1. Dispute regarding the validity of an arbitration clause contained in the printed terms of a Bill of Lading under the Arbitration and Conciliation Act, 1996. (Para 2 , 3 , 4 )
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2018 Supreme(SC) 1169
SUPREME COURT OF INDIA
ROHINTON FALI NARIMAN, NAVIN SINHA, JJ.
M/s Caravel Shipping Services Pvt. Ltd. – Appellant
Versus
M/s Premier Sea Foods Exim Pvt. Ltd. – Respondent
Civil Appeal Nos. 10800-10801 of 2018 (Arising out of SLP (C) Nos. 31101-31102 of 2016)
Decided On : 29-10-2018
Important Points
IMPORTANT POINT
Reference of any other document in the main contract makes that document binding on the parties.
Reference of any other document in the main contract makes that document binding on the parties.
Subject
Arbitration Law - Arbitration Agreement
Act Referred
Headnote
Arbitration and Conciliation Act, 1996 – Section 7(5) and 8 – As per Bill of Lading “Merchant” (shipper, consigner or consignee) expressly agreeing to be bound by all terms, conditions, clauses and exceptions on both sides of the Bill of Lading whether typed, printed or otherwise – Clause 25 containing the arbitration clause, a printed condition annexed to the Bill of Lading – Held, reference in Bill of Lading making the arbitration clause part of contract between the parties – Section 8(3) application filed in the same year as that of the suit – Further held, a particular witness being examined not an impediment in the Section 8(3) application being allowed. (Para 10, 11)
(2009) 7 SCC 696; AIR 1955 SC 812 – Relied upon
Facts of the case:
The instant Bill of Lading states that the Consignor/Shipper is one M/s Premier Seafoods Exim Private Limited of Kerala, and that Caravel Shipping Services Private Limited is the agent who facilitates transport.
The Respondent filed a Suit to recover a sum of Rs. 26,53,593/- in which the Bill of Lading was expressly stated to be a part of cause of action.
The appellant filed an IA seeking appointment o arbitrator invoking clause 25 of the printed form,.
The trial dismissed the IA and the High Court affirmed the same.
Finding of the Court:
Section 8(3) of the Act applies.
Result: Appeals allowed.
Legal Category Hierarchy
Table of Contents
2. Whether an unsigned Bill of Lading with printed arbitration terms is binding under Section 7(4) versus whether reference to such terms incorporates them under Section 7(5). (Para 5 , 6 )
3. A party relying on a Bill of Lading for a suit cannot deny its arbitration clause; written agreements need not always be signed to be binding. (Para 7 , 8 , 9 , 11 )
4. An arbitration agreement must be in writing as per Section 7(3) of the Arbitration Act, but it is not mandatory that it be signed by parties. (Para 9 , 10 )
5. Appeals allowed and the judgments of the High Court set aside. (Para 12 )
6. Does an arbitration agreement need to be signed to be valid?
No. Under Section 7(3) of the Arbitration and Conciliation Act, 1996, the only prerequisite is that the arbitration agreement must be in writing. It does not necessarily need to be signed by the parties. (Para 9 )
7. Can a party rely on a document for a cause of action but deny its arbitration clause?
No. A party cannot rely on a Bill of Lading to establish a cause of action for a suit while simultaneously arguing that the arbitration clause within the same document is not binding because it is unsigned. (Para 8 )
8. How are printed terms incorporated into an arbitration agreement?
Under Section 7(5) of the Arbitration Act, if a contract refers to another document containing an arbitration clause, such reference sufficiently indicates that the arbitration clause forms part of the contract. (Para 5 , 10 )
9. Does the stage of a civil suit prevent a Section 8 application from being allowed?
The fact that a suit has progressed to the examination of witnesses does not preclude a Section 8 application from being allowed, provided the application was filed promptly. (Para 11 )
JUDGMENT :
R.F. Nariman, J.
1. Leave granted.
2. The present appeals arise out of a document styled as “Multimodal Transport Document/Bill of Lading” dated 25.10.2008. This Bill of Lading states that the Consignor/Shipper is one M/s Premier Seafoods Exim Private Limited of Kerala, and that Caravel Shipping Services Private Limited, who is the appellant before us, is the agent who facilitates transport. The very opening Clause of the Bill of Lading specifies:
“In accepting this Bill of Lading the Merchant expressly agrees to be bound by all the terms, conditions, clauses and exceptions on both sides of the Bill of Lading whether typed, printed or otherwise.”
3. The Respondent filed a Suit being O.S. No. 9 of 2009 before the Sub-Judge’s Court in Kochi to recover a sum of Rs. 26,53,593/- in which the Bill of Lading was expressly stated to be a part of cause of action. Soon after the Suit was filed, an I.A. being I.A. No. 486 of 2009 was filed by the appellant under Section 8 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as “the Act”) in which it was pointed out to the Court that an arbitration clause was included in the printed terms annexed to the Bill of Lading. The I.A. also pointed out that a Section 11 petition to appoint an Arbitrator in accordance with Clause 25, being the printed term in question, has also been filed in Chennai. The Sub-Court, Kochi, by its judgment dated 08.01.2013 dismissed the I.A., stating that printed conditions annexed to the Bill of Lading would not be binding upon the parties, and also that as no part of the cause of action arose in Chennai, the I.A. would have to be dismissed.
4. In the Original Petition filed under Article 227 of the Constitution of India, the High Court referred to certain provisions of the Multimodal Transportation of Goods Act, 1993, and also stated that the arbitration clause, being in a printed condition, there being no intention to arbitrate and nothing to show that Clause 25 was brought to the notice of the respondent, agreed with the learned Sub-Judge and dismissed the Original Petition. A Review filed against the said judgment was also dismissed by a judgment dated 14.06.2016.
5. Ms. Liz Mathew, learned counsel appearing on behalf of the appellant pointed out that printed conditions of the Bill of Lading were expressly referred to in the Bill of Lading and both parties were stated to be bound by the same. This being so, in accordance with Section 7(5) of the Arbitration Act read with this Court’s judgment in M.R. Engineers and Contractors Private Limited vs. Som Datt Builders Limited, (2009) 7 SCC 696 would make it clear that there was a reference in the contract to the arbitration clause, and since it is in writing and the reference is such that the arbitration clause formed part of the contract, according to her, both the courts were in error. She also pointed out to us that, in the meanwhile, the Madras High Court, by order dated 09.01.2015, has referred to the Kerala proceeding, but nonetheless applied the arbitration clause and appointed a Senior Advocate to arbitrate between the parties in that proceeding.
6. On the other hand, Mr. P.A. Noor Muhamed, learned counsel for the respondent, invited our attention to Section 7(4) of the Act and argued that Section 7(4)(a) requires an arbitration agreement to be in a document that is signed by the parties. Since the Bill of Lading was not signed by his client, according to him, he is, therefore, not bound by the arbitration clause contained in that document. Further, he has also argued that at present the stage of the suit is that issues have been struck and one witness is being examined.
7. Having heard learned counsel for both parties, we are of the view that the Bill of Lading makes it clear that the term “Merchant” (which is defined in the Standard Conditions Governing Multimodal Transport Documents - Clause (1) (e) as meaning shipper, consigner or consignee) expressly agrees to be bound by all the ter
