Calcutta High Court
Sifandros Carrier Ltd vs Lmj International Ltd on 3 October, 2018
Equivalent citations: AIRONLINE 2018 CAL 1424
Author: Soumen Sen
Bench: Soumen Sen
IN THE HIGH COURT AT CALCUTTA
Ordinary Original Civil Jurisdiction
ORIGINAL SIDE
BEFORE:
The Hon'ble JUSTICE SOUMEN SEN
G.A. No.514 of 2017
E.C. No.975 of 2015
SIFANDROS CARRIER LTD.
VS.
LMJ INTERNATIONAL LTD.
For the Petitioner : Mr. Amitava Majumdar, Adv.
Ms. Damayanti Sen, Adv.
Mr. Souvik Kundu, Adv.
Mr. Dipam Sengupta, Adv.
For the Defendants : Mr. Anindya Kumar Mitra, Sr. Adv.
Mr. Surojit Nath Mitra, Sr. Adv.
Mr. D.N. Sharma, Adv.
Ms. Sananda Mukhopadhyay, Adv.
Mr. Tarun Aich, Adv.
Hearing concluded on : 07.09.2018
Judgment on : 03.10.2018
Soumen Sen, J.: This is an application under Section 48 of the
Arbitration and Conciliation Act, 1996 challenging the enforceability of a
foreign award dated 21st September, 2012 as amended by the amending
award dated 20th November, 2012. The grounds for challenge are:-
(a) That there was no concluded contract on 2nd April, 2008 between
the parties.
(b) That there was no valid invocation of the alleged arbitration clause
and, accordingly, the appointment of Mr. Christopher Moss was
bad, invalid and illegal.
(c) That the tribunal was not properly constituted.
(d) That the Tribunal did not consider the objection raised by the
petitioner as to the legality and validity of the charterparty dated
2nd April, 2008 as well as the arbitration clause and the
composition and constitution of the arbitral tribunal.
Although, various grounds have been taken in the petition but
arguments have been advanced essentially on two points, namely, the
constitution of the arbitral tribunal and that there was no valid concluded
contract.
Before considering the objections raised by the petitioner, it is
necessary to briefly indicate the facts.
The transaction between the parties relates to a voyage charter party
dated 2nd April, 2008 by which Sifandros Carriers Ltd. (hereinafter referred
to as the "award-holder") chartered the vessel M.V. Gant Vision to LMJ
International Ltd. (hereinafter referred to as the "award-debtor") for the
carriage of iron ore fines in bulk from Haldia and Paradip, India to a safe
port in China.
In the transaction between the parties, M/s. Anthony Giavridis
Maritime Inc. (hereinafter referred to as "AGM") acted as a broker for the
award-holder and M/s. Trampline of New Delhi (hereinafter referred to as
"Trampline") acted as the agent of the award-debtor.
On 31st March, 2008, Trampline, by an email addressed to AGM,
informed them about a potential charterer and enquired about the
availability of suitable vessels for shipment of iron ore fines. Trampline
promised to send full details should the award-holder be interested to carry
the award-debtor's cargo. By a further email of 31st march, 2008, Trampline
forwarded a firm indication that the award-debtor is interested in shipping
its cargo using the award-holder's vessel and sent the terms of the possible
fixture along with the details of the award-debtor for the consideration of the
award-holder. In clause 25 of this fixture note, Trampline proposed that
arbitration be held in Singapore and English Law be applicable, with other
details being as per the pro-forma charter party. In reply, AGM proposed
certain terms of carriage and amended Clause 25 of the draft fixture sent by
Trampline to provide for arbitration in London instead of arbitration in
Singapore, with the applicable law continuing to be English law. In addition
to the aforesaid, AGM suggested freight from the proposed USD 52/PMT to
USD 54.5/PMT. In response to the said email, Trampline sent two
subsequent emails on 31st March, 2008 proposing amendments to certain
terms of carriage specified in the draft fixture, by reversing the freight
charges and inserting an option for the charterers, i.e. the award-debtor, to
pay the freight in Euros. However, Clause 25 of the said fixture, which
stipulated arbitration in London under English Law, was accepted without
any modification by Trampline.
Thereafter, at 16:01:23 hours (that is, 20:32 India Time), Trampline
recorded the terms which had been negotiated between the parties and by
its further email sent at 20:32:25 hours on 1st April, 2008, Trampline
requested time till 1600 hours IST of the following day for lifting the said
cargo. In other words, Trampline sought time till 1600 hours IST for final
acceptance by the award-debtor. Pursuant to a telephonic conversation,
AGM, on 1st April, 2008, agreed to grant time till 12 noon Greek time on 2nd
April, 2008 for the award-debtor to confirm the terms of the charterparty.
Trampline by an email of 2nd April, 2008 at 10:35 hours (incorrectly dated
8th April, 2008), sent to AGM requested the award-holder to reconsider the
following amendments:-
i) that Freight be USD 52 PMT;
ii) that Charterers need 72 hours free time at Haldia for Docs; and
iii) that Charterers would delete turn time at disport.
Trampline, by a further email on the same date, i.e. 2nd April, 2008
(incorrectly dated 8th April, 2008), requested the award-holder to agree to fix
the exchange rate at 'US Dollar 1 = EURO 1.58'. AGM replied to the above
two emails received from Trampline by its email of 2nd April, 2008 at 11:03
hours suggesting the following changes:-
i) 40 hours free time at Haldia; and
ii) Exchange Rate to be fixed at 1 USD = 1.50 . The Charterers
were also given an option to pay in USD as the Owners did not
wish to take the exchange rate risk.
Trampline, however, by its email of 2nd April, 2008, sent at 11:54
hours (incorrectly time-stamped by Trampline as being sent on 8th April,
2008), sought to re-negotiate the terms, alleging that the award-debtor had
been offered another vessel on more favourable terms. Trampline suggested
the following changes:-
i) Exchange Rate to be 1 USD = 1.50 ;
ii) Freight to be USD 47 PMT;
iii) 40 hours free time at Haldia, 12 hours free time at
Paradip; and
iv) No turn time at China.
In reply, by an email dated 2nd April, 2008 sent at 12:05 hours, AGM
accepted the changes proposed by Trampline and requested that the Notice
of Readiness (in short "NOR") of the vessel be accepted at any time - day or
night, Sundays and holidays included (ATDN SHINC). Trampline by its
email of 2nd April, 2008 at 12:32 hours confirmed that the terms of carriage
were in order and the vessel was fixed. Trampline also requested
reconfirmation of the clean fixture from AGM. By its email of 2nd April, 2008
at 12:29 hours, AGM confirmed that the vessel was fixed on the main terms
which had been negotiated and agreed upon between the parties and
requested Trampline to send the full recap and the Pro-forma charter party.
Trampline, by its email of 2nd April, 2008 at 13:24 hours, sent the fixture
recap to AGM, recording the terms which had been finally agreed upon and
accepted by the parties. AGM, by its email sent at 04:18 hours on 2nd April,
2008 requested Trampline, inter alia, to send the award-debtor's Pro-forma
charter party. Trampline by an email of 2nd April, 2008 at 1753 hours (that
is, 2017 hours Greece time) forwarded the said Proforma Charterparty to
AGM. Thereafter, the award-holder by its email dated 2nd April, 2008 sent
at 0654 hours (1854 hours) confirmed the award-holder's acceptance of the
award-debtor's Proforma Charter party provided the same suitably amended
to incorporate the main terms agreed between the parties. The award-
debtor also suggested few minor changes. However, as the vessel had been
fixed, the broker gave notice of the vessel's expected time of arrival (ETA) at
Haldia, and in the early hours of 5th April, 2008, AGM sought details of the
agents appointed by the award-debtor at the load port. On 3rd April, 2008,
Trampline by its email sent at 14:08 hours (that is 16:33 Greece time)
confirmed the award-debtor's acceptance of the award-holder's comments
on the Proforma charterparty and reconfirmed that the vessel is clean fixed
and they would revert with the Working charterparty. The Working Charter
party was subsequently sent by Trampline to AGM on 4th April, 2008 and
Trampline sought confirmation of the same. Along with the said email, the
GENCON charter party dated 2nd April, 2008 was sent as an attachment.
The vessel arrived at Haldia Port on 4th April, 2008 and tendered Notice of
Readiness at 2300 hours and the NOR was accepted on the same day by
M/s. Bon Voyage Shipping and Logistic, i.e. the agent appointed by the
award-debtor.
On 9th April, 2008 at 17.59 hours (India time), AGM requested
Trampline to make certain corrections in the Working Charterparty in
accordance with the agreed terms between the parties. By the said email,
AGM specifically requested correction of Clauses 29, 30, 31, 35, 36 and 41.
In response to the said email, on 9th April, 2008, Trampline, by an email
sent at 18:24 hours (20:50 Greece Time), confirmed the insertion of the
correct clauses relating to issuance of a bill of lading and recorded the
changes in the fixture recap. The email stated that all that was left to be
incorporated in the Working Charter party were the bank details of the
award-holder. As the drawn-up Charter party was not received from
Trampline by an email of 18th April, 2008, AGM requested Trampline to
provide the same for its record. Trampline replied that since there was a
holiday in India, it would revert with the Charterparty on Monday which
would be 21st April, 2008.
The award-debtor completed loading at Haldia on 20th April, 2008 at
02:00 hours and the vessel sailed for Paradip and tendered its Notice of
Readiness at 11:00 hours on 21st April, 2008. The said NOR was accepted
by the award-debtor through its agents on 22nd April, 2008 at 09.30 hours.
It transpired that the vessel berthed on 27th April, 2008 due to congestion at
Paradip. The award-debtor remitted EURO 1,238,248 towards part payment
of freight (USD 1,915,570 equivalent to EURO 1,277,046.67). AGM by an
email dated 13th May, 2008, while confirming the receipt of freight payment
of EURO 1,238,248 against the debit note of USD 1,915,570 requested the
Trampline to make good of the short payment being balance amount of
EURO 38,998.67 in accordance with the terms of the contractually agreed
exchange rate. Trampline, in its reply dated 13th May, 2008 (incorrectly
dated 13th June, 2008), inter alia, alleged that the charterer/ award-debtor
had paid the equivalent amount in US Dollars as per the exchange rate
given by the Indian Central Bank. AGM immediately replied stating that the
award-debtor was ignoring the terms of the charter party and the award-
holder expected the award-debtor to perform their obligations in accordance
with the agreement. The said email was followed by a further mail of 14th
May, 2008 from AGM to Trampline, inter alia, demanding payment of the
outstanding freight and demurrage incurred at the load port. The notice of
readiness was tendered at Xingang, China on 15th May, 2008 at 0005 hours.
On 19th May, 2008 at 0811 hours, lay time expired.
In view of alleged failure on the part of the award-debtor to pay the
balance freight as well as demurrage due to the additional time consumed
by the award-debtor for cargo operations at the port of loading, the award-
holder initially instituted proceeding for attachment and garnishment of the
award-debtor's property in the United States District Court for the Southern
District of New York. However, the said proceeding was dismissed. On 19th
May, 2009, Swedish Club, the Protection and Indemnity Club (P & I Club) of
the award-holder wrote to Trampline and requested the latter to inform the
award-debtor of the invocation of the arbitration agreement by the award-
holder and the appointment of Mr. Christopher Moss as the award-holder's
arbitrator. The P & I Club also requested the award-debtor to nominate its
arbitrator. Subsequently, by a letter dated 17th August, 2010 addressed to
the award-debtor, the award-holder through its Solicitors M/s. Bose and
Mitra & Co. served the statement of claim filed on its behalf before Mr.
Christopher Moss. The award-debtor replied to the letter dated 17th August,
2010 by its letter dated 4th November, 2010 (issued "without prejudice") in
which it alleged that the purported charter party dated 2nd April, 2008 had
not been signed by the award-debtor and, accordingly, the terms and
conditions contained therein in relation to arbitration in Clause 25 read with
Clause 44 did not apply to the award-debtor, with the arbitration clause
being void and inoperative. The letter dated 4th November, 2010 alleged that
the purported charter party alleged to have been executed on 2nd April, 2008
was not a valid and binding document as the same had not been signed by
the award-debtor, and, even otherwise, the arbitration proceedings could not
commence as the constitution of the arbitral tribunal was contrary to the
provision of the English Arbitration Act, 1996. The letter also alleged that,
as such, the reference sought to be initiated at the instance of the award-
holder was bad, void and patently illegal, inasmuch as, there was no
subsisting dispute or claim in respect of which there could any arbitration
proceeding. A copy of the said letter was mailed to the arbitral tribunal
consisting of Mr. Christopher Moss.
In response to the aforesaid letter, the solicitor of the award-holder,
while denying the contents of the letter dated 4th November, 2010 again
invoked arbitration under Clause 44 of the Charterparty and requested the
award-debtor to nominate its arbitrator within 14 days from the date of
receipt of the letter, which was dated 25th May, 2011. The said letter was
received by the award-debtor on 27th May, 2011.
In view of the alleged failure of the award-debtor to nominate its
arbitrator, the award-holder, through their advocates M/s. Bose and Mitra
and Co., wrote a letter dated 29th July, 2011 to the President of LMAA
(London Maritime Arbitrators Association) to appoint an arbitrator on behalf
of the award-debtor. A copy of the said letter was sent to the award-debtor
by fax, email, courier and hand, with the award-debtor acknowledging the
receipt of the said letter. By their email dated 1st August, 2011, addressed
to both the parties, the President of LMAA, while acknowledging receipt of
request to appoint an arbitrator, sought further details of the nature of the
dispute and asked for the payment of GBP 250 to be made towards
administrative costs in making a default appointment as per LMAA rules.
By a letter dated 9th August, 2011 the solicitors of the award-holder wrote a
letter to the President of LMAA (marked to the award-debtor) setting-out in
brief the nature of the dispute between the parties and informing them that
the award-holder would be making the payment of GBP 250 towards
administrative costs. The award-debtor acknowledged the receipt of the said
letter. The solicitor of the award-holder, on receipt of instructions from the
award-holder, addressed another letter to the President of LMAA, informing
him that they still awaited nomination of the arbitrator for the award-debtor.
The solicitors also enquired about the status of the appointment of the
arbitrator for the award-debtor. The said letter was sent to the award-
debtor and was duly acknowledged by the award-debtor. The President of
LMAA, by an email dated 29th November, 2011, informed the parties of the
appointment of Anthony Hallgarten, QC, as arbitrator appointed by the
award-debtor. The said email was also addressed and sent to the award-
debtor. The award-holder, by a letter dated 19th December, 2011, through
their Advocates M/s. Bose and Mitra and Co., served the email dated 19th
December, 2011 upon the award-debtor to ensure that the proper notice of
appointment of arbitrator was served upon the award-debtor. The said
letter was duly acknowledged by the award-debtor. Pursuant to the
instructions of the award-holder, its solicitor sent a letter dated 23rd May,
2012 to the arbitrators along with the claim submissions on behalf of the
award-holder. The said letter was also sent to the award-debtor. The
award-debtor acknowledged the receipt of the said letter and the statement
of claim. The award-holder set out their case in their claim submissions
dated 23rd May, 2012 and sought payment of EURO 38,998 by way of
unpaid freight and USD 553,378.68 by way of unpaid demurrage along with
interest. The tribunal by email dated 29th May, 2012 directed the award-
debtor to file defence submissions by 26th June, 2012. The award-debtor
however, did not comply with the direction of the Tribunal. By an email
dated 28th June, 2012, the advocates of the award-holder wrote to the
tribunal and the award-debtor seeking further directions for the award-
debtor to file their defence submission, in view of the non-compliance of the
earlier direction. This email of the award-holder was replied to by the award-
debtor by their email of the same date in which the award-debtor alleged
that the purported arbitration proceeding at the instance of the award-
holder was patently illegal, misconceived, untenable and contrary to the
public policy of India due to several reasons as stated in its previous email
dated 4th November, 2010. It was reiterated that there was no subsisting
dispute or claim in respect of which there could be any arbitration
proceeding and as such the award-debtor denied its liability. The tribunal by
their email on 3rd July, 2012 made a final order of defence submission to be
served on the award-holder and the tribunal by 10th July, 2012. Since one
of the email addresses of the award-debtors was incorrectly stated, the
advocates of the award-holder by their email dated 5th July, 2012 requested
the Tribunal to correct the address and resend the directions of 3rd July,
2012. The tribunal, accordingly, sent its order to the correct email address.
The award-debtor did not file their defence submission. As a result of this,
the award-holder wrote an email dated 20th August, 2012 to the tribunal
seeking suitable directions with regard to the award-debtor's non-
compliance of orders requiring them file their defence submission. The
tribunal, under such circumstances, by an email dated 21st August, 2012,
made a final and peremptory order against the award-debtor as per Section
41 of the English Arbitration Act, 1996. The peremptory order was also
served upon the award-holder stating that the defence submissions were to
be served by 28th August, 2012. The tribunal in the said order made clear
that if the defence submissions were not served within this further final
period, the tribunal would conclude that the award-debtor would not take
part in the arbitration proceeding despite being given every reasonable
opportunity to do so. The order stated that the tribunal would consider the
documents and submissions served on behalf of the award-holder and if
appropriate would proceed to an award. The said order of the tribunal was
sent by email dated 21st August, 2012 to all the parties. As defence
submissions were not served by 28th August, 2012, and since there was no
communication received by the tribunal in response to its email dated 21st
August, 2012, the tribunal proceeded to consider the documents and claim
submissions of the award-holder and to write its award. The arbitral
tribunal made an award in favour of the award-holder on September 21,
2012 and ordered the award-debtor to pay the balance Freight and
Demurrage of 38,998.67 euros and 368,919,12 euros respectively. It
amended the said Award by correcting some clerical errors and issued an
Amended Award on November, 20, 2012.
The argument on behalf of the award debtor is made by Mr. Anindya
Kumar Mitra, Sr. Adv., and Mr. Surajit Nath Mitra, Sr. Adv.
Mr. Anindya Kumar Mitra, Sr. Adv., restricted his submission with
regard to the composition and constitution of the arbitral tribunal. Mr.
Mitra has submitted that the arbitral tribunal was not constituted in
accordance with the agreement between the parties or law of the country
where the arbitration was held and accordingly not enforceable in view of
the Section 48(1)(d) of the Arbitration and Conciliation Act, 1996
(hereinafter referred to as the "Indian Arbitration Act").
Mr. Mitra submits that the arbitration was held in London and
English law is to apply. The constitution of the Arbitral Tribunal is governed
by Sections 15 and 18 of English Arbitration Act, 1996 (hereinafter
referred to as the "English Arbitration Act"). The award has been made
by two arbitrators, one nominated by the claimant/ award-holder and the
other nominated by the President of LMAA on behalf of the award debtor in
the arbitration. The letter of appointment dated 29th July, 2011 was written
by the claimant/award-holder to the President of LMAA. The default
appointment of a second Arbitrator was made by the President of LMAA as
communicated to the parties by an email of LMAA dated 29th November,
2011. It is thus clear that second arbitrator was appointed by the President
of LMAA on the basis that there was a default in appointment of an
Arbitrator by the charterer/award-debtor in the arbitration proceedings.
The Arbitral Tribunal in the award has set out the arbitration clause at
paragraph 3 of the Award.
Mr. Mitra has referred to paragraph 4 of the award to show the
circumstances under which the second arbitrator Mr. Hallgarten was
appointed. The said paragraph reads:-
"4. Pursuant to the said provision in due course Owners
appointed me Christopher Moss, a member of the LMAA, of 4 Charlotte
Place, London, SW1V 1DP as their arbitrator. By an email dated 29th
July, 2011 from Bose & Mitra on their behalf, Owners asked the
President of the LMAA to appoint a second arbitrator, claiming that
Owners had intimated the appointment of their arbitrator to Charterers,
that by a letter dated 25th May, 2011 they had called upon Charterers
within two weeks to appoint their arbitrator and that they had received
no response. In consequence, the President duly appointed me Anthony
Hallgarten QC, a member of the LMAA, of 20 Essex Street, London,
WC2 3AL to be the second arbitrator."
Mr. Mitra submits that since the English law of Arbitration is
applicable, the arbitrators could not have proceeded without appointing any
umpire or third arbitrator whereas, the arbitral tribunal consists of two
arbitrators only.
Mr. Mitra submits that the contract specifically stipulates that in case
of disputes and differences arising out of the contract, it shall be referred to
arbitration in London and English law is to apply. The arbitration
agreement was concluded by the first paragraph of the arbitration clause,
but number of arbitrators was not mentioned. It only says "Arbitration in
London" which shall mean the Arbitral Tribunal shall consist of a sole
arbitrator. Mr. Mitra refers to Sections 15, 16 and 17 of the English
Arbitration Act and submits that the said sections have clearly mentioned
the procedure for appointment of arbitrators and the constitution of the
Arbitral Tribunal. Mr. Mitra submits that Section 15(3) of the English
Arbitration Act stipulates that if there is no agreement as to the number of
arbitrators, the Tribunal shall consist of a sole arbitrator. There is no
agreement that the number of arbitrators shall be two. Section 15(2)
provides that "unless otherwise agreed by the parties, an agreement that the
number of arbitrators shall be two or any other even number shall be
understood as requiring the appointment of an additional arbitrator as
chairman of the Tribunal". The said provision shall not apply as the
arbitration agreement in the instant case is complete in the sense that the
parties have agreed upon a sole arbitrator for reference to an "Arbitration in
London" without mentioning the number of arbitrators and accordingly
Section 15(3) of the English Arbitration comes into play and so there would
be one arbitrator only.
Mr. Mitra submits that the meaning of the expression arbitration
clause providing "for arbitration in London" without mentioning the number
of arbitrators means a sole arbitrator is to be appointed and in this context
Mr. Mitra has referred to and relied upon the Queen's Bench decision
(Commercial Court) in Atlanska Plovidba vs. Consignaciones Asturianas
S.A. ("The LAPAD") reported at 2004 (2) LLR 109 (paragraphs 8,9, 15-
23) and also paragraphs 4-035 at pages 125 of Russell on Arbitration, 23rd
Edition.
The learned Senior Counsel has submitted that where no choice of
arbitrator is made, Section 15(3) of the English Arbitration Act implies a
reference to a Tribunal consisting of a sole arbitrator.
Mr. Mitra has referred to the email dated 28th June, 2012 sent by the
respondent to the claimant with copies marked to Christopher Moss, the
arbitrator nominated by the claimant and submits that in the said communication the award-debtor has referred to its earlier email dated 4th November, 2010 in which, inter alia, the award-debtor raised objection with regard to the Constitution of the Arbitral Tribunal as it was not constituted as per the provision of the English Arbitration Act. Mr. Mitra has made specific reference to the 3rd paragraph of the letter dated 4th November, 2010 which reads:-
"It appears that the said Sifandros had also taken steps for constitution of the Arbitral Tribunal even though we are not aware nor any notice was issued to us at any point of time"
The grievance of the petitioner is that the Tribunal did not deal with this letter at all. Mr. Mitra has further submitted that the provisions of the English Arbitration Act shall prevail over LMAA Rules and any rules of the LMAA Rules which is in any way inconsistent with Section 15 of the English Arbitration Act would not be valid. In any event, no notice in writing was issued by the claimant/award-holder calling upon the respondent/award- debtor to join in or agree on the appointment of a sole arbitrator. Therefore, the procedure for constituting the arbitral tribunal was not set in motion in accordance with the agreement of the parties.
Mr. S.N. Mitra, the learned senior counsel appearing on behalf of the petitioner, has supplemented the argument made by Mr. A.K. Mitra, Senior Advocate.
The learned Senior Counsel has submitted that the award suffers from total non-application of mind. The award is a "copy paste" of the claim submission. A perusal of the claim submission and particularly 'Exhibit-B' to the claim submission would demonstrate that there was no concluded charter party of 2nd April, 2008. The parties even at that time were negotiating on the terms of the charter party. The materials on record would show that such negotiations continued long after 2nd April, 2008. The pro-forma charter party disclosed in the claim submissions have never fructified into a concluded contract. The petitioner had never agreed to enter into a voyage charter party on Gencon 1994 Form. Moreover, the Fixture Recap dated 2nd April, 2008 of the claim submission would show that the terms thereof were not agreed between the parties. The Arbitral Tribunal had also failed to take into consideration the fact that the "Rider clauses"
and particularly clause 44 thereof were never agreed upon by the parties. Mr. Mitra has referred to the email dated 25th May, 2011 and submits that in the said email, the award-holder has contended that the charter party was based on the pro-forma charter party dated 29th May, 2007 of the applicant forwarded to them through the brokering channel whereas in the statement of claim, it is alleged that the claim is arising out of a voyage charter party dated 2nd April, 2008 on the Gencon 1994 Form with the additions and amendments evidenced by a Fixture Recap dated 2nd April, 2008. The proforma charter party of which reference has been made and forms part of the claim submission would show that many of the clauses of the pro-forma charter party were not agreed upon by the respondent. The award-holder also having regard to the order passed by the United States District Court, Southern District of New York directing release of the funds attached to the award-holder could not have maintained the arbitration proceeding. The Arbitral Tribunal erred in not deciding its jurisdiction though a challenge was thrown by the respondent as would appear from its e-mail dated 28th June, 2012 and letter dated 4th November, 2010. The non- consideration of such objections affects the valuable rights of the award debtor and in failing to consider such jurisdictional issue the Arbitral Tribunal had acted in contravention of the Fundamental Policy of Indian Law.
The award debtors stated that the communication received after the appointment of Mr. Anthony Hallgarten, Q.C. by LMAA as the second Arbitrator, did not prescribe any time-table on the basis of LMAA terms. Further, they contended that though the Arbitral Tribunal was comprised of two Arbitrators yet all directions were given by one Mr. Christopher Moss alone.
The purported award allowed the award-holder to unjustly enrich itself by enabling the award-holder to received payments in Euros than in USD at rate or rates different from the exchange rate prevailing as on the date of payment. The purported award is contrary to law and also contrary to public policy of India.
Per contra, Mr. Amitava Mazumdar, Advocate on behalf of the award- holder has submitted that the above arguments appear to be a belated attempt to further obfuscate issues and delay the execution of the Award. A party who has deliberately avoided participating cannot question the jurisdiction of the tribunal after being faced with an unfavourable award. Mr. Mazumdar has referred to Sleepwell Industries Co. Ltd. v. LMJ International Ltd., reported at 2017 (4) CHN (CAL) 621 for the proposition that a party who has consciously and deliberately avoided a proceeding knowing fully well that the result of the proceeding may be adverse to its interest cannot complain of violation of natural justice. It is submitted that a Special Leave Petition filed by LMJ being SLP No. 25189 of 2015 was dismissed by the Hon'ble Supreme Court by an order dated September 2, 2015.
The Arbitration Agreement in the present case is contained in the Pro-forma Charter party and more specifically at Clause 44 of the Rider Clauses to the Proforma Charterparty. The Arbitration Agreement was governed by English Law and the procedure to be followed was as set out in the London Maritime Arbitrators' Association Terms, 2006 ("LMAA Terms").
It is submitted that under the English Arbitration Act and Section 15(1) thereto, parties are free to agree on the number of arbitrators to form the tribunal and whether there is to be a chairman or umpire. This means that appointing a chairman/umpire (as the case may be) is not mandatory as per the English Arbitration Act and parties are free to agree otherwise.
As per the Arbitration Agreement and the procedure agreed between parties if parties were not agreeable to appointing a sole arbitrator, each party was to appoint one arbitrator each. The Award-holder was not agreeable to a sole arbitrator and therefore called upon the award-debtor on numerous occasions to appoint its own arbitrator, which the award- debtor failed to do. Accordingly, the award-holder, through its advocates called upon the President of the LMAA to appoint the second arbitrator as per the procedure envisaged between parties in the Arbitration Agreement.
After the Tribunal was constituted, in spite of notices, the award- debtor did not file its Defence Statement nor was there any communication from the award-debtor requesting for any oral hearing. Accordingly, the tribunal proceeded to decide the matter on "documents only" basis. It is stated that this procedure is permissible.
Mr. Mazumder has referred to Section 34 of the English Arbitration Act which deals with and submitted that the said section (Procedural and evidential matters), gives complete autonomy to the tribunal to decide all procedural and evidentiary matters, subject to the right of the parties to agree any matter, which inter-alia in Section 34(2)(h) include whether and to what extent there should be oral or written evidence or submissions. It is submitted that this is corollary to Section 19 read with Section 24 of the Indian Arbitration Act, and is therefore a procedure well recognized under Indian law and within the contours of Indian public policy.
It is further stated that the LMAA Terms, in Rule 12 (Arbitration Procedure), incorporates Section 34 of the English Arbitration Act. In fact, the LMAA Terms give the Tribunal complete autonomy to decide, in the absence of an agreement between parties, the extent to which there should be oral or written evidence or submissions in the arbitration and whether the arbitration is to be "on documents alone" i.e. without a hearing.
Upon claim submissions being served by the award-holder, first on 17th August 2010 and thereafter again on 23rd May 2012, numerous directions were given to the award-debtor to file its Defence Submissions. Under Section 41(5) of the English Arbitration Act, if without showing sufficient cause a party fails to comply with any order or directions of the Tribunal, the Tribunal may make a peremptory order prescribing time for compliance. This was duly done in the present case by the Tribunal on 21st August 2012. Since the award-debtor did not comply with the Final and Peremptory Order of the Tribunal, under Section 41(7)(c) of the English Arbitration Act, the Tribunal being empowered to proceed and decide the dispute on the basis of such materials as provided to it, duly conducted the Arbitration on a "documents alone" and proceeded to pass the Award on 21st September, 2012.
Under the LMAA Terms, the Second Schedule sets out the procedure to be followed generally, in the course of arbitration proceeding. Since no Defence Submissions were ever served by the award-debtor, Rules 1-4 of the Second Schedule of the LMAA Terms were followed in their entirety, and to the extent possible in light of the default of the award-debtor in participating in arbitration.
Under Rule 13 (c) of the LMAA Terms, the Tribunal may of its own accord determine if the arbitration is to be dealt with on a "documents alone". The Tribunal while making the Final and Peremptory Order on 21st August, 2012, specifically put the award-debtor on notice that should they choose not to serve their written submissions, the Tribunal would consider the documents and submissions on behalf of the Claimant/ award-holder and proceed to an Award. Therefore, all pre-requisites under Rule 13(c) of the LMAA Terms, being followed, the present Arbitration was proceeded with on a "documents only" basis.
The counsel for the award-holder states that the Arbitration Agreement specifically states that if the Arbitration is on documents, the concurring decision of the two arbitrators appointed by both parties or in the event of one party failing to appoint its arbitrator, the arbitrator appointed on their behalf by the President of the LMAA shall be treated as final.
Mr. Mazumber submitted that, moreover, the ground of improper constitution of the Tribunal is a ground which may be specifically taken during the Arbitration proceedings, and where a party takes no part in the arbitration proceeding chooses not to participate in the proceedings, it can also challenge the Award under Section 72 of the English Arbitration Act. It is further submitted that under Section 4(1) read with Schedule 1 of the English Arbitration Act, Section 72 is a mandatory provision which will have effect notwithstanding any agreement to the contrary. The award- debtor has not taken recourse to this remedy under Section 72 nor has it filed any appeal before the English High Court within the stipulated time under the English Arbitration Act and is accordingly estopped from raising any objections on merits of the case in the enforcement proceedings of the Award. Mr. Mazumdar in this context has relied upon in Naval Gent Maritime Ltd. V. Shivnath Rai Harnarain (I) Ltd., 2009 SCC OnLine Del 2961 (paragraphs 9 and 12); and POL India Projects Limited V. Aurelia Reederei, (2015) 7 Bom CR 757 (paragraph 97].
Mr. Mazumdar accordingly submits that the grounds under Section 48(1)(d) sought to be urged by the award-debtor are untenable, without any merit and ought to be dismissed at the very threshold itself with exemplary costs.
Mr. Mazumdar has submitted that the enforcement of a foreign award is a three-dimensional process as evidenced from Sections 47, 48 and 49 of the Act. A party applying for the enforcement of a foreign award must make an application under Section 47 of the Act accompanied by the documentary evidence indicated in the said Section. The burden of proof on him upon production of the aforesaid documents stands discharged and the onus shifts to the party resisting the enforcement. The learned counsel has in this context relied upon Glencore Grain Rotterdam B.V. v. Shivnath Rai Harnarain (India) Co., (2008) 155 DLT 457 (paragraph 37). Mr. Mazumdar submits that the award-debtor has made vague and baseless allegations without any material particulars and has simply reiterated the defences available under Section 48 of the Act. The award- debtor has failed to establish the grounds contended by it or establish that its case falls within any of the limbs of Section 48 of the Act. The award-holder further submit that the Tribunal has passed a reasoned award after considering the claim submissions of the Award- holder. The Tribunal has particularly pointed out that even in the absence of Defence Submissions, it was for the Award-holder to establish its case, and that upon review of the pleadings, the Tribunal has satisfied itself that this burden has been sufficiently met by the Award-holder. In light of the newly inserted Explanation (1) to Section 48 of the amended Act the scope of inquiry under Section 48, the foreign award cannot be reviewed on merits. Reliance in this context is placed on Shri Lal Mahal Limited v. Progetto Grano Spa, (2014) 2 SCC 433 (paragraphs 27, 29 and 45). The Award was unanimously passed by the Tribunal after considering all pleadings and documents on record. The Tribunal comprised of Arbitrators who are experienced men in the maritime field has passed the award on appreciation of facts. In this jurisdiction under Section 48 court cannot re-appreciate the facts or sit in appeal over the Award. Mr. Mazumdar has submitted that the argument of the Petitioner/ Judgment Debtor that the Award-holder has failed to establish a written/signed agreement between the two parties is not tenable due to the following reasons:
i) The Petitioner and Respondent entered into the Charterparty dated 2nd April 2008 by way of a Fixture Recap. It is a common and accepted practice in the shipping industry to conclude contracts of carriage by way of email communications and a fixture recap as in the present case. This has been recognized by the Apex Court of India in the case of Shakti Bhog Foods Limited v. Kola Shipping Limited, (2009) 2 SCC 134 [See para 19, 23, 28, 29 and 30].
ii) As the drawn up charter party was not received from Trampline, the broker AGM called upon Trampline to provide the same for its record.
Trampline replied to the Broker that since there was a holiday in India, it would revert with the charter party on Monday which would be 21st April, 2008. The terms of the fixture had been agreed upon and/or duly recorded in the fixture recap which was exchanged over e-mail between Trampline and the Broker on 2nd April, 2008. Execution of the charter party on the terms agreed upon and recorded in the fixture recap dated 2nd April, 2008 was a mere formality and the contract between the parties stood concluded on 2nd April, 2008. All the terms of the Charterparty for carriage of the Award-debtor's cargo by the Award-holder's vessel were finalized and only the charter party document was left to be prepared and signed. As is usual in the merchant shipping industry, the parties did not wait for execution of the charter party document and acted upon the terms agreed and recorded in the fixture recap dated 2nd April, 2008 which were incorporated in the suitably amended Award-debtor's Proforma Charterparty dated 29th May, 2007.
iii) An affidavit dated 8th December 2014 by Mr. Theodoros A Giavridis, the authorized person of the broker AGM, who personally negotiated the present Charterparty with Trampline has been annexed show evidencing the conclusion of the said Charterparty by way of email exchanges and fixture recap.
iv) The email dated 2nd April 2008 sent by AGM to Trampline states that "...FURTHER TO OUR TELECON, WE ARE NOW FIXED ON MAIN TERMS. PLS PASS FULL RECAP AND PFMA CP". Thereafter, the discussions were only pertaining to the recap. The terms of the main Charterparty remained unchanged.
v) While the Award-holder had earned freight under the Charterparty in the sum of USD 1,915,570 (equivalent to 1,277.046.67), the Petitioner/ Judgment Debtor actually made part payment of the freight due under the Charterparty of 1,238,048 and left the balance amount of 38,998.67 due and payable. Having made part payment of the freight, the Petitioner/ Judgment Debtor has admitted that there was a valid and subsisting agreement being the Charterparty and are now estopped from denying any liability arising out of the said Charterparty. The arbitration was invoked as per Clause 44 of the Rider Clauses to the Charterparty. Clause 25 of the Fixture recap only supports the understanding that parties had agreed to the arbitration Clause under the Charter party. In fact, even the working Charter party reproduces Clause 44 of Rider Clauses to the Charter party. Clause 44 was mutually agreed between parties and therefore formed a valid arbitration agreement (inasmuch as there was a clear agreement to arbitrate).
By its e-mail of 31st March, 2008, Trampline on behalf of the award- debtor approached the Brokers for the Award-holder ("AGM") and inquired whether the Award-holder would be interested to carry the Award-debtor's cargo. By its further e-mail of 31st March, 2008, Trampline sent a firm indication that its client, the award-debtor, was interested in shipping its cargo by the award-holder's vessel and also sent the terms of the possible fixture along with the details of the award-debtor for the consideration of the award-holder. In this e-mail, Trampline had, inter alia, proposed that the arbitration would be in Singapore and English Law would apply and other details would be as per the Proforma Charterparty cargo.
In reply, AGM sent its e-mail of 31st March, 2008, proposing certain terms of carriage and amended clause 25 of the draft fixture sent by Trampline to provide for arbitration in London instead of arbitration in Singapore under English Law.
By its two subsequent e-mails of 31st March, 2008 Trampline on behalf of the award-debtor proposed amendments to certain terms of carriage specified in the draft fixture. However, clause 25 of the said fixture which stipulated arbitration in London under English Law was accepted without any modification by the award-debtor, and this clause was never re- visited by parties in subsequent negotiations.
It is submitted that an intention to arbitrate is the only requirement for determining the existence of an arbitration agreement and the presence or absence of a concluded substantive contract between the parties becomes irrelevant. It is trite law that the arbitration clause (agreement) is independent of the underlying contract and is separable from the commercial rights and obligations are contained in the underlying, substantive or main contract. The substantive agreement and the arbitration agreement form two separate contracts and the legitimacy and validity of the latter cannot be affected even if one claims that the former is unconcluded. In this context, reliance is placed on Enercon (India) Ltd. &Ors. v. Enercon GmBH & Anr. reported at (2014) 5 SCC 1 (paragraphs 80-86).
It is further submitted that under the yardsticks laid out in Section 48 of the Indian Arbitration Act, the enforcement of a foreign award may be refused, at the request of a party against whom it is invoked, only if that party furnishes to the court proof that the arbitration agreement under which the Award is furnished is not valid under the law to which the parties have subjected it or, failing any indication thereon, under the law of the country where the award was made. Reliance is placed on Coal India v. Canadian Commercial Corporation reported at AIR 2012 Cal 92 (Paragraph 11). Admittedly, there is no finding that the arbitration agreement as contained in Clause 44 of the Rider Clauses to the Charterparty read with Clause 25 of the clean Fixture Recap was not valid under the laws of England, to which it was subject. In any case, as borne out from the pleadings, it is not the award-debtor's case that there was no valid arbitration agreement and therefore, any other objections to the validity or conclusiveness of the underlying Charter party contract were for the Tribunal seized of the matter to decide.
The award-debtor's allegation of 'patent illegality' is untenable inasmuch as the same is not a ground for rejecting the enforcement under Section 48 of the Act. The grounds for refusal are limited to the award being contrary to the (1) fundamental policy of Indian law, (2) the interest of India, and (3) justice or morality. In this context reliance is placed on Shri Lal Mahal Limited v. Progetto Grano Spa reported at (2014) 2 SCC 433 (paragraphs 27, 29 and 45) and Explanation 1 to Section 48 of the amended Act.
The learned counsel has submitted that the allegation that no notice of invocation of arbitration was received by the petitioner is factually incorrect. By its email dated 19th May 2009, Swedish Club, the Protection and Indemnity Club of the Award-holder wrote to Trampline and requested the latter to inform the award-debtor of the invocation of the arbitration agreement by the award-holder and the appointment of Mr. Christopher Moss as the award-holder's Arbitrator. The P&I Club of the award-holder also requested the award-debtor for appointment of its Arbitrator. Subsequently, the award-holder caused service of the statement of claim filed on its behalf before Mr. Christopher Moss through its Solicitors M/s. Bose and Mitra & Co., on the award-debtor on 17th August 2010.
The award-debtor replied to the letter dated 17th August 2010 sent by the Award-holder's Solicitors by its "without prejudice" letter of 4th November 2010. Even while raising several baseless allegations in the said letter of 4th November 2010, the award-debtor did also acknowledge the award-holder's letter of 17th August 2010 and specifically referred to the same and the statement of claim filed therewith. The presumption would therefore be that at all material times, the award-debtor was well aware of the fact that arbitration proceedings had commenced or about to be commenced against it. Therefore, the award-debtor has admitted that it was aware of the arbitral proceedings and cannot at the stage of the enforcement of the Award, take the plea that it was unaware of the invocation of arbitration.
The award holders submitted that subsequently, by abundant caution and in order to give a further opportunity to the award-debtor to nominate its arbitrator, the award-holder through its Solicitors M/s. Bose and Mitra & Co., re-invoked the arbitration by a letter dated 25th May 2011, which invocation letter the award-debtor has itself relied upon in its own pleadings. In fact, the award-debtor has acknowledged receipt of the said letter of 25th May 2011. In the said letter of 25th May 2011, the award-holder ensured that all the allegations raised in the letter of 4th November 2010 were sufficiently addressed and replied to. It is relevant to note that the award-debtor has never replied to the letter dated 25th May 2011.
Thereafter, and in order that the award-debtor be afforded every opportunity to appoint its arbitrator, the award-holder, through its Solicitors M/s. Bose and Mitra & Co., through their letter dated 23rd June 2011 provided the award-debtor further period of 14 days for appointment of arbitrator.
Therefore, the allegations of the award-debtor that they were not notified of the invocation of arbitration and therefore the Tribunal was not properly constituted, is baseless, and as such deserves no consideration.
The award-holder submits that the second schedule of the LMAA terms provides for the manner in which the defence submission or point of defence is to be submitted by the Defendant. The email dated 28th June, 2012 certainly was not in the manner required by the terms and was not even addressed to the Tribunal and therefore the Tribunal in accordance with procedure agreed between parties, did not consider these submissions.
In any case, it merely refers to an email dated 4th November, 2010 without even attaching the said email. Moreover the award-debtor's correspondence dated 4th November, 2010 was a "without prejudice"
correspondence, which is inadmissible in evidence. Reliance is placed on Section 23 of the Indian Evidence Act, 1872, and the decisions in Sonia Magu. Commissioner of Income Tax reported at [2009] 185 TAXMAN 402 (Delhi) (paragraph 12) and Unilever plc v. The Procter & Gamble Co.
reported at [2000] 1 WLR 2436 (paragraph 17).
Even if the correspondence dated 4th November, 2010, was not marked "without prejudice", the Hon'ble Supreme Court has held that the scope of public policy in India under Section 48(2)(b) of the Indian Arbitration Act is limited to the three categories enumerated in Renusagar Power Co. Limited v. General Electric Co. reported at 1994 Supp (1) SCC 644, i.e. (i) fundamental policy of Indian law; or (ii) the interests of India; or (iii) justice or morality. The Court further held that that the term "public policy of India"
does not include an award being patently illegal and that the scope of inquiry under Section 48 of the Act does not permit the review of the foreign award on merits. The enforcement of a foreign award can be refused only if such enforcement is contrary to the fundamental policy of Indian Law. It is submitted that while considering enforceability of foreign awards, the court does not exercise appellate jurisdiction over the foreign award nor does it enquire as to whether while rendering the foreign award some errors have been committed. It is submitted that patent illegality must go to the root of the matter. In this context reliance is placed on Shri Lal Mahal Limited v. Progetto Grano Spa, reported at (2014) 2 SCC 433 (paragraphs 27, 29 and 45) and Daiichi Sankyo Co. Ltd. V. Malvinder Mohan Singh reported at 2018 SCC OnLine Del 6869 (paragraph 58 and 96).
The award-debtor was given sufficient opportunities to put forth their defence in the arbitration proceedings and were given reasonable notice of the proceedings; however the award-debtor failed to raise any defence before the Tribunal.
It is submitted that, the award-debtor is barred from raising the ground of public policy as it pertains to the merits of the dispute. The newly inserted Explanation (1) to Section 48 of the amended Act clarifies that the test as to whether there is a contravention with the fundamental policy of Indian law shall not entail a review on the merits of the dispute.
The award-debtor has not filed any appeal before the English High Court within the stipulated time under the English Arbitration Act 1996 and are accordingly estopped from raising any objections on merits of the case in the enforcement proceedings of the Award. This has been confirmed by Bombay High Courts. Reliance is placed on Naval Gent Maritime Ltd. v. Shivnath Rai Harnarain (I) Ltd. Reported at 2009 SCC OnLine Del 2961 (paragraph 9 and 12) and POL India Projects Limited v. Aurelia Reederei reported at (2015) 7 Bom CR 757 (paragraph 97).
The Amendment Award was only issued to correct an obvious typographical error/clerical error in the Original Award. It is submitted that Section 57(3) of the English Arbitration Act gives discretion to the Tribunal to correct an award so as to remove clerical mistakes. Section 57(3) of the English Arbitration Act reads as follows:-
"57. Correction of award or additional award.
(3)The tribunal may on its own initiative or on the application of a party--
(a) correct an award so as to remove any clerical mistake or error arising from an accidental slip or omission or clarify or remove any ambiguity in the award, or
(b) Make an additional award in respect of any claim (including a claim for interest or costs) which was presented to the tribunal but was not dealt with in the award.
These powers shall not be exercised without first affording the other parties a reasonable opportunity to make representations to the tribunal."
The LMAA terms, in paragraph 25(a)(i), clearly give the Tribunal authority to make corrections to accidental mistake, omission or error of calculation in the awards on its own initiative .the learned counsel has referred to paragraph 25 (a) (i) of the LMAA terms which reads as follows:-
"25. (a) In addition to the powers set out in Section 57 of the Act, the tribunal shall have the following powers to correct an award or to make an additional award:
(i) The tribunal may on its own initiative or on the application of a party correct any accidental mistake, omission or error of calculation in its award."
The contention that the Amendment Award was not made within 28 days of the date of the Original Award and is therefore time-barred is baseless. The LMAA terms, in paragraph 25(d), clearly state that any correction of an award shall be effected within 90 days of the date of the original award unless all parties shall agree a longer period. Paragraph 25
(d) of the LMAA terms reads as follows:-
"25 (d) Any correction or interpretation of an award may be effected in writing on the original award or in a separate memorandum which shall become part of the award. It shall be effected within 90 days of the date of the original award unless all parties shall agree a longer period. In fact, the reference to 28 days (in paragraph 25 (b) of the LMAA Terms) is only for an application to be made for correction of an award. Admittedly, the award-debtor did not make such an application for correction within the said 28 days from the date of the original Award and has therefore waived any purported right of representation in this regard. It is submitted that the Award-holder was constrained to institute proceedings initially for attachment and garnishment of the award-debtor's property in order to secure its claim in the arbitration that it intended to invoke, and accordingly initiated proceeding being 08CIV.5999 RJH in the United States District Court for the Southern District of New York on 1st July, 2008. The New York Proceedings were in the nature of interim reliefs (much akin to an application under Section 9 of the Act) for the limited purpose of maritime attachment and garnishment in order to obtain security for the award-holder's claims which were to be determined in arbitration. The New York Proceedings were in aid of the arbitral reference and at the time of instituting these proceedings, the Award-holder had expressly reserved its right to proceed with arbitration as envisaged under the Charter party and had in fact stated that it was preparing to commence such arbitration. It is submitted that an interim action for security, pending arbitration, cannot bar subsequent arbitration proceedings.
In relation to the New York Proceedings, the U.S. Second Circuit's decision in Shipping Corporation of India, Ltd. v. Jaldhi Overseas Pte Ltd. reported at 585 F.3d 58 (2d Cir. 2009) was rendered holding that all such actions for attachment and garnishment should be dismissed for lack of subject matter jurisdiction. The Jaldhi decision (supra) was subsequently given retrospective effect by the U.S Second Circuit decision in Hawknet Ltd. v. Overseas Shipping Agencies reported at 2009 U.S. App. LEXIS 24970 (2nd Cir. Nov. 13, 2009), and therefore all interim attachments issued in the New York Proceedings were vacated and these proceedings dismissed without any reliefs being granted to the Award-holder on 15th January 2010.
In the meanwhile, on 31st March, 2009, the award-holder was contacted by a M/s Talbot Asset Management & Restructure Pvt. Ltd. ("Talbot") alleging that they had been appointed by trade creditors/ liquidators of the award-debtor in order to settle all outstanding debts. An understanding was reached between parties (i.e. the award-holder's American lawyers and Talbot) to settle the outstanding dues of the award-holder. However, no settlement agreement was ever entered into between the parties and no payment was ever effected by either Talbot or the award-debtor nor any other party honouring this understanding, which was immediately rendered null and void.
Mr. Mazumdar submits that even assuming that a settlement agreement had been entered into (though never performed), the settlement agreement in itself would not dilute or take away the original cause of action arising out of the underlying contract (in this case the Charter party). In order that a contract that is altered in material particulars so as to dispense with performance thereunder, it must be clear that the alteration must go to the very root of the original contract and change its essential character, so that the modified contract must be read as doing away with the original contract. If the modified contract has no independent contractual force, in that it has no meaning and content separately from and independently of the original contract, it is clear that there is no new contract which comes into being. In such a situation, the original terms continue to be part of the modified contract except to the extent that they are inconsistent with the modifications made and this would therefore be governed by Section 63 of the Indian Contract Act, 1872. In this context, the learned counsel referred to Chrisomar Corporation v. MJR Steels Private Limited reported at 2017 SCC OnLine SC 1104 (paragraphs 33-38).
It is submitted at the outset that merely because the Tribunal consisted of two members does not mean that the proceedings fall foul of Section 48(1)(d) of the Indian Arbitration Act. In any event, under the yardsticks laid down under amended Section 48 of the Indian Arbitration Act, the constitution of the Tribunal under the arbitration agreement must be as per the law of the country governing the arbitration agreement. It is submitted that under the English Arbitration Act, a two member Arbitral Tribunal is permitted to be constituted, since under English law, parties are free to agree on the number of arbitrators to form the tribunal.
Merely because a two member arbitral Tribunal was constituted in the London Arbitration, this would not violate the fundamental policy of Indian law. It is submitted that, Section 10 of the Indian Arbitration Act is a derogable provision. Thus, as long as the composition of the arbitral tribunal or the arbitral procedure are in accordance with the arbitration agreement between the parties and the law of the country governing such arbitration agreement, Section 48 does not permit challenge to an award merely on the ground that the composition of the arbitral tribunal was in conflict with Section 10 of the Act. In this context reliance was placed on Narayan Prasad Lohia vs. Nikunj Kumar Lohia & Ors. reported at (2002) 3 SCC 572 (paragraph 19).
The award-debtor seems to allege the fact that Mr. Anthony Hallgarten did not communicate during the arbitral proceedings and that therefore all direction were passed by Mr. Moss unilaterally. These allegations are shockingly bereft of any proof or evidence in support and ought to be dismissed in limine. It is submitted that Mr. Anthony Hallgarten QC was duly copied in every e-mail correspondence from the Tribunal which substantiates the fact that all orders were issued by the Tribunal jointly and was not unilateral as wrongly alleged by the award-debtor.
In any case, it is submitted that under LMAA terms it is common practice for one arbitrator of a panel of two arbitrators to take the lead on a matter, but this does not automatically mean that the other member of the Tribunal does not consent to the orders passed.
In any case, it is stated that the present allegation is not one fit to be termed as "unjust enrichment". It is submitted that unjust enrichment means retention of a benefit by a person that is unjust or inequitable and occurs when a person retains money or benefits which in justice, equity and good conscience, belongs to someone else. The learned Counsel in this regard has relied upon Sahakari Khand Udyog Mandal Ltd. v. CCE & Customs reported at (2005) 3 SCC 738 (paragraphs 31- 33).
It is lastly submitted that once the arbitration agreement is valid, all other objections or disputes relating to the substantive agreement (i.e. the Charter party) would be for the Tribunal seized of the dispute to decide upon, including questions of whether the underlying contract in itself was concluded or not. In this context reliance is placed on Indian Farmers Fertilizers Cooperative Limited v. Bhadra Products reported at (2018) 2 SCC 534 (paragraph 19).
It is, therefore, submitted that the said ground taken by the award- debtor is baseless and does not merit consideration from this Court.
For the aforesaid reasons, the Award-holder submits that the Application is untenable, without any merit and ought to be dismissed at the very threshold itself with exemplary costs.
The challenge to the enforcement of the award is essentially two fold, namely, that there is no concluded contract between the parties, and that the arbitral tribunal which gave the award in question was not properly constituted.
I have already briefly indicated the facts and recorded the respective submissions made by the parties, amongst others, on these two issues.
I shall first deal with the issue whether there was any concluded charter party with an arbitration agreement between the parties and thereafter, decide the constitution of the arbitral tribunal and other ancillary issues that have been put forth to challenge the enforceability of the present award.
Section 7 of the Indian Arbitration Act defines an arbitration agreement which is pari materia with Section 5 of the English Act. Under section 7 of the Indian Arbitration Act, the arbitration agreement is in writing if it is contained in (a) A document signed by the parties; (b) An exchange of letters, telex, telegrams or other means of telecommunications including communication through electronic means which provide a record of the agreement; (c) An exchange of statements of claim and defence in which the existence of the agreement is alleged by one party and not denied by the other.
Section 5(1) of the English Arbitration Act read with Section 5(2) therein states that arbitration agreements have to be in writing and can be considered validly so, whether or not signed by the parties, if the agreement is made by exchange of communications in writing. Section 6(2) of the English Arbitration Act makes clear that "the reference in agreement to a written form of arbitration clause or to a document containing an arbitration clause constitutes an arbitration agreement if the reference is such as to make that clause part of the agreement." Further, Section 7 of the English Arbitration Act clarifies that unless the parties agree that the arbitration agreement is to be considered invalid, non-existent or in effective if the agreement of which it is a part is considered invalid, non-existent or ineffective, the arbitration agreement shall not be invalidated due to the invalidity, non-existence or ineffectiveness of the agreement of which it is a part. This severability of arbitration agreements "is part of the very alphabet of arbitration law" as stated by the House of Lords in Lesotho Highlands v Impreglio SpA [2006] 1 AC 221 at paragraph 21 (Lord Steyn) and the Court of Appeal in Harbour Assurance Co. (U.K.) Ltd. v Kansa General International Insurance Co. Ltd., [1993] QB 701, 724-725 (Hoffman LJ).
Learned Counsel for the award-holder submitted that the award- holder and award-debtor had entered into a valid Charter party agreement by 2nd April, 2008 through e-mail communications and a Fixture Note. It is submitted that the 2nd April, 2008 e-mail from the award-holder's agent to the award-debtor's agent, which the award-debtor cites in his petition as proof of on-going negotiations and not a full-fledged contract, actually state agreement on main terms and evidence negotiations on the Fixture Recap and Pro-forma Charter party thereafter. Finally, in the e-mail from the award-holder's agent to the award-debtor's agent on 31st March, 2008, the award-holder's agent changed the place of arbitration from Singapore to London in the draft Fixture Note. Beyond this, there were no changes to the Fixture Note in this regard and this constitutes a valid agreement on arbitration even if no substantive Charter party is found to exist. For this latter argument, the learned Counsel placed reliance on Enercon (India) Ltd. & Ors. (supra).
Despite the Counsel's reliance here on Indian law, his argument remains valid under the English Arbitration Act. The parties' intent to arbitrate is clearly apparent from the multiple email communications between them that are characteristic of charterparty negotiations.
Scrutton on Charterparties And Bills of Lading, 23rd edition, a classic on the subject has recognised that the exchange of multiple emails between the parties is an unique characteristic of charter party negotiations. In the words of the learned author: "Charter parties will commonly be concluded by a sequence of communications typically today in the form of emails, that will eventually result, in an application of the normal principles regarding offer and acceptance, in a binding agreement. The full terms of the final agreement are generally not repeated in each successive communication; they may be collated in a recapitulation email or may never be reduced to one source but remain identifiable only by examination of the chain of communications. In either case, while the communications may contemplate the drawing up of a formal record of the agreement, such contemplation would not, of itself, evidence an intention to postpone the creation of a legally binding agreement."
The signing of charter party is not essential so long as the parties have decided on the essential terms, and appear ad idem through their communications in a fixture recap or proforma charter party. According to Maritime Law, 2nd Edition (Yvonne Baatz, editor), the broker normally advises its Principal on how to tailor the standard form to the individual transaction in charter party negotiations. According to the authors of this book: "Once the charterparty has been concluded, its terms will be recorded in a fixture recap, that is, an email or other written form recording the terms of the charterparty and referring to any standard form or proforma charterparty in relation to another vessel agreed.....A charterparty may be drawn up and signed by both parties but it is surprising how often this is not done and therefore the fixture recap must be relied on."
In the instant case, the award-debtor disputes the existence of the arbitration agreement without specifying the grounds on which such objection is based. The statement of claim with its annexures shows how the parties have conducted themselves. The award-debtor in this application has not denied that Trampline has acted as an agent on its behalf. The goods have been delivered to the consignee on the basis of the terms of the charterparty. The award-debtor accepted the goods under such terms but made part payment of the freight due under the charter party. The dispute is with regard to the conversion rate to be applied for the goods supplied as well as demurrage. The fact that the goods were carried by the vessel Gant Vision to the destination port at Xingang, China has not been denied. The award-debtor has conveniently avoided the basis on which the goods were loaded and ultimately delivered to the destination port and on what considerations and basis made the part payment towards the freight. The existence of the several emails exchanged between the agent of the award- holder and the agent of the award-debtor has not been disputed. On the contrary, the award-holder has filed a detailed affidavit from its agent, AGM, who personally negotiated the present charterparty with Trampline, New Delhi who were acting on behalf of the award-debtor. The parties did not wait for formal execution of the charter party document and acted upon the terms agreed and recorded in the Fixture recap dated 2nd April, 2008.
The Supreme Court in Shaktibhoj Foods Ltd. (supra) has recognized the aforesaid principle and has stated that it is a common and accepted practice in the shipping industry to conclude contracts of carriers by way of email communication and fixture recap, as in the present case. The relevant observations are:
"29. Fixtures are frequently recorded in a telex or fax recapitulating the terms finally agreed (a recap). Thus a recap telex or fax may constitute the "charterparty" referred to in another contract. In Welex AG v. Rosa Maritime Ltd. (Elipson Rosa case), it was decided by the Queen's Bench Division (Commercial Court) that a voyage charter party of Elipson Rosa was concluded on the basis of a recap telex which incorporated by reference a standard form charter. Before any formal charter was signed, bills of lading were issued referring to the "charter party", without identifying it by date. It was held that the charter party referred to was the contract contained in or evidenced by the recap telex."
The multiple emails exchanged between the parties include the arbitration clause as the mode of settlement of dispute. It would appear from the communications of the parties on 31st March, 2008, that they agreed to arbitration in London with English Law applying, by amending clause 25 of the Fixture Note via e-mail. The e-mail from the award-holder's agent on 2nd April, 2008 stipulating agreement on main terms combined with the lack of discussion by the parties on clause 25 of the Fixture Note post 31st March, 2008 all indicate that they were ad idem on an arbitration agreement. Now, it is true that the Pro-forma charter party sent on 2nd April, 2008 by the award-debtor's agent states that clause 44 of the "Rider Clauses" which contains the arbitration clause on which the present arbitration is based is "subject to agreement". But after this there are no amendments to it or discussions on it. On 4th April, 2008 the award-holder's agent sent the Working Charterparty to the award-debtor's agent, which again reproduced the said clause 44 in exactly the same words as the Proforma Charterparty. While clause 44 was untouched, other clauses of the Working Charterparty such as 29, 30, 31 etc. were debated till April 18, 2008, i.e. when the Award- holder's agent sought for the final Charterparty for signature, which did not happen and often does not happen as noted above.
The act of not changing the said clause 44 in this context strongly indicates that the parties had agreed on arbitration in accordance with clause 44 of the "Rider Clauses" in the Working Charterparty/Proforma Charterparty, if they had not agreed on the said clause they would have indicated it like they did for other clauses. Pursuant to Section 6 of the English Arbitration Act, which requires only referenced communication to the document containing the arbitration agreement, there is a clear agreement here: the parties here have clearly referred to the Proforma Charterparty in their communications till 4th April, 2008 and their reference to the said document in the context of their negotiations coupled with no indication whatsoever of disagreement regarding the said clause 44 when the Working Charterparty was sent shows that they clearly agreed to incorporate the said arbitration clause. The arbitration agreement here is not signed as contended in the award-debtor's petition but it need not be signed as elucidated above under Section 5 of the English Arbitration Act.
The issue of concluded contract is a mixed question of law and fact and unless the petitioner furnishes evidence of non-existence of such agreement before the Arbitral Tribunal and invites the Tribunal to decide on such application, the Court in this jurisdiction cannot permit such issues to be raised at all since it would frustrate the purpose of the Indian Arbitration Act. It is not open for a party who has consciously avoided a proceeding and refused to participate in the arbitration proceeding to raise objections on the merits of the dispute or question the composition of the Tribunal. The buyers have accepted the goods under the charter party. The interference of this Court should be minimal.
In Shri Lal Mahal Ltd. (supra), it was held that the contraventions of law alone would not attract bar of public policy and something more is required to be established to resist enforcement of a foreign award. The expression "public policy of India" must be given narrow meaning and enforcement of foreign award would be refused if it is contrary to: (i) fundamental policy of Indian law, or (ii) the interests of India, or (iii) justice or morality. The scope of enquiry under Section 48 has been stated in paragraphs 45 and 46 of the report. It reads:
"45. Moreover, Section 48 of the 1996 Act does not give an opportunity to have a 'second look' at the foreign award in the award - enforcement stage. The scope of inquiry under Section 48 does not permit review of the foreign award on merits. Procedural defects (like taking into consideration inadmissible evidence or ignoring/rejecting the evidence which may be of binding nature) in the course of foreign arbitration do not lead necessarily to excuse an award from enforcement on the ground of public policy.
46. In what we have discussed above, even if it be assumed that the Board of Appeal erred in relying upon the report obtained by buyers from Crepin which was inconsistent with the terms on which the parties had contracted in the contract dated 12.05.1994 and wrongly rejected the report of the contractual agency, in our view, such errors would not bar the enforceability of the appeal awards passed by the Board of Appeal."
Even if one argues that there was no concluded contract between the parties, although that argument is eminently an argument in despair and untenable, one cannot argue that the non-existence of the charterparty invalidates the arbitration agreement here. The law is well-settled, both in England and India, that the arbitration clause in a contract is quite different and distinct from other clauses in the contract. The arbitration clause, as ruled in C. DVC v. KK Kar, reported at AIR 1974 SC 158, stands apart from the rights and obligations under the contract as it has been incorporated with the object of providing a machinery for the settlement of disputes arising in relation to or in connection with the contract. This principle has been re-enforced in J.K. Jain v. DDA reported at (1995) 6 SCC 571, where it was stated that an arbitration clause in a contract amounts to two contracts, one relating to the execution of the work and the other on how to resolve the dispute in the event any dispute arises in respect of the said contract. In Russell on Arbitration (24th edition) at paragraph 2-007, a similar view is expressed: "[a]n arbitration agreement specifies the means whereby some or all disputes under the contract in which it is contained are to be resolved. It is however separate from the underlying contract." An arbitration clause in a commercial contract is an agreement inside an agreement. The parties make their collective bargain but in addition agree on a private tribunal to resolve any issues that may arise between them (per Saville J. in Union of India v. McDonnell Douglas Corp (1993) 2 Lloyd's Rep. 48). This is known as the "doctrine of separability" and section 7 of the English Arbitration Act provides a statutory codification of the previous case law on this subject (Heyman vs Darwins Ltd. 1942 AC 356). This severability of arbitration agreements in English law "is part of the very alphabet of arbitration law", as stated by the House of Lords in Lesotho Highlands v Impreglio SpA reported at [2006] 1 AC 221 at paragraph 21 (Lord Steyn) and the Court of Appeal in Harbour Assurance Co. (U.K.) Ltd. v Kansa General International Insurance Co. Ltd. reported at [1993] QB 701, 724-725 (Hoffman LJ). Section 7 of the English Act places this severability of arbitration agreements on statutory footing, specifying that unless otherwise agreed by the parties, an arbitration agreement which forms or was intended to form part of another agreement shall not be regarded as invalid, non-existent or ineffective because that other agreement of which it is a part is considered invalid, non-existent or ineffective. The arbitration agreement shall not be invalidated due to the invalidity, non-existence or ineffectiveness of the agreement of which it is a part, and it shall for that purpose be treated as a distinct agreement.
In Enercon India Limited (supra), the same principle is reiterated in paragraph 83 to 85 of the report. The Hon'ble Supreme Court has reiterated that the concept of severability of the arbitration clause/agreement from the underline contract is a necessity to ensure that the intention of the parties to resolve the dispute by arbitration does not evaporate into thin air with every challenge to the legality, validity or finality or breach of the underline contract.
In Indian Farmers Fertilizers Cooperative Limited (supra), the Kompetenz principle was applied in interpreting Section 16(1) to Section 16(4) of the Indian Arbitration Act, which are based on Section 16 of the UNCITRAL Model Law. Similar provisions in the English Arbitration Act 1996 were noticed, namely, Section 30 and 31 of the English Arbitration Act. The Hon'ble Supreme Court held that the Arbitral Tribunal can embark upon an enquiry into the issues raised by the parties to the dispute. In this instant case, the issues, namely the validity and existence of the arbitration agreement and the composition of the Arbitral Tribunal, were never raised before the Tribunal. The applicant award-debtor had failed to file a defence statement. On such consideration, it cannot be said that the Tribunal did not decide such issues.
Moreover, it was open for the award-debtor to file its defence submission before the arbitral tribunal raising such dispute as to the existence of the arbitration agreement, in which the case the arbitral tribunal would have considered such submission. But as the facts clearly indicate, the award-debtor did not file these objections properly at all and showed little interest in the arbitral proceedings. The award-debtor was served with the claim submission twice and the award-debtor was fully aware of the basis of the claim, but the award-debtor still stayed away from the arbitration. Instead of participating in the proceeding, the award-debtor issued two letters dated 4th November, 2010 and 28th June, 2012. The second email was only a reiteration of the 4th November, 2010 letter. Even if it is assumed that the first invocation is not in accordance with the procedure agreed by and between the parties, as stated in the 4th November, 2010 letter, there cannot be any doubt that the petitioner invoked the arbitration by a letter dated 25th May, 2011 by serving an appropriate notice to the award-debtor. The award-holder appointed Mr. Christopher Moss as the award-holder's arbitrator and requested the award-debtor to nominate its arbitrator in accordance with the contract. The award-debtor acknowledged the receipt of the said letter but did not reply to it. Clause 44 of the "Rider Clauses" in the Proforma Charterparty/Working Charterparty is clear on the fact that if one party fails to appoint its arbitrator two weeks after the other party has appointed theirs, then the latter party can approach the President of the LMAA to appoint one of its members as arbitrator for them. The award-holder sent a request to the President of the LMAA on 29th July, 2011, with the President of the LMAA appointing Anthony Hallgarten, QC as the second arbitrator via email (copied to the Award-debtor) on 29th November, 2011. Thereafter, the award-holder notified the same on 19th December, 2011 as well. The lack of response to all of these communications is very clearly indicative of the award-debtor's unwillingness to participate in these proceedings or clearly agitate the improper constitution of the tribunal issue in front of the said tribunal. They have barely mentioned the matter in the above-quoted letter and email. But this is far from qualifying it as an argument that the tribunal could consider. Schedule 2, paragraph 2 of the LMAA Terms, which prescribes the procedure here under the arbitration agreement states clearly that defence submissions must be sent with relevant documentation and paragraph 6 of the said Schedule disallows bare denials. The letters/emails do not conform to these basic requirements and cannot be reasonably treated as an indication of the award-debtor raising these issues before the tribunal. Thus, the respondent having failed to raise any such dispute before the arbitral tribunal is now clearly estopped from raising it here.
This brings us on to the second issue, that is, whether the award can be challenged under Sec. 48(1)(d) of the Indian Arbitration Act on the ground the Arbitral Tribunal has not been constituted in accordance with the agreement between the parties. Mr. Anindya Kumar Mitra, the learned Senior Counsel appearing on behalf of the award-debtor, has submitted that irrespective of whether the applicant fails to prove that there is any concluded contract, it is still open to the applicant to demonstrate that the arbitral tribunal has not been properly constituted in which case the award may be treated as nullity. This argument recognizes the severability of the arbitration agreement.
This argument is likely to succeed provided there is no deliberate avoidance to participate before the tribunal as in such a situation it shall be construed as waiver of right to object to the composition of the tribunal and cannot be a ground to resist enforcement of the award.
Before I consider this objection in greater detail it is necessary to refer to some of the provisions of English Arbitration Act and the LMAA Terms (2006). The relevant provisions of the Arbitration Act 1996 and LMAA Terms (2006) are:
The Arbitration Act, 1996 Sec. 15 - The arbitral tribunal (1) The parties are free to agree on the number of arbitrators to form the tribunal and whether there is to be a chairman or umpire. (2) Unless otherwise agreed by the parties, an agreement that the number of arbitrators shall be two or any other even number shall be understood as requiring the appointment of an additional arbitrator as chairman of the tribunal.
(3) If there is no agreement as to the number of arbitrators, the tribunal shall consist of a sole arbitrator.
Sec. 16 - Procedure for appointment of arbitrartors. (1) The parties are free to agree on the procedure for appointing the arbitrator or arbitrators, including the procedure for appointing any chairman or umpire.
(2) If or to the extent that there is no such agreement, the following provisions apply.
(3) If the tribunal is to consist of a sole arbitrator, the parties shall jointly appoint the arbitrator not later than 28 days after s ervice of a request in writing by either party to do so.
(4) If the tribunal is to consist of two arbitrators, each party shall appoint one arbitrator not later than 14 days after service of a request in writing by either party to do so.
(5) If the tribunal is to consist of two arbitrators-
(a) each party shall appoint one arbitrator not later than 14 days after service of a request in writing by either p arty to do so, and
(b) the two so appointed shall forthwith appoint a third arbitrator as the chairman of the tribunal.
(6) If the tribunal is to consist of two arbitrators and an umpire -
(a) each party shall appoint one arbitrator not later than 14 days after s ervice of a request in writing by either party to do so, and
(b) the two so appointed may appoint an umpire at any time after they themselves are appointed and shall do so before any substantive hearing or forthwith if they cannot agree on a matter relating to the arbitration.
(7) in any other case (in particular, if there are more than two parties) Section 18 applies as in the case of a failure of the agreed appointment procedure.
Section 17 - Power in case of default to appoint sole arbitrator (1) Unless the parties otherwise agree, where each of two parties to an arbitration agreement is to appoint an arbitrator and one party ("the party in default") refuses to do so, or fails to do so within the time specified, the other party, having duly appointed his arbitrator, may give notice in writing to the party in default that he proposes to appoint his arbitrator to act as sole arbitrator.
(2) If the party in default does not within 7 clear days of that notice being given-
(a) make the required appointment, and
(b) notify the other party that he has done so, The other party may appoint his arbitrator as sole arbitrator whose award shall be binding on both parties as if he had been so appointed by agreement.
(3) Where a sole arbitrator has been appointed under sub-Section (2) the party in default may (upon notice to the appointing party) apply to the court which may set aside the appointment.
(4) The leave of the court is required for any appeal from a decision of the court under this section.
The LMAA Terms 2006 are:
Rule 12
(a) It shall be for the tribunal to decide all procedural and evidential matters subject to the right of the parties to agree any matter.
However, the normal procedure to be adopted is as set out in the Second Schedule.
(b) In the absence of agreement it shall be for the tribunal to decide whether and to what extent there should be oral or written evidence or submissions in the arbitration. The parties should however attempt to agree at an early stage whether the arbitration is to be on documents alone (i.e. without a hearing) or whether there is to be an oral hearing.
Rule 13
(a) In all cases the procedure set out in paragraphs 1 to 14 of the Second Schedule should be adopted.
(b) Applications for directions should not be necessary but, if required, they should be made in accordance with the Second Schedule.
(c) Arbitrations on documents alone Following completion of the steps covered by paragraphs 1 to 14 of the Second Schedule if it has been or is then determined by the tribunal or agreed by the parties that the case is to be dealt with on documents alone, the tribunal will then given notice to the parties of its intention to proceed to its award and will so proceed unless either party within seven days requests, and is thereafter granted, leave to serve further submissions and/or documents.
(d) Oral hearings If it is determined or agreed that there shall be an oral hearing, then following the fixing of the hearing date a booking fee will be payable in accordance with the provisions of the First Schedule. The Second Schedule (1) The normal procedure (which shall apply unless the parties agree otherwise) requires service of claim submissions. If, exceptionally, formal pleadings are thought appropriate (e.g. in more complicated references) special permission must be obtained from the tribunal. Whether claim submissions or points of claim are served, they must set out the position of the claimants in respect of the issues that have arisen between the parties as clearly, concisely and comprehensively as possible, and must always be accompanied by all supporting documentation relevant to the issues between the parties. (2) Except in unusual cases (e.g. applications for interim final awards for sums which are said to be indisputably due and owing) defence submissions or, if the tribunal has permitted formal pleadings, points of defence (and counterclaim, if any) with all documentation relevant to the issues between the parties (other than that disclosed by the claimants) are to be served 28 days after receipt of the claim submissions or points of claim. An allegation that all relevant documentation has not been disclosed with the claim submissions or points of claim will not normally be a reason for allowing additional time for service of defence submissions or points of defence. However a failure to disclose all relevant documentation at an appropriate stage may be penalized in costs.
(3) Submissions in reply or, if the tribunal has permitted formal pleadings, points of reply are to be served 14 days after service of submissions or points of defence unless there is also a defence to a counterclaim, in which case the submissions or pleadings are to be served within 28 days form receipt of the submissions or points of defence and counterclaim. Any reply to the defence to counterclaim must be served within 14 days thereafter.
(4) A party serving supporting documentation must check with the tribunal whether it wishes to receive copies of all or some of the documentation at that stage. The aim should be for a tribunal to see enough documentation to be able to identify the issues in the case but not to be burdened with, for instance, copy invoices at the commencement of a reference.
The Rider Clause 44 is the most important clause. It reads-
"Arbitration Clause:
All disputes or differences arising out of or under this contract which cannot be amicably resolved shall be referred to arbitration in London and English Law to apply.
Unless the parties agree upon a sole arbitrator, one arbitrator shall be appointed by each party. In the case of arbitration on documents, if the two arbitrators so appointed are in agreement their decision shall be final. In all other cases the arbitrators so appointed shall appoint a third arbitrator and the reference shall be to the three- man tribunal thus constituted.
If one party fails to appoint an arbitrator, whether originally or by way of substitution for two weeks after the other party, having appointed their arbitrator, has (by telex fax or letter) called upon the defaulting party to make the appointment the president for the time being of the London Maritime arbitrators association shall, upon application of the other party, appoint an arbitrator on behalf of the defaulting party and that arbitrator shall have the like powers to act in the reference and make an award (and if the case so requires, the like duty in relation to the appointment of a third arbitrator) as if he had been appointed in accordance with the terms of the agreement.
This contract is governed by English Law and there shall apply to all proceedings under this Clause the terms of the London Maritime Arbitrators Association current at the time when the arbitration proceedings were commenced. All appointees shall be members of the Association.
Provided that where the amount in dispute does not exceed the sum of USD 25000 (or such other sum as the parties any agree any dispute shall be resolved in accordance with the small claims procedure of the London Maritime Arbitrator's Association." (emphasis supplied) It would appear that the constitution of the arbitral tribunal here was in accordance with clause 44 of the "Rider Clauses" of the Charter party. This clause stipulates that the tribunal shall comprise of two arbitrators, one appointed by each party, if the parties do not agree on a single arbitrator. The agreement provides that when one party fails to appoint its arbitrator within two weeks of the other party doing so, then the latter party shall have the other arbitrator appointed by the President of the LMAA. These stipulations have been followed.
The Rider Clause makes the English law as the substantive law and the LMAA Terms as the procedural law. Section 10 of the Indian Arbitration Act is in pari materia with Section 15 of the English Arbitration Act. Both are derogable provisions. The law on this point has been settled both under the English law as well as Indian law. The award-holder wanted an arbitral tribunal consisting of two members. This is apparent when the award-holder issued the Letter of Invocation, nominating its arbitrator and requesting the award-debtor to nominate their arbitrator. The award-debtor, in reply, disputed the existence of the charter party agreement and in doing so had contended that they did not receive any notice as to the constitution of the Arbitral Tribunal. It was, inter alia, contended that the terms and conditions in relation to arbitration in Clause 25 read with Clause 44 does not bind the award-debtor. This communication dated 4th November, 2010 was addressed to the attorney of the award-holder in answer to the first Letter of Invocation dated 17th August, 2010. The letter was issued "without prejudice". Thereafter, on 25th May, 2011, a fresh invocation was made, by which the award-holder appointed its arbitrator and requested the defendant to appoint its nominee arbitrator within 14 days from the date of the said letter. Although the petitioner received the said letter but did not nominate its arbitrator. Instead, they gave a cryptic reply dated 28th June, 2012, by which the award-debtor denied its liability and referred to their e- mail dated 4th November, 2010 wherein the award-debtor alleged that the arbitration proceeding that has been initiated at the instance of the award- holder is patently illegal, misconceived, untenable and contrary to the public policy of India due to the several reason mentioned in the letter. They were aware of the commencement of the arbitration proceeding. This communication was also marked to the Arbitral Tribunal. However, as required under the LMAA Rules, no defence statement was filed. It is not in dispute that various opportunities were given to the award-debtor to participate in the said proceedings. There is no inconsistency between Section 15 of the English Arbitration Act and the LMAA Rules. Once a party has invoked the arbitration clause by nominating its own arbitrator, it is clear that the said party is not agreeing to a sole arbitrator. LMAA Rules permit an Arbitral Tribunal consisting of two arbitrators in case of arbitration on documents. By agreeing to the LMAA terms, the parties have agreed to an Arbitral Tribunal consisting of two arbitrators. The arbitrators however would be required to appoint a third arbitrator in case the arbitration is not on documents. Section 34 of the English Arbitration Act read with Rule 12 of the LMAA Rules give complete autonomy to the Tribunal to decide on all procedural and evidentiary matters, subject to the right of the parties to agree any matter. Rule 13(c) of the LMAA Rules permit arbitration on documents alone after completion of the steps covered in paragraph 1 to 4 of the second Schedule. The facts narrated in the earlier parts of this judgment would clearly show that all the required steps were taken before the arbitrators adopted the procedure under Section 13(c), that is to say, arbitration on documents alone. In spite of numerous notices being sent to the award-debtor communicating that the arbitration should be on documents alone, the applicant award-debtor did not object to such procedure. The applicant award-debtor has remained silent. This silence is fatal. This certainly gives an impression that the award-debtor would have no objection if the arbitrator decides the dispute on documents alone. The arbitrators have passed a unanimous award.
Even otherwise, Section 15(2) of the English Arbitration Act would not apply as the parties in the instant case have decided on an Arbitral Tribunal consisting of two arbitrators. In any event, appointment of a third arbitrator in the given facts and circumstance would not have made much difference even if one concedes to it at the most a procedural mishap. A party having suffered an award cannot raise any objection to the constitution of the Tribunal when such party had waived its right by not raising such objection before the Tribunal.
In Nikunj Kumar Lohia (supra), the Supreme Court considered Section 10 of the Indian Arbitration Act, which provides that the number of arbitrators shall not be an even number. The question arose as to whether in spite of such provision Section 10 is a non-derogable provision. It was observed that the answer to the said question would depend on the question as to whether under the Act a party has a right to object to the composition of the Arbitral Tribunal if such composition is not in accordance with the said Act and if so then at what stage. Arbitration is a creature of agreement. There can be no arbitration if there is no arbitration agreement in writing between the parties. The right to challenge the competence, impartiality and jurisdiction of the Tribunal is provided in section 12, 13 and 16 of the Indian Arbitration Act. A party who has even participated in the appointment of an arbitrator and/or may have himself appointed an arbitrator could still challenge the jurisdiction of the tribunal under section 16(2). However at the same time, a party would be free if it so chooses not to raise such a challenge, which on a conjoined reading of section 10 and 16 shows that the objection to the composition of the tribunal is a matter that is derogable. It was held that in such a situation, if the party chooses not to so object, there will be a deemed waiver under section 4 of the Indian Arbitration Act. The said decision also dealt with the question as to whether a common award passed by two arbitrators would be invalid in light of section 11(2) of the Indian Arbitration Act, which provides for appointment of a third arbitrator who shall preside over the arbitration in case the tribunal consist of two arbitrators. This issue has been addressed in paragraph 17 of the said report which reads:
"17. We are also unable to accept Mr. Venugopal's argument that, as a matter of public policy, Section 10 should be held to be non-
derogable. Even though the said Act is now an integrated law on the subject of arbitration, it cannot and does not provide for all contingencies. An arbitration being a creature of agreement between the parties, it would be impossible for the legislature to cover all aspects. Just by way of example Section 10 permits the parties to determine the number of arbitrators, provided that such number is not an even number. Section 11(2) permits the parties to agree on a procedure for appointing the arbitrator or arbitrators. Section 11 then provides how arbitrators are to be appointed if the parties do not agree on a procedure or if there is failure of the agreed procedure. A reading of Section 11 would show that it only provides for appointments in cases where there is only one arbitrator or three arbitrators. By agreement parties may provide for appointment of 5 or 7 arbitrators. If they do not provide for a procedure for their appointment or there is a failure of the agreed procedure, then Section 11 does not contain any provision for such a contingency. Can this be taken to mean that the agreement of the parties is invalid? The answer obviously has to be in the negative. Undoubtedly the procedure provided in Section 11 will mutatis mutandis apply for appointment of 5 or 7 or more arbitrators. Similarly, even if parties provide for appointment of only two arbitrators, that does not mean that the agreement becomes invalid. Under Section 11(3) the two arbitrators should then appoint a third arbitrator who shall act as the presiding arbitrator. Such an appointment should preferably be made in the beginning. However, we see no reason, why the two arbitrators cannot appoint a third arbitrator at a later stage, i.e. if and when they differ. This would ensure that on a difference of opinion the arbitration proceedings are not frustrated. But if the two arbitrators agree and give a common award there is no frustration of the proceedings. In such a case their common opinion would have prevailed, even if the third arbitrator, presuming there was one, had differed. Thus we see do not see how there would be waste of time, money and expense if a party, with open eyes, agrees to go to arbitration of two persons and then participates in the proceedings. On the contrary there would be waste of time, money and energy if such a party is allowed to resile because the award is not to its liking. Allowing such a party to resile would not be in furtherance of any public policy and would be most inequitable." (emphasis supplied) Unlike the Indian Arbitration Act, a much sweeping power is given under the English Arbitration Act to challenge the award even if the aggrieved party may not have participated in the said proceeding. Section 72 of the English Arbitration Act permits him to challenge the award inter alia on the ground of "improper constitution of the tribunal". The petitioner would have lost this opportunity in the event the said award is challenged under the municipal law in this jurisdiction, having not raised such objection before the arbitral tribunal. This is also clear from paragraphs 18 and 19 of Nikunj Kumar Lohia (supra), which read:
"18. Even otherwise, under the said Act the grounds of challenge to an arbitral award are very limited. Now an award can be set aside only on a ground of challenge under sections 12, 13 and 16 provided such a challenge is first raised before the Arbitral Tribunal and has been rejected by the Arbitral Tribunal. The only other provision is Section 34 of the said Act. The only ground, which could be pressed in service by Mr. Venugopal is that provided under Section 34(2)(a)(v). Section 34(2)(a)(v) has been extracted hereinabove. According to Mr. Venugopal if the composition of the Arbitral Tribunal or the arbitral procedure, even though it may be in accordance with the agreement of the parties, is in conflict with a provision of the Act from which the parties cannot derogate, then the party is entitle to have the award set aside. He submits that the words "unless such agreement was in conflict with a provision of this Part from which the parties cannot derogate" as well as the words "failing such agreement" show that an award can be set aside if the agreement is in conflict with a provision of Part I of the said Act or if there is no agreement which is in consonance with the provisions of Part I of the said Act. In other words, according to Mr. Venugopal, even if the composition or procedure is in accordance with the agreement of the parties an award can be set aside if the composition or procedure is in conflict with the provisions of Part I of the said Act. According to Mr. Venugopal the words "failing such agreement" do not mean that there should be no agreement in respect of the composition of the Tribunal or the arbitral procedure. According to Mr. Venugopal, an agreement in respect of the composition of the Arbitral Tribunal or arbitral procedure which is not in consonance with a provision of Part I of the said Act would be invalid in law and therefore would be covered by the phrase "failing such agreement". He submits that the words "failing such agreement" mean failing an agreement which is in consonance with a provision of Part I of the said Act. He submits that Section 34(2)(a)(v)entitles the respondents to challenge the award and have it set aside.
19. In our view, Section 34(2)(a)(v) cannot be read in the manner as suggested. Section 34(2)(a)(v) only applies if "the composition of the Arbitral Tribunal or the arbitral procedure was not in accordance with the agreement of the parties". These opening words make it very clear that if the composition of the Arbitral Tribunal or the arbitral procedure is in accordance with the agreement of the parties, as in this case, then there can be no challenge under this provision. The question of "unless such agreement was in conflict with a provision of this Part" would only arise if the composition of the Arbitral Tribunal or the arbitral procedure is not in accordance with the agreement of the parties. When the composition of the procedure is not in accordance with the agreement of the parties then the parties get a right to challenge the award. But even in such a case the right to challenge the award is restricted. The challenge can only be provided (if) the agreement of the parties is in conflict with a provision of Part I from which the parties cannot derogate. In other words, even if the composition of the Arbitral Tribunal or the arbitral procedure is not in accordance with the agreement of the parties but if such composition or procure is in accordance with the provisions of the said Act, then the party cannot challenge the award. The words "failing such agreement" have reference to an agreement providing for the composition of the Arbitral Tribunal or the arbitral procedure. They would come into play only if there I no agreement providing for the composition of the Arbitral Tribunal or the arbitral procedure. If there is no agreement providing for the composition of the Arbitral Tribunal or the arbitral procedure and the composition of the Arbitral Tribunal or the arbitral procedure was not in accordance with Part I of the said Act then also a challenge to the award would be available. Thus so long as the composition of the Arbitral Tribunal or the arbitral procedure are in accordance with the agreement of the parties, Section 34 does not permit challenge to any award merely on the ground that the composition of the Arbitral Tribunal was in conflict with the provisions of Part I of the said Act. This also indicates that Section 10 is a derogable provision."
A Division Bench of the Delhi High Court in Anita Garg v. M/s Glencore Grain Rotterdam B.V. reported at (2011) 4 Arb LR 59: (2011) 182 DLT 365 considered Nikunj Kumar Lohia (supra). In Anitra Garg (supra), a challenge was thrown with regard to the composition of the arbitral tribunal that consisted of two arbitrators. The Division Bench considered the English Arbitration Act which permits arbitral tribunals of two arbitrators and makes the appointment of a chairman or umpire optional except where the arbitral tribunal consist of two or other even numbers. In fact, the judgement makes note of a recommendation of the Law Ministry that Section 10 of the Indian Arbitration Act should be made mandatory by the device of the introduction of an 'explanation'. Section 15 of the English Arbitration Act and Section 10 of the Indian Arbitration Act was considered and it was held that Schedule I of the English Act clarifies that Section 15 therein is not mandatory. The Division Bench repelled an argument that the decision in Nikunj Kumar Lohia (supra) cannot be sustained on the ground that it was contrary to Section 10 of the Indian Arbitration Act and is no more a good law in view of the seven judge bench decision in SBP v. Patel Engineering Ltd. reported at (2005) 8 SCC 618, by observing:
"27... Secondly, Mr. Sundaram has also sought to dilute the conclusion that Section 10 of the A&C Act is a derogable provision. We are unable to agree with him on both points. As we have already mentioned, SBP is concerned only with the important question as to whether the exercise under Section 11 of the A&C Act is administrative or judicial in nature. It does not even touch upon Section 10 of the A&C Act. For this simple reason, the opinion in Lohia that Section 10 is a derogable provision continues to hold the field. If Section 10 is not derogable, the necessity of having to consider whether a contract can prescribe an Arbitral Tribunal of even number could not arise, because jurisprudentially parties cannot contract contrary to a stature. The dialectic for the holding that Section 10 is not "mandatory" [the word used in Schedule-I of the English statute, viz. Arbitration Act, 1996] is to be found in paragraph 16 of the judgment. Their Lordships observed that "it is no longer open to contend that, under Section 16, a party cannot challenge the composition of the Arbitral Tribunal before the Arbitral Tribunal itself Such a challenge must be taken, under Section 16(2), not later than the submission of the statement of defence. Section 16(2) makes it clear that such a challenge can be taken even though the party may have participated in the appointment of the arbitrator and/or may have himself appointed the arbitrator. Needless to state a party would be free, if it so chooses, not to raise such a challenge. Thus, a conjoint reading of Section 10 and 16 shows that an objection to the composition of the Arbitral Tribunal is a matter which is derogable. It is derogable because a party is free not to object within the time prescribed in Section 16(2). If a party chooses not to so object there will be a deemed waiver under Section 4." Proceeding on the understanding that it is not mandatory that the Arbitral Tribunal must comprise odd numbers, Their Lordships went on to hold that the contract must be given effect to. However, since Section 10 of the A&C Act, at the very least, recommends that the Arbitral Tribunal should not consist of an even number, the Apex Court opined that the parties were, notwithstanding their agreement, empowered to raise this objection at the very threshold under Section 16(2) of the A&C Act, but are barred from doing so once an Award is pronounced. It was on this legal progression, since no objection had been raised on the score of the Arbitral Tribunal consisting of even number of persons, that the Supreme Court upheld the Award even though it was pronounced by an Arbitral Tribunal comprising only two persons." (emphasis supplied) The Special Leave Petition being SLP (C) 36100/2011 challenging Anita Garg (supra) was dismissed for non-prosecution as the petitioner remained unrepresented even in the second call, by an order dated 19th October, 2012.
Furthermore, as stated in Termarea Srl v Rederiaktiebolaget Sally (The "Dalny") reported at [1979] 1 WLR 1320, at 1323 placitum H and at 1324 placitum C, and explained in Russell on Arbitration, 23rd edition, an agreed arbitral award made by a two-man tribunal invariably is not invalid in English law merely by virtue of the fact that it was made by a two- man tribunal. In Termarea Srl (supra), it has been held that an agreed award by a tribunal of two is completely valid. So, with the operation of the waiver and no real legal bearing on the validity of the award due to the constitution of the tribunal, I find that the award here cannot be set aside.
The circumstances under which waiver should be presumed against the party challenging the award has been discussed in Naval Gent Maritime Ltd. vs. Shivnath Rai Harnarain (I) Ltd. reported at 2009 SCC Online Del 2961, wherein the judgment debtor contended that the award had not yet become binding between the parties in view of Section 66 of the English Arbitration Act, and unless leave of the court in England was sought, the award would not be a binding award. It was argued that the issue as to whether the foreign award sought to be enforced in India under Section 48 has become binding is to be determined in accordance with law of the countries where it was made. Therefore, an Indian court under Section 48 may refuse to enforce a foreign award if it has not become binding. The learned Single Judge after recording satisfaction that there has been a compliance of Section 47 of the Arbitration and Conciliation Act, 1996 has rejected the said submission on the ground that Section 48(1)(c) read with section 48 (3) of the Arbitration and Conciliation Act, 1996 makes it clear that the competent authority in this case is the authority of the country of origin, where the award has been made and the party against whom the award has been made was in the process of taken steps before the courts of that country in challenging the award. The competent authority is not the authority in India. The court then proceeds to observe:
"12. Had the JD taken steps to challenge the award in England and any proceedings were pending between the petitioner and the respondent/ Judgment Debtor in England, it was reasonable for the judgment Debtor to argue that the award has not yet become final and binding between the parties. But once judgment debtor had not challenged the award, the plea taken by the judgment debtor that the award has not become binding is baseless. Reliance of judgment debtor on the Rules of Supreme Court of England regarding enforcement of award does not carry weight. Section 66 of the Arbitration Act, 1996 of England is in respect of enforcement of award made in England by the courts of England. JD's contention that this court under Section 48 should refuse the enforcement of award since it has not yet become binding in England does not stand the scrutiny of law. Section 66 of Arbitration Act of England is in the nature of Section 17 of Arbitration Act, 1940 (old Indian Arbitration Act) where the court makes a domestic award as a Rule of law. Under Section 66, the English Court has to hold if the award was enforceable and binding after ensuring that the award satisfies certain conditions. Section 66 of Arbitration Act of England has therefore no application in India for determining in India whether a foreign award (even if given in England) was binding or not. The Courts in India have to consider the enforceability of the foreign award in accordance with part II of the Arbitration and Conciliation Act, 1996 and have not to see if the award satisfies Section 66 of English Arbitration Act, 1996."
In POL India Projects Limited (supra), Justice Dhanuka of the Bombay High Court has held that since the English Arbitration Act specifically provided remedy for challenge under Section 67 and 68 which remedy has to be exercised between the time prescribed under the said Act, the petitioners admittedly having not challenged the declaratory arbitration award and also final award, the petitioners are estopped for challenging the said award. The petitioners in such circumstances have also lost their right to challenge any findings with regard to the composition of the arbitral tribunal. The award-debtor before the arbitral tribunal did not file any defence statement. On the basis of the materials on record it cannot be said that the judgment debtor was denied sufficient opportunities to appear and defend the arbitration proceeding. The judgment debtor in this proceeding has raised an issue that the voyage charter party dated 2nd April, 2008 is an unsigned document and on that basis strenuously argued that there is no concluded charter party agreement between the parties.
Relinquishment of a known right being the essence of a waiver would be a bar in challenging enforceability of a foreign award. Cliff Navigation SA v. LMJ International Ltd. reported at 2015 SCC OnLine Cal 2044, essentially envisages that the right to object under Section 48 is waived at the enforcement stage when a particular objection is not made before the arbitral tribunal. One could argue that the 4th November, 2010 or the 28th July, 2011 letter/email did object to the constitution of the tribunal, but that argument would be untenable given those communications were bare denials and not in accordance with the agreed procedure as pointed out above. The petitioners at its own risk and peril avoided the proceeding. This is an indirect method to reopen the award which has otherwise attained finality.
To summarily deal with a minor procedural issue, while paragraph 25(a)(i) of the LMAA Terms does give the tribunal the power to correct errors on its own initiative, paragraph 25(d) does require a reasonable opportunity to be afforded to the other parties to make representations before exercising the powers under paragraph 25(a). Paragraph 25(a) of the LMAA Terms provides that the powers set out therein are in addition to those set-out in s. 57 of the English Arbitration Act, which in a proviso to s. 57(3) requires removal of clerical mistakes or error from accidental slips to not be corrected without affording the other party a reasonable opportunity to make representations. As would be apparent from the email by Mr. Moss on November 02, 2012 notifying the errors, this opportunity is not given to the other party. Mr. Moss simply proceeds to issue an amending award under Section 57 of the English Arbitration Act and paragraph 25 of the LMAA Terms. However, there is ample reason to not block an award because opportunity was not given for hearing before correcting minute clerical errors, considering the award-debtor had not raised objections in the not-at- all insubstantial interval between the notification of errors and serving of Amended Award, thereby waiving his right to do so now. The inoperability of this Section 48 bar here due to waiver of right to object is simply a corollary application of the principle enunciated in Cliff Navigation SA v. LMJ International Ltd. (supra). In fact, more specific authority for this conclusion is again found in Minmetals Germany GmbH v Ferco Steel Ltd., reported at [1999] CLC 647, 659 where Coleman, J. stated "that the concept of express or implied waiver of procedural objection is well established in the context of international arbitration law."
Thus, challenge to the enforceability of the award fails. Accordingly, the application being G.A. No. 514 of 2017 is dismissed with costs assessed at 2000 GMs.
Urgent Photostat certified copy of this judgment, if applied for, be given to the parties on usual undertaking.
(Soumen Sen, J.)