1 IN THE HIGH COURT OF BOMBAY AT GOA APPLICATION FOR APPOINTMENT OF ARBITRATOR NO. 4 OF 2009 AMIGO Shipping Corporation, Ship owners and Charters, having its registered Office at Suite 406-407, Tower B-Torre de Las Americas, P.O. Box 0818-00534, City of Panama Republic of Panama, represented by its Director, Mr. Gautam Trehon. ........ Applicants. V/s. M/s. Western India Shipyard Ltd., a company registered under the Companies Act 1956, having registered office at Mormugao Harbour, Mormugao, Goa. ........ Respondent. Mr. S. D. Lotlikar, Senior Advocate with Ms. Jimi John, Advocate for the applicants. Mr. M. S. Sonak, and Mr. J. Supekar, Advocates for the respondent. CORAM : S.J. VAZIFDAR, J. DATE : 26th March, 2010. 2 O R A L J U D G M E N T : This is an application under Section 11 of the Arbitration and Conciliation Act, 1996 (“the Act” for short), for the appointment of an arbitrator for the respondent and for a further direction that the arbitrators so appointed choose a third arbitrator as a Presiding Arbitrator and that the disputes between the parties be resolved by the arbitral tribunal, within the time stipulated by this Court. 2. Mr. Sonak, the learned Counsel appearing on behalf of the respondent opposed the petition on the following grounds : I. There is no contract between the parties; II. The Standard Terms and Conditions which contain the arbitration clause were not forwarded by the respondent to the applicants and are, therefore, not binding on the respondent; III. There was a full and final settlement of all the disputes between the parties; IV. The original arbitration agreement, as required by the scheme made by this Court, is not produced. 3 Re : I - There is no contract between the parties : 3. (A) By a letter dated 1st April, 2007, the applicants stated that they were interested in dry docking one of their multi-purpose ships, M.V. AMIGO in the respondent's dry dock in the last week of April, 2007. Referring to the previous discussions, the applicants stated that the vessel had to be dry docked for its annual and special survey where the shaft needed to be drawn for inspection and repairs, if any. The applicants further stated that they desired to use the respondent's wet-berth to carry out the special survey repairs and inspections of various machinery and hull which they intended carrying out on their own. The applicants enclosed particulars of the ship, the repair list and the docking plan. The applicants requested the respondent for confirmation of dry-docking availability by the end of April, 2007 and for the lowest quotation for the jobs mentioned. (B) (i) The respondent, by a letter dated 17th April, 2007, submitted its quotation and stated that the dry-dock slot would be available around 6th to 8th May, 2007, subject to early confirmation. The respondent stated that it would require ten days to complete the job specified in the applicants' enquiry. The respondent quoted its fees and other terms and conditions and further stated that the quotation was 4 valid for a period of 60 days from the date thereof. (ii) The petitioners' case in paragraph 3 of the application is that under cover of the said letter dated 17.4.07, the respondent also forwarded to the applicants a document on the letter head of the respondent titled : “STANDARD TERMS AND CONDITIONS – GENERAL CONDITIONS FOR CONSTRUCTION, CONVERSION, MAINTENANCE AND REPAIR WORK.” Article 25 of the Standard Terms and Conditions, pertains to arbitration. I will refer to the relevant articles of the Standard Terms and Conditioning (STC) while dealing with the submissions. Suffice it to note at this stage that the respondent has denied having sent the said document to the applicants under cover of the said letter or otherwise. (C) The applicants by a letter dated 18.4.2007, confirmed the ship's availability for dry docking repairs at the respondent's dock slot from the period around 6th to 8th May, 2007. The reference of this letter is as follows : “Ref: Letter of Confirmation for Dry-Docking repairs 5 of M.V. AMIGO (IMO No.8519198)” (emphasis supplied.) 4. The three letters, viz. the letters dated 1st April, 2007, 17th April, 2007 and 18th April, 2007, thus constituted a contract between the parties. The letter dated 1st April, 2007 was an invitation to offer. The letter dated 17th April, 2007 constituted an offer by the respondents and the applicants' letter dated 18.4.2007 was an acceptance of the respondent's offer. Nothing more was required to constitute a concluded contract between the parties. 5. The doubt, if any of there being a concluded agreement between the parties, is removed by the respondent's letter dated 19.4.2007, which was expressly with reference to the applicants' letter dated 18.4.2007. By this letter, the respondent confirmed “availability for the dry-docking repairs of your good vessel around 6th to 8th May, 2007”. Mr. Sonak's contention that there was no concluded contract between the parties is, therefore, rejected. 6 Re : II - The Standard Terms and Conditions which contain the arbitration clause were not forwarded by the respondent to the applicants and are, therefore, not binding on the respondent : 6. Faced with this, Mr. Sonak advanced this second submission. 7. I will refer to the remaining facts before dealing with the further submissions. 8. The correspondence that ensued between the parties discloses the disputes between them. I am not concerned, in this application, with the merits of the case. That is for the arbitrator to decide. Suffice it to note that the main dispute is the applicants' contention that the respondent failed to provide the dry docking facility for the said ship, time and again, as a consequence whereof, the applicants had to incur idle costs. The applicants' grievance as stated in a letter dated 6.6.2007 was that the vessel was scheduled to go on time charter for two years and that they were about to lose the charter as a result of the vessel not being docked in time and were incurring 7 financial losses, as well as loss of repute as a result thereof. The applicants also stated that a vessel of that size was not safe due to the onset of monsoons. The applicants forwarded the communication received by them from their Greek shipbrokers, stating that the charterers had threatened to cancel the time charter agreement, and reserving their rights for possible losses. The applicants called upon the respondent to take prompt action in dry-docking the vessel to mitigate the situation. The respondent by a letter dated 28.6.2007, confirmed the availability of the dry dock repairs around the second week of July, 2007. By an e-mail message dated 15.7.2007, the applicants once again referred to the breaches on the part of the respondent. The applicants set out the manner in which they had incurred losses and stated that they would submit a detailed statement in respect of the losses suffered by them. 9. It would be convenient at this stage, before coming to the applicants invocation of the arbitration agreement, to set out Article 25 as well as Article 1 which was relied upon by both the learned Counsel, 8 in support of their rival submissions. Articles 1 and 25 of the STC reads as under : “ ARTICLE 1 : PRELIMINARY RROVISIONS. 1.1 The general conditions set out in the present document are deemed to be an integral part of all and any contracts which have as an objective, the work of repairing, maintaining, reconstructing or converting ships, to be carried out by Western India Shipyard Ltd. - hereinafter referred to as Shipyard, except where otherwise stipulated in writing. 1.2 The said general conditions are also deemed to be an integral part of all and any contract which have as objective the work of repairing, maintaining, reconstructing, or converting parts of a ship, lighters, barges, pontoons, tugs, drilling platforms, floating cranes or other marine equipments likewise to be carried out by the shipyard save as may otherwise have been agreed in writing. 1.3 In the execution of the contracts mentioned in the previous Clause, the general Conditions set out in this document shall be applied with the adoptions required by the specific nature of the object of such contracts. 1.4 The reference to ship made in the present 9 document cover both the hull and machinery and those made to equipment and cargo shall apply whether or not the equipment or cargo is on board. 1.5 If the Clients, i.e. the party with whom the Shipyard contracts, is constituted by two or more individuals and/or companies, the obligations and liabilities of those persons will be jointly assumed. 1.6 The provisions laid down in the present contract are applicable to the relations with the Client even when the Shipyard has sourced subcontractors, suppliers and other services. 1.7 The contracts referred to by the present document are not deemed to be concluded before the Shipyard confirms, in writing, the proposal it has submitted following the consultation or the order which has been sent to it independently of the consultation. 1.8 The proposal and also confirmation thereof, even when preceded by the proposal, shall contain a reference to the present document, the contents of which shall be reproduced in them or on reverse side, or shall accompany them in writing separately. 1.9 The signed contract exclusively covers the 10 work specified by the Clients in his consultation or order, and accepted by the yard. The price agreed shall be exclusively in respect of that work.” Articles 25 of the Standard Terms and Conditions reads as under : “ ARTICLE 25: COMPETENT COURTS 25.1 The litigation which may arise in respect of the contracts referred to by the present general conditions shall be resolved by an arbitration court, without the right to appeal, which the parties hereby renounce: although the provisions of Clause 25.7 of this Article shall be exempt therefrom. 25.2 The arbitration court shall comprise three members, one appointed by each of the parties and the third who will act as umpire, chosen by arbitrators appointed by the parties. 25.3 The arbitration court shall be situated in the judicial district of Goa. 25.4 The application requesting the fixing of a day for appointment of the arbitrators shall be sent to the Court of the judicial district of Goa. 25.5 It is for the arbitrators to determine which legal procedures to follow, although the parties shall always be heard after the 11 preparation and before decision of the action. 25.6 The constitution and function of the arbitration's court shall be exclusively in accordance with Indian Law. 25.7 However, only the Shipyard may, in order to enforce its rights, if it should wish to do, have recourse to other Courts Indian or others, with jurisdiction in the area where the ship is to be found or in areas where the Client may have assets of any kind of representation.” 10. The applicants, by their Advocates letter dated 27/7/2007 reiterated that they had suffered losses due to the respondent's breaches. By the said letter, the applicants invoked arbitration as per Article 25 of the Standard Terms and Conditions. By a further letter dated 1/8/2007, the applicants appointed and nominated one N.S. Biswas, as their arbitrator, and called upon the respondent to appoint its arbitrator, failing which, it was stated that the applicants would apply to the Court for appropriate orders. 11. The respondent, by its Advocate letter dated 17.8.2007, 12 refuted the applicants' allegations on merits. It is important to note with reference to Mr. Sonak's second submission presently under consideration the respondent's response to the applicants' invocation of arbitration as per Article 25 of the STC. Paragraph 7 of the letter, in this regards, reads as under : “ 7. My client says that the notice issued by you invoking arbitration clause, vide article 25 of the standard terms and conditions, is wrongly invoked as the same is misconceived and not applicable for your client, as the said standard terms and conditions are only applicable in case of customers/clients who enter into the contract with my client for repairs of their vessel.” 12. It is important to note that the only contention raised in this letter, which was the first response to the applicants' invocation of arbitration, was that the STC were not applicable “as the said standard terms and conditions are only applicable in case of customers/clients who enter into the contract with my client for repairs of their vessel”. The respondent did not deny the existence of the STC. Nor did it deny that the same were still in force and usage. There was no expression of surprise as to how the applicants came in possession 13 thereof. The respondent did not state that it had never forwarded the same to the applicants. Nor was it stated that the same are normally forwarded in a particular manner or upon the happening of any particular event. To reiterate, the only contention was that as there was no concluded contract, the STC would not apply. Indeed, if there was no concluded contract, there could be no question of the terms and conditions contained in the STC applying for in that case there could be no agreement wherein the same could be held to have been incorporated. The question, therefore, is whether there was a concluded contract or not ? I have already held that there was. 13. Mr. Sonak contended that the standard terms and conditions were never forwarded to the applicants and were, therefore, not a part of the contract. He submitted that the denial by the respondent requires evidence. 14. This contention is raised merely to avoid the arbitration. As noted, this contention is an afterthought. Not once during the course of the said correspondence did the respondent contend that the STC 14 had not been forwarded by it to the applicants. It is true that in the correspondence the applicants did not specifically state that the STC had been forwarded to them by the respondent. The inference, however, to this effect is clear. The arbitration was invoked specifically in terms of Article 25. The respondent's response thereto in the letter dated 17.8.2007 indicates that the STC were forwarded by it to the applicants. Had that not been so, the respondents' response to the invocation of the arbitration by the applicants by their letters dated 27.7.07 and 1.8.07 would have been entirely different. The respondent would have contended expressly that the STC had never been agreed upon in this particular case and that they had not been forwarded to the applicants. It would have atleast expressed ignorance and surprise as to the manner in which the applicants had obtained the same. The respondent would have addressed correspondence to the applicants in this regard. The respondent did nothing of the sort. In fact, in its reply dated 17.8.07, the only contention, at the cost of repetition, was that the STC did not apply because there was no concluded contract. The denial today is an afterthought. 15. It is also pertinent to note that Article 1 of the respondent's 15 Standard Terms and Conditions, makes the same applicable to all the contracts of the nature stipulated therein. Article 1.1 states that the terms and conditions “are deemed to be an integral part of all and any contracts which have as an objective, the work of repairing, ... except where otherwise stipulated in writing”. This is emphasized again in Article 1.2 which states that the same “are also deemed to be an integral part of all and any contract which have as objective the work of repairing, ... save as may otherwise have been agreed in writing”. The respondent thereby held out to the world at large that the STC would apply ipso facto to any such contract and it is only where it is otherwise stipulated in writing that the same would not apply. 16. Article 1, obviously, cannot bind a third party unless the respondent establishes the acceptance of the STC by the third party. However, once it is established that the STC have been brought to the notice of the third party, in any manner, and the third party has not protested against the same, they form integral part of the contract between such third party and the respondent. It is difficult to see how in such circumstances the respondent can deny the applicability of the STC. It is not alleged or even suggested that the respondent has 16 obtained the STC illegally and surreptitiously. It is not even suggested that the STC was not available to the parties even without the same being forwarded. If a party bona fide obtains the STC and acts thereupon, the respondent, especially in view of Article 1.1 and 1.2, be estopped from denying the same. 17. The reliance upon Article 1.7 is of no assistance to the respondent. Article 1.7, in fact, supports the applicants' case entirely. As I have stated earlier, the contract between the parties is concluded. Thus, the contract i.e. the Articles of the STC are also binding between the parties, as the shipyard i.e. the respondent had confirmed, in writing, the proposal it had submitted. In other words, Article 1.7 makes the terms and conditions of the STC binding between the parties only upon the respondent confirming the proposal which it admittedly did. 18. Article 1.8 does require the proposal and confirmation between the respondent and its contracting parties to contain a reference to the STC, as stated therein “or shall accompany them in writing separately”. In the present case, the term “accompany” does not necessarily mean attached to or even sent under cover of the proposal 17 or confirmation. It could be forwarded at any time. Further, as I have also held, if a third party comes into possession of the STC, bona fide and in the normal course of events, the terms therein are binding between the respondent and its contracting parties. 19. Further, even assuming that the terms and conditions are not reproduced, Article 1.8 does not make the contract void. The submission is, therefore, rejected. Re : III There was a full and final settlement of all the disputes between the parties. 20. (A) Mr. Sonak relied upon a letter dated 12.11.2007 in support of this submission. The letter also refers to the applicants' letter also dated 12.11.2007, confirming dry docking of the vessel on 14.11.2007. (B) The affidavit-in-reply states that the vessel was satisfactorily repaired at the respondent's shipyard from 15.11.07 to 1.12.07 and that the parties executed a settlement note on 1.12.2007 in respect of the respondent's invoice dated 1st December, 2007 for dry dock repairs of the vessel, amounting to Rs.21,37,500/-. 18 21. The document titled “BILL SETTLEMENT NOTE” settles only the respondent's invoice for the said repairs. Paragraph (1) of the document refers to the invoice and states that it was mutually discussed by the parties on 1.12.2007 and that they agreed and settled for a value of Rs. 21,37,500/-. Paragraphs 3 and 4 of the settlement note, relied upon by Mr. Sonak, read as under : “ 3. With this settlement we confirm there is no further claim with respect to repair on any of the parties. 4. This is the full and final settlement.” This full and final settlement is obviously only in relation to the said invoice/bill and not in respect of the other rights, contentions and claims of the parties. The doubt, if any, is removed by clause 3 which expressly states that with the settlement, the parties confirm that there was no further claim “with respect to repair on any of the parties”. This, by no stretch of imagination deals with, leave alone, settles the applicants' claim for damages on account of the delay in providing dry docking facility. 22. This submission is, therefore, rejected. 19 Re : IV - The original arbitration agreement, as required by the scheme made by this Court, is not produced. 23. During the course of the hearing, it was contended that the original agreement had not been produced. The applicants, therefore, filed the original correspondence which I have held earlier constituted a contract between the parties. The applicants also produced a xerox copy of the STC stating that it was a xerox copy that was forwarded by the respondent to the applicants. These are standard terms and conditions. They, as per Article 1, are deemed to be an integral part of all contracts of the nature stipulated therein. There was no requirement for the execution thereof by the parties, or the authentication thereof by the respondent. It is not the respondent's case that the STC are not those published by it. 24. Faced with this, an affidavit of one J.C.F. Sequeira, the respondent's Vice President (Corporate Affairs) & Company Secretary was relied upon. In this affidavit, all that is stated is that the STC produced by the applicants are only a photo copy and not the original. 20 25. It is little difficult to accept this contention. There is no question of any “original copy”. They are obviously printed in bulk and as and when contracts are entered into, a set would be given to the other contracting party. Each is, therefore, an original. The copy sent to the applicants is itself the original. It did not require to be executed. It is deemed to be a part of the contract as per the terms thereof. 26. Shri Sonak also relied upon an affidavit of one B. Eremita. The affidavit states that he was not authorised to negotiate, execute, sign and deliver the documents, including the standard terms and conditions on behalf of the respondent. He denied having executed or delivered the standard terms and conditions on behalf of the respondent, to the applicants for execution thereof. He contends that his signature is fabricated. 27. This affidavit inspires little confidence. It does not carry the respondent's case further, in any event. There is not a whisper from the respondent that the document does not emanate from it. Whether the said Eremita had signed the same is not relevant. 21 Obviously his initial appears only on the stamp of the company thereon. It is nobody's case that the STC were executed by or between the parties. The said Eremita's initials were not in execution of any separate agreement. Thus, even assuming that the initials on the document are not his, it would make no difference. 28. What is important to note in this regard is that it is the applicants' contention that the STC were forwarded under cover of the respondent's letter dated 17.4.07. That letter was addressed by one J.K. Roy, the respondent's Sr. Vice President. He has not filed any affidavit, denying the applicants' case that the STC were forwarded under cover of the said letter to the applicants. Thus, whether the said Eremita forwarded the same or not is totally irrelevant. 29. Mr. Sonak relied upon the following observations of the Supreme Court in M. Dayanand Reddy vs. A.P. Industrial Infrastructure Corporation Limited and ors., (1993) 3 SCC 137 : “ 9. It has been indicated hereinbefore that the case of respondent is that through mistake the clause containing the arbitration agreement was not scored out in the copy of the agreement since forwarded to 22 the applicant. The attention of the appellant was drawn to such mistake by the respondents before initiation of the proceedings before the City Civil Court. It also appears that on April 9, 1984, which is long before the agreement dated December 11, 1986, respondent 1, Corporation, came to the decision that arbitration was not really necessary as the aggrieved party to the agreement could always seek redress in a court of law. It was, therefore, decided that the arbitration clause in the standard specifications should be deleted altogether and the agreement was to be finalised in respect of engineering work without any provision for arbitration. It was also indicated