TMI Blog2001 (8) TMI 1289X X X X Extracts X X X X X X X X Extracts X X X X ..... ound 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 - CIVIL APPEAL NO. 5537 OF 2001 S.L.P. (C) NO. 17183 OF 1999 - - - Dated:- 20-8-2001 - A.P. MISRA AND D.P. MOHAPATRA, JJ. R.F. Nariman, Tilok Bose, C.R. Addy, P. Addy, Ghanshyam Joshi and S. Saxena for the Appellant. Dr. A.M. Singhvi, Padam Khaitan, Gauri Rasgotra, Purnima Singh, Suman Jyoti Khaitan, S.N. Mookherjee and H.K. Puri (N.P.) for the Respondent. JUDGMENT Mohapatra, J. - Leave granted. 2. The appellants herein are the owners and parties interested in the Vessel M.V. Baltic Confidence ( 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 8-5-1997. Five Bills of Lading all dated 26-5-1997 were issued by the appellants wherein the Respondent o. 2 agreed and undertook to carry on board the said ship 11,433.510 metric tonnes of Canadian Yellow Peas ( the peas ) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he 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 party s 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 50,000 the arbitration shall be conducted in accordance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upplied] 6. In T.W. Thomas Co. Ltd. and Portsea Steamship Co. Ltd. 1912 Appeal Cases 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 shipper s 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." [Emphasis supplied] Dealing with the question Lord Atkinson observed: "I think it would be a sound rule of construction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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". [Emphasis supplied]. 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 section 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 ." 10. The Queen s Bench Division (Commer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 clause 17 in order to give effect to that expressed intention. Authority however, is not absent. In The Rena K, [1978] 1 Lloyd s 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-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 is 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 opi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uld 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 defendant s submission 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. - Halmilton Co. v. Mackie Sons [1889] 5 T.L.R. 677, applied and followed. Temperley Steam Shipping Co. v. Smythe Co. [1905] 2 K.B. 791, distinguished. Thomas Co. Ltd. v. Portsea Steamship Co. Ltd. [1912] A.C. 1 followed ." 14. 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 contrac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. 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 appeal 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 corporation 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 subject-matter of the first contract and therefore, was not incorporated in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntract 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 clause 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 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 clause 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 condition of the contract No. 73 of 13-12-1947 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." (p. 17) From the conspectus of the views expressed by courts in England and also in India, it is clear that in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 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 in 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. 18. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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