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2004 Supreme(Bom) 1545
IN THE HIGH COURT OF BOMBAY
Kamdar S.U., J.
Oil and Natural Gas Commission Ltd. .... Petitioners.
Versus
Garware Shipping Corporation Ltd..... Respondents.
Arbitration Petition No. 329 of 2004, decided on 7-12-2004.
Advocates appeared :
Rajeev Kumar with S.A. Bhalwal i/b. Vyas Bhalwal, for petitioners.
R.M. Kadam with B.B. Saraf with Ms. Payal Daftari with Onkar Warange with Ketki Furia i/b. Shaunak Satpute Co., for respondents.
Headnote:Arbitration and Conciliation Act, 1996 - Section 34 - Jurisdiction of Court. - Since interpretation of agreement between parties is an exclusive domain of Arbitrator hence Court in its jurisdiction under Section 34 of Act cannot interfere with such an interpretation. - The five ships of the respondent Corporation were inducted in the year 1983 and 1984 whereas the ships of the Shipping Corporation of India were all inducted in 1984-85. The aforesaid position is an admitted fact since the same is set out by the petitioners themselves on page 7 of the petition. If, therefore, the date of induction is taken as the relevant date then 11th year of operation of the vessel of the respondent corporation would be the 10th of the operation of the vessel of the Shipping Corporation of India. Therefore, to compute the 11th year as the base year for the purpose of next five years, it is necessary that the date of induction is taken into consideration and the 11th year of operation of the vessels of Shipping Corporation of India should be taken as 12th year of vessel operation of the respondent herein. Court found that the said dispute was specifically referred to the arbitrator. Thus in Court’s view the decision of the arbitrator is wholly within jurisdiction and is final and binding. It is well-settled that the interpretation of the clause of the agreement between the parties is an exclusive domain of the arbitrator and the Court in its jurisdiction under Section 34 cannot interfere with such an interpretation even if two views are possible. In Court’s view, the arbitrator has not himself fixed the charter rate as contended by the petitioner but only interpreted the formula prescribed by the Second Saxena Committee report as accepted by the High Level Working Group. In that view of the matter, Court did not find any merit in the aforesaid contention advanced by the counsel for the petitioner and therefore reject the same.
Arbitration and Conciliation Act, 1996 - Section 34 - Setting aside of award. - Award passed by Arbitrator appreciating evidence on record in proper perspective cannot be set aside under Section 34 of Act. - Now turning to the second argument which is advanced by the counsel for the petitioner, namely, that the arbitrator has fixed his own charter rate, Court find that the same is factually incorrect. The arbitrator has only held insofar as the repair and maintenance expenses is concerned, the relevant period of the Shipping Corporation of India which is a comparable year to the respondent herein on the basis of date of induction of the ship has to be taken into consideration. The arbitrator considered the date of induction as the relevant date and not the financial year as contended by the petitioner herein.
Arbitration and Conciliation Act, 1996 - Section 34 - Award - Agreement for charter hire rate between parties to enable adequate earning to the Indian shipowners - Under the formula the yardstick for reimbursement was taken on the basis of amount expended by petitioner Shipping Corporation of India - This was not in dispute - However for applying said formula the date of induction of ship was to be taken into consideration or merely a financial year was the bone of contention which was referred to arbitrator - In the award the arbitrator has categorically stated that what is looked into is not the legality and validity of the formula fixed but the implementation of the said formula by the respondent Shipping Corporation. - In light of the aforesaid contentions of the rival parties, Court is required to determine the question of legality and validity of the award impugned herein. Insofar as the contention for the petitioner is concerned that the Second Saxena Committee Report and the formula adopted therein as well as the integrated report of the High Level Working Group is binding on the petitioner and consequently binding on the respondent Corporation, Court find no difficulty in accepting the said argument. In fact the respondent corporation is not disputing the formula on the basis of which the said recommendations were made to reimburse the amount of overhead expenses incurred by the Indian ship owners. The only dispute which is raised is that the said formula has to be applied by taking which particular year into consideration. It is because under the formula the yard-stick for reimbursement is taken on the basis of amount expended by Shipping Corporation of India which is a Government of India undertaking. This formula is not in dispute. However, for applying the said formula the date of induction of ship is to be taken into consideration or merely a financial year is the bone of contention between the parties which was referred to arbitrator. Court find that even in the award the arbitrator has categorically stated that what is looked into is not the legality and validity of the formula fixed but the implementation of the said formula by the respondent corporation.
2. Some of the material facts in the present case, briefly enumerated, are as under :-
3. On 1-10-1983 pursuant to the representation made by the Indian National Shipping Owners Association (I.N.S.A) it was decided that new agreement for charter hire rate should be entered into so as to enable adequate earning to the Indian Ship owners. It was suggested by I.N.S.A that formal contract based on reasonable margin of profit and international time charter rate with an appropriate safe-guard should be provided for by the between the I.N.S.A. and O.N.G.C. On 18-8-1984 the Government of India issued a directive to the petitioner directing that necessary action for entering into the formal contract with Indian Shipping Owner on the basis of the General Price Preference Policy should be taken by the petitioner herein. On 1-8-1984 the petitioner introduced five vessels of the respondent Corporation and inducted in operation. On 3-10-1984, between the petitioner and the respondent five charter party agreements were executed inter alia providing that the said five vessels shall be hired for a period of five years at the daily character rate stipulated in the agreement. The said period of five years was completed on 6-11-1988, 14-12-1988, 18-1-1989 and 19-3-1989. On 31-1-1989, Government of India through Ministry of Petroleum addressed a letter to the petitioner to extend the methodology of fixing the charter rate of Indian Shipping Companies for a further period of three years. On 13-6-1989, the Government of India informed the petitioner that the matter has been considered by the Ministry and inter alia pointed out that there may be change in the methodology in computation of charter rate agreements by and between the parties. It was proposed that the rates may be applicable for five years from the date of expire of the said term and operating charges to be based on actual operating expenses of the petitioners vessels as per the audited accounts for 1987-88 and for the subsequent period they should be granted 5% escalation. In October, 1989 the Government of India appointed the Additional Secretary and Financial Adviser Mr. Shiva Subramanium as a one man committee and he submitted his report on 1-2-1990. The Government of India by a letter dated 17-11-1990 directed the petitioner hereto to accept the said Shiva Subramanium report and implement the same accordingly.
4. On 18-1-1993, another Committee was appointed by Ministry of Surface and Transport of the Government of India, namely, Dr. Saxena Committee to review the operating cost payable of the offshore vessels. On 16-4-1993 a meeting was held by the Secretary to the Ministry of Surface Transport with the petitioner herein and the petitioner was directed to initiate action for extending contracts for all 25 Offshore Vessels beyond the aforesaid five years period. Thus, by virtue of the said direction, the petitioner was required to extend the period further after expiry of second five years term. The second five years term in so far as the five vessels of the respondents are concerned, expired as under :-
Garware I 07-11-1993
Garware II 15-03-1993
Garware III 19-01-1994
Garware IV 02-03-1994
Garware V 20-03-1994
Similarly as in the case of the respondent herein there were other ship owners whose vessels were also hired by the petitioner for the purpose of carrying out various operations. One of such company was the Shipping Corporation of India. In respect of all these companies, the period of extension was granted subsequent to the expiry of five years on 16-3-1995. The second Saxena Committee was constituted to determine the daily charter rate for the period of 12th year and subsequent thereafter i.e. 13th to 16th year. On 14-9-1995 certain additional terms of the reference were framed and referred to the Se
