Case: M/s. Govind Rubber Ltd Vs. M/s. Louids Dreyfus Commodities Asia Pvt. Ltd

lean in favour of giving effect to the arbitration clause to which the parties have agreed. The learned Author has also referred to another judgment in Paul Smith Ltd v. H and S International Holdings Inc., (1991) 2 Llyods Rep.127 in order to emphasise that in construing an arbitration agreement the Court should seek to give effect to the intentions of the parties. (See page 28 of the book). 18. The Apex Court also in the case of Union of India v. D.N. Revri and Co., AIR 1976 SC 2257 , held that a commercial document between the parties must be interpreted in such a manner as to give efficacy to the contract rather than to invalidate it. The learned Judges clarified it by saying:- "7. It must be remembered that a contract is a commercial document between the parties and it must be interpreted in such a manner as to give efficacy to the contract rather than to invalidate it. It would not be right while interpreting a contract, entered into between two lay parties, to apply strict rules of construction which are ordinarily applicable to a conveyance and other formal documents. The meaning of such a contract must be gathered by adopting a common sense approach and it must not be allowed to be thwarted by a narrow, pedantic and legalistic interpretation." 19. In the instant case, admittedly, the respondent issued a sale contract for supply of goods incorporating in the said sale contract various terms including hundred percent payment against letter of credit and also providing the governing terms as "Singapore Commodity Exchange". Though the appellant issued purchase order dated 21st August, 2008 on terms and conditions set out therein but the appellant requested the respondent to change the payment terms mentioned in the sales contract. The request for amendment was accepted by the respondent. At this juncture, we would like to quote hereinbelow the Email dated 27th August, 2008 sent by the appellant acknowledging the amendments on the payment term in the sale contract. "bbr@vsnl.comTo MeKwan.Yip@idcommodities.comCc:Andrew.Trevett@idcommodities.comChristina.Chlia@idocmodities.comSubject: Re: Govind Rubber"Hi Mee Kwan,As discussed & confirmed with Andrew yd, Govind Rubbeers payment terms have been changed to:10% ADVANCE BY TT, BALANCE AGAINST D/P AT SIGHT SO, PLEASE AMEND YOUR SALE CONTRACT ACCORDINGLY & SEND ME THE SALE CONTRACT & PROFORMA INVOICE FOR BOTH CONTRACTS SEPARATELY.Await your earlier action, since Govind Rubber wants to send the 10% advance TT today & is waiting for your Proforma Invoice.Rgds,Biju___Original Message__From: MeeKwan.Yip@idcommodities.comTo: bbr@vsnl.comCc: Andrew.Trevatt@idcommodities.com;Christina.Chia@idcommodities.comSubject: Re: Govind Rubber." 20. From the documents available on record and also referred in the impugned order, it is evident that at the request of the appellant, the invoice was split into two invoices and in the said letter of request reference was made to the sale contract. The appellant proceeded to supply the goods on the terms contained in the sale contract. The intention of the parties, as appearing from the correspondence, it can safely be inferred that there had been meeting of mind between the parties and they were ad idem to the terms of sale contract which contained the forum of dispute resolution at Singapore Commodity Exchange. Apart from that, after the dispute was referred to Singapore Commodity Exchange for arbitration, the appellant in response to the notice made a counter claim before the Arbitral Tribunal contending that the appellant had incurred huge loss in view of the failure on the part of the respondent to supply the goods in time. By making a counter claim, the appellant indeed submitted to the jurisdiction of the arbitrator. 21. The principles laid down by the House of Lords in the case of Cairncross v. Lorimer, (1860) 7 Jur NS 149, were approved of by the Judicial Committee in the case of Sarat Chunder Dey v. Gopal Chunder Laha, 19 IA 203 . We may also take the liberty of reading a passage from another Privy Council decision where the general principle applicable to such cases is stated. "On the whole, therefore, their Lordships think that the appellant, having a clear knowledge of the circumstances on which he might have founded an objection to the arbitrators proceeding to make their award, did submit to the arbitration going on; that he allowed the arbitrators to deal with the case as it stood before them, taking his chance of the decision being more or less favourable to himself; and that it is too late for him, after the award has been made, and on the application to file the award, to insist on this objection to the filing of the award": see the case of Chowdhri Murtaza-Hossein v. Mt. Bibi Bechunnissa, 3 IA 209. It is true that the question in the present case is a question of competence of the arbitrator which in a sense is a question of jurisdiction, but it is not like the jurisdiction of a Court, because the jurisdiction of arbitrators is derived from consent of the parties. 22. It is clear that for construing an arbitration agreement, the intention of the parties must be looked into. The materials on record which have been discussed hereinabove make it very clear that the appellant was prima facie acting pursuant to the sale contract issued by the respondent. So, it is not very material whether it was signed by the second respondent or not.23. It is not in dispute that although the appellant having full notice and knowledge of the dispute having been decided by the Arbitral Tribunal and an award was passed on 18th December, 2009, the said award has not been challenged by the appellant in any court of law. Instead, the appellant filed the suit against the respondent in the High Court inter alia praying for damages.24. In the aforesaid premise, we do not find any valid ground to oppose the enforcement of the foreign award. The High Court in the impugned order has rightly held that the foreign award is enforceable under Part II and is binding for all purposes on the parties.

Decision (1 = appeal accepted, 0 = rejected): 0

Explanation:
0[ds]12. There may not be any dispute with regard to the settled proposition of law that an agreement even if not signed by the parties can be spelt out from correspondence exchanged between the parties. However it is the duty of the Court to construe correspondence with a view to arrive at the conclusion whether there was any meeting of mind between the parties which could create a binding contract between them. It is necessary for the Court to find out from the correspondence as to whether the parties were ad idem to the terms of contract.We are also of the opinion that a commercial document having arbitration clause has to be interpreted in such a manner as to give effect to the agreement rather than invalidate it. On the principle of construction of a commercial agreement, Scrutton on Charter Parties (17th Edition, Sweet & Maxwell, London, 1964) explained that commercial agreement has to be construed, according to the sense and meaning as collected in the first place from the terms used and understood in the plain, ordinary and popular sense (See Article 6 at page 16). The learned Author also said that the agreement has to be interpreted in order to effectuate the immediate intention of the parties. Similarly, Russel on Arbitration (21st Edition) opined, relying on Astro Vendeor Compania Naviera SA v. Mabanaft GmbH, (1970) 2 Llyods Rep.267, that the Court should, if the circumstances allow, lean in favour of giving effect to the arbitration clause to which the parties have agreed. The learned Author has also referred to another judgment in Paul Smith Ltd v. H and S International Holdings Inc., (1991) 2 Llyods Rep.127 in order to emphasise that in construing an arbitration agreement the Court should seek to give effect to the intentions of the parties. (See page 28 of the book).It is clear that for construing an arbitration agreement, the intention of the parties must be looked into. The materials on record which have been discussed hereinabove make it very clear that the appellant was prima facie acting pursuant to the sale contract issued by the respondent. So, it is not very material whether it was signed by the second respondent or not.23. It is not in dispute that although the appellant having full notice and knowledge of the dispute having been decided by the Arbitral Tribunal and an award was passed on 18th December, 2009, the said award has not been challenged by the appellant in any court of law. Instead, the appellant filed the suit against the respondent in the High Court inter alia praying for damages.24. In the aforesaid premise, we do not find any valid ground to oppose the enforcement of the foreign award. The High Court in the impugned order has rightly held that the foreign award is enforceable under Part II and is binding for all purposes on the parties.