Dismissed

Steel Authority of India Ltd. v. Pacific Gulf Shipping Co. Ltd.

Bombay HC19 Mar 2013ARBP/87/2013

Case brief

AI extract

What is this about?

In this arbitration petition, the Bombay High Court examined challenges to an arbitral award regarding demurrage charges and interest rates. The court rejected the petitioner's submissions on factual findings regarding vessel readiness and the interest rate, resulting in the dismissal of the petition.

What did the court decide?

The arbitration petition was dismissed with no order as to costs.

Steel Authority of India Ltd. Vs Pacific Gulf Shipping Co. Ltd. — Arbitration | Bombay HC (2013)

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IN THE HIGH COURT OF JUDICATURE AT BOMBAY

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ORDINARY ORIGINAL CIVIL JURISDICTION

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ARBITRATION PETITION NO. 87 OF 2013

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Steel Authority of India Ltd.

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..... Petitioner

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VERSUS

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Pacific Gulf Shipping Co. Ltd.

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..... Respondent

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Mr.S.C.Naidu, a/w. Mr.Sourabh Kulkarni, i/b. M/s.C.R.Naidu & Co. for the Petitioner.

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Mr.Prashant Pratap, Senior Advocate, a/w. Ms.Ashwini Sinha, i/b. Mr.Manoj Khatri for the Respondent.

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CORAM : R.D. DHANUKA, J.

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DATED : 19^th MARCH, 2013

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P.C.

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By this petition filed under section 34 of the Arbitration and Conciliation

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Act, 1996, petitioner seeks to challenge part of the award dated 3^rd August, 2012

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passed by the Arbitral Tribunal allowing claims made by the respondent.

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By a charter party agreement dated 15^th November, 2010 entered into

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between the petitioner and the respondent who were deponent/performing the

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owners of the vessel for transportation of 75,000 metric tones coking coal in bulk

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from DBCT Port, Queensland, Australia.

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On 10^th December, 2010, the vessel M.V. Navios Sagittarius sailed from Hay Point, Australia carrying approximately 74,058 metric tones. On 28^th December, 2010 the said vessel arrived at Port at Visakhapatnam. On 28^th December, 2010, the agent of the owner of the vessel gave notice of readiness of 1515 hours. It is the case of the petitioner that on 31^st December, 2010 at 0855 hours Visakhapatnam Port Authorities contacted the master of the vessel for the purpose of berthing of the vessel. The master of the vessel however indicated that he was not ready and required 2.5 hours. On 31^st December, 2010, at 0925 hours the master of the vessel indicated that he requires 2 to 3 hours and the vessel was not ready. On 31^st December, 2010 a 1300 hours, the master of the vessel indicated that the vessel was not ready. It is the case of the petitioner that on 31^st December, 2010, at 1305 hours LOWLANDS CAMELIA proceeded to berth another vessels which was waiting. On 31^st December, 2010 at 1425 hours, the master of the vessel indicated readiness of the vessel. On 2^nd January, 2011 at 2140 hours, the vessel berthed at Visakhapatnam. On 3^rd January, 2011 at 1230 hours, the discharge for ligthening at Vizag was completed.

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The dispute which is subject matter of the present petition is about demurrage charges demanded by the respondent in respect of delay in berthing the vessel at Visakhapatnam Port.

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The dispute was referred to the arbitration. Both the parties nominated the arbitrator who appointed the presiding arbitrator. All the three arbitrators are expert in shipping matters. By an impugned award dated 3^rd August, 2012 passed unanimously, the Arbitral Tribunal directed the petitioner to pay demurrage after re-calculating the laytime and worked out at US $ 79,475.68 with interest at the rate of 9% per annum from 24^th May, 2011 till the date of payment.

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Mr.Naidu, the learned counsel appearing for the petitioner submits that the vessel had arrived at Port at Visakhapatnam on 28^th December, 2010 at 1515 hours and notice of readiness was given by the respondent. The master of the vessel however indicated that the vessel could not proceed to berth and would require some time to rectify the problems. The Port Authorities therefore waited till 1305 hours and still the vessel was not ready. The learned counsel submits that eventually the petitioner allowed berthing of another waiting vessel MV LOALANDS CAMELIA whose turn otherwise was to berth after the vessel of the respondent. Engine problem which occurred was rectified on 31^st December, 2010 at 1415 hours and the vessel was ready to berth then. However the vessel berthed on 2^nd January, 2011 at 2140 hours after the working vessel had vacated the berth. It is submitted that notice of the readiness served on the petitioner was accepted by the petitioner on 2^nd January, 2011 at 2140 hours and thus such notice could only be

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deemed to have been tendered at the earliest at 2140 hours on 2^nd January, 2011 when the vessel was ready in all respect to discharge the cargo and laytime would have commenced on 3^rd January, 2011. The learned counsel submits that there was no valid notice of readiness tendered by the vessel and thus no demurrage charge could be directed to be paid against the petitioner.

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The learned counsel submits that the respondent did not give notice as per clause 32 of the charter party agreement and was not ready in all respect. The impugned award is thus based on the presumption and surmises and not based on the evidence. It is submitted that the fresh time of 24 hours would start only when the second time the respondent was ready.

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The next submission of Mr.Naidu, the learned counsel appearing for the petitioner is that the Arbitral Tribunal committed a grave error of law by ignoring the payment of an amount of US $ 4,977.42 which was admitted and undisputed and was apparent from the record of the Arbitral Tribunal.

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The next submission of Mr.Naidu, the learned counsel for the petitioner is

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that the interest awarded by the Arbitral Tribunal at 9% per annum on the amount payable in foreign currency is arbitrary, unreasonable, excessive and highly

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disproportionate. It is submitted that LIBOR rate of interest during the material period was 1.5% per annum on US $ and thus interest at the rate of 9% per annum could not have been awarded by the Arbitral Tribunal. The learned counsel placed reliance upon the judgment of the Supreme Court in case of Rajendra Construction Company vs. Maharashtra Housing and Area Development Authority & Ors .¹ in support of his plea that the Supreme Court had reduced rate of interest from 18% to 10%. Considering the equity and in the interest of justice. The learned counsel also placed reliance upon the judgment of the Supreme Court in case of Krishna Bhagya Jala Nigam Ltd. vs. G.Harischandra Reddy & Anr.² in support of the plea that the Supreme Court had considered that after economic reforms in India, the interest regime has changed and the rates have substantially reduced and reduced the rate of interest from 18% to 9%.

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The learned counsel also placed reliance upon the Delhi High Court in case of Fittydent International Gmbh vs. Brawn Laboratories Ltd. delivered on 11^th May, 2010 in C.S.(OS) 2447 of 2000 in I.A. 12332 of 2008 in support of the plea the Delhi High Court reduced the rate of interest to 2% per annum simple interest

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in case of an award directing payment in foreign currency.

1 AIR 2005 SC 3701

2 AIR 2007 SC 817

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The learned counsel appearing for the petitioner placed reliance upon the judgment of Delhi High Court in case of MMTC vs. Al Bamar Company Ltd.⁵ in support of his plea that in case of award directing the petitioner to pay in foreign currency, Delhi High Court has reduced the award of interest from 7% to 3 ½ %.

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Mr.P.S.Pratap, the learned senior counsel appearing on behalf of the respondent on the other hand submits that the Arbitral Tribunal after considering the fact and the provisions of the charter party had interpreted the terms of the charter party and have rendered a finding of fact. It is submitted that the interpretation of the Arbitral Tribunal is possible interpretation and the views of the Tribunal shall not be substituted by this court by its own views. The learned senior counsel submits that considering the provisions of the charter party and more particularly clauses 33, 35, 38 and 40 the Arbitral Tribunal has excluded the period between 28^th December, 2010 and upto 1415 hours on 31^st December, 2010 and have recalculated laytime on that basis and arrived at the figure of US $ 79,475.68 towards demurrage payable by the petitioner to the respondent. The learned senior counsel submits that though the claim of the petitioner was much more, the Arbitral Tribunal did not grant the entire claim but has scaled down by allowing only demurrage of US $ 79,475.68.

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5 (2009) Delhi Law Times 513

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In so far as the submission of the petitioner that the Arbitral Tribunal ignored the payment of amount in US $ 4,977.42 is concerned, the learned senior counsel submits that the respondent had denied this allegations in the rejoinder filed by the respondent before the Arbitral Tribunal in para 58 that the remittance of US $ 464,245.52 could be taken in full and final settlement. It is submitted that the petitioner did not make any submission on this issue before the Arbitral Tribunal nor proved the said allegations and thus no such plea can be raised for the first time in the present proceedings. Regarding rate of interest awarded at 9% by the Arbitral Tribunal, the learned senior counsel submits that under section 31(7) of the Arbitration and Conciliation Act, 1996, it is at the discretion of the Arbitral Tribunal to include in the sum for which the award is made interest, at such rate as it deems reasonable, on the whole or any part of the money, for the whole or any part of the period between the date on which the cause of action arose and the date on which the award is made. The learned senior counsel submits that the respondent in its statement of claim before the Arbitral Tribunal had claimed interest at the rate of 12% per annum, however in the written statement filed before the Arbitral Tribunal by the petitioner, rate of interest as claimed by the respondent was not disputed. It was not the case of the petitioner that the rate of interest as claimed by the respondent was exorbitant or arbitrary or unreasonable. It is submitted that no interference is thus warranted with the award. The learned senior

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counsel placed reliance upon the judgment of the Supreme Court in case of Madhya Pradesh Housing Board vs. Progressive Writers and Publishers³ in support of the plea that the court cannot substitute its own evaluation and come to the conclusion that the arbitrator had acted contrary to the bargain between the parties. It is submitted that the award of the arbitrator is ordinarily, final and the courts hearing the applications do not exercise any appellate jurisdiction and reappraisal of evidence by the court is impermissible.

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Mr.Pratap, the learned senior counsel placed reliance upon the judgment in

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case of Municipal Corporation of Delhi vs. M/s.Jagan Nath Ashok Kumar and another⁴ in support of his plea that since the Arbitral Tribunal was comprising of the experts in the field of shipping law, the award being unanimous award and based on the findings of fact, this court shall not interfere with such award.

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The learned counsel distinguishes the judgment of the Supreme Court and the Delhi High Court relied upon by the petitioner on the ground that the Supreme Court has reduced the rate of interest from 18% to 9 or 10%. As far as judgment of Delhi High Court is concerned, the learned senior counsel submits that no reasons

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are rendered by the Delhi High Court while reducing the rate of interest at 2%. It

3 (2009) 5 SCC 678

4 (1987) 4 SCC 497

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is submitted that in any event, the Arbitral Tribunal has exercised their discretion judicially and this court shall not interfere with the rate of interest awarded by the Arbitral Tribunal.

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On perusal of the impugned award, it is clear that the Arbitral Tribunal which is comprising of the members who are expert in the field have after considering the evidence placed by parties and after interpreting the terms of the charter party, have rendered a finding of fact that the charter were not entitled to take time beyond when the vessel was ready in all respect to discharge the cargo which was 1415 hours on 31^st December, 2010. The Arbitral Tribunal has also considered that it was admitted position that other vessel berthed which was also on account of the petitioner and they had not suffered any actual loss. Considering the provisions of the charter party, the Arbitral Tribunal rendered a finding that the laytime commenced is 24 hours after the time of notice i.e. 1515 hours on 29^th December, 2010. On 31^st December, 2010 time from 0845 hours to 1415 hours shall be excluded. Considering the provisions of the contract and after interpreting the terms of the contract and on perusal of the evidence on record placed by the parties, the Arbitral Tribunal re-calculated the laytime and came to the conclusion that demurrage payable by the petitioner was in the sum of US $ 79,475.68. It is clear that the Arbitral Tribunal has not allowed the entire claim made by the

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respondent. I am therefore not inclined to accept the submission made by the petitioner that the notice of readiness was not proper or that vessel was not ready in all respect. In my view, the finding rendered by the Arbitral Tribunal is not perverse and thus no interference is warranted by this court with finding of fact rendered by the Arbitral Tribunal.

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In so far as the issue as to whether remittance of US $ 464,245.52 was paid in full and final settlement or not or whether any credit in respect of the payment made by the petitioner was given or not, perusal of the rejoinder and more particularly para 58 indicates that the respondents have denied the said stand of the petitioner. On perusal of the award, it is clear that no such issue was argued by the petitioner before the Arbitral Tribunal by the petitioner. Hence, this submission therefore cannot be allowed to be made across the bar in the present proceedings. It is not the case of the petitioner that the said submission was made by the petitioner and the same was not considered by the Arbitral Tribunal.

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As far as the interest awarded at the rate of 9% is concerned, in my view the Arbitral Tribunal has rightly exercised their discretion under section 37(1) (a) of the Arbitration and Conciliation Act and has awarded interest at the rate of 9% per annum though respondent had claimed interest at the rate of 12% per annum. In

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my view the Arbitral Tribunal has exercised its discretion under section 31(7) (a) of the Arbitration and Conciliation Act, 1996. The petitioner has not disputed the rate of interest by filing a written statement. In view of the fact that the Arbitral Tribunal has reduced the rate of interest from 12% to 9% in the facts of this case and the petitioner not disputing the rate of interest in the written statement, no interference is warranted with the rate of interest awarded by the Arbitral Tribunal. Reliance placed by the petitioner on the judgments of Delhi High Court is of no assistance to the petitioner.

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There is no merit in the submissions made by the petitioner. I, therefore, pass the following order :-

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(a) Arbitration Petition is dismissed.

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(b) There shall be no order as to costs.

Steel Authority of India Ltd. v. Pacific Gulf Shipping Co. Ltd.

Case brief

What is this about?

What did the court decide?

Steel Authority of India Ltd. v. Pacific Gulf Shipping Co. Ltd.

Case brief

What is this about?

What did the court decide?

What the court decided

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Issues for consideration

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