VIZAG SEAPORT PRIVATE LIMITED vs M/S STEEL AUTHORITY OF INDIA LIMITED
- Court
- Calcutta High Court
IN THE HIGH COURT AT CALCUTTA
CIVIL APPELLATE JURISDICTION
ORIGINAL SIDE
BEFORE:
THE HON’BLE JUSTICE ARIJIT BANERJEE
AND
THE HON’BLE JUSTICE OM NARAYAN RAI
APO 112 OF 2022
IA NO: GA/1/2022
VIZAG SEAPORT PRIVATE LIMITED
VS.
STEEL AUTHORITY OF INDIA LIMITED
For the Appellant : Mr. Ritzu Ghosal, Sr. Adv.
Mr. Aurin Chakraborty, Adv.
Mr. Aditya Chakraborty, Adv.
Mr. Anirban Ghosh, Adv.
For the Respondent : Mr. Pradip Kumar Ghose, Sr. Adv.
Mr. Aryak Dutt, Adv.
Hearing Concluded On : 09.04.2026
Judgment On : 25.06.2026
OM NARAYAN RAI, J.:-
1. This appeal under Section 37 of the Arbitration and Conciliation Act, 1996
(hereafter “the 1996 Act”) is directed against a judgment and order dated
August 10, 2022 whereby the Hon’ble Single Judge has allowed the
respondent’s application under Section 34 of the 1996 Act and set aside the
majority arbitral award dated August 30, 2015.
FACTS OF THE CASE:
2. Shorn of unnecessary details, the relevant facts are as follows:-
Page 1 of 47
a. The appellant and the respondent had entered into a Short Term
Agreement (hereafter “STA”) on May 06, 2008 for a period of three years
(with a provision for extension of one year at the option of the
respondent), whereunder the appellant was to handle coal-cargo imported
by the respondent through two multi-purpose berths named EQ-8 and
EQ-9 at Visakhapatnam Port.
b. In terms of the said agreement, the appellant was to handle an assured
volume of 1.5 million metric tonnes per annum of cargo at EQ-8 which
involved unloading the cargo from the vessels that alighted at the General
Cargo Berth or any other place nominated by the Visakhapatnam Port
Trust (hereafter “VPT”), transportation thereof from hook point to
stockpile area and mechanised loading of the cargo on the railway wagons
or rakes.
c. On or about December 20, 2010 the appellant issued a notice to the
respondent demanding payment of demurrage charges for the period May
04, 2009 to November 30, 2010 in respect of cargo volumes that had
allegedly exceeded the contractual period. The respondent refused to
honour the demand contending that demurrage charges were not
provided for in the contract.
d. In view of such disputes and differences between the parties on the aspect
of payment of demurrage charges, the arbitration clause in the agreement
was invoked and the dispute was referred to a three member arbitral
Tribunal.
e. The appellant lodged its claim for a sum of Rs.30,83,07,496/- (Rupees
Thirty Crore Eighty-Three Lakh Seven Thousand Four Hundred and
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Ninety-Six) along with interest @8% p.a. thereon before the Tribunal. The
respondent contested the claim by filing its counter statement.
f. The Tribunal rendered a split verdict on August 30, 2015. While the
majority award directed payment of Rs.19,68,46,018/- (Rupees Nineteen
Crore Sixty-Eight Lakh Forty-Six Thousand and Eighteen) only together
with interest @8% p.a. thereof from the date of reference till the date of
the award and @6% from the date of award till realization to the
appellant, the minority award rejected the claim of the appellant.
g. Feeling aggrieved by the majority award, the respondent approached this
Court under Section 34 of the 1996 Act. The Section 34 application of the
respondent has been allowed by the order impugned upon setting aside
the majority award and affirming the minority view. Hence, the present
appeal.
SUBMISSIONS ON BEHALF OF THE APPELLANT:
3. A summary of the submissions of Mr. Ghosal, learned Senior Counsel
appearing for the appellant (both orally as well as in writing) is follows:-
a. The impugned judgment travels beyond the limits of Section 34 of the
1996 Act and by extension Section 37 of the 1996 Act since the Hon’ble
Single Judge has re-appreciated evidence, re-interpreted the contract,
preferred the minority view over the majority and substituted his own
understanding of the contractual and statutory framework for that of the
Tribunal which is not permissible.
b. Section 34 Court does not sit in appeal over an arbitral award. In support
of such submissions, the following judgments were relied on:-
Page 3 of 47
1
i. Oil & Natural Gas Corporation Limited vs. Saw Pipes Limited ,
2
ii. Associate Builders vs. Delhi Development Authority ,
iii. Ssangyong Engineering & Construction Company Limited vs.
3
National Highways Authority of India (NHAI)
iv. PSA SICAL Terminals Private Limited vs. Board of Trustees of
4
V.O. Chidambranar Port Trust Tuticorin & Others
c. The Explanation to Section 34(2)(b)(ii) of the 1996 Act confines "public
policy of India" to fraud or corruption, violation of Section 75 or Section
81 of the 1996 Act, contravention of the fundamental policy of Indian law,
or conflict with basic notions of morality and justice. Section 34(2A) of the
1996 Act (patent illegality) is further restricted by the proviso, which
prohibits setting aside an award merely for erroneous application of law
or re-appreciation of evidence.
d. As there is no allegation of fraud, corruption, violation of Section 75 or
Section 81 of the 1996 Act, or any outcome that shocks morality or
justice, the majority award could not have been interfered with. The
majority award does not suffer from any "patent illegality" which covers
only obvious defects on the face of the award.
e. Under Section 37 of the 1996 Act, this Court is not expected to conduct a
second merits review.
f. This Court must restore the discipline as laid down in Ssangyong
Engineering & Construction Company Limited (supra) and PSA SICAL
1
(2003) 5 SCC 705
2
(2015) 3 SCC 49
3
AIR 2019 Supreme Court 5041
4
AIR 2019 Supreme Court 4661
Page 4 of 47
Terminals Private Limited (supra) and reinstate the reasoned majority
award which is a possible view.
g. The appellant is a licensee of the VPT. Under Section 42 of the Major Port
Trusts (MPT) Act, 1963 (hereafter “the 1963 Act”), the VPT delegated to
the appellant the authority to render specified port services at Berths EQ-
8 and EQ-9. Under Section 47A of the 1963 Act, the Tariff Authority for
Major Ports (hereafter “TAMP”) is the statutory body mandated to fix
tariffs, including demurrage and storage charges. The appellant acts as a
port operator within the statutory regime of the 1963 Act.
h. Article 4.1 and Appendix 6 of the License Agreement, expressly authorise
the respondent to levy and collect tariff, including demurrage and storage
charges, strictly in accordance with the Scale of Rates (SoR) notified by
VPT/TAMP from time to time. The STA dated May 06, 2008 between the
appellant and the respondent specifically refers to and incorporates this
Licence Agreement.
i. The STA itself repeatedly ties the contractual arrangement to the
statutory framework. Clause 2 (definitions), Clause 5.5, Clause 5.32(i),
Clause 14.3, Clause 14.6 and Annexure-1 all refer to the Licence
Agreement, the 1963 Act, the VPT Rules and TAMP notifications. Clause
5.5 states that discharge of cargo shall be regulated by the rules and
regulations enforced by VPT/MPT Act from time to time.
j. Annexure-1 sets out the Integrated Terminal Service Charges (hereafter
“ITSC”) of Rs. 167 per metric ton and its components. It clearly records
that royalty and lease rentals are in terms of VPT/TAMP notifications and
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subject to escalation accordingly. The STA is thus not a free-standing
private contract; it is expressly embedded in the MPT/TAMP structure.
k. Two TAMP Orders are central: the order dated April 02, 2007 (Exhibit-
C19) in force when the STA was signed and the order dated April 15, 2009
(Exhibit-R7) in force during the claim period. Both orders separate
demurrage (Clause 3.5) and storage charges (Clause 3.6.2) and emphasise
that storage area must be treated as temporary transit space, not
warehousing and that the charges are meant to deter prolonged stay of
cargo. The fact of land subsidence of shore/harbour area due to
prolonged storage of heavy commodities in transit area is also a cogent
geographical reason for which there is a deter vis a vis form of penalty for
prolonged storage.
l. The majority award also relies on three decisions of the Hon’ble Supreme
Court in the cases of Trustees of the Port of Madras vs. Aminchand
5
Pyarelal & Others , Board of Trustees of the Port of Bombay vs.
6
Indian Goods Supplying Co. and Board of Trustees of the Port of
7
Bombay vs. Jai Hind Oil Mills Co. & Others , which uphold the power
of port authorities to levy demurrage to prevent congestion and ensure
quick clearance. The Court has recognised demurrage-like charges as
legitimate tools to keep the cargo moving.
m. Within this matrix , the appellant, as licensee and operator, provides
integrated terminal services under the STA. ITSC is determined and
adjusted in light of TAMP, SoR and the Licence Agreement. Any further
5
(1976) 3 SCC 167
6
(1977) 2 SCC 649
7
(1987) 1 SCC 648
Page 6 of 47
liability for breach such as storage charges for excess stacking contrary to
Clause 5.12 must be assessed by reading the STA, Licence Agreement and
TAMP SoR together.
n. The dispute arises from the respondent's continuous stacking of cargo
beyond the limits in Clause 5.12 of the STA and its failure to evacuate
cargo promptly by arranging sufficient rakes and giving proper schedules
under Clauses 4.3 to 4.6 and 4.10.
o. The first part of Clause 5.12 requires the appellant to store a maximum of
60,000 MT of the respondent's cargo at any time. In exigency, the
appellant can store an additional 30,000 MT, but only for a period not
exceeding 15 days upon the respondent giving 30 days' prior notice.
p. The appellant 's claim is limited to storage charges for cargo stacked in
breach of this clause, i.e. quantities in excess of 60,000 МТ (ог 90,000 MT
in exigency) and for periods beyond 15 days without notice. The claim
period is from May 04, 2009 to March 01, 2012. The computation is
strictly as per Clause 3.6.2 of the TAMP SoR, which provides storage
charges for cargo remaining in storage beyond the free period. No
demurrage under Clause 3.5 was claimed; only storage charges under
Clause 3.6.2 for excess stacking in storage space.
q. Over-stacking began intermittently on May 16, 2009. From then on, the
appellant addressed multiple letters/emails (Exhibits C25 to C50) to the
respondent, warning that stocks had exceeded 60,000 MT, pointing out
that the two rakes per day contemplated in the STA were not being
allotted and asking the respondent to evacuate cargo. On December 20,
2010, by Exhibit C51, the appellant formally informed the respondent
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that it would claim storage charges at TAMP rates under the 1963 Act.
The respondent denied the claim by Exhibit C58 dated September 17,
2011.
r. The original claim was about Rs. 30.83 crores (or Rs. 33.21 crores
including all heads) computed using daily stock data from C68 and
applying the step-up rates in Clause 3.6.2 to the excess over contractual
limits and free period. The majority award, after checking the calculations
and the evidence, finally awarded Rs.19.68 crores with interest, thereby
disallowing roughly Rs. 13.5 crores.
s. The respondent did not challenge the correctness of the underlying data
or the mathematical method. Its alleged defences were legal and
interpretative- that ITSC was all-inclusive, that the STA was a lease, that
TAMP was inapplicable, that Clause 5.12 was wrongly read, that once
actual volume exceeded 2 million MT no storage charges lay and that
appellant waived its rights. The majority award examined and rejected
each of these defences.
t. The Hon’ble Single Judge’s conclusion that 40,500 sq. m. was leased to
SAIL and that ITSC included lease rental for that area, so no further
storage charges could be levied is contrary to the contract,
correspondence, Licence Agreement and the majority award.
u. The STA does not state that any plot or area is leased or exclusively
earmarked for the respondent. Clause 3.3 simply says that 40,500 sq. m.
will be utilised for handling cargo, mechanised handling facilities, drains,
roads, railway tracks, buildings, amenities and other systems for
integrated terminal services. It describes functional use of the back-up
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area, it does not confer exclusive possession of a storage area to the
respondent. Clause 1.1(a) makes this even clearer. If 40,500 sq. m. were
exclusively leased to the respondent, the appellant could not also commit
to use the same facilities for other customers.
v. The Tribunal rightly concluded that the parties had deliberately avoided
any exclusive lease arrangement.
w. The ITSC break-up does not change this. Annexure-1 shows that the
appellant recovers its own lease rentals to VPT as part of its cost base,
these are rentals the appellant pays to VPT for the entire licensed area
(1,17,000 - 1,21,700 sq. m.), not rents paid by the respondent for any
exclusive plot. Lease rent is only about 0.5% of the cost base underlying
ITSC of Rs. 167/-. Recovering this cost from all users does not convert
any user into a lessee of a defined area.
x. Clause 5.12 is inconsistent with any lease to the respondent. Clause 5.12
exists precisely because there is no such exclusive lease. The Hon’ble
Single Judge's reliance on TAMP Clause 3.5(3)(v) also rests on a
misunderstanding. First, there is no lease to the respondent. Second, the
appellant has not claimed demurrage under Clause 3.5 at all. It has
claimed storage charges under Clause 3.6.2 for excess stacking in storage
space. Clause 3.5(3)(v) is meant to prevent double recovery of demurrage
from a user who is already paying rent for an operational area which is
not the case here.
y. The majority award carefully analyses the STA, Licence Agreement,
correspondence and TAMP orders to conclude that there is no lease to
SAIL and that ITSC does not cover unlimited storage of excess cargo in
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breach of Clause 5.12. This reasoning is cogent. The Hon’ble Single
Judge's contrary view is based on a fresh re-reading of the contract and
evidence, which is prohibited under Section 34 of the 1996 Act.
z. The conclusion that the latter part of Clause 5.12 entitled the respondent
to store upto 1,20,000 MT once annual cargo handled exceeded 2 million
MT conflates actual volume with cargo commitment. Clause 5.12 has two
parts. The first sets the normal regime- up to 60,000 MT at any time; and
in exigency upto 90,000 MT for 15 days, with 30 days' prior notice. The
second part applies "only if the cargo commitment is expected to go beyond
2 million MT per year" , in which event higher storage may be organised.
Cargo commitment must be understood with Clause 1.2(a) and Clauses
4.1 - 4.3.
aa. Under Clause 1.2(a), the respondent gave a firm commitment of 1.5
million MT per year for three years. Clause 4.3 requires the respondent to
inform VSPL before each financial year of likely annual volumes and then
review. Only if SAIL increases this commitment by informing the appellant
that its expected commitment will exceed 2 million MT per year, does the
latter part of Clause 5.12 apply.
bb. In fact, the respondent never modified its commitment of 1.5 million MT.
It never sent pre-year data saying that cargo commitment was expected to
go beyond 2 million MT, never gave 30 days' prior notice to allow the
appellant to arrange additional space and never agreed to the higher
penalty risk for shortfall that such increased commitment would carry.
On the respondent’s own showing, actual volume in 2010-11 crossed 2
million MT only near the end of the year and incidentally.
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cc. The majority award recognised the difference between "commitment" and
"actual volume". In paragraph 120, it generously applied Clause 5.12 and
extended a benefit to the respondent by deducting Rs. 6,39,42,719/- from
the claim on the footing that cargo in 2010-11 exceeded 2 million MT,
although the strict conditions of the second part of Clause 5.12 were not
met.
dd. Both the majority and minority awards and the respondent's own
pleadings, accept that the appellant stacked the respondent's cargo in
excess of the contractual limit and for prolonged periods. The only real
question is the financial consequence.
ee. The Hon’ble Single Judge's approach treats the accidental crossing of 2
million MT in one year as an automatic entitlement to much higher
storage without SAIL complying with the other preconditions of Clause
5.12. That reading undermines the structure of assured commitment and
penalties in Clauses 4.1-4.3 and ignores the prior notice requirement.
ff. The majority finding of breach by the respondent is based on
contemporaneous documents. The majority Tribunal found no proof that
the respondent had complied with Clauses 4.5, 4.6 and 4.10 or that the
appellant had failed to place wagons after proper instructions. As these
were matters within the special knowledge of the respondent, therefore,
the only reasonable inference from the record is that the respondent failed
to evacuate cargo forcing the appellant to use its limited storage space as
a warehouse for SAIL.
gg. TAMP SoR and the 1963 Act fully apply to STA as both parties relied on
TAMP and the respondent had also filed Exhibit R7 (TAMP order dated
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April 15, 2009) and used Clause 3.5(3)(v) to support its case of lease. It
also filed a Section 16 application arguing that the Tribunal had no
jurisdiction and that TAMP should decide.
hh. The TAMP orders of April 02, 2007 (C19) and 15 April 2009 (R7) contain
detailed reasons. The tariff structure distinguishes demurrage (Clause
3.5) for cargo overstaying in transit area and storage charges (Clause
3.6.2) for cargo stacked in storage space. The appellant’s claim is only
under Clause 3.6.2 and only for excess beyond contractual caps.
ii. The Tribunal's approach is also supported by Hon'ble Supreme Court
cases which recognise that demurrage-like charges are essential for
decongesting ports and are not penal windfalls. The majority award
merely uses TAMP-approved rates to quantify damages for breach of a
clause (5.12) whose object is to prevent indefinite storage.
jj. The Hon’ble Single Judge's remark that STA is a private contract to which
TAMP does not apply ignores the incorporative clauses in STA, the Licence
Agreement, the respondent's own reliance on TAMP and its Section 16
plea and the statutory character of the respondent's operations.
kk. The Review Meeting of October 09, 2009 was meant to address the
quantity of cargo, performance against commitment and linked
adjustments in ITSC and not breach of Clause 5.12 or damages. It cannot
be concluded that the appellant waived its right to demurrage charges or
storage charges by not raising such issue there.
ll. VSPL raised the issue of over-stacking separately and repeatedly. Clause
14.5 of STA clearly provides that no amendment or waiver shall be
binding unless executed in writing. There is no such written waiver.
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Silence on a particular claim in a review meeting whose scope is different
cannot, in the face of Clause 14.5, amount to waiver or estoppel.
mm. The majority award rightly rejected the waiver/estoppel plea of the
respondent. The Hon’ble Single Judge reversed this by treating one
meeting's silence as waiver, ignoring Clause 14.5 and the Tribunal's
findings which is beyond the scope of Section 34 of the 1996 Act.
nn. Subsequent work orders dated November 28, 2013 and September 20,
2014, issued after the STA period, providing for higher free storage
(e.g.1,75,000 MT free) and could not be relied on to show the parties'
understanding that ITSC includes free storage. They cover three to six
month periods, at significantly higher ITSC rates and different storage
conditions based on changed negotiation and business strategy in later
years after the earlier dispute had already arisen.
oo. The present dispute is only about breach of the STA dated May 06, 2008
for the period May 04, 2009 to March 01, 2012. Later contracts cannot
retrospectively rewrite Clause 5.12 or convert limited earlier obligations
into unlimited free storage. The Hon’ble Single Judge's use of these later
documents to undermine the majority award shows re-evaluation of
evidence.
pp. The Hon’ble Single Judge wrongly criticised the Rs. 40 lakh lump sum
deduction in the majority award despite a clear basis for such deduction.
qq. Once the Tribunal explains how it reached its figure, a Court under
Section 34 of the 1996 Act cannot re-calculate the quantum. The majority
Tribunal has displayed extreme arithmetic prowess and the reasoning
Page 13 of 47
ascribed to the deduction of Rs. 40 lakh warranted no interference by a
Court under Section 34 of the 1996 Act.
rr. Limitation, though faintly raised by the respondent, is not a real issue.
The claim is well within three years in either view.
ss. Allegations of bias against the majority arbitrators were never raised
during the arbitration. They appear only later in the respondent's Section
34 challenge and do not meet the statutory requirements under Sections
12 and 13 of the 1996 Act.
tt. Even if it is assumed that the majority Tribunal misapplied law by
applying TAMP SoR that could not be a ground to set aside the majority
award as erroneous application of law is not available as a ground under
Section 34 of the 1996 Act.
uu. The impugned judgment undermines the fundamental policy of Indian
arbitration law by re-writing the contract (treating STA as a lease, treating
ITSC as all-inclusive, diluting Clause 5.12), ignoring the incorporative
TAMP/MPT references and effectively preferring the minority award over
the majority on merits.
vv. The impugned judgment dated August 10, 2022 in A.P. No. 1750 of 2015
sets aside the award by re-appreciating evidence, re-interpreting the
contract and statutory framework and substitutes the Court's choice for
the Tribunal's possible and reasoned view. The grounds invoked do not
fall under Section 34(2) or 34(2A) of the 1996 Act.
SUBMISSIONS ON BEHALF OF THE RESPONDENT:
4. A summary of the submissions of Mr. Ghose, learned Senior Counsel
appearing for the respondent (both orally as well as in writing) is follows:-
Page 14 of 47
a. The majority award is wrong and deserves to be set aside.
b. The arbitration reference arose out of the STA between the parties. The
STA was for a period of three years commencing from the date of the
agreement with provision for extension for one more year at the
respondent’s option. The period of agreement was from May 06, 2008 with
extension expiring on May 05, 2012.
c. Referring to the various clauses of the STA, it was argued that right from
unloading of the cargo from the vessel till dispatch of the cargo in railway
rakes, the responsibility was entirely of the appellant. The respondent
booked the railway wagons and handed over the indents to the appellant
for bringing the rakes and loading of cargo to be dispatched to various
steel plants of the respondent.
d. Clause 5.12 of the STA is the most important clause giving rise to the
present dispute between the parties. There is no dispute as held by the
majority and minority of arbitral Tribunal that this clause has two parts -
First part relates to storing of cargo volume of 60,000 MT with provisions
for further 30,000 MT for a period not exceeding 15 continuous days. The
respondent was to give 30 days' notice to the appellant to organise
stacking of the cargo. As per the second part of clause 5.12 if the cargo
volume was expected to go beyond 2.0 million MT per year, then the
appellant was to organise storage of cargo upto 90, 000 MT with further
provisions for storing of 30,000 MT of cargo in case of exigencies for a
period not exceeding 15 days.
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e. For all the work/services rendered by the appellant, the rates were fixed
as shown in ITSC in terms of clause 6 of the STA and the Schedule of
Rates read with Annexure -1.
f. Under Clause 8 of the STA it was agreed by the parties that the first six
months of the operation shall be treated as the test period to make
assessment of the actual quantity of cargo that can be made available to
the appellant by the respondent and the terms will be reviewed jointly and
if required terms and conditions will be further revised.
g. The breakup of the charges for handling has been set out in Rate
Schedule of ITSC (Annexure -1).
h. Nowhere in the STA, it is stated that the agreement will be governed by
regulation of the 1963 Act or TAMP. On the contrary when the appellant
raised the question of TAMP rates, the respondent submitted that the
reference should be made before TAMP and not before the Tribunal. The
respondent made a formal application to this effect. The appellant
submitted that this is a private agreement between the parties and the
1963 Act or TAMP has nothing to do with it and the application of the
respondent was rejected by the Tribunal.
i. The majority view has failed to consider the charts shown in the meeting
held on December 19, 2014 indicating annual handling of cargo by the
appellant. Going by the chart, it will appear that during the STA period,
the cargo volume guaranteed by the respondent far exceeded 1.5 million
MT or 0.75 million MT in the initial period. The cargo volume exceeded or
was likely to exceed 2.0 million MT per annum and therefore the second
Page 16 of 47
part of clause 5.12 would be applicable and not first part of clause 5.12
as held by the majority.
j. The majority award failed to consider the charts showing the handling of
the cargo which were handed up by the appellant to the Tribunal on
December 19, 2014. There is no whisper in the majority award regarding
the chart which is a very vital piece of evidence. It also shows total non-
application of mind. This was a vital piece of evidence ignored by the
majority and ignoring it is a ground for setting aside the award.
k. The majority dealt at length regarding the transit area when the same has
been deleted. It is non-application of mind by majority.
l. In support of the submission that an arbitral award can be set aside if it
is in conflict with public policies as enumerated in Section 34(2)(b)
[Explanation1] of the 1996 Act the respondent also relied upon Oil &
Natural Gas Corporation Limited (supra) and Associate Builders
(supra).
m. Oil & Natural Gas Corporation Limited vs. Western Geco
8
International Limited was relied on to demonstrate that "non-
application of mind is a defect that is fatal to any adjudication."
n. Paragraphs 31 and 52 of Associate Builders (supra) were pressed to
contend that where the Tribunal ignored vital evidence in arriving at its
decision, such decision would be perverse. Similar statement is in Para
52.
8
(2014) 9 SCC 263
Page 17 of 47
o. PSA SICAL Terminals Private Limited (supra) was cited to demonstrate
that the aforesaid decisions have been consistently followed by the
Hon’ble Supreme Court in its subsequent decisions.
p. The minority award had extensively dealt with the charts showing the
handling of the cargo which were handed up by the appellant to the
Tribunal on December 19, 2014.
q. Because of non-consideration of a vital piece of evidence namely the
charts, the majority proceeded on the basis that the first part of clause
5.12 of STA was applicable whereas it should have been the second part.
Thus there is an error apparent on the face of the majority award.
r. The majority finding in paragraph 72 of the award to the effect that “it is
universal practice of business to look for more and more profit and in doing
so if there appears any violation of agreement inviting penalty/demurrage,
the same cannot be avoided or denied.” shocks the conscience of the
Court.
s. In other words, the majority Tribunal gave its blessing to violate the
terms of the agreement to make more profit. Paragraph 28 and 42.3 of
Associate Builders (supra) were placed to show that if the finding shocks
the conscience of the Court the award deserves interference.
t. The majority award travelled beyond the terms of the contract and
practically re-wrote the contract in complete violation of Section 28(3) of
the 1996 Act. The majority consistently in their award relied upon TAMP
regulations and the 1963 Act.
u. Nowhere in the STA it is said that TAMP rules and regulations or the 1963
Act will govern the STA.
Page 18 of 47
v. On the contrary, before the Tribunal, the appellant categorically
submitted that it is a private contract between the parties and the parties
are bound by the terms and conditions of STA. Paragraphs 19 and 42.3 of
Associate Builders (supra) were read to prop the contention.
w. With regard to the rules applicable to the substance of the dispute as
defined in Section 28(3) of the 1996 Act and also in the case of Oil &
Natural Gas Corporation Limited (supra), the Hon’ble Supreme Court
has clearly laid down that any violation of a substantive provision of India
law is fatal to the award which was also held in Associate Builders
(supra) and the subsequent decisions by the Hon’ble Supreme Court.
x. After expiry of the STA period by efflux of time, the contract was renewed
by the respondent's work orders dated November 28, 2013, May 27, 2013,
May 13, 2014 and April 29, 2014.
y. In the subsequent work orders, the appellant was to provide storage space
for 1, 75,000 MT of cargo of SAIL irrespective of any time limit. Therefore
the whole argument of appellant VSPL that it did not have space for
storing of cargo beyond 90,000 MT beyond 15 days and the storage space
cannot be used as a warehouse for storing of cargo which would be in
violation of the 1963 Act is belied from the said work orders which were
all accepted by the appellant. The appellant throughout reiterated that it
is a private contract with the respondent and was entitled to fix its own
terms and conditions with the importer for operations of EQ8 and EQ9
berths. It is a Build Operate Transfer contract with the VPT.
z. If the appellant wanted to charge demurrage/storage charges beyond 15
days or any period, it could have modified the terms of STA in the review
Page 19 of 47
meeting held on October 09, 2009. Clause 8 of STA stipulates that the
parties agreed that after first six months of operation which is to be
treated as test period, to make assessment of the quantity of cargo made
available by the respondent to the appellant and after which the terms
would be reviewed jointly and if required, terms and conditions would be
further revisited. The contract commenced on May 06, 2008 and review
meeting took place on October 09, 2009, long after expiry of six months
and it was held in terms of Clause 8 of the STA. The appellant VSPL never
asked for any modification of the terms and conditions of STA and
therefore the legal conclusion is there was waiver by the appellant VSPL.
aa. On the proposition that waiver means consciously giving up a known legal
right, the judgments in the cases of Shaw and Co. vs. B. Shamaldas
9
and Co. and Provash Chandra Dalui & Another vs. Biswanath
10
Banerjee & Another were relied upon.
bb. The judgment in the case of Dakshin Haryana Bijli Vitran Nigam
11
Limited vs. M/s. Navigant Technologies Private Limited was relied
on to show the relevance of a dissenting award and to contend that the
Court is not precluded from considering the findings and conclusions of
the dissenting Arbitrator. It was submitted that the Hon’ble Supreme
Court in Ssangyong Engineering & Construction Company Limited
(supra), upheld the view holding the dissenting opinion to be the correct
position of law.
9
AIR 1954 Calcutta 369
10
AIR 1989 Supreme Court 1834
11
AIR 2021 Supreme Court 2493
Page 20 of 47
12
cc. State of Chhattisgarh & Another vs. Sal Udyog Private Limited
was relied on to show that legal view as regards ‘patent illegality’ taken in
Associate Builders (supra) and Ssangyong Engineering &
Construction Company Limited (supra) remains firm.
dd. A decision of the Hon’ble Supreme Court in the case of Food Corporation
13
of India vs. Chandu Construction & Another , was relied on for the
proposition that where there is an express term in the contract, the Court
cannot find, on a construction of the contract, an implied term
inconsistent with the express term.
ee. In this case, the majority held that the rules and regulations of TAMP and
Major Port Trust Act are inbuilt and automatically apply. This is a totally
wrong proposition. There is no such implied term. An Arbitrator derives
his authority from the contract and if he acts in disregard of the contract,
he acts without jurisdiction. The departure from contract amounts to
manifest disregard of his authority or misconduct on his part and it may
also tantamount to malafide action.
ff. The majority delved in scrutinizing the claim when the appellant failed to
prove its claim. The appellant hopelessly failed to prove that cargo was
stored for 15 continuous days as it relied upon first part of clause 5.12.
Then the majority took upon itself to analyse the storage of cargo and the
period. It is not far the Tribunal to enter the arena of conflict and prove
the claim when the claimant has failed to prove the same. The claimant at
the hearing from time to time gave charts to back up its claim but the
respondent pointed out mistakes in the charts recorded in detail in the
12
AIR 2021 Supreme Court 5503
13
(2007) 4 SCC 697
Page 21 of 47
minority award. The majority found the calculation to be too complicated
and deducted a lump-sum amount of Rs.40,00,000/- from the claim
amount without giving any reason. This is deprecated in Associate
Builders (supra) case. It is also in violation of Section 31(3) of the 1996
Act which states that Arbitral Tribunal shall give the reason upon which
the award is based. No reason has been given for deduction for Rs.40
lakhs which is in violation of the said statutory provisions. Principles laid
down in Oil & Natural Gas Corporation Limited (supra), Associate
Builders (supra), Ssangyong Engineering & Construction Company
Limited (supra) have been consistently followed throughout until now.
gg. The argument of setting aside of the award has to be on narrow ground of
Sections 34(2) & 34(2)(a) of the 1996 Act. The respondent has
demonstrated the patent illegality, breach of fundamental policy and
breach of substantive law of the land committed by VSPL and noted in the
majority award. The minority award has dealt in detail with all the
provisions argued before the Tribunal.
hh. The minority award should be upheld and majority award should be set
aside and the appeal be dismissed.
ANALYSIS & DECISION:
5. We have heard the learned Senior Advocates appearing for the respective
parties and considered the material on record.
6. The contours of Section 34 of the 1996 Act now stand clearly defined by a
plethora of authorities and some of the very prominent amongst them have
been cited by both the parties viz. Oil & Natural Gas Corporation Limited
(supra), Associate Builders (supra) and Ssangyong Engineering &
Page 22 of 47
Construction Company Limited (supra). We would not burden this
judgment by repeating the same once again.
7. We may, however, notice the scope of a Section 37 appeal as succinctly
summarised by the Hon’ble Supreme Court in the case of Punjab State
14
Civil Supplies Corporation Limited vs. Sanman Rice Mills :-
“ 13. In para 11 of Bharat Coking Coal Ltd. v. L.K. Ahuja, it has been observed as
under:
“ 11. There are limitations upon the scope of interference in awards passed by an
arbitrator. When the arbitrator has applied his mind to the pleadings, the evidence adduced
before him and the terms of the contract, there is no scope for the court to reappraise the
matter as if this were an appeal and even if two views are possible, the view taken by the
arbitrator would prevail. So long as an award made by an arbitrator can be said to be one
by a reasonable person no interference is called for. However, in cases where an arbitrator
exceeds the terms of the agreement or passes an award in the absence of any evidence,
which is apparent on the face of the award, the same could be set aside.”
15. In Dyna Technology (P) Ltd. v. Crompton Greaves Limited, the court observed as
under:
“ 24. There is no dispute that Section 34 of the Arbitration Act limits a challenge to an
award only on the grounds provided therein or as interpreted by various courts. We need to
be cognizant of the fact that arbitral awards should not be interfered with in a casual and
cavalier manner, unless the court comes to a conclusion that the perversity of the award
goes to the root of the matter without there being a possibility of alternative interpretation
which may sustain the arbitral award. Section 34 is different in its approach and cannot be
equated with a normal appellate jurisdiction. The mandate under Section 34 is to respect
the finality of the arbitral award and the party autonomy to get their dispute adjudicated
by an alternative forum as provided under the law. If the courts were to interfere with the
arbitral award in the usual course on factual aspects, then the commercial wisdom behind
opting for alternate dispute resolution would stand frustrated.
25. Moreover, umpteen number of judgments of this Court have categorically held that
the courts should not interfere with an award merely because an alternative view on facts
and interpretation of contract exists. The courts need to be cautious and should defer to the
view taken by the Arbitral Tribunal even if the reasoning provided in the award is implied
14
2024 SCC OnLine SC 2632
Page 23 of 47
unless such award portrays perversity unpardonable under Section 34 of the Arbitration
Act.”
20. In view of the above position in law on the subject, the scope of the intervention
of the court in arbitral matters is virtually prohibited, if not absolutely barred and that
the interference is confined only to the extent envisaged under Section 34 of the Act.
The appellate power of Section 37 of the Act is limited within the domain of Section 34
of the Act. It is exercisable only to find out if the court, exercising power under Section
34 of the Act, has acted within its limits as prescribed thereunder or has exceeded or
failed to exercise the power so conferred. The appellate court has no authority of law to
consider the matter in dispute before the Arbitral Tribunal on merits so as to find out as
to whether the decision of the Arbitral Tribunal is right or wrong upon reappraisal of
evidence as if it is sitting in an ordinary Court of Appeal. It is only where the court
exercising power under Section 34 has failed to exercise its jurisdiction vested in it by
Section 34 or has travelled beyond its jurisdiction that the appellate court can step in
and set aside the order passed under Section 34 of the Act. Its power is more akin to
that superintendence as is vested in civil courts while exercising revisionary powers.
The arbitral award is not liable to be interfered unless a case for interference as set out
in the earlier part of the decision, is made out. It cannot be disturbed only for the
reason that instead of the view taken by the Arbitral Tribunal, the other view which is
also a possible view is a better view according to the appellate court.
21. It must also be remembered that proceedings under Section 34 of the Act are
summary in nature and are not like a full-fledged regular civil suit. Therefore, the scope
of Section 37 of the Act is much more summary in nature and not like an ordinary civil
appeal. The award as such cannot be touched unless it is contrary to the substantive
provision of law; any provision of the Act or the terms of the agreement.”
8. The limitations of the Section 37 Court are thus quite clear. Keeping the
same in mind we now proceed to deal with the case at hand.
9. We have before us, a case where the arbitral Tribunal has rendered a
fractured verdict. While the majority view has supported the claimant -
appellant, the minority view has gone against it.
Page 24 of 47
10. Dakshin Haryana Bijli Vitran Nigam Limited (supra) has considered a
similar case where the majority award was under challenge and held as
follows:-
“ 22. An “arbitral award” is the decision made by the majority members of an
Arbitral Tribunal, which is final and binding on the parties. Section 35 provides that an
arbitral award shall be “final and binding” on the parties and persons claiming under
them. A dissenting opinion does not determine the rights or liabilities of the parties
which are enforceable under Section 36 of the Act.
23. The reference to the phrase “arbitral award” in Sections 34 and 36 refers to the
decision of the majority of the members of the Arbitral Tribunal. A party cannot file a
petition under Section 34 for setting aside, or under Section 36 for enforcement of a
dissenting opinion. What is capable of being set aside under Section 34 is the “arbitral
award” i.e. the decision reached by the majority of members of the Tribunal. Similarly,
under Section 36 what can be enforced is the “arbitral award” passed by the majority
of the members . ”
11. By the order impugned the Hon’ble Single Judge has set aside the majority
award. We therefore have to see as to whether the majority award suffers
from any of the defects that have been enumerated under Section 34 of the
1996 Act.
12. The arbitral Tribunal had framed the following issues for adjudicating the
dispute before it:-
“1. Whether the instant Arbitration Proceedings are maintainable?
2. Whether the claim of the claimant is barred by limitation?
3. Whether the Arbitration Proceedings are barred under the Rules and Regulations
framed By TAMP?
4. Whether Respondent has committed breach of contract as alleged by the
claimant?
5. Whether Claimant has committed breach of contract as alleged by the
Respondent?
6. Whether it is a case of lease and the Claimant having collected the lease amount
is not entitled to any demurrage on cargo stored on the demised premises as alleged?
Page 25 of 47
7. Whether the Integrated Terminal Service Charges (ITSC) being levied, include
storage charges also?
8. Whether the Claimant is entitled to the amount claimed?
9. Whether the Claimant is entitled to interest, if so, at what rate and from which
date?”
13. Issue nos. 3 to 10 are material for the present purpose as the contest circles
around them only.
14. The majority members decided issue nos. 3, 4 and 5 by holding that the
respondent has acted in breach of the agreement but the appellant has not.
Paragraphs 45 to 82 of the award deal with the said issues. The ultimate
conclusion arrived at by the majority members is premised on the
applicability of the 1963 Act and TAMP. Paragraphs 58 to 66 of the majority
view deserve to be noticed in such context:-
“ 57. In the instant case, VSPL claimed demurrage/storage charge on the basis of
the first part of clause 5.12 of STA. In view of all above our mind leans to accept the
interpretation of the clause that when the volume of cargo exceeds 60,000 MT
continuously for 15 days without any 30 days’ notice from SAIL the VSPL is entitled to
claim demurrage/storage charge in terms of TAMP orders. We shall now discuss as to
whether MPT Act and so also TAMP orders are applicable to the instant case or not
hereinbelow.
58. A serious debate was made by both the parties as regards the application of
MPT Act so also the orders of the TAMP authority in the instant case. Let us examine
the matter cautiously. There is no denying of the fact that transaction between the
parties were made on the land of the port. The users of land of sea port are statutorily
regulated by the Major Port Trusts Act, 1963. In the forenotes of the STA itself three
letters bearing reference Nos. 01:27:001:576 & 580:2007-08 dt. 14th November 2007,
01:27:001:689:2007-08 dt 21" December 2007 and 01:27:001/795/2008 dt.30th
January 2008 find mention to be forming an integral part of the STA. Thus in Exhibit
C/16 & C/17 at page No.82 & 84 in point Nos. 6 & 7 VSPL accepted the proposal of
SAIL for priority as per berthing policy and procedures followed by VPT. Again, Exhibit
C/20 at page 132 and in paragraph 4 of the said latter at page 133 it is clearly
mentioned that with regard to SAIL's apprehension on ousting priority for SAIL Vessels
it was confirmed by the VSPL as Port under meaning of MPT Act 1963 section 42 that
Page 26 of 47
VSPL is fully authorised to give such ousting priority to a valued customer like SAIL.
VPT came within the purview of MPT Act 1963 by Amendment Act 1974. There again
clause-1 (k) of the STA has it that the VSPL shall make different types of facilities in
order to take care of urgent need of SAIL including congestion at the Port as per
berthing policy and procedures followed by VPT. There is no denying of the fact that
VPT comes within the purview of MPT Act. Even in the definition Clause 2 of STA, the
MPT Act is defined as Major Port Trusts Act 1963 as amended, supplemented,
reenacted or replaced from time to time. Naturally, the question comes in our mind if
there is no scope of application of MPT Act in the said agreement what was the
purpose of defining the MPT Act in Clause-2 of STA? In our view, the answer lies in the
affirmative.
59. All these questions as to whether the MPT Act will be applicable in the instant
case are answered in the STA itself in its clause 5.5. Clause 5.5 of STA deals with the
provision of discharge of cargo and second paragraph of the said clause reads as
under:
"Discharge of cargo shall be round the clock, in terms with this Agreement and as
per the rules and regulations that are enforced by the VPT/MPT Act from time to time
(emphasis added)."
60. The main transaction between the parties centres round the discharge of cargo
and clause 5.5 has clearly mentioned that the same will be regulated by the rules and
regulations that are enforced by the VPT/MPT Act from time to time.
61. Thus the argument of the Respondent that the STA which is a self-contained
agreement does not give any scope to import the application of MPT Act does not cut
any ice.
62. Then again clause 5.28 of the STA recognizes the authority of VPT in the
unlikely event of non-performance/under performance of the Berth. The authority of
VPT is again recognized in clause 5.34 in respect of berth discharge at NOM area /
other place nominated by the VPT and in that case with the assistance of VSPL, the
SAIL is to take clearance from the VPT. Again in annexure-1 to STA where the chart of
ITSC of Rs.167 and its various components are described it is clearly mentioned in
respect of royalty and lease rental that the same would be in terms of VPT/TAMP
notification. All these are what are stated and provided and also contained in the STA
itself as regards the application of MPT Act and so also the application of TAMP
authority.
63. Furthermore the respondent SAIL itself tried to build up its case on the
notification of The TAMP authority. It was argued before us that in terms of item No.
(xxii) at page C/109 the term "transit area" was deleted at the request of the Claimant.
Our attention was also drawn at clause (xxi) at page 108 by the Ld. Advocate for the
Page 27 of 47
Respondent and with these two clauses he tried to impress upon us that the terms
"transit areas" there are also taken out by the TAMP authority at the request of the
claimant. These two clauses will be discussed by us subsequently at the appropriate
place separately in other context. But in any case those two clauses are in the order of
the notification of TAMP authority being Notification No.G40 dt.31" March 2005. Thus
the respondent was also required to build up their case with the help of order of the
TAMP authority. Moreover, in their written statement of defence and written notes of
argument the Respondent has heavily banked upon the TAMP orders to build up their
case.
64. TAMP authority is a creation of the MPT Act under the provision of section 47A
of the said Act for the purpose of imposition and regulation of the scale of rates at the
Port for services performed by Board and other persons. In order to know the function
of the Board the provisions of section 42 clause (3) A and (4) of MPT Act are to be
understood. Those clauses read as under:
"Without prejudice to the provisions of sub-section (3), a Board may, with the
previous approval of the Central Government, enter into any agreement or other
arrangement (whether by way of partnership, joint venture or in any other manner)
with, any body corporate or any other person to perform any of the services and
functions assigned to the Board under this Act on such terms and conditions as may
be agreed upon.
(4) No person authorized under sub-section (3) shall charge or recover for such
service any sum in excess of the amount (specified by the Authority, by notification in
the Official Gazette)."
65. On plain reading of those clauses as stated above it appears that the Board
may authorize any person for any of the services mentioned in clause (I) of section 42
and such terms and conditions as mentioned agreed upon which were assigned to the
Board itself by the Act. Among those functions those are assigned to the Board are
landing, shipping of transhipping passengers and goods between vessels in the port
receiving, removing, shifting, transporting, storing or, delivering goods brought within
the Board premises. Including the carriage by the neighbouring railways area or vice
versa and the like activities find mention in clause (I) of section 42.
66. In the instant case it is admitted that the claimant took lease of the certain port
area namely EQ8 and EQ9 from the VPT for a period of 30 years and on the basis of
that lease agreement the Claimant entered into a long term agreement with the SAIL
and thereafter as the said LTA could not be given effect to for some technical reasons
like non-performance of dredging of the sea port to the optimal level as stipulated in
the LTA, the STA between parties was executed. Thus in view of the above position of
the MPT Act, VSPL steps into the shoes of VPT in order to perform the various activities
Page 28 of 47
assigned to the Board of VPT and on the strength of that lease agreement only, the
VSPL got the authority to enter into Short Term Agreement with SAIL. From the facts
and circumstances and of the documents placed before us by both the parties we have
no reason to disbelieve that this position was unknown to the SAIL at the time of
execution of the STA. In fact on the request of SAIL, VSPL supplied a copy of such
lease agreement to them. Here in the instant case in our considered view the SAIL is a
user of the port under the STA and VSPL stands in the position of the owner as a
lessee of the VPT.”
(Emphasis supplied)
15. Thus according to the majority members, the 1963 Act as well as TAMP were
applicable. A perusal of the afore-quoted paragraphs of the majority award
would clearly reveal that the ultimate conclusion of the majority members
that the 1963 Act as well as TAMP were applicable to the parties apropos the
STA hinges on the following points:-
a. In terms of the first part of clause 5.12 of the STA the appellant would be
entitled to claim demurrage/storage charge in terms of TAMP orders if
cargo exceeded 60,000 MT continuously for 15 days without a 30 days’
notice from the respondent.
b. The transactions between the parties were carried out on the land of the
VPT. The users of land of a sea port are statutorily regulated by the Major
Port Trusts Act, 1963.
c. The users of land of a sea port are statutorily regulated by the Major Port
Trusts Act, 1963.
d. The appellant accepted the proposal of the respondent as regards ousting
priority as per the berthing policy and procedures of VPT and the
appellant allayed the respondent’s apprehension on ousting priority for its
vessels by affirming that in terms of Section 42 of the 1963 Act, the
Page 29 of 47
appellant was fully authorised to give such ousting priority to a valued
customer like the respondent.
e. VPT came within the purview of the 1963 Act by virtue of the Amendment
Act 1974.
f. Clause 5.5 of STA which deals with the provision of discharge of cargo
clearly mentions that the same will be regulated by the rules and
regulations that are enforced by the VPT/1963 Act from time to time.
g. Clause 5.28 of the STA recognizes the authority of VPT in the unlikely
event of non-performance/under performance of the Berth.
h. The authority of VPT is again recognized in clause 5.34 in respect of berth
discharge at NOM area/other place nominated by the VPT and in that
case with the assistance of the appellant, the respondent is to take
clearance from the VPT.
i. In Annexure-1 to the STA where the chart of ITSC to the tune of Rs.167
and its various components are described it is clearly mentioned that
royalty and lease rental would be in terms of VPT/TAMP notification.
j. The respondent itself tried to build up its case on the notification of the
TAMP authority.
k. In terms of Section 42 of the 1963 Act the appellant steps into the shoes
of the VPT in order to perform the various activities assigned to the Board
of VPT and on the strength of that lease agreement only, the appellant got
the authority to enter into STA with the respondent.
16. None of the reasons cited by the majority members lead to the conclusion
that either the 1963 Act or TAMP (whether singly or together) would apply to
the STA for the purpose of levying demurrage charges. We are aware of our
Page 30 of 47
limitation as a Section 37 Court under the 1996 Act and we are cognizant
that an error of reasoning would not make an award so defective as to incur
the wrath of Section 34 of the 1996 Act but the question is whether it is
permissible for an arbitrator to conjure up a contract or a contractual term
where there is none by mere quirk of reasoning?
17. There can be no dispute that certain functions of the VPT may be required
to be carried out by the appellant in terms of the lease/license that the
appellant has been granted by the VPT. The extent to which and the manner
in which the core functions of the VPT are required to be carried out by the
appellant, TAMP and the 1963 Act would certainly be applicable but would
such applicability also get ipso facto extended to the STA for imposition of
demurrage charges without there being any express mention of the same?
The answer must be in the negative. While the VPT would exercise sovereign
and statutory control over all lands within port limits even if the same has
been leased out, the same would not impinge on the private contractual
relationship between the appellant and the respondent unless the STA
expressly states so.
18. Indeed, if there are provisions in the STA that either specifically or by
necessary implication indicate that the parties agreed that the 1963 Act and
TAMP would apply to them for collection/implementation/imposition of
demurrage, then the statute and the tariff would be applicable for such
purpose. However, no clause in the STA has been cited to demonstrate that.
It cannot be introduced in the STA interpretatively, all the more so when the
term relates to financial implications.
Page 31 of 47
19. The phrase "discharge of cargo... round the clock" used in clause 5.5 of the
STA only binds the parties to an operational timeline. It forces the appellant
to supply continuous labour, arrange shifting, and clear customs round the
clock so that the berth can physically be emptied quickly. The expression
"as per rules and regulations enforced by the port under the Act" used in the
said clause is a safety and administrative restriction. It means the physical
handling must comply with changing port safety codes, environmental laws,
and shifting schedules under the 1963 Act. That such clause is entirely
operational becomes evident from the fact that it carries absolutely no fiscal
or monetary implication. It does not state that the respondent agrees to pay
any specific financial rate, nor does it incorporate a financial tariff matrix. A
mandate to perform a physical task according to rules cannot be retrofitted
into a financial indemnity clause.
15
20. In the case of Food Corporation of India & Others vs. Abhijit Paul the
Hon’ble Supreme Court has reiterated the method for and the purpose of
interpretation of a contract in the following words:-
“ 26. Interpretation of contracts concerns the discernment of the true and correct
intention of the parties to it. Words and expressions used in the contract are principal
tools to ascertain such intention. While interpreting the words, courts look at the
expressions falling for interpretation in the context of other provisions of the contract
and also in the context of the contract as a whole. These are intrinsic tools for
interpreting a contract. As a principle of interpretation, courts do not resort to materials
external to the contract for construing the intention of the parties. There are, however,
certain exceptions to the rule excluding reference or reliance on external sources to
interpret a contract. One such exception is in the case of a latent ambiguity, which
cannot be resolved without reference to extrinsic evidence. Latent ambiguity exists
when words in a contract appear to be free from ambiguity; however, when they are
sought to be applied to a particular context or question, they are amenable to multiple
15
(2023) 15 SCC 40
Page 32 of 47
outcomes. This position is well explained in the following passage of Halsbury's [
Halsbury's Laws of England (5th Edn., 2012) Vol 32, para 409.] :
“Latent ambiguity: When the instrument appears on its face to be free from
ambiguity but, upon the endeavour being made to apply it to persons or things
indicated, it appears that the words are equally applicable to two or more persons, or
two or more things, either without any inaccuracy or with a common inaccuracy…”
Extrinsic evidence, in cases of latent ambiguity, is admissible both to ascertain
where necessary, the meaning of the words used, and to identify the objects to which
they are to be applied [Halsbury's Laws of England (5th Edn., 2012) Vol 32, para 394.]
... ”
21. If the STA is examined in the light of the well settled rules governing
interpretation of contracts, it would be at once clear that the parties had not
intended to include demurrage charges in the STA.
22. It is beyond cavil of doubt that demurrage charges are costs incurred for
breaching the timeline allocated for stocking goods at the port. Thus
demurrage charges are in the nature of compensatory damages. Now, two
expressions defined in the STA deserve notice at this stage:-
“ Committed Discharge Rate means The committed discharge of coking coal
vessels, up to Haldia Draft at VSPL Berth shall be at the rate of 22,000 Metric Tonnes
Per WWD SHINC for all hatches lightening and 17000 Metric Tonnes per WWD SHINC
for full discharge on best endeavor basis
However, penalty shall be payable if the discharge rate falls below 20000 Metric
Tonnes per WWD SHINC for lightening and …….
“Penalty” means amount payable by SAIL/VSPL to the other Party, towards
damage/non-performance in terms with the provisions of the Agreemen t.”
(Emphasis supplied)
23. Thus the parties have provided for imposition of penalty or damages upon
breach of a condition. Clause 5.12 of the STA which provides for storage and
stacking (and which forms the backbone of the majority award) may now be
noticed:-
Page 33 of 47
“5.12. Storage and Stacking – VSPL shall ensure storing of the Cargo grade-
wise up to a maximum of 4 grades and up to a maximum Cargo volume of
60,000 M.T. VSPL shall, in case of exigencies, endeavor to accommodate
Cargo of a further 30,000 M.T. for a period not exceeding 15 (fifteen)
continuous days. However, SAIL shall give 30 days notice to VSPL to
organize stacking requirement of such higher Cargo volumes. If the Cargo
Commitment by SAIL to VSPL is expected to go beyond 2.0 million MT per
year, VSPL shall organize for storage of Cargo up to 90,000 MT with a further
provision of storing 30,000 M.T of coal in exigencies for a period not exceeding
15 days. VSPL shall stack the Cargo in an orderly manner.”
24. It is interesting to note that while in the said clause the parties have
clarified that in case of exigencies the appellant would endeavor to
accommodate cargo for a further period of 15 days, they have remained
silent on the aspect of imposition of demurrage charges in case the storage
or stacking outlasts the 15 days’ period. The tenor of the STA reveals that
parties have specifically mentioned the circumstances and conditions where
damages would be payable. If there is an omission, it is a conscious
omission. Such silence cannot not sound in demurrage charges. If the
parties did not intend to make overstay demurrageable can the arbitral
Tribunal do so in the manner done by the majority members? We fail to find
a positive answer to that question.
25. In such context, the reasoning given by the minority member becomes
significant. We use it as a part of our reasoning in the light of the following
observations of the Hon’ble Supreme Court in the case of Dakshin
Haryana Bijli Vitran Nigam Limited (supra):-
Page 34 of 47
“At the stage of judicial scrutiny by the Court under Section 34, the Court is not
precluded from considering the findings and conclusions of the dissenting opinion of
the minority member of the Tribunal.”
26. The minority view on this point may be found from paragraphs 27 to 28 of
the minority award:-
“ 27. Claimant's contention that since Section 48 of Port Act permits levying of
demurrages. TAMP notifications issued from time to time would automatically apply to
this contract. Provisions of the Port Act and TAMP permit charging demurrages as a
deterrent from longer stay of cargo in the terminal. To strengthen his contentions Mr.
Somayajulu, counsel for the claimant relied on the following decision of Apex court;
Trustee of the Port of Madras vs. Amin Chand Pyarelal, (1976) 3 SCC 167.; Board of
Trustee of the Port of Bombay vs. Jai Hind Oil Mills Co. And others (1987) 1 SCC 648;
and Board of Trustees of the Port of Bombay vs Indian Goods Supplying Co., (1977) 2
SCC 649. Relying on these judgments counsel for claimant contended that "congestion
in the ports affects the free movement of ships and of essential goods. Ships like
wagons, have to be kept moving and that can happen only if there is pressure on the
importer to remove the goods from the Board's premises with the utmost expedition"
Therefore, authority has the right to charge demurrage in order to ensure quick
clearance of cargo from the port.
There is no quarrel with the proposition of Law but we cannot lose sight of the fact
that in the above cases Apex court was dealing with issues arisen out of Major Port
Trust Act and not out of a private contract. In the present case parties are to be
governed by private contract. Hence on facts of these cases reliance by claimant are of
no help.
This being a private contract between two parties, terms and conditions of TAMP as
such would not apply automatically to this private contract. If claimant was interested
to charge demurrage it ought to have incorporated the same in this Agreement. In fact
claimant while entering into this agreement consciously did not incorporate charging of
demurrages. When rates for stacking of cargo was suggested in this case claimant did
not estimate any income from demurrages and that is why it did not form part of ITSC
Annexure-I of STA. Claimant had intentionally not incorporated demurrages because it
had charged higher rates for stacking of respondent's cargo which fact is clear from
answer of claimant to a query raised by TAMP appearing in its Order dated
15.03.2005 at S.No.IV page 98 Vol.I of claimant's documents. There claimant admitted
that the demurrage income was considered NIL. This was done. because claimant
wanted to earn more revenue through the respondent. Once the provision to charge
Page 35 of 47
demurrages were consciously not provided in the contract by implication "demurrages"
cannot be made applicable by relying on Section 48(1)(d) of Port Act. TAMP only fixes
scales of rates, had demurrages been incorporated in this agreement then for the rates
claimant could rely on the scale fixed by TAMP. Claimant in no uncertain words
admitted this fact while answering query of TAMP as mentioned above. Arbitrators are
creature of contract, they can neither travel beyond the terms of the contract nor
incorporate in it which is not there.
28. Reference and reliance on Section 42 and 48 of the Port Act by Mr. Somayajulu,
Advocate for claimant is misplaced. Admittedly TAMP has been created under the Port
Act. The said Act empowers TAMP to fix scale of rates for various items provided those
items/paras form part of the contract. Section 48(1)(d) of the Port Act does talk about
wharfage, storage or demurrages of goods. But we cannot overlook the opening
sentence of Section 48(1) which says the Authority i.e. in this case TAMP shall from
time to time frame a scale of rates at which any of the services specified hereunder
would be performed meaning thereby if contract provides charging of demurrages of
goods then the scale of rates as provided by TAMP would apply. Similarly for
wharfage and storage. But if demurrages of goods does not find mention in the private
agreement between two parties then the question of claiming demurrage at the scale of
rates as framed by TAMP would not arise.
Admittedly, STA is a private contract between VSPL & SAIL and that TAMP is not
the authority to decide dispute like the present between the parties. There is no
provision in this contract regarding payment. of demurrages respondent/SAIL keeps
its cargo stacked for longer period beyond the free time as prescribed in Article 5.12 of
STA. To my mind, all terms and conditions of TAMP mutatis mutandis will not apply to
this private contract. Parties are bound by the terms of this agreement i.e. STA. By
implication provision of TAMP cannot be attracted nor apply particularly when
claimant itself decided not to estimate its income arising out of demurrages while
fixing rates under ITSC Annexure-I. This find mention in the response given by
claimant to a query raised by TAMP. It appears in TAMP's order dated 15.03.2005 at
page 98 item (iv) of Vol. I (claimant's documents). TAMP's query was; "The reason for
not estimating income from demurrage charges". To this claimant's response was as
follows;
“Since major portion of the storage area will be used on rental basis, income from
plot rental has been taken into account. It does not desire/expect the cargo to remain
in the transit area beyond the free period and hence the demurrages income is
considered NIL."
(Emphasis supplied)
Page 36 of 47
27. The minority award has also considered other evidence on record to cull out
the intention of the parties and has clearly indicated the reason behind non-
incorporation of the demurrage charges in the STA. The minority award has
found that the appellant had indulged the respondent and refrained from
including demurrage charges in the STA as it was getting good business
from the respondent who was “ the only major customer importing cooking
coal through Gearless Panamax Vessels in Vizag Port for about 5 MnMTs”
Paragraphs 32 and 35 of the minority award may be noticed in such
context:-
“32. That the claimant had been insisting the respondent not to divert its vessel to
Gangavaram and Paradip has been established by various letters of the claimant.
Fact of the matter is claimant was scared of losing revenue if the respondent diverted
its vessels to some other ports. In this regard reference can be made to claimant's
letter dated 22.08.2009 Ex. R-10 (Page 283 of respondent's documents) wherein
claimant expressed that it would be geared up to dispatch 3-rakes a day to cater to
the requirement of SAIL. Hence SAIL should not divert its cargo to other ports.
Followed by letter dated 20.12.2010 Ex. R-12. Letter dated 20.01.2011. Ex. R-11 and
email dated 03.05.2011 Ex. R-13. On one hand claimant had been insisting
respondent not to divert their vessels from Vizak port at the same time charged
demurrages for the same period. This is against principle of natural justice. On the day
letter Ex. R-11 dated 20.1.2011 and R-10 dated 22.08.2009 were written to
respondent not to divert the cargo, the status of claimant's terminal as shown in Ex.R-
11 was 85,100 MT and 97,103 MT of respondent cargo, still claimant insisted the
respondent not to divert its cargo. It is not correct for claimant to urge that since
respondent had not made available volume of cargo, therefore, asked it not to divert,
this argument is belied from the language of those letters. In none of these letters/e-
mails it is been mentioned that volume of cargo made available was not as per
agreement. The reason for protest by claimant was loss of revenue. Having
pressurised the respondent not to divert its cargo, at the same time claiming
demurrages shows malafide on the part of claimant.
That not only there is absence of provision in STA to charge demurrages, the
agreement confirmed 40,500 sq.meter area to be utilized for handling of cargo of the
respondent beside amenities and other system with providing integrated terminal
Page 37 of 47
services as per this agreement. By this agreement means the area to be utilized
exclusively for respondent's cargo. Contention of the claimant that while entering into
Long term agreement it was made clear vide letter dated 17.12.2003 Ex. C-5 that no
specific area had been offered for stacking SAIL'S cargo, this argument, to my mind, is
belied by claimant's own showing. Inspite of this letter Ex. C-5 claimant while entering
into Long Term agreement incorporated an Article as Article 3.4 under the heading
Capacity and confirmed that an area of 81,000 sq.meter would be utilized for SAIL's
cargo as per that agreement. If claimant had no intention to specifically earmarked
any area to SAIL it would not have incorporated Article 3.3 in STA. Contention of the
claimant that this area is part of terminal hence has to be treated as terminal area,
this argument is without merits. Terminal area is defined. As per that definition the
area of 40,500 sq.meter cannot be called terminal. What claimant argues is contrary to
the terms and conditions of the contract. Contractual necessity and compulsion to
retain SAIL cargo at VPT/VSPL seems to be the reason of allotting specific area to
SAIL. That is how it was incorporated in STA vide Article 3.3. Fact of the matter is
claimant at all cost wanted to retain SAIL, therefore, did not use any discretion against
it. Claimant admitted that it had no discretion in granting reduction in tariff to SAIL
because claimant was desperate to retain SAIL cargo.
35. The intention not to charge demurrages appears to be claimant's commercial
necessity as admitted by claimant itself. In case demurrages were to be charged SAIL
might have shifted to some other port, fearing this eventuality demurrage was not
incorporated in the agreement in question. The very fact that the term demurrages is
absent from the STA goes to show that while entering into this contract claimant
consciously waived its right to claim demurrage. This conclusion is supported from
claimant's own admission made to TAMP and which appears in TAMP's order dated
11.10.2011 at Page 18 item (4) of respondent's documents. While considering income
estimation TAMP questioned the reason of claimant giving discount in tariff to SAIL. In
order to justify its action claimant's response was as under:
Item 4(a) "SAIL is the only major customer importing cooking coal through Gearless
Panamax Vessels in Vizag Port for about 5 MnMTs. As TAMP is aware RINL's cooking coal
hit her to handled at Vizag Port has fully migrated to Gangavaram Port. Hence for
operational viability of VSPL and protection of cargo volume in VPT it is absolutely essential
for VPSL to retain SAIL -cargo. Keeping this in view a 4 year Short Term Agreement with
SAIL was entered w.e.f. 06.05.2008. As such giving reduction in approved tariff to SAIL is
purely out of the contractual necessity and compulsion to retain SAIL cargo at VPT/VSPL.
Thus, there is absolutely no discretion from out end in granting reduction on tariff to SAIL.
Page 38 of 47
It is again submitted that the concession in tariff to SAIL is also in accordance with TAMP
guidelines 2.16, 1.4.4 and as advised by TAMP vide ref. Xxv(i) (b) of earlier tariff order.
4(b) It may not be out of place to mention here that after one year of commencement of
contract, SAIL unilaterally insisted upon further reduction of rate and forced VSPL to
reduce the rates, correspondence referred to herein can be produced to the authorities with
the permission of SAIL
4(c) It is submitted that but for this rebate, VSPL could not have achieved the 30%
growth in throughout compared to projections in 2009-10 and 2010-11. Despite the cargo
growth, the revenue earned is almost the same level of revenue as per projections in 2009-
10 and 2010-11 implying that cargo growth achieved is the offshoot of the rebate given.
This shows the reason why claimant was indulgent to respondent. It further proves
that claimant was dependent on respondent's cargo and hence gave special
concessions status to SAIL.”
(Emphasis supplied)
28. The underlined portion of the minority award shows the appellant’s stand
before the TAMP authority and forms material evidence to demonstrate that
parties did not intend to include demurrage charge.
29. Issue nos.6 and 7 have been decided by the majority members by holding
that the STA did not contemplate any lease of the storage area and that the
ITSC charges did not include storage charges.
30. Even if the majority Tribunal’s conclusion that the STA did not contemplate
a lease and that ITSC charges did not include storage charges is assumed to
be a possible or plausible view not open to interference under Section 34 of
the 1996 Act, the same would not lead to application of demurrage charges
if the parties ultimately did not intend to do so.
31. We may, however, record that the finding of the minority member in
paragraphs 34 and 36 to 38 of the minority award, to the effect that the STA
in effect envisaged a lease of the storage area appeals to the conscience of
the Court.
Page 39 of 47
32. As would be evident from paragraph 57 of the majority award, the main
premise for the ultimate conclusion reached by the majority members is that
the first part of clause 5.12 of the STA should be interpreted to mean that
the appellant would be entitled to demurrage charges in case the cargo is in
excess of 60,000 MT and overstays the free period of 15 days. We have
found such construction to be impossible in the facts of the present case
since the parties have not agreed to imposition of demurrage charges on the
respondent.
33. Even if we proceed on the basis that clause 5.12 of the STA does provide for
application demurrage charges, then also the award of demurrage charges
appears to be in clear contravention of the said clause.
34. Clause 5.12, has three parts:-
i. The first part imposes an obligation on the appellant to ensure storing of
cargo upto a maximum volume of 60,000 MT.
ii. The second part provides that in case of exigency, the appellant would
accommodate additional cargo volume to the extent of 30,000 MT for 15
days. It requires the respondent to give 30 days’ notice.
iii. The third part provides that if the cargo commitment by the respondent to
the appellant goes beyond 2.0 million MT per year then the appellant
would organize for storage of cargo upto 90,000 MT with a further
provision for storing 30,000 MT coal in case of exigencies for a period of
15 days. This does not require any notice.
35. Thus, while assessing the amount of demurrage charge to be paid (assuming
it to be payable) it would be required to be considered as to whether in the
relevant year the cargo volume had exceeded 2.0 million MT or not because
Page 40 of 47
for every such year the minimum storage volume would be 90,000 MT and
not 60,000 MT. These aspects have not been considered by the majority
Tribunal at all despite charts showing the handling of the cargo being
produced by the appellant to the Tribunal on December 19, 2014 which
once again makes the majority award perverse and patently illegal for non-
application of mind.
36. The minority award has factored these aspects in the first sub paragraph of
paragraph 31 and paragraph 43 of the award which are quoted
hereinbelow:-
“31. Article 5.12 of STA is in two parts. First part provides stacking of 60,000 MT
and an additional 30,000 MT for a period not exceeding 15 continuous days and it
would be subject to giving 30 days notice. In the second part there is no requirement of
notice. In case cargo is excepted to go beyond 2.0 million MT per year storage/stacking
of cargo would be organized by the claimant i.e. 90,000 MT with further provision of
storing 30,000 MT of coal in exigencies for a period not exceeding 15 days.
Per clause 8 of the agreement review meeting was held, instead of being held in the
first six months as per the terms of the contract it was held after one and a half year
i.e. on 05.10.2009. Purpose of review was to make an assessment of the actual
quantity of cargo that the respondent was to make available to the claimant and also
to test the operational parameters and terms were also to be reviewed jointly
thereafter. In that meeting claimant agreed to give concession of rates expecting huge
quantity of respondent's cargo to be stacked. As per claimant's own showing over
stacking of cargo started way back on 4 May 2009 but not a word uttered in this
regard in the review meeting held on 05.10.2009. Clause 1.2(a) prescribe that the
aspect of assured cargo volume as well as tonnage reckoned for payment of penalty
shall be jointly reviewed, after six months of the agreement, based on actual
performance. Thus that review meeting was not only to assess whether cargo
commitment was completed but also to assess to find out violation of operational
parameter i.e. stacking of excess cargo by the respondent. If it had been penalty
would have been imposed. But no such thing find mention in the said review meeting.
In the review meeting the claimant even did not object to over stacking of additional
cargo in the absence of 30 days notice. Since claimant knew that levy of "demurrages"
was not part of the contract, hence did not mention the same. By its conduct claimant
Page 41 of 47
waived its right, and therefore, estopped from claiming the same now. In this case
claimant had been stacking, cargo of the Respondent in excess of 60,000 MT and at no
point of time refused to stack additional 30,000 MT because of lack of 30 days notice.
Hence by its conduct claimant waived its right of 30 days prior notice before making
arrangement of stacking additional quantity of cargo.
43. It would not be out of place to mention that in the proceeding held on
19.12.2014 claimant filed a Chart showing cargo handlings during May 2008 to 5th
May 2009, May 2009 to 5th May 2010, May 2010 to 5th May, 2011 and May 2011 to
5th May 2012. If we see the chart as filed by the claimant it is clear that for the period
May 2008 to 5th May 2009 respondent had supplied a quantity of 0.97 MT. As per
agreement respondent was to supply in the first year of the contract a quantity of 0.75
MT. Therefore, claimant has rightly shown that they were not to claim any
demurrages. For the period May 2009 to 5th May 2010 as per claimant's own showing
the respondent supplied quantity of 1.94 MT and for the period May 2010 to 5th May
2011 claimant has shown that respondent supplied a quantity of 2.06 MT. For the
period May 2011 to 5th May 2012 quantity was 1.86, MT. Applying the second part of
clause 5.12 which says if the cargo is expected to go beyond 2.0 million MT then the
limit would be 90,000 plus 30,000 i.e. 1,20,000 MT. Therefore, for the period May
2009 to 5th May 2010 when the quantity delivered was 1.94 MT it was expected to go
beyond 2.0 million MT. For the period May 2010 to 5th May 2011 actual quantity was
more than 2.0 million MT. Therefore, for these period also limit for the purpose of
counting over stacking ought to be the limit prescribed in the second part of clause
5.12 i.e. 120,000, MT. If we see the statement filed by the claimant on 19.12.2014, in
none of the lot respondent exceeded this limit. In fact claimant has completely ignored
second part of clause 5.12. Similarly for the period May 2011 to 5th May 2012, the
quantity delivered by the respondent was 1.86 MT which can also be called expected
to go beyond 2.0 million MT. The maximum limit as prescribed is 90,000 MT + 30,000
MT for the period of 15 days. Claimant has not taken note of these aspects and the
provision of the contract, therefore, wrongly levied demurrages.
Whichever angle we may look into this case, I find claimant has failed to prove any
breach having been committed by the respondent. Hence for the reasons discussed
above claimant is not entitled to demurrages. Claims of claimant are accordingly
rejected.”
37. The ultimate decision to award demurrage and interest on issue nos. 8, 9
and 10 framed by the arbitral Tribunal is a consequence of the conclusions
Page 42 of 47
arrived at on the earlier issues. Since the basis has been found to be bad,
the consequential command must also fail.
38. It is apparent from the discussion made hereinabove that neither TAMP nor
the 1963 Act influence the financial terms between the parties to the STA at
least insofar as imposition of demurrage charges is concerned. It is also
clear that the parties consciously avoided incorporation of any demurrage
charge clause in the STA. That being so the ultimate conclusion reached by
the majority becomes without foundation and therefore perverse. Reliance
by the majority members on the judgments of Aminchand Pyarelal &
Others (supra), Indian Goods Supplying Co. (supra) and Jai Hind Oil
Mills Co. & Others (supra) would have helped only if it could be concluded
that STA was fully governed by the 1963 Act and TAMP. Such is not the case
here.
39. The majority members have while holding that the appellant is entitled to
demurrage charges observed that “It is the universal practice of business that
the parties involved in such commercial transaction will always look forward
for more and more profit and in doing so if there appears to be any violation of
While so
agreement inviting penalty/demurrage the same cannot be avoided.”
observing, the majority members have missed that penalty/demurrage
cannot be imposed unless specified in the contract.
40. Furthermore the minority award has also found that the appellant could not
produce any evidence in support of its contention that there was any
stacking or storing beyond the free period. In such view of the matter, even if
the best case of the appellant is taken, no amount could have been awarded
Page 43 of 47
to the appellant. In that context the following findings of the minority
Tribunal are relevant:-
“39. The question for consideration is whether additional cargo was kept for more
than 15 continuous days. And whether cargo load expected to go beyond 2.0 million
MT per year was considered by the claimant while working out demurrages.
40. From the statement filed by claimant with the pleadings at page 204 Volume 1
(claimant's documents) which was sent to respondent with claimant's letter dated
20.12.2010, nowhere depicts that cargo in excess of 60,000 MT remained stacked 15
continuous days. When asked to explain, counsel for claimant stated he would file
fresh statement which he did. He filed fresh statement on 19.12.2014 claiming
demurrages w.e.f. May 2009 to 5th May 2012. Again this statement did not show that
cargo of 30,000 MT remained stacked for 15 continuous days. Therefore, the arbitral
Tribunal fixed a date of hearing on 01.03.2015 seeking clarification before announcing
the award.
41. Mr. Somyajulu, counsel for the claimant during that hearing filed yet another
statement showing the dates on which cargo of SAIL was in excess of 60,000 MT. This
was filed on 01.03.2015. From this list he pointed out that there were four lots when
excess cargo remained stacked for 15 continuous days. Those are at Sr.No.195
starting from 15.11.2009 and continued till Sr. No.287 dated 15.02.2010. The second
lot is from Sr.No.165 dated 12.09.2010 to Sr.No.297 dated 22.01.2011. The third lot is
from Sr.No.100 dated 09.07.2011 to Sr. No. 143 dated 21.08.2011 and the fourth is
from Sr. No. 280 starting from 05.01.2012 to Sr.No.355 dated 20.03.2012. Admittedly
this statement is not supported by any evidence. Delhi High Court in the case of
Ishwar Singh & Ors. Vs. DDA & Ors. CS(OS) No.764A/ 1991 decided on
23.12.2009 held that “No presumption can be made by the Arbitrator of payment
made to staff because making of presumption of such expenses, without evidence is
fraught with dangers". Mere producing a list without substantiating it with record
maintained in due course of business is fraught with danger hence no reliance can be
placed on it. One need to be very careful in relying on such statement in the absence of
any evidence.”
(Emphasis supplied)
41. The aforesaid findings reveal that there was no evidence before the Tribunal
at all to justify award of demurrage charges. In that view of the matter, the
majority award is one without evidence.
Page 44 of 47
42. We also find substance in the submission of the respondent that non raising
of the issue as regards imposition of demurrage charge in the review meeting
held on October 09, 2009 amounts to waiver of its right to claim the same,
assuming it had such right. In such context clause 8 of the STA may be
noticed once:-
“ 8.0. Review:
SAIL and VSPL agree that the first six months of operation of this agreement shall
be treated as a test period to make an assessment of the actual quantity of Cargo that
can be made available to VSPL terminal and to test the operational parameters, after
which the terms will be reviewed jointly and if required terms and conditions will be
further revised.”
43. Thus clause 8 of STA provides that the parties would jointly review the
terms of the STA. The terms and conditions of the STA do not expressly
provide for demurrage charges. Therefore, if the same were to be levied the
same ought to have been included while reviewing the terms. Not having
done so would mean waiver of the appellant’s right to claim such charge. In
such context the second sub paragraph of paragraph 31 of the minority
award is quite relevant which has already been quoted hereinabove.
44. While on this we cannot miss the flip side. It can be contended that if the
appellant understood demurrage charges to be embedded in clause 5.12 as
held by the majority and as argued by the appellant, then there can be no
need to seek modification and as such there can be no case of waiver.
However, in the facts of this case such contention would also not hold good.
In such context, the following findings of the minority member may be
noted. The same is extracted hereinbelow:-
“33. That the fact that area of 40,500 sq. Meter was allotted for SAIL's cargo gets
reflected from claimant's own conduct. SAIL vide letter dated 17.09.2011(Ex. 58) which
Page 45 of 47
was in response to claimant's letter claiming demurrages, denied the claim of the
claimant taking the plea based on the provision of Article 3.3 of STA and asserting
therein that claimant had confirmed 40,500 sq. Meter area for SAIL's cargo, therefore,
SAIL was not liable to pay demurrages. Claimant did not dispute this fact in its reply
letter dated 25.10.2011 which was in response to respondent's letter dated
17.09.2011 Ex. C-58. Legal effect of allowing SAIL to utilize the facility area inspite of
SAIL refusing to pay demurrages amounts to waiver of its right. Claimant neither
terminated the contract nor invoked arbitration when respondent refused to pay
demurrages, rather extended the contract for another one year inspite of SAIL refusing
to pay demurrages as demanded by claimant vide letter dated 20.12.2011. While
extending the contract claimant did so without insisting SAIL to first clear the
outstanding dues on account of demurrages. This shows waiver of right if any by the
claimant. It would not be correct to contend that waiver does not apply against
statutory dues. Insisting of 30 days’ notice is not statutory. It is a term of private
contract which parties by their conduct can waive.”
45. Provash Chandra Dalui (supra) and Shaw and Co. (supra) are well known
authorities on the well settled legal proposition that waiver is
relinquishment of a known right.
46. State of Chhattisgarh (supra) while referring to the earlier decisions of the
Hon’ble Supreme Court in the cases of Associate Builders (supra) and
Ssangyong Engineering & Construction Company Limited has
reiterated the well settled principles for setting aside an arbitral award. In
the case at hand we have found that the award is bad for non-application of
mind, it is based on no evidence patently illegal and perverse.
47. Both Chandu Construction & Another (supra) as well as PSA SICAL
Terminals Private Limited
(supra) reiterate that the role of the arbitrator is
to arbitrate within the terms of the contract, that he has no power apart
from what the parties have given him under the contract and that he cannot
travel beyond the terms of the contract. The majority members have indeed
Page 46 of 47
travelled beyond the contract and as such the majority award deserves to be
set aside.
48. Learned Single Judge has decided the application for setting aside the
concerned arbitral award well within the parameters of Section 34 of the
1996 Act. The learned Judge has correctly appreciated the facts of the case
and has applied the correct law. In any event, in our opinion, the view taken
by the learned Single Judge is an eminently plausible one. It is settled law
that if a learned Judge of the High Court takes a possible view, the Division
Bench will not interfere in an Intra-Court appeal just because the Division
Bench may have a different opinion. The Division Bench will only interfere if
the conclusion arrived at by the Single Judge is clearly wrong or perverse,
which is not the case here. Therefore, we do not find any reason to interfere
with the judgement and order under appeal.
49. For all the reasons aforesaid, the order impugned is sustained. APO 112 of
2022 together with IA NO: GA 1 of 2022 stand dismissed. There shall be no
order as to costs.
50. Urgent photostat certified copy of this judgment, if applied for, be supplied
to the parties subject to compliance with all requisite formalities.
I agree.
(Arijit Banerjee, J.) (Om Narayan Rai, J.)
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