Omar Shipping Sa vs Rika Global Impex Ltd
2022 Latest Caselaw 5023 AP

    THE HON'BLE SRI JUSTICE R.RAGHUNANDAN RAO

       EXEP.No.1 of 2021 & ICOMAOA No.12 of 2021

ORDER:

In an Arbitration, initiated in London, by the

respondent herein, an award dated 05.11.2012, has been

passed against the Applicant herein and one M/s SETIT

International Import Export PLC, jointly and severally, for

payment of a sum of Rs.862,935 U.S dollars together with

interest at 451,060 dollars at 5.5% per annum compounded at

three monthly rests from 06.06.2012 until date of payment and

interest at the same rate to be paid on U.S dollars 411,877 from

the date of award until payment.

2. The Respondent, which is a ship owning company,

had invoked Arbitration, in London, by relying upon the

following facts:

a) By way of a fixture note, dated 13.05.2012, the

Charterer, M/s. Marina Shipping and Trading Pte

Ltd chartered the Vessel M.V. Omar B, owned by

the Respondent for performing a voyage from

Kakinada port to Massawa in Eritrea. The fixture

note was in the form of GENCON (1994 edition).

b) The vessel, Omar B, in pursuance of the said

fixture note, reached Kakinada port and loaded

the Cargo on 29.05.2012. On the same day, a Bill

of Lading dated 29.05.2012 was signed by the

agents of the Charterer, Lotus Marine Services

Private Limited. The Bill of Lading is also shown

as signed for and on behalf of the master of the

vessel. The Bill of Lading stated that the shipper

is the Applicant herein and the consignee was one

SETIT International Import-Export Plc. The Bill of

Lading also stated that freight of U.S dollars

472,950 had been prepaid. The Bill of Lading had

five standard conditions of carriage printed on the

reverse side. Clause-I which is relevant, stated

that:

i) All terms and conditions, liberties and

exceptions of the Charter Party, dated as over

leaf, including the Law and the Arbitration

clause, are herewith incorporated.

c) The fixture note of 13.05.2012, was treated as the

Charter Party, mentioned in the Bill of Lading and

it was taken that the Bill of Lading would be

governed by English Law and the arbitration, in

the event of disputes, would be in London.

d) The Respondent claimed that the freight of

449,795 dollars, overage premium of 11,050

dollars and demurrage amounting 411,708.33

dollars had remained unpaid. As these amounts

were not paid, the Respondent commenced

arbitration against Marina, the Applicant herein

and SETIT International Import and Export Plc.

3. The Arbitrator, on the basis of the Bill of Lading,

commenced arbitration and directed notice to be served on

the Applicant herein and M/s SETIT International Import

Export PLC. After, recording the fact that, notices of

appointment of the Arbitrator and notices of the Arbitral

proceedings had been served on the Applicant herein, the

Arbitrator had passed an award, in favour of the Respondent,

awarding a sum of Rs.862,935 U.S dollars together with

interest at 451,060 dollars at 5.5% per annum compounded

at three monthly rests from 06.06.2012 until date of payment

and interest at the same rate to be paid on U.S dollars

411,877 from the date of award until payment. The said

amounts being payable, jointly and severally, by the Applicant

herein and M/s SETIT International Import Export PLC.

4. The Arbitrator had held that, the fixture note dated

13.05.2012, had stipulated that in the event of dispute,

arbitration would be in London as per English Law and that this

clause was incorporated into the bill of lading dated 29.05.2012.

The arbitrator held that the Applicant and Setit International are

both parties to the Bill of Lading and would be liable for clearing

the liabilities claimed by the Respondent.

5. There is one other aspect which needs to be noticed.

The arbitrator observed that the date of the Charter Party dated

12.05.2012, mentioned in the Bill of Lading should be taken to

be the fixture note dated 13.05.2012 as there was a violation in

the date. The arbitrator also took the view that the fixture was

probably concluded on 12.05.2012 and the terms were merely

confirmed the next date in the fixture note dated 13.05.2012.

6. After the said award had been passed, the

Respondent had approached the High Court of Justice, Queens

Bench Division, Commercial Court in England, which passed a

Judgment, dated 24.06.2014, directing the Applicant and Setit

International to pay the amounts awarded under the award

dated 05.11.2012.

7. The Applicant had moved Arbitration O.P.No.80 of

2013, before the III Additional District Judge, East Godavari

District at Kakinada, under Section 34 of the Arbitration

Conciliation Act, 1996 for setting aside the Award dated

05.11.2012. This application was dismissed on 03.12.2018, on

the ground that the arbitration had been held in England and

an application under Section 34 would not be maintainable

before the Court.

8. After the dismissal of O.P.No.80 of 2013, the

Respondent herein had approached this Court, for enforcement

of the award of 05.11.2012, by way of Execution Petition No.1 of

2021. The applicant, after receipt of notice of this petition, has

filed the present application bearing I.A.No.1 of 2022, under

Section 48 of the Arbitration and Conciliation Act, 1996, for a

declaration that the said award dated 05.11.2012 is not

enforceable, not executable and is barred under Section 48 of

the Arbitration and Conciliation Act, 1996 and consequently to

reject the petition seeking enforcement of the award.

9. The case of the Applicant, as contended by it's

counsel, Sri Vivek Chandrasekhar, is:

A) The entire award has been passed, without notice

behind the back of the Applicant.

B) The Arbitrator conducted the entire Arbitration, on

the basis of the Bill of Lading, which was held to incorporate the

terms of the fixture note dated 13.05.2012, which stipulated

that disputes would be resolved by way of Arbitration conducted

in London applying English Law.

C) The date of the Charter Party mentioned in the Bill

of Lading is 12.05.2012, which is a separate agreement executed

between the Respondent and M/s Rika Shipping, which is a

sister concern of the Applicant. The finding of the Arbitrator that

the Fixture note of 13.05.2012, is the Charter Party mentioned

in the Bill of Lading is wrong and the error is on the face of the

record.

D) Clause 25 of the Charter Party, dated 12.5.2012,

states that, the arbitration would be in Mumbai-India and

English law would apply. Consequently, the Arbitration held in

London is not the Arbitration contemplated in the Bill of Lading

read with the Charter Party of 12.05.2012 and the award arising

out of such arbitration is non-est and requires to be declared as

an award which cannot be enforced.

E) As the Applicant, even though shown as the Shipper,

had not signed the said Charter party, the Applicant would not

be bound by the terms of the Charter Party.

F) Similarly, the Applicant is not bound by the Bill of

Lading, as the Applicant, even though shown as the Shipper,

had not signed the said Bill of Lading.

G) The Bill of Lading, recorded that the freight had been

prepaid and the award of the Arbitrator to pay the freight again

is against the terms of the Bill of Lading itself. In any event, the

mode and manner of payment of the freight by the Applicant has

been set out in the application and the same may be taken into

account to hold that the award of freight with interest is clearly

not permissible.

10. Sri Ashwin Shankar learned counsel, appearing for

Miss Avanija Inuganti, learned counsel for the Respondent

contends that the objections raised by the Applicant are clearly

untenable. He contends as follows:

A) The Applicant had been served with notice of

appointment of the Arbitrator and the Arbitral

proceedings. The Arbitrator in paragraph Nos.13, 19, 20

and 21, of the award, had referred to the various notices

sent by the counsel for the Respondent and the notices

sent by the Arbitrator himself. In view of the factum of

service of notices being recorded by the Arbitrator, the

contention of the Applicant that it had not received notice

of the appointment of the Arbitrator or the Arbitral

proceedings is not tenable and has to be rejected.

B) The Applicant would be bound by the terms of

fixture note of 13.05.2012 and the Bill of Lading, even if

the Applicant had not signed these documents. In support

of this contention, he relies upon a Judgment of the

Hon'ble Supreme Court in the case of M/s. Carvel

Shipping Services Pvt. Ltd., vs M/s.Premier Sea Foods

Exim Pvt.Ltd., dated 29.10.2018 in Civil Appeal

Nos.10800-10801 of 2018.

C) M/s. Marina Shipping and Trading Pte Ltd., had

obtained the services of the vessel of the Respondent, by

the fixture note dated 13.05.2012. M/s. Marina Shipping

and Trading Pte Ltd, even before obtaining the services of

the vessel of the Respondent could not have offered the

vessel of the Respondent to the Applicant on 12.05.2012.

The alleged charter party agreement has been created by

the Applicant to get over the fact that the parties had

agreed for Arbitration to be conducted in London, in

accordance with English Law.

D) The noting, on the Bill of Lading, that Freight has

been prepaid will not detract from the liability of the

Applicant to pay the Freight to the Respondent. The

Arbitrator had dealt with this issue, in detail, in

paragraphs 33 to 36 of the Award and the award of the

Arbitrator to this extent cannot be faulted.

CONSIDERATION OF THE COURT:

11. The present application has been filed under Section

48 of the Arbitration and Conciliation Act, 1996. This provision

reads as follows:

Conditions    for   enforcement      of   foreign
awards:

(1)    Enforcement of a foreign award may be

refused, at the request of the party against whom it is invoked, only if that party furnishes to the Court proof that__

(a) The parties to the agreement referred to in Section 44 were, under the law applicable to them, under some incapacity, or the said agreement is not valid under the law to which the parties have subjected it or, failing any indication thereon, under the law of the country where the award was made; or

(b) The party against whom the award is invoked was not given proper notice of the appointment of the arbitrator or of the arbitral proceedings or was otherwise unable to present his case; or

(c) The award deals with a difference not contemplated by or not falling within the terms of the submission to arbitration, or it contains decisions on matters beyond the scope of the submission to arbitration: Provided that, if the decision on matters submitted to arbitration can be separated from those not so submitted, that part of the award which contains decision on matters submitted to arbitration may be enforced; or

(d) The composition of the arbitral authority of the arbitral procedure was not in accordance with the agreement of the parties, or, failing such agreement, was not in accordance with the law of the country where the arbitration took place; or

(e) The award has not yet become binding on the parties, or has been set aside or suspended by a competent authority of the country in which, or under the law of which, that award was made.

2) Enforcement of an arbitral award may also be refused if the Court finds that--

(a) the subject-matter of the difference is not capable of settlement by arbitration under the law of India; or

(b) the enforcement of the award would be contrary to the public policy of India.

Explanation 1.--For the avoidance of any doubt, it is clarified that an award is in conflict with the public policy of India, only if,--

(i) the making of the award was induced or affected by fraud or corruption or was in violation of section 75 or section 81; or

(ii) it is in contravention with the fundamental policy of Indian law; or

(iii) it is in conflict with the most basic notions of morality or justice.

Explanation 2.--For the avoidance of doubt, the test as to whether there is a contravention with the fundamental policy of Indian law shall not entail a review on the merits of the dispute.

(3) If an application for the setting aside or suspension of the award has been made to a competent authority referred to in clause (e) of sub-section (1) the Court may, if it considers it proper, adjourn the decision on the enforcement of the award and may also, on the application of the party claiming enforcement of the award, order the other party to give suitable security

12. In Vijay Karia & Ors. vs Prysmian Cavi E Sistemi

SRL & Ors., (2020) 11 SCC 1, the Hon'ble Supreme Court, while

considering the discretion of the enforcing court, after a

comprehensive review of the law, had set out the contours of

Section 48, in the following manner:

58. When the grounds for resisting enforcement of a foreign award under Section 48 are seen, they may be classified into three groups

-- grounds which affect the jurisdiction of the arbitration proceedings; grounds which affect party interest alone; and grounds which go to the public policy of India, as explained by Explanation 1 to Section 48(2). Where a ground to resist enforcement is made out, by which the very jurisdiction of the Tribunal is questioned -- such as the arbitration agreement itself not being valid under the law to which the parties have subjected it, or where the subject-matter of difference is not capable of settlement by arbitration under the law of India, it is obvious that there can be no discretion in these matters. Enforcement of a foreign award made without jurisdiction cannot

possibly be weighed in the scales for a discretion to be exercised to enforce such award if the scales are tilted in its favour.

59. On the other hand, where the grounds taken to resist enforcement can be said to be linked to party interest alone, for example, that a party has been unable to present its case before the arbitrator, and which ground is capable of waiver or abandonment, or, the ground being made out, no prejudice has been caused to the party on such ground being made out, a court may well enforce a foreign award, even if such ground is made out. When it comes to the ―public policy of India‖ ground, again, there would be no discretion in enforcing an award which is induced by fraud or corruption, or which violates the fundamental policy of Indian law, or is in conflict with the most basic notions of morality or justice. It can thus be seen that the expression ―may‖ in Section 48 can, depending upon the context, mean ―shall‖ or as connoting that a residual discretion remains in the court to enforce a foreign award, despite grounds for its resistance having been made out. What is clear is that the width of this discretion is limited to the circumstances pointed out hereinabove, in which case a balancing act may be performed by the court enforcing a foreign award.

13. In the present case the objections to the enforcement

of the award are;

i) The arbitration was conducted without notice to the

Applicant.

ii) There is no arbitration agreement as the Applicant was

not a signatory to the Bill of Lading or the earlier Charter

Party/fixture note.

iii) The Arbitration clause applicable was the clause in the

Charter Party of 12.05.2012, fixing the place of arbitration as

Mumbai and not the Fixture Note of 13.05.2012 which required

arbitration to be conducted in London.

iv) The Award is clearly contrary to the Bill of Lading,

which specifically noted that the freight was prepaid.

14. The above grounds fall within all the three categories

and would have to be considered before determining whether the

award can be enforced.

ARBITRATION CONDUCTED WITHOUT NOTICE:

15. The Applicant contends that it had not received the

notice of appointment of the arbitrator or notice of the arbitral

proceedings and any award passed without such notice being

given to the Applicant becomes unenforceable by virtue of

Section 48(1)(b) of the Arbitration and Conciliation Act, 1996.

On the other hand, the Respondent contends that notice of the

appointment of the arbitrator was sent to the Applicant and

subsequently notice of the arbitral proceedings were sent by way

of separate notices again, despite which, the Applicant did not

choose to appear before the arbitrator and the award was

passed on the merits of the case.

16. The Arbitrator has specifically referred to this issue

and had recorded that notices were sent not only by the

Respondent, but also by the arbitrator to the Applicant and

other respondents in the arbitration and the arbitration was

carried on after adequate opportunity had been given to the

Applicant. This court does not find any reason to disbelieve the

service of notices, at the stage of appointment of arbitrator and

the arbitral proceedings, as recorded in the award of

05.11.2012. In the circumstances, the first contention of the

Applicant, of non service of notices is rejected.

APPLICANT IS NOT BOUND BY ARBITRATION

AGREEMENT AS IT IS NOT SIGNATORY TO THE AGREEMENT.

17. The Applicant contends that the arbitration

agreement is not binding on it as it was not a signatory to any

of the documents. Sri Ashwin Shankar, relying upon a

judgment of the Hon'ble Supreme Court in M/s Caravel

Shipping Services Pvt. Ltd. Vs. M/s. Premier Sea Foods

Exim Pvt. Ltd. (2019) 11 SCC 461 : (2019) 4 SCC (Civ) 720 :

2018 SCC OnLine SC 2417 contends that the Applicant is bound

by the terms of the Bill of lading and Fixture note even if it is

not a signatory. He further contends that the Applicant having

used the Bill of Lading to recover its money from the consignee

cannot blow hot and cold.

18. The Hon'ble Supreme Court, in similar

circumstances had, in the above judgment, held as follows:

7. A perusal of the same shows that the respondent has expressly agreed to be bound by the arbitration clause despite the fact that it is a printed condition annexed to the bill of lading. Secondly, it must be remembered that the respondent has itself relied upon the bill of lading as part of its cause of action to recover the sum of Rs 26,53,593 in the suit filed by it. The respondent, therefore, cannot blow hot and cold and argue that for the purpose of its suit, it will rely upon the bill of lading (though unsigned) but for the purpose of arbitration, the requirement of the Arbitration Act is that the arbitration clause should be signed.

8. In addition, we may indicate that the law in this behalf, in Jugal Kishore Rameshwardas v. Goolbai Hormusji [Jugal Kishore Rameshwardas v. Goolbai Hormusji, AIR 1955 SC 812] , is that an arbitration agreement needs to be in writing though it need not be signed. The fact that the arbitration agreement shall be in writing is continued in the 1996 Act in Section 7(3) thereof. Section 7(4) only further adds that an arbitration agreement would be found in the circumstances mentioned in the three sub-clauses that make up Section 7(4). This does not mean that in all cases an arbitration agreement needs to be signed. The only pre- requisite is that it be in writing, as has been pointed out in Section 7(3).

19. The Applicant does not dispute the finding of the

Arbitrator, in the award or the contention of the Respondent

that the Applicant had recovered it's money from the consignee,

on the basis of the Bill of Lading. In view of the above ratio laid

down by the Hon'ble Supreme court, the Applicant is bound by

the terms of the Arbitration clause, under the Bill of Lading.

THE ARBITRATION CLAUSE IN THE CHARTER PARTY

OF 12.05.2012 IS APPLICABLE AND NOT THE FIXTURE

NOTE OF 13.05.2012.

20. The Respondent contends that the fixture note of

13.05.2012, stipulating that disputes were to be resolved by way

of arbitration conducted in London according to English Law,

stood incorporated in to the Bill of Lading dated 29.05.2012 on

account of the terms of the Bill of Lading.

21. Clause -I of the five standard conditions of carriage

set out on the reverse side of page-I of the Bill of Lading states

as follows:

―All terms and conditions, liberties and exceptions of the Charter party, dated as overleaf, including the Law and Arbitration Clause, are herewith incorporate‖.

22. The date of the Charter Party mentioned, overleaf,

in the Bill of Lading is 12.05.2012. However, the Charter Party

of 12.05.2012, being put forward by the Applicant was not

before the Arbitrator, who took the view that the fixture note

dated 13.05.2012 should be treated as the Charter Party

dated 12.05.2012, mentioned in the Bill of Lading. He took

this view on the ground that there was either an error in the

date shown in the Bill of Lading or that 12th May was probably

the date on which the fixture was concluded and the terms

was confirmed on the next day.

23. The contention of the Applicant is that the said

finding is incorrect as there was a charter party agreement

dated 12.05.2012 and the terms of the said charter party

dated 12.05.2012 provided for the seat of arbitration to be

Mumbai-India and that arbitral proceedings conducted in

London are not in terms of the arbitration agreement.

24. This issue has significance. If the contention of the

Applicant is accepted, the proceedings ought to have been

conducted in Mumbai. Any award passed under the said

arbitration clause would be amenable to the jurisdiction of the

Courts in India under Section 34 of the Arbitration Agreement.

25. Sri Ashwin Shankar, the learned counsel,

appearing for the Respondent, contends that there was no

Charter Party agreement executed on 12.05.2012 and the said

agreement has now been created for the purpose of getting

over the award.

26. The authenticity of the Charter Party of

12.05.2012, would have to be tested on the twin criteria of

Industry practice and probabilities.

27. The normal procedure, in maritime business, for a

hiring a vessel, is to go through the Shipping brokers. These

brokers, who have vast experience in negotiating such

transactions, arrive at the terms of the hire of the vessel as a

time charter or a voyage charter. The terms of such charters,

over a period of time have become, more or less, standardized.

After negotiations, the parties before entering enter into a

formal Charter Party Agreement, execute what are called

Fixture notes. A fixture note lists out the main clauses agreed

by the ship owner and the charterer. After this a formal

Charter party agreement is executed between the parties. All

or some of the terms of the said Charter Party are

incorporated in the Bill of Lading.

28. This would mean that a Fixture Note would

precede the Charter Party and the question of executing a

Fixture Note after the charter party would not arise.

[

29. When the Charter Party is tested on the anvil of

probabilities, it is seen that the Respondent had agreed to

offer the services of their vessel to M/s. Marina Shipping and

Trading Pte Ltd only on 13.05.2012 under the said Fixture

Note. It follows that M/s. Marina Shipping and Trading Pte Ltd

could not have executed a charter party with the Applicant in

relation to a vessel, which was neither owned by M/s. Marina

Shipping and Trading Private Limited nor hired by it on the

date on which the charter party had been executed. In the

circumstances, the charter party dated 12.05.2012 cannot be

accepted to be genuine and the finding of the arbitrator would

have to be upheld.

AWARD COULD NOT HAVE BEEN PASSED FOR

PAYMENT OF FREIGHT WHEN THE BILL OF LADING

RECORDED THAT FREIGHT WAS PAID.

30. The Arbitrator considered the issue of the noting on

the Bill of Lading that freight had been paid and, after

referring to the law, in England, on this issue, had held that,

notwithstanding the said noting, the Applicant would remain

liable for payment of the said freight. The Applicant has not

placed anything before this court to contradict the said finding

in law.

31. In the circumstances, the contention of the

Applicant that the award dated 05.11.2012 is hit by the

provisions of Section 48 of the Arbitration and Conciliation

Act, 1996 has to be rejected. Consequently, this application is

dismissed.

Miscellaneous petitions, pending if any, shall stand

closed.

___________________________________ JUSTICE R.RAGHUNANDAN RAO Date : 05-08-2022 RJS

HON'BLE SRI JUSTICE R.RAGHUNANDAN RAO

EXEP.No.1 of 2021 & ICOMAOA No.12 of 2021

Date : 05.08.2022

RJS