Jaisu Shipping Company Pvt Ltd v. Oilcorp Oil Marketing Corporation
2001-09-28
K.BALAKRISHNAN NAIR, K.S.RADHAKRISHNAN
body2001
DigiLaw.ai
JUDGMENT K.S. Radhakrishnan, J. 1. The primary question that has come up for consideration -in this case is whether the petition filed by the respondent Corporation under section 9 of the Arbitration and Conciliation Act, 1996 (hereinafter called the Arbitration Act) is maintainable before the District Court, Ernakulam M.F.A.892/01 is preferred by the first respondent in Arbitration O.P. 86/01 and M.F.A.996/01 is preferred by the petitioner in Arbitration O. P. 86/01. Arbitration O.P. was filed by the petitioner under section 9 of the Arbitration Act for a prohibitory order restraining the second respondent from making any payments to the first respondent under the annual dredging contract for the year 2000-2001 and also for other consequential reliefs. 2. Short facts which are necessary for disposal of these cases are as follows: We may describe the parties according to their status in the Arbitration O.P. Second respondent invited tenders for awarding the work of dredging for maintenance of channels at Cochin Port for the years 2000-2001 and 2001-2002 (optional) for an approximate quantity of 13 million cubic metres of in-situ materials consisting of clay, silt and sand from Port's inner and outer channels. Several persons applied. First respondent's tender was accepted and a contract agreement was entered into between respondents 1 and 2. In order to carry out the work the 1st respondent approached the petitioner, a Corporation at Bahrain far hiring of Trailing Suction Hopper Dredger "Duke of SA". Petitioner accordingly offered to hire the said dredger at a charter rate of US $ 12000 per day excluding consumables to work in the outer channel only based on a quarterly average of 300 trips per month. The offer contained a sliding scale of charter rate in case the quarterly average fell below the required levels and it was indicated therein that the same would be added as an addendum to the chapter party. First respondent wide message, dated 6th July 2000 accepted the offer. Thereafter a uniform time charger party was entered into between the petitioner and First respondent on 29th July 2000 for the Duke of SA to be delivered by tire petitioner at the Port of Cochin by mid August 2000 for a hire period of three months renewable at the owner's discretion for a further period of three months. Charter party dated 29th July 2000 is produced before this Court as Annexure A-f. in M.F.A. 892/01. 3.
Charter party dated 29th July 2000 is produced before this Court as Annexure A-f. in M.F.A. 892/01. 3. Petitioner submits that pursuant to the charter party the dredger was mobilised and the same arrived at Cochin on 10th August 2000 and was cleared by customs. Petitioner's dredger performed according to the specifications within the parameters of the stipulations in the addendum to the charter party. Petitioner submits there was no complaints from the first respondent till December 2000. Later first respondent unlawfully in violation of the terms of the charter party off hired the vessel with effect from 5th December 2000. At the time of unlawful termination of the charter party by the first respondent large amounts were outstanding to the petitioner towards charger rate apart from other dues which were yet to be computed. Petitioner submits with a view to maintain good business relationship between the parties and to settle the issues a meeting was fixed between parties on 5th and 6th of March 2001 at Delhi. Petitioner demanded an amount of US $ 3,00,000 from the first respondent. First respondent took up the stand that the amount outstanding would not be more than us $ 1,62,000. Petitioner submits accordingly the first respondent paid into the account of the petitioner an amount of US $ 1,62,000 and agreed to deposit an amount of US $ 1,38,000 pending settlement of the disputes between the parties by arbitration. According to the petitioner the said arrangement was confirmed by letter dated 25th March 2001 by the first respondent and it was notified that the award would be binding on both the parties. It was also pointed out in case any amount was found payable by the petitioner to the first respondent the same should be paid for which purpose the petitioner was requested to furnish a corporate guarantee on the said account. According to the petitioner, in spite of petitioner furnishing corporate guarantee dated 9th April 2001, containing the endorsement by the BNP Paribas Bank, Bahrain agreeing to hold the amount of US $ 1,38,000 to be deposited by the first respondent as trust money and follow the arbitration award and act accordingly first respondent went back on its commitment and did not deposit the said amount.
Later, the petitioner suggested to the first respondent that matters in dispute between the parties be referred to arbitrator and suggested the name of one Captain Rajiv Kapur as Arbitrator. The sand request was not agreeable to the first respondent. Petitioner felt that there will not be any chance for amicable settlement of disputes. Meanwhile petitioner came to know that the work under the contract entered into between respondents 1 an3 2 had been satisfactorily completed and that first respondent was taking steps to collect the dues from 2nd respondent after settling dues. It is to safeguard the interests of the petitioner be approached the District Court and filed application under section 9 of the Arbitration Act, 1996. The District Court then vide Order dated 26th May 2001 in I.A. 1563/2001 was pleased to grant an ex parte order of injunction restraining the second respondent from making any further payment to the first respondent under the contract for dredging pending passing of an award in duly constituted arbitral proceedings. 4. First respondent entered appearance and resisted the application. The first respondent complained that the dredger given by the petitioner did not meet the specifications which were required to be met under the charter party. It was pointed that the hop per on the dredger was to have a capacity of 3200 cubic metres whereas, in actual fact, the hopper on the dredger had a maximum capacity of only 2970 cubic metres. Over and above, the overflow door of the hopper had to be so adjusted that it reduced the 4 capacity of the hopper to 2600 cubic metres. It was also pointed out that, the hopper in a time of 8 minutes, the pumps could load the hopper on in 15-18 minutes, effecting considerable delay in the dredging operations. Because of the various problems faced since the dredger did not meet the specifications of charter party first respondent had no option but to off-hire the dredger. According to him, the same was necessitated because of the petitioner's obligation under charter party. Later first respondent informed M the petitioner that an amount of US $ 72,135-09 is due to the first respondent, The first respondent also submitted in view of clause 31 of the Charter party, the parties are governed by the English law, and the disputes are to be referred to arbitration in London. 5.
Later first respondent informed M the petitioner that an amount of US $ 72,135-09 is due to the first respondent, The first respondent also submitted in view of clause 31 of the Charter party, the parties are governed by the English law, and the disputes are to be referred to arbitration in London. 5. Petitioner submitted even though charter party contemplated of recourse to arbitration under UK Law in the event of any dispute or difference arising between the parties, there was a subsequent understanding between the parties that they would resort to arbitration proceeding under the Indian Law, more specifically under the Indian Arbitration and Conciliation Act, 1996, although the number of Arbitrators to be appointed and the procedure to be followed was not agreed upon by the parties. While the petitioner avers that there was a separate written agreement between the parties for an arbitration in India as per the Indian Arbitration Laws, the 1st respondent would submit that there was only an informal understanding with regard to the conduct of arbitration proceedings under Indian Law, but the details regarding the number and manner of appointment of arbitrators and the procedure to be followed as also the venue of the arbitration had not been agreed upon. Further first respondent submitted before the court below that the charter party contract contemplated recourse to arbitration under English Law and at London and there is no written agreement to the contrary and therefore the District Court has no jurisdiction to entertain the petition under the Arbitration Act, 1996. 6. The Court below rejected the contention of the first respondent and took the view that the court has got jurisdiction to entertain the petition under section 9 of the Act. Court below placed reliance on the decision of the Supreme Court in Sundaram Finance Ltd. v. N.E.P.C. India Ltd. A.I.R. 1999 S.C. 565, and took the view that the Court has got power to pass interim orders even before commencement of arbitral proceedings. The Court then passed an interim in Order on 26th May 2001 restraining the 2nd respondent in paying any amount to the 1st respondent.
The Court then passed an interim in Order on 26th May 2001 restraining the 2nd respondent in paying any amount to the 1st respondent. Court later modified its earlier interim Order vide Order dated 12th June 2001 holding that the said order will have effect of withholding only an amount of US $ 4,03,595 and that the second respondent could release the amount to the first respondent producing bank guarantee for the said amount. Aggrieved by those orders both these appeals have been preferred by the petitioner and the first respondent. When the matter came up for hearing we heard Senior Counsel Sri P. K. Kurian for the appellant in M.F.A. 892/01 and Sri Rajiv A. George on behalf of the appellant in M.F.A. 996/01. 7. Senior Counsel Sri P. K. Kurian submitted that the Court below has committed an error in entertaining the petition under section 9 of the Arbitration Act, 1996 as well as charter party. According to the Counsel as per charter party the dispute if any could be resolved by arbitration in London and the charter party would be governed by English Law and the Court in India has no jurisdiction to entertain any petition under section 9 of the Arbitration Act. 8. Counsel appearing for respondent. Sri Rajiv A. George on the other hand, submitted that the correspondence between the parties, especially Annexures 2 and 3 in M.F.A. 892/01 as well as the pleading would show that parties have agreed to resolve the dispute under the Indian Arbitration Act, 1996 and therefore petition under section 9 of the Arbitration Act is I 'maintainable. 9. Counsel on either side admitted charted party. It is relevant to refer to clause 31 of charter party which reads as follows: "31. Law and Arbitration: (a) This charter party shall be governed by English Law and any dispute arising out of this charter party shall be referred to arbitration in London, one arbitrator being appointed by each party, in compliance with the Arbitration Acts 1950 and 1979 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 14 days, failing which the arbitrator already appointed shall act as sole arbitrator.
On the receipt by one party of the nomination in writing of the other party's arbitrator, that party shall appoint their arbitrator within 14 days, failing which the arbitrator already appointed shall act as sole arbitrator. If two arbitrators properly appointed shall not agree they shall appoint an unpire whose decision shall be final. (b) Should any dispute arise out of this charter party, the matter in dispute shall be referred to three persons at New York, one to be appointed by each of the parties hereto, and the third by the two so chosen; their decision or that of any two of them shall be final, and for purpose of enforcing any award, this agreement may be made a rule of the Court. The arbitrators shall be member of the Society of Maritime Arbitrators, Inc. of New York and the proceedings shall be conducted in accordance with the rules of the Society. (c) Any dispute arising out of this charter party shall be referred to arbitration at the place stated in Box 33 subject to the law and procedures applicable there. (d) If Box 33 in Part I is not filled, in sub-clause (a) of this clause shall apply. (a), (b) and (c) are alternatives; state alternative agreed in. Box 33."t It is evident from the abovementioned clause 31 of the charter party that parties agreed that they would be governed by English Law and any dispute arising out of the charter party shall be referred to arbitration in London and that one arbitrator being appointed by each party in accordance with the Arbitration Acts 1950 and 1979 or any statutory modification or re-enactment thereof for the time being in force. 10. We may examine the question whether the correspondence between the parties as well as the averments in the case would come within the scope of section 7(4) (b) or 7(4) (c) of the Act. Before examining the correspondence between the parties as well as averments in this case we may refer to the charter party. Clause 32 of the charter party is crucial in deciding dispute between the parties which is extracted below: "32.
Before examining the correspondence between the parties as well as averments in this case we may refer to the charter party. Clause 32 of the charter party is crucial in deciding dispute between the parties which is extracted below: "32. Entire Agreement: This is the entire agreement of the parties, which supersedes all previous written or oral understandings and which may not be modified except by a written amendment signed by both parties."t We may indicate no written amendment signed by both parties as .per clause 32 is forthcoming in this case. Unless and until clause 32 of the charter party is modified by a written amendment signed by both the parties arbitration dispute will have to be resolved at London applying the English Law. Correspondence between the parties are not sufficient enough to oust the arbitration at London and the application of English Law. 11. Petitioner, as we have already indicated relies on two letters dated 17th April 2001. Subsequent to those letters another letter was issued by the petitioner dated 19th April 2001. The relevant portion of the same is extracted below for easy reference. "For all clarity and to avoid misinterpretation and misunderstandings please note that the charter party clearly states in item 33 where any official arbitration should take place. This is in London, U. K. under U. K. law. We have no intention to deviate from this agreement. * * * * * * From the correspondence we were under the impression that you suggested that an arbitration committee would be put together in India for an amicable settlement. However from your fax we now understand that you wish an official arbitration committee and in India. We regret to inform you that we cannot agree since this is not in line with the Charter Party. Based on your rejection of our offer for an amicable settlement as per our fax oilc/rdg/0324/bah, dated 12th March 2001 we inform you that your offer is now expired and nil and void. We will now claim the full amount due to us as per the charter party." (emphasis supplied) 12. All these correspondence between the parties would indicate tha there were some understanding, between the parties to resolve the dispute amicably. Those understanding would not oust the jurisdiction of arbitration at London, U.K. or jurisdictions of U.K. Courts or applicability of English Law.
All these correspondence between the parties would indicate tha there were some understanding, between the parties to resolve the dispute amicably. Those understanding would not oust the jurisdiction of arbitration at London, U.K. or jurisdictions of U.K. Courts or applicability of English Law. We are of the view the proceedings between the parties would not take away the scope and ambit of clause 32 of the charter party which specifically stated that charter party may not be modified except by a written amendment signed by both parties. In this case no written amendment signed by both the parties is forthcoming so as to oust the jurisdiction of the arbitration at U.K. as governed by English law has provided under clause 31. 13. We are of the view that the two letter dated 17th April 2001 or the averments made by the petitioner in the proceedings would not satisfy the definition of Arbitration Agreement Under section 7 (4) (a) (b) read with section 2 (b) of the Act. Section 7 (4) (b) says that an arbitration agreement is in writing if it is contained in an exchange of, letters, telex, telegrams or other means of telecommunication which provide a record of the agreement. Further section 7 (4) (c) says that an exchange of statements of claim and defence in which the existence of the agreement is alleged by one party and nut denied by the other would also be an arbitration agreement. Clause 32 of the charter party as we have already indicated deals with the venue as well as law to be applied, i.e., London, U.K. and English Law. The said clause can be nullified only by a written amendment signed by both the parties. We have already indicated parties have not produced any written agreement signed by both parties ousting clause 32 of charter party. Mere correspondence would not take away the venue which is at London as well as the law applicable. We have already indicated letter dated 17th April 2001 sent by first respondent would not indicate that they are agreeable for arbitration in India and also the applicability of the Indian Law with regard to the dispute between the parties. We therefore reject the contention of the petitioner that the ingredients of section 7 (4) have been satisfied in this case.
We therefore reject the contention of the petitioner that the ingredients of section 7 (4) have been satisfied in this case. We therefore hold the application filed under the Arbitration Act before the District Court is not maintainable. We therefore allow M.F.A. 892/01 and dismiss M.F. A. 996/01.