Sunnaren Seaways Inc. vs The Metals And Scrap Trading ...
2006 Latest Caselaw 1648 Del

JUDGMENT

Pradeep Nandrajog, J.

1. Metal Scrap Trade Corporation limited (hereinafter referred to as MSTCL) has preferred objections to the Umpire's award dated 15.4.1995. Vide order dated 17.8.1994, Mr. M.S. Anchan and Mr. N. Gopalakrishnan the 2 arbitrators appointed by the parties, one each, referred the dispute to Captain S.M. Berry as an Umpire inasmuch as the learned arbitrators diferred on 2 out of 3 claims of Sunnaren Seaways Inc., Monrovia, Liberia (hereinafter referred to as the owner). For record, award published by Mr. M.S. Anchan is dated 14.8.1994 and that published by Mr.N. Gopalakrishnan is 17.8.1994.

2. On 14.12.1989, a voyage charterparty agreement was entered into between MSTCL and the owner where under the ship M.V. Progressive owned by the owner was chartered to carry pig iron from Novorossiosk, Russia (load port) to Bombay (discharge port). Inter alia, Clauses 21, 22, 24, 51, 56 and 64 of the charter party provided as under:

Clause 21: The Master's written notice of readiness to load is to be given to the Suppliers Agents after the vessel is ready in all respects including customs clearance, free pratique as well as thorough preparation of vessel's holds for the carriage of Pig iron and such notice to be given to the Suppliers Agents at loadport during office hours.

Clause 22: The Master to give 24 hours notices of ETA at each load/discharge port to "PROMSYRIOIMPORT MOSCOW" (Suppliers), "METSCRAP NEW DELHI", "METSCRAP CALCUTTA" and "TRANSCHART NEW DELHI".

Clause 24: Cargo shall be loaded at the average rate of 2100 MT per weather working day of 24 running hours, Sundays and Holidays excepted, unless used, if used actual time used to count, Saturdays and days preceding holidays to count as 3/4 of a day only basis six or more available workable hatohes and prorata if less. Vessel equipped with six cranes of 8 tons each, as such six hooks available. Cargo shall be discharged at the average rate of 1000 MT per weather working day of 24 running hours, Sundays and Charter party Holidays excepted, even if used, basis five or more available workable hatches prorata if less.

At load port laytime to commence 24 hours after notice of readiness given and accepted, vessel being in free pratique, customs cleared, whether in berth or not. Time lost in waiting for berth to count.

Time at discharging port shall not count between noon on Saturday and 8 a.m. on Monday, nor between 12 noon on the last working day preceding a Charter party holiday and 8 a.m. on the first working day thereafter, even if used, unless the vessel is already on demurrage. Time shall begin to count from 24 running hours after vessel's arrival within port limits and notice of readiness tendered and accepted during official working hours at discharging port, reported and in free pratique whether in berth or not, but not between the hours of 5 p.m. and 8 a.m. on a weekday, or during any of the periods above excepted, even if used, unless at discharging port the vessel arrives already on demurrage. Charterers have the right to work during excepted periods, such time used not to count as laytime.

Laytime allowed for loading and discharging to be non-reversible.

Clause 51: Any time lost due to breakdown of winches, derricks/cranes not to count as laytime and any expenses incurred to be for owners' account.

Clause 56: The vessel shall give free use of winches and steam or power for same if required, but not exceeding their ordinary capacity and available gear for loading and discharging, also lights for night work as on board, winchmen from crew, if permitted, otherwise shore winchmen to be for Charterers' account. Charterers' privilege discharging overside, owners allowing free use of gear winches/derricks.

Clause 64: 90% freight to be paid by Charterers (per Clause 38, 39) initially on quantity loaded as per loadport draft survey, subject to necessary adjustment being made on the exact quantity at the time of making final settlement of balance freight on true and right delivery of cargo based on outturn weight determined by joint draft survey with owners surveyor and MSTC at discharging port or weighing bridge. In case of draft survey franchise of 1% (one percent) to be allowed against loadport weight. Balance 10% freight on completion of discharge and settlement of demurrage/dispatch account as payable (per Clause 38, 39).

3. The ship was docked at Novorossiosk on 18.12.1989 at 13.45 hours. The captain of the ship tendered her 'Notice of Readiness' on 18.12.1989 itself at 13.45 hours. However, inward clearance was granted by the port authorities to the ship on 24.12.1989 at 11.20 hours. The ship was allotted a berth at 13.30 hours. Loading of the pig iron commenced immediately and was completed on 31.12.1989.

4. It is not in dispute between the parties that in view of Clause 24 since average rate of loading was 2100 MT, loading time taken to transfer the cargo to the ship under Clause 24 of the charter party entitled MSTCL to utilize the time spent in loading and said time was laytime allotted. It is also not in dispute between the parties that in view of Clause 22, 24 hours reckoned from the time notice of readiness was given in terms of Clause 21 had also to be counted towards laytime.

5. The ship sailed from the loading port and arrived at Mumbai on 16.1.1990. The ship got a berth on 18.2.1990. Discharge i.e. unloading commenced at 13.30 hours on 18.2.1990 and was completed on 7.3.1990 at 23.30 hours.

6. While effecting unloading at Bombay port, Shore Cranes had to be hired by the owner for which a sum of US$ 15,572.70 had to be paid by the owner to the Bombay Port Trust. Shore Cranes had to be hired for the reason the cranes provided at the ship developed failure.

7. Due to failure of the cranes provided by the owner on the ship, extra time was consumed for unloading. The Bombay Port Trust had charged demurrage from the owner.

8. When the ship was loaded at the port of loading, as per bill of lading, quantity of pig iron loaded and as reflected in the bill of lading was 17,257.67 MT. At the port of unloading i.e. Bombay, weigh bridge of the Bombay Port Trust showed quantity transported as 17,509.4 MT.

9. The owner laid a three fold claim against MSTCL. First claim was in sum of US$ 255,848.05 towards demurrage. This had 2 limbs. The first limb was demurrage for the period 19.12.1989 to 24.12.1989. The second was demurrage on account of extra time taken for unloading at the port of discharge i.e. Bombay. The second claim was on account of crane charges paid at the port of discharge in sum of US$ 15,572.70. The third was on account of differential in the weight i.e. weight disclosed by the agent of MSTCL when ship was loaded and as entered in the bill of lading and the weight recorded by weighment at weigh bridge of the Bombay Port Trust when the ship was unloaded. Claim was for additional cargo freight in sum of US$ 9,549.15.

10. The two arbitrators disagreed with each other on demurrage and crane charges claimed by the owner. Both concurred on the claim pertaining to additional cargo freight. Whereas Mr. M.S. Anchan allowed all claims of owner, Mr. N. Gopalakrishnan allowed claim for additional cargo freight and port demurrage at discharge port.

11. The Umpire has concurred with the opinion expressed in the award published by Mr. M.S. Anchan.

12. Learned Counsel for MSTCL, Mr. Jaideep Gupta, Sr. Adv. conceded that if the award of the learned Umpire was upheld, sum awarded is correct. I clarify, learned Counsel meant that there was no dispute on the computation.

13. I need therefore only note the relevant clauses of the charter party and the rival submissions for the reason whether the award of the Umpire needs to be set aside or not requires an interpretation of the charter party.

14. Law on the issue is crystal clear. Where agreement between the parties admits of no two meanings and it is a simple case of applying the contractual terms, an arbitrator, being the creature of the contract has his mandate limited to act as per the contract. If he travels beyond the contract or reinvents the contract, the arbitrator would be guilty of exceeding his mandate. It would be a case of legal misconduct requiring the award to be set aside. (See SAIL v. J.C. Budhiraja ).

15. On the other hand, if a contract requires interpretation, arbitrator would be empowered to interpret the contract and if two views are possible, view adopted by the arbitrator would be immune to challenge and it would be no ground to urge that the other view is more plausible view. To put it differently, adequacy or inadequacy of the reasonableness of the view taken by the arbitrator cannot be questioned as long as the view taken does not suffer from the vice of perversity.

16. Since the latter 2 claims do not require any analysis of the various terms and phraseology used in the relevant clauses of the charterparty, let me overcome the simple issues before I grapple with the contentious one.

17. Clause 24 of the charter party stated that the ship is equipped with 6 cranes of 8 tonnes each.

18. Learned Counsel for the parties conceded that this meant that the cranes could lift a weight up to 8 tonnes at a time.

19. It is further admitted by the learned Counsel for the parties that the agent deployed by MSTCL for unloading the ship at Bombay port used magnets which were hooked on to the cranes for lifting the pig iron. It is also not in dispute that vide clause 56 of the charterparty the owner was obliged to provide the cranes free of cost.

20. Since an absurd finding by an arbitrator has to be set aside as it would be a case of legal misconduct, laying a challenge to the award of the Umpire pertaining to crane charges held payable by MSTCL to the owner, Mr. Jaideep Gupta, learned senior counsel argued that the reasoning of the learned Umpire is perverse.

21. I quote from the Umpire's award. It has been noted as under:

B) In the matter of crane hire charges I find that:

1). No special provision was provided in the Charter Party for the use of magnets for the discharge of the Cargo by the Charterers. Charter Party did provide for the vessel to have gear of minimum 2.5 long tons and the vessel had 6 cranes with 8 mt safe working load.

2). The weight of magnet and the cargo lifted are only a part of the total weight, while the actual load on the cranes of the magnetic lift also includes the electromagnetic field and this to may mind is the cause of excess load on the cranes and their subsequent breakdown.

3). I uphold the decision of learned Arbitrator Mr. M.S. Anchan, and award the crane expense to the owners.

Cranes Hire charges paid by owners: US$ 15,572.70

22. Picking on para 2, Mr. Jaideep Gupta, learned senior counsel stated that a principle of physics unknown to physicists has been adopted by the learned Umpire. Learned Counsel urged that electromagnetic field would have no mass and therefore no weight.

23. Learned Umpire has held that the weight of the magnet and the cargo lifted were only a part of the total weight. Actual weight on the crane also includes the electromagnetic field.

24. Indeed, I was a little confused when I read para 2 of the award. I wondered whether I correctly understood the various laws penned down by physicists. As I remember physics which I had studied in high-school, by close of the 19th century, scientists could reflect with satisfaction that they had penned down most of the mysteries of the physical world. The X-ray, the cathode ray, the electron and radioactivity had been discovered. Mysteries of the physical world: electricity, magnetism, gases, optics, acoustics, kinetics and statistical mechanics, to name a few, had all fallen into an order.

25. Scientists had produced a body of universal laws, so wide and majestic, that we still tend to write them out in capitals:- The Electromagnetic Field Theory of Light; Richter's Law of Reciprocal Proportions; Charles's Law of Gases; The Law of Combining Volume; The Zeroth Law; The Valency Concept; The Laws of Mass Action and others beyond counting. Many wise men believed that there was nothing much left for science to do till a young Swiss, having no access to a laboratory and no library greater than that of the National Patents office in Bern, where he was employed as a technical examiner Class III, published a paper in the German Physics Journal 'Annalen der Physik'. His name was Albert Einstein.

26. 'On the Electro Dynamics of Moving Bodies' was an extraordinary scientific paper ever published. It had no footnotes or citations. It contained almost no mathematics. Made no mention of any work that had influenced or preceded it and acknowledge the help of none. His famous equation E=mc2 appeared as a brief supplement which followed a few months later.

27. As I recall from my school days, 'E' in the equation stands for Energy, 'm' for Mass and c2 for the speed of light squared.

28. In simplest terms what the equations says is that mass and energy have an equivalence. They are two forms of the same language: energy is liberated matter; matter is energy waiting to happen. Surely, electromagnetic field, would have no mass and hence no weight till it is converted into matter. Being a field, it cannot be converted into matter.

29. Reassuring myself by re-reading my school text book on physics, there can be no doubt that the reasoning of the learned Umpire suffers from a grossly mistaken notion of the law of physics, namely magnetic dynamics.

30. But the conclusion arrived at i.e. sum awarded cannot be faulted. Why?

31. A correct analysis of what happened finds mention in a message transmitted by the captain of the ship to the charter's agent. It reads as under:

ON COMMENCEMENT OF DISCHARGING ON SUNDAY 18TH FEB 1330 CHRRS/CGO RCVRS/CGO RCVRS STEVEDORES ACTING UNILATERALLY INSTALLED ONTO VSL'S CRANES MAGNETS WEIGHTING EACH 5.1 MT AS PER MAGNETS SPECIFICATIONS.

UPON COMMENCEMENT OF DISCH OPERATIONS BY MEANS OF MENTIONED MAGNETS EACH MAGNET WAS LIFTING CGO WEIGHT EACH LIFT BETWEEN 2 M/T TO 2.5 M/TS.

THE ELECTROMAGNETIC FIELD CREATED WHEN MAGNETS WERE HEAVED AT THE TIME THE CGO LIFT WAS DETACHED FROM THE SURFACE OF CGO SUBSTANTIALLY INCREASED THE TENSION/WEIGHT AND AS A RESULT THE TOTAL WEIGHT OF MAGNET WEIGHT + CGO LIFT + ELECTROMAGNETIC FIELD SUBSTANTIALLY EXCEEDED SHIP'S CRANES SWL OF 8TS.

SAME MAGNETS WERE INSTALLED TO ALL SHIP'S CRANES (1, 2, 3, 4, 5, 6).

32. What was happening was that the electromagnetic field created by the magnet was pulling the pig iron towards the magnet and vice versa. When the magnet was heaved (obviously by the crane) a tension was created in the arms of the crane. At that point of time, the 8 ton capacity of the cranes was stressed.

33. To put it in the words of laymen, when a magnet is brought very close to iron pieces, it attracts large number of iron pieces as intensity of the magnetic field is high. As the magnet is pulled away, the field creates a tension on the object pulling the magnet. This phenomenon can be observed in the form of a few metal pieces either dropping or getting partially lifted due to magnetic field, but not attaching to the magnet and re-dropping to the surface when a magnet is withdrawn from the iron mass.

34. Learned Umpire has correctly understood the physical phenomenon but unfortunately has failed to express himself with clarity.

35. I may only note a relevant fact, being that the 6 cranes were on the ship and when loading was effected at the port of loading, no problem was encountered. It is highly unlikely that all cranes suffered mechanical breakdown within less than 2 months when unloading took place. It would not be irrelevant to note that after loading, till cranes were used for unloading, they were not used at all because the ship was on the high sea.

36. The Stevedore's whose services were engaged by the agent of MSTCL obviously used powerful magnets resulting in excess tension created on the arm of each crane when the magnet was heaved by the arm of the crane.

37. I accordingly uphold the award insofar it directs reimbursement of the money paid by the owner for hiring cranes at the port of discharge.

38. The second area of dispute pertains to the actual weight of the cargo which was brought by the ship from Novorossiosk to Bombay.

39. Admitted position between the party is that at the port of loading, cargo was not weighed jointly and weight recorded in the bill of lading was as disclosed by the agent of MSTCL.

40. When cargo was unloaded at Bombay, a surveyor was appointed by MSTCL who reported the weight which approximated the one in the bill of lading with 1% variation allowed as per bill of lading. Thus, MSTCL stated that no differential freight was payable.

41. The owner relied upon the weighment effected by the Bombay Port Trust.

42. There was a difference in the two weights.

43. Relevant clause is Clause 64 of the charter party.

44. Admittedly, the draft survey which was conducted by M/s. Geo-Chem Laboratory was done in terms of a memorandum of understanding between the cargo supplier and MSTCL. The owner was not associated in the joint draft survey.

45. Clause requires a joint draft survey with owner and MSTCL; both joining in the survey. This had not happened. Faced with the problem, Mr. Jaideep Gupta, learned senior counsel for MSTCL argued that being claimant, owner was to establish excess weight as per joint survey and it was thus the obligation of the owner to have got executed the joint draft survey. Counsel argued that since obligation to establish the affirmative was on the owner, claim had to fail.

46. I do not agree for the reason, as correctly pointed out by Shri N. Ganapathy Amitabh, the clause in question does not prescribe only one method of determining the weight of the cargo transported. Two methods, each in the alternative to the other is contemplated. The first is to determine weight by joint draft survey with owner's surveyor and MSTCL at discharge port and the second, evidenced by the expression 'or weighing bridge', by weighing at a weigh bridge.

47. It is not in dispute that the unloaded cargo was weighed at a weigh bridge by the Bombay Port Trust Authorities and this weight was adopted by the owner to raise the additional claim.

48. Objection to the award pertaining to the second claim is accordingly rejected.

49. Dealing with the first issue, namely demurrage, as noted above, it had two limbs. The first was due to demurrage claimed by the owner for the period ship was at the port of loading between 19.12.1989 and 24.12.1989 i.e. when it arrived at the port and when it got a berth and loading commenced. The second was demurrage on account of extra time taken for unloading occasioned due to the crane problem.

50. Suffice would it be to state that as a corollary of decision on the second point of dispute, demurrage due to excess time taken for unloading has to be paid inasmuch as cranes provided by the owner were not malfunctioning. Defect developed due to tension created on the arms of the crane as noted while discussing claim No. 2.

51. On the first limb of the claim, issue has to be decided on the language of Clause 21 of the charter party. The Umpire has relied upon the decision reported as (1971) 2 All.E.R. 1060, The Delian Spirit Shipping Development Corporation v. V/O Sojuzneftexport.

52. Clause 22 of the charterparty requires a 24 hours notice of estimated time of arrival. Clause 24 stipulates laytime to commence 24 hours after notice of readiness. Clause 21 requires the master's written notice of readiness to load after the vessel was ready in all respects including custom clearance and free partique.

53. Admittedly, the ship had reached the area of the port and had dropped anchor on 18.12.1989. But berth had not been allotted to the ship. Berth was allotted on 24.12.1989.

54. A few phrases may be understood before I continue with the analysis.

55. Laytime means the time allotted by the ship owner to the voyage charterer within which loading and unloading of cargo is allowed without any charge/payment.

56. Notice of readiness means that the ship has arrived and is in a state of readiness to load/discharge the cargo.

57. Free partique means permission granted by the port authorities on being satisfied as to the state of health of those on board a ship on arrival as a condition precedent for them to make physical contact with the shore. Nobody can enter or leave the ship till free partique is granted.

58. The reason is obvious. In the past, sailors were only males and their escapades with the willing ladies on the shore is history. Primarily due to said reason free partique was introduced. Over the period of time it extended to ensure that the sailors on the ship were not suffering from any contiguous disease. Even the health of the ship, where found to be carrying hazardous material needed to be certified.

59. Once free partique is granted i.e. permission is granted by the port authorities, a ship can get a berth.

60. Arrived ship means a ship within the area of the port.

61. A ship may be an arrived ship, in that, it would be within the area of a port but may not be a ready ship, in that, berth is not allotted to the ship.

62. An arrived ship is at some distance from the berth. It lies anchored in the water within the harbour. Nature of cargo may be such that it could be transported to this ship by means of small vessels and then loaded on to the arrived ship. Nature of cargo may be of the kind that a ship must be docked at the berth before it can be loaded.

63. This is the reason why different charterparty agreements provide different contingencies under which a ship has to be treated as a ready ship.

64. Thus, each charterparty agreement has to considered.

65. Charterparty agreement which was subject matter of the decision in the Delian Spirit (supra), inter alia, vide Clauses 6 and 7 stipulated as under:

'6. The vessel shall load and discharge at a place or at a dock or alongside lighters reachable on her arrival, which shall be indicated by Charterers, and where she can always lie afloat, any lighterage being at the expense, risk and peril of the Charterers...

'7. The laying days shall commence from the time the vessel is ready to receive or discharge her cargo, the Captain giving six hours' notice to the Charterers' Agents, berth or no berth, during official office hours.

66. The Queen's Bench Division was obviously dealing with a charterparty agreement which is differently worded as compared to the instant charter party agreement.

67. Since Clause 7 of the charterparty agreement which was being considered in the Delian Spirit (supra) stated that laying time shall commence after 6 hours of the notice of arrival, berth or no berth, it was held that a ship arrived, as understood in the said charterparty agreement meant, a ship which had entered the port area and had laid anchor.

68. It was held that as per language of Clause 6 and 7, Delian Spirit became an arrived ship in the technical sense because whether she got a berth or not at the jetty was irrelevant.

69. Whether or not the ship in the instant case i.e. 'M.V. Progressive' became an arrived ship has to be determined with reference to Clause 21 read with Clause 24 of the charterparty agreement. M.V. Progressive would have become an arrived ship pursuant to a written notice of readiness to load given to the supplier's agent, but after the vessel was ready in all respects including custom clearance and free partique. This is the requirement of Clause 21.

70. But second para of Clause 24 also has to be taken into account. The said para of Clause 24 contemplates notice of readiness, 'whether the ship is in berth or not'. The clause clearly stipulates that time lost in waiting for berth to count.

71. Notice of readiness was served by the master's written notice at 1345 hours on 18.12.1989. It was accepted on immediate tender of notice of readiness by the agent of MSTCL.

72. In his concurring opinion, Sir Gordom Willmer in The Delian Spirit's case (supra), having regard to what Kennedy L.J. observed in the report published as (1908) 1 K.B. 499 Leonis Steamship Co. Ltd. v. Rank Ltd. held that acceptance without question by the officials acting on behalf of the charters to the master's notice of readiness to load was not an unimportant point.

73. In The Delian Spirit (supra), master's notice of readiness to load being accepted without question by the officials acting on behalf of the charterers was held against the charterers.

74. There is no evidence on record that the ship M.V. Progressive had raised a yellow flag i.e. was quarantined by the port authorities. There is no evidence that the ship had transported hazardous waste which was unloaded and the ship required clearance for loading or that any sailor was suffering from an contiguous disease.

75. It is not in dispute that when a captain of the ship served notice of readiness he had informed that the ship was a ready ship.

76. Thus, notwithstanding the difference in the language of the charterparty agreement in the instant case and the one which was subject matter of consideration in The Delian Spirit (supra) the inevitable conclusion is that the agents of MSTCL having accepted notice of readiness without demur or protest and in view of language of sub para 2 of Clause 24 of the charterparty agreement, laytime commenced 24 hours after notice of readiness was served i.e. laytime commenced at 13.45 hours on 19.12.1989. It hardly mattered whether the ship got a berth or not.

77. Calculations not being disputed, challenge to the award of the learned Umpire pertaining to claim No. 1 of the owner has to be rejected.

78. I find no infirmity in the award published by the Umpire.

79. IA No. 2486/1995 is dismissed.

CS(OS) No. 1660A/1995

1. Award dated 15.4.1995 published by the Umpire is made a Rule of the Court.

2. Decree be prepared.

3. Post decretal interest from date of decree till date of realisation is awarded @6% per annum.

4. Considering that the objections to the award were not wholly frivolous and merited a consideration, I refrain from awarding costs.