Bombay High Court
The Union Of India vs Companies Act on 2 December, 2013
Bench: S.J. Vazifdar, G.S. Patel
OSAPL1138-1139-1140-2003-F
Shephali
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
APPEAL NO. 1138 OF 2003
IN
ARBITRATION PETITION NO. 283 OF 2001
IN
AWARD NO. 44 OF 2000
ALONG WITH
APPEAL NO. 1139 OF 2003
IN
ARBITRATION PETITION NO. 314 OF 2001
IN
AWARD NO. 42 OF 2000
AND
APPEAL NO. 1140 OF 2003
IN
ARBITRATION PETITION NO. 315 OF 2001
IN
AWARD NO. 43 OF 2000
1. The Union Of India
C/o. Food Corporation of India 16-20,
Barakhamba Lane, New Delhi 110 001
2. The Food Corporation of India,
16-20, Barakhamba Lane, New Delhi
110 001 ... Appellants
1 of 23
::: Downloaded on - 23/12/2013 20:31:32 :::
OSAPL1138-1139-1140-2003-F
versus
The Great Eastern Shipping Co. Ltd.,
a company registered under the
Companies Act, having its registered office
at Hongkong Bank Building, 60, Mahatma
Gandhi Road, Mumbai 400 001 ... Respondents
A PPEARANCES
FOR THE APPELLANTS Mr. Vilas D. Sonawane, Advocate.
FOR THE RESPONDENTS
ig Mr. Rahul Narichania, Advocate, along
with Mr. Kunal Shah, i/b M/s. Bhatt &
Saldanha, Advocates & Solicitors.
CORAM : S. J. Vazifdar &
G.S.Patel, JJ.
JUDGEMENT RESERVED ON : 2nd December 2013
JUDGEMENT PRONOUNCED ON : XXX December 2013
JUDGMENT : (Per G.S. Patel, J.)
I
1. These three appeals are disposed of by this common order
and judgment. Although the challenge in each appeal is to a separate
order by the learned Single Judge in three arbitration petitions,
those arbitration petitions were heard together. Arbitration Petition
2 of 23
OSAPL1138-1139-1140-2003-F
No. 314 of 2001 and Arbitration Petition No. 315 of 2001 were
decided on the basis of the order and judgment in Arbitration
Petition No. 283 of 2001, challenged in Appeal No. 1138 of 2003. In
appeal, too, parties agreed that the decision in Appeal No.1138 of
2003 would cover the other two appeals. Thus, all three appeals
were heard together, though arguments were advanced only in the
lead matter. Therefore, it will be convenient to dispose of all three
matters by a common judgment. That said, there are certain factual
differences in the matters and, where necessary, we have referred to
these in the present judgment.
2.
By his order dated 4th August 2003, the learned Single Judge
dismissed the present appellants' Arbitration Petition No.283 of
2001. The challenge in that arbitration petition was to an award
dated 12th June 2000 passed by an arbitral sole Umpire. The two
arbitrators initially appointed were unable to arrive at a unanimous
decision. The appellants thereupon filed Arbitration Petition No.39
of 1999 in this court, on which an order was passed on 13th August
1999. The 2nd appellant then sought a review of that order in
Review Petition No.51 of 1999. In that review petition, on 26th
November 1999, parties consented to the appointment of an umpire,
and agreed on the name of the person to be appointed. This needs to
be stated in view of the last submission made before us on behalf of
the appellants regarding this appointment.
II
3 of 23
OSAPL1138-1139-1140-2003-F
3. In charter party contracts of cargo carriage by ship, there is
usually a clause (or 'rider') that specifies how much time may be
taken by the vessel's charterer in loading and unloading his cargo.
This is called the "laytime". If the charterer takes more laytime than
is allowed by the charter party once the ship is readied for
unloading, then the charterer must pay a defined amount, calculated
in money multiplied by units of time, as "demurrage" to the owner.
This is because the owner's vessel has been delayed longer than
anticipated in the discharging of its cargo, and demurrage is thus an
opportunity cost to the owner. Conversely, if the unloading is
completed before the contractual laytime expires, the owner must
pay the charterer "dispatch" or "dispatch money"; for this is said to
represent the savings to the owner. Before laytime starts running,
the ship owner must also give notice of the vessel's readiness for
loading or unloading. The period during which this notice is to be
given is governed by a "laycan" clause typical in such contracts.
4. In two of the three cases before us, the dispute is as to
demurrage. In the other case, it is about the calculation of dispatch
money. In all three, the controversy centres around the correct
computation of laytime. That computation turns on the
interpretation of one particular clause of the charter party. The
present respondents relied on the majority decision of the House of
Lords in President of India v Jebsens (UK) Ltd & Ors.1 to contend that
in the context of an identical clause or rider in the charter party in
question, what is known as the "heavy hatch formula" was not the
correct method of calculating laytime. The present appellants
commended the minority view (of Templeman, LJ) to both the
(1991) Ll.L.Rep 1
4 of 23
OSAPL1138-1139-1140-2003-F
learned Umpire and the learned Single Judge, submitting that it is,
indeed, only such a formula that can be applied.
5. The appellants also challenged the award of interest at 18% as
being excessive.
6. Having carefully considered the record before us, as also the
decision in Jebsens, we are of the view that findings of the learned
Umpire on all the issues canvassed before him are, as the learned
Single Judge rightly holds, both possible and plausible, and cannot
be said to be perverse. These findings accord with our own. We are
inclined, therefore, to dismiss these appeals. Our reasons follow.
III
To appreciate the controversy before us, it is necessary to set
7.
out briefly the relevant facts in each case. In all three cases, the
present respondents were the successful claimants in arbitration.
The present appellants were the petitioners before the court below,
challenging the arbitral awards.
8. The facts in Appeal No. 1138 of 2013:
(a) On 26th September 1988, the respondents entered into
a charter party with the appellants. The respondents let
their vessel, M.V. "Jagdeesh", on hire to the appellants
for carriage of the latter's cargo of 20,000 metric tons
of bulk wheat "5% more or less at owners' option from ½
5 of 23
OSAPL1138-1139-1140-2003-F
safe berth(s), 1 safe port, U.S. West Coast Columbia River
Districts including Portland to 1/ 2 safe berth(s), 1/ 2 Safe
Port(s)/safe anchorage(s) India, coasts uncombinable."
This charter party had two addenda, one dated 20th
September 1988 and the other dated 22nd September
1988.
(b) At 0148 hrs on 28th September 1988, the M.V.
Jagdeesh arrived at the port of Portland, Oregan, USA.
It tendered notice of readiness that same day at 1345
hrs. Loading was complete at 1000 hours on 5th
October 1988. The charter party allowed a laytime of
five days for loading. The vessel used 5 days, 20 hours
and 15 minutes for loading.
(c) On 31st October 1988, the appellants nominated the
port of Veraval as the port of discharge for their cargo.
The M.V. Jagdeesh arrived at Veraval at 1330 hrs on 8th
November 1988 and the respondents immediately
tendered notice of readiness (at 1330 hrs on the same
day). The discharge port laytime commenced 24 hours
later, in accordance with Rider 17(c) of the charter
party, i.e., at 1330 hrs on 9th November 1988. On 25th
November 1988, while the vessel was awaiting
discharge at Veraval, the appellants renominated
Karwar port as a second port of discharge. As a result,
the appellants paid the respondents an amount of
Rs.1,06,46,227.84. This comprised Rs.1,78,928/- as
6 of 23
OSAPL1138-1139-1140-2003-F
90% of the coast differential, Rs.1,78,128/- towards 90%
of the second port differential, and 90% basic freight.
(d) The vessel then arrived at the port of Karwar at 0618
hrs on 26th November 1988. There, the draft was
found to be too shallow for the vessel, which therefore
needed to be lightened. This process took till 17th
December 1988, when cargo discharge began.
Discharge was completed at 0530 hrs on 4th January
1989. The appellants used, according to the
respondents, 45 days, 8 hours and 12 minutes.
(e) On these facts, the respondents raised three claims in
arbitration:
(i) Demurrage at the port of loading.--The
respondents claimed that while the permissible
laytime for loading was five days, the appellants
used 6 days, 20 hours and 15 minutes. The
difference was 1 day, 20 hours and 15 minutes.
The respondents claimed demurrage of
Rs.92,187.50 computed at Rs.50,000/- per day.
(ii) Demurrage at the port of discharge.--The
respondents claimed that the allowable laytime
for cargo discharge was 20 days, 4 hours and 48
minutes. The appellants used 45 days, 8 hours
and 12 minutes, an excess of 25 days, 3 hours and
7 of 23
OSAPL1138-1139-1140-2003-F
24 minutes. The respondents claimed demurrage
of Rs.12,57,083.30 at the rate of Rs.50,000/- per
day.
(iii) Balance 10% freight.--The respondents also
claimed that under Rider 7 of the charter party,
the appellants were indebted to the respondents
in the amount of Rs.25,71,946/- being the
balance 10% freight. The claim included the
coastal differential and the second port
differential.
(f ) The appellants denied all liability. They made a
counter-claim for Rs.3,83,330/- towards expenses
incurred for the time used for lightening the vessel to a
30-foot draft at Karwar Port, the second port they had
nominated, and for other costs.
(g) The learned Umpire dismissed the counter-claim and
allowed the respondents' claim in the aggregate sum of
Rs.25,06,494.62. The freight claim and the claim for
demurrage at the port of loading were awarded in
amounts less than originally claimed. The demurrage
claim at the port of discharge was fully allowed. The
learned Umpire also awarded interest at 18% per annum
from 4th May 1989 to the date of the award and further
interest on the principal amount at the same rate till
payment. Before the learned Single Judge, there was no
8 of 23
OSAPL1138-1139-1140-2003-F
challenge to the learned Umpire's rejection of the
appellants' counter-claim.
9. The facts in Appeal No. 1139 of 2003
(a) In this case, the charter party between the appellants as
hirers and the respondents as owners of a vessel named
M.V. "Jag Vivek" was dated 10th October 1988. The
terms of the charter party were substantially similar to
those of the charter party in Appeal No. 1139 of 2003.
The differences, if any, are immaterial.
The vessel arrived at Portland, Oregon, U.S.A. at 1133
(b)
hrs. on 26th November 1988. Portland was the port of
loading under the charter party. The respondents
tendered notice of readiness at 1345 hrs on 28th
November 1988. The laytime for loading commenced
24 hours later, i.e., 29th November 1988 at 1345 hrs in
view of Rider 17(c) of the charter party. According to
the respondents, the laytime allowable to the appellants
under the charter party for the loading of cargo at
Portland was six running days, including Sundays and
holidays. According to the respondents, the vessel used
4 days, 8 hrs and 51 minutes for loading. The appellants
thereby earned a dispatch of 1 day, 15 hrs and 9
minutes, which, at the rate of Rs.30,000/- per day
amounted to Rs.48,937.50.
9 of 23
OSAPL1138-1139-1140-2003-F
(c) The vessel arrived at the designated port of discharge,
Visshakhapatnam, on 20th January 1989 at 0110 hours.
It tendered notice of readiness for discharge at 1000
hours on that very day. Under the same clause of the
charter party, namely, Rider 17(c), the laytime
commenced 24 hours later, i.e., on 21st January 1989 at
1000 hours. Cargo discharge was complete on 13th
February 1989 at 0115 hours.
(d) The respondents' claim in arbitration was that on their
computation of laytime, the appellants were allowed 16
days, 19 hours and 10 minutes for cargo discharge.
They used 11 days, 12 hours and 46 minutes, saving 5
days, 6 hours and 24 minutes of laytime. The
Appellants therefore earned a disport dispatch of
Rs.1,84,333/- for this period calculated at Rs.30,000/-
per day.
(e) The respondents also claimed the amount of
Rs.12,17,528.37/- towards the balance 10% freight.
(f ) The dispute between the parties was as to the correct
calculation of allowable laytime both at the port of
loading and at the port of discharge for the purposes of
computing the earned dispatch.
10. The facts in Appeal No. 1140 of 2003:
10 of 23
OSAPL1138-1139-1140-2003-F
(a) In this case the charter party between the Appellants
and the Respondents was dated 2nd September 1988. It
was in respect of a vessel named M.V. "Jag Vishnu",
which was hired to load and carry 25000 metric tons of
wheat from Portland, Oregon, U.S.A. to the east or
west coasts of India excluding Haldia and Calcutta.
The other terms of the charter party in this respect
were substantially similar to the previous ones.
(b) The vessel arrived at Portland, Oregon for loading of
cargo at 1030 hrs on 2nd October 1988. It tendered
notice of readiness at 1230 hrs on the same day.
Loading was completed at 1545 hrs on 12th October
1988. The allowable laytime under the charter party
was 6 days; the vessel used 9 days, 7 hrs and 45
minutes. The respondents contended that the vessel
used 3 days, 7 hours and 45 minutes in excess of the
allowable laytime at the port at loading.
(c) The ship reached its designated discharge port at
Calicut on the west coast of India at 0800 hrs on 13th
November 1988. Notice of readiness for discharge was
tendered at 1000 hrs on 14th November 1988. Laytime
commenced 24 hrs later at 1000 hrs on 15th November
1988. Discharge was completed at 1645 hrs on 28th
December 1988. A total of 37 days, 4 hours and 15
minutes were used in cargo discharge. The respondents
claimed that the appellants used excess laytime of 19
days 21 hours 5 minutes.
11 of 23
OSAPL1138-1139-1140-2003-F
(d) The respondents made three claims against the
appellants; (i) demurrage for excess laytime used at the
port of loading and port of discharge; (ii) balance 10%
freight; and (iii) wrongful deduction of Rs.1,00,000/-
by the appellants from the freight due to the claims
towards carrying charges.
(e) In this case, the respondents claimed that the
appellants were therefore liable to pay demurrage of
Rs.1,66,145.85 at the rate of Rs.50,000/- per day for
excess laytime at the port of loading. The learned
Umpire allowed this claim in full. The second claim
was for demurrage of Rs.9,95,520.250 for excess
laytime at the port of discharge. Demurrage was
computed at the rate of Rs.50,000/- per day.
(f ) The learned Umpire allowed the Respondents claim in
full in the amount of Rs.27,14,633.58 together with
interest at 18% per annum from 27th April 1989 till the
date of the award, and further interest at the same rate
from the date of the award of the decree till payment.
The appellants' claim for deductions and their counter-
claim were dismissed.
LAYTIME AND THE HEAVY HATCH FORMULA
11. In all three Appeals the principal dispute is as regards the
correct computation of laytime. The computation of laytime affects
12 of 23
OSAPL1138-1139-1140-2003-F
the respondents' claim for demurrage (for excess laytime used) and
the appellants' claim for dispatch money (for laytime saved). In
arbitration petition No. 1283 of 2001 from which Appeal No. 1138 of
2003 arises, the only challenge before the learned Single Judge was
to the learned Umpire's award on the question of demurrage at the
port of discharge. The issue of dispatch money did not arise in that
case, and there was no challenge as regards the award on the freight
claim. The only other point canvassed before the learned Single
Judge was as to the award of interest at 18% per annum.
12. The rival contentions as to the computation of laytime turn
on the interpretation of one particular rider in the charter party and
the decision of the House of Lords in Jebsens.2 The relevant clause
of the charter party is Rider 17, the relevant portion of which reads
as follows:
17. DISCHARGING RATE/TIME ETC.
(a) Cargo to be discharged by Consignees stevedores,
free of risk and expense to vessel at the average rate of
1000 metric tons basis five or more available workable
hatches and prorate for less number of hatches, per
weather working day of 24 consecutive hours, Saturday
afternoon, Sundays and charter party holidays excepted,
even if used, always provided the vessel can deliver at
this rate.
(b) .........
(c) At first/sole discharging port or place, time to count
from 24 hours after receipt of Master's written notice of
readiness to discharge given to Charterers or their
Agents, during ordinary office hours on a weekday before
4 P.M. (similarly before noon if on Saturday), also having
been entered at Custom House and in free pratique
whether vessel is in berth or not.
Supra.
13 of 23
OSAPL1138-1139-1140-2003-F
(d) Time at second discharging port shall begin to
count from the time the vessel arrives within port limits
and reported but Sundays and charter party holidays and
also the time from 1700 hours on the day preceding the
charger party holiday or 12 noon if Saturday till 0800
hours next working day excepted, unless the vessel
arrives at second discharge Port already on demurrage."
(emphasis supplied)
This clause is common to all three cases.
13. There is no dispute about the dates when the vessel arrived at
the port, when it gave notice of readiness, and when discharge was
actually completed, i.e., the laytime actually used in discharging
cargo at Karwar. The question is what, on an interpretation of Rider
17, would be the allowable laytime.
14. The respondents before the learned Umpire relied on the
majority decision in Jebsens.3 The respondents, on the other hand,
submitted that it was the minority view in that decision of the
House of Lords, which adopts what is known as the "heavy hatch
formula", that should be applied in construing the demurrage clause.
In Jebsens,the charterer was the President of India. The owners
submitted that the laytime clauses of the charter parties in question
provided for an overall rate of discharge of 1000 metric tons per
weather working day. Their submission was that the effect of the
other words in that clause, viz., "basis five or more available
workable hatches pro rata for less number of hatches" was not to
substitute a per-hatch rate for the specified overall rate but were
supra
14 of 23
OSAPL1138-1139-1140-2003-F
only words that qualified the overall rate. These qualifications were
two: first, if, at the time when discharge commenced, fewer
workable hatches than specified were available, the overall rate
would be reduced pro rata; and second, when as discharging
progressed, if any of the hatches was temporarily unavailable, the
period of unavailability of that particular hatch would not count
towards laytime used. The majority in Jebsens held that when all
hatches were available and workable, the fact that discharge had
been completed from one hatch would not make it unavailable or
unworkable so as to attract the exclusion specified by the second
qualification. In other words, the rate of discharge in such a laytime
clause was to be construed as an overall rate for the vessel and not as
a per-hatch rate.
15. To illustrate: the overall discharge rate was 1000 metric tons
per day. A minimum of five hatches were to be used in discharge. If
Hatch No.1 was emptied of its cargo, this would not render it
unworkable or unavailable so as to extend the laytime. It was only if
a yet-to-be-discharged hatch was unavailable that the laytime would
be extended. On the other hand, a per-hatch rate would result in the
translation of the 1000 metric ton daily discharge rate into a rate of
200 metric tons per hatch per day. Each hatch had to discharge at
least this much cargo. This is the so-called "heavy hatch formula".
One of the consequences of this formula is that laytime can never be
computed with reference to the overall or average rate of 1000 MT
per day, though that is the discharge rate mentioned in the clause,
unless each hatch has exactly the same amount of cargo as every
other, and discharges at exactly the same rate. As the majority in
Jebsens observed, this is a wholly unreasonable and unrealistic
15 of 23
OSAPL1138-1139-1140-2003-F
assumption. Suppose Hatch No.1 had only 50 MT of cargo, and the
remaining 150 tons had been added to Hatch No.4. In that situation,
Hatch No.1 would finish its discharge much sooner than Hatch
No.4; but this would not affect the overall discharge rate. For this
reason, the majority of the House of Lords did not accept the heavy
hatch formula as a legitimate construction of such a clause.
16. Speaking for the majority in Jebsens Lord Goff of Chieveley
said:
"...if a hatch is not in this sense available workable,
whether at the commencement of loading or discharge (as
the case may be), or by reason of any temporary
impediment during the operation of loading or discharge,
or by reason of the loading or discharge of the hatch
having been completed, time shall not count in respect
of that hatch. This leads to the practical result that, if this
approach is adopted in respect of the form of the
clause under consideration in the present appeals, it
will have the same effect as if the clause had provided
for a discharging rate per available workable hatch --
a well established formula for the computation of laytime,
which the charterer says must have been intended by
choosing a clause in this form which adopts the available
workable hatch as its basis. The owners riposte that the
form of the clause now under consideration does not
provide for a rate per hatch but for an overall rate for the
whole vessel, and that if it had been intended to provide
for a rate per hatch that could easily have been done, in
accordance with well established precedent. Indeed Mr.
Young for the owners was able to point out that, on the
charterer's approach, the laytime for discharging
would never be calculated with reference to the
average rate for the vessel of 1000 tonnes per day,
unless there was an equal quantity of cargo under
each hatch, which was in practical terms an
inconceivable eventuality. It was the owners' approach
which was accepted by the arbitral tribunal in all three
cases.
...
16 of 23
OSAPL1138-1139-1140-2003-F
It is plain that what really struck the arbitrators was that
the clause did indeed provide for an overall rate of
discharge, and did not expressly provide for a rate per
hatch, despite the existence of well-known authorities
dealing with clauses which so provided. They were simply
not prepared to ignore the express provision for the
overall rate; they preferred to treat the reference to
"available workable hatches" not as substituting a
rate per hatch for the expressly provided overall rate
for the ship, but rather as imposing a qualification
upon it. This was the reaction of commercial men, who
must have been well aware of the practical consequences
of their decision, and who must also have been well
aware how charter-parties are negotiated and how they
are likely to be understood by practical men in the trade.
No great issue of principle arises in this case, which is
concerned with the construction of an amended clause;
though doubtless the clause in the present form has been
employed by the charterer in a considerable number of
cases, with the result that the present appeals are of
importance to him. I can see no good reason for departing
from the conclusion of the arbitrators in these three cases;
indeed, like the Court of Appeal, I for my part have
reached the same conclusion, for basically the same
reasons as the arbitrators. I am however also influenced
by the shape of the clause, which appears to me to be
so drawn as to give primacy to the overall rate for the
vessel. I am also fortified by the fact that this conclusion
is consistent with the reasoning of Mr. Justice Parker in
the The Tropwave, [1981]2 Lloyd's Rep.159, through it is
fair to observe that the form of the clause in that case was
somewhat different, and that the point was there a
subsidiary one."
17. The minority view, of Templeman, LJ was that any
interpretation other than the heavy hatch formula would have
"bizarre and gambling" results. The discharge rate would be some
notional figure arrived at by dividing the overall tonnage by the
specified number of hatches. The heaviest hold and the lightest hold
would have to be deemed to be discharging at the same, notional,
equal rate, although, in practice, the heaviest hold would discharge
at a rate faster than the lightest hold. Lord Templeman therefore felt
17 of 23
OSAPL1138-1139-1140-2003-F
that the Rider could only be construed as the heavy hatch formula,
one that was time-tested and well-established.
18. In Jebsens, the arbitrators accepted the owners' interpretation
as correct, viz., that the clause did not lend itself to interpretation as
a heavy hatch formula. In appeal by the charterers, the Queen's
Bench Division reversed the decision of the arbitrators. The Court
of Appeal allowed the owners' appeal and reversed the decision of
the Queen's Bench Division, restoring the view of the arbitrators.
The charterers' appeal to the House of Lords failed, and the view of
the Arbitrators accepting the interpretation canvassed by the owners
was upheld.
19. In the present case, Rider 17 is almost identical in wording to
the clause before the House of Lords in Jebsens. Neither the learned
Umpire nor the learned Single Judge were in any way bound by the
decision of the House of Lords. They were entitled to choose
between the two opinions expressed in that decision. Both the
learned Umpire and the learned Single Judge accepted the view of
the majority. This cannot be said to be a view that is impermissible,
implausible or perverse. The learned Single Judge observed that the
present appellants (the petitioners before the learned Single Judge)
were unable to demonstrate how the application of the heavy hatch
formula would have made any difference in the facts of this
particular case. In any event, he took the view that the interpretation
placed by the respondents, and which accorded with the
interpretation canvassed by the ship owners in the Jebsens, was
correct. Even before us, apart from saying that both the learned
Umpire and the learned Single Judge "ought to have accepted the
18 of 23
OSAPL1138-1139-1140-2003-F
heavy hatch formula", Mr. Sonawane, learned advocate for the
Appellants, was unable to establish (a) how in the facts of this case it
would have made any difference; or (b) why only that formula must
be accepted as correct while interpreting a clause such as this one.
20. Once we find that the view of the learned Umpire was
plausible, and the more so when we find that it is a view that we,
too, share, then there is no room for intervention. It is not possible,
in these circumstances, to accept the contention of the appellants
that the impugned order suffers from any infirmity on this count.
EXTENSION OF TIME FOR LIGHTENING
21. This issue arises only in Appeal No. 1138 of 2003. Mr.
Sonawane's submission is that the time spent in lightening the
vessel at Karwar must be excluded from the computation of
allowable laytime.
22. Mr. Sonawane submitted that no cargo was discharged at the
port of Veraval. Therefore, in his submission, Karwar would be the
first port of discharge. There is, however, no dispute that when the
vessel arrived at the second port of discharge, Karwar, it needed to
be lightened, since the draft at the port of Karwar was only 30 feet.
The time spent in lightening of the vessel, from 26th November
1988 to 17th December 1988, must, therefore, in Mr. Sonawane's
submission, be excluded from the allowable laytime.
19 of 23
OSAPL1138-1139-1140-2003-F
23. In this context, Mr. Sonawane relied on rider 31 of the
charter-party, which reads as follows.
"31. LIGHTENING:
If on arrival of the vessel at the first discharge port in India
the vessel's draft exceeds 30 feet salt water and it
becomes necessary to do lightening to enable vessel to go
alongside berth nominated by the Receivers the Owners to
arrange lightening upto 30 feet at their risk and expense
and time used for same not to count as laytime."
24. According to Mr. Narichania, learned counsel for the
respondents, the mere fact that there was no discharge at Veraval
does not alter the position in any way. He points out, and, in our
view, rightly, that on 31st October 1988 the Appellants nominated
the port of Veraval as the port of discharge for the cargo. This was
before the vessel arrived at Veraval at 1330 hrs. on 8th November
1988. Notice of readiness was tendered at 1330 hrs. on the same day,
i.e., immediately on arrival at the port. Laytime commenced 24
hours later on 9th November 1988 at 1330 hrs. The vessel was
awaiting discharge at Veraval right upto 25th November 1988, which
is when the appellants redirected the vessel to Karwar.
25. In these circumstances, Mr. Narichania is, in our view,
justified in his submission that it is not possible to hold that Veraval
was not the first port of discharge. That the owners, viz., the
appellants, chose not to discharge the cargo at Veraval, is
inconsequential. Certainly, they cannot be expected to assume any
financial liability on that account. Rider 31 of the charter-party only
applies to lightening at the first discharge port, which, in this case,
20 of 23
OSAPL1138-1139-1140-2003-F
must be held to be the port of Veraval. That rider has no application
whatsoever to lightening at the second port of discharge, i.e.,
Karwar. It is only at the first port of discharge that the costs of
lightening were to the owners, i.e., the respondents' account.
26. Mr. Sonawane's submission does not commend itself to us for
another reason too. If his contention is accepted then it must
necessarily follow that the appellants would be entitled under the
charter party constantly to redirect the vessel from port to port,
without discharging any cargo at any of these ports, and treating
only the final port where discharge actually takes place as the "first"
port of discharge. All costs towards lightening as also any unused
laytime at the intervening ports would, therefore, be only to the
respondents' account. In our view, this is a wholly unreasonable,
and even illogical, construction of the clause and the contract.
27. It is, therefore, in our view not possible to accept Mr.
Sonawane's contention in this behalf.
28. The remaining point is as to the rate of interest awarded by
the learned Umpire. As we have noted, the learned Umpire has
awarded interest at 18% per annum on the principal amount from 4th
May 1989 till the award and at 18% per annum thereafter. Mr.
Sonawane's submission was that under the provisions of the Interest
Act, interest can only be awarded at the prevailing rate and not at
the rate demanded. He submitted that the rate of 18% per annum
was excessive, that it was not the current rate of interest, and that
there was no material placed on record by the respondents to
21 of 23
OSAPL1138-1139-1140-2003-F
establish the current rate of interest at the relevant time. Equally,
and as correctly held by the learned Single Judge in paragraph 11 of
the impugned order, the appellants too did not place any material
either before the learned Umpire or before the learned Single Judge
to establish the current rate of interest at the time when the amount
became payable. As noted by the learned Single Judge, the learned
Umpire did not give any reasons for the award of interest. This
being an arbitration under the 1940 Act, the learned Umpire was not
bound to do so. The amount due to the respondents became payable
in 1989. In the absence of any material placed by the appellants as to
the prevailing rate of interest, and absent any reasons by the learned
Umpire, it is not possible to disturb the award or the impugned
order on this ground. It is well settled that an award under the 1940
Act cannot be interfered with only on the ground that a higher rate
of interest has been awarded.4
29. The last submission made before us by the appellants was that
under the arbitration clause of the charter party, the arbitrators and
umpire were required to be "commercial" men, and that the learned
Umpire, being a retired judge of this Court, was not "qualified".
This submission needs only to be stated to be rejected. Indeed, it
should not have been made at all, especially in view of the fact that
on 26th November 1999, the parties took a consent order from this
court in Review Petition No.51 of 1999 agreeing on the name of the
learned Umpire and referring the matter to him.
Steelman Limited V/s. State of Madhya Pradesh, (1987) SCC 252
22 of 23
OSAPL1138-1139-1140-2003-F
30. We find no merit in this appeal. There is no warrant for
interference with the order of the learned Single Judge. This appeal
is, therefore, dismissed.
31. Before the learned Single Judge it was agreed that the
decision in Appeal No.1138 of 2003 would govern Appeal No.1139
of 2003 and Appeal No.1140 of 2003 as well. Before us, too, learned
Counsel for both sides also so agreed. The issue in those two
appeals also relates to demurrage or dispatch money, and the rate of
interest awarded by the learned Umpire. The question of demurrage
turns on an interpretation of identical riders in the charter parties in
those matters governing the computation of allowable laytime, and
the applicability or non-applicability of the heavy hatch formula. We
have decided both issues, viz., the interpretation of the demurrage
clause as also the question of the rate of interest awarded, in Appeal
No.1138 of 2003. Our findings on these issues will therefore cover
the other two appeals as well. Those appeals, viz., Appeal No.1139
of 2003 and Appeal No.1140 of 2003, are, therefore, also dismissed.
(G.S. Patel, J.) (S.J. Vazifdar, J.)
23 of 23
