Dismissed

Ispat Industries Ltd. v. the Shipping Corpn.of India Ltd.

Bombay HC18 Jun 2014APP/236/2002

Case brief

AI extract

What is this about?

The High Court dismissed two appeals challenging awards under Section 34 of the Arbitration Act. Upholding the arbitrator's findings that the vessel's gear was suitable and that charterer negligence caused discharge delays, the Court ruled the award not perverse and refused setting aside of the demurrage award against the appellants.

What did the court decide?

Both appeals were dismissed; no order as to costs.

Ispat Industries Ltd. Vs the Shipping Corpn.of India Ltd. — Arbitration | Bombay HC (2014)

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Shiv

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IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION

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APPEAL NO.236 OF 2002

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JSW Ispat Steel Industries (formerly known as Ispat Industries Ltd.) a Company incorporated in India under the Companies Act having its place of Business at 219, Vardhman Chambers, 2nd Floor, Sector -17, New Bombay 400 705 ...Appellants V/s. The Shipping Corporation of India Ltd., having its registered office at 245, Madam Cama Road Mumbai – 400 021 ...Respondents

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WITH

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APPEAL NO.534 OF 2009

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Mr.M.S.Doctor Advocate i/b Juris Corp for the Appellants.

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Mr.Rahul Narichania Senior Advocate i/b Mulla & Mulla and Craigie Blunt and Caroe for the Respondents.

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CORAM : S.J. VAZIFDAR &

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A.K. MENON, JJ. DATE : 18TH JUNE, 2014.

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JUDGMENT: (PER A.K. MENON, J.)

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1. This judgment disposes off two appeals.

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(A) Appeal No.236 of 2002 impugns the order of the learned single Judge dismissing Arbitration Petition No.570 of 2001 filed under section 34 of the Arbitration and Conciliation Act 1996 challenging an interim award dated 10th July, 2001 rejecting the appellants' counter claim on the ground that it was barred by limitation. The learned Judge held that the award is not perverse, that the arbitrator's view was a possible one and that therefore the award was not in conflict with the public policy of India.

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(B) Appeal No.534 of 2009 impugns the order of the learned Single Judge dismissing Arbitration Petition No.343 of 2009 challenging the final award dated 5.1.2009 (as corrected on 20.2.2009). By this award the arbitrator awarded the respondent's

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claim for demurrage.

The basis of the appellants' counter claim is the basis of its defence to the respondent's claim. We have dismissed the appeal No.534 of 2009 upholding the award holding against the appellants and in the respondent's favour on merits. Accordingly, even if the first appeal succeeds on the question of limitation the appellants would fail on merits. The result of the first appeal therefore for all practical purposes follows the result of the second appeal.

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Further the appellants did not press its claim for the balance freight but only challenged the award in so far as it awarded the respondent's claim for demurrage and rejected its claim for damages.

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We therefore proceed to deal with the second appeal being Appeal No.534 of 2009.

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The dispute which led to the arbitration arose from a contract of affreightment dated 12.4.1996 (“the contract”) whereby the appellants chartered two vessels belonging to the Respondents M.V. Uttarkashi and M. V. Mandakini for transportation of iron ore

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from Vishakhapatnam to Mumbai. The cargo was loaded at Vishakapatnam and discharged at Mumbai. According to the appellants the discharge of cargo at Mumbai was delayed owing to unsuitable / under-performing grabs and cranes provided by the respondents on the vessels. On the other hand the Respondents claimed demurrage on account of slow unloading of the cargo at the discharge port.

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The Respondents invoked the arbitration and filed a claim for USD 9,41,504.32 being the principal sum of USD 6,34,839/- and interest thereon. This claim included loss of profit of USD 2,89,280. The statement of claim was filed on or about 18th August, 1999. The appellants filed a counter claim on or about 17th February, 2000 claiming a sum of USD 3,65,826.10.

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The arbitrator awarded in favour of the respondents a sum of USD 42,817 and USD 2,48,270 in respect of demurrage incurred by M.V. Mandakini and M.V. Uttarkashi and dismissed the counter claims.

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Learned counsel for the appellants relied upon clauses (1)

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and 35 of the contract in support of his submission that the

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Respondents failed to provide the vessels with cranes and grabs as per the contractual specifications and were therefore in breach of the contract. The relevant provisions of the contract of affreightment are as follows :

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“1. IT IS THIS DAY MUTUALLY AGREED BETWEEN The Shipping Corporation of India Ltd., Mumbai Owners of the good motor vessel M.V. Uttarkashi sister of following description :

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…. …. Gear	…. …. …. 5 x 25 Tons Cranes
Grab	5 X 6 CBM
…. ….	…. …. ….
Owners	Grab/cranes suitable
Guarantee	to discharge iron ore. grabs are opening/closing from crane cabin attached with reel tower.”

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“16. Vessel is guaranteed suitable for grab discharge. No cargo to be loaded in or on top or deep tanks nor in between decks nor in bridge space nor in any other place not accessible for discharge by means of mechanical grabs and Bulldozers. Bulldozers and drivers to be arranged and paid for by Charterers. Should nevertheless any cargo be loaded by vessel in places not accessible to grabs any time and or dispatch money so lost and all extra expenses over and above the cost of normal grab discharge at port of destination to be for Owners' account, Deep tanks, tunnels and all other provisions within vessel/s holds are to be adequately protected against damage by stevedores' grabs, failing which Owners to be responsible for all consequences. Charterers not to be responsible for any negligence, default or error of judgment of stevedores, employed and claims for stevedores

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damage if any to be settled directly between stevedores and Owners. However Charterers will at their best assist settlement and will bear ultimate responsibility for such settlement provided Master gives written notice of such damage latest within 24 hours of occurrence and in any case prior vessel's departure.”

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Vessel to depart from loading terminal promptly upon completion of loading.

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The cargo to be discharged at the rate of 5000 MT or in Charterers option at the rate of 7500 MT per day of 24 consecutive hours Sundays and holidays included and basis four cranes/grabs available at all times. Vessel's cranes and grabs driven by shore labour free of expenses to the Owner. The Charterers to advice their option of rate of discharge on completion of loading of each vessel.

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Owners confirm vessels cranes and grabs are suitable for loading/discharging of bulk iron ore.

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54. Owners shall guarantee that the vessel is fitted with cargo gears, winches, cranes and grabs are in efficient working conditions with the necessary certifications as provided under tackle regulations prevalent at discharge, vessel shall provide steam and power free of costs for all cranes simultaneously during unloading operations.

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Vessels to provide light for night work.

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63. Owners guarantee that vessel's grab and cranes are capable of discharging basis 4 hooks minimum 8000 MT with barges available in one day.”

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Mr.Doctor submitted that the appellant were desirous of

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transporting 400 MT of iron ore in two vessels, both of which had identical equipment. There was no delay while the vessels were loaded with iron ore at Vishakapatnam. When the vessel came to Mumbai the discharge of cargo was slower on account of inefficient working of cranes and grabs. He also contended that the grabs were incapable of lifting 6 CBM of iron ore which was contrary to clause 1 of the contract. The award in so far as it ignored this condition is contrary to the contract and is therefore liable to be set aside.

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9 (A) In support of his submission, Mr.Doctor relied upon paragraphs 6 and 7 of the affidavit in lieu examination in chief of one Krishnamurti Chidambaran, witness for the Respondents which are as follows :

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“6. I say that the density of iron ore is in the region of 2 to 2.5 tonnes per cubic meter i.e. less than 3.5 tonnes per cubic meter. Thus, the said grabs as per the technical specification of SMAG and the drawing at Exhibit “C” are suitable for handling and discharge of iron ore. The maximum cargo weight is 8.5 tonnes.

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7. The capacity of a grab is described both in terms of volume and weight of cargo that can be grabbed by the grab. The grab is lowered by the crane to which it is attached in open condition on to the cargo. The grab is then closed by lifting of the crane hook. After the closure, a certain volume of the cargo is entrapped inside the grab. The grab is then lifted away by the crane along with the cargo. The weight of cargo contained in the grab at this time would depend upon the density of the cargo. To put this in layman's terms, density could be explained as follows :

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“Density is the weight of any material in comparison with the weight of an equal volume of water”.

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The grabs in question were designed for a maximum volume of 9 cubic meters and a maximum gross weight including the weight of the grab itself, of 16 metric tons. This would give a maximum carrying capacity of 8.5 tonnes of cargo since the empty weight of the grabs was 7.5 tonnes after modification.”

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(B) Mr.Doctor also relied upon the answers of the witness in

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cross examination to questions 56, 57 and 61 which are as under :

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“Q.56 Witness attention is drawn to the 2^nd sentence in paragraph 12 of this affidavit of evidence thus “the said grabs were also in accordance with clause 1 of the Contract of Affreighment in question. Can you substantiate this statement in light of your earlier answer ?

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A. The design of the grabs providing for number of kick plates allow flexibility of usage of these grabs for cargoes with difference densities while at the same time providing a means to the user of the grabs from exceeding the safe working load of these grabs. The grabs as per the technical specifications meets the requirement and that is why I have given the answer as above.

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Q.57 As per clause 1 of the Contract how many kick plates should have been removed in order to meet the Contract term (Witness is shown clause 1 of the COA) A. The number of kick plates to be removed would depend upon the density of the cargo and in the event of iron ore it would generally require the removal of all the three sets of kick plates of this design of grab.”

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Q.61 Were these grabs capable of lifting 6 cu. Mtrs. at a time ?

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A. These grabs were not suitable for lifting 6 cbm of iron ore per lift.”

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R elying upon the aforesaid deposition, Mr.Doctor submitted that the Respondents were in breach in not having provided grabs capable of lifting 6 CBM iron ore as seen from the witnesses answer to question 61. He therefore contended that the delay in discharge was attributable to unsuitable equipment and the demurrage claim could not be thrust upon the appellants.

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Mr.Narichania, the learned senior counsel for the Respondents refuted the Appellants' submission and rightly contended that in the contract the Respondents had provided certain guarantees only in three clauses, namely, clause 16, 54 and 63 set out earlier. Clause 1 did not guarantee the capacity of the grabs to lift 6 CBM iron ore. The capacity of the grabs supplied did not affect the rate of discharge which was guaranteed by clause 63 of the contract. Nor did it affect any of the other guarantees contained in the contract. The guarantee contained in clause 1 itself was only to the effect that the cranes and the grabs were suitable to discharge iron ore. It is admitted that this guarantee was met. Further clause 63 guaranteed that the grabs and cranes were capable of discharging 8000 MT on the basis stipulated therein. The arbitrator considered the entire material on record in a detailed, and if we may add with respect, well reasoned award held that this

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guarantee too had been met. He accordingly held that the grabs were capable of meeting the discharge rate stipulated in the contract and that therefore the grabs being unable to lift 6 CBM iron ore was irrelevant. The arbitrator noted in this regard that at the port of loading the discharge was at a higher rate and the appellants had by reason thereof earned despatch. The arbitrator accordingly upheld the respondent's case for the cause of delay.

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The arbitrator accepted the respondent's case that the vessel was fitted with cargo gear, winches, cranes and grabs which were in efficient working condition and further that the vessel's grabs were capable of discharging basis 4 hooks minimum 8000 sq. mtrs. with barges available in one day; that the appellants failed to provide barges in time and that the stevedores for loading and unloading were engaged by the appellants and that the delays in unloading cannot be attributed to the Respondents or its vessels. The arbitrator also found that the appellants were responsible for the delay adversely effecting the discharge rate. The appellants' default included its labour reporting late, the empty barges not being placed in time and the loaded barges not being removed in time.

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The award consists essentially findings of fact and

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appreciation of evidence. The same are certainly not perverse. Indeed they appear totally justified. We are not entitled in any event to re-appreciate the evidence given the limited scope of section 34. We find that the arbitrator, only after considering all the evidence and the rival contentions, concluded that the grab capacity of the cranes was stated to be 25 mt and that of the grabs as 6 cbm. This is the volume indication of the cargo which can be accommodated in the grab and it does not refer to the weight of the cargo which can be lifted in a cycle. There is a finding that the contract did not mention the weight of the iron ore which can be safely picked up by the grab in one lift. The arbitrator found that there was no commitment on the part of the Respondents in this respect and the only guarantee was the discharge rate of 8000 MT per day which was fulfilled. The arbitrator has considered the technical aspects of the matter and concluded that the Respondents’ declaration as to crane capacity was not misleading or incorrect and no prejudice was caused to the appellants on this count. The effect of higher density of iron ore has also been considered by the arbitrator. Therefore, the arbitrator concluded that the Respondent was not in breach of the contract. It is sufficient to refer to the following findings of the arbitrator :

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“(vii) The Daily discharge Report of 1-7-1996 shows that in a 9 hour shift from hatch No.5, the

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cargo discharged was 1,500 mt. This gives an average of 166.66 mt per hour. Charterers have contended that the grab cycle was taking 4 minutes (15 cycles per hour) and the cargo weight in one lift was only 5.8 mt. The fact that 1500 MT of cargo could be discharged in 9 hours clearly shows that the grabs were capable of carrying about 8 MT of iron ore per lift. It also shows that the cycle time was about 2.85 minutes per grab/crane as opposed to 4 minutes contended by the charterer. This falsifies the Respondent's case. In view of what is stated above even if one were to apply the charterer's parameters of 5.8 M.T. per lift X 15 cycles per hour, it would only show that the charter's parameters are completely unreal and incorrect.

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But even if we assume that the parameters of the charterers are correct, the vessel should have discharged well over 8,000 mt guaranteed by the owners as shown by the following calculations :-

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15 cycles per hour (4 minutes per cycle)

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4 grabs working 24 hours.

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5.6 mt per grab lift.

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Therefore, 15 x 24 x 4 x 5.8 = 8352 mt in 24 hours.

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It is pertinent to note that the Charterers exercised this option of discharging 7500 MT per day. The vessel was capable of discharging 8000 MT per day applying the Charterer's own parameters.

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(viii) From the above simple analysis the conclusion is inescapable. If the quantity discharged per day from either vessel was well below 8,000 mt the reasons have to be sought elsewhere. Stevedores Daily Reports of the discharge which is a contemporaneous report is positive proof that charterers themselves were responsible for the delays adversely affecting the rate of discharge. There are copious entries in these reports of work held up because of labour

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reporting late, empty barges not placed in time, loaded barges not removed in time, etc. It should be noted that time loss owing to crane breakdown and/or other reasons for which owners were responsible were excluded from the laytime when preparing the laytime statements. The Tribunal has perused all the material documents on record. The Tribunal holds that owners have successfully established their claim for demurrage on both the vessels. The Respondent has not shown that the balance frieght is also allowed.”

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In our view the appellants have not made out any case within the limited scope of section 34 of the Act which would justify interference with the award. Moreover, the learned Single Judge after having considered all the grounds of challenge has rightly come to the conclusion that the award and the findings therein were within the framework of law. In any view of the matter, the arbitrator was competent to evaluate the evidence led and his decision on this aspect was conclusive. The appellants have thus failed to make out any case within limited scope of section 34 of the Act.

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In the result both the appeals are dismissed. No order as

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to costs.

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(A.K. MENON, J.) (S.J. VAZIFDAR, J.)

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Ispat Industries Ltd. v. the Shipping Corpn.of India Ltd.

Case brief

What is this about?

What did the court decide?

Ispat Industries Ltd. v. the Shipping Corpn.of India Ltd.

Case brief

What is this about?

What did the court decide?

What the court decided

A compact analysis

Issues for consideration

Statutes considered

Parties & counsel

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Case details

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