Full Judgment Text
2013:BHC-OS:9321-DB
SKC APP-391-13
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
APPEAL NO. 391 OF 2013
IN
ARBITRATION PETITION NO. 87 OF 2013
WITH
NOTICE OF MOTION (L) NO. 1464 OF 2013
Steel Authority of India Ltd. .. Appellant
vs.
Pacific Gulf Shipping Co. Ltd. .. Respondents
…....
Mr. S. C. Naidu with Mr. Saurabh Kulkarni i/b. C. R. Naidu & Co. for
Appellant.
Mr. Prashant S. Pratap- Senior Advocate with Ms. Trupti R. Agarwal, Mr.
Ashwini Sinha i/b. Ms. Lavina Kriplani for Respondents.
…....
CORAM : DR. D. Y. CHANDRACHUD, AND
M. S. SONAK, JJ.
19 September 2013
P.C. :
The Appeal arises from a decision of a learned Single Judge dated
19 March 2013 on a petition under Section 34 of the Arbitration and
Conciliation Act, 1996 which sought to question the legality of an arbitral
award rendered by a three member arbitral tribunal. The learned Single
Judge has dismissed the Arbitration Petition consequent upon which the
original Petitioners are in Appeal.
2] The dispute between the parties arises out of a Charterparty of 15
November 2010 in respect of the vessel m. v. Navios Sagittarius. The
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SKC APP-391-13
Appellants are charterers of the vessel. The respondents are the
owners. The vessel was nominated for a voyage charter to carry a
consignment of coking coal in bulk from DBCT, QLD, Australia, to three
nominated Ports of discharge in India namely Vizag, Paradip and Haldia.
The dispute between the parties relates to the quantum of demurrage that
was payable to the Respondents upon the completion of discharge.
Clause 33 of the Charterparty, which was described as a “Time Counting
Provision” inter alia provided that :
“At each discharging port : Time to count 24 hours after
Notice of Readiness is served on arrival of the vessel
within port limits at each port of discharge and whether in
berth or not and in free pratique and ready in all respects
to discharge the cargo.”
3] The facts are not in dispute. Notice of Readiness was tendered by
the vessel on arrival at Vizag on 28 February 2010 at 1515 hours.
Under the Charterparty the obligation to obtain a berth was that of the
charterer, the Appellant to these proceedings. Under Clause 33 laytime
would commence 24 hours after tender of the Notice of Readiness.
Laytime commenced at 1515 hours on 29 December 2010. On 31
December 2010 a notice was given by the port authorities to the Master
to pick up anchor and go to the Pilot Boarding ground. However, between
0845 hours and 1415 hours on 31 December 2010 the vessel reported
an engine problem to the port authorities. Admittedly the problem was
rectified at 1425 hours on 31 December 2010 when the vessel reported
readiness to the port authorities.
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SKC APP-391-13
3a] Before the arbitral tribunal the submission of the Appellant
proceeded on the basis that the vessel had developed engine trouble
between 0845 hours and 1415 hours on 31 December 2010 as a result of
1
which the vessel was not ready to proceed. The arbitral tribunal
excluded the period between 0845 hours and 1415 hours on 31
December 2010 since the vessel was not ready in all respects during that
period to discharge the cargo. The contention of the Appellant is that
besides the exclusion of the period between 0845 hrs and 1415 hours on
31 December 2010 which was occasioned as a result of engine failure,
the Appellant was entitled to the exclusion of a further period between
1415 hours on 31 December 2010 until 2140 hours on 2 January 2011
when the vessel actually berthed. There is no dispute about the fact that
in the meantime, the Appellant nominated a second vessel, which was
carrying cargo consigned to the Appellant and which accordingly berthed.
The learned Single Judge has rejected the challenge to the Arbitral
Award, holding that this constituted a fair interpretation of the terms of the
Charterparty by an expert arbitral tribunal.
4] Clause 38 of the Charterparty contains the following provision:
“In the event of breakdown of gears/cranes/winches and
equipments of the vessel by reason of disablement or
insufficient power etc., the period of such inefficiency shall
not count as laytime, irrespective of vessel is on demurrage
or not.”
1 Paragraph 21 of the Arbitral Tribunal's award.
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For convenience of exposition, we have incorporated (and struck off) in
clause 38 the words “gears/cranes/winches and” which were consciously
deleted by the parties at the time of the execution of the Charterparty.
Clause 38 indicates that in the event of a breakdown of the equipment of
the vessel by reason of disablement, such period shall not count as
laytime irrespective of whether the vessel was on demurrage. The
submission of the Appellant is that clause 38 must relate only to the
breakdown of discharge equipment and would not cover engine failure.
5] The interpretation of clause 38 was within the jurisdiction of the
arbitral tribunal. If the tribunal has adopted a plausible interpretation
neither the learned Single Judge in a Petition under Section 34, nor for
that matter, this court in an appeal from the decision of the Single Judge
would be justified in substituting its interpretation. But that apart, we find
that the interpretation which has been adopted by the arbitral tribunal is
the only correct interpretation. Parties consciously deleted the words
gears/cranes/winches when they executed the Charterparty. Clause 38
covers the breakdown of 'equipments of the vessel' which would not
count as laytime. Hence the view which has been taken by the arbitral
tribunal is correct and does not call for any interference. The view is
based on an interpretation of the terms of the contract.
6] The counter claim which was made by the Appellant was
essentially consequential in nature. As the arbitral tribunal noted, the
counter claim was for consequential damages on account of the vessel
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SKC APP-391-13
not being able to proceed to the berth when the Port had called for it at
0845 hours on 31 December 2010. As a matter of fact, the admitted
position was that since the vessel in question was unable to berth
between 0845 hours and 1415 hours on 31 December 2010, the
Appellant nominated a second vessel which was carrying cargo which
was consigned to the Appellant during this period. In the circumstances,
having regard to this factual background, the arbitral tribunal noted that
no evidence was led before the tribunal to show that the Respondents
were aware of the possibility of any consequential damage. This part of
the reasoning of the arbitral tribunal is unexceptionable and was correctly
not held to result in a ground within the meaning of Section 34 for setting
aside the Award.
7] The final aspect of the submission of the Appellant relates to the
award of interest. The claim before the arbitral tribunal was for interest at
the rate of 12% per annum. The arbitral tribunal has awarded interest at
the rate of 9% per annum from 24 May 2011 namely the date on which
the cause of action had accrued. The submission of the Appellant is that
the Tribunal ought not to have awarded anything in excess of the LIBOR
rate since the award is in foreign currency.
8] Section 31(7)(a) of the Arbitration and Conciliation Act 1996
confers discretion upon the arbitral tribunal, where the Award is for the
payment of money, to award interest unless otherwise agreed by the
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parties at such rate as it deems reasonable. We find no reason or
justification to accept the submission that since the award was in foreign
currency, the arbitral tribunal ought to have awarded no more than the
LIBOR rate. LIBOR does not circumscribe the discretion of the tribunal.
Senior Counsel appearing on behalf of the Respondents has submitted
that even in the U.K. the Judgment Debts (Rate of Interest) Order 1993
prescribes a rate of 8% per annum in relation to any judgment entered
after the coming into force of the Order. Be that as it may and quite
independently, we have come to the conclusion that the award of interest
by the arbitral tribunal, cannot be regarded as being penal,
unconscionable or disproportionate.
9] The view which has been taken by the learned Single Judge does
not suffer from any error. No case for interference in appeal has been
made out. The appeal is dismissed.
10] In view of the disposal of the appeal, the Notice of Motion in the
appeal (Notice of Motion (L) No. 1464 of 2013) does not survive and is
disposed of.
(Dr. D. Y. Chandrachud, J.)
(M. S. Sonak, J.)
Chandka
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SKC APP-391-13
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
APPEAL NO. 391 OF 2013
IN
ARBITRATION PETITION NO. 87 OF 2013
WITH
NOTICE OF MOTION (L) NO. 1464 OF 2013
Steel Authority of India Ltd. .. Appellant
vs.
Pacific Gulf Shipping Co. Ltd. .. Respondents
…....
Mr. S. C. Naidu with Mr. Saurabh Kulkarni i/b. C. R. Naidu & Co. for
Appellant.
Mr. Prashant S. Pratap- Senior Advocate with Ms. Trupti R. Agarwal, Mr.
Ashwini Sinha i/b. Ms. Lavina Kriplani for Respondents.
…....
CORAM : DR. D. Y. CHANDRACHUD, AND
M. S. SONAK, JJ.
19 September 2013
P.C. :
The Appeal arises from a decision of a learned Single Judge dated
19 March 2013 on a petition under Section 34 of the Arbitration and
Conciliation Act, 1996 which sought to question the legality of an arbitral
award rendered by a three member arbitral tribunal. The learned Single
Judge has dismissed the Arbitration Petition consequent upon which the
original Petitioners are in Appeal.
2] The dispute between the parties arises out of a Charterparty of 15
November 2010 in respect of the vessel m. v. Navios Sagittarius. The
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SKC APP-391-13
Appellants are charterers of the vessel. The respondents are the
owners. The vessel was nominated for a voyage charter to carry a
consignment of coking coal in bulk from DBCT, QLD, Australia, to three
nominated Ports of discharge in India namely Vizag, Paradip and Haldia.
The dispute between the parties relates to the quantum of demurrage that
was payable to the Respondents upon the completion of discharge.
Clause 33 of the Charterparty, which was described as a “Time Counting
Provision” inter alia provided that :
“At each discharging port : Time to count 24 hours after
Notice of Readiness is served on arrival of the vessel
within port limits at each port of discharge and whether in
berth or not and in free pratique and ready in all respects
to discharge the cargo.”
3] The facts are not in dispute. Notice of Readiness was tendered by
the vessel on arrival at Vizag on 28 February 2010 at 1515 hours.
Under the Charterparty the obligation to obtain a berth was that of the
charterer, the Appellant to these proceedings. Under Clause 33 laytime
would commence 24 hours after tender of the Notice of Readiness.
Laytime commenced at 1515 hours on 29 December 2010. On 31
December 2010 a notice was given by the port authorities to the Master
to pick up anchor and go to the Pilot Boarding ground. However, between
0845 hours and 1415 hours on 31 December 2010 the vessel reported
an engine problem to the port authorities. Admittedly the problem was
rectified at 1425 hours on 31 December 2010 when the vessel reported
readiness to the port authorities.
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3a] Before the arbitral tribunal the submission of the Appellant
proceeded on the basis that the vessel had developed engine trouble
between 0845 hours and 1415 hours on 31 December 2010 as a result of
1
which the vessel was not ready to proceed. The arbitral tribunal
excluded the period between 0845 hours and 1415 hours on 31
December 2010 since the vessel was not ready in all respects during that
period to discharge the cargo. The contention of the Appellant is that
besides the exclusion of the period between 0845 hrs and 1415 hours on
31 December 2010 which was occasioned as a result of engine failure,
the Appellant was entitled to the exclusion of a further period between
1415 hours on 31 December 2010 until 2140 hours on 2 January 2011
when the vessel actually berthed. There is no dispute about the fact that
in the meantime, the Appellant nominated a second vessel, which was
carrying cargo consigned to the Appellant and which accordingly berthed.
The learned Single Judge has rejected the challenge to the Arbitral
Award, holding that this constituted a fair interpretation of the terms of the
Charterparty by an expert arbitral tribunal.
4] Clause 38 of the Charterparty contains the following provision:
“In the event of breakdown of gears/cranes/winches and
equipments of the vessel by reason of disablement or
insufficient power etc., the period of such inefficiency shall
not count as laytime, irrespective of vessel is on demurrage
or not.”
1 Paragraph 21 of the Arbitral Tribunal's award.
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For convenience of exposition, we have incorporated (and struck off) in
clause 38 the words “gears/cranes/winches and” which were consciously
deleted by the parties at the time of the execution of the Charterparty.
Clause 38 indicates that in the event of a breakdown of the equipment of
the vessel by reason of disablement, such period shall not count as
laytime irrespective of whether the vessel was on demurrage. The
submission of the Appellant is that clause 38 must relate only to the
breakdown of discharge equipment and would not cover engine failure.
5] The interpretation of clause 38 was within the jurisdiction of the
arbitral tribunal. If the tribunal has adopted a plausible interpretation
neither the learned Single Judge in a Petition under Section 34, nor for
that matter, this court in an appeal from the decision of the Single Judge
would be justified in substituting its interpretation. But that apart, we find
that the interpretation which has been adopted by the arbitral tribunal is
the only correct interpretation. Parties consciously deleted the words
gears/cranes/winches when they executed the Charterparty. Clause 38
covers the breakdown of 'equipments of the vessel' which would not
count as laytime. Hence the view which has been taken by the arbitral
tribunal is correct and does not call for any interference. The view is
based on an interpretation of the terms of the contract.
6] The counter claim which was made by the Appellant was
essentially consequential in nature. As the arbitral tribunal noted, the
counter claim was for consequential damages on account of the vessel
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not being able to proceed to the berth when the Port had called for it at
0845 hours on 31 December 2010. As a matter of fact, the admitted
position was that since the vessel in question was unable to berth
between 0845 hours and 1415 hours on 31 December 2010, the
Appellant nominated a second vessel which was carrying cargo which
was consigned to the Appellant during this period. In the circumstances,
having regard to this factual background, the arbitral tribunal noted that
no evidence was led before the tribunal to show that the Respondents
were aware of the possibility of any consequential damage. This part of
the reasoning of the arbitral tribunal is unexceptionable and was correctly
not held to result in a ground within the meaning of Section 34 for setting
aside the Award.
7] The final aspect of the submission of the Appellant relates to the
award of interest. The claim before the arbitral tribunal was for interest at
the rate of 12% per annum. The arbitral tribunal has awarded interest at
the rate of 9% per annum from 24 May 2011 namely the date on which
the cause of action had accrued. The submission of the Appellant is that
the Tribunal ought not to have awarded anything in excess of the LIBOR
rate since the award is in foreign currency.
8] Section 31(7)(a) of the Arbitration and Conciliation Act 1996
confers discretion upon the arbitral tribunal, where the Award is for the
payment of money, to award interest unless otherwise agreed by the
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parties at such rate as it deems reasonable. We find no reason or
justification to accept the submission that since the award was in foreign
currency, the arbitral tribunal ought to have awarded no more than the
LIBOR rate. LIBOR does not circumscribe the discretion of the tribunal.
Senior Counsel appearing on behalf of the Respondents has submitted
that even in the U.K. the Judgment Debts (Rate of Interest) Order 1993
prescribes a rate of 8% per annum in relation to any judgment entered
after the coming into force of the Order. Be that as it may and quite
independently, we have come to the conclusion that the award of interest
by the arbitral tribunal, cannot be regarded as being penal,
unconscionable or disproportionate.
9] The view which has been taken by the learned Single Judge does
not suffer from any error. No case for interference in appeal has been
made out. The appeal is dismissed.
10] In view of the disposal of the appeal, the Notice of Motion in the
appeal (Notice of Motion (L) No. 1464 of 2013) does not survive and is
disposed of.
(Dr. D. Y. Chandrachud, J.)
(M. S. Sonak, J.)
Chandka
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