Bombay High Court
Ispat Industries Ltd vs Shipping Corporation Of India Ltd on 16 October, 2009
Author: Anoop V. Mohta
Bench: Anoop V. Mohta
1
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
ARBITRATION PETITION NO. 343 OF 2009
Ispat Industries Ltd.,
a company incorporated under the
Companies Act, 1956 having its
Registered Office at 'Park Plaza', 71,
Park Street, Kolkata - 700 016 and
carrying on business inter alia from
'Nirmal', 7th Floor, Nariman Point,
Mumbai 400 021. ...Petitioner.
Vs.
Shipping Corporation of India Ltd.,
a company incorporated under the
Companies Act, 1956 having its
Registered Office at 245, Madam
Cama Road,
Mumbai-400 021. ... Respondent.
Mr. Aspi Chinoy Sr. Counsel with Ms. Shamina Lakdawala, Mr. Gaurav
Mitra, Mr. Gautam Mitra i/by Juris Corp. for the Petitioner.
Mr. F. Divitre, Sr. Counsel with Mr. Rahul Naricharia, Mr. Atul Thakkar
& Ms. Vaishnavi Nair i/by M/s. Mulla & Mulla & C.B.C. for the
Respondent.
CORAM: ANOOP V. MOHTA, J.
DATE OF RESERVING THE JUDGMENT :- 31/08/2009.
DATE OF PRONOUNCING THE JUDGMENT :- 16/10/2009.
JUDGMENT:
1 Heard finally, by consent of the parties.
::: Downloaded on - 09/06/2013 15:14:06 ::: 22 The Petitioner has invoked Section 34 of the Arbitration and Conciliation Act, 1996 (for short, the Arbitration Act), in the matter of disputes arising out of the Contract of Affreightment (for short, the COA) dated 12th April, 1996 between the Shipping Corporation of India (for short, SCI) and the Petitioner Ispat Industries Ltd., formerly known as Nippon Denro Ispat Ltd. (for short, IIL).
3The parties entered into the COA and accordingly the ship owners gave two vessels "Mandakini" and "Uttar Kashi" on charter to the charterers for the carriage of iron ore in bulk from Vishakhapatnam to Mumbai. The disputes arose between the parties during the performance of the COA because of disablement of cranes and the matters related to the same. The parties have appointed, by consent, Mr. R.S. Cooper as a Sole Arbitrator.
4 The relevant facts as noted in the award are as under:-
"I. FACTS:-
The main facts relevant to the disputes are as under:
i) Quantity: 400,000 mt 10% MOL in CHOP to be transported between 15-4-1996 to 31-3-1997.::: Downloaded on - 09/06/2013 15:14:06 ::: 3
ii) Discharge Rate:7,500 mt SHINC per day of 24 consecutive hours. Basis 4 cranes/ grabs available at all times. The cargo was to be discharged on FOIST basis. Discharging was at cost and at responsibility of the charterer.
iii) Demurrage: $ 11,000 per day or pro rata.
iv) In the event of failure of Charterers to provide the required quantity, owners to be suitably compensated. Neither party to be liable for consequential damages.
v) The two vessels, Mandakini and Uttar Kashi each performed one voyage - Mandakini loaded 45590 mt. And Uttar Kashi loaded 46411 mt. There is no dispute regarding the loading operations at Vishakhapatnam in respect of both the vessels.
95% of the freight on cargo loaded by the two vessels was duly paid to the owners by the charterers. The balance 5% remained unpaid and is one of the items in dispute between the parties.
::: Downloaded on - 09/06/2013 15:14:06 ::: 4vi) After the vessels had performed their respective first voyages, the charterers refused to load any further cargo and repudiated the COA. The ground advanced by the charterers was that the vessels were unsuitable for the contract as their cargo gear was inefficient and was incapable of performing according to the contractual conditions.
vii) Details of the performance of the two vessels at Mumbai during discharging are summarized hereunder.
Mandakini arrived Mumbai 15-5-1996 Discharge commenced 19-5-1996.
Discharge completed 26-5-1996.
Uttar Kashi arrived Mumbai 4-6-1996 Discharge commenced 9-6-1996.
Shifted to high seas after partial discharging 18-6-1996.
Reberth on 28-6-1996 Discharge completed 5-7-1996 ::: Downloaded on - 09/06/2013 15:14:06 ::: 5 Consequently, according to the owners both vessels exceeded the agreed lay time during discharge and ran into demurrage which is one of the issues in dispute.
II. Owners Claim Details:
1) Mandakini:
a) Owners claimed demurrage incurred by the vessel for 4 days 3 hours and 2 minutes totaling US$ 42817.88
b) Additionally, owners have claimed Rs.
176921/- being cost of repairing damage alleged to have been caused by the stevedores of the charterers made up of the following bills:
SSK Eng - Rs.21,934/-
SSK Eng - Rs.91,000/-
Indo Marine Rs.63,987/-
=======
Total: Rs.1,76,921/-
c) Owner's claim also includes 5% net unpaid freight amounting to US$ 10,000.31 which is in addition to the demurrage.
::: Downloaded on - 09/06/2013 15:14:06 ::: 6d) Charterers earned agreed dispatch of US$4170 at the load port Vishakhapatnam and owners have given credit to the charterers for this amount when computing the demurrage of US$ 42900.
e) Owners have also claimed interest at 8% per annum from 28-10-1996 upto the date of the Award and thereafter until payment or realization.
2) Uttar Kashi:
a) Owners have claimed demurrage incurred by the vessel for 25 days 2 hours and 6 minutes.
However, after some adjustment downwards owners to avoid controversies have agreed to reduce the time in excess of lay days to 22.57 days and have revised the demurrage claim to US$ 248,270.
b) Owners claim includes 5% net unpaid freight amounting to US$ 10181.41 which is in addition to the demurrage of US$ 248270.
c) Owners have claimed interest at 8% p.a. from ::: Downloaded on - 09/06/2013 15:14:06 ::: 7 15-7-1996 upto the date of the award and thereafter until payment or realization.
3) Loss of Profit:
For premature termination of the COA, owners are claiming US$ 289,280 by way of loss of profit with interest at 8% p.a. from 1-4-1997 until payment or realization.
III. Charterers counter-claim details:
Charterers have made a counter-claim as shown below US$ 7813.80 additional charges incurred for disablement of cranes of Mandakini.
US$ 4804.40 disablement of cranes of
Uttar Kashi.
US$ 1740.50 cost of charges for port
entry for discharging cargo.
US$ 877.70 excess berth hire charges.
US$ 8824.11 excess shipping charges.
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US$ 24060.51
The other counter claim has been dismissed by the Tribunal as time barred.::: Downloaded on - 09/06/2013 15:14:06 ::: 8
5 After considering the rival submissions and based upon the facts and the COA, by the impugned award dated 5th January, 2009, the Arbitrator has concluded as under:-
a) Respondent, Ispat Industries Ltd. to pay the Claimant, Shipping Corporation of India as follows:
Mandakini:-
USD 42817.88 demurrage
USD 10001 ig unpaid freight
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USD 52818.88 plus interest @ 8% p.a. from
28/10/1996 till payment or
realization.
Uttarkashi:-
USD 248270 demurrage
USD 10181 unpaid freight
-----------------
USD 258451 plus interest @ 8% p.a. from
15/07/1996 till payment or
realization.
b) Costs: Charterers to pay owners Rs.150,000/-
comprising owners' Advocates/ clients legal costs and their share of the Tribunal's fees.
6 The relevant clauses of the COA are :-
::: Downloaded on - 09/06/2013 15:14:06 ::: 9"The cargo to be discharged at the rate of 5000 MT or in Charterers option at the rate of 7500 MT par day of 24 consecutive hours Sundays and holidays included and basis four cranes/ grabs available at all times. Vessel's cranes and grabs driven by shore labour free of expenses to the Owner. The Charterers to advice their option of rate of discharge on completion of loading of each vessel."
"63. Owners guarantee that vessel's grab and cranes are capable of discharging basis 4 hooks minimum 8000 MT with barges available in one day."
7 The scope and purpose of Section 34 of the Arbitration Act, has reiterated by me in the following cases:-
"Jigar Vikamsey Vs. Bombay Stock Exchange Limited (Arbitration Petition No. 66 of 2009), dated 28 th August, 2009, "11 The Petition is under Section 34 of the Act. The Apex Court recently in G. Ramchandra Reddy & Company v. Union of India & anr., (2009) 6 SCC 414 and in Madhya Pradesh Housing Board v. Progressive Writers and Publishers, (2009) 5 SCC 678, while dealing with both the Arbitration Acts and considering the ::: Downloaded on - 09/06/2013 15:14:06 ::: 10 principles to challenge the Arbitral Award has re-iterated the following points :
(a) The re-appraisal of the evidence by the Court is not permissible (Ispat Engineer Foundary Works vs. Steel Authority of India, (2001) 6 SCC 347). An Award of an Arbitrator need to be read as a whole to find out the implication and meaning thereof of the reasons. The Court, however, does not sit in Appeal over the Award.
(b) The interference, where reasons are given would still be less, unless there exists a total perversity and/or the Award is based on a wrong proposition of law.
(c) Even if two views are possible on an interpretation of central clause, that would not be justification in interfering with the Award specially when the view so taken is possible/plausible one (Sudarshan Trading v. Allied Construction (2003) 7 SCC 396). [ G. Ramchandran (Supra) ]. But the interpretation of the clause which is wholly contrary to law should not be upheld by the Court.
[Numaligarh Refinery Ltd v. Daehim Industrial Co.
Ltd., 2007(10) SCALE 577/(2007) 8 SCC 466 ]
(d) The jurisdiction of the Court to interfere with an Award made by an Arbitrator is limited, unless there is an error apparent on the face of the Award and/or jurisdictional error and/or legal mis-conduct. [Numaligarh Refinery Ltd (supra).
(e) The wrong point of law and apparent, improper and incorrect findings of facts which are demonstratable on the face of the material on record, may be treated as grave error and/or legal misconduct.
(g) "From the above decisions, the following principles emerge:
(a) An award, which is
(i) contrary to substantive provisions of law; or ::: Downloaded on - 09/06/2013 15:14:06 ::: 11
(ii)the provisions of the Arbitration and Conciliation Act, 1996; or or
(iii) against the terms of the respective contract; or
(iv) patently illegal; or
(v) prejudicial to the rights of the parties;
is open to interference by the court under Section 34(2) of the Act.
(b) The award could be set aside if it is contrary to :
(a) fundamental policy of Indian law; or
(b) the interest of India; or
(c) justice or morality.
(c) The award could also be set aside if it is so unfair and unreasonable that it shocks the conscience of the court.
(d) It is open to the court to consider whether the award is against the specific terms of contract and if so, interfere with it on the ground that it is patently illegal and opposed to the public policy of India."
[ Delhi Development Authority vs. R.S.Sharma & Co.-
(2008) 13 SCC 80 ].
In view of above settled principles of law, the judgments cited by the parties in support of their respective submission on law need no further discussion. The facts are totally distinct and distinguishable."
8 The Apex Court recently in Vimal Chand Ghevarchand Jain & ors. vs. Ramakant Eknath Jajoo, 2009 (5) SCALE 59 has observed while dealing with the construction of a commercial contract as under :
"A document, as is well known, must be construed in its ::: Downloaded on - 09/06/2013 15:14:06 ::: 12 entirety"
I have observed in Reliance Natural Resources Ltd. v. Reliance Industries Limited, 2007 (Supp.) Bom. C.R.925 as under:
"93 Apart from that the following extracts from Chitty on Contracts (27th Edition), 1994 in para 12.053 is also useful:
"Every contract is to be construed with reference to its object and the whole of its terms, and accordingly, the whole context must be considered in endeavouring to collect the intention of the parties, even though the immediate object of inquiry is the meaning of an isolated word or clause."
9 Recently, in Durham V. BAI (Run Off) Ltd (in scheme of arrangement) and other cases, [2009] 2 All ER, 26, the Queen's Bench Division while dealing with the construction of wordings in a commercial contract by referring to various other English Judgments has observed as under:-
(203)A summary of helpful principles, drawn largely from the words of Longmore LJ in Absalom (on behalf Lloyd's Syndicate 957) v TCRU Ltd (2005) EWCA Civ 1586 at (7), (2006) 1 All ER (Comm) 375 at (7), (2006) 2 Lloyd's Rep 129, and based upon submissions to me by counsel, which I had approved, in the recent case of Reilly V. National Insurance * Guarantee Corporation Ltd (2008)EWHC 722 (Comm) at (13), (2008) 2 All ER (Comm) 612 at (13), was again the subject matter of agreement, and I repeat and incorporate it:
'(a) Ordinary Meaning. There is a presumption that the ::: Downloaded on - 09/06/2013 15:14:06 ::: 13 words to be construed should be construed in their ordinary and popular sense, since the parties to the contract must be taken to have intended, as reasonable men, to use words and phrases in their commonly understood and accepted sense. (See also para (7) (i)-(iii) in the judgment of Longmore LJ and in particular: "The object of the inquiry is not necessarily to probe the 'real' intention of the parties, but to ascertain what the language they used in the document would signify to a properly informed observer.")
(b) Businesslike Interpretation. It is an accepted canon of construction that a commercial document, such as an insurance policy, should be construed in accordance with sound commercial principles and good business sense, so that its provisions receive a fair and sensible application.
(See also the words of Lord Diplock in Antaios Cia Navieras SA V Salen Rederierna AB, The Antaios (1984) 3 All ER 229 at 233, (1985) AC 191 at 201 cited at (7)(iv) by Longmore LJ: If a "detailed semantic and syntactical analysis of words in a commercial contract is going to lead to a conclusion that flouts business common sense, it must be made to yield to business common sense".)
(c) Commercial Object. The commercial object or function of the clause in question and its relationship to the contract as a whole will be relevant in resolving any ambiguity in the wording.
(d) Construction to avoid unreasonable results. If the wording of a clause is ambiguous, and one reading produces a fairer result than the alternative, the reasonable interpretation should be adopted. It is to be presumed that the parties, as reasonable men, would have intended to include reasonable stipulation in their contract.' 10 The parties have made their respective interpretation of these various terms and clauses from their points of view in support of ::: Downloaded on - 09/06/2013 15:14:06 ::: 14 their submissions. The Court need to take into consideration all but within the frame of law. The contract/agreements need to be read as a whole considering the nature & the purpose of the business. The clause and the contract as a whole even if is clear and unambiguous, the court needs to consider the same in the facts and circumstances of the case. It is necessary to see relationship between words; sentences;
clauses; chapters and the whole document. It cannot be read in isolation. The aspect of faith, trust, fiduciary relationship and understanding between the parties, just cannot be overlooked, while interpreting any such private commercial documents.
11 The learned Arbitrator, after considering the pleadings, as well as, the evidence placed on record by the parties, has rightly observed as under:-
"iv) The grab capacity was shown in the COA as 6 cbm..
This is the volume indication of the cargo which can be accommodated in the grab. It does not refer to the weight of the cargo which can be lifted in one cycle.
There is no mention by the owners in the COA as to the weight of the iron ore which can be safely picked up by the grab in one lift and there was no ::: Downloaded on - 09/06/2013 15:14:06 ::: 15 commitment on the part of the owners in this respect.
The only guarantee was a discharge rate of 8000MT per day. This was fulfilled by the owners as set out below.
v) Mr. Chidambaram who was a representative of the manufacturers of the grab pointed out in his evidence that the grabs had been modified and the weight of the cargo was not to exceed 8.5 tons. Given the weight of the empty grab was 7.5 mt, the maximum all up weight of the grab plus the iron ore was not meant to exceed 16 mt. Thus, 16 mt. Was the outer limit. Once this point is realized it becomes obvious that the entire debate over the maximum capacity of the cranes becomes sterile. The SWL of the cranes was 20 mt which was well above the grab plus cargo weight of 16 mt. Hence, the argument that there was a breach of the COA by the owners in declaring the crane capacity as 25 mt is wide of the mark as no prejudice was caused to the charterers on this account.
vi) The density of the cargo as given by the charterers ::: Downloaded on - 09/06/2013 15:14:06 ::: 16 was about 2.4. Charterers were contending that a grab of 6 cbm which was the commitment of the owners should have been capable of lifting 14.4 mt (6 x 2.4). Owners countered this argument by pointing that they were not committed to any specific weight of iron ore in one grab lift. The quantity lifted would depend upon the density of the iron ore and the overall weight limit of 8.5 mt. If the density of the iron ore was 1.4 a grab of 6 cbm would accommodate 8.4 mt. But if the density was 2.4 filling the grab to its full volume of 6 cbm would result in the all up load exceeding the maximum limit of 16 mt. In this situation the kick plates of the grabs had to be removed to reduce the grab volume to 3.5 cbm to avoid over loading. This is precisely what the owners did.
vii) The daily discharge report of 1-7-1996 shows that in a 9 hour shift from hatch No.5, the cargo discharged was 1,500 mt. This gives an average of 166.66 mt.
Per hour. Charterers have contended that the grab cycle was taking 4 minutes (15 cycles per hour) and ::: Downloaded on - 09/06/2013 15:14:06 ::: 17 the cargo weight in one lift was only 5.8 mt. The fact that 1500 MT of cargo could be discharged in 9 hours clearly shows that the grabs were capable of carrying about 8 MT of iron ore per lift. It also shows that the cycle time was about 2.85 minutes pre grab/ crane as opposed to 4 minutes contended by the charterer. This falsifies the Respondent's case. In view of what is stated above even if one were to apply the charterer's parameters of 5.8 M.T. Per lift x 15 cycles per hour, it would only show that charter's parameters are completely unreal and incorrect.
But even if we assume that the parameters of the charterers are correct, the vessel should have discharged well over 8,000 mt. Guaranteed by the owners as shown by the following calculation:-
15 cycles per hour (4 minutes per cycle) 4 grabs working 24 hours.
5.8 mt per grab lift.
Therefore, 15 x 24 x 4 x 5.8 = 8352 mt in 24 hours.
It is pertinent to note that the Charterers exercised ::: Downloaded on - 09/06/2013 15:14:06 ::: 18 the option of discharging 7500 MT per day. The vessel was capable of discharging 8000 MT per day applying the Charterer's own parameters.
viii) ....
It should be noted that time loss owing to crane breakdown and/or other reasons for which owners were responsible were excluded from the laytime when preparing the laytime statements. The Tribunal has perused all the material documents on record. The Tribunal holds that owners have successfully established their claim for demurrage on both the vessels. The Respondent has not shown that the balance freight has been paid. The claim for the balance freight is also allowed."
12 The findings so given by the learned Arbitrator need no interference. It is well within the framework of law and the record.
There is no perversity and or any illegality. The view so expressed, based upon the clauses of the COA, cannot be said to be of illegal and or wrong in any sense. The view expressed by the learned Arbitrator by interpreting the clauses and after analysing the material available ::: Downloaded on - 09/06/2013 15:14:06 ::: 19 on record, need no interference.
13 The aspect of adverse inference, as the owners failed to produce the Chief Officer as a witness, has been dealt with rightly as the masters of both the vessels, who were in command of the vessels, were extensively cross-examined. There is nothing to show any prejudice caused to the charterers. It is rightly observed that the Chief Officer could not have possibly shed any more light as such decision is on simple arithmetical calculation derived from parameters by the charterers.
14 With regard to the payment of the bills amounting to Rs.176,921/-for damage by stevedore labour to Mandakini, the owners failed to place on record the proof of payment of the bills. The claim of physical damage caused to the vessel is rejected rightly.
15 The claim of the owners for loss of profit owing to premature termination of the COA calculated on a hypothetical figure based on some PTI Bulletins is not sustainable. There is nothing to support the actual loss of profit and or calculation and material in support of the same. Loss of profit just cannot be granted on the basis of ::: Downloaded on - 09/06/2013 15:14:06 ::: 20 hypothecation on presumption and or assumption, the dismissal of this claim therefore, is correct.
16 With regard to the counter claim of charterers under various heads, is also dismissed rightly for want of supporting evidence including of the witness who had no personal knowledge of the fact of the case. No proof has been placed/ produced for any payment to the authorities. Apart from that, the counter claim would have survived, if the claimants were in breach of Contract. In view of the finding that the claimant is not in breach of contract, all the counter claims raised in the Arbitration, therefore, has been rightly rejected.
17 The Arbitrator has awarded the interest @ 8% p.a., as the claim is awarded in USD currency. The power of Tribunal to grant pre-
arbitration interest, is correct, as there was no contract to the contrary.
There was no agreed express bar. The interest @ 8% p.a. is therefore, fair and reasonable. The power of Arbitrator to grant interest at various stages, under the Arbitration Act, has been reiterated in JT 2009 (9) SC 429, M/s. Sayeed Ahmed & Co. Vs. State of U.P. & Ors..
18 The order of costs, in view of above, so awarded also need no ::: Downloaded on - 09/06/2013 15:14:06 ::: 21 interference.
19 Resultantly, the Petition is dismissed. No order as to costs.
20 The learned counsel appearing for the Petitioner seeks stay to the effect and operation of this order. I am inclined to grant the same for six weeks. The stay is accordingly granted till 27th November, 2009.
ig (ANOOP V. MOHTA, J.)
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