1974 (1) TMI 108 - HC - Indian Laws

Court rules deductions by charterers unlawful, shipowners justified in withdrawal under charterparty clause.

The court found the deductions made by the charterers from the shipowners' bill to be unlawful and arbitrary. The shipowners were deemed justified in ... - Issues Involved:1. Validity of deductions made by the charterers from the shipowners' bill.2. Right of the shipowners to withdraw the ship from the charterers' service.3. Applicability and enforcement of a negative covenant in the charterparty.4. Grant of an interim injunction to restrain the shipowners from hiring out the vessel to third parties.5. Appointment of an arbitrator under the arbitration clause of the charterparty.Detailed Analysis:1. Validity of Deductions Made by the Charterers:The main question was whether the deductions made by the charterers from the shipowners' bill were lawful. The deductions included Rs. 3,02,349.87 for actual time being more than standard time and Rs. 50,000 for over-carried Iraqi crude due to a defect in the pump. The shipowners contended that these deductions were unlawful and contrary to the terms of the charterparty. The court found that the deduction of Rs. 50,000 was not justified under clause 21 or clause 24 of the charterparty, which deal with off-hire and guarantees, respectively. The charterers also failed to account for the period from November 1, 1972, to December 4, 1972, and from January 20, 1973, to April 11, 1973, in their performance calculations. Moreover, the charterers did not consider the 108 hours per quarter to which the shipowners were entitled under clause 21. The court concluded that the deductions were arbitrary and capricious, and thus, unlawful.2. Right of the Shipowners to Withdraw the Ship:The shipowners claimed their right to withdraw the ship under clause 8 of the charterparty, which allows withdrawal in default of payment after a seven-day notice. The charterers argued that the shipowners waived their right to withdraw by not doing so immediately after the notice period expired and by appropriating Rs. 2,05,506.13 towards their dues. The court held that the shipowners did not waive their right as the ship was engaged in unloading and was withdrawn immediately after completing the operation. The court found that the shipowners' action was lawful and justified under clause 8.3. Applicability and Enforcement of a Negative Covenant:The charterers argued for the enforcement of a negative covenant to restrain the shipowners from using the ship inconsistent with the charterparty. They cited cases where courts granted injunctions to enforce negative covenants in charterparties. However, the court distinguished these cases, noting that the ship was already withdrawn and on a voyage for Ganda Lines. The court referred to the principles laid down in notable cases like De Mattos v. Gibson and Lord Strathcona Steamship Co. v. Dominion Coal Co., and concluded that a time charter does not give the charterer a proprietary or possessory interest in the ship. Therefore, the court held that enforcing the negative covenant was inappropriate.4. Grant of Interim Injunction:The charterers sought an interim injunction to restrain the shipowners from hiring out the vessel to third parties. The court considered whether the charterers had a prima facie case and whether damages would be an adequate remedy. The court concluded that the charterers had no proprietary or possessory interest in the ship, and damages would be a sufficient remedy. The court also noted that enforcing the negative covenant could cause significant harm to the shipowners if the arbitrator ultimately found the charterers in breach of the contract. Therefore, the court refused to grant the injunction.5. Appointment of an Arbitrator:The charterparty contained an arbitration clause referring disputes to the Central Board of Arbitration. The Board declined to arbitrate, creating a vacancy. Under Section 8 of the Arbitration Act, the court had to fill this vacancy. The court found no indication that the vacancy should not be filled and appointed Shri K. N. Wanchoo, retired Chief Justice of the Supreme Court of India, as the sole arbitrator to decide the disputes between the parties.Conclusion:The court dismissed the charterers' application for an interim injunction and vacated the ex parte injunction granted earlier. The court accepted the application for the appointment of an arbitrator and appointed Shri K. N. Wanchoo as the arbitrator to resolve the disputes. The parties were left to bear their own costs.