* 1 * APPEAL-713/06 IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION APPEAL NO. 713 OF 2006 IN ARBITRATION PETITION NO. 103 OF 2006 Essar Shipping Ltd. ....Appellant/Orig.Petitioner V/S. The Great Eastern Shipping Co.Ltd ....Respondent/Orig.Respondent ------- Mr. Prashant S. Pratap with Mr. H.G. Pratap, Advocate for the appellant. Mr. Sudeep Sen with Mr. Shivkumar Ganesh i/by. Bose Mitra & Co. adv.for the respondent. CORAM : D.K. DESHMUKH, & SMT. R.P. SONDURBALDOTA, JJ. DATED : 10th JUNE, 2010. P.C. :- 1. Heard. 2. By this appeal, the appellant challenges the order dated 13th June, 2002 passed by the learned Single Judge of this Court in Arbitration Petition No. 103 of 2002. By that petition, objection was raised to an Award made by Arbitral Tribunal under the Arbitration Act, 1940. The Award directed the appellant to pay the respondent a sum of Rs.12,89,961.68/- with interest at the rate of 10% p.a. from 14th October, 1994 till date. The learned Single Judge by * 2 * APPEAL-713/06 his order dated 13th June, 2006 has rejected the objection. Hence, the original petitioner is in appeal against that order. The dispute between the parties arose under the time charter dated 3rd February, 1994. The respondent had chartered his vessel with the petitioner. By the Award, the Arbitral Tribunal had directed the petitioner to pay a sum of Rs.4,83,719.64/- to the respondent. An objection was raised to that part of the Award. Clause-3 of the Charterparty provided that the charterers at the port of delivery and the owners at the port of re-delivery shall take over and pay for all fuel remaining on board the vessel. Clause-33 provided that the bunker quantity on delivery to be as on boaard and the bunker quantity on re-delivery to be the same as on delivery. It provided that the charterer shall pay for the bunker on board at the I.O.C./Coastal price prevailing at the date of delivery at Madras. The same price will be applicable at the time of re-delivery. It is common ground that at the time of delivery of the vessel 195 MT of Fuel Oil and 47.9 MT of Diesel Oil was on board. Upon re-delivery the quantities of Fuel Oil and Diesel Oil were 352 MT and 151.334 MT respectively. The appellant while making payment to the respondent deducted the price of Fuel Oil and Diesel Oil on board from the payment to be made to the respondent at the I.O.C. rate. The dispute arose between the parties. According to the respondent as per the Charterparty, the appellant could have delivered exactly the same quantity of Fuel Oil and Diesel Oil at the time of re-delivery. In any case, for any quantity of Fuel Oil and Diesel Oil delivered in excess, price could be deducted only at the rate at which it was agreed between the respondent and the next hirer of * 3 * APPEAL-713/06 the vessel and not at the rate agreed between the petitioner and the respondent in the Charterparty. This dispute was referred to the Arbitrators. Perusal of the Award of the Arbitrators shows that so far as this aspect of the matter is concerned, two issues were framed namely Issue No.1 and Issue No. 2. The first issue was whether it was an obligation on the charter party that the appellant delivers same quantity of bunkers at the time of re-delivery and if it is found to be so, then, whether the respondent pays to the appellant for the excess bunkers at the rate agreed with the next hirer or at the market rate prevailing on the date of re-delivery. The Arbitrators by their Award, so far as Issue no.1 is concerned, found that there was no absolute obligation on the appellant to deliver exactly the same quantity of bunkers at the time of re- delivery. On Issue no.2 it was found that the respondent is not entitled to claim the amount which was claimed by them but to an amount of Rs. 4,82,719.64/- only. It is only this direction which was challenged in the petition. The learned Single Judge, as observed above has rejected the objection and the petition. 3. The learned counsel appearing for the appellant, submits that, the learned Arbitrators could have considered Issue no.2 only on recording a finding in the affirmative on Issue no.1. Having not recorded the finding in affirmative on Issue no.1, Issue no.2 could not have been even considered. The learned Counsel submits that if there was no obligation on the appellant to deliver the same quantity of bunkers, then the appellant were within their rights in delivering the quantity of bunkers as was available on board and they * 4 * APPEAL-713/06 were also entitled to deduct the price of the bunkers at the rate which was agreed between the parties in the Charterparty or at any rate at the market price prevailing on the date of re-delivery. It is submitted that the Arbitrators have not considered any of these relevant aspects and after having found that there is no breach of agreement committed by the appellant, have arrived at the amount of damages. It was submitted that an Award for damages could have been made only on a finding of breach of contract. Without recording the finding of breach of contract, an Award for damages could not have been made. 4. The learned counsel for the respondent, on the other hand, submits that on Issue no.1, there is a finding recorded that the respondent has committed breach of the agreement by delivering excess quantity of bunkers. In the submission of the learned counsel, therefore, as excess quantity of bunkers were delivered, the appellant was not entitled to claim the price which was agreed in the Charterparty between the parties, because, the respondent has agreed at a much lower price for the bunkers with the next hirer. The respondent suffered losses because of deduction of the price of bunkers by the appellant at the rate agreed in the Charterparty which was much higher. The learned counsel submits that as breach of agreement is admitted by the appellant, the appellant cannot make any grievance against the Award. 5. Now in the light of this rival submissions, if the record is perused, it becomes clear that it is Issue no.1 and 2 framed by the learned Arbitrators which are relevant. They read as under :- * 5 * APPEAL-713/06 “Issue No(i). Whether on a true and correct interpretation of the Charter party the respondent is liable to re-deliver the vessel with the same quantity of bunkers on board as on delivery. Issue No.(ii). If yes, whether the Claimant is entitled to claim from the respondent for the excess quantity of bunkers on board the vessel on the date of re-delivery at the rate of USD 80 PMT for Fuel Oil and USD 170 PMT for Diesel Oil as averred by the Claimant or at the market price, prevailing on the date of re- delivery which is the IOC Coastal price on that date as averred by the respondent.” 6. Perusal of these two Issues make it clear that if answer to Issue no.1 by the Arbitrator was in the affirmative, then only there was an occasion for the Arbitrator to consider Issue no.2. So far as Issue no.1 is concerned, the finding and the decision of the Arbitrator reads as under : “Decision on Issue : Issue No.(i) For this issue, as also for the next, it is necessary to reproduce the Clause-33. This reads as follows : Clause-33. “Bunker quantity on delivery to be as on board, which is estimated at about 195 MT Fuel Oil and 55 MT Diesel Oil. Bunker quantities on re-delivery to be the same on delivery. Charterers to pay for bunkers on board along with the first charter hire at the I.O.C. Coastal prices prevailing on the date of delivery at Madras. The same prices will be applicable at the time re-delivery. . The clause for an easier and simple understanding can be split into two parts. The first part is about the quantities on * 6 * APPEAL-713/06 board at delivery and quantities on re-delivery. And the second part relates to the prices to be applied. About the quantities, the Tribunal finds and holds, that on a true and correct interpretation, the respondent was liable to re- deliver the vessel with the same, or about the same quantity of bunkers on board as on delivery. However, the parties did not intend it to be an absolute obligation as they expressly deleted part of Clause-3 of the printed format of the Charterparty which contained an altogether, and more strict phraseology, stating .....”to be re-delivered with not less than... and not more than....tons.” 7. It is clear from what is quoted above that insofar as Issue no.1 is concerned that in the contract there was no absolute obligation caste on the appellant to deliver exactly the same quantity of bunkers at the time of re- delivery. It was the submission of the learned counsel for the respondent, that though a finding positively in the affirmative was not recorded on Issue no.1, it is obvious from the Award that the appellant could have delivered slightly higher quantity of bunkers. In our opinion, the submission is not well-founded. Firstly, the Award does not disclose that the Arbitrators have considered what would be slightly higher quantity of bunkers which could be delivered because if that is the finding of the Arbitrators, then the Arbitrators would have to hold an enquiry and record a finding as to what is the exact marginal or slightly higher quantity of bunkers which could be delivered and difference of price will have to be calculated only after excluding that slightly higher quantity of bunkers. Perusal of the Award shows that this exercise has not at all been * 7 * APPEAL-713/06 undertaken by the Arbitrators. Thus, from the Award we do not find that the Arbitrators have anywhere recorded a finding that though there was no absolute obligation caste upon the charter party to deliver exactly the same quantity of bunkers only slightly higher quantity could have been delivered. In our opinion, an enquiry into Issue no.2 was possible by the Arbitrator only on recording a positive finding that there was liability on the appellant to deliver the same quantity of bunkers at the time of re-delivery of the vessel or a finding that if there was no obligation or liability to deliver same quantity, what was the permissible higher or lower quantity of bunkers that could be delivered. Without recording these findings, there was no question of entering into enquiry into Issue no.2, because, an enquiry into Issue no.2 would ensue only on a finding that the appellant has delivered quantity of bunkers in excess of the agreed quantity. In the absence of any finding as to what was the agreed quantity to be delivered, there was no question of entering into enquiry as to what is the price to be paid for the excess quantity, because the provisions of Clause-33 are clear, that the price to be paid for the bunkers at the time of re-delivery shall be the same which was prevailing at the time of delivery of the vessel. Therefore, in the absence of the finding that excess bunkers in breach of the contract were delivered, there was no question of the appellant deducting any price, other than the price mentioned in the contract. 8. We find from the record, that the learned Single Judge has missed this aspect of the matter. The learned Single Judge has found that it was for the appellant to prove what is the market price of the bunkers at the time of re- * 8 * APPEAL-713/06 delivery and if that has not been proved by the appellant, he cannot succeed. In our opinion, the contention of the appellant in relation to the market price was an alternative submission on being found that he has committed breach of the agreement. It was the submission of the appellant that if it is found that he has committed breach of the agreement by delivering excess quantity of bunkers, he should be paid price for the bunkers which was the market price prevailing on the date of delivery and not the price which was agreed in the contract between the respondent and his next hirer to which the appellant was not a party. In our opinion, that aspect would arise for consideration only if the appellant is found liable to deliver either same or similar quantity of bunkers. Taking overall view of the matter, therefore, in our opinion, the Arbitrators were not justified in making the Award directing the appellant to pay an amount of Rs.4,83,719.64/-. In the result, therefore, the appeal succeeds. The order of the learned Single Judge impugned in the appeal is set aside. The petition filed by the petitioner before the learned Single Judge being Arbitration Petition No. 103 of 2006 is allowed in terms of prayer clause (a). The amount that may have been deposited by the appellant pursuant to the interim order made in the appeal shall be refunded to the appellant with accruals, if any, on the expiry of the period of 6 weeks. [D.K. DESHMUKH, J] [SMT. R.P. SONDURBALDOTA, J]