Time charter and arbitration vacancy: no injunction for non-performance, but court may appoint an arbitrator when the agreed forum declines.
A time charter gives the charterers only a contractual right to the vessel's services, not a proprietary or possessory interest in the ship. On that basis, and because the charterers had made unjustified deductions from advance hire and had not performed their reciprocal obligations, equitable relief by injunction was refused; damages were treated as an adequate remedy and no irreparable injury was shown. The arbitration clause also remained operative after the agreed arbitral forum declined to act, since that created a vacancy in the contractual machinery. The Court could fill that vacancy under the Arbitration Act, 1940, and appoint an arbitrator where the agreement did not exclude that course.
Issues: (i) whether the charterers were entitled to an injunction restraining the shipowners from withdrawing the vessel and employing it elsewhere; and (ii) whether an arbitrator should be appointed under the arbitration agreement after the agreed arbitral forum declined to act.
Issue (i): whether the charterers were entitled to an injunction restraining the shipowners from withdrawing the vessel and employing it elsewhere.
Analysis: The charter was held to be a time charter and not a demise of the ship. Under such a contract, the charterers had no proprietary or possessory interest in the vessel, only a contractual right to its services. On the facts, the charterers had made deductions from advance hire which were found to be unjustified and contrary to the charterparty terms, so they had not performed their part of the contract so as to attract equitable relief. Section 41 of the Specific Relief Act barred injunction where specific performance could not be granted, and although Section 42 permits injunctions in cases involving a negative covenant, its proviso applied because the plaintiff had failed to perform the contract so far as it was binding on it. Damages were also found to be an adequate remedy, and no irreparable injury was shown.
Conclusion: The injunction was not warranted and the shipowners were not to be restrained from withdrawing or re-employing the vessel.
Issue (ii): whether an arbitrator should be appointed under the arbitration agreement after the agreed arbitral forum declined to act.
Analysis: The arbitration clause referred disputes to the Central Board of Arbitration, but the Board declined to enter upon the reference. That created a vacancy in the agreed machinery. Reading the arbitration agreement as a whole, the Court found no indication that the vacancy was intended to remain unfilled. Section 8 of the Arbitration Act, 1940 empowered the Court to supply the vacancy and appoint an arbitrator where the agreement did not exclude that course. The dispute was therefore fit to be referred to arbitration under the contractual mechanism.
Conclusion: The application for appointment of an arbitrator was allowed and a sole arbitrator was appointed.
Final Conclusion: The request for injunctive relief failed, but the dispute was directed to arbitration by appointment of a sole arbitrator under the contract.
Ratio Decidendi: A time charter does not confer a proprietary or possessory interest in the ship, and where the plaintiff has not performed its reciprocal contractual obligations, equity will not grant an injunction to enforce a negative covenant; a court may, however, fill a vacancy in the agreed arbitral machinery unless the contract shows a contrary intention.
TaxTMI 
AI Drafter ✕
TaxTMI 
