Bombay High Court
The Union Of India vs Tolani Shipping Co. Ltd on 21 August, 2009
Author: S.J.Vazifdar
Bench: S.J.Vazifdar
1
pps
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
ARBITRATION PETITION NO. 424 OF 2006
The Union of India ..Petitioner
versus
Tolani Shipping Co. Ltd. ..Respondent
Mr. D.J.Khambatta, Addl. Solicitor General with Ms.
S.I.Shah i/b. T.C.Kaushik for the petitioner.
Mr. Mustafa Doctor with Mr.Kunal Shah i/b. M/s. Bhatt &
Saldhana for the respondent.
CORAM : S.J.VAZIFDAR, J.
DATE : 21ST AUGUST, 2009.
ORAL JUDGMENT:
1. This is a petition under Section 34 of the Arbitration & Conciliation Act, 1996 to set aside the award th dated 10/16 March, 2006 passed by the Arbitral Tribunal consisting of three arbitrators. The Arbitral Tribunal awarded a sum of Rs.1,08,03,020/- together with interest at 9% on a sum of Rs.21,36,154/- from 11.2.1996 till the date of payment. The Arbitral Tribunal also awarded a sum of Rs.72,428/- towards costs. The parties were directed to share the costs of the India Council of Arbitration ::: Downloaded on - 09/06/2013 14:55:47 ::: 2 equally.
2. By a charter party agreement dated 19.5.1995 entered into between the parties, the respondent chartered its vessel for carriage of 17,000 M.Ts. 5% more or less urea from ½ safe berth(s) Constanza to ½ safe berth(s) each ½ safe Ports/Archorages, West or East Coast of India.
The vessel carried the cargo from Constanza to Vishakapatnam and Haldia and discharged a part of the cargo at each of the ports.
3. The vessel earned a demurrage of Rs.
1,08,00,431/- for sixty three days twelve hours and forty six minutes of excess lay time used. The respondent submitted a lay time statement. The same was not accepted by the chartering wing of the Ministry Of Surface Transport (MOST) which then prepared its lay time statement for load and discharge and forwarded the same to the respondent.
The respondent accepted the same by its letter dated 19.1.1996 and requested the petitioner to release the amount of balance freight and demurrage. The respondent submitted to the petitioner its debit note for an aggregate sum of Rs.1,08,03,020/- being the amount due and payable for the balance freight and demurrage.
::: Downloaded on - 09/06/2013 14:55:47 ::: 34. The petitioner having failed to pay the said sum, the respondent invoked the arbitration clause contained in the charter party agreement on 18.10.1996. The Arbitral Tribunal consisting of three Arbitrators made an award on 15.4.1999. The award was challenged by the respondent in this Court. By an order and judgment dated 29.11.2001, the award was set aside.
5. The respondent invoked the arbitration again on 31.8.2002. The Arbitrators nominated by the parties having failed to nominate the presiding Arbitrator, the respondent made an application in that regard to this Court. By an order dated 8.9.2003, this Court appointed the presiding Arbitrator. The Arbitral Tribunal made an award on 10.3.2006 which is sought to be set aside in this petition.
6. Mr.D.J. Khambatta, the learned Addl. Solicitor General of India, challenged the award on the ground that it was not a reasoned award both in respect of the merits of the matter as well as on the question of interest, and that the Arbitral Tribunal had decided the matter ignoring an essential term of the contract.
::: Downloaded on - 09/06/2013 14:55:47 ::: 47. Mr. Doctor, learned counsel appearing on behalf of the respondent submitted that there were no grounds in the petition challenging the award on the basis that it did not contain reasons.
8. It would be convenient to deal with the challenge relating to the award of interest first. Mr. Khambatta submitted that the award contained no reasons as to why interest was awarded only from a particular date.
was awarded for the amounts due on freight from 11.2.1996 Interest and for demurrage from 15.4.1999. He submitted that the award contained no reasons for the same.
He submitted that the first award was set aside for reasons entirely attributable to the respondent and for no fault of the petitioners. Thus, he submitted, the petitioner would be justified in contending that the interest ought not to be awarded upto the date on which the first award was set aside.
9. As far as the award of interest is concerned, Mr.Khambatta fairly conceded that there was no separate ground challenging the same. Mr.Khambatta, however, submitted that the award had been challenged on the general ::: Downloaded on - 09/06/2013 14:55:47 ::: 5 basis that it was contrary to law. The law required a reasoned award. The petitioner was entitled therefore to challenge the award of interest.
10. This submission however must be rejected in view of the judgment of the Division Bench of this Court dated 20.4.2009 in Appeal No.799 of 2004 in Arbitration Petition No.493 of 2002 in Patel Engineering Ltd. vs. Konkan Railway Corporation/ B.M.C.
11. Apart igfrom the fact that I am bound by the judgment of the Division Bench of this Court in Patel Engineering v. Konkan Railway Corporation Ltd., I am not inclined to accept the submission for another reason.
There admittedly is no ground challenging the award as arbitrary in so far as it grants interest from particular dates. No such contention was admittedly raised before the Arbitral Tribunal. No such contention has been pleaded in the petition. It is not even contended in the petition that the ground was taken before the Arbitral Tribunal, but was not considered.
12. The challenge to the award of interest is thus rejected.
::: Downloaded on - 09/06/2013 14:55:47 ::: 613. Mr.Khambatta submitted that the award contains no reasons even on the merits of the case. In response to Mr. Doctor s submission that there was no challenge in the petition to the award on this ground Mr. Khambatta submitted that the grounds had been raised in paragraphs 19(e), (f), (g), (n), (o) and (s) to (w).
I have proceeded on the basis that the challenge on this ground has been raised in the petition although I do not for a moment suggest that Mr. Doctor s submission is not without force.
14. Mr. Khambatta and Mr. Doctor cited several judgments on the question of what constitutes reasons and the nature of the reasons adequate to meet the requirement of a reasoned award under the Act.
I do not consider it necessary to refer to these judgments as I find that the Arbitral Tribunal has furnished reasons sufficient to meet the requirement of a reasoned award by any standard.
15. The Arbitral Tribunal has set out the claims and the rival contentions of the parties. The Arbitral Tribunal noted and addressed itself to the relevant issues ::: Downloaded on - 09/06/2013 14:55:47 ::: 7 viz. that the petitioner had refuted the respondent s claim for demurrage on the ground that the respondent was negligent in taking care of the cargo during the voyage which resulted in the cargo getting damaged and hardened and as a result thereof, a longer period was required to discharge the same. The Arbitral Tribunal also noted the petitioner s contention that as a result of the negligence of the master and the crew and of the condition of the respondent s vessel there was ingress of water in the hatches necessitating resulting the in use of the cargo machines getting and extra solidified labour to discharge the same.
On the basis of these allegations, the petitioner had also raised the counter claim for an aggregate amount of Rs.1,16,76,930/- on various counts. The Arbitral Tribunal dismissed the counter claim. There is no challenge to the same.
The Arbitral Tribunal noted the submissions on behalf of the Respondent interalia to the effect that the delay in discharging the cargo was on account of the inefficiency of the petitioner s stevedores, and inadequacy of gangs.
16. Thereafter, the Arbitral Tribunal rightly noted ::: Downloaded on - 09/06/2013 14:55:47 ::: 8 that it was an admitted fact that the vessel at Haldia took a longer time to discharge the cargo than the lay time allowed under the charter party and that the crux of the matter was to decide the cause in the delay namely whether it was, as alleged by the respondent, due to the inefficiency of the petitioner s stevedores and inadequate supply of gangs, or as alleged by the petitioner due to ingress of sea water in the hatches as a result of the negligence of the master and the crew and of the condition of the respondent s vessel.
17. The Arbitral Tribunal accepted the respondent s case and rejected the petitioner s case. In doing so, the Arbitral Tribunal furnished adequate, and if I may say, with respect, cogent reasons. In arriving at their conclusion, the Arbitral Tribunal relied upon the relevant evidence. Indeed the documents relied upon before me by Mr.Khambatta are expressly referred to and considered in the award. My attention has not been invited to any relevant material which remained to be considered by the Arbitral Tribunal, the failure to consider which would constitute a refusal to consider the relevant material. It was not even suggested that the Arbitral Tribunal referred to any irrelevant material.
::: Downloaded on - 09/06/2013 14:55:47 ::: 918. Even before setting out their conclusions, the Arbitral Tribunal furnished reasons for certain conclusions relating to the factors that led to the discharge of the cargo being delayed. In paragraph 14.1 the Arbitral Tribunal has held as under:
The dates of commencement of discharge and completion of discharge at Haldia are not disputed by either party. Claimants are contesting the contents of the Haldia Dock Company letters alleging ingress of sea water as these are not backed by any Lab analysis and mere visual inspection by Dock Complex officials cannot be the basis to determine whether the water inside the hatches is sea water or fresh water is a valid assertion. HDC has also acted as a stevedore for respondents and there is no documentary evidence produced regarding the availability of adequate gangs to work all hatches and use of mechanical means for discharging the cargo. There is only one reference in the statement of facts at the fag end of the ship discharge that mechanical means were used for discharging the cargo from Hatch No.1 and that the work was interrupted on 6.10.95 between 14.00 hrs to 17.00 hrs. All other detentions mentioned in the statement of facts are on account of rain or the ships cranes not working. All these detentions have been dealt with accordingly in the lay time Statement of Transchart. The vessel was shifted 11 times by the Port and completed the discharge finally n 14.10.95.
19. Mr. Khambatta did not deny that the above observations constitute the findings of the Arbitral Tribunal. He however submitted that the same constituted ::: Downloaded on - 09/06/2013 14:55:47 ::: 10 merely findings without any reasons in support thereof. For instance, he submitted that in the second sentence, the Arbitral Tribunal has merely upheld the respondent s challenge to the contents of the letters of HDC without furnishing reasons. I do not agree.
20. The sentence read as a whole makes it quite clear that the respondents challenge to the contents of the letters of HDC was upheld as they were not backed by any laboratory analysis. It is also held that a mere visual inspection by the Dock Complex Officials cannot be the basis to determine whether the water inside the hatches is sea water or fresh water. It was noted that HDC was the petitioner s stevedor and there was no evidence about the availability of adequate gangs.
21. It cannot be said that these reasons are absurd, irrational or even inadequate. In any event the paragraph read in its entirety furnishes clear, explicit and adequate reasons. Even if the Arbitral Tribunal had not gone a step further and furnished reasons for the necessity of a laboratory analysis etc, it would not have vitiated the conclusion. That would merely constitute reasons for reasons. Arbitrators are not always bound to give reasons ::: Downloaded on - 09/06/2013 14:55:47 ::: 11 for their reasons. If a reason for a finding is self evident, intelligible or clear, I see no necessity for further reasons to in turn support such reasons unless the circumstances so demand. The matter could otherwise go on ad-infinitum.
22. The consideration of the absence of a laboratory report and a visual inspection not being a valid basis to determine whether the hatches contained sea water or fresh not necessitate water as relevant factors are self evident, clear and did further clarification or justification.
Nor did the consideration by the Tribunal as relevant of HDC being the petitioner s stevedor and not producing evidence of the availability of adequate gangs require any amplification or clarification. Nevertheless the Arbitral Tribunal furnished even this as I will indicate later. The Arbitral Tribunal considered HDC s letters and the other factors yet again.
23. In paragraph 15 the arbitrators specifically referred to the letters of HDC dated 16.8.1995, 22.8.1995 (wrongly mentioned as 22.10.1995) and 26.8.1995 and to the survey reports. The letters were relied upon by the petitioner in support of their contention that the cargo ::: Downloaded on - 09/06/2013 14:55:47 ::: 12 was left untrimmed leaving high walls at the port of discharge, with hardened cargo in the hatches making it hazardous and difficult for the discharge to take place with normal gangs and tools. This, the petitioners attributed to the poor maintenance of the old ship which led to the ingress of water during the voyage. They further contended that the same was also because of lack of diligence and on account of the negligence of the Master to make the hatches water tight. Having noted the same, the Arbitral Tribunal held as under:
Survey report of 29.8.1995 shows ingress of water in Hatch No.3 and hardening of the cargo in an area of 1.2 x 0.8 x 0.8 meters and this, on analysis by the Lab report, shows mixture of sea water and rain water. Some water was found in Hatch No.4 and but it was not contaminated by Sea water. The Survey reports show crust formation of varying degree from 1 to 2 but nowhere mentions that the cargo has been hardened. The Statement of Fact also refers only of discharging having been discontinued on one occasion because the cargo had hardened and the bulldozers were inserted in Hatch No.1 for the breaking for the solidified cargo on 6.10.95 between 1400 hrs to 1700 hrs. There is no other reference to the solidification of cargo or use of any mechanical means for discharging the cargo. The daily discharge reports, which could have thrown light and which were called upon by the Claimants to be produced, were not provided by the Respondents as they were not available.
Respondents have relied solely on the HDC s letters and the authority of Port Trust issuing these letters. No doubt, HDC s letters refer to ingress of Sea water, hardening of the cargo, hazardous condition of the discharge but ::: Downloaded on - 09/06/2013 14:55:47 ::: 13 the Survey reports which follow these letters and the Lab analysis does not show any contamination of sea water except in Hatch No.3 and the cargo is described as more or less free flowing . These reports themselves are long after the commencement of discharge at Haldia.
The Tribunal weighing these two against each other have relied upon the joint survey report and the Lab analysis rather than upon the conclusions arrived at by the HDC officials after visual inspections of these Holds, that the cargo did not get contaminated by sea water in Hold No.1, 2, 4 & 5 and there was minimal contamination in Hold No.3. Thus, the allegation of the Respondents about Owners /Master s negligence and lack of due diligence of the cargo is unproved.
The award contains more than just adequate reasons. I find in fact the basis of the award to be clear and well reasoned.
24. The Arbitral Tribunal found as a matter of fact and on the basis of the analysis contained in the laboratory report that the hardening in hatch No.3 was only of an area of 1.2 x 0.8 x 0.8 meters on account of mixture of sea water and rain water. So far as hatch No.4 is concerned, it was found that the water therein was not sea water.
Further, while there was some crust formation there was no mention of the cargo being hardened. Apart from the solitary occasion mentioned in the statement of facts that discharge had been discontinued due to hardening of the ::: Downloaded on - 09/06/2013 14:55:47 ::: 14 cargo it was once again noted that there was no other reference to the solidification of cargo or use of mechanical means for discharging the same.
In fact, the finding that the cargo was more or less free flowing is based on one of the survey reports itself, namely the survey report dated 19.8.1995. The words in the survey report are : The cargo of urea, in bulk was cited to be more or less free flowing
25. These reasons would coming to the conclusions quoted above.
suffice in themselves for
26. It is also important to note that the Arbitral Tribunal considered the fact that the delay discharge reports which could have thrown light on the issue and which the respondent had called upon the petitioner to produce, were not produced would be of considerable importance. This is obvious. The failure of a party to produce material evidence is not merely a relevant but a material factor.
27. After dealing with the contention of the parties regarding clause 41 which I will refer to later, the Arbitral Tribunal once again noted the respondents argument ::: Downloaded on - 09/06/2013 14:55:47 ::: 15 regarding shortage of gangs and accepted the same. In this regard the Arbitral Tribunal relied upon the documents produced during the hearing namely the letters from Lee & Muirhead to the Manager of Haldia Dock Complex & the Calcutta Port Trust dated 17.8.1995 and 19.8.1995 respectively. These letters not merely support but establish the respondent s case and findings of the Arbitral Tribunal in this regard. The letter addressed to Haldia Dock Complex asked them to speed up the discharge of the cargo by allotting the maximum number of hooks.
stated that as against the application for 18 hooks on It each of three dates, the petitioner had supplied only 3 hooks, 4 hooks and 5 hooks on those days. The Haldia Dock Complex was informed that the vessel was likely to incur heavy demurrage on this count. The letter dated 19.8.1995 addressed to the Calcutta Port Trust expressly stated that the vessel had been discharging extremely poorly due to the lack of adequate hooks being provided by the authorities.
In both the letters it was stated that the port authorities would be held responsible for the poor discharge of the cargo. It is important to note that the Haldia Dock Complex were acting on behalf of the petitioner and not the respondent. In this view of the matter, the following observation in the award was entirely justified:
::: Downloaded on - 09/06/2013 14:55:47 ::: 16Claimants argument on the other hand that there was shortage of gangs is substantiated by the Respondents documents produced during the hearing Lee & Muirhead s Limited messages to th th Manager (SH & CH), HDC dated 17 and 19 August, 1995, pages 43-44 (249-250) of the Compilation.
The Tribunal has also taken note of the fact that HDC were also acting as the stevedores and the shortage of gangs would reflect on them and especially that the matter of working inside the holds was the responsibility of the Respondents and if the discharge got slowed down on account of poor trimming then the Claimants cannot be held responsible and further that slow discharge could have been the result of lesser number of gangs as well.
28. In the result I find that the Arbitral Tribunal considered all the relevant factors weighed them in the balance and found the petitioner s case wanting and the respondent s case well founded. The least that must be said is that the conclusions arrived at are possible and by no means absurd or perverse.
29. This brings me to Mr.Khambatta s contention regarding clause 41 which reads as under:
The cargo to be loaded and discharged by the charterers free of expense and risk to the vessel but under the supervision of the Master. All trimming and/or leveling to be for owners account. Overtime for the account of ::: Downloaded on - 09/06/2013 14:55:47 ::: 17 party ordering it. Officers and Crew s overtime to be for Owners account. Overtime ordered by Port Authorities, to be shared equally between the Owners and Charterers.
Mr.Khambatta submitted that under Clause 41 it was the respondent s responsibility to trim the cargo which it failed to do.
30. Even if Mr.Khambatta s interpretation of Clause 41 and in particular the second sentence thereof, is correct, it would make no difference to the result of this petition.
The award would even in that event have to be upheld as even on facts the Arbitral Tribunal has held that the delay in discharge was in any case not on account of unsafe conditions or due to absense of trimming. The record did not show that the discharge was delayed or due to the absence of trimming. The daily discharge reports which could have thrown some light on the case of delay were not produced by the petitioner. Thus, even assuming that trimming the cargo was the respondent s responsibility as contended by Mr. Khambatta on the basis of clause 41, there was no failure on the respondent s part in this regard and the same in any event did not result in the demurrage being incurred.
::: Downloaded on - 09/06/2013 14:55:47 ::: 1831. Faced with this, Mr.Khambatta submitted that even if the award can be upheld, on any other basis, if the Arbitral Tribunal has mis-construed a clause in the contract, or stated an erroneous proposition of law, the award must be set aside.
32. The submission is not well founded. I see no warrant or justification to set aside an award even if the same can be upheld on other grounds merely because the law or Arbitral Tribunal may have stated an incorrect proposition of misconstrued a clause in a contract. I see neither logic nor propriety in such an approach. Take for instance a case where a claim is sought to be defended on several points of law and the Arbitral Tribunal upholds the defence in respect of each of them. If Mr. Khambatta s submission is accepted the award would have to be set aside even if the Court comes to the conclusion that the finding regarding all the questions of law but one are well founded. I see nothing in the Act that leads to such a conclusion. Mr.Khambatta s reliance on the judgment of the Supreme Court in ONGC vs. Saw Pipes Ltd. (2003) 5SCC 705 (paragraphs 13, 14 and 41) is not well founded either.
There is nothing in the observation of the Supreme Court in the Judgement in general and in the said paragraphs in ::: Downloaded on - 09/06/2013 14:55:47 ::: 19 particular which supports Mr.Khambatta s contentions.
This question did not arise for the consideration of the Supreme Court.
33. In the present case the respondent incurred no liability even assuming that under clause 41 the respondent was responsible for trimming the cargo. In other words, there was no failure on the respondents part to comply with the provisions of Clause 41 and the failure if any did not for demurrage.
lead to the consequences which gave rise to the liability It would be a travesty of justice in such a case to penalize a party for the error of a court or tribunal in misconstruing a contractual term or legal provision.
34. So far as the claim for freight is concerned, there was in any event no dispute. Mr.Khambatta fairly stated that irrespective of the findings on the other question the petitioner would make payment in respect of freight.
35. Mr.Khambatta though not in the opening but in the rejoinder on 13.9.2006 submitted a draft containing proposed amendments to the grounds of challenge in the ::: Downloaded on - 09/06/2013 14:55:47 ::: 20 petition. The same are taken on record, but must be rejected in view of the judgment of this Court in Vastu Invest and Holdings Pvt. Ltd. v. Gujarat Lease Financing Ltd. (2001) 103 (2) BLR 156.
36. In the circumstances, the petition is dismissed, but with no order as to costs.
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