Bombay High Court
Rashtriya Chemicals & Fertilizers Ltd vs J.S. Ocean Liner Pte. Ltd. A Body on 27 March, 2012
Author: Anoop V. Mohta
Bench: Anoop V. Mohta
1 arbp35.11gp.sxw
ssm
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
ARBITRATION PETITION NO. 35 OF 2011
WITH
ARBITRATION PETITION NO. 599 OF 2011
Rashtriya Chemicals & Fertilizers Ltd.,
A Public Sector Company incorporated
under the provisions of the Companies
Act, 1956 having its Registered Office
at Administrative Building, Chembur,
Mumbai 400 074. ......Petitioner.
Vs.
J.S. Ocean Liner Pte. Ltd. a body
corporate, registered under the laws
of Singapore, having its Registered
Office at 18-03, High Street Centre,
1, North Bridge Road,
Singapore-179 094 ......Respondent.
Mr. Sanjay Kothari with Ms. Sheeja John with Mr. Prantik Majumdar
i/by M/s. M.P. Savla & Co. for the Petitioner in both the matters.
Mr. Ashwin Shankar with Mr. Bimal Rajshekhar with Ms. Ritcha Sahay
for the Respondent in both the matters.
CORAM :- ANOOP V. MOHTA, J.
JUDGMENT RESERVED ON :- 23 FEBRUARY 2012
JUDGMENT PRONOUNCED ON :- 27 MARCH 2012.
JUDGMENT:-
::: Downloaded on - 09/06/2013 18:21:40 :::2 arbp35.11gp.sxw ssm Both the Arbitration Petitions under Section 34 of the Arbitration and Conciliation Act, 1996 (for short, the Arbitration Act) are filed by the Petitioner Company, an Original Claimant to the Counter-Claim and an Original Respondent to the Claim filed by the Respondent (Original claimant), against an interlocutory award dated 2 September 2010 and against final award dated 17 February 2011, passed by the same learned Arbitrator.
2 An agreement of Affreightment (for short, "the Agreement") was executed on 6 November 2006, between the parties i.e. Rashtriya Chemicals and Fertilizers Ltd., (for short "RCF"). [The Charters/Petitioner] and J.S. Ocean Liner Pte. Ltd. (for short "JSOL") [the Owners/Respondent]. The agreement was to provide the vessel to the Petitioner as and when required, from November 2006 to December 2007. The Respondent was to carry cargo from the port of Aqaba, Jorden to the port of Mumbai. As stated 90% of the freight was to be paid within 7 days from the completion of loading and the balance 10% to be paid within 60 days of completion of discharge.
3 In view of the purchase order of one JPMC of Jorden for the rock Phosphate, the Petitioner was to purchase minimum 2.25 lacs ::: Downloaded on - 09/06/2013 18:21:40 ::: 3 arbp35.11gp.sxw ssm MTs. of Rock Phosphate before 31 December 2007 and the price was also fixed accordingly. The purchase order also provided that the Petitioner would have an option to purchase the total goods before the date at the same price. As agreed, the Petitioner gave requisition for the vessels. The Respondent could provide vessels to ship only 1,63,255 MTs of cargo, as alleged, below the minimum contracted quantity. The Respondent undertook 13 voyages to ship that quantity of cargo. The various communications/ correspondences exchanged between the parties in view of deficit cargo. The Petitioner ultimately did purchase the deficit material at the higher price than Purchase Order price and imported the same at higher freight than the Contract of Affreightment (for short, "COA") freight. Some materials were borrowed locally. A part of cargo received in damaged condition also.
The Respondent agreed to compensate the same but he did not do so.
4 The Respondent's claim was for 10% balance freight of USD 293584.78 for the journey already undertaken. The Petitioner by communication dated 14 August 2007 informed that all balance freight payments were stopped and would be adjusted against the loss caused to the Petitioner. Though assurances were given, in letter dated 9 October 2007, but it was never fulfilled. The Respondent, ::: Downloaded on - 09/06/2013 18:21:40 ::: 4 arbp35.11gp.sxw ssm therefore, on 6 December 2007, invoked the Arbitration Clause and made an application to the Indian Council of Arbitration (for short ICA) ) for referring the dispute for balance freight to the Arbitrator, in view of clause 43 of the Agreement which is as under:-
"43. All disputes arising under this Charter Party shall be settled in India in Accordance with the Provisions of the Arbitration and Conciliation Act, 1996, (No. 26 of 1996) or any further amendments thereof and under the Maritime Arbitration rules of the Indian Council of Arbitration. The Arbitrators to be appointed from out of the Maritime Panel of Arbitrators of the Indian Council of Arbitration. The Arbitrators shall be commercial men."
5 The Petitioner filed a written statement, as well as, a counter-
claim on 30 June 2008, after receipt of the notice from the ICA. The Respondents filed reply to the counter-claim, as well as, the rejoinder to the written statement, on 7 August 2008. The Tribunal framed issues on 16 December 2008. The matter proceeded further.
6 Oral application dated 3 April 2009 was made by the Respondent's advocate to pass an interim award. The Petitioner filed an application for rejection of Respondent's claim and for the stay of the Arbitration proceedings, including the oral application on the ground that the Respondent, a foreign company incorporated, having ::: Downloaded on - 09/06/2013 18:21:40 ::: 5 arbp35.11gp.sxw ssm more than 50% of share capital owned by the Indian National/Citizens. The Respondent resisted the same by reply dated 15 April 2009 stating to have assets within the jurisdiction to secure the counter-claim.
7 The Petitioner, by letter dated 16 April 2009 asked for a direction to disclose the assets of the Respondent, held in India. No reply was filed. Therefore, the reminders were sent by the Petitioner.
There was no respond from the Respondent. No decisions were taken.
Ultimately, on 12 September 2009, the Respondent completed its submissions to support the interim award. The Petitioner submitted interrogatories to the Respondents, but it was never replied and/or responded. On 10 October 2009, the Petitioner presented two applications one for an ad-interim order against the Respondent to furnish the security and second to disclose the particulars and documents. The stay was also sought of the Arbitration Proceedings.
The same was replied on 22 October 2009. The learned Arbitrator did not pass any order on these applications. The Respondent decided not to lead any evidence. On 13 May 2010, the Tribunal passed a direction to file an affidavit of evidence, but reserve the order of all the interim applications. The affidavit was accordingly filed by the ::: Downloaded on - 09/06/2013 18:21:40 ::: 6 arbp35.11gp.sxw ssm Petitioner. The cross-examination of the witnesses started on 22 July 2010 and over by 2 September 2010. The matter was kept for oral submissions.
8 On 2 September 2010, the learned Arbitrator, rejected three applications filed by the Petitioner, after more than a year on the date on which the evidence of the Petitioner's witness was over. On the very date, the interim final award against the Petitioner for the freight on the ground that the Petitioner admitted the liability/claim in the written statement/counter-claim. Arbitration Petition No.35/2011 is the Petition under Section 34 filed on 30 November 2010 against the interim award. The same was admitted on 10 June 2011.
9 The learned Advocates for both the parties completed their oral submissions. The learned Arbitrator thereafter on 17 February 2011 passed the final Award, maintaining the interim award in favour of the Respondent but the counter-claim of the Petitioner was dismissed.
The Petitioner, preferred Section 34 Application (Arbitration Petition No.599/2011) on 20 June 2011 and the same was admitted on 5 August 2011. Both the Petitions, therefore, as arise out of the same contract and between the same parties and as the interim, as well as, ::: Downloaded on - 09/06/2013 18:21:40 ::: 7 arbp35.11gp.sxw ssm the final award have been passed by the same Arbitrator and as the basic evidence and issues are also common, hence dealt with by this common judgment.
10 Maritime Arbitration Rules of Indian Council of Arbitration (ICA) governs the arbitration proceedings between the parties. This also means Arbitration Act will apply to this arbitration proceedings.
These Rules apply to maritime defined disputes. Clause 7 of ICA reads as under :
7 Scope of Application :
These rules shall apply, inter alia, to maritime disputes in respect of following:
1 Interpretation of charterparty, any contract of affreightment and bills of lading;
2 Carriage of goods by sea;
3 Marine Salvage, towage of vessels or other floating objects;
4 Damages arising out of collisions, groundings, fire or any such accidents whether in port or at sea, including damage to fix or floating objects at ports;
5 Interpretation of any shipping documents;::: Downloaded on - 09/06/2013 18:21:40 :::
8 arbp35.11gp.sxw ssm 6 Ownership of vessels and aspects relation to lines and mortgages;
7 General Average, particular average and matters arising out of contracts of marine insurance;
8 Wreck removal and marine pollution;
9 Disputes relating to other matters connected with shipping and not mentioned above.
11 It is also provided in these Rules that the Respondent may make a counter-claim against the claimant, if it arises out of the same transaction. The normal procedure permitting the other side to file a counter-claim is also there. The Rules further provide the power of Arbitrator, conduct of arbitration proceedings covering the aspect of timings of the arbitration session, evidence, optional conciliation, fast track arbitration, Power to decide the case in the absence of party, dismissal of application of arguments and filing of written arguments including the power to pass interim award. The Arbitral Tribunal needs to pass reasoned award expeditiously and furnish and circulate the Award through the Secretary. The general procedure of fees and expenses, administration and registration fees are also provided apart from ICA Code of conduct for the Arbitration Committee, Arbitrator, ::: Downloaded on - 09/06/2013 18:21:40 ::: 9 arbp35.11gp.sxw ssm the parties and the Counsel. It is clear, considering the scheme of ICA rules, as referred above, that though the provisions of Code of Civil Procedure (CPC) or Evidence Act need not be strictly followed, yet the basic provisions of principles of natural justice, equal and fair play, are the essential elements. The recording of evidence and oral and written arguments as provided also shows that the Arbitral Tribunal need to follow the basic principles of Evidence Act and CPC.
12 The ICA Rules provide and permit the parties/Respondent to file counter-claim and further permits the other parties to file reply. The Arbitral Tribunal, in this matter, after recording the evidence by rejecting all the preliminary applications filed by the Petitioner, has passed the interim final award basically by holding that the Petitioner admitted the freight claim in the written statement. The important facet is that no Court and/or Arbitrator just dissect the other portion of the pleadings while granting such order and/or Award on the basis of alleged admission at interim stage of the proceedings. I have noted that the other portion of the counter-claim, as well as, reply filed by the Petitioner to the claim raised by the original claimant/Respondent, there are various reasons and resistances were averred to the claim raised by the Respondent/original claimant. The sentence so relied ::: Downloaded on - 09/06/2013 18:21:40 ::: 10 arbp35.11gp.sxw ssm upon by the learned Arbitral Tribunal just cannot be read in isolation, by overlooking the positive contra statement, whereby the Petitioner resisted the freight charges. It was specifically mentioned and contended that the Respondent was not liable for the said amount, even if any, in view of the counter-claim raised by the petitioner.
13 It is clear, considering Order 12, Rule 6 of CPC and even otherwise, before passing a decree on admission, the Court is required to consider the other averments in the written statement read with counter-claim so raised. The admissions are subject to the rebuttal and not always final and binding. Both need to be read together. Strikingly, the learned Arbitrator has passed the interim award after recording the evidence of the parties. In my view, such procedure so adopted to pass interim award, at such end of the proceedings on the ground of alleged admission was incorrect. The learned Arbitrator need to give reasoning while accepting the admission so given, but also by considering the other surrounding and opposing and/or rebuttable averments so made to oppose the claim of the Respondent. The Arbitrator, in this case, failed to do so. In Rajesh P. Thakkar vs. M/s. Kotak Mahindra Bank Ltd. 1 , I have 1 2012 (1) Mh. L. J. 119 ::: Downloaded on - 09/06/2013 18:21:40 ::: 11 arbp35.11gp.sxw ssm already observed in paragraph 6 as under :
"Merely because other party admits the claim that itself is not sufficient reason not to give opportunity to such party. It is settled law that admission even if made is always rebuttable and in a given case, the party may give justification and/or clarify the same admission."
14 I am of the view that the said sentence, even if any, cannot be treated as unequivocal admission. On the contrary, the same was subject to various conditions as averred in other paragraphs and including in the same paragraph itself. The pleadings need to be read 2 It is as a whole. (Western Coalfields Ld. vs. M/s.Swati Industries).
also relevant to note that Section 18 of the Arbitration Act, mandates that the Arbitrator must give equal opportunity to both the parties.
But in the present case, the learned Arbitrator without considering the counter-claim and the other averments made by the Petitioner, relying upon the sentence, awarded the claim. The fact remains that the interim award could not be executed as the same was challenged in the Petition (Arbitration Petition No.35/2011), which was admitted on 10 June 2011. The final award was passed on 17 February 2011 and the Petition challenging the impugned award was admitted on 5 August 2011.
2 AIR 2003 Bom. 369 ::: Downloaded on - 09/06/2013 18:21:40 ::: 12 arbp35.11gp.sxw ssm 15 The learned counsel appearing for the Respondent/original claimant submitted that the interim award so passed was based upon various other material on record and not only the admission. In the light of Shipping and International Trade, freight earned by ship owner, as submitted, is considered to be sacrosanct and to be immuned from the set off. The provision is in accordance with the international and the English Law and as the Indian Law is silent, the interim award cannot be stated to be unjust and/or bad in law. The reference is made to M.V. Elisabeth v. Harwan Investment & Trading Co.3 wherein it is observed as follows :-
"the powers of that Court were derived from custom and practice and the principles developed by common law and equity as well as by the generally recognised principles of civil law developed and practiced in Europe. There is no reason why those principles should also not be drawn upon to enrich and strengthen the jurisprudence of this country, even if the jurisdiction of our courts were to be, by compulsions of history, considered to be curtailed and dovetailed to the colonial past - a proposition which is neither correct nor consistent with our status as a sovereign republic."
16 The reference is also made to Liverpool and London S.P. And I. Association vs. m.v. Sea Success I and anr.4 , wherein it is observed 3 AIR 1993 SC 1014 4 (2004) 9 SCC 512 ::: Downloaded on - 09/06/2013 18:21:40 ::: 13 arbp35.11gp.sxw ssm as follows :
"Global changes and outlook in trade and commerce could be a relevant factor. With the change of time; from narrow and pedantic approach, the Court may resort to broad and liberal interpretation."
17 To support this further, the reference is also made to The House of Lords in Aries Tanker Corporation vs. Total Transport Ltd. 5 , "That a claim in respect of cargo cannot be asserted by way of deduction from the freight, is a long established rule in English law."
and "This is all the less so since the parties themselves, if they dislike the rule, can perfectly well provide otherwise in their contract. (1973) 3 All ER 589, (1974) QB 233 I am therefore firmly of opinion that the rule against deduction has to be applied to this charterparty so that the charterers' claim for short delivery cannot be relied on by way of defence."
18 The submission is also made that the claim and counter-claim need not be decided together in view of above and also by referring to Order 12 Rule 6 of CPC. He has also relied on Numero Uno International v. Prasar Bharti,6 by referring to the following 5 (1977) 1 All ER 398 6 2008 (5) R.A.J. 1 (Delhi) ::: Downloaded on - 09/06/2013 18:21:40 ::: 14 arbp35.11gp.sxw ssm sentences, "Such being the legal nature and character of a counter
-claim, its pendency does not denude the arbitrator of the power to make an interim award in the original suit/claim if such an interim award is otherwise justified... No interference with an interim award would, however, be permissible only because the defendant has made a counter-claim or because some areas of dispute independent of the area covered by interim award remains to be resolved." He therefore also submitted that the claim and counter-claim as decided finally of these submissions/challenge to the interim award is now academic.
19 As noted, the ICA rules provide and empower the Arbitrator to pass ad-interim award, the Arbitrator is within his jurisdiction to pass such award. We are testing here the procedure so adopted and the reasoning so given while granting the interim award, after closing of the evidence. The counter-claim can be filed by the Respondent and, therefore, to say that irrespective of the counter-claim, the Arbitrator is entitled to pass award with regard to the freight, based upon the above judgments could have been a situation where the Arbitrator had passed the award immediately, after deciding the preliminary objection so raised by the Petitioner. But in this case, admittedly, the Arbitrator kept all the three objections; Respondent's lack of capacity ::: Downloaded on - 09/06/2013 18:21:40 ::: 15 arbp35.11gp.sxw ssm to sue; prayer for security from the Respondents; and non-disclosure of Respondent's assets being foreign company, for long. For un-known reason, the Arbitrator failed to decide those applications which, in a given case, could have gone to the root of the matter. The Arbitrator, however, after one year rejected those objections and passed the interim award and thereafter the final award, within a span of six months, by rejecting the counter-claim of the Petitioner in toto. The Petitioner has no choice but to challenge all the applications in the present case.
20 Merely because counter-claim was raised that itself should not be the reason not to grant interim award as provided under the Act and the Rules, but the reasoning to grant the award on the basis alleged admission and the claim of freight should based upon agreed contract and the regulations and not only the English laws. It need to be considered from the point of view of the averments made by the Petitioner in the reply to the claim of the Respondent and in his counter-claim for the loss, based upon the ICA rules.
21 The issue still remains so far as the Indian laws, the ICA rules and the practice is concerned. The Arbitrator without deciding the ::: Downloaded on - 09/06/2013 18:21:40 ::: 16 arbp35.11gp.sxw ssm counter-claim so specifically raised, can overlook the same even though the parties have led the evidence and can grant the award on the basis of freight charges so claimed. There is no dispute that the counter-claim was raised against the original claimant arise out of same transaction and between the same parties. The specific provision so provided under the ICA rules and even otherwise, as per the provisions of CPC, the counter-claim so raised and if it is permissible to raise and if arise out of same transaction between the parties, in my view, it needs to be adjudicated simultaneously, based upon the evidence, as well as, material available on record. It cannot be dissected in such fashion merely because international practice so referred permits the Arbitrator to grant such freight charges in such arbitration proceedings.
22 In the present case, as the parties have admittedly governed by the provisions of Arbitration Act as well as the ICA rules and if those rules and provisions, provide the other party to raise counter-claim arising out of the same transaction, in my view, it just cannot be dissected to pass interim order on the basis of only English law and/or Hague rule. The English law and/or such practice, if any, have definitely persuasive value. In the absence of any restriction and/or ::: Downloaded on - 09/06/2013 18:21:40 ::: 17 arbp35.11gp.sxw ssm provision, in international business and/or arbitration, those need to be respected. But when the Indian provisions and law are clear and basically the power of Court and/or Arbitrator to decide the counter
-claim simultaneously and as also provided in the ICA rules, this specific provisions, in my view, just cannot be overlooked by the Arbitrator, even for deciding such interim award on the basis of alleged admission based on the mandatory freight charges. The citations so referred by the learned counsel appearing for the Respondent have no where dealt with the provisions of Indian law as the counter-claim may be in the nature of claim for damages (Order 8 Rule 6A(1) and can be set up as defence under Order 8 Rule 6F, apart from any restriction of territorial jurisdiction. The facts of those English cases are totally distinct and distinguishable. The English judgments even if any have a persuasive value, but cannot prevail over the clear judgments and the provisions of the Indian law. The present arbitration proceedings and/or dispute and/or difference, if any, need to be settled as per the agreed ICA rules and the Arbitration Act.
There is nothing to prove that the parties have agreed for the Hague rules. The material shows otherwise.
23 One cannot overlook the facet that the claimant is a foreign ::: Downloaded on - 09/06/2013 18:21:40 ::: 18 arbp35.11gp.sxw ssm party and, therefore, the insistence for security and/or disclosure ought to have been considered by the Arbitrator immediately on the applications filed by the Petitioner. The Petitioner is Government of India undertaking and it had counter-claim of Rs. 46 crores. The objection that the Respondent being a foreign entity is not entitled for the claim in view of the provisions of the Companies Act itself, is quite material.
24 There is nothing in the Arbitration Rules and/or CPC to accept the submission of the learned counsel appearing for the Respondent that ICA rules do not permit right of set off. If the counter-claim is permitted, it is difficult to accept the Respondent's case that the set off is not permitted. The concept of set off though different than the counter-claim still it is a valid and permissible defence if available under the law and if it is a defence to the extent of suit claim and a claim against the Plaintiffs for the balance, just cannot be overlooked by the Arbitrator and/or by the Court. It is also necessary to note that there is no total bar under the agreement that the Petitioner is not entitled to claim any damages and/or compensation in case of loss and/or damages to the goods or the vessel. One cannot overlook the fact that earning of freight is dependent upon complete delivery. If ::: Downloaded on - 09/06/2013 18:21:40 ::: 19 arbp35.11gp.sxw ssm goods are not delivered fully, there is no question of full freight automatically. In the present case, there is nothing to show that the ship owner was not liable for the loss at any time. In view of clauses 15 and 27 of the contract, the reliance on the judgments are of no assistance. There is no case of complete delivery of the goods by the Respondents.
25 The submission that the charterers are not entitled to the right of set off as the doctrine of equitable set off does not apply to a claim for freight and specially in view of the specific agreed rules and laws are concerned need to be considered in the facts of the case. The Respondent though asserted that they have assets in India and ready and willing to provide the details of the same, but inspite of repeated communications and applications, not provided the same. This is not a case of deficiency in service but this is a case of non-delivery and/or damaged goods delivery, discharged at the port. It is unacceptable that the claim of freight can be decided without considering the counter-claim of damages/compensation for loss of goods/cargo. The Court now, therefore, need to consider both the Petitions under Section 34 of the Arbitration Act against the interim award as well as final award. One cannot overlook that the doctrine of set off as ::: Downloaded on - 09/06/2013 18:21:40 ::: 20 arbp35.11gp.sxw ssm proposed, based upon the English laws itself which provides (Halsbury's Laws of England, 4 th Edition, Volume 42, paragraph
432), that "the set off is available to a Defendant only when the rules of the procedure of the Court in which the Plaintiff brings in his action, allow a set off to be pleaded and the mode in which a plea of set off has to be raised is also determined by those rules". As noted, the provisions of CPC in India definitely permit the parties to raise counter-claim and/or set off within the prescribed period.
26 The concept of counter-claim and set off is well defined. In addition to this, the ICA rules itself permit the parties to raise the counter-claim. In my view also it is difficult to permit the parties to claim a set off and be decided at latter stage of proceeding while by overlooking the claim and the counter-claim of the parties. In my view, both need to be adjudicated and decided simultaneously and together as it arises out of the same transaction between the parties apart from common evidence. Therefore, the submission with regard to the foreign doctrine of set off of freight, in my view, in the present facts and circumstances, cannot be invoked to overlook the provisions of the Indian laws and the agreed rules.
::: Downloaded on - 09/06/2013 18:21:40 :::21 arbp35.11gp.sxw ssm 27 Now it is too late to accept the case of keeping the issue of counter-claim pending while deciding the issue of interim award in view of the submission so raised by the learned counsel appearing for the Respondent. On the contrary, to avoid further complication, it is necessary to adjudicate and decide both the Petitions together.
28 The Power of Arbitrator to pass interim award on the basis of material available on record, including the admission if any, at the earliest point of time of the proceedings is well recognized, specially in view of Section 31(6) and Section 2(1)(c) read with definition of interim award. But, in a case where the various objections were raised in writing, without deciding those objections at the earliest and at the fag-end of the Arbitration proceedings, after recording the evidence of the parties, the interim award so passed, which followed immediately by the final award within a span of six months, basically on the foundation of the alleged admission and English doctrine set off, by overlooking the various averments made by the opposite party denying the claim, as well as, raising the counter-claim, is contrary to the law. It complicate the issues and the claims. Let it be clear that we are dealing the Arbitration proceedings based upon the Rules, whereby it is permissible for the other side to file the counter-claim to ::: Downloaded on - 09/06/2013 18:21:40 ::: 22 arbp35.11gp.sxw ssm avoid multiplicity of the proceedings and proper adjudication of the Arbitration proceedings. To keep the counter-claim pending instead of deciding simultaneously, will hamper the Arbitration proceedings.
29 I have already observed in Arbitration Petition No. 200 of 2007 decided on 15 July 2011 M/s. Puyvast Chartering B.V. Vs. KEC International Ltd. the scope and purpose of Section 34, based upon the Supreme Court Judgment, which is explained as under-
"The Apex Court has reiterated in J.G. Engineers Private Limited Vs. Union of India & Anr. 7 that the jurisdiction of the Court under Section 34 of the Act, is supervisory and not appellate. The Court can set aside the award, only if any of the grounds mentioned under Sections 34(2)(a)(i) to (v) or Sections 34(2)(b)(i) and (ii), or Section 28(1)(a) or 28(3) read with Section 34(2)(b)(ii) of the Act are made out. An award adjudicating claims which are "excepted matters" excluded from the scope of arbitration, would violate Sections 34(2)(a) (iv) and 34(2) (b) of the Act. Making an award allowing or granting a claim, contrary to any provisions of the contract, would violate Section 34(2)(b)(ii) read with Section 28(3) of the Act."
The award falls within the ambit of "illegal" and "the contrary to the law".
30 The Arbitrator by overlooking the basic terms and conditions of 7 (2011) 5 S.C.C. 758 ::: Downloaded on - 09/06/2013 18:21:40 ::: 23 arbp35.11gp.sxw ssm the agreements and the agreed bye-laws and procedure passed delayed interim award and the final award, the Court is, if the case is made out of illegality and reflects unequal treatment and the award is in a breach of principle of natural justice, fair-play and equity, which causes more injustice and hardship and gross prejudice to other side, empowered to interfere with the same.
31 The submission, therefore, that the award though passed but as the Petitioner accepted the part payment that itself is sufficient to dismiss the case/ Petition as an estoppel from challenging the award is also unacceptable. The parties are entitled to, if paid and received the part amount and that itself cannot be the reason to deprive him, his rights to challenge the remaining part of the award which is illegal and unacceptable to him. In the present matter, the doctrine of waiver and estoppel are of no assistance, as admittedly the Petitioner has raised the preliminary objections and challenged the interim award read with the final award on various grounds.
32 The counter-claim of the Petitioner was of Rs. 46 crores, which was dismissed basically on the ground of acquiescence and waiver in the breach and the delay, but the learned Arbitrator failed to consider ::: Downloaded on - 09/06/2013 18:21:40 ::: 24 arbp35.11gp.sxw ssm that the Respondent agreed in writing to pay the compensation for the damaged cargo. The differences in freight and the price of the cargo which the Respondent failed to shift, compel the Respondent to purchase the goods from out station therefore, some part of the counter-claim was also on account of the risk purchase, ought not have been overlooked. There is material on record to show and even noted by the Arbitrator that the Respondent failed to shift the contract quantity of the goods. The Arbitrator, in fact, answer the issue of the breach on the part of the Respondent in favour of the Petitioner in paragraph No. 13 of the award. The relevant part reads as under:-
"13.14............
In my view, the Charterers waited and watched while losses mounted and then belatedly sought to foist them on the Claimants. This is certainly not the conduct of a prudent charterer. The Respondents could have called upon the Claimants to place an additional loader but did nothing of the kind."
"13.16 The charterers have presented no evidence whatsoever as to the freight rates prevailing at or about the times of various breaches. Hence it is not possible for this Tribunal to determine the damages they could perhaps be entitled to - if they had mitigated their loss at the appropriate times. In view of the reasons given, this part of the claim (i.e. claim on account of higher freight to transport the short fall of 61,775 M.Tons and higher customs duty thereon) must fail."::: Downloaded on - 09/06/2013 18:21:40 :::
25 arbp35.11gp.sxw ssm "13.17 I now turn to the second part of the claim - i.e. for USD 197477.03 on account of "to and fro"
expenses for the cargo borrowed from Bharuch and Dahej. The Respondents stated that borrowing this quantity was necessitated in order not to shut down their plant due to shortage of raw material. Once again, in order to succeed the Respondents must establish that such an eventuality was within the reasonable contemplation of the parties when they made the contract. In my opinion, the Respondents have failed to establish that essential requirement and hence this part of their claim must also fail."33
The learned Arbitrator ought not to have dismissed the counter-
claim filed by the Petitioner on the ground that the Petitioner failed to mitigate the loss. If a party failed to mitigate the loss, which he does not thereby himself claiming damages, the Arbitrator in such circumstances, would take into account the fact/situation while assessing the quantification of the damages. But before that, the Respondent must prove and raise the plea about the existence of situation of mitigation. The Respondent failed to do the same.
34 The Petitioner has given the details of counter-claim. The rejection of the counter-claim on the ground that the Petitioner failed to give information as to how the damaged cargo was disposed of, in the present facts and circumstances, basically when the Respondent ::: Downloaded on - 09/06/2013 18:21:40 ::: 26 arbp35.11gp.sxw ssm agreed to compensate for the same was incorrect specially when, the fact of disposal all the cargo was not in dispute. All the expenses related to moister, the differences, costs of dry cargo and expenses were provided in detail. The Arbitrator failed to consider the material on record and failed to appreciate the evidence and the relevant and material fact which is impermissible. This also makes the award bad in law, as it amounts to erroneous application of law, as it caused improper and incorrect finding also.
35 Admittedly, the Respondent claimant did not examine any witness in support of their claim and/or in support of their defence to the counter-claim. The learned Arbitrator ought to have taken adverse inference against the original claimant. No justification whatsoever was given by the claimant for not examining any witnesses. The burden cannot be shifted upon the Petitioner to prove the negative. The Respondent was under obligation to provide vessels as per the requirement. The acceptance and/or rejection of the vessel if any, goes to show that there was considerable delay and in fact steps were taken by the Petitioner to avoid losses. The defaults, therefore, on the part of Respondent, in not providing proper vessel cannot be the reason to discard the claim of the Petitioner on the ground of ::: Downloaded on - 09/06/2013 18:21:40 ::: 27 arbp35.11gp.sxw ssm delay/ breaches, inaction on the part of Respondent to complete the delivery of the cargo. There again comes the interpretation of the clauses of the agreement, including the obligation to provide suitable and required sized vessels. The revised schedule made known to the Respondent and to which they were never objected. The time was the essence of the contract. Therefore, admittedly the breaches committed by the Respondent. The contract voidable at the instance of the aggrieved party and the affected parties entitled for the compensation of such breaches. The Respondent, inspite of repeated notice, failed to perform their part and therefore, the Petitioner was entitled for the counter-claim/ compensation. The Arbitrator failed to deal with this facet and dismissed the counter-claim by putting wrong burden upon the Petitioner to prove negative, by holding that the Petitioner failed to take steps to avoid losses. The Respondent cannot claim benefit and/or defence with regard to the stock position of the Petitioner of the goods at the relevant time. They were bound to perform the COA.
36 There are various correspondences and emails placed on record by the Petitioner which was not disputed by the Respondent by leading counter and contra defence, specifically when there is no ::: Downloaded on - 09/06/2013 18:21:40 ::: 28 arbp35.11gp.sxw ssm denial to the breaches of the terms of the COA by the Respondent.
They have even admitted, not to continue with the performance for want of balance payment of freight. This also means that the Respondent ought to have completed their parts of delivery of the cargo within stipulated time and then go to insist for the full freight charges. But their own inaction of non performance on their part for non-payment of balance freight, itself shows the breaches committed by them which could entitle them to full freight charges. One cannot overlook the fact that the claim was with regard to the 10% of the balance freight only. It is not the case that no payment was made by the Respondent to the Petitioner towards the freight charges.
37 The case that it was unprofitable to perform their part, that itself cannot be the reason or the increasing costs is not justification for the admitted breach so committed by the Respondent. The plea of frustration of the contract not pleaded and/or proved.
38 The loss of opportunity or profit as contemplated under Section 73 of the Contract Act, just cannot be overlooked. It also means the consequential loss suffered by the Petitioner because of defaults of the Respondent. The Petitioner, therefore, was entitled for the ::: Downloaded on - 09/06/2013 18:21:40 ::: 29 arbp35.11gp.sxw ssm compensation and/or of the damages, at least, based upon the agreements and the existing market price. The claim with regard to the damage the cargo ought not to have overlooked. The quantity of the cargo lifted by the claimants was also matter of record. All the essential ingredients supported the counter-claim and defence so placed and proved by the Petitioner, but not dealt with by the Arbitrator.
39 The claim with regard to the loss and damages in the same, have been provided in details by separate tables along with supporting averments. The same were supported by the witnesses of the Petitioner. In the cross-examination, those remain intact. The Respondent failed to lead any evidence. Therefore, all these aspects even referring to the issues if proved by leading evidence the Arbitrator's decision to discard the same by dismissing the counter-
claim is totally of no application of mind to the facts, as well as, the record.
40 The counter-claim was, therefore, based upon the losses and damages which arise because of Respondent's breaches in lifting the contract cargo and related aspects. The Respondent failed to support ::: Downloaded on - 09/06/2013 18:21:40 ::: 30 arbp35.11gp.sxw ssm the case of plea of mitigation. Any way, that cannot be the reason to dismiss the counter-claim in such fashion, as done in the present case.
The Respondent cannot claim the benefits of their own wrong. The details and the supporting evidence so averred read with evidence so placed on record by the Petitioner, were just overlooked by the Arbitrators while dismissing the counter-claim. The unsupportive averments in reply to the counter-claim ought not to have been accepted by the Arbitrator. The Petitioner admittedly had actually imported the cargo, in view of the above circumstances, and to support that placed material on record, therefore, there was no question of assessment of the damages on assumption and/or presumption.
41 There is nothing mentioned by the Arbitrator that the evidence so lead by the Petitioner's witnesses, is incredible and/or unreliable.
The reasons are that the Petitioner failed to prove the same. The records show otherwise in view of the reply to the counter-claim, as well as, the claim of the Respondent itself. The defence was that there was no breach committed by them. There was intention to perform their part and the breach committed by the Petitioner. The submission that the breach was regular and periodical and mitigation ::: Downloaded on - 09/06/2013 18:21:40 ::: 31 arbp35.11gp.sxw ssm was not timely and nor reasonably and damaged quantified wrongly by the Petitioner have not been dealt with properly by the Arbitrator.
42 Therefore, taking over all view of the matter, in my view, the Petitioners have made out the case. As award so passed is illegal and contrary to the record and the law.
43 The view expressed by the minority Arbitrator just cannot be overlooked. The view expressed by the majority Arbitrators, considering the Arbitration Act, to prevail first. Therefore, the impugned awards passed by the majority Arbitrators have been discussed and deliberated. The Court under Section 34 of the Arbitration Act, is empowered to deal with the merits of the matter and pass order accordingly, irrespective of the views given by the Arbitrators. In the present case, I have already observed that the majority award is illegal and bad in law, as it is contrary to the records and the law. The view expressed by the minority Arbitrators, awarding the counter-claim in favour of the Petitioner based upon the evidence so lead by the Petitioner, just cannot be overlooked.
However, considering the facts and circumstances, as the majority Arbitrators not considered the material placed on the record by the ::: Downloaded on - 09/06/2013 18:21:40 ::: 32 arbp35.11gp.sxw ssm Petitioner, in my view, the award needs to be interfered with. The Minority award, however, just cannot be granted though the Court has power to modify the award. I have already observed in Axios Navigation Co. Ltd. Vs. Indian Oil Corporation Limited 8 "20 Admittedly, the appointment of the Arbitrator was by the consent of the parties. The matter was heard by all the Arbitrators as they agreed for the common procedure to be followed. Only because the dissenting Arbitrator has expressed his opinion on same facts and material differently, that cannot be the reason to overlook the well reasoned dissenting opinion. It is permissible to express individual opinion even by the Arbitrator. There is no bar at all for the Arbitrator to express their independent views though for the purposes of award, the majority decision is required.
21 In any judicial decision making process, every Judge is entitled to express his views on the subject. Therefore, in case of conflict of view which is not uncommon and in fact it is useful as it provides another dimension to the same issue based upon the same material which is important for any judicial decision making process. I am of the view, therefore, that the view expressed by the dissenting Arbitrator and if relied upon by the loosing party and/or aggrieved party who wants to support the same reasoning, such right just cannot be denied merely because the scheme of the Act required in case of conflict, the majority view need to be treated as an awardable opinion."
44 In K.V. George, Vs. The Secretary to Government, Water and 8 2012 Vol. 114 (1) Bom. L.R. 0392 ::: Downloaded on - 09/06/2013 18:21:40 ::: 33 arbp35.11gp.sxw ssm power Department, Trivandrum & Anr. 9 , the Apex Court while dealing the Arbitration matter, though under old Act but referring to the provisions of CPC has observed as under:-
"It is the duty of the Arbitrator while considering the claims of the appellant to consider also the counter-claims made on behalf of the respondents and to make the award after considering both the claims and counter-claims. This has not been done and the Arbitrator did not at all consider the counter-claims of the respondents in making the award. As such the first award dated January 22, 1981 made by the Arbitrator in Arbitration Case No. 132 of 1980 is wholly illegal and unwarranted and the High Court was right in holding that the Arbitrator misconducted himself and the proceedings in making such an award and in setting aside the same and directing the Arbitrator to dispose of the reference in accordance with law considering the claim of the contractor and the counter-claim of the respondents."
(The principle is further discussed, in J.G. Engineer's Pvt. Ltd.
10Vs. Calcutta Improvement Trust & Anr. ) 45 Therefore, taking overall view of the matter, I am inclined to observe that the majority awards need to be quashed and set aside.
The matter is remanded back for fresh consideration before the same Tribunal and/or such other Tribunal so constituted under the ICA, by 9 AIR 1990 S.C. 53 10 (2002) 2 SCC 664 ::: Downloaded on - 09/06/2013 18:21:40 ::: 34 arbp35.11gp.sxw ssm consent of the parties. Therefore, considering the wrong appreciation of the evidence, as well as, the record by the Arbitral Tribunal, I am inclined to remand the matter back for fresh hearing. The Arbitral Tribunal to give full opportunity to both the parties and pass order accordingly. The parties are at liberty to make their submission based upon the documents and evidence already available on record, before the Arbitral Tribunal or add more, by giving notice to each other, subject to order of the Tribunal.
46 Once the Award is quashed and set aside, resulting order on grant of interest is also needs to be quashed and set aside, except the costs so awarded.
47 Resultantly, the following order:-
ORDER
a) Both the impugned majority awards dated 17 February 2011 and 2 September 2010, are quashed and set aside.
b) All points are kept open.
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c) The Arbitral Tribunal to re-hear the matter and pass appropriate order by giving opportunity to both the parties, as expeditiously, as possible.
d) Both the Petitions are allowed. Rule made absolute accordingly.
e) There shall be no order as to costs.
f) Order accordingly.
(ANOOP V. MOHTA, J.) ::: Downloaded on - 09/06/2013 18:21:40 :::