According to the plaintiff No. 2 neither Iran nor United Arab Emirates are parties to the New York Convention of 1958 which is the basis of and which is the schedule to the said Act of 1961. It was also submitted that neither Article 2 nor any other Article of the New York Convention applies to the arbitration agreement between the parties and that the applicant is not entitled to invoke section 3 of the said Act of 1961. ( 18 ) ARTICLE 1 of the said Convention makes it quite clear that the Convention applied to the recognition and enforcement of arbitral awards made in the territory of a State other than the State where the recognition and enforcement of such award was sought and arising out of differences between the persons whether physical or legal. Here in the instant case the arbitration agreement was made in London. The agreement provides for arbitration to be held in London and it also provides that the charterparty was to be governed by English Law. So for as the said Act of 1961 and the said New York Convention being Annexure thereto are concerned the only thing relevant is the territory of the State where the arbitral award is made. The nationality of the persons who are parties to the agreement is immaterial. The place where the agreement has been made and/or the place where the arbitration is to be held and award is to be made are material in so far as the said convention of 1958 is concerned. It refers to recognition and enforcement of arbitral awards made in the territory of a State other than the State where the recognition and enforcement of such awards are sought. It refers to recognition and enforcement of arbitral awards made in the territory of a State other than the State where the recognition and enforcement of such awards are sought. The language of section 3 of the Act of 1961 is mandatory and the Court has no option but to make an order to stay the proceeding. The petitioner who is the owner of the said vessel, has relied on the judgment reported in (1987)4 SCC 137 (General Electric Company v. Renu Sagar Power Company) and also the judgment of the Supreme Court reported in (1994)2 SCC 155 (Suenska Handlels Banking v. Indian Charge Chrome Ltd. ). Relying on the aforesaid two judgments of the Supreme Court, it was submitted that the provisions of section 3 of the said Act of 1961 are mandatory and that the right of foreign arbitration is an indefeasible right in which Court does not have any discretion. It was also submitted that even if the plaintiff enters into contracts with different parties the plaintiff can not defeat rights of the parties to the arbitration agreement. ( 19 ) IT was also sought to be submitted on behalf of the plaintiffs respondents that the arbitration agreement is not signed. It is well known that what the law requires is that the agreement should be in writing and whether the same is signed or not is not material. In the instant case the factum of the agreement is not disputed. ( 20 ) IT was also submitted on behalf of the petitioner that a combined application for challenging the jurisdiction and for stay is maintainable and the question of stay may be decided first. Reliance was placed on the judgment reported in (1984) 1 All ER 760 and it was submitted that a combined application for challenging the jurisdiction and/or maintainability of the action and for stay of the suit is maintainable and that the application for stay is to be heard first. ( 21 ) THE rules of the Calcutta High Court were in relation to 1937 Act, which had been repealed by section 10 of 1961 Act. No rules have been framed under 1961 Act although there was power to do so under section 11 of the Act. ( 22 ) UNDER the circumstances, there is no specific form of application for stay under section 3 of the 1961 Act. No rules have been framed under 1961 Act although there was power to do so under section 11 of the Act. ( 22 ) UNDER the circumstances, there is no specific form of application for stay under section 3 of the 1961 Act. Even if there was such a form it would be a matter of mere technicality and non-compliance with the form can always be condoned by the Court and cannot be permitted to defeat the substantive rights of a party to go to arbitration and to get stay. (1987) 4 SCC 137 (General Electric Co. v. Renusagar Power Co.) ( 23 ) IT was also submitted on behalf of the petitioner relying on the judgments reported in (1974) 2 All England Report 686 (The Golden Trader) and 1984 (1) All England Report 1126 (William and Glyn's Bank v. Astro Dinamico) that an admiralty suit can also be stayed under 1961 Act and/or the said convention. Under the New York Convention or the 1961 Act, there is no requirement regarding the Nationality of the contracting parties. This is in sharp contrast to the Geneva Convention and the 1937 Act which stipulates that the foreign award must be an award or difference between persons who are subject to the jurisdiction or powers notified by the Central Government. Under the New York Convention and the 1961 Act, the requirement is that the award must be in the territory of a notified country. There is no dispute that United Kingdom and/or London is one of the territories of notified countries and/or a party to the convention. ( 24 ) SINCE the arbitration in the instant case, is in. London, the award would be delivered in London and the award will be a foreign award within the meaning of 1961 Act. ( 25 ) IN the instant case, according to the charter party English Law is by choice of the parties, the law applicable to the transaction. According to English Law, the English Courts have stayed action in rem at the instance of the owner on the basis of the arbitration agreement as in (1974) 2 All England Reports 686 (supra ). ( 26 ) THE learned counsel for the petitioner also relied on the judgment of the Division Bench of this Court reported in (1983) 2 CLJ 334 (Mohammed Saleh Behbehani v. Bhoja Trader ). ( 26 ) THE learned counsel for the petitioner also relied on the judgment of the Division Bench of this Court reported in (1983) 2 CLJ 334 (Mohammed Saleh Behbehani v. Bhoja Trader ). In the said case, the Division Bench of this Court held that the admiralty jurisdiction of this Court does not extend beyond the limits laid down by the Colonial Courts of Admiralty Act, 1890 and claims arising out of breaches of charter-party, terms do not fall within the said jurisdiction. It was also held that cause of action in such cases does not create a maritime lien on the ship in favour of the party. ( 27 ) I am unable to accept the submissions on behalf of the plaintiffs/ respondents that the petitioners are not entitled to an order under section 3 of the said Act of 1961. I am also not inclined to accept the Submission on behalf of the plaintiffs/respondents that an action in ram cannot be stayed under the provisions of the said Act of 1961. The action is as against the ship and the only real party who is affected are the parties who claim interest in the ship and/or the owner. So far as the plaintiffs are concerned, they are really instituting the suit as against the owner of the vessel and the remedy also is as against the owner, arising out of the charter party agreement and/or breaches thereof. ( 28 ) SO far as the plaintiff No. 1 is concerned, the plaintiff No. 1 had no dealings or transactions whatsoever directly with the owners of the ship who are the petitioners. The dealings and transactions, if any, were between the plaintiff No. 1 and the plaintiff No. 2. The plaintiff No, 1 is an unnecessary party, in so far as the said ship and/or the owners of the said ship are concerned and there is no privity of contract as between the plaintiff No. 1 and the owners of the ship. ( 29 ) FROM the reading of the plaintiff it appears that the claim of the plaintiff No. 2 is based on the charter party and/or damages arising out of the breach of the said charter party. The same identical claim has been made by the plaintiff No. 2 before the Arbitrators in London by making counter-claim in the arbitration proceedings. The same identical claim has been made by the plaintiff No. 2 before the Arbitrators in London by making counter-claim in the arbitration proceedings. ( 30 ) IN my opinion, I have no doubt that this Admiralty Suit is liable to be stayed under the provisions of Foreign Awards Recognition and Enforcement Act, 1961. 1 am also satisfied that tire plaintiffs are not entitled to any order for arrest of the ship. I am also satisfied that the claim of the plaintiff No. 2 is totally based on the charter party agreement and/or the provisions thereof and/or for damages arising out of alleged breaches thereof. In view of the said judgment of the Division Bench of this Court no suit for such a claim can be filed before this Court in its Admiralty Jurisdiction and the suit is as such not maintainable and is liable to be dismissed and this Court has no jurisdiction to entertain, try and determine this suit in its admiralty jurisdiction. ( 31 ) IT is, therefore, ordered that the said suit being Admiralty Suit No. 3 of 1993 (Essar Oil Limited and Anr. v. Owners and Parties Interested in the Barge 'pegah') and all proceedings thereunder be and are hereby stayed. All interim orders made in the said suit including the interim order dated 17th September, 1993 is vacated. The Marshal of this Court is directed to release the said Barge 'pegah' from arrest forthwith and is also directed to inform all concerned authorities including port trust authorities, customs authorities and all other concerned Government authorities that the said Barge has been released from arrest in so far as the order dated 17th September, 1993 or other orders made in Admiralty Suit No. 3 of 1993 are concerned and that the said Barge is free to travel in so far as the said Admiralty Suit No. 3 of 1993 and/or the proceedings and/or orders made therein are concerned. The petitioner will in the first instance pay the statutory and/or custody charges or any other charges payable to the Marshal are concerned and the petitioner will be entitled to recover the same from the plaintiffs respondents who are hereby directed to pay and reimburse such custody and/or statutory charges or other charges as may be paid by the petitioner to the Marshal, within a fortnight after the receipt of the notice of demand in respect of such payments by the petitioner to the Marshal. ( 32 ) SINCE I am of the view that the plaintiffs were not entitled either to institute the Admiralty Suit in this Court nor were they entitled to obtain any interim order for arrest of the said ship, the suit is dismissed on the ground of lack of jurisdiction and/or non-maintainability Bud the petitioner/ owner of the said vessel will be entitled to recover the damages suffered by the petitioner owner as a result of obtaining of interim orders by the plaintiffs, and/or the arrest of the said barge, persuant thereto. The petitioner will be entitled to recover the same by taking or initiating appropriate proceedings as the petitioner may be advised or is entitled to under law. ( 33 ) THE plaintiffs/respondents have prayed for stay of the operation of this judgment and order which is opposed. Stay as prayed for is declined. ( 34 ) ALL parties including the Marshal of this Court as also the Senior Master and the Official Referee as also the Port Trust Authorities, Customs Authorities, Port Security Authorities and all other concerned Government Authorities in the Port of Calcutta and/or in the Port of Haldia will act on a signed copy of the operative portion of this judgment and order. Appeal dismissed.