M/S. Scandia Shipbrokering & ... vs Mmtc Ltd.
2010 Latest Caselaw 63 Del

* IN THE HIGH COURT OF DELHI AT NEW DELHI

+      CS(OS) No.2524A/1995 & IA No.515/1996

                           Date of Decision: January 08, 2010

M/S. SCANDIA SHIPBROKERING & AGENCY LTD.
                                          .....Plaintiff
               Through: Mr.Prashant Pratap and
                        Mr. O.P.Gaggar, Advocates.


                             VERSUS
MMTC LIMITED                                        .....Defendant
                         Through:   Mr.C.M.Oberoi, Advocate.


%      CORAM:
       HON'BLE MS. JUSTICE ARUNA SURESH

(1)    Whether reporters of local paper may be allowed to
       see the judgment?           Yes

(2)    To be referred to the reporter or not?         Yes

(3)    Whether the judgment should be reported in the
       Digest?   Yes
                             JUDGMENT

ARUNA SURESH, J.

1. Umpire Capt.D.K. Verma filed his Award dated

17th August, 1995, for making it a Rule of the Court.

Notice of filing of the award was served upon both the

parties. Defendant MMTC Limited filed its objections to

the award. These objections have been controverted by

the claimant/plaintiff with the prayer to make the award

a Rule of the Court.

2. In brief, the facts of this case are that on 18th

July, 1990, defendant MMTC Limited entered into a

Charter Party Contract with the plaintiff as owners of the

Motor Vessel Kopalnia Szombierki (hereinafter referred to

as the 'Vessel') for carrying a cargo of Rock Sulphate in

bulk from the Port of Aqaba (Jordan) to the Port of Haldia

(Calcutta). Vessel arrived at Aqaba for loading of cargo

on 22nd July, 1990 and loading of cargo was completed on

24th July, 1990. Vessel arrived at Sandheads on 9th

August, 1990. The Vessel waited at Sandheads from 9th

August, 1990 to 27th August, 1990, on account of

congestion at Haldia Port and no berth being available. It

tendered a Notice of Readiness. The Pilot was granted

free pratique and the Vessel berthed at Haldia Port on

27th August, 1990. Since total time allowed for discharge

expired, the Vessel was on demurrage since after 7th

September, 1990. Discharge was completed on 23rd

September, 1990. Plaintiff claimed demurrage for 385

hours aggregating to US$ 72,187.50; balance freight and

demurrage claim of US$ 94,548.67 was sent by the

defendant to the plaintiff on 26th December, 1990.

Defendant claimed dispatch at the Port of loading and

accepted demurrage at discharge Port only for 1 day 2

hours 27 minutes and made payment of US$ 26,827.06

towards balance freight.

3. Consequently, a dispute arose inter se the

parties within the meaning of Arbitration Clause 46 in the

Charter Party Contract. Plaintiff appointed Capt.S.M.Beri

as its Arbitrator on 13th May, 1993. Respondent

appointed Mr. Suraj Prakash as its Arbitrator on 20th

August, 1993. On 9th November, 1994, both the

Arbitrators appointed Capt.D.K.Verma as an Umpire.

Arbitrators entered into reference and adjudicated upon

the claim of the plaintiff. Arbitrator Capt.S.M.Beri made

his award on 6th April, 1995, whereas Arbitrator Mr.Suraj

Prakash made his award on 29th April, 1995. Since both

the Arbitrators disagreed and made their separate

Awards, Arbitrator S.M.Beri wrote a letter dated 26th April,

1995 to the Umpire, Capt.Verma, informing him that he

should enter into reference as the Arbitrators had

disagreed. As requested by the Umpire, defendant

deposited Rs.20,000/- towards Umpire's fees and

expenses on 14th June, 1995 and plaintiff deposited has

shared fees and expenses on 23rd June, 1995. Umpire

gave notices to the parties on 27th June, 1995, that he

had received the deposited amount and had entered

upon the reference as an Umpire on 23rd June, 1995 and

would make his award within two months. Umpire

published his award on 17th August, 1995 directing the

defendant to pay the plaintiff a sum of US$ 62,971.51

together with interest @ 12% per annum from 25th April,

1991, on account of demurrage at the Port of discharge

after allowing a set-off in the sum of US$ 8,718.25

towards dispatch at the Port of Haldia. Capt.D.K.Verma

filed his award in the Court on 1st November, 1995 to

make it a Rule of the Court.

4. Mr. C.M.Oberoi, learned counsel appearing for

the objector/defendant has argued that the Umpire has

mis-conducted himself in utter disregard to the

Arbitration Agreement contained in Clause 46 of the

Charter Party Contract, and provisions of the Arbitration

Act, 1940 (hereinafter referred to as the 'Act') and in

violation of the well settled principles of law and natural

justice. It is argued that Umpire, who pronounced the

award did not sit in the arbitration proceedings held by

the Arbitral Tribunal. The Umpire was not empowered to

write any award in absence of an agreement specially

when dispute between the two Arbitrators was regarding

the issue of a reasoned award, which is apparent from

the letter dated 20th May, 1995, written by Arbitrator Mr.

Suraj Prakash to Capt.Beri, the other Arbitrator.

5. It is further argued that the Umpire did not

hold any hearing nor issued any notice of hearing to the

parties and none appeared on behalf of the defendant

before the Umpire and it is not known whether the

plaintiff's Advocate communicated with or appeared

before the said Umpire. It is emphasized that Umpire

mis-conducted himself, as he did not give any

opportunity of hearing to the defendant nor did he issue

any notice of hearing and acted in violation of principles

of natural justice and provisions of Schedule I Para 4 to

the Act.

6. Mr. Prashant Pratap, learned counsel

appearing for the plaintiff has argued that the two

Arbitrators had issued notices to the parties dated 26th

April, 1995 and 20th May, 1995 respectively, that they

had differed and had referred the dispute to the Umpire.

He further argued that despite the Umpire having issued

the notice dated 27th June, 1995, informing the parties

that he had entered upon reference, defendant did not

move any application before the Umpire for an oral

hearing and, therefore, under these circumstances, their

conduct indicated that they waived their right of oral

hearing. It is further argued that oral hearing before an

Umpire is not a sine-qua-non of the principles of natural

justice. After coming to know that Arbitrators had

disagreed and Umpire had entered into reference, it was

for the defendant to make an application seeking oral

hearing. The counsel emphasized that defendant

deposited the fees with the Umpire on 14th June, 1995

with no request for an oral hearing and it seemed that

defendant understood that the Umpire would made his

award based on the pleadings, documents and evidence

adduced before the Arbitrators, record of which was

handed over to him. It is further argued that no

prejudice of any nature has been caused to the

defendant on account of alleged failure on the part of the

Umpire to grant any opportunity of oral hearing or in not

issuing any notice for the hearing, further defendant has

not stated what prejudice has been caused to them and,

therefore, it cannot be said that Umpire mis-conducted

himself in utter violation of the Charter Party Contract,

and the provisions of the Act and violated the principles

of natural justice.

7. Clause 46 of the Charter Party Contract

provides for arbitration in the following manner:-

"All disputes arising under this charter shall be settled in India in accordance with the provisions of the Arbitration Act, 1940 of India, each party appointing an Arbitrator from out of the panel of Arbitrators maintained by the Indian Council of Arbitration, New Delhi and the two Arbitrators appointing an Umpire whose decision, in the event of disagreement between the Arbitrators shall be final and binding upon both parties hereto. The Arbitrators and the Umpire shall be commercial men."

8. Thus, it is clear that as per this Clause, each

party was required to appoint an Arbitrator from out of

the panel of the Arbitrators maintained by the Indian

Council of Arbitration, New Delhi, and the two Arbitrators

appointing an Umpire, whose decision, in the event of

disagreement between the Arbitrators, would be final and

binding. The Arbitrators and the Umpire had to be

commercial men. In accordance with this Clause, when a

dispute arose between the parties regarding payment of

demurrage and freight charges, plaintiff appointed

Capt.S.M.Beri and defendant appointed Mr.Suraj Prakash

as their Arbitrators. Both the Arbitrators, vide letter

dated 9th November, 1994, appointed Capt.D.K.Verma as

an Umpire, informing him that as per the Arbitration

Clause, in the event of a disagreement between the

Arbitrators, they would refer the matter to him. The fact

remains that Arbitrators disagreed with each other and

gave separate awards.

9. Resultantly, vide communication dated 25th

April, 1995, Capt.S.M.Beri, Arbitrator of the plaintiff

informed Umpire D.K.Verma that the two Arbitrators in

the matter of dispute inter se the parties had disagreed

and he sent the original award annexed to the said letter,

with a request to the Umpire to issue his award at the

earliest. Copies of this letter were sent to Sh.Suraj

Prakash, Arbitrator of the defendant, to the defendant

company as well as to the counsel for the plaintiff.

Sh.Suraj Prakash, Arbitrator for the defendant sent a

communication dated 20th May, 1995, to Capt.S.M.Beri,

Arbitrator of the plaintiff informing that he had already

submitted his award dated 29th April, 1995, to Umpire

Capt.D.K.Verma for his information and issue of final

award on the basis of two different awards given by both

of them. He had also sent copies of his communication

to the Umpire, to counsel for the plaintiff as well as to the

defendant. There is no dispute that the defendant was

communicated disagreement between the two

Arbitrators.

10. One of the objections raised by the defendant

is that none of the Arbitrators supplied it the copies of

their respective awards. This objection is nullified from

the fact that Capt.S.M.Beri, Arbitrator for the plaintiff had

sent a copy of his award along with the communication.

True that, Sh.Suraj Prakash, Arbitrator for the defendant,

did not supply the copy of his award to the parties stating

that it was not a joint agreed award by the Arbitrators.

The defendant could have asked from the Arbitrator to

supply them a copy, when he failed to do so. In any

case, this has not prejudiced the case of the defendant in

any manner.

11. It is emphasized by learned counsel for the

defendant that the Arbitration Clause envisages only one

reference. The Umpire and the Arbitrators were required

to sit in the said reference. However, the arbitration

proceedings were conducted by the two Arbitrators

without involvement of the Umpire, who never

participated in the arbitration proceedings and,

therefore, the entire arbitration proceedings stood

vitiated as the two Arbitrators acted contrary to the

Arbitration Clause without involving the Umpire. It is

highlighted that the two Arbitrators made their awards on

different dates and communicated the same to the

Umpire. These submissions are devoid of any merits.

12. The term 'Umpire' has not been defined in the

Arbitration Act. In case of Arbitrators not agreeing in an

award, the matters in dispute is to be decided by the

third person, who is called an 'Umpire'. Therefore,

'Umpire, means a third person, who is to decide a

controversy of the question, submitted to the Arbitrators,

in case of their disagreement. The Umpire's authority

commences when Arbitrators are unable to agree. The

Umpire, even if he sits in the proceedings conducted by

the Arbitral Tribunal, can hear the evidence and

arguments advanced before them, but, cannot interfere

in the proceedings, as he is not a Chairman of the Board

of Arbitrators. Even though an Umpire may have heard

whole of the evidence and followed the proceedings

before the Arbitrators, he cannot, on entering the

reference, pronounce his award forthwith without giving

the parties further opportunity to make their submissions

before him, unless, of course, the terms of the reference

permit him to do so. He must hear the parties afresh,

and deliver the award only if the parties have nothing

further to submit. 'Entering on the reference' in

Paragraph 4 of Schedule I does not mean 'proceed to

give the award'. Thus, it is clear that for an Umpire to

make his award, it is not a pre-condition that he must sit

in the Arbitral Proceedings conducted by the Arbitrators

after entering into reference.

13. Schedule I Para 4 of the Act reads as under:-

"4. If the arbitrators have allowed their time to expire without making an award or have delivered to any party to the arbitration agreement or to the umpire a notice in writing stating that they cannot agree, the umpire shall

forthwith enter on the reference in lieu of the arbitrators."

14. In his book 'Law of Arbitration', Author

Sh.S.D.Singh, dealing with Section 30 of the Act has

analyzed the hearing before an Umpire in Note 30 at page

372, which is of relevance for proper adjudication of

settling down the controversy raised by the defendant

that Umpire mis-conducted himself and acted in utter

violation of the principles of law laid down in the Act.

15. Note 30 of Section 30 of the Act reads as

follows:-

"30. Hearing before an umpire. It is legal misconduct on the part of an umpire to decide a case without giving notice to the parties or hearing their comments on the evidence. He must hear the evidence of the parties and their witnesses, if application be made to him by either party to do so, notwithstanding that the same evidence has already been adduced before the arbitrators. The umpire is not justified in the face of an objection by either party, in taking any part of the evidence from the notes of the arbitrators unless there are special provisions in the submission permitted him to do so. If it is necessary for the justice of the case that the umpire should personally hear the witnesses and application is made to him for that purpose, he is

not justified in refusing to hear them. If the umpire refused to hear evidence even when requested by the parties to do so, the award would be bad for misconduct.

An objection on the ground that the umpire has not reheard the evidence may, however, be waived by the conduct of the parties; and the fact that the parties seeking to impeach the award made no application to the umpire for rehearing the evidence, will generally operate as a waiver by conduct.

An umpire may, however, take part in the deliberation before the arbitrators, and may sit with them and consider the matters referred. If an award is made by the arbitrator unanimously, it would not be bad merely because the umpire took part in the deliberation.

But, though the umpire may sit with the arbitrators, and hear the evidence and arguments advance before them, he cannot interfere in the proceedings before them for he is not a sarpanch or a chairman of the Board of Arbitrators. But if an umpire while sitting with the arbitrators during the hearing of evidence puts a few questions to the witnesses to clear certain points or takes some part in the discussions as to how the documents are to be exhibited, there is no misconduct involved.

Even though an umpire may have heard the whole of the evidence and followed the proceedings before the arbitrators, he cannot, on entering

on the reference, pronounce his award forthwith without giving the parties further opportunity to make their submissions before him, unless, of course, the terms of the reference permit him to do so. „Entering on the reference‟ in Paragraph 4 of Schedule I does not mean „proceed to give the award‟. He must hear the parties afresh, and deliver the award only if the parties have nothing further to submit."

16. It may be noticed from Para 4 of the First

Schedule to the Act that the Umpire enters on the

reference 'in lieu of the Arbitrators'. Condition No.6 also

indicates that the Act does not contemplate any

distinction with regard to the conduct of proceedings by

the Arbitrator or the Umpire. It is an undeniable fact that

on reference of the matter to the Umpire, the Arbitrators

become functus officio. Thereafter the Umpire takes

upon himself the exclusive authority of determining the

disputes and in doing so, he takes place of Arbitrator, as

the expression 'in lieu of Arbitrators' conveys. In other

words, unless there is an agreement to the contrary, it is

crystal clear that there is no continuation of the

proceedings before the Umpire and the process of

arbitration has to start de novo before him as he takes

the role of primary and exclusive authority to decide.

17. An Umpire, in view of provisions of First

Schedule, is bound to observe the rules ensuring fair-play

and justice and improvise the procedure in conformity

with the principles of natural justice just as the

Arbitrators are bound to do. It is the duty of an Umpire

to afford a reasonable opportunity to the parties

concerned. At the same time, it is also true that the

principles of natural justice vary according to the

requirements of the case and whether in a particular

case, it is incumbent on the part of the Umpire to record

the evidence and to hold an oral enquiry is a matter

which may depend on the nature and complexion of the

case. However, at least, an Umpire is expected to put the

parties on notice and afford them an opportunity of

hearing. Of course, if in the course of hearing, the parties

do not ask for oral evidence to be recorded or other

procedures to be followed, an Umpire may be justified in

giving the award. The Umpire cannot refuse to hear the

witness again and if on request of a party he fails to do

so, the award would be bad for misconduct. This legal

principle is, however, qualified by the principles of waiver

by conduct of parties.

18. The defendant participated in the arbitration

proceedings and made no application to the Umpire for

re-hearing the evidence. The Umpire had addressed a

communication dated 27th June, 1995, to the parties as

well as counsel for the plaintiff indicating that defendant

MMTC had deposited a sum of Rs.20,000/- towards his

fees and expenses on 14th June, 1995 whereas the

plaintiff has deposited Rs.20,000/- for the same on 23rd

June, 1995.

19. Last paragraph of this communication reads

as follows:-

" Parties are informed that I have commenced my adjudication as an Umpire in the above matter on 23rd June, 1995 and within two months from now my Award will be published and parties will be informed."

Copies of this communication were sent to both the

Arbitrators, appointed by the respective parties.

20. Thus, it is clear that the Umpire had notified

the parties about his having entered into reference on

23rd June, 1995. If the defendant was serious in its

endevour that it should get an opportunity to get the

evidence recorded afresh or resubmit the arguments, it

could have easily filed an application seeking an

opportunity from the Umpire to submit its arguments or

to lead additional evidence, if any. After the aforesaid

communication, Umpire was not required to specifically

call upon the parties to clarify whether they wanted to

lead evidence afresh or re-argue the matter. On receipt

of this communication, it was for the defendant to make

a request to the Umpire to afford it an opportunity to

lead evidence afresh or to re-argue the matter. It was

only if the Umpire had refused to hear the witness again

or re-hear the party on request made to him or he failed

to do so, the award would be bad for misconduct.

21. Hence, I do not find any oblique reference to

indicate that defendant had any such intention to submit

afresh before the Umpire. When the defendant seeking

to impeach the award made no application to the Umpire

for rehearing of the evidence, the same would generally

operate as a 'waiver' by conduct. This objection as

raised, is clearly an after though which arose during the

culmination of the proceedings before the Umpire. The

defendant did not demand the hearing and at no stage

applied for all or any of the evidence to be recorded

afresh. Therefore, under these circumstances, it must be

held that the defendant waived its aforesaid right by its

conduct. The Umpire was required to make his award

within two months of his entering into reference of the

matter, which he did in the instant case. Therefore, it

cannot be said that Umpire mis-conducted himself and

acted against the agreement or the provisions contained

in the Act or violated the principles of natural justice.

22. On merits it is argued that the impugned

award suffers from errors apparent on the face of the

award as Umpire acted wrongfully and illegally in holding

that the Vessel rightly tendered the Notice of Readiness

on 9th August, 1990, which on its face was invalid,

ineffectual, illegal and in violation of the contractual

provisions contained in Clause 37 of the Charter Party

Contract and Vessel could not have bene considered in

law to be ready in all respects for discharge. It is urged

that Umpire acted wrongfully by ignoring the legal

requirement and disregarding the fact that the Vessel

had been granted final inward entry by Customs only on

27th August, 1999; the Umpire erred in appreciating the

documentary evidence when he observed that due to

congestion at the Port of Haldia and Clauses 32 and 42 of

the Charter Party Contract did not come into effect; the

Umpire failed to appreciate the statement of Mr.Jacob, a

witnesses for the defendant and his cross-examination

correctly.

23. In view of the fact that this Court cannot sit in

appeal to decide if the Arbitrator or the Umpire, as the

case may be, did not properly appreciate the evidence

adduced on record, the challenge to the award on its

merits is not sustainable. The Court, in dealing with an

application to set aside an award, is not to consider

whether the view of the Arbitrator on the evidence is

justified. The Arbitrator's adjudication is generally

considered as binding between the parties as he is a

Tribunal selected by the parties and the power of the

Court to set aside the award is restricted to cases set out

in Sections 30 and 33 of the Act. Therefore, this Court,

cannot not sit as a court of appeal; to reappraise the

evidence and attempt to come to a different view than

arrived at by the Umpire. Merely because this Court on

the same set of evidence could possibly come to a

different view would not be a ground to interfere with the

award.

24. In Arosan Enterprises Ltd. v. Union of

India & Anr., (1999) 9 SCC 449, the Supreme Court

categorically laid down that in the event of there being

no reasons in the award, question of interference of the

court would not arise at all. In the event, however, there

are reasons, the interference would still be not available

unless there exist a total perversity in the award or the

judgment is based on a wrong proposition of law. In the

event, however, two views are possible on a question of

law, the Court would not be justified in interfering with

the award of the Arbitrator if the view taken recourse to

is a possible view.

25. It is for the Arbitrator to appreciate and assess

the evidence of the parties as interpretation of the

contract is within the jurisdiction of the Arbitrator. The

Court, therefore, has no power to interfere and

reappraise the evidence and the terms and conditions of

the Contract. There is no scope for the Court to

reappraise the matter.

26. In the instant case, the Umpire has applied his

mind to the pleadings, evidence adduced before the

Arbitrators and the terms and conditions of the contract

and has given a well-reasoned award. Hence, there is

no reason for this Court to interfere in the impugned

award made by the Umpire within the ambit of Sections

30 and 33 of the Act.

27. Therefore, the objection petition, being

without any merit is hereby dismissed. The award dated

17th August, 1995 is hereby made a Rule of the Court.

Decree in terms of the award be prepared.

ARUNA SURESH (JUDGE)

JANUARY 08, 2010 sb