O.M.P. 482/2010 Page 1 of 39 * IN THE HIGH COURT OF DELHI AT NEW DELHI Judgment reserved on: 07.07.2011 % Judgment delivered on: 20.07.2011 + O.M.P. 482/2010 SOUTHERN PETROCHEMICAL INDUSTRIES CORPORATION LIMITED AND ANOTHER ..... Petitioners Through: Mr. K.V. Viswanathan, Senior Advocate, with Mr. Gagan Gupta, Advocate. Versus THE GREAT EASTERN SHIPPING CO LTD ..... Respondent Through: Mr. Amitava Majumdar, Mr. Arvind Kumar & Mr. Saurabh Arun Chaudhari, Advocates. CORAM: HON’BLE MR. JUSTICE VIPIN SANGHI 1. Whether the Reporters of local papers may be allowed to see the judgment? : 2. To be referred to the Reporters or not? : 3. Whether the judgment should be reported in the Digest? : J U D G M E N T VIPIN SANGHI, J. 1. The present is a petition filed under Section 34 of the Arbitration and Conciliation Act to assail the arbitral award dated 17.02.2010 passed by an arbitral tribunal consisting of three learned Arbitrators, O.M.P. 482/2010 Page 2 of 39 namely Mr. H.M.Singh, Mr. R.S. Saran and Capt. S.M.Berry. By the impugned award, the arbitral tribunal has allowed the claim of the respondent to the tune of Rs.44,19,527.78 and has granted interest at the rate of 6.5% per annum from 18.05.1994 onwards till the date of payment. The Tribunal has also quantified the fee at Rs.3,20,000/-, which is to be shared equally between the parties. 2. The petitioner No.2, Government of India, Through the Ministry of Chemicals and Fertilizers, Department of Fertilizers, took the respondents vessel “Jag Rahul” under a charter party dated 10.06.1992, to carry 35,000 mts, 5% more or less at the respondent‟s option, of bulk Di-Ammonium Phosphate (DAP). Petitioner No.1, M/s Southern Petrochemical Industries Corporation Limited were the receivers of the cargo at the port of Kakinada. In pursuance of the Charter Party, the vessel carried 36,145 mts of bulk DAP from port of Morehead City to Kakinanda and discharged the cargo at Kakinada. The voyage was completed on 23.11.1992. 3. There is no dispute that the respondent‟s vessel arrived at the port of Kakinada on 0706 hours on 08.08.1992 and tendered Notice of Readiness (NOR) at 1000 hours on the same day. In accordance with clause 28 of the Charter Party, the lay time commenced to run at 0800 hours on 10.08.1992. The petitioner commenced discharge operations at 1045 hours on 01.10.1992 and completed discharge at 0800 hours on 23.11.1992. In terms of the Charter Party, the lay time available to the petitioner for discharge of the cargo of 36,145.891 mts was 30 O.M.P. 482/2010 Page 3 of 39 days 2 hours and 55 minutes. However, the petitioner utilized 92 days and 5 hours. On this basis the respondent claimed demurrage for 62 days 2 hours and 5 minutes at the rate of 1,40,000 per running day pro-rata. 4. The petitioner, on the other hand, vide communication dated 08.04.1993 contended that the demurrage period was 27 days 17 hours and 22 minutes. The petitioner calculated the said period on the basis that there was, inter alia, a stevedore labour strike at the port of Kakinada. In relation to the said period, demurrage stands paid to the respondent. The dispute before the arbitral tribunal pertained to the remaining period only. 5. On 16.05.1994, the Ministry of Surface Transport forwarded to the respondent a revised time sheet thereby agreeing to count the period of strike/labour problem as lay time used at discharge port. The Ministry of Surface Transport conveyed the agreement to pay demurrage on the basis that the demurrage period was 59 days and 7 hours. Thereafter, the Ministry of Surface Transport vide communication dated 02.06.1994, addressed to the Department of Fertilizers, called upon the Department of Fertilizer to pay the demurrage for the period of 59 days and 7 hours. It appears, the petitioners, who were to bear the burden of the additional demurrage disputed the said claim of the respondent. Consequently, vide communication dated 27.10.1994 addressed to the respondent, the Ministry of Surface Transport restated its earlier position that the O.M.P. 482/2010 Page 4 of 39 discharge demurrage amounted to only 27 days 17 hours and 22 minutes. 6. Disputes arose between the parties about the calculation and payment of discharge port demurrage. The respondent on 27.07.1995 invoked the arbitration agreement between the parties contained in Clause 51 of the Charter party and nominated an Arbitrator. According to the petitioner, the invocation of the arbitration by the respondent was not in accordance with the arbitration agreement and, consequently, the claim of the respondent was barred by limitation. This aspect shall be dealt with in detail a little later while dealing with the petitioner‟s submission that the claim of the respondent was barred by limitation. Suffice it to state at this stage, that the arbitral tribunal consisting of the aforesaid three arbitrators was constituted in terms of the order dated 18.06.2008 in OMP No.194/1998 passed by a learned single Judge of this Court. All the three learned Arbitrators are men with experience in the maritime field. 7. To claim exclusion of the period (from lay time calculation) for which the petitioner claimed that there was a strike of the stevedores/labour at the discharge port, the petitioner relied upon clause 33 of the Charter Party. Clause 33 of the Charter Party reads as follows:- “If the cargo cannot be loaded by reason of riots, civil commotions or of a strike or lockout of any class of workmen essential to the loading of the cargo, or by reason of obstructions or stoppages beyond the control of the Charterers caused by riots, civil commotions or of a O.M.P. 482/2010 Page 5 of 39 strike or lockout, on the railways, or in the Docks or other loading places, or if the cargo cannot be discharged by reason of riots, civil commotions, or of a strike or lockout of any class of workmen essential to the discharge, the time for loading or discharging as the case may be shall not count during the continuance, of such causes, provided that a strike or lockout of the Shippers and/or receivers, men shall not prevent demurrage accruing if by the use of reasonable diligence they could have obtained other suitable labour at rates current before the strike or lockout. In case of any delay by reason fo the before mentioned causes, no claim for damages or demurrage, shall be made by the Charterers, Receivers of the cargo or Owners of the steamer. For the purpose, however, of settling dispatch money accounts, any time lost by the steamer through any of the above causes shall be counted as time used in loading and discharging as the case may be.” 8. In support of its claim that there was a strike of the stevedore labourers at the Kakinada port, the petitioner placed before the Arbitral tribunal, a certificate dated 03.03.1994 issued by the Kakinada Steamer Agents Association (Regd.) wherein it was certified as follows:- “The mv. “JAG RAHUL” which arrived in Kakinada Port on 8th August, 1992 for discharge of about 36,245 mt D.A.P A/C. SPIC was not allowed discharge turn till 23.08.92 as per norms of allotment of working turns to vessels at Kakinada Port. When she was about to get into turn the Stevedoring Labour declared strike on 23.08.92 which resulted in delay in allotment of turn to the said ship till the strike was resolved. The stevedors strike was called of on 27.09.92 and finally the vessel was allotted discharge turn on 29.09.92.” 9. The petitioner also produced a communication dated 01.10.1994 from the Commissioner of Labour, Labour Department, Government of Andhra Pradesh stating that the stevedore labour workers at Kakinada went on strike w.e.f. 23.08.1992 and called of the same on 24.09.1992. O.M.P. 482/2010 Page 6 of 39 The said communication was statedly founded upon the report of the Assistant Commissioner of Labour, Kakinada. 10. The learned arbitral tribunal rejected the defence of the petitioner and awarded the respondent/claimants claim. The reasoning of the tribunal for allowing the said claim reads as follows: “In the course of the arguments the claimants accepted that there may have been a strike whose commencement, ending and duration varies from document to document. However, the same does not affect the claim since the charterer had the option tio nominate the second port, as per cl.24 of the charter party which specifically states that such orders can be given even during the period of discharge, which for reasons known to the charterers, they have not exercised. For determining the demmurage/dispatch in voyage charters the most important documents are the Notice of Readiness (NOR) and the Statement of Facts (SOF). These are contemporaneous documents which record day to day events during the course of vessel‟s stay in the port for loading/discharging operations. The Statement of Facts (SOF) in the subject case is completely silent about the vital point at the issue ie. Strike. The fact of strike is just not mentioned and recorded in the SOF. The subsequent evidence produced by the Respondent to show and prove strike is at much later stage. And evidence on strike that has been provided is rather inconsistent. When preparing the time sheet for determining the duration of delay/demurrage the charterers went by the Statement of Facts and conveyed the demurrage calculations unequivocally. Subsequently they re-siled and retracted from the acceptance on grounds/evidence which is just not sufficient enough to support the charterers‟ case and the Tribunal is not convinced that there are sufficient acceptable grounds to deviate from the position outlined in NOR/SOF.” 11. The submission of Mr. K.V. Vishwanathan, learned senior counsel for the petitioner is that the award made by the arbitral tribunal is O.M.P. 482/2010 Page 7 of 39 patently illegal. He submits that even the respondent/claimant had accepted that there was a strike of the stevedores/labourers at the relevant time. This fact is even recorded by the arbitral tribunal in the aforesaid extract of the award. My attention is also drawn to para 15 of the statement of claim filed by the respondent, wherein the respondent had, inter alia, stated “The claimant states that the respondent had sufficient knowledge of the intended strike of the Stevedores labour and could have obtained other suitable labour. The Respondents failed to exercise reasonable diligence in the matter and the alleged strike cannot prevent the accrual of the demurrage”. 12. Learned senior counsel for the petitioner submits that the aforesaid extract clearly shows the admission of the respondent/claimant of the factum of the strike. The case of the respondent/claimant was that the said strike would not stop running of the lay time and the accrual of the demurrage as, by exercise of reasonable diligence, the petitioner could have arranged for other suitable labour. In this argument of the respondent, there is a clear admission of the factum of the strike. The same position was restated by the respondent in its rejoinder filed before the arbitral tribunal, particularly in para 3 under the heading rejoinder “rejoinder to respondents defence submission”. 13. The submission of the petitioner is that the tribunal has not even considered the evidence produced by the petitioner to prove the existence of the strike. Neither the certificate issued by the Kakinada O.M.P. 482/2010 Page 8 of 39 Steamer Agents Association (Regd.) dated 03.09.1994, which certified that the stevedores labour declared strike on 23.08.1992 and the same was called of on 27.09.1992, nor the communication dated 01.10.1994 issued by the Commissioner of Labour, Govt. of Andhra Pradesh Labour Department, certifying that there was a strike of the stevedore labour between 23.08.1992 and 24.09.1992 have been considered by the tribunal. 14. Learned senior counsel for the petitioner submits that in one of the proceedings of the tribunal, the parties had recorded that they do not deny the existence of the documents filed by the opposite party. However, the interpretation and applicability of the documents to the facts of the case, after hearing the parties, was left to the tribunal. In the said order passed by the tribunal, it was, inter alia, recorded as follows: “The respondents have filed another application under Rule 14 and 15(2) of the Maritime Arbitration Rules of ICA. On admission and denial of documents there are mostly inter party documents and about the other documents the position is that while the existence is not denied, their interpretation and applicability to the facts of the case was left to the Tribunal to take a view after hearing the parties. On this basis the respondents did not press their application and the application stands disposed off. The claimants were heard on the merits of the case.” 15. Mr. Vishwanathan submits that as there was no dispute raised by the respondent to the authenticity of the aforesaid two certificates – one issued by the Kakinada Steamer Agents Association (regd.), and the other by the Labour Commissioner, Govt. of Andhra Pradesh, there O.M.P. 482/2010 Page 9 of 39 was no occasion for the petitioner to lead any further evidence to establish the existence of the strike of the stevedores labour at the relevant time. He submits that the learned tribunal, despite the aforesaid undisputed evidence and admission of the respondent/claimant in its statement of claim and rejoinder, has returned a finding that merely because the factum of the strike was not recorded in the Statement of Facts (SOF), it could not be accepted that there was indeed a strike at the relevant time. 16. Mr. Vishwanathan further submits that the only inconsistency pointed out in the aforesaid certificates was with regard to the date on which the strike of the stevedore labour ended/was called off. While, according to the Kakinada Steamer Agents Association (Regd.), the said strike was called off on 27.09.1992, according to the certificate issued by the Commissioner of Labour, Govt. of Andhra Pradesh, the same was called off on 24.09.1992. He submits that the petitioner had, in fact, while computing the demurrage period as 27 days 17 hours and 22 minutes, treated the strike as lasting only upto 17.09.1992, which was therefore advantageous to the respondent. He submits that the arbitral tribunal should have therefore accepted the calculation of the demurrage period as done by the petitioner as 27 days 17 hours and 22 minutes, as the addition of the period thereafter either upto 24.09.1992, or upto 27.09.1992, would have reduced the demurrage period even further. O.M.P. 482/2010 Page 10 of 39 17. Mr. Vishwanathan submits that there is a fundamental error in the approach of the arbitral tribunal in proceeding on the basis that the SOF is the only repository of all facts, and if the event of strike of stevedore labour was not mentioned in the SOF, the same could not be pleaded or proved otherwise. He submits that it is well settled in law that the SOF is considered only as a prima facie evidence of the facts which existed at the relevant time. The SOF, in the present case, records the occurrence of events which have taken place on and from the date on which the discharge turn was allotted to the respondent, i.e. 29.09.1992. It does not record the earlier events. That is why the factum of strike/labour unrest has not been recorded. 18. Mr. Vishwanathan submits that in the SOF, there is nothing recorded to contraindicate or to deny the existence of the strike. In support of his submission that the SOF cannot be construed as recording the emergence of any „lis‟ or dispute for adjudication, and that the said document merely recorded the catalogue of events, he relies upon the decision of the Calcutta High Court in Hindusthan Paper Corporation Ltd. v. Wellbrines Chemicals Private Ltd., 2002 (3) Cal LT 114 (HC). It has also been held in this decision that the said document does not have much of an impact on the adjudication by the arbitrators. He, therefore, submits that the adjudication by the arbitrators of the disputed questions of fact (assuming that the factum of strike was a disputed fact) cannot solely depend upon the recordings made in the SOF. O.M.P. 482/2010 Page 11 of 39 19. Mr. Vishwanathan submits that the award made by the arbitral tribunal is unreasoned. The arbitral tribunal has merely recorded that the petitioner resiled and retracted from the acceptance of the demurrage period as 59 days and 7 hours “which is just not sufficient enough to support the charterers‟ case and the Tribunal is not convinced that there are sufficient acceptable grounds to deviate from the position outlined in NOR/SOF”. The Arbitral Tribunal has not stated as to why the reasons given by the petitioners for claiming that the demurrage period as 27 days 17 hours and 22 minutes are not sufficient, and why the grounds to “deviate” (according to the petitioner there is no “deviation”) from the SOF are not sufficiently acceptable. 20. He further submits that the Arbitral Tribunal does not say as to how, or why, the petitioners who are not even the author of the communication dated 16.05.1994, could be bound down by the said communication which had been issued by the Ministry of Surface Transport without taking the petitioners into confidence. As to what constitutes reasons, Mr. Vishwanathan relies on the observations of the Supreme Court in Union of India Vs. M.L. Capoor & Ors., AIR 1974 SC 87. The Supreme Court had held that “Reasons are the links between the materials on which certain conclusions are based and the actual conclusions. They disclose how the mind is applied to the subject matter for a decision whether it is purely administrative or quasi-judicial. They should reveal a rational nexus between the facts O.M.P. 482/2010 Page 12 of 39 considered and the conclusions reached. Only in this way can opinions or decisions recorded be shown to be manifestly just and reasonable”. 21. Mr. Vishwanathan submits that, admittedly, it was the Govt. of India acting through the Ministry of Chemicals and Fertilizers and Southern Petro Chemicals Industries Corporation Ltd., i.e. the petitioners herein, who are the beneficiaries under the charter party in question. The charges towards demurrage were payable by the petitioners. 22. At this stage itself I may note that learned counsel for the respondent has also submitted that, at the relevant time, all charter parties entered into between various departments/organizations of the Government were formally entered into by the Ministry of Surface Transport. The submission of Mr. Vishwanathan is that the petitioners communicated the demurrage period, according to their calculation, on 07.04.1993. The lay time calculation had taken into account the strike period upto 17.09.1992. Thereafter, the Ministry of Surface Transport had, on its own, unilaterally communicated that the charterers are agreeable to count the strike/labour problem period as lay time used at discharge port and computed the demurrage period as 59 days and 7 hours. 23. When the Ministry of Surface Transport required the Department of Fertilizers to make payment of the demurrage charges for 59 days and 7 hours, the same was disputed by the petitioners. The petitioners O.M.P. 482/2010 Page 13 of 39 insisted that the demurrage period was 27 days 17 hours and 22 minutes on the basis of irrefutable evidence. As a consequence, the Ministry of Surface Transport on 27.10.1994 communicated to the respondent that the demurrage period was only 27 days 17 hours and 22 minutes, and no more. 24. Mr. Vishwanathan further submits that there is no admission in any of the communications relied upon by the respondent of the fact that there was no strike/labour unrest at the Kakinada Port. At best, it could be said that the Ministry of Surface Transport, without the concurrence of the Charterers and on its own, without having the advantage of perusing the relevant documents, had communicated the premature decision to pay the demurrage even for the period during which the strike/labour unrest was there. He submits that even a perusal of the letter dated 16.05.1994 would shows that in the said letter it was not admitted that there was no strike/labour problem. What was recorded by the Ministry of Surface Transport was that the Charterers are agreeable to counting of strike/labour party as lay time used at discharge port. 25. Mr. Vishwanathan submits that the respondent while filing its statement of claim, did not even implead the Ministry of Surface Transport as a party respondent, knowing fully well that the Charter Party was entered into with the petitioner No. 2 through the agency of the Ministry of Surface Transport. Had the respondent impleaded the Govt. of India through the Ministry of Surface Transport, the reason for O.M.P. 482/2010 Page 14 of 39 issuance of the unilateral communication dated 16.05.1994 could have been explored and brought out. Mr. Vishwanathan submits that the communication dated 16.05.1994 could not be attributed to the petitioners or be considered to be an admission of liability by the petitioners, as the same had not been issued by either of them, and on that basis, liability could not have been fastened on them. 26. Mr. Vishwanathan relied upon Section 31 of the Evidence Act to submit that, even assuming for the sake of argument that there was an admission that there was no strike/labour problem, such an admission would not be a conclusive proof of the said matter and that it may only operate as an estoppels in certain cases. He submits that the respondent did not alter its position to its disadvantage in any manner on account of issuance of the communication dated 16.05.1994 and, therefore, there is no question of the petitioners being estopped from denying the respondents claim for discharge demurrage beyond 27 days 17 hours 22 minutes. 27. In support of his aforesaid submission, he places reliance on the Supreme Court judgement in Geo-Group Communications Inc. Vs. IOL Broadband Limited, (2010) 1 SCC 562. In paragraph 25 of this decision, the Supreme Court held as follows: “25. It is well settled that admission previously made can be allowed to be explained in order to show that it was erroneous. The maker of the admission can very well show that the facts admitted are not correct. In the present case, the applicant Company has not only explained the so-called admission to show that it was erroneous but has successfully demonstrated that the facts admitted are not O.M.P. 482/2010 Page 15 of 39 correct. Therefore, the applicant Company cannot be non- suited on the basis of so-called admission made in Para 4 of the notice dated 31.07.2008.” 28. Learned counsel for the petitioners submits that the Arbitral Tribunal in its award, while dealing with the claim of the respondent on merits, has purported to quote paragraph 3 of page 10 and paragraph 5 of page 11. However, it is not clear as to from where the Arbitral Tribunal has taken the quoted passage, which reads as follows: “(3) The Claimants state that in the first instance there was no strike and subsequently aver that even if the strike was there its commencement, conclusion and duration has not been established. The Respondents themselves have given different dates and periods and in any case the Respondents had the option of second port discharge as per Clause 24 of the Charter Party – page 12 – “orders of second discharge port if required can be given by the charterers while the vessel is discharging at the first port unless given earlier”. The charterers gave no such orders and hence they cannot escape the consequence of the strike”. “(5) It is only Exh.‟D‟ pages 21, 22 and 23 which refer to the strike. The only difference being that Exh. „C‟ is contemporary document whereas Exh.‟D‟ was sent by the Respondents to the Claimants later on, Exh.‟E‟. Page 24 is the letter written by Transchart to the Claimants that the Charterers are agreeable for counting the strike labour problem period as a laytime use at discharge port. This document has been subsequently updated by the Respondent 2 on the ground that Transchart is not authorized agent and were not in full