2004 (7) TMI 680 - HC - Indian Laws

Court enforces arbitration clause in bills of lading, directs disputes to arbitration

Stephen Commerce Pvt. Ltd. Versus The Owners and Parties Interested in the Vessel M.V. Wise King

The court held that the disputes arising from the bills of lading should be referred to arbitration as the arbitration clause in the charter party was ... - Issues Involved:1. Arbitration Clause in the Bills of Lading2. Incorporation of Charter Party Arbitration Clause3. Limitation under Hague Rules4. Validity and Authorization of Bills of Lading5. Admiralty Action and Reference to ArbitrationDetailed Analysis:1. Arbitration Clause in the Bills of Lading:The core issue was whether the disputes arising from the bills of lading should be referred to arbitration as per the arbitration clause contained in the charter party. The plaintiff argued that the bills of lading did not contain any identifiable arbitration clause and that the specific charter party was not mentioned, making the arbitration clause inapplicable. However, the court held that the arbitration clause in the charter party was incorporated by reference in the bills of lading, and thus, the disputes should be referred to arbitration.2. Incorporation of Charter Party Arbitration Clause:The court examined whether the arbitration clause in the charter party was effectively incorporated into the bills of lading. The plaintiff contended that the incorporation clause was vague and the charter party was not identifiable. The court referred to the Supreme Court decision in the case of 'Owners and Parties Interested in the vessel M.V. Baltic Confidence & Another v. State Trading Corporation of India Ltd. & Anr.' which established that the intention of the parties to the bills of lading is the governing factor. The court concluded that the arbitration clause was validly incorporated and binding on the parties.3. Limitation under Hague Rules:A significant issue was whether the one-year limitation period under the Hague Rules would render the arbitration clause inoperative. The plaintiff argued that referring the disputes to arbitration after the limitation period would be unjust. The court acknowledged this concern but emphasized that the decision in 'Baltic Confidence' was binding. To address the limitation issue, the court directed the defendants to file an affidavit undertaking not to raise the plea of limitation before the arbitrator. Failure to file such an affidavit would result in the revival of the suit.4. Validity and Authorization of Bills of Lading:The plaintiff raised concerns about the validity of the bills of lading, arguing that they were not signed by the master and the agent who signed them was not authorized. The court dismissed these arguments, noting that the plaintiff had relied on these bills of lading to file the suit and thus could not deny their validity. The court referred to the charter party clause that authorized others to sign on behalf of the master, reinforcing the validity of the bills of lading.5. Admiralty Action and Reference to Arbitration:The plaintiff argued that admiralty actions could not be referred to arbitration. The court did not separately discuss this issue, relying on the Supreme Court's decision in 'Baltic Confidence' which mandated the reference to arbitration despite the admiralty nature of the suit.Conclusion:The court allowed the application for reference to arbitration, directing the parties to refer the disputes to arbitration as per the arbitration clause in the charter party. The suit was stayed permanently, subject to the defendants filing an affidavit undertaking not to raise the limitation plea. If the affidavit was not filed within four weeks, the order of reference would be revoked, and the suit would be revived. The court also ordered the bank guarantee furnished by the defendants to be kept renewed for the satisfaction of any award made in the arbitration. The judgment was stayed for two weeks to allow for any urgent appeals.