2007 Supreme(SC) 1339

2007(7) Supreme 628
Supreme Court of india
(From Bombay High Court)
Tarun Chatterjee & D.K. Jain, JJ.
Bharat Petroleum Corporation Ltd. — Petitioner
versus
The Great Eastern Shipping Co. Ltd. — Respondent
Appeal (civil) 4829 of 2007
[Arising out of S.L.P. (C) No. 17687 of 2005)
Decided on : 12-10-2007

important point
An acceptance need not always be given in so many words. The terms of a contract between the parties can also be proved by their conduct.

Headnote:(a)Indian Contract Act, 1872 – Section 7 – General rule is that an offer is not accepted by mere silence on the part of the offerree, yet it does not mean that an acceptance always has to be given in so many words – Under certain circumstances, offerree’s silence, coupled with his conduct, which takes the form of a positive act, may constitute an acceptance ‘an agreement sub silentio’ – The terms of a contract between the parties can also be proved by their conduct. (Para 19)

       (b)Indian Contract Act, 1872 – Section 7 – Doctrine of sub silentio – The conduct of the parties show that except for the charter rate, there was no other dispute between them – The appellant accepted the stand of the respondent sub silentio and thus, continued to bind themselves by other terms and conditions contained in the Charter Party dated 6th May, 1997, which obviously included the arbitration clause. (Para 20)

       (c)Indian Contract Act, 1872 – Section 37 – Since the hired vessel was not re-delivered in terms of clause 4.1, Charter Party cannot be held to have been fully worked out – Therefore, notwithstanding the expiry of the period fixed, the said charter party did not get extinguished for the purpose of determination of the disputes arising thereunder and the arbitration clause contained therein could be invoked by the respondent – No infirmity in the impugned judgment. (Paras 22 to 24)

       (d)Arbitration and Conciliation Act, 1996 – Section 11 – As the charter party did not come to end, the arbitration clause continues to be operative – The Arbitral Tribunal therefore had the jurisdiction to decide the reference – However the earlier Tribunal having come to conclusion that it had no jurisdiction, a new Tribunal constituted. (Para 25)

       Facts of the case :

       1.An agreement, called the ‘Time Charter Party’ was entered into between the appellant and the respondent on 6th May, 1997 for letting on hire vessels for a period of two years from 22nd September, 1996 to 30th June, 1997 and from 1st July, 1997 to 30th June, 1998, on the terms and conditions set out in the said agreement. However, before the Charter Party was to come to an end, on 29th June, 1998, the Indian Oil Corporation Limited, acting as agent of the appellant, requested them to extend the validity of the Charter Party Agreement beyond 30th June, 1998 for a period of one month from 1st July, 1998 with option for two further extensions of 15 days each. The respondent agreed to the said proposal.

       2.The terms and conditions; exceptions and exemptions contained in the Charter Party dated 6th May, 1997 remained unaltered. The parties are ad idem that the Charter Party dated 6th May, 1997 was extended till 31st August, 1998.

       3.It appears that since Charter Party dated 6th May, 1997 was coming to an end on 31st August, 1998, the Oil Companies sought permission of the Oil Co-ordination Committee, for further extension of the Charter Party which was denied.

       4.Thereafter, in September, 1998, the IOC for and on behalf of the Oil Industry, floated a fresh tender for carriage of petroleum products along the Indian coast on time charter basis for a period of one year commencing from 1st September, 1998 to 31st August, 1999.

       5.After opening of the received bids, IOC decided to invite revised price bids. Being aggrieved, one of the bidders filed a writ petition in the Bombay High Court.

       6.While disapproving in principle the action of the IOC in inviting fresh price bids after opening the bids, by way of interim order, the Court directed that (i) the charter hire rates should be fixed by the Tender Evaluation Committee and (ii) as the tender was for the period ending 31st August, 1999 and the writ petition was being decided on 20th August, 1999, the IOC will not be required to enter into a contract for the period from 1st September, 1998 to 31st August, 1999.

       7.The respondent’s vessel ‘JAG PRAJA’, continued to be chartered by the appellant till 31st August, 1999.

       8.The writ petition was ultimately disposed of on 20th August, 1999. It was only after a gap of about seven months thereafter that on 15th March, 2000, the IOC informed the respondent about the evaluation of the tenders in terms of the order passed by the High Court. The respondent, expressed their disappointment with the rate but conveyed their acceptance except for two vessels with the expectation that their outstanding balance of the hire shall be paid to them at the earliest. Failing to get an upward revision of the rate in respect of these two vessels the respondent called upon the appellant to pay balance amount of Rs.43,947,517/- to them as charter hire in respect of vessel JAG PRAJA for the period from 1st September, 1998 to 31st August, 1999 within 15 days from date of receipt of the said notice or treat it as an arbitration notice. Pursuant to the said notice an Arbitral Tribunal was constituted.

       9.The Arbitral Tribunal came to the conclusion that they had no jurisdiction to decide the Reference. The Tribunal was of the view that with the performance, original charter party dated 6th May, 1997 got extinguished.

       10.The respondent challenged the said Award before the High Court. By the impugned order, the learned Single Judge has set aside the said Award, inter alia, holding that Arbitral Tribunal has the jurisdiction to adjudicate the disputes between the parties. It was held that the charter party dated 6th May, 1997 did not come to an end by efflux of time and it was extended by the parties on the same terms and conditions except the rate of hire.

       11.Correctness of this order of the High Court is questioned in this appeal.

       Findings of the Court :

       The Time Charter Party did not get extinguished by efflux of time.

       Result : Appeal dismissed.