TaxTMI 
TaxTMI 
2008 (8) TMI 1051
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....petition are recapitulated below. 3. The charter party agreement in dispute marks the second time the parties have done business with each other. The first time was in 2004. In March of that year, the respondent entered into a contract with the Oil and Natural Gas Corporation Limited ("ONGC") to carry out construction work on ONGC's installations at Bombay High. On 26th October, 2004, the applicant and the respondent entered into a charter party agreement. Under this prior agreement, the respondent hired a vessel combination from the applicant. The respondent required a specialized offshore construction barge known as a "Gal Constructor." It also required an anchor handling tug, named "AHT Malaviya Five." The AHT Malaviya is used in combination with the Gal Constructor. I shall refer to the Gal Constructor and the AHT Malaviya as the "vessel combination." 4. The respondent needed this combination to execute offshore work for ONGC. This work was part of ONGC's RSPPM project, Phase I. The first phase was completed in November 2004. 5. In this case, the controversy is confined to the alleged agreement relating to the second phase of ONGC's project. 6. In this a....
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....port or STBD side at the barge" as well as a " ... working platform as an extension to main deck in the aft quarter over one of the anchor rests". 13. In response to a meeting on August 8th and the above letters, the respondent faxed a letter to the respondent on August 13th, 2005. The letter suggested that additional provisions be incorporated in a new draft of the contract. The respondent requested the right to modify the Gal Constructor, thereby enabling it to perform a riser installation. The respondent further asked the applicant to pay the outstanding amount (USD 188,500) from the preceding contract. In conclusion, the respondent stated that it would be willing to finalize the contract before the 30th of August. 14. On 16th August, the parties met to discuss the proposed changes. The applicant formally responded to the respondent's suggestions in a letter dated August 22nd, noting that the parties had come to the following agreement regarding a number of outstanding issues: S. No. Clause Agreement 1 Modifications for Riser Installation Clause on the basis of Addendum 3 to Charter Party dated 26th Oct 04 to be incorporated 2 Early Termination ....
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....redit issued at sight by the Charterer's bank for USD 6,500,000 ... These L/C(s) to be opened, latest by 15th September 2005. However draft of L/C(s) should be provided to the Owners by 1 st September 2005. 33. Law and arbitration (state Cl 31(a) or 31(b) or 31(c), as agreed, If 31c agreed also state place of arbitration) (Cl.31) Clause 31(c) - Indian Arbitration and Conciliation Act, 1996 at Mumbai ..... " 17. I must provide some background before dealing with other documents, as the faxed CPA sits at the center of this dispute. 18. It appears that both parties signed the faxed CPA, and it bears the applicant's seal. However, it does not bear the respondent's seal. The applicant contends that it had sent the original to the respondent on August 22nd. The respondent did not return the original. Instead, on September 8th, the respondent's head office faxed a copy of the CPA to its local office. [The top of the said fax shows the date and time as well as the place from and to which it was sent; it reads "08-SEP- 2005 13:52 FROM IOEC HEAD OFFICE TO ALLAHVERDI"]. This faxed copy is signed by the respondent's Project Director....
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....concludes by saying that the respondent " ... can not conclude the charter party agreement until the above issue are settled." 25. On September 24th, the respondent met with Likpin Engineers to discuss whether the applicant's vessel could be converted to perform a riser installation. Likpin surveyed the vessel on 23rd September 2005 and, in the following minutes, concluded that :- "Taking into account the number of problems associated with the vessel, it is the conclusion of Likpin and IOEC that the Gal Constructor is not suitable as a riser installation. ... the vessel size combined with the limited crane reach cannot be corrected or overcome and hence the vessel should not be chartered for riser installation operations." 26. In a letter dated September 27th, 2005, the respondent again asked the applicant to issue a cheque or remit $186,618. It once again demanded that it be granted the right to sublet the vessel and that until those issues were settled, it could not conclude the CPA. 27. In a letter dated September 29th, 2005, the respondent reiterated its demands, namely, that the applicant remit $186,618 and that it provide the respondent with the sole and....
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....on arrived at P & V Channel, Mumbai on October 6th. Because it had yet to receive the line of credit, it informed the respondent that it could not proceed further with the mobilization of the vessel combination. The applicant provided the respondent with an invoice for mobilizing its vessel combination. It gave the respondent another chance to comply with the purported contract: "please note that contractual hire will begin as and from 0000 hours of the 11th October 2005. We on our party stand ready and willing to comply with all our obligations." 31. In its October 10th letter, the respondent reiterated that the terms of the agreement were still under negotiation and that no contracted had been concluded. It objected to the absence of a provision that provided the respondent with the absolute right to sublet the vessel. 32. It also argued that the applicant's vessel combination was not fit for the agreed purpose. This issue is beyond the scope of this decision, which limits itself to deciding whether or not a contract containing an arbitration clause was formed. While I have made mention of some of the other issues, such as whether the vessel was fit for the agreed purpo....
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....nation for only 170 days. However, since you agreed to take barge and AHT from us for 45-55 days, we agreed to extend the intended hire period from 170 days to 200 days and accordingly in this background the said LOI was issued. However, since thereafter you unilaterally declined to take our barge and AHT on the ground of difference in rate levels offered by us, we, in view of the said condition and in the light of your refusal to accept our barge and AHT, asked you for absolute subletting right of the said vessels to compensate us/minimize our expenses for risk of additional days than the originally intended 170 days. The correspondences which were exchanged between us make it aptly clear that negotiations and change in terms and conditions from your side continued even after issuance of LOI and therefore the question of concluding the CPA in respect of RSPPM project phase-II does not arise at all." 37. In its December 2nd, 2005 letter, the respondent called upon the applicant to arrange for a third party inspection of the applicant's vessel, in order to determine whether or not it was suitable for riser installation. 38. In response, on 23rd January 2006, the applicant ....
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....nt to a contract, the court would look for the intention of the parties, the nature of the transaction, the language employed in the informal agreement and other relevant circumstances. None of these is conclusive in itself. ... The fact that the parties contemplate that the letters or an informal agreement would be superceded by a more formal one, does not prevent it from taking effect as a contract. If the letter of intent is acted upon, especially for a length of time, the court is likely to hold the parties bound by the contract." [See Mulla, Indian Contract and Specific Relief Acts, 13th Edition at pages 317-318]. 45. In Dresser Rand S.A. v. M/s. Bindal Agro Chemical Ltd. & Another, AIR 2006 SC 871 at page 884 at para 34, a two-Judge Bench of this Court emphasized that whether letters of intent rise to the level of being a contract hinges on the terms of the letter itself. It observed as under :- "It is no double true that a Letter of Intent may be construed as a letter of acceptance if such intention is evident from its terms. It is not uncommon in contracts involving detailed procedure, in order to save time, to issue a letter of intent communicating the acceptan....
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....upplying the barge. By doing so, the respondent was attempting to offset the costs it would incur by having the applicant's vessel combination for an extra 30 days. 50. Furthermore, the respondent claims that no contract could arise from its LOI of 23rd June because the parties were not ad idem, i.e., in agreement on each point. Along these lines, Chitty on Contracts [29th Edn. Vol.1 at page 134] has observed :- "When parties carry on lengthy negotiations, it may be difficult to say when and whether a contract has been concluded. The court must then look at the whole correspondence and decide, whether on its true construction, the parties had agreed to the same terms." 51. In M/s. Rickmers Verwaltung Gimb H v. Indian Oil Corporation Ltd., AIR 1999 SC 504 at page 509 para 12, this Court reiterated this stand: "Unless from the correspondence it can unequivocally and clearly emerge that the parties were ad idem to the terms, it cannot be said that an agreement had come into existence between them through correspondence." [See also: Dresser Rand S.A. v. M/s. Bindal Agro Chemical Ltd. & Another, AIR 2006 SC 871 at page 879 para 21 (affirming the same)] 52. The resp....
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.... members that dispute the authenticity of a will. 56. The respondent could argue that it handed over an unsigned copy of the faxed CPA and that the applicant forged it after the fact. Such an assumption is equally dubious. Why would the respondent go through the trouble of returning the applicant's August 22nd CPA unsigned, when it had been routed vide fax through its Head Office? 57. There is no evidence to suggest that the faxed CPA was forged. To the contrary, the evidence we do have is the faxed CPA bearing the parties' signatures coupled with correspondence between the parties. The correspondence, as it is more than just a pleading, adds additional weight to the applicant's story. The applicant's letter of 21st October corroborates the allegation that Ali Rahmati delivered the faxed CPA to the applicant on 12th September. The date of delivery of 12th September fits the timeline provided on the fax header, as the respondent could only have delivered the faxed CPA after 8th September. Moreover, it appears that having received the faxed CPA on 12th September, the applicant was prompted to ask for the original vide email on 14th September. Once again, the dat....
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....g to the learned counsel for the applicant, affixing a seal under section 7 of the Act is not a requirement. [See: Bihar State Mineral Development Corporation & Another v. Encon Builders (1) (P) Ltd., (2003) 7 SCC 418 at page 423 para 13 (one of the essential elements of an arbitration agreement is that "the parties must agree in writing to be bound by the decision of such tribunal.") and K.K. Modi v. K.N. Modi & Others, (1998) 3 SCC 573 at page 585 para 21 ("there are, of course, the statutory requirements of a written agreement Vide Section 2 Arbitration Act, 1940 and Section 7 Arbitration and Conciliation Act, 1996.") 62. The respondent makes much of the fact that the "faxed CPA" of August 22nd is (1) a copy, not the original; (2) is stamped by one, not by both parties; (3) one of the parties did not sign every page; and (4) it was first sent vide fax. 63. Section 7 defeats all four assertions. First, there is no requirement that the arbitration agreement be an original. Where the statute has gone to great lengths to define exactly what is meant by the term "in writing," we are precluded from adding another term to definition. Indeed, "it is contrary to all rules of constr....
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....other means of telecommunication which provide a record of the agreement." This section covers agreements that are sent via facsimile ("fax") as they are "other means of telecommunication". "Fax" is defined as "a machine that scans documents electronically and transmits a photographic image of the contents to a receiving machine by telephone line" or "a document received by such a machine." [See: Chambers 21st Century Dictionary, Allied Publisher's Limited (1996)]. This definition clearly provides that a fax falls under "other means of telecommunication." Thus, faxed agreements are acceptable under Section 7 of the Act. 68. Section 7(4)(b) further requires us to ask whether a record of the agreement is found in the telecommunication, in this case a fax. What could be a better record of the agreement than the signatures of the parties themselves? As noted above, with no evidence to indicate that the respondent's signature was forged, the faxed CPA stands on its own as the record of agreement. Likewise, Section 7(4)(b) stands satisfied. 69. The court has to translate the legislative intention especially when viewed in light of one of the Act's "main objectives": "to....
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....s cited in Law and Practice of International Commercial Arbitration, Alan Redfern and Martin Hunter, Street & Maxwell, London (1986) at page 388 (citing UN doc.A/CN.9/07, paras 16-27]. 74. It goes without saying, but in the interest of providing the parties a comprehensive review of their arguments, I note that once it is established that the faxed CPA is valid, it follows that a valid contract and a valid arbitration clause exist. This contract, the faxed CPA, does not suffer from a conditional clause, as did the Letter of Intent. Thus, the respondent's argument that the parties were not ad idem must fail. 75. I have heard the learned counsel appearing for the applicant and the respondent at length. I have carefully reviewed the entire correspondence between the parties. The charter party agreement that had been signed by the applicant and the respondent clearly indicated that the parties have entered into a valid and concluded contract. The other correspondence between the parties also leads to a definite conclusion: the parties have entered into a valid contract containing an arbitration clause. Since a dispute has arisen between the applicant and the respondent, it ne....