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1995 Supreme(Del) 728
High Court Of Delhi
BHARAT STARCH INDUSTRIES LIMITED - Appellant
Versus
PRUDENT INTERNATIONAL SHIPPING ANDTRADING COMPANY LIMITED - Respondent
First Appeal Orde 71 of 1995
Decided On : 09/15/1995
A.M.SANGHVI, NISHA BAGCHI, SHANKAR GOPAL PAGIRE, SURUCHI AGARWAL, VIKASH DHAVAN
The Court applied the principles of agency, interpretation of contracts, and the binding nature of admissions in correspondence to determine whether the Appellant was the charterer of the ship, whether the 2nd Defendant and its employee were treated or accepted as agents by the Appellant, and whether the Charter Party and MOU were binding on the Appellant.
Headnote:
CHARTER PARTY - ARBITRATION - JURISDICTION - STAY OF PROCEEDINGS - AGENCY - MOU - ADMISSION - INTERPRETATION - LEGAL PRINCIPLES:
Fact of the Case:
Bharat Starch Industries Ltd. (Appellant) filed a suit against Prudentinternational Shipping and Training Company Ltd. (1st Defendant), Andargro Services Ltd (2nd Defendant), Maritime Arbitrators Association (3rd Defendant), and a member of the 3rd Defendant Association (4th Defendant) seeking a declaration that there was no privity of contract between the Appellant and the 1st Defendant, and that there was no arbitration clause between the Appellant and the 1st or 3rd Defendants. The Appellant also sought a permanent injunction restraining the Defendants from proceeding with arbitration.
Finding of the Court:
The Court held that the Appellant was the charterer of the ship and that the 2nd Defendant and its employee, Mr. Paul Mcgowan, were treated or accepted as agents by the Appellant. Therefore, the Charter Party (which contained the arbitration clause) signed by the 2nd Defendant through its employee, Mr. Paul Mcgowan, was binding on the Appellant. The Court also held that the MOU signed by the 2nd Defendant, which contained an admission that the Appellant was the Charterer, was accepted by the Appellant in subsequent correspondence.
Issues: 1. Whether the Appellant was the charterer of the ship? 2. Whether the 2nd Defendant and its employee, Mr. Paul Mcgowan, were treated or accepted as agents by the Appellant? 3. Whether the Charter Party (which contained the arbitration clause) signed by the 2nd Defendant through its employee, Mr. Paul Mcgowan, was binding on the Appellant? 4. Whether the MOU signed by the 2nd Defendant, which contained an admission that the Appellant was the Charterer, was accepted by the Appellant in subsequent correspondence?
Ratio Decidendi: 1. The Court relied on various documents and correspondence exchanged between the parties to conclude that the Appellant, by its conduct, had accepted that it was the charterer, that Mr. Paul Mcgowan of the 2nd Defendant was its agent, and therefore, the latter was entitled to sign the Charter Party and bind the Appellant. 2. The Court held that the 2nd Defendant and its employee, Mr. Paul Mcgowan, were treated or accepted as agents by the Appellant based on the documents and correspondence exchanged between the parties, which showed that the Appellant had accepted the 2nd Defendant and its employee as its agents. 3. The Court held that the Charter Party (which contained the arbitration clause) signed by the 2nd Defendant through its employee, Mr. Paul Mcgowan, was binding on the Appellant because the Appellant had accepted that the 2nd Defendant was its agent and had accepted the Charter Party in its correspondence. 4. The Court held that the MOU signed by the 2nd Defendant, which contained an admission that the Appellant was the Charterer, was accepted by the Appellant in subsequent correspondence, as evidenced by the Appellant's references to the MOU and its terms in its correspondence with the 2nd Defendant.
Final Decision: The Court dismissed the Appellant's appeal and held that the dispute was to be settled by the Arbitrators at London.
( 1 ) THIS is an appeal filed by theplaintiff (M\s. Bharat Stanch Industries Ltd. . New Delhi) againstthe order of the learned Single Judge dated 24-2-1995 in I. A. 10655194 in Suit 2788194. by trial order tne learned Single Judge granted stay of the proceedings in tlie suit and refused to stay action under the arbitration clause contained in the Charter Party which hasresulted in the proposed arbitration by the 3rd and 4th defendantsat London.
( 2 ) THE appellant, who filed the suit sought a declaration in itsfavour and against the defendants declaring that there was no privityof contract between the appellant and the 1st defendant (M/s. Prudentinternational Shipping and Training Company Ltd. , Bahamas) andlor a declaratoin that there did not exist any arbitration clause between the appellant and the 1st defendant or the 3rd defendant andthat the defendants 3 and 4 could not have any jurisdiction to entertain any arbitration proceedings. A permanent injunction was soughtagainst defendants 1, 3 and 4 proceeding with the arbitration. M/s. Andargro Services Ltd, New Delhi was impleaded as the 2nd defendant as it was claiming to be an agent of the appellant and it wasclaiming to be entitled to sign the Charter Party which contained the arbitration clause. The case of the appellant was that the 2nddefendant was not entitled to sign the Charter Party on behalf ofthe appellant.
( 3 ) PENDING suit, the appellant sought a temporary injunction torestrain defendants 1, 3 and 4 from enforcing the Charter Party dated22-4-1994 and Clause 29 thereof containing the arbitration clause,and for restraining the defendants 1, 3 and 4 from proceeding with thearbitration pending disposal of the suit. The learned Single Judgedismissed the application of the appellant-plaintiff.
( 4 ) THE question is whether the plaintiff-appellant which transported goods from Kakinada Port in Andhra Pradesh on board theship of the 1st defendant could be said to be a party to the Charterparty containing the arbitration clause so that the question of theliability of the appellant/plaintiff for demurrage could be subjectmatter of arbitration at London as per Clause 29 in the Charter Party. For the purpose of deciding whether the appellant was a party tothe Charter Party, it becomes necessary to decide whether the 2nddefendant (Andagro Services Pvt. Ltd. New Delhi) and in particular. its employee, Mr. Paul Mcgown signed the Charter Party as theagent of the appellant. In case, there is prima facie proof that thesaid defendant was an agent of the appellant, the appellant will bebound by the Charter Party and the arbitration clause would beattracted, and in that event, the question whether the appellant willbecome liable for demurrage has to be decided in the arbitrationprocedings at London.
( 5 ) THE learned Single Judge, on an exhaustive consideration ofthe documents and correspondence exchanged between the partiescame to the conclusion that the appellant, by its conduct, had accepted that it was the charter, that Mr. Paul Mcgown of the 2nd defendant was its agent and, therefore, the latter was entitled to signthe Charter Party and bind the appellant. The learned Single Judge,therefore, held that the arbitration clause applied to- the case and thatthe appellant could not seek stay of the arbitration proceedings.
( 6 ) IN this appeal, learned counsel for the appellant, Mr. Suruchiaggaiwal, placed before us various facts and circumstances to showthat appellant was not a party to the Charter Party. She contendedthat appellant did not sign the Charter Party with the 1st defendant. She contended that 2nd defendant and its employee, Mr. Paulmcgowan had no authority to sign the Charter Party as the agent ofthe appellant had not also signed the MOU with 2nd defendant andtherefore any admission in the MOU that the appellant was Chartererof the Ship, was not binding on appellant.
( 7 ) ON the other hand, Dr. Shankar Ghosh, Sr. Counsel appearingfor the 1st
