Citation Code: MANU/TN/4387/2023
Date of Judgement: 28 July 2023
Court: The High Court of Judicature at Madras
Coram: Justice Abdul Quddhose
Factual Background
M/s Caravel Logistics Pvt. Ltd. (hereinafter “Petitioner”), the Carriers in the present case issued a Bill of Lading to the Shipper namely Saeid Sahebolzamani in Iran. The Petitioner was claiming demurrage against the INI Farms Pvt. Ltd. (hereinafter “First Respondent”) and its agent, Intercont Agencies (collectively “Respondents”).
The First Respondent, the consignee in the present case, did not take the delivery of the Cargo due to a dispute with the Shipper in Iran. Due to this, no transfer of title of the Cargo from the Shipper to the Respondents took place and the bill of lading was also not delivered. Thereafter, the Petitioner invoked arbitration by sending a notice, but the respondents contested the applicability of the arbitration clause contained in the bill of lading, as it was never given to them.
Consequently, a petition under Section 11(6) of the Arbitration and Conciliation Act of 1996 was filed by the Petitioner in the High Court of Judicature of Madras seeking the appointment of a sole Arbitrator to adjudicate upon the dispute that has arisen between the Petitioner and the respondents.
Issues involved in the case
Whether a Consignee under a Bill of Lading who has not taken delivery of the goods due to a dispute with the Shipper is bound by the Arbitration Clause contained in the Bill of Lading.
Whether the High Court of Judicature at Madras has the jurisdiction to hear the present matter.
Petitioner’s Position
The Petitioner argued that the name of the First Respondent appears in the Bill of Lading as a ‘notify party’ and they paid the initial freight, thus binding them to the Arbitration clause contained in the Bill of Lading. Moreover, Respondents were obligated to empty and return the containers to the Petitioner at the discharge port i.e., the Port of Nhava Sheva. Reliance was placed on the decision of the Supreme Court in the case of Caravel Shipping Services Pvt. Ltd. vs. Premier Sea Foods Exim Pvt. Ltd., wherein the court rejected the argument that the absence of a signature on the bill of lading rendered the arbitration agreement non-binding. The court observed that it is not necessary that an arbitration agreement must be signed in all cases. The court noted that the party was named and had explicitly agreed to be bound by conditions in the Bill of Lading, thus binding itself to the arbitration agreement.
The Petitioner also clarified that they are only entitled to the money and denied ever acting as an agent of a Foreign Disclosed Principal.
Respondent’s Position
The First respondent contended that they never received the original Bill of Lading with the Arbitration clause from the shipper as they did not accept delivery of the goods because of their low quality. They further contended that they were not subject to the conditions of the Bill of Lading, including the Arbitration Clause, because there was no transfer of title. Reliance was placed on Owners and Parties Interested in the Vessel M.V. Polaris Galaxy vs. Banque Cantonale De Geneve, wherein the Supreme Court observed that a Bill of Lading serves as evidence of the terms of the contract between the carrier and the shipper. However, only when the bill is transferred, it becomes conclusive evidence of the contract terms between the carrier and the new holder i.e. consignee.
Furthermore, the current petition under Section 11 of the Arbitration and Conciliation Act, 1996 is not maintainable as the Petitioner is an agent of a Foreign Disclosed Principal. The Respondents reasoned that if the Petitioner is an agent and the claiming party is the principal, then it would be an ‘international commercial arbitration’, which is within the purview of the Supreme Court and not under the purview of the High Court.
Additionally, the territorial jurisdiction of the Madras High Court was contested by the Respondents, wherein they argued that only the Courts of Mumbai have jurisdiction as Nhava Sheva was the location of the cargo delivery.
The First Respondent further contended that because the issue at hand involves a disagreement between a consignee and a carrier, the Supreme Court’s ruling of Caravel Shipping Services Pvt. Ltd. vs. Premier Sea Foods Exim Pvt. Ltd. relied upon by the Petitioner, is not relevant, as in that case, the dispute was between a Shipper and a Carrier.
Decision & Reasoning
The court observed that unless the arbitration clause was made known to the Respondents, the question of binding the Respondents would not arise. As the Respondents never received the original Bill of Lading, there was no consensus ad idem between the parties required by Section 7 of the Arbitration & Conciliation Act, 1996.
The court concurred with the Respondent’s contention on the non-application of Caravel Shipping Services Pvt. Ltd. vs. Premier Sea Foods Exim Pvt. Ltd. and the Respondent’s reliance on Owners and Parties Interested in the Vessel M.V. Polaris Galaxy vs. Banque Cantonale De Geneve.
The court determined that the petition was not maintainable because there was no arbitration agreement between the parties. Thus, the Petitioner would have to bring a civil suit for any allegations. The jurisdictional objections were not considered by the court as the petition was declared not maintainable.
Author(s)
Bhoomi Aggarwal
Student at Dr. B.R. Ambedkar National Law University, Sonepat