1 IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION ARBITRATION PETITION NO. 199 OF 2008 IN SUIT NO. 112 OF 2007 M/s.Great Eastern Shipping Company Limited ...Petitioner (Orig.Defendant) vs. M/s.Reliance Industries Limited & Anr. ...Respondents (Orig.Plaintiffs) Mr.Amitava Majumdar with Mr.Veeral Vakharia with Mr.Rishiraj Neog i/b. M/s.Bose & Mitra & Co. for the Petitioner. Mr.Rahul Narichania with Ms.Preeti Shah i/b. M/s.Motiwalla & Co. for Respondent Nos.1 and 2. WITH ARBITRATION PETITION NO. 146 OF 2008 IN SUIT NO. 286 OF 2007 M/s.Great Eastern Shipping Company Limited ...Petitioner (Orig.Defendant) vs. Oriental Insurance Co.Ltd. & Ors. ...Respondents 2 Mr.Amitava Majumdar with Mr.Veeral Vakharia with Mr.Rishiraj Neog, Mr.Saurabh Gadkari and Mr.Aditya Krishnamurthy i/b. M/s.Bose & Mitra & Co. for the Petitioner. Mr.Nitin Kamat for the Respondents. CORAM : V.M. KANADE, J. DATED : FEBRUARY 3, 2010 P.C. :- 1 This petition has been filed by the petitioner M/s.Great Eastern Shipping Company Limited, who is the original defendant in Suit No. 112/2007, under Section 8 of the Arbitration and Conciliation Act, 1996 in which the petitioners have prayed that the parties be referred to arbitration in terms of arbitration clause contained in the Charter Party Agreement dated 1.9.2004 and that the Suit No.112/2007 be dismissed or alternatively, the suit be permanently stayed and the parties be referred to arbitration in terms of arbitration clause contained in the said Charter Party Agreement 3 dated 1.9.2004. Brief admitted facts are as under :- 2 The petitioners and respondent no.1 entered into a Charter Party Agreement dated 1.9.2004. The respondent No.1 M/s.Reliance Industries Limited raised various claims against the petitioners on account of alleged short landing and contamination of its cargo which was carrying on the board of petitioners vessels pursuant to the said Charter Party Agreement. This claim has been settled by respondent no.2 - Oriental Insurance Company Limited on a claim lodged by respondent no.1. On 22.12.2006, the respondents filed a suit against the petitioners. The petitioners have filed this arbitration petition on 19th March, 2008 alleging that in view of clause 46 of the Charter Party Agreement, any and all differences and disputes arising out of the charter should be put to arbitration in the City of Mumbai pursuant to Arbitration and Conciliation Act, 1996. The respondents have filed their reply to this petition 4 and they have raised the following objections as to the maintainability and have opposed the relief claimed by the petitioners by raising four grounds :- 3 Firstly, it is alleged that the arbitration clause in the charter party had been suspended, cancelled/waived by the arbitration clause contained in the Bill of Lading. It is contended that the said clause is non-obstante clause and overriding clause in the charter party. Secondly, it is contended that the petition is not maintainable since the plaint in Suit No.112/2007 was filed on 22nd December, 2006 and the arbitration petition is taken out on 19th March, 2008 and that too after the petitioners had taken steps in the proceedings. It is further contended that the petitioners did not refer the dispute to arbitration prior to time laid down under Order 8 Rule 1 of CPC for filing written statement. It was contended that one S. Gadkari was appearing on behalf of the petitioners and had taken time in 5 filing the written statement on 12.12.2007, 14.3.2008 and 28.3.2008, 20.6.2008 and 7.10.2008. Thirdly, it was contended that the second respondent i.e. the second plaintiff which is an insurance company had insured the cargo in question and the second respondent had settled the claim under insurance policy with the first respondent. It is further contended in the reply that the first respondent had signed and executed a letter of subrogation dated 21.12.2006 in favour of the second respondent and by virtue of the said letter of subrogation, the second respondent was entitled to seek a decree from this court in the present suit against the petitioner. It is further contended that there is no privity of contract between the second respondent (second plaintiff) and the petitioner herein and there is no arbitration agreement in writing as required under Section 7 of the Arbitration Act between the petitioner and the second respondent and therefore, the said petition was liable to be dismissed. Lastly, it was contended 6 that the carriage of the cargo, in question, was from one port in India to another port in India and the voyage under the contract was and is governed by the provisions of Indian Carriage of Goods by Sea Act, 1925. It was further contended that under Article III Rule 6 of the said Act, a suit had to be brought within one year after delivery of the goods or the date when the goods should be delivered and if this was not done, then carrier and the ship would be under liability in respect of loss or damage. It was further submitted that under the said Rule, arbitration proceedings are not contemplated and therefore, the second respondent was obliged to file a suit. It was further submitted that the Indian Carriage of Goods by Sea Act, 1925 is a special statute and it would prevail over a general statute viz. the Arbitration and Conciliation Act, 1996. It was lastly contended that the copy of the said arbitration clause was not annexed to the petition as required under the relevant Rule. It was submitted that therefore, on 7 that ground also, the petition was liable to be dismissed. Lastly, it was contended that if now this court directed the parties to go for arbitration, the same would be barred by limitation. 4 Counsel appearing on behalf of the petitioner, firstly, submitted that in view of the provisions of Section 8 of the Arbitration and Conciliation Act, 1996, the Court was under an obligation to refer the parties to an arbitration. In support of the said submission, he relied on the judgment in the case of P. Anand Gajapathi Raju and Others vs. P.V.G. Raju (Dead) and others, reported in (2000) 4 SCC 539. He then submitted that so far as the first objection raised by the respondent is concerned that the arbitration clause in the Bill of Lading would prevail and not the clause in charter party agreement. He submitted that, in fact, there was no contradiction between the two clauses and both the clauses clearly stipulated that the arbitration would be in Mumbai and Indian Law was to 8 apply. He then submitted that in a case where the charterer or the shipper and the consignee is the same, in such cases, the underlying contract is the charter party and Bill of Lading was merely a receipt and therefore, in such cases, the charter party is the main contract and the arbitration clause in the charter party would prevail. He relied on the judgment of the Apex Court in British India Steam Navigation Co. Limited vs. Shanmughavilas Cashew Industries and Others, reported in (1990) 3 SCC 481. He then submitted that the second objection raised by the respondents was in respect of steps taken in the suit by the petitioners. He submitted that the wording under the Old Act of 1940 and the same provision in the New Act, 1996 was different and distinct. He submitted that in the present case, the petitioner had merely taken time to file written statement and that did not amount to taking steps as submitted by the Counsel for the petitioner. In support of the said submission, he invited my attention to the judgment of the Apex Court in the 9 case of Rashtriya Ispat Nigam Ltd. and Another vs. Verma Transport Co., reported in (2006) 7 SCC 275 page 283 and para 12 and para 19 and page 289 para 36. He submitted that in the said case also, time was taken to file written statement and the Apex Court also held that this did not amount to taking steps and therefore, the petition under Section 8 of the said Act was maintainable. He then submitted that so far as the Indian Carriage of Goods by Sea Act is concerned, the said Act was of the year 1925. He submitted that the Arbitration Act was passed initially in 1940 which was repealed and new act came into force in 1996. He submitted that the word suit therefore, used in Article III Rule 6 would have to be read as suit or arbitration proceedings since the Arbitration Act had come into force at the subsequent stage. In support of the said submission, he relied on the judgment of the English Court in the case of MERAK reported in 1964 Volume II Lloyds s List Law Reports page 527. He invited my attention to page 537. He also invited my attention 10 to following page 538 viz.:- But it tends to confirm me in my view of the proper construction of suit is brought as envisaging and including the initiation of arbitration: for otherwise (the argument suggests) the Carriage of Goods by Sea Act, 1924, would at the least severely hamper the introduction of enforceable arbitration clauses in a field in which those concerned regard them as desirable. 5 Apart from the ground raised by the respondents in their reply to the petition, it was firstly submitted that the plaintiff no.2 is not a party to the arbitration agreement and therefore, by virtue of provisions of Section 8 of the said Act, the petition is mis-conceived since the 2nd respondent is not party to the charter party agreement entered into between the first respondent and the petitioner and Section 8 read with Section 2(h) requires an application to be made by a party to the arbitration agreement. He also submitted that 11 under the 1940 Act, particularly, under Section 34, an arbitration could be invoked by a party to the agreement or a person claiming under it against the party to the agreement or a person claiming under it. He submitted that in the new Act, a person claiming under it could not invoke arbitration. He also submitted that in the first schedule to Arbitration Act, 1940 also, arbitration could be invoked by a party to the agreement or a person claiming under it against a party to the agreement or a person claiming under it. He invited my attention to clauses 6 and 7 of the first schedule. He then invited my attention to the judgment of the Supreme Court in the case of Sukanya Holdings Pvt. Ltd. vs. Jayesh H. Pandya and another (AIR 2003 SC 2252) and in the case of SREI Infrastructure Finance Ltd. vs. Bhageeratha Engineering Ltd. & Ors. (AIR 2009 Gauhati 110). He then submitted that the judgments of the English Court in the case of Voest Alpine (Court of Appeal) dealt with the English Arbitration Act, 1996. He submitted that under the 12 English Arbitration Act, 1996, the words claiming under are present whereas under the Indian Arbitration Act, 1996, these two words are absent. It is submitted that in absence of these words, the respondent no.2 could not be directed to go to arbitration since he is not party to arbitration agreement. It was then submitted that the suit could be filed under the Carriage of Goods by Sea Act only. He invited my attention to Article III Rule 6 of Carriage of Goods by Sea Act which provides a suit is to be filed within one year or if the period has elapsed, within a further period of three months provided that leave of the court is taken to institute the suit within a further period of three months. He invited my attention to the judgment in the English case MERAK. He submitted that the said case led the English Court considers Article III Rule 6 of the English Carriage of Goods Act, 1924. He submitted that the said judgment considered the word suit to also include arbitration . He submitted that under the Indian Law, the Courts 13 could not add words into a statute. He submitted that the case of MERAK is not binding on this court. He then submitted that the plaintiff no.2 as a subrogee could not become a party to the arbitration agreement. He submitted that subrogation is not the same as an Assignment and though in an assignment, the assignee can maintain an action in its own name by reason of the assignor having divested himself by its right under the subrogation, the subrogee has no independent right to the suit and can only claim through or under the assured. He submitted that the judgment of Voest Alpine Intertrading was not relevant which equated assignment with subrogation under the English Law. He, however, submitted that that is not a legal position in India in view of the following judgments :- 1)The Oriental Fire and General Insurance Co.Ltd., Bombay vs. Americal President Lines Ltd. (1968) The Bombay Law Reporter Page 487, 2)Union of India vs. Sri Sarada Mills Ltd. (1972) 14 2 SCC 877. He then submitted that the grave prejudice has been caused to the plaintiff due to delay in filing Section 8 application. He submitted that if the parties are referred to arbitration, the claim of the respondents may be considered to be barred in view of Article III Rule 6 of Carriage of Goods by Sea Act, 1925 and the right of consignee was extinguished as held by the Supreme Court in the case of East & West Steamship vs. S.K. Ramalingam Chettiar reported in AIR 1960 SC 1058. 6 On the other hand, in rejoinder, the learned Counsel for the petitioner submitted that so far as the submission of the respondent no.2 being not a party to the charter party agreement and therefore, could not be a party to the arbitration, it was submitted that under the letter of subrogation, the insurer had no better right than the insured and therefore, was bound by 15 provisions of charter party and therefore, the insurer had to file the suit in the name of respondent no.1 and had sought decree jointly and therefore, respondent no.2 was bound by the terms of the charter party and arbitration agreement contained therein. So far as the other submission of the respondent that the plaintiff had no other option but to file suit under the Indian Carriage of Goods by Sea Act, 1925, it was submitted that the contract of carriage is the charter party and not the bill of lading and hence, Carriage of Goods by Sea Act, 1925 does not apply and secondly, even if it is held that it applies, it was submitted that it has been held that the word suit in Article III Rule 6 of the Schedule to Carriage of Goods by Sea Act is to be read as arbitration where appropriate. He again relied on the judgment on MIRAK and the judgment of the Supreme Court in the case of Baltic Confidence, reported in 2001 7 SCC page 473 and Page 478 para 9. On the submission on limitation by the respondent, it was submitted that 16 Section 43 of the Act provides that the Limitation Act, 1963 applies to arbitration as it applies to proceedings in court and therefore, respondent no.2 could always rely on Article 14 of the Limitation Act in the arbitration. It was then submitted that under Section 16 of the Act, the Tribunal has power to decide any issue as to jurisdiction. It was, however, submitted the respondent could not be protected by this court since statutory obligation had been cast upon it by section 8 to refer the matter which is subject matter of arbitration. 7 I have heard both the learned Counsel appearing on behalf of the petitioner and the respondent at length. In the present case, the respondent no.1 and the respondent no.2 have filed the suit against the petitioner for alleging breach of contract of carriage which resulted in loss being caused to the cargo carried on the petitioner s vessel M.T. JAG PADMA . Further it is an admitted position that respondent no.1 were 17 charterers and shippers and receivers of the cargo carried on the petitioners vessel and the respondent no.2 was the insurer to the said cargo. The charter party admittedly entered into between the petitioner and the respondent no.1. There is some substance in the submission made by the petitioner that the contract of carriage by the petitioner and the respondent no.1 is the charter party dated 1st September, 2004 and not a bill of lading. It is well settled position in law that when the shipper, charterer and consignee are the same party, the bill of lading merely acts as a receipt and the document containing the contract of carriage is the charterparty. In the present case, the arbitration clause is contained in clause 46 of the charter party and is, therefore, binding on both the parties. The charter party specifically mentions that at the end of the agreement that additional clauses 43 to 80 both inclusive shall be duly incorporated in this charter party. Clause 46 is one of the additional clauses. It states that the 18 arbitration shall be in Mumbai and Indian Law shall apply and any and all differences and disputes of whatsoever nature arising out of this charter shall be put in arbitration in Mumbai pursuant to Arbitration Act, 1996. The Apex Court in the case of British India Steam Navigation Co. Ltd. vs. Shanmughavilas Cashew Industries and Others, reported in (1990) 3 SCC page 481 in para 47 has observed as under :- 47. xxxxxxxxxxxx The effect of a bill of lading depends upon the circumstances of the particular case, of which the most important is the position of the shipper and of the holder. Where there is a bill of lading relating to the goods, the terms of the contract on which the goods are carried are prima facie to be ascertained from the bill of lading. However, if a shipper chose to receive a bill of lading in a certain form without protest he should ordinarily be bound by it. Thus, it cannot be said that the bill of lading is not conclusive evidence of its terms and the persons executing it is not necessarily bound by all its stipulations, unless he repudiates them on the grounds that, as he did not know, and could not 19 reasonably be expected to know, of their existence, his assent to them is not to be inferred from his acceptance of the bill of lading without objection. Where there is a charterparty, the bill of lading is prima facie, as between the shipowner and an endorsee, the contract on which the goods are carried. This is so when the endorsee is ignorant of the terms of the charterparty, and may be so even if he knows of them. As between the shipowner and the charterer the bill of lading may in some cases have the effect of modifying the contract as contained in the charterparty, although, in general, the charterparty will prevail and the bill of lading will operate solely as an acknowledgement of receipt. (emphasis supplied) 8 In the present case, it is an admitted position that the charterer, shipper and receiver in the bill of lading are of Reliance Industries Limited. Same view has been expressed in the Halsbury s Laws of England, 5 th Edition, Volume 7, 2008 Para 353. There is also much substance in the submission made by the Counsel for the petitioner. That even otherwise, there is no inconsistency 20 between the arbitration clause in the charter party and that in the bill of lading, both of which lay down that all the disputes and differences will have to be referred to arbitration under the Indian Laws. 9 So far as the second submission on the question as to whether the petition under Section 8 is barred by limitation is concerned, in my view, the petition has been filed within limitation for the following reasons :- In the present case, under Section 8 of the new Act, reference has to be made before the first statement on the substance of the dispute is filed. It is an admitted position that in the present case, the petitioner has not filed any statement on the substance of the dispute nor has he filed any written statement in the suit. A distinction will have to be made between the provisions of Section 34 of the Old Act, 1940 which had used the expression before filing the written statement or taking any steps in the proceedings . Admittedly, in Section 8 21 of the Act, the wording used is slightly different and it talks about first statement on the substance of the dispute. Therefore, under Section 8 of the Act, the words taking any steps in the proceedings are not incorporated. The Apex Court in the case of Kalpana Kothari vs. Sudha Yadhav reported in (2002) 1 SCC page 203 and which has been followed by the Apex Court in the case of Rashtriya Ispat Nigam Ltd. And Another vs. Verma Transport Co. reported in (2006) 7 SCC page 275, in para 27 has referred the observation in Kalpana Kothari which reads as under :- No doubt, at the appellate stage, after filing a written application for dismissal of the applications filed by the appellants under Section 34 of the Arbitration Act, 1940, as not pressed in view of the repeal of the 1940 Act and coming into force of the 1996 Act and getting orders thereon, the appellants herein have once again moved the High Court under Section 8 of the Act, with a request for stay of proceedings before the High Court as well as the trial court, but the application came to be rejected by the learned Judge in the 22 High Court that no such application could be filed, once the application earlier filed under the 1940 Act was got dismissed as not pressed and also on the ground of estoppel, based on the very fact. We are of the view that the High Court did not properly appreciate the relevant and respective scope, object and purpose as also the considerations necessary for dealing with and disposing of the respective applications envisaged under Section 34 of the 1940 Act and Section 8 of the 1996 Act. Section 34 of the 1940 Act provided for filing an application to stay legal proceedings instituted by any party to an arbitration agreement against any other party to such agreement, in derogation of the arbitration clause and attempts for settlement of disputes otherwise than in accordance with the arbitration clause by substantiating the existence of an arbitration clause and the judicial authority concerned may stay such proceedings on being satisfied that there is no sufficient reason as to why the matter should not be referred to for decision in accordance with the arbitration agreement, and that the applicant seeking for stay was at the time when the proceedings were commenced and still remained ready and willing to do all things necessary to the proper conduct of the arbitration. This provision under the 1940 Act had nothing to do with actual reference to the arbitration of the disputes and that was left to be taken care of under Sections 8 and 23 20 of the 1940 Act. In striking contrast to the said scheme underlying the provisions of the 1940 Act, in the new 1996 Act, there is no provision corresponding to Section 34 of the Old Act and Section 8 of the 1996 Act mandates that the judicial authority before which an action has been brought in respect of a matter, which is the subject-matter of an arbitration agreement, shall refer the parties to arbitration if a party to such an agreement applies not later than when submitting his first agreement. The provisions of the 1996 Act do not envisage the specific obtaining of any stay as under the 1940 Act,