- 1 - IN IN IN THE HIGH COURT OF JUDICATURE AT BOMBAY THE HIGH COURT OF JUDICATURE AT BOMBAY THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORDINARY ORDINARY ORIGINAL CIVIL JURISDICTION ORIGINAL CIVIL JURISDICTION ORIGINAL CIVIL JURISDICTION ARBITRATION ARBITRATION ARBITRATION PETITION PETITION PETITION NO.66 OF 2002 NO.66 OF 2002 NO.66 OF 2002 WITH WITH WITH ARBITRATION ARBITRATION ARBITRATION PETITION PETITION PETITION NO.67 OF 2002 NO.67 OF 2002 NO.67 OF 2002 WITH WITH WITH ARBITRATION ARBITRATION ARBITRATION PETITION PETITION PETITION NO.68 OF 2002 NO.68 OF 2002 NO.68 OF 2002 WITH WITH WITH ARBITRATION ARBITRATION ARBITRATION PETITION PETITION PETITION NO.69 OF 2002 NO.69 OF 2002 NO.69 OF 2002 The Shipping Corporation of India ... Petitioners v/s Oyster Marine Inc. ... Respondents Mr Gaurav Joshi with Mr V. Uttam i/b M/s Mulla and Mulla and Craigie Blunt and Caroe for Petitioners. Ms Rajani Iyer with Ms S.M. Singh, Mr S.C. Naidu, Mr Manish Dave and Mr Jayesh Choksi i/b M/s C.R. Naidu and Co. for Respondents. CORAM : D.K.DESHMUKH J. DATE : 1ST SEPTEMBER 2004 - 2 - ORAL JUDGMENT :- 1. The parties in these four petitions are identical. Some of the issues involved in these petitions are also identical. Before the Arbitrator, the evidence in all these matters was treated as common. Therefore, these four petitions can be conveniently disposed off by a common order. 2. In all these petitions, awards 22nd October 2000 made by the same learned Arbitrator directing the petitioners to pay various amounts under different heads to the respondents are challenged. The facts that are material and relevant for deciding these petitions are that the petitioners are a Government of India Company engaged in the business of shipping and it owns several vessels. The vessels which are subject matter of the present proceedings are M.T. KOLANDIA, M.T. RAFI AHMED KIDWAI, M.V. LOK VIVEK and M.V. HARKISHIN. The respondent Company is a partnership firm. It is engaged in the business of providing services of ship management, consultancy, manpower and agency services. The petitioners, who are owners of the abovenamed four vessels had entered into agreements with the - 3 - respondents. The agreements were described as manning agreement for providing services on the said vessels for their efficient total management. It was the responsibility of the respondents to provide officers and crew members for manning the said vessels. The respondents were liable to pay all the expenses relating to the personnel of the vessels including wages, salaries etc. By agreements between the parties, the amounts that the petitioners were liable to pay to the respondents for providing the above referred services were fixed. It appears that there were disputes between the parties in relation to amounts receivable by the respondents under certain heads. Therefore, the amounts were not paid by the petitioners, ultimately summary suit Nos.3113 of 1995, 314 of 1995, 324 of 1995 and 3204 of 1995 were filed in this Court. In those summary suits, the parties agreed to refer their disputes to a common Arbitrator. Accordingly, the disputes were referred to the learned Arbitrator, the parties submitted their pleadings, led documentary as well as oral evidence and the learned Arbitrator has passed four different awards, all dated 22nd October 2000, each relating to a separate vessel, directing the petitioners to pay different sums under different heads to the respondents. - 4 - 3. By the awards, in so far as vessel M.V. KOLANDIA is concerned, the learned Arbitrator has directed the petitioners to pay an amount of Rs.7,20,000/- towards performance bonus and Rs.3,766/- towards compensation for the provisions left behind by the respondents on board of the vessel. These amounts were directed to be paid with interest at the rate of 18 % p.a. upto the date of the award and at the rate of 12 % p.a. from the date of the award till realisation. In relation to the vessel M.V. RAFI AHMED KIDWAI, the learned Arbitrator has directed the petitioners to pay an amount of Rs.3,60,000/- towards performance bonus, Rs.17,60,935/- towards arrears of manning fee, Rs.27,612.25 towards loss of provisions on board of the vessel. The learned Arbitrator has also directed the petitioners to pay interest to the respondents at the same rate as in the case of vessel M.T. KOLANDIA. So far as the vessel M.V. LOK VIVEK is concerned, the learned Arbitrator has directed the petitioners to pay Rs.7,07,000/- towards performance bonus, Rs.26,483.85 towards loss of provisions on board of the vessel, Rs.15,773/- towards price of the provisions left on board of the vessel, Rs.3,38,000/- towards radio calls, Rs.6,864/- towards extra / special overtime and Rs.2,735/- towards cost of extra messing. The learned Arbitrator has also directed payment of interest at the - 5 - same rate as in the case of M.T. KOLANDIA. So far as the vessel M.V.HARKISHIN is concerned, the learned Arbitrator has directed the petitioners to pay an amount of Rs.4,50,000/- towards performance bonus, Rs.1,27,816/- towards special overtime, Rs.1,42,866/- towards premature discharge compensation. The learned Arbitrator has directed payment of interest at the same rate as in the case of M.T. KOLANDIA. The analysis of the awards made by the learned Arbitrator shows that in relation to all four vessels, the learned Arbitrator has directed the petitioners to pay amounts towards performance bonus. In other words, the issue of performance bonus is common to all the four vessels. The amounts have been directed to be paid by the learned Arbitrator as price of the provisions left behind on board of the vessel in relation to two vessels i.e. M.T. KOLANDIA and M.V. LOK VIVEK. The issue of loss of provisions on board of the vessel is also common in relation to two vessels i.e. M.T. RAFI AHMED KIDWAI and M.V. LOK VIVEK. Similarly, the issue of special overtime is common in relation to two vessels i.e. M.V. LOK VIVEK and M.V. HARKISHIN. The other issues are arising in relation to a singular vessel. The issue of interest is also common in relation to all vessels. Therefore, first I propose to take up the issue of performance bonus which is common to all the vessels. - 6 - 4. In relation to vessel M.T. KOLANDIA, the manning agreement was signed on 14th June 1990. As per the agreement, the petitioners were to pay an amount of Rs.6,15,000/- p.m. as manning fees to the respondents. On 12th September 1990, the petitioners offered an increase in manning fees of Rs.1,90,000/- p.m. and the petitioners also offered an additional amount of Rs.30,000/- p.m. as performance bonus. On 28th December 1990, the petitioners addressed a letter to the respondents laying down criteria for payment of performance bonus. By that letter, the amount of Rs.30,000/- was split up into three categories - (1) maintenance and upkeep of the vessel - Rs.10,000/-; (2) provision of duly certified and experienced senior officers with a minimum of tour duty of six months - Rs.10,000/- and (3) achievement of physical performance in respect of bunker and lube oil consumption as per annexure - Rs.10,000/-. So far as the vessel M.T. RAFI AHMED KIDWAI is concerned, the manning agreement was entered into on 16th December 1989. The per month manning fees was the same i.e. Rs.6,15,000/-. In case of this vessel also on 12th September 1990, increase in manning fees was agreed i.e. Rs.1,90,000/- p.m. and additional amount of Rs.30,000/- p.m. towards performance bonus was also agreed. On 28th December - 7 - 1990, criteria for being eligible for performance bonus was also communicated. So far as the vessel M.V. LOK VIVEK is concerned, the manning agreement was entered into on 4th February 1991. The manning fees was agreed at Rs.7,95,000/- p.m. This agreement is after 28th December 1990 but in the agreement itself, there is no mention either of performance bonus or of the criteria laid down by letter dated 28th December 1990 for being eligible for performance bonus. so far as the vessel M.V. HARKISHIN is concerned, the agreement was entered into on 5th July 1991, it was effective from 28th June 1991. The manning fees agreed was Rs.7,95,000/-. In relation to this vessel also, though the agreement is subsequent to 28th December 1990, in the agreement there is no mention of performance bonus nor is there any mention of the criteria to be fulfilled for being eligible for the performance bonus. It appears that manning contracts in relation to all the vessels were extended after 1st July 1992 and the manning fee was increased. In so far as the period after 1st July 1992 is concerned, there is a dispute between the parties whether performance bonus was to be paid by the petitioners for that period or it was not to be paid. 5. So far as this aspect of the matter is concerned, perusal of the award of the learned - 8 - Arbitrator shows that according to the learned Arbitrator, proposal for payment of performance bonus was contained in the letter dated 12th September 1990 of the petitioners, which stated that performance bonus shall be payable for trouble free operation of the vessel. According to the learned Arbitrator, it is this offer which was accepted by the respondents and therefore, according to the learned Arbitrator, performance bonus was to be paid for trouble free operation. The learned Arbitrator has held that the criteria which is laid down by the letter dated 28th December 1990 is not binding because the petitioners paid the performance bonus amounting to Rs.1,38,750/- against the invoices of the claimants on or before 29th January 1991 and therefore, it shows that the petitioners had given up the norms or criteria laid down in the letter dated 28th December 1990. Following observations of the learned Arbitrator, in my opinion, are relevant :- "While making such payments of the performance bonus for the said periods, the Respondents had not raised any issue pertaining to any criteria / norms stated by the Respondents in their said letter dated 28th December 1990 addressed to the Claimants. In the facts and - 9 - circumstances and the evidence on record, both oral and documentary, I hold that the payment of additional amount of Rs.30,000/- per month by the Respondents to the Claimants towards performance bonus was subject to the trouble free operation of the Vessel by the Claimants and that performance bonus was to be paid by the Respondents to the Claimants on quarterly basis after three months after the expiry of the quarter as mentioned in the Respondents’ said letter dated 12th September 1990." . Perusal of the awards in other cases shows that similar reasoning has been adopted by the learned Arbitrator in relation to other vessels also. The learned counsel appearing for petitioners submits that the learned Arbitrator has totally omitted from consideration the letters dated 15th October 1993 and 22nd September 1993 written by the respondents to the petitioners submitting their claim for the performance bonus by specifically referring to the letter dated 28th December 1990. The learned counsel thus submits that these letters show that the criteria for being eligible for payment of performance bonus laid down in the letter dated 28th December 1990 was accepted by the respondents. The learned counsel also referred to the - 10 - letter dated 27th May 1994 and pointed out that in that letter, the respondents specifically referred to the letter dated 28th December 1990 and the criteria laid down therein and accepted that performance is the sole criteria for deciding the payment of performance bonus. It was also admitted that their performance was not 100%. The learned counsel further submits that the respondents had in the statement of claim specifically referred to the letter dated 28th December 1990. The learned counsel submits that at no point of time the respondents ever claimed that the criteria laid down in the letter dated 28th December 1990 was either waived by the petitioners or was not applicable. According to the learned counsel, on the contrary, it was the case of the respondents that the criteria laid down in the letter dated 28th December 1990 was binding on the respondents. It is submitted that so far as the aspect of satisfying the norms laid down in the letter dated 28th December 1990 is concerned, apart from the fact that the learned Arbitrator has not considered this aspect of the matter, the letter of the respondents themselves shows that they have not complied with these norms. The learned counsel therefore, submits that the award made by the learned Arbitration in this regard is liable to be set aside. The learned counsel also invited my attention to the statement made by the respondents’ witness stating - 11 - therein that the performance norms as set out in the letter dated 28th December 1990 were binding and that the respondents had submitted their invoices pursuant to those norms. The learned counsel further submits that so far as the payment made which has been relied on by the learned Arbitrator is concerned, it is for the period before December 1990 and as the norms were issued in December 1990, payment for the earlier period was made without insisting on compliance with the norms set out in the letter dated 28th December 1990. It is further submitted that the learned Arbitrator has wrongly cast burden to prove that the norms were not fulfilled by the respondents on the petitioners. It is submitted that it was for the respondents to satisfy the learned Arbitrator that they had fulfilled the norms in order to entitle them to the award of performance bonus. It is submitted that by submitting invoices dated 22nd September 1993 and 15th October 1993, by pointedly making reference to the letter dated 28th December 1990, the respondents had admitted applicability of the norms. Nowhere in the evidence there was even an attempt made to explain this admission and therefore in the absence of the explanation, the learned Arbitrator ought to have relied on that admission to reject the claim of the respondents. - 12 - 6. On behalf of the respondents, on the other hand, it is submitted that offer for payment of performance bonus was made by letter dated 12th September 1990 and the offer was to pay performance bonus for trouble free operation. The performance bonus was payable from 1st April 1990, it is this offer which was accepted by the respondents and thus, there was a concluded contract between the parties for payment of performance bonus on satisfying the norm of trouble free operation. According to the respondents, if the petitioners wanted to impose any more conditions, then they would be binding only if they are accepted by the respondents. According to the respondents, the offer made in the letter dated 28th December 1990 was never accepted by the respondents and therefore, the norms laid down in the letter dated 28th December 1990 are not binding on the respondents. It is also submitted that the payment of performance bonus for the period from 1st April 1990 to 31st December 1990 by the petitioners without insisting on the satisfaction of the norms shows that even according to the petitioners, the norms laid down in the letter dated 28th December 1990 were not binding between the parties. It is further submitted that submission of invoices by letters dated 22nd September 1993 and 15th October 1993 would also not amount to acceptance of the conditions contained in the - 13 - letter dated 28th December 1990 because acceptance of the offer has to be within a reasonable time. It is lastly submitted that in any case, the award cannot be set aside for this reason. It is further submitted that the witnesses examined for the petitioners have themselves stated that the performance of the respondents was satisfactory. 7. So far as the period after 1st July 1992 is concerned, according to the petitioners, no performance bonus was paid because the petitioners never offered to pay performance bonus for the period subsequent to 1st July 1992. According to the petitioners, for considering the offer to be made to the existing manning contractors, for continuation of the contracts for a further period, a meeting of the Standing Committee of the petitioners was held on 2nd July 1992 and in that meeting, the offer to be made was decided upon. In that meeting, it was specifically decided that no performance bonus would be payable. The learned counsel therefore submits that as the offer was to be made pursuant to the decision of the Standing Committee dated 2nd July 1992, no performance bonus could be claimed. No officer of the petitioners had power to offer payment of performance bonus contrary to the decision of the Standing committee. It is further submitted that even - 14 - assuming that performance bonus was payable for the period subsequent to 1st July 1992, it would be payable on the same terms and conditions and therefore, as the respondents have not complied with the norms laid down in the letter dated 28th December 1990, the respondents would not be entitled to payment of performance bonus for the period subsequent to 1st July 1992 also. 8. So far as this aspect of the matter is concerned, the learned counsel for the respondents relies on the deposition of Anil Badle, a witness examined on behalf of the petitioners to claim that the respondents at no point of time were informed that for the period after 1st July 1992 performance bonus will not be paid. 9. Now, if in the light of these rival submissions the record of the case is perused, it becomes clear from the observations in the award quoted above that the learned Arbitrator has held that the norms laid down by letter dated 28th December 1990 were waived by the petitioners because they made payment of performance bonus for the period from 1st April 1990 to 31st December 1991, in February 1991, without insisting on compliance of the norms laid down in the letter dated 28th December 1990. In my opinion, the reason given by - 15 - the learned Arbitrator omits from consideration following relevant aspects :- i) That the payment related to the period when no norms were laid down. Norms were for the first time laid down by letter dated 28th December 1990. ii) The learned Arbitrator also did not consider the statements made in paragraph 16 of the statement of claim. Paragraph 16 of the statement of claim reads as under :- "16. The Respondents, by their letter dated 28th December 1990 for the first time set out the norms against which the Claimants would be paid performance bonus. The performance bonus amount of Rs.30,000/- Rupees Thirty Thousand only) per month was split in three equal segments of Rs.10,000/- (Rupees Ten Thousand only) to be paid to the Claimants against satisfactory performance in the following manner:- - 16 - (a) Maintenance and upkeep of the vessel Rs.10,000/- (b) Provision of duly certified and experienced ship board personnel with minimum of six for 5 Sr.Officers Rs.10,000/- (c) (i) Achievement of physical performance norms inspection of speed bunker and Lube oil consumption as per attached performance. (ii) down time inspection operation Rs.10,000/- These requirements were to be periodically reviewed and on compliance therewith the Claimants were to be entitled to the performance bonus." - 17 - Perusal of paragraph 16 quoted above shows that the respondents proceeded on the basis that the norms laid down in the letter dated 28th December 1990 are applicable and are required to be fulfilled. iii) The learned Arbitrator did not consider the letter dated 22nd September 1993. Perusal of that letter shows that it was written in relation to the vessel M.T.KOLANDIA, seeking payment of performance bonus for the period from April 1992 to March 1993. This letter pointedly referred to the agreement letter dated 28th December 1990 and by that letter, details were given to claim that the respondents have complied with the norms laid down in the letter dated 28th December 1990. iv) The learned Arbitrator also excluded from consideration the letter dated 15th October 1993 by which invoices for payment of performance bonus from October 1991 to March 1992 in relation to vessel - 18 - M.T. KOLANDIA were submitted. Here again, the letter dated 28th December 1990 was pointedly referred to and an attempt was made to show that the norms laid down in the letter dated 28th December 1990 have been complied with. v) The learned Arbitrator also excluded from consideration the letter dated 27th May 1994. The reference of this letter reads as under :- "Re: Performance bonus due to us for the period from October 1991 to December 1993 in respect of vessels - M.V. LOK VIVEK, M.V. HAKISHIN, M.T. RAFI AHMED KIDWAI AND M.T. KOLANDIA." Following statements from that letter are relevant :- "Sir, as you are already aware this ’PERFORMANCE BONUS’ of Rs.30,000/- per month / per vessel already sanctioned by you is split into 3 equal segments of Rs.10,000/- each and is determinable and - 19 - payable to us against satisfactory performance of the Criteria A, B and C specified above. We are fully aware that the ’PERFORMANCE’ is the soul criterion for deciding this payment from our side at this juncture, we can only say that we have performed may not be to your entire satisfaction but at the same time the very fact that the vessels were managed by us for over three years speak for itself. Sir, under the circumstances we should be entitled if not to 100 % payment may be to a good percentage which you may favourably consider....." By this letter, the respondents accepted the applicability of the norms laid down by letter dated 28th December 1990 and also conceded that the respondents have not complied with those norms fully. vi) The learned Arbitrator also ignored the statements made by the witness of the respondents where he has relied on - 20 - performance norms as set out in the letter dated 28th December 1990 and admitted that the invoices were submitted on that basis. 10. In my opinion, exclusion from consideration of these relevant and material aspects vitiates the award of the learned Arbitrator in so far as the aspect of performance bonus is concerned. The learned Arbitrator, apart from excluding from his consideration relevant and material aspects as indicated above, has considered irrelevant aspects. Perusal of the award shows that the learned Arbitrator has observed that the performance was considered excellent by the officers of the petitioners and endorsements about the performance of the vessel were noted as satisfactory in the logbooks whereas it is an admitted position that the logbooks though were produced by the petitioners, were not admitted is evidence because of an objection raised by the respondents. It is further to be noted here that the learned Arbitrator has considered the statements made by the witness regarding performance of the vessel in relation to the charter party agreements and not the norms laid down in the letter dated 28th December 1990. The level of performance of the vessel so far as charter party is concerned is totally difficult than the level - 21 - of performance for being entitled to the performance bonus. 11. I find that the learned Arbitrator has also placed the burden of proving that the norms laid down in the letter dated 28th December 1990 were fulfilled by the respondents on the petitioners. The learned Arbitrator has referred to the deposition of the witnesses Mr Pinaki Mukherjee and Mr Ramchandra Bhaskar Zarapkar and has said that they had not been able to show that the respondents did not comply with the norms laid down in the letter dated 28th December 1990. It is pertinent to note here that these witnesses had evaluated the performance of the vessels considering the parameters specified in the relevant charter party agreements and there was no evaluation carried out by them to find out whether the