2001 (8) TMI 1289 - SC - Indian Laws

Arbitration clause in Charter Party Agreement applies to Bills of Lading disputes

The Supreme Court held that the arbitration clause from the Charter Party Agreement was applicable to disputes under the Bills of Lading. The specific ... Whether the High Court, on construction of the terms and conditions of the Charter Party Agreement and the condition in the Bills of Lading incorporating the terms and conditions of the Charter Party Agreement into it was right, in holding that the parties in the suit are not bound by the agreement contained in Clause 62 of the Charter Party Agreement for purpose of arbitration of the disputes raised in the suit? Held that:- Appeal allowed. The main ground on which it was contended that the clause in inoperative is that the expression ‘Charter Party’ in clause 62 of the Charter Party Agreement was not changed to ‘Bill of Lading’ while incorporating the same in the latter. This contention, we are constrained to observe cannot be accepted since it goes against the clear intention of the parties as evident from the incorporation clause. On a careful consideration of the entire matter we are of the view that there is no good ground or acceptable reason why the intention of the parties to incorporate the arbitration clause in the Charter Party Agreement in the Bill of Lading should not be given effect to. The High Court was not right in rejecting the prayer of the appellants for stay of the suit Issues Involved:1. Applicability of the arbitration clause from the Charter Party Agreement to the disputes arising under the Bills of Lading.2. Interpretation and incorporation of arbitration clauses in maritime contracts.Detailed Analysis:1. Applicability of the Arbitration Clause:The primary issue in this case was whether the arbitration clause in the Charter Party Agreement (Clause 62) was applicable to disputes arising under the Bills of Lading. The appellants argued that the disputes should be referred to arbitration as per the Charter Party Agreement, while the respondents contended that the arbitration clause did not apply to the Bills of Lading.2. Interpretation and Incorporation of Arbitration Clauses:The court examined various precedents to determine the intention of the parties and the proper interpretation of the incorporation clause in the Bills of Lading. Significant cases considered included:- Hamilton & Co. v. Mackie & Sons: This case established that general words in a Bill of Lading referring to a Charter Party do not incorporate arbitration clauses unless explicitly stated.- T.W. Thomas & Co. Ltd. v. Portsea Steamship Co. Ltd.: The House of Lords held that general incorporation clauses in Bills of Lading do not include arbitration clauses unless specifically mentioned.- Merak, In re: The Court of Appeal held that an arbitration clause in a Charter Party can be incorporated into a Bill of Lading if the Bill of Lading specifically refers to it.- Astro Valiente Compania Naviera SA v. Pakistan Ministry of Food & Agriculture (No. 2): The court held that a Bill of Lading can incorporate an arbitration clause from a Charter Party if it directs attention to the Charter Party.- Miramar Maritime Corpn. v. Holborn Oil Trading Ltd.: Lord Diplock emphasized that terms in a Charter Party that are directly germane to the shipment, carriage, or delivery of goods can be presumed to be incorporated into the Bill of Lading.- Navigazione Alta Italia SPA v. Svenska Petroleum AB (The 'Nai Matteini): The court held that the wording of the Bill of Lading must give a clear indication of the Charter Party terms being incorporated.- Pride Shipping Corpn. v. Chung Hwa Pulp Corpn. (The 'Oinoussin Pride'): The court held that the expressed intention of the parties to incorporate the arbitration clause must be given effect.- Daval Aciers D'usinor Et De Sacilor v. Armare S.R.L. (The 'Nerano'): The Court of Appeal held that specific reference to the arbitration clause in the Bill of Lading indicates the parties' intention to incorporate it.- Atlas Levante-linie Aktiengesellschaft v. Gesellschaft Fuer Getriedehandel A.G. and Becher (The 'Phonizien'): The court held that extensive verbal redrafting is necessary to incorporate an arbitration clause into a Bill of Lading.- Union of India v. D.M. Revri & Co.: The court emphasized a common-sense approach to interpreting commercial contracts to give effect to the parties' intentions.- Alimenta S.A. v. National Agr. Co-operative Marketing Federation of India Ltd.: The court held that an arbitration clause in an earlier contract can be incorporated into a later contract if not inconsistent with the terms of the later contract.- Dwarkadas & Co. v. Daluram Goganmull: The Full Bench of the Calcutta High Court held that an arbitration clause in an earlier contract can be incorporated into subsequent contracts if it is intelligible and not inconsistent.Conclusion:The Supreme Court concluded that the intention of the parties to incorporate the arbitration clause from the Charter Party Agreement into the Bills of Lading was clear. The specific reference to 'including the law and arbitration clause' in the Bills of Lading indicated the parties' intention to resolve disputes through arbitration as per the Charter Party Agreement. The court found no inconsistency or insensibility in incorporating the arbitration clause and held that the High Court erred in rejecting the appellants' prayer for a stay of the suit. The appeal was allowed, and the judgment of the Division Bench of the High Court was set aside. The trial court was directed to proceed in accordance with the law, and costs were awarded to the appellants.