Alpana Navigation Co. Pvt. Ltd. vs Union Of India
1998 Latest Caselaw 109 Del

ORDER

S.N. Kapoor, J.

1. This judgment relates to petition under Section 14(2) of the Arbitration Act. 1940 for filing of the award dated 14th July, 1993 and for making it a rule of the Court and objection filed against the award.

2. The claimants entered into Charter Party dated 20th September 1988 to let their vessel MV PROTEUS to the respondents for the carriage of 20,000 Metric Tonnes wheat from Columbia River Dist. Port for discharge at Indian Port(s). Accordingly, claimants presented the vessel to the respondent at Vancouver W.A. on 18.12.1988. After loading of cargo, the vessel sailed for India on 20.10.1988; arrived at Old Mangalore Port on 30th November 1988 and commenced and completed discharge of the entire cargo between 17th December 1988 and 22nd January 1989. A dispute arose between the parties for respondent Union of India withheld a payment of U.S.$ 150352.82 on account of freight. Since the Charter Party provides for settlement of all disputes arising under the charter party by arbitration in accordance with the provisions of Indian Arbitration Act, 1940, the claimants and respondent respectively appointed Shri K.P. Patel and Rear Admiral Krishna Dev (Retd.) as joint arbitrators. Both of them appointed Mr. H.M. Singh, IAS (Retd.) as umpire. The arbitration proceedings commenced on 3rd August 1992 at Delhi which ultimately resulted in the impugned award dated 14th July, 1993. Since the respondents are doing the business for gains at Delhi and this Court has jurisdiction to entertain this application under Section 14(2) of the Arbitration Act, the claimants claim that award may be made a rule of the Court.

3. The respondents have challenged the award amongst others on the ground that since in terms of the clause 30 of the Charter Party the claimants failed to raise claim at the load port, the claim has become stale and the arbitrators had no jurisdiction. This point was raised in additional counter statement dated 17.12.1992 and during the course of the arguments the learned arbitrators have failed to give a finding on the point. The arbitrators committed an error in awarding U.S.$ 8068.75 towards the demurrage at the load port. The arbitrators had wrongly interpreted clause (xvii) and additional clause (viii-A) of the Charter Party and rejected the contention that lay time should commence from 0800 hours on 12.10.1988 when 24 hours period had expired after the notice of readiness was accepted. The additional claim in clause (iv) of the Charter Party was wrongly construed. Wrong formula namely gross tonnage divided by the average discharge rate per day has been applied in calculating lay time hour available. The arbitrators have erroneously rejected the claim of the respondent for certain deductions in the calculation of the lay time and accepted calculation of the claimant of 19 days 2 hours and 24 minutes as against 25 days 20 hours 31 minutes and awarded the sum of US$ 99909.38 towards demurrage at discharge port. No finding has been given on additional counter statement dated 17.12.1992 about the claim that the entire claim was barred by limitation as the claim was not raised within three years from the date of completion of discharge on 22.1.1989. Learned arbitrators have erroneously awarded the interest at the rate of 12% per annum in favour of the claimants from 23.9.1989 for the Charter Party did not provide for any payment of interest on disputed claims. The arbitrators failed to take into account the appreciation of the dollars as against the rupee from 23rd May, 1989 from the date of the award. The learned Arbitrators have erroneously awarded fee in favour of the umpire when the umpire has not participated in the proceedings.

4. The claimants are obviously contesting the objections raised on each of the points raised by the objectors.

5. I have heard the parties counsel at length and gone through the record. It is apparent that the dispute relates to the question of jurisdiction, commencement and calculation of lay time and deduction relating thereto, question of limitation, interest on disputed claims, and fee of the umpire, and rate of exchange between US$ and Indian rupee.

6.1 Taking first the question of limitation. Submission of the learned counsel for the objector is that since cargo was discharged on 22nd January 1989 and arbitration clause was invoked on 29th January 1992 claim is not within the period of limitation in terms of Section 37(1) of Arbitration Act, 1940 and Art. 12 of the Schedule of the Limitation Act. Section 37(1) of the Arbitration Act provided that all the provisions of Indian Limitation Act, 1908 should apply to arbitrations as they applied to proceedings in court. Article 12 of the Schedule of Limitation Act provides the period of three years. Consequently, the claim should not have been entertained.

6.2 In response to these objections, argument of the claimant/petitioner is that it is settled position that mixed questions relating to facts and law are in the exclusive domain of the arbitrator and the award stemming from the arbitration proceedings is final and binding. It is open to the arbitrator to decide on the rival contentions of the parties to the issue as to limitation and if an arbitrator makes the mistake either in law or on fact and in such mistake does not appear on the face of the award, the award will not be bad notwithstanding any mistake (Kanpur Nagar Mahapalika Vs. M/s Narain Das Haribansh, ). It is further contended by the claimant that in any case under additional clause 16 of the Charter Party, "the balance 10% freight together with demurrage (if any) or less despatch (if any) is payable by Charterers within 120 (one hundred twenty) days of completion of discharge, on production of (i) copy of bill(s) of Lading, (ii) copy of Charter Party; (iii) receipt for payment of dispatchers' fee at the loading port(s) (if applicable)". Payment of balance freight, therefore became due not on the date of application of dispatch or on 22nd May 1989 i.e. 120 days from the date of completion of discharge. Arbitration clause was invoked on 29th January 1992 and claim is, therefore, patently within time.

6.3 On the other hand, learned counsel for the objector contended that on the basis of Govt. of Kerala Vs. Kunhamoo, 1988 (1) KLT 405, Section 5 of Limitation Act is applicable only to the courts and not to the tribunal in the absence of any specific provision making the provision of the Limitation Act applicable and in the absence of specific provision, a tribunal will not be invested with any powers based on the provisions of Limitation Act. Section 5 or any other provision of Limitation Act is not applicable for proceedings before the arbitrator. This contention of the learned counsel for the objector cannot be accepted in view of Section 37 of the Arbitration Act, 1940. Section 37(1) provides that "All the provisions of Limitation Act, 1908 (9 of 1908), shall apply to arbitrations as they apply to proceedings in Court." This is a specific provision extending the application for Limitation Act as a whole and not in piecemeal to the arbitration proceedings. In para 11 of judgment, Kerala High Court no doubt referred to Nityanand M. Joshi Vs. LIC of India, but that judgment did not refer to arbitration proceedings. It relates to an industrial dispute and Article 137 of Limitation Act alone. No provision like Section 37(1) of the Arbitration Act, 1940 was considered by the Supreme Court. Besides, in Panchu Gopal Bose Vs. Board of Trustees for Port of Calcutta, following observations at p.1620 provide directions in this regard. The relevant portion reads as under:

14. "...The cause of Arbitration, therefore, arises when the claimant becomes entitled to raise the question, i.e. when the claimant acquires the right to require arbitration. The limitation would run from the date when cause of arbitration would have accrued, but for the agreement."

15. "...Accordingly, the arbitrator was entitled and bound to apply the law of limitation. Section 3 of the Limitation Act applied by way of analogy to arbitration proceedings, and like interpretation was given to Section 14 of the Limitation Act. The proceedings before the arbitration are like Civil Proceedings before the court within the meaning of Section 14 of the Limitation Act. By consent the parties have substituted the arbitrator for a court of law to arbiter their disputes or difficulties. It is, therefore, open to the parties to plead in the proceedings before him of Limitation as a defense."

6.4 The above observations and rationale implied therein indicates that Section 5 of Limitation Act would be equally applicable to Arbitration proceedings. If arbitrator is bound by the provisions of Section 3 and 14 of the Limitation Act, it has to be held that the Arbitrator also enjoys powers to condone delay under Section 5 of the Limitation Act. It appears to be settled law that the courts must be very liberal in condensation of delay to ensure judgments etc. on merits instead of technicalities.

6.5 In so far as the question of misconduct and the failure of the arbitrator to spell out the reasons or failure to decide the question of limitation is concerned, Govt. of Kerala Vs. Kunhamoo, (supra), lays down a legal proposition that where the arbitrator had to render a decision on the question of law incidental to the legality of the reference, the point of law may be deemed to have been decided by the arbitrator, and irrespective of the fact whether it has a reasoned decision or a deemed decision, if it is manifestly erroneous, the court could interfere with the award under Sections 16 and 30 of the Arbitration Act, 1940.

6.6 The Apex Court in Smt. Santa Sila Devi Vs. Dhirendra Nath Sen & Ors., made following observations:

"Before dealing with this point, it is necessary to emphasise certain basic positions. The first of them is that a court should approach an award with a desire to support it, if that is reasonably possible, rather than to destroy it by calling it illegal (See Selby v. Whitbread and Co. (1917) 1 KB 736 at p.748. Besides it is obvious that unless the reference to arbitration specifically so requires the arbitrator is not bound to deal with each claim or matter separately, but can deliver a consolidated award. The legal position is clear that unless so specifically required an award need not formally express the decision of the arbitrator on each matter of difference."

6.7 In B.V. Radha Krishna Vs. Sponge Iron India Ltd., , the apex court observed as under:

12. "...there is a distinction between disputes as to the jurisdiction of the Arbitrator and the disputes as to in what way that jurisdiction should be exercised. There may be a conflict as to the power of the Arbitrator to grant a particular remedy. One has to determine the distinction between an error within the jurisdiction and an error in excess of the jurisdiction'. court cannot substitute its own evaluation of the conclusion of law or fact to come to the conclusion that the Arbitrator had acted contrary to the bargain between the parties. Whether a particular amount was liable to be paid is a decision within the competency of the Arbitrator. By purporting to construe the contract the Court cannot take upon itself the burden of saying that this was contrary to the contract and as such beyond jurisdiction. If on a view taken of a contract, the decision of the Arbitrator on certain amounts awarded is a possible view though perhaps not the only correct view, the award cannot be examined by the Court. Where the reasons have been given by the Arbitrator in making the award the Court cannot examine the reasonableness of the reasons. If the parties have selected their own forum, the deciding forum must be conceded the power of appraisement of evidence. The Arbitrator is the sole Judge of the quality as well as the quantity of evidence and it will not be for the Court to take upon itself the task of being a Judge on the evidence before the Arbitrator."

"...it is difficult to give an exact definition of the word 'reasonable'. Reason varies in its conclusions according to the idiosyncrasies of the individual and the time and circumstances in which he thinks. In cases not covered by authority the verdict of jury or the decision of a Judge sitting as a jury usually determines what is 'reasonable' in each particular case. The word reasonable has in law prima facie meaning of reasonable in regard to those circumstances of which the actor, called on to act reasonably knows or ought to know. An arbitrator acting as a Judge has to exercise a discretion informed by tradition, methodized by analogy, disciplined by system and subordinated to the primordial necessity of order in a social life. Therefore, where reasons germane and relevant for the Arbitrator to hold in the manner he did, have been indicated, it cannot be said that the reasons are unreasonable."

"...It is well settled that if a question of law is referred to Arbitrator and the Arbitrator comes to a conclusion, it is not open to challenge the award on the ground that an alternative view of law is possible. In this connection, reference may be made to the decisions of this court in Alopi Parshad and sons Ltd. Vs. Union of India, and Kapoor Nilokheri Co-op. Dairy Farm Society, . In Indian Oil Corpn. Ltd. Vs. Indian Carbon Ltd. , this Court has held that the Court does not sit in appeal over the award and review the reasons. The Court can set aside the award only if it is apparent from the award that there is no evidence to support the conclusions or if the award is based upon any legal proposition which is erroneous."

6.8 In the light of the above observations, it is apparent that if the Limitation Act applies to the arbitration proceedings, as it applies to courts, Section 5 of the Limitation Act shall also be applicable and the question of condensation of delay would amount to an error within the jurisdiction and not an error in excess of the jurisdiction. Had there been no specific provision like Sub-section (1) of Section 37 of the Arbitration Act, 1940, the position might have been totally different.

6.9 Learned counsel for the petitioner further referred to clauses (b), (c) and (d) of clause 16 of the Charter Party which read as under:

(b) 90% of the freight is payable within seven (7) working days of safe arrival of vessel and cargo at first or sole discharge port India and on submission of freight bill, in triplicate, by the Indian Broker, on behalf of owners, to Charterers. The balance 10% freight together demurrage (if any) or less despatch (if any) is payable by Charterers within 120 (one hundred twenty) days of completion of discharge, on production of (i) copy of bill(s) of Lading, (ii) copy of Charter Party; (iii) receipt for payment of despatchers' fee at the loading port(s) (if applicable)".

(c) owners to confirm receipts of funds within 10 (ten) days of remittance of initial and final payments.

(d) Freight is deemed to be earned upon safe arrival of the vessel and the cargo at the first or sole discharge port. The entire freight shall at all times be at the risk of the vessel owners."

6.10 From the perusal of clause (b) it appears that 90% freight is payable within seven working days of safe arrival of vessel at the discharge port in India, i.e. on 30th November 1988.

6.11 According to the respondent, they paid to the claimant US$ 617,899.25 towards 90% of the freight charges on 7th December 1988. In so far as the 10% of the remaining freight was concerned, discharge of cargo was admittedly completed at 13:30 hours on 22nd January 1989 and on 4th October 1989, respondent paid US $47,348.95 towards balance freight. The period of 120 days would start running from 22nd January 1989. Thus, remaining 10% balance freight was payable by 22nd May 1989. This would obviously bring the claim of freight and damages within three years period of limitation since the claim for arbitration was invoked on 29th January 1992. Consequently, question of condensation of any delay does not arise.

7.1 In regard to load port claims and question of jurisdiction relating to these claims, the learned counsel for the Objector referred to clause 30 of the Charter Party. It reads as under:

"It is agreed that for each and every day's demurrage and detention at the port of leading by default of said parties of the second part or their agent.......per day or pro rata shall be paid by the said parties of the second part or their agent to the said party of the first part or its agent, and such claims (or claim for despatch money) shall if disputed be settled by arbitrators at port of loading, and there paid, and shall not be elsewhere enforceable..."

7.2 It is contended that the claim relating to demurrage at load port should and could have been dealt with at the port of loading by the Arbitrators and nowhere else as mentioned in clause 30 and consequently, the arbitrator appointed subsequently in India could not have dealt with this aspect. But one could not conveniently ignore that clause 42 (as has been pointed out by the learned counsel for the petitioner) provides that all disputes arising under the Charter Party should be settled in India in accordance with Arbitration act, 1940.

7.3 Consequently, while construing clause 30, one has to take into account other clauses of the Charter Party, namely clauses 7 to 53 inclusive as attached or deemed to be incorporated in the Charter Party. According to clause 42, all disputes arising under this charter, were to be settled in India by arbitrator from out of the panel of arbitrators maintained by Indian Counsel for Arbitration, New Delhi. Obviously, this clause 42 overrides the printed part of clause 30 in the Charter Party. This clause 42 governs the whole of the contract and the arbitration could take place only in India, for, it is well settled that if there is any conflict between printed clause with written additions or stamped clause on the margin or additional clauses, not the printed clause, but the written additions or stamped or additional clauses, on ordinary principles of construction shall prevail (See United Bank of India Ltd. Vs. Nederlandsche Standard Bank, , Canada and Dominion Sugar Co. Ltd. Vs. Canadian National Steamship Ltd., 1947 AC 46, Glynn Vs. Margetson, 1893 AC 351; and 10 Halsbury (Hailsbury's 10th Edition p.279).

8.1 There cannot be any dispute with the proposition laid down in State of UP Vs. Ram Nath International Construction (P) Ltd., . In that judgment, it was held that the arbitrator, being creature of the agreement itself, is duty bound to enforce the terms of the agreement could not travel beyond the agreement itself. If the arbitrator adjudicates a claim of a contractor with reference to the clauses of agreement itself whereby the agreement gets engrafted into the award, it will be open to the court to examine those clauses of the agreement and find out the correctness of the conclusion of the arbitrator with reference to those clauses.

8.2 In so far as the lay time calculation at load port is concerned, chatterers were supposed to pay demurrage if the steamer to be loaded is detained longer than six running days, as per clause 17. This is subject to the condition that the detention occurs by default of charters or their agents in terms of clause 9 of the additional agreement. Clause 17 also provides that if the vessel is detained longer than the time allowed for loading or discharging, demurrage shall be paid at the rate of US $4,500/- per running day or pro rata. Despatch money at half the said demurrage rate per running day or pro rata to be paid to Charterers for working time saved at loading port(s) and at discharging port(s). According to the case of the objectors, a notice of readiness was tendered at 15.30 hours on 10th October 1988 and loading of 19,099.866 MT cargo was completed at 20.50 hours on 19th October 1988 and the vessel left for India. From the award, it is apparent that taking time spent on shifting of the vessel and on trimming of the cargo, calculated demurrage for 1 day 19 hours 2 minutes. On this basis the demurrage at load port US$ 8068.75 was awarded. This could not be said to be unjust for calculation mistake was noticed.

8.3 In regard to demurrage at discharge port, notice of readiness was tendered and accepted at 10.00 hours on 1st December 1988. Lay time commenced on 2nd December 1988. On 22nd January 1988 discharge of cargo completed at 13.30 hours. In term of clause 14(b) and (c) it continued till discharge of cargo was complete at 13.30 hours on 22nd January 1989. As against demurrage for one month and 20 days at the rate of US $ 4,500 per day only a sum of US $ 99,909.38 was allowed at discharge ports.

8.4 It may be mentioned that the arbitrators being commercial men and expert in concerned commercial transactions, construed the charter party to the best of their ability. No mala fides have been imputed, nor there appears any such thing. No misconduct could be attributed to them for any of the reasons whatsoever. Consequently, lay time computation by the arbitrators cannot be rejected.

9.1 Learned counsel for the objector also challenged awarding of interest at the rate of 12% from 23rd May 1989 from the date of payment, whichever is earlier. The arbitrator has awarded interest from 23rd May 1989 (probably, taking that the payment was to be made up to 22nd May 1989 so far as 10% balance became payable on that date). Thus, the interest has been awarded in respect of pre-reference period; during the period of arbitration proceedings till the date of the award and from the date of the award till the date of decree. It is well settled that the arbitrator has jurisdiction to award pre-reference interest in cases which arose after coming into force the Interest Act 1978. Under Section 3(b) of the Interest Act, the interest could be charged only from the date of service of notice. (See State of Orissa Vs. B.N. Agarwala, 1997 (1) Scale 596).

9.2 It appears that the claimant company demanded relative interest for the first time vide letter Ex. 'G' at p.223 dated 11th January 1990 (on the Arbitrator's file) from the time of completion of discharge, on 22nd January 1989, and on 15th February 1990 they sought arbitration proceedings also. The arbitrator had not awarded interest from the date of notice i.e. 11th January 1990 but from the date of expiry of 120 days from the date of completion of discharge of entire cargo from the vessel, for the 10% amount had fallen due only on completion of 120 days from the date of completion of discharge of cargo. In terms of Section 3(b) of the Interest Act, 1978 as has been interpreted in various cases including B.V. Radha Krishna Vs. Sponge Iron India Ltd., (supra). it is apparent that the Objector is justified to a limited extent for claimants are entitled only from the date of notice i.e. 11th January 1990.

10. In so far as the fee of the umpire is concerned, the fact that he had not participated in the arbitration proceedings had not been disputed. Two views are possible: first, since the umpire had been appointed, he must have been paid his fee, irrespective of whether he was called upon to participate in the arbitration proceedings or not, and the second is that because he had not participated, he need not be paid. Where two views are possible, this court is not supposed to substitute its own views. Consequently, this plea has to be rejected.

11. Next submission relates to exchange rate. There does not appear any force for if the award is to be given in US dollars, it could mean only the exchange rate between US$ and Indian rupee prevailing on the date of award, as has been ordered by the arbitrator and not the exchange rate prevailing at the time when the completion of discharge of cargo took place or on expiry of 120 days.

12. For the foregoing reasons, the award is accepted and made rule of the court with slight modification about interest. The claimants are entitled to recover US$ 1,28,511.82 with interest at the rate of 12% per annum from 11th January 1990 till the date of the award and till the date of decree at the exchange rate prevailing on the date of the award. The claimants are also entitled to interest at the rate of 12% per annum on US$ 1,28,511.82 from the date of decree till realisation. Objections are disposed of accordingly.

13. Decree sheet be prepared accordingly.