2014 Supreme(Del) 1207

IN THE HIGH COURT OF DELHI AT NEW DELHI
VIPIN SANGHI, J.
STEEL AUTHORITY OF INDIA LTD (SAIL) - Petitioner
Versus
DAMPSKIBASELSBAKET NORDEN A/S - Respondent
O.M.P. 773/2013 AND I.A. No. 14983/2013
Decided On : 30.04.2014

The time lost in waiting for a berth is to be treated as if the vessel were in berth and at the disposition of the charterer for carrying out the loading or discharging operation, and the charterer is entitled to a pro-rata reduction in demurrage for the pre-berthing period corresponding to the breakdown of a crane.

Headnote:

The court set aside the arbitral award to the extent that it denied the charterer's claim for a pro-rata reduction in demurrage for the pre-berthing period corresponding to the breakdown of a crane. The court held that the tribunal erred in failing to apply the principle established in the Darrah case, which requires that the time lost in waiting for a berth be treated as if the vessel were in berth and at the disposition of the charterer for carrying out the loading or discharging operation. Accordingly, the court remitted the matter back to the tribunal for reconsideration of this aspect.

Fact of the Case:

The dispute arose from a contract of affreightment (COA) between a ship owner and a charterer for the carriage of a cargo of coking coal from Newport News, Virginia, USA to Vishakhapatnam, Paradip, and Haldia, India. The COA required the owner to nominate vessels for three shipments, two of which were MV Nord Fighter and MV Navios Kypros. During the discharge operations at Vishakhapatnam and Haldia, one of the cranes on each vessel suffered a breakdown, resulting in a reduction in the discharge rate. The charterer deducted the corresponding amount from the balance freight, claiming that the despatch amount earned by it was USD 97,395.83 for MV Nord Fighter and USD 43,291.67 for MV Navios Kypros. The owner, on the other hand, calculated the laytime on the basis of the NOR tendered by it on arrival of the vessels at the respective ports and claimed an additional amount of USD 312,104.16 for MV Nord Fighter and USD 105,875.00 for MV Navios Kypros. The dispute was referred to arbitration, and the arbitral tribunal upheld the owner's stand, awarding a sum of USD 417,979.16 along with interest amounting to USD 70,556.34 in favor of the owner.

Finding of the Court:

The court found that the tribunal erred in its interpretation of the relevant clauses of the COA, particularly clauses 1(a), 35, 40, 43, and 44. The court held that the tribunal's interpretation of clause 35, which provides for the commencement of laytime, was overly narrow and did not take into account the effect of other relevant clauses, such as clause 1(a), which imposes an obligation on the owner to provide a minimum number of functional cranes and grabs within a specified time of berthing. The court also found that the tribunal's interpretation of clauses 40, 43, and 44, which deal with the consequences of breakdown of a crane, was unreasonable and did not give effect to the intention of the parties as expressed in the COA.

Issues: 1. Whether the tribunal erred in its interpretation of clause 35 of the COA, which provides for the commencement of laytime, by failing to take into account the effect of other relevant clauses, such as clause 1(a), which imposes an obligation on the owner to provide a minimum number of functional cranes and grabs within a specified time of berthing? 2. Whether the tribunal erred in its interpretation of clauses 40, 43, and 44 of the COA, which deal with the consequences of breakdown of a crane, by failing to give effect to the intention of the parties as expressed in the COA?

Ratio Decidendi: The court applied the principle established in the Darrah case, which requires that the time lost in waiting for a berth be treated as if the vessel were in berth and at the disposition of the charterer for carrying out the loading or discharging operation. The court held that this principle applies equally to the pre-berthing period as it does to the post-berthing period, and that the charterer is entitled to a pro-rata reduction in demurrage for the pre-berthing period corresponding to the breakdown of a crane.

Final Decision: The court set aside the arbitral award to the extent that it denied the charterer's claim for a pro-rata reduction in demurrage for the pre-berthing period corresponding to the breakdown of a crane. The court remitted the matter back to the tribunal for reconsideration of this aspect in light of the principle enunciated in the Darrah case.