Full Judgment Text
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CASE NO.:
Special Leave Petition (civil) 17183 of 2001
PETITIONER:
THE OWNERS & PARTIES INTERESTED IN
Vs.
RESPONDENT:
VS.
DATE OF JUDGMENT: 20/08/2001
BENCH:
A.P. Misra & D.P. Mohapatra
JUDGMENT:
D.P.Mohapatra, J.
Leave granted.
The appellants herein are the owners & parties interested
in the Vessel M.V. Baltic Confidence (for short the ship). The 2nd
respondent herein is the charterer of the said ship under the Time
Charter Party Agreement entered between it and the appellants with
effect from 8th of May, 1997. Five Bills of Lading all dated 26th May,
1997 were issued by the appellants wherein the respondent no.2
agreed and undertook to carry on board the said ship 11,433.510
metric tonnes of Canadian Yellow Peas (the peas for short) from the
Port of Vancouver in Canada to the Port of Calcutta in good order
and condition. The respondent no.1 herein is the holder and
endorsee of each of the said Bills of Lading and the owner of the said
stock of peas. The said respondent no.1 filed Admiralty Suit No.17
of 1997 in the High Court at Calcutta in its admiralty jurisdiction
against the appellants and respondent no.2 alleging inter alia that the
defendants had negligently and in breach of the contract of carriage
and/or breach of their duties as bailees, failed to deliver goods to the
plaintiff in good order and condition; the defendants have delivered
part of the goods weighing 4,910 metric tonnes damaged by sea
water and in consequence the plaintiff had suffered loss and damage
at least in the sum of US $ 1,384,620 being the value of the said
damaged quality. The plaintiff further alleged that it has suffered
further loss and damages. It was in these circumstances that the
plaintiff filed the suit.
The appellants and respondent no.2 herein as the 1st and 2nd
defendants in the suit filed an application under Section 45 of the
Arbitration and Conciliation Act,1996 (for short the Act) praying inter
alia for staying of the proceedings in the suit and for referring the
disputes to arbitration in terms of Clause 62 of the Charter Party
Agreement which was specifically incorporated as a condition of the
Bills of Lading. The said application was rejected by a single Judge
of the Court by the order passed on 10th November, 1998 holding,
inter alia, that the arbitration clause in the Charter Party Agreement
was not applicable to the alleged disputes arising from the Bills of
Lading and, therefore, the application filed by the defendants was not
maintainable. On appeal by the defendants, the Division Bench of
High Court confirmed the order passed by the single Judge vide the
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judgment dated 2nd August, 1999. The said judgment is under
challenge in this appeal filed by the defendants.
The question that arises for determination is, whether the High
Court, on construction of the terms and conditions of the Charter
Party Agreement and the condition in the Bills of Lading incorporating
the terms and conditions of the Charter Party Agreement into it was
right, in holding that the parties in the suit are not bound by the
agreement contained in Clause 62 of the Charter Party Agreement for
purpose of arbitration of the disputes raised in the suit. Before
proceeding to consider the question further it will be convenient to
quote Clause 62 of the Charter Party Agreement and the relevant
clause in the Bills of Lading. Clause 62 of the Charter Party
Agreement is as follows :
This Charter Party shall be governed by and
construed in accordance with English Law and
any dispute arising out of this Charter Party
shall be referred to arbitration in London in
accordance with the Arbitration Acts 1950 and
1979 or any statutory modification or re-
enactment thereof for the time being in force.
Unless the parties agree upon a sole
arbitrator, one arbitrator shall be appointed by
each party and the arbitrators so appointed
shall appoint a third arbitrator, the decision of
the three-man tribunal thus constituted or any
two of them, shall be final. On the receipt by
one party of the nomination in writing of the
other partys arbitrator, that party shall appoint
their arbitrator within fourteen days, failing
which the decision of the single arbitrator
appointed shall be final. For disputes where
the total amount claimed by either party does
not exceed USD 50000 the arbitration shall be
conducted in accordance with the Small
Claims Procedure of the London Maritime
Arbitrators Association.
Clause 1 of the Conditions of Carriage of the Bills of
Lading reads as follows :
All terms and conditions, liberties and
exceptions of the Charter Party, dated as
overleaf, including the Law and Arbitration
Clause, are herewith incorporated.
The question for consideration is whether the parties
agreed that Clause 62, the arbitration clause in the Charter Party
Agreement shall be applicable to disputes arising under the Bills of
Lading. For determination of this question it is necessary to ascertain
the intention of the parties to the Bills of Lading. This question has
engaged the attention of courts in India and in England from time to
time.
In Hamilton and Co. v. Mackie and sons,Vol.V,1888-9, The
Times Law Reports, page 677 the plaintiffs were the owners of the
steamer President Garfield, and the action was brought for the
balance of the Bill of Lading freight, the defendants being the
consignees of the cargo and endorsees of the Bill of Lading. It was
agreed by the Charter Party that any dispute that might arise under
the charter was to be settled by arbitration at the port where the
dispute arose. On the Bill of Lading the words were stamped, All
other terms and conditions as per Charter Party. The Judge at
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Chambers stayed the action on the ground that the matter ought to
have gone to arbitration, and the Divisional Court upheld his decision.
The Court of Appeals, allowing the appeal, held that Where there
was in a bill of lading such a condition as this, All other conditions as
per Charter Party, it had been decided that the conditions of the
Charter Party must be read verbatim into the Bill of Lading as though
they were there printed in extenso. Then if it was found that any of
the conditions of the Charter Party on being so read were
inconsistent with the Bill of Lading they were insensible, and must be
disregarded. The Bill of Lading referred to the Charter Party, and
therefore when the condition was read in, All disputes under this
charter shall be referred to arbitration, it was clear that the condition
did not refer to disputes arising under the Bill of Lading, but to
disputes arising under the Charter Party. The condition therefore was
insensible, and had no application to the present dispute, which arose
under the Bill of Lading."
(Emphasis supplied)
In T.W.Thomas & Co. Limited and Portsea Steamship
Company, Limited, 1912 Appeal Cases page 1, the House of Lords
considered a case in which the Bill of Lading provided that the goods
shipped thereunder should be delivered to the shipper or to his
assigns, he or they paying freight for the said goods, with other
conditions as per charter party, and in the margin was written, in ink,
Deck load at shippers risk, and all other terms and conditions and
exceptions of charter to be as per charter party, including negligence
clause. The charter party provided that Any dispute or claim arising
out of any of the conditions of this charter shall be adjusted at port
where it occurs, and same shall be settled by arbitration. Holding
that the arbitration clause was not incorporated in the Bill of Lading,
the House of Lords observed, inter alia, that :In determining what
passes under a general clause of this kind the Bill of Lading is the
primary document to be looked at, and the question of the scope of
the cesser clause is not relevant to that question. Dealing with the
question Lord Atkinson observed:
I think it would be a sound rule of
construction to adopt that when it is sought to
introduce into a document like a bill of lading
a negotiable instrument a clause such as
this arbitration clause, not germane to the
receipt, carriage, or delivery of the cargo or
the payment of freight, - the proper subject-
matters with which the bill of lading is
conversant, - this should be done by distinct
and specific words, and not by such general
words as those written in the margin of the bill
of lading in this case.
Lord Robson made the following observations :
It is to be remembered that the bill of lading is
a negotiable instrument, and if the obligations
of those who are parties to such a contract are
to be enlarged beyond the matters which
ordinarily concern them, or if it is sought to
deprive either party of his ordinary legal
remedies, the contract cannot be too explicit
and precise. It is difficult to hold that words
which require modification to read as part of
the bill of lading and then purport to deal only
with disputes arising under a document made
between different persons are quite
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sufficiently explicit for the appellants
purpose.
(Emphasis supplied)
In re: The Merak, Lloyds List Law Reports 1964 Vol.2,
the Court of Appeal considered the clauses in the charter party
entered into between the parties, in clause 10 whereof it was
stipulated : The bills of lading shall be prepared in the form endorsed
upon this Charter and shall be signed by the Master, quality,
condition and measure unknown, freight and all terms, conditions,
clauses (including Clause 32), and exceptions as per this Charter..
Clause 32 (arbitration clause) provided inter alia All claims must be
made in writing and the Claimants Arbitrator must be appointed
within twelve months of the date of final discharge otherwise the
claim shall be deemed waived and absolutely barred. Bills of lading
issued by master of Merak acknowledging shipment of timber at
Walkom for voyage as per charter dated the 21st of April, 1961, and
providing: All the terms, conditions, clauses and exceptions including
Clause 30 contained in the said charter party apply to this Bill of
Lading and are deemed to be incorporated herein. The Court of
Appeal (Sellers, Davies and Russell, L.JJ.) held that: Bill of Lading
was issued under charter of Apr.21; that commencement of
arbitration proceedings was suit brought within Art.III, Rule 6, of
Hague Rules; and that, therefore, arbitration clause was not
repugnant to Hague Rules and nullified by clause paramount; It was
further held that: Clause 32 was incorporated by language of Bill of
Lading and by express reference in Clause 32 to dispute arising out
of any Bill of Lading issued hereunder. In this connection, Lord
Scarman, J., construing the two documents, held as follows:
(1)that the charter party arbitration clause
made sense in the context of the bills of lading
and the general words of the bill of lading
incorporation clause sufficed to incorporate it;
that the reference to Clause 30 was falsa
demonstratio which should not be allowed to
obscure clear intention of incorporation
clause; (2)(i) that bills of lading were issued
under charter-party of Apr.21; (ii) that the
arbitration clause was not inconsistent with
clause paramount; and that, therefore,
arbitration clause was included in bills of
lading; (3) that Sect.4(2) gave effect to
intention of the Protocol on Arbitration
Clauses, 1923, which was that where there
was a business contract between parties
subject to different contracting States, those
parties were to be referred to arbitration if they
had so agreed, whether their agreement
related to present or future differences; that,
therefore, Sect.4(2) applied to agreement in
this case; and that, accordingly, proceedings
would be stayed; (4) that no undue hardship
would be caused if time for giving notice of
arbitration were not extended; and that,
therefore, no extension would be granted.
(Emphasis supplied)
In the case of Astro Valiente Compania Naviera SA v.
Pakistan Ministry of Food and Agriculture (No2) The Emmanuel
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Colocotronis (No2), The Queens Bench Division (Commercial Court),
(1982) 1 All ER 823, considered the case in which the charter party
provided, inter alia, that the charter party contract was to be
completed and superseded by the signing of a Bill of Lading and
further that the Bill of Lading was to contain a clause providing for
arbitration in London by two arbitrators and umpire and that any claim
was to be made in writing within nine months of final discharge. The
shipment was acknowledged by a Bill of Lading which included a
clause that All other conditions, exceptions, demurrage, general
average and for disbursement as per (the) charter-party. The Bill of
Lading did not specifically provide for arbitration. The question arose
whether the buyers were bound to arbitrate. In that connection, it
was observed, inter alia, that: Provided that the Bill of Lading itself
directed attention to the Charter Party, it was permissible and proper
to look at the Charter Party to ascertain the terms to be incorporated
in the Bill of Lading. Applying that principle, the Bill of Lading, by
referring to All other conditions . As per (the) charter-party,
specifically required reference to the Charter Party, which in turn
clearly and specifically provided that the arbitration clause was to be
one of the conditions incorporated in the Bill of Lading. The buyers
were therefore bound to arbitrate under the arbitration clause in the
Charter Party and their appeal would accordingly be dismissed.
(Emphasis supplied)
In Miramar Maritime Corporation and Holborn Oil Trading Ltd.,
1984 Appeal Cases 676, House of Lords considered the case where
the owners entered into a tanker voyage Charter Party in the
standard Exxonvoy 1969 form with charterers and the Bill of Lading
purported to incorporate all the terms of the charter (except the rate
and payment of freight), including a demurrage clause rendering the
charterers liable for demurrage, and the owners claimed that the
demurrage clause thereby incorporated into the bill rendered the
consignees of the cargo, as holders of the Bill of Lading, directly
liable for the demurrage incurred and held that on the true
construction of the language of the Bill of Lading it was the intention
of the parties to the Bill of Lading contract that the charterer alone
should be liable for demurrage. In that connection Lord Diplock
observed :
I regard it, however, as more important that
this House should take this opportunity of
stating unequivocally that, where in a bill of
lading there is included a clause which
purports to incorporate the terms of a
specified Charter Party which are directly
germane to the shipment, carriage or delivery
of goods and impose obligations upon the
charterer under that designation, are
presumed to be incorporated in the bill of
lading with the substitution of (where there is a
cesser clause), or inclusion in (where there is
no cesser clause), the designation charterer,
the designation consignee of the cargo or
bill of lading holder.
The Queens Bench Division (Commercial Court) in the
case of Navigazione Alta Italia SpA v. Svenska Petroleum AB (The
Nai Matteini), 1988 Vol.I Lloyds Law Reports 452, considered the
issue : whether the Bill of Lading was effective to incorporate the
arbitration clause in either the head charter or the sub-charter and if
so which, and held as follows:
that (1) the wording of the bill of lading gave
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no indication whether the unidentified charter
referred to was the head or sub-charter both
with their quite different forms of arbitration
clause; the bill of lading complied with neither
charter-party requirement but was a standard
form held at Ras Tanura which was printed in
the form as the loading port; there was no
relevant bill of lading as referred to in the form
and the form gave no clue as to what
arbitration clause in what charter-party was
referred to (see p.459 cols.1 and2);
(2) there was no arbitration agreement in force
between the owners and consignees and the
bill of lading did not have the effect of
incorporating an arbitration clause which
extended to disputes under the bill between
the plaintiffs and the defendants (see p.459,
col.2);
(3) the normal rule was that the presumed
intention of the parties to the bill of lading
contract was to incorporate the head charter;
the bill of lading was governed by the terms of
the head charter but the arbitration clause in
that charter was not to be read as applying to
anything other than disputes between the
owners and charterers arising under that
charter-party (see p.459, col.2).
(4) the purpose of the mechanics in any
arbitration clause was to put the other side on
notice that a claim was to be made so as to
give the other party a proper opportunity to
prepare and take part in choosing the arbitral
tribunal; the telex of June 23 achieved this
although it wrongly claimed that the venue
was London; and if the head charter was
incorporated and the arbitration clause had to
be modified to cover this dispute the wrong
assertion that London was the venue was not
of substance; the clause was not incorporated
and the plaintiffs were entitled to their
declaration (see p.460, col.1).
The Queens Bench Division (Commercial Court), in the
case of Pride Shipping Corporation v. Chung Hwa Pulp Corporation
and another (The Oinoussin Pride), (1991) Vol.1 Lloyds Law
Reports 126, held that :
In the absence of authority I would conclude
that, if practical, effect should be given to the
expressed intention of the parties to the bills,
namely, to incorporate the arbitration clause in
them, and that it is not only practical but
necessary to do so by adding those words to
cl.17 in order to give effect to that expressed
intention. Authority however, is not absent. In
The Rena K, (1978) 1 Lloyds Rep.545, in a
case virtually on all fours with the present one
in that the incorporation clause of the bills of
lading specifically incorporated the arbitration
clause of the charter-party, and which is to be
distinguished only on the ground that the
charter-party there was a voyage charter-
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party, whereas here there is a time charter-
party, Mr.Justice Brandon at p.551, col.1 said:
The addition of these words
(including the arbitration clause)
must, as it seems to me, mean that
the parties to the bills of lading
intended the provisions of the
arbitration clause in the charter-party
to apply in principle to disputes
arising under the bills of lading, and if
it is necessary, as it obviously is, to
manipulate or adapt part of the
wording of that clause in order to give
effect to that intention, then I am
clearly of the opinion that this should
be done.
(Emphasis suppllied)
In the case of Daval Aciers Dusinor Et De Sacilor and others v.
Armare S.R.L. (The Nerano), (1996) Vol.1 Lloyds Law Reports
page 1,the Court of Appeal, dismissing the appeal, held inter alia, that
:
(1)looked at on its own, the provision on the
front of the bill of lading only incorporated the
conditions of the charter (which it was
common ground would not include the
arbitration clause in the charter) and the
reference to English jurisdiction could (in the
absence of any reference to arbitration) only
be a reference to the English Courts; however
if the provisions was considered with cl.1 on
the back of the bill of lading a different
meaning emerged; the provision on the face
of the bill of lading did not expressly prohibit
the incorporation of terms other than
conditions from the charter, nor was the
reference to English jurisdiction couched in
language that excluded an English arbitration
agreement which would ex hypothesi be
subject to English jurisdiction; the two
provisions read together were not inconsistent
with each other (see p.4 col.1)
(2) the parties had not merely used general
words of incorporation, they had expressly
identified and specified the charter arbitration
clause as something to be incorporated into
their contract; by identifying and specifying the
charter-party arbitration clause it was clear
that the parties to the bill of lading contract did
intend and agree to arbitration so that to give
force to that intention and agreement the
words in the clause had to be read and
construed as applying to those parties (see
p.4, col.2);
(3) the Court was engaged on the process of
construing the words the parties had written
down and used; in their context the words
were to be given the meaning the law
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ascribed to them and the arbitration
agreement did not thereby cease to be an
agreement in writing if the words of the
arbitration clause were to be manipulated or
adapted (see p.5 col.1);..
(Emphasis supplied)
Queens Bench Division (Commercial Court) in Atlas
Levante-linie Aktiengesellschaft v. Gesellschaft Fuer Getriedehandel
A.G., and Becher (The Phonizien), (1966) Vol.1 Lloyds List Law
Reports at p.150 held by McNair, J., that:
If conditions of charter-party were read into
bills of lading as if printed in extenso, terms of
Clause 22 would be insensible and should be
disregarded; and that extensive verbal
redrafting would be necessary to make it read
as a submission to arbitration between
shipowners and each individual indorsee of a
bill of lading; (2) that Court could not accept
defendants submision that, where the
charterer was also the shipper, the wide
words of incorporation used in this case were
apt to incorporate into the bill of lading the
arbitration clause even in respect of a dispute
between the shipowner and a subsequent
holder of the bill of lading. Judgment for
plaintiffs. Hamilton & Co. v. Mackie & Sons,
(1889) 5 T.L.R. 677, applied and followed.
Temperley Steam Shipping Company v.
Smythe & Co. (1905) 2 K.B. 791,
distinguished. Thomas & Co. Ltd. v, Portsea
Steamship Company, Ltd., (1912) A.C.1
followed.
This Court in the case of Union of India v. D.M.Revri &
Co, (1977) 1 SCR 483, held inter alia :
There were, after integration, two Secretaries
in the Ministry of Food & Agriculture, but the
argument that this event rendered the
arbitration agreement vague and uncertain, is
based on a highly technical and doctrinaire
approach and is opposed to plain common
sense. A contract is a commercial document
between the parties and must be interpreted
in such a manner as to give it efficacy rather
than to invalidate it. It would not be right while
interpreting a contract entered into between
two lay parties, to apply strict rules of
construction which are ordinarily applicable to
formal documents. The meaning of such a
contract must be gathered by adopting a
common sense approach and it must not be
allowed to be thwarted by a narrow pedantic
and legalistic interpretation. The Secretary in
the Ministry of Food and Agriculture in charge
of the Department of Food, would be the
Secretary in the Ministry of Food and
Agriculture concerned with the subject matter
of the contract and under clause (17), he
would be the person intended by the parties to
exercise the power of nominating the
arbitrator. Furthermore, the respondents did
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not raise any objection to the appointment of
the arbitrator and participated in the arbitration
proceedings without protest, indicating the
clear intendment of the parties that the
Secretary in the Ministry of Food & Agriculture
concerned with the subject matter of the
contract should be the person entitled to
nominate the arbitrator (488 B-E, 489 A-E).
(Emphasis supplied)
In the case of Alimenta S.A. etc. v. National Agricultural Co-
operative Marketing Federation of India Ltd. & Anr., (1987) 1 SCC
615 at page 616, this court considered the case in which :
NAFED, an Indian undertaking and Alimenta,
a Swiss company, entered into two contracts
for sale and supply of HPS groundnut kernels.
Clause 11 of the first contract stipulated :
Other terms and conditions as per FOSFA-20
contract terms. Clause 9 of the subsequent
contract stipulated : :All other terms and
conditions for supply not specifically shown
and covered hereinabove shall be as per
previous contract signed between us for
earlier supplies of HPS" The FOSFA
(Federation of Oils, Seeds and Fats
Association) 20 contract provided :Any
dispute arising out of this contract,shall be
referred to arbitration in London (or elsewhere
if so agreed). When disputes arose
between the parties under both the contracts
while Alimenta sought to commence
arbitration proceedings invoking Clause 11
and Clause 9 of the contracts, NAFED filed a
petition under Section 33 of the Arbitration Act
alleging inter alia that there was no valid
arbitration agreement between the parties.
The NAFED contended that it was not at all
aware of any arbitration clause in FOSFA-20
contract and accordingly, it could not agree to
incorporate any such arbitration clause in the
contracts in question. The High Court
disallowed the petition under Section 33 in
respect of the first contract but allowed the
same in respect of the second contract.
Affirming the judgment of the High Court and
dismissing the appeals Supreme Court held:
(1) The arbitration clause of an earlier
contract can, by reference, be incorporated
into a later contract provided, however, it is
not repugnant to or inconsistent with the terms
of the contract in which it is incorporated. In
the instant case the arbitration clause in the
FOSFA-20 contract provided any dispute
arising out of this contract and as such there
would be no inconsistency between this
clause and the terms of the first contract and
hence, no difficulty in incorporation of the
arbitration clause in the first contract. Such
incorporation would be quite intelligible (para
7).
The contention that the arbitration clause in
FOSFA-20 contract was not germane to the
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subject matter of the first contract and
therefore, was not incorporated in the
contract, cannot be accepted. Even assuming
that the subject matters of the FOSFA-20
contract and the first contract in question were
different, the former being a CIF contract,
while the latter an f.o.b. contract, no question
as to the germaneness of the arbitration
clause to the subject matter would be
relevant. Where, as in the instant case, the
parties are aware of the arbitration clause of
an earlier contract, the subject matter of which
is different from the contract which is being
entered into by them, but incorporate the
terms of the earlier contract by reference by
using general words, there would be no bar to
such incorporation merely because the
subject matters of the two contracts are
different, unless, however, the incorporation of
the arbitration clause will be insensible or
unintelligible. In the instant case, the
arbitration clause in FOSFA-20 contract will fit
in the first contract and it will be neither
insensible nor unintelligible. Therefore, the
arbitration clause in FOSFA-20 contract was
incorporated into the first contract. (para 12)
(2) However, though the first contract
includes the terms and conditions of supply
and as Clause 9 of the second contract refers
to these terms and conditions of supply, it is
difficult to hold that the arbitration clause is
also referred to and, as such, incorporated
into the second contract. When the
incorporation clause refers to certain particular
terms and conditions, only those terms and
conditions are incorporated and not the
arbitration clause. The normal incidents of
terms and conditions of supply are those
which are connected with supply, such as, its
mode and process, time factor, inspection and
approval, if any, reliability for transit, incidental
expenses etc. The arbitration clause is not a
term of supply. There is no necessity in law
that when a contract is entered into for supply
of goods, the arbitration clause must form part
of such a contract. Accordingly, only those
terms and conditions are incorporated into the
second contract and not the arbitration clause
(para 14).
A Full Bench of the Calcutta High Court in the case of
Dwarkadas & Co. v. Daluram Goganmull, AIR (38) 1951 Calcutta 10,
considering the question of incorporation of the arbitration clause in
earlier contract into a subsequent contract, held:
In the present case, the arbitration clause in
the first contract referred to arbitration
disputes which arose in respect of the goods
or in reference to any of the conditions
hereof. It was in fact an arbitration clause
framed in the very widest terms and if that
clause, which was Cl.17 of the original
contract were so written in both the
subsequent contracts, it would be wholly
intelligible and not inconsistent with any of the
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terms of the subsequent contracts and would
on its face apply to all disputes arising under
the subsequent contracts. That being so, it
appears to me that the arbitration clause
which is found as Cl.17 of the terms and
conditions of the first contract dated 13-12-
1947 between Bubna More & Co., and the
respondents was imported into each of the
subsequent contracts by reason of the phrase
which appears in each of the subsequent
contract Subject to all terms and conditions of
the contract NO.73 of 13-12-47 issued to us
by M/s.Bubna More & Co. That being so,
there was in each of the subsequent contracts
an arbitration clause which, if valid, would
govern disputes arising between the parties.
From the conspectus of the views expressed by courts in
England and also in India, it is clear that in considering the
question, whether the arbitration clause in a Charter Party
Agreement was incorporated by reference in the Bill of Lading;
the principal question is, what was the intention of the parties to
the Bill of Lading? For this purpose the primary document is the
Bill of Lading into which the arbitration clause in the Charter
Party Agreement is to be read in the manner provided in the
incorporation clause of the Bill of Lading. While ascertaining the
intention of the parties attempt should be made to give meaning
to the incorporation clause and to give effect to the same and not
to invalidate or frustrate it giving a literal, pedantic and technical
reading of the clause. If on a construction of the arbitration
clause of the Charter Party Agreement as incorporated in the Bill
of Lading it does not lead to inconsistency or insensibility or
absurdity then effect should be given to the intention of the
parties and the arbitration clause as agreed should be made
binding on parties to the Bill of Lading. If the parties to the Bill of
Lading being aware of the arbitration clause in the Charter Party
Agreement have specifically incorporated the same in the
conditions of the Bill of Lading then the intention of the parties to
abide by the arbitration clause is clear. Whether a particular
dispute arising between the parties comes within the purview of
the arbitration clause as incorporated in the Bill of Lading is a
matter to be decided by the arbitrator or the court. But that does
not mean that despite incorporation of the arbitration clause in
the Bill of Lading by specific reference the parties had not
intended that the disputes arising on the Bill of Lading should be
resolved by arbitrator.
Coming to the case on hand it is to be kept in mind that
while incorporating the conditions of the Charter Party
Agreement in the Bill of Lading specific reference has been
made to the arbitration clause by use of the expression
including the law and arbitration clause. Therefore, the parties
have taken care not to couch the interpretation clause in the Bill
of Lading in general terms but have made their intention clear
that the disputes arising thereunder should be resolved by
arbitration according to the clause in the Charter Party
Agreement. On a fair reading of the clause 62 of the Charter
Party Agreement (Arbitration clause) and Condition 1 of the Bill
of Lading (incorporation clause) there is no manifest
inconsistency or insensibility. Such was not the case of the
parties in the suit nor any such finding recorded in the judgment
of the High Court (Single Judge or by the Division Bench). It
was also not contended before us that if the arbitration clause in
the Charter Party Agreement is implemented in relation to
disputes arising on the Bill of Lading it would give rise to an
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absurd/unworkable situation. It was also not urged before us that
the condition in the Bill of Lading incorporating the arbitration
clause of the Charter Party was null and void being incapable of
being performed. The main ground on which it was contended
that the clause is inoperative is that the expression Charter
Party in clause 62 of the Charter Party Agreement was not
changed to Bill of Lading while incorporating the same in the
latter. This contention, we are constrained to observe cannot be
accepted since it goes against the clear intention of the parties
as evident from the incorporation clause.
On a careful consideration of the entire matter we are of
the view that there is no good ground or acceptable reason why
the intention of the parties to incorporate the arbitration clause in
the Charter Party Agreement in the Bill of Lading should not be
given effect to. The High Court was not right in rejecting the
prayer of the appellants for stay of the suit.
In the result, the appeal is allowed with costs. The
Judgment of the Division Bench of the High Court confirming the
judgment of the Single Judge is set aside. The petition filed by
the appellants for stay of the suit is allowed. The trial court is
directed to proceed in the matter according to law. Hearing fee
assessed at Rs.50,000/-.
.J.
( A.P.MISRA)
.J.
(D.P.MOHAPATRA)
August 20, 2001