TMI Blog2007 (4) TMI 739X X X X Extracts X X X X X X X X Extracts X X X X ..... d have been different from those arrived at. Thirdly, the finding of the arbitrator about the shortage of 1350 metric ton (for short, M.T.) in loading the material is contrary to the materials on record in as much that in fact the shortage was only to the extent of 350 M.T. 2. The respondents herein received an order on 16-4-1996 from a French buyer S.I. Lessafre for export of 60,000 M.T. of molasses, to be shipped in three lots of 20,000 M.T. each. The buyer agreed to pay the actual freight and demurrage charges in addition to the price of US$ 40 per M.T. FOB, JNPT. Negotiations were held between the appellants and the respondents for handling and storage of the molasses in the tanks of the appellants at JNPT. Consequent to such negotiations, the appellants sent MoU dated 25-5-1996 to the respondents incorporating the terms and conditions in relation to such contract. The arrangement was to be for twelve months with a clause entitling termination by 30 days' notice by either of the parties. The storage charges were payable at the rate of ₹ 250/- per M.T. in the first week of every month in advance and one month's charges were to be deposited with the appellants, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hould be deposited with the appellants' Solicitors. The respondents, however, on 3-2-1997 applied for review of the order dated 24-1-1997 which was allowed. In February, 1997 a sum of ₹ 2,14,40,875/- was deposited with the appellants' Solicitors consequent to export of the molasses in terms of the order dated 3-2-1997. The respondents amended their statement of claim on 5-3-1997 and made additional claim in respect of shipment pursuant to the order dated 3-2-1997. The appellants filed their reply on 26-3-1997. On 27-3-1997, the appellants amended their counter-claim to ₹ 5,83,85,081/-being the amount claimed by Bannari Amman on account of non-supply of goods. Under the award dated 8-12-1997, it was directed that: (i) the appellants should pay to the respondents a sum of ₹ 2,41,53,827/- along with interest @ 18% p.a. from the date of the award till realisation in addition to costs of ₹ 10,000/-; (ii) the respondents should pay to the appellants a sum of ₹ 2,14,40,875/- along with interest @ 18% p.a. from the date of award till realisation and costs of ₹ 20,000/-, and (iii) the amount which was deposited by the respondents in terms ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... M.T. and being so the learned arbitrator could not have held that the shortage was of 1,350 M.T. The finding is totally contrary to the materials on record and the same has also been ignored by the learned single Judge. In other words, it is the contention on behalf of the appellants that inspite of sufficient materials revealing the misconduct on the part of the arbitrator in awarding the claim to the extent it has been awarded, the learned single Judge erred in dismissing the arbitration petition. 5. To ascertain whether the learned single Judge erred in rejecting the challenge to the award in question and in refusing to set it aside on the grounds canvassed, it is necessary to consider the following points: (i) Whether the point regarding the exclusion of the dispute arising out of the second shipment from the jurisdiction of the learned arbitrator was raised before the learned arbitrator? (ii) Whether the claim arising out of the second shipment was within or beyond the jurisdiction of the learned arbitrator for adjudication of the said dispute between the parties? (iii) Whether under the agreement between the parties, the appellants had guaranteed pumping rate of & ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rm of statement of claim or statement of defence, if the pleas are raised which originate from or relate to the subject-matter of dispute, then such pleas could form part of the dispute for adjudication before the arbitrator, unless in the statement of either of the parties it is specifically denied or objected to on the ground that the plea sought to be raised by the other party is beyond the scope of the dispute for adjudication by the arbitrator being outside the scope of reference. In other words, in case of enlargement of the scope of dispute in the statement of claim in comparison to the one referred to, and in the absence of any objection by the other party, it could be deemed to have been conceded to form the subject-matter of dispute for adjudication before the arbitral Tribunal. This is abundantly clear from Section 16(2) r/w Section 4 of the said Act. Undoubtedly, Section 16(2) refers to the point of jurisdiction. However, Section 16(2) r/w Section 16(1) would disclose that the point of jurisdiction thereunder would include any controversy as regards the existence or validity of arbitration agreement which would obviously cover any plea regarding exclusion of the subject ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tatement refers to the defence plea about the absence of liability on account of there being no agreement between the parties regarding the rate of pumping of the second consignment and it did not relate to exclusion of the subject-matter from the scope of arbitration. As regards the claim of demurrage, certainly there was specific submission that it was beyond the scope of the arbitration agreement and therefore the same being beyond the scope of arbitration. In other words, the defence was to the effect that the claim for demurrage was beyond the scope of arbitration proceedings since the same do not form part of the arbitration agreement between the parties. 12. The arbitration agreement between the parties is comprised under Clause 17 of the agreement between the parties and it reads thus: 17. Arbitration: All dispute of difference whatsoever arising between the parties out of or relating to the contract/MOU meaning and operations or effects of the breach thereof, shall be settled by arbitration subject to the Bombay Jurisdiction in accordance with the rules of arbitration of India. Award made in pursuance thereof shall be binding on the parties to the contract/MOU. 13 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he learned arbitrator directed SGS India to inspect the tank No. 101 and submit the report. On 17-1-1997 the appellants filed an application before the learned arbitrator requesting that the molasses for which lien was claimed should be sold through an independent agency while claiming that the quality of the molasses would be deteriorated if the storage thereof is prolonged. Thereupon the appellants were permitted under the order dated 24-1-1997 by the learned arbitrator to sell the molasses at the rate of US$ 35 per M.T. FOB. On 3-2-1997 the respondents filed an application for review of the said order expressing willingness to export the molasses at the rate of US$ 42 per M.T. FOB and consequently the said order was reviewed allowing the respondents to export the said molasses and to deposit the sale proceeds with the attorneys of the appellants after deducting ₹ 2,00,000/- towards the expenses. Accordingly, 14,349 M.T. of molasses was exported in the first week of February, 1997. On complaint by the respondents about failure to deposit the amount of the sale proceeds by the respondents, on 31-3-1997 the learned arbitrator directed the respondents to deposit the entire sal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the point of demurrage being beyond the scope of arbitration, the appellants did not raise any objection on that count. The appellants did not insist for framing of the said issue and or for exclusion from adjudication of the issues arising out of the second shipment. Apart from making the statement quoted above, the appellants did not pursue the said objection any further. Obviously it must be held that the appellants had waived their objection in that regard. It is too late in the day for the appellants to raise dispute about the scope of arbitration and to insist that it cannot extend beyond the one referred under the letter dated 3-9-1996. 16. The appellants had not shown any objection or reluctance for participating in the adjudication process before the learned arbitrator in relation to the disputes arising out the second shipment. On the contrary, the appellants volunteered to place on record the necessary materials in support of their allegations in answer to the claim made in that regard by the respondents, and there being no objection raised as regards the absence of any issue being framed by the arbitrator on the aspect of exclusion of the dispute in relation to the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nnot even entertain the dispute for arbitration. That was not the objection canvassed by the appellants before the learned arbitrator. On the contrary, the appellants had submitted themselves to the arbitration proceedings in relation to the dispute arising out of the second shipment also. Hence there is absolutely no substance in the first ground of challenge. 18. The learned Advocate for the appellants has sought to rely upon the decision of the Apex Court in Rajinder Krishan Khanna and Ors. v. Union of India and Ors. reported in : AIR1999SC463 in support of the contention about the dispute being beyond the scope of reference. The decision is of no help to the appellants. The said decision was in the peculiar facts of that case. Therein, the matter was referred to arbitration pursuant to an order of the Court. The terms of arbitration in accordance with the order of the Court did not include any claim for damages for the loss of potential of the lands and there was no averment or particulars in that behalf disclosed in the order of reference. In those circumstances, the Apex Court had held that: It is difficult to see how, in the circumstances, the second respondent can be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 15-7-1996 was written after the parties had arrived at the agreement and had already acted upon the said agreement. Mere doubt or some difficulty expressed in the said letter about possibility of the appellants to pay the rate agreed upon nowhere discloses that there was any modification in the terms of the agreement. The letter merely stated that: You will appreciate that it is not possible for us to confirm the pumping rate. Needless to say we shall attempt to get as high a rate as possible. 20. With reference to the said letter, it is sought to be contended that the pumping rate of ₹ 200/-per T/hour as was sought to be incorporated in the MoU under the letter dated 30-5-1996 was never accepted and agreed upon by the appellants and it was specifically informed so to the respondents under the said letter. The intimation that it is not possible to confirm the pumping rate and that they would attempt to get as high a rate as possible by itself, and that too after the agreement finalised on 30-5-1996 was acted upon by the parties, cannot amount to modification of Clause 11 of the MoU under the letter dated 30-5-1996. It is to be noted that consequent to the letter dated 3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on states that vessel was to receive 19,000 M.T. of cargo of molasses and whereas the quantity shipped was 18,619.589 M.T. It is well-settled that to ascertain the agreed quantity to be loaded in a ship, one has to refer to the charter party document. The primary evidence regarding the capacity of the vessel to load depends upon the charter party and the information in that regard disclosed in such charter party. One fails to understand why no reference is being made by the appellants to the charter party and the secondary evidence in that regard is sought to be relied upon without ascertaining as to whether the letter dated 1-8-1996 refers to the total quantity to be loaded in terms of the charter party document or not. The letter dated 1-8-1996 cannot replace the contents of the charter party document which is the best evidence which could reveal the total quantity of the molasses which was required to be loaded in the ship in terms of the agreement between the parties. Considering the same, no fault can be found with the finding arrived at by the arbitrator as well as the learned single Judge while dealing with the objections in that regard filed by the appellants. 23. For th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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