| The Appellants are the owners and
parties interested in the vessel M.V.Baltic Confidence (for
short, “the ship”). Respondent 2 is the charterer
of the said ship under the Time Charter Party Agreement entered
between it and the Appellants. Five Bills of Lading, all dt.26/5/1997,
issued by the Appellants wherein Respondent 2 agreed and undertook
to carry on board the said ship Canadian yellow peas from
the port of Vancouver in Canada to the port of Calcutta in
good order and condition. Respondent 1 is the holder and endorsee
of each of the said Bills of Lading and the owner of the stock
of peas. Respondent 1 filed an Admiralty suit in the Calcutta
High Court against the Appellants and Respondent 2 for failing
to deliver the goods in good order and condition and for loss
and damages suffered by it.
The Appellants and Respondent 2 herein, as the 1st and 2nd
defendants in the aforesaid suit filed in Calcutta High Court,
filed an application under Section 45 of the Act of 1996 for
stay of the proceedings in the suit and for referring the
disputes to arbitration in terms of Clause 62 of the Charter
Party Agreement which was specifically incorporated as a condition
of the Bills of Lading. The said application was rejected
by a Single Judge of the High Court who held that the arbitration
clause in the Charter Party Agreement was not applicable to
the alleged disputes arising from the Bills of Lading. On
appeal by the defendants, the Division Bench of the High Court
confirmed the order passed by the Single Judge of the High
Court.
The Supreme Court observed that the principal question to
be considered in this case is “what was the intention
of the parties to the Bill of Lading while incorporating therein
Clause 62 of the Charter Party Agreement”. It is to
kept in mind that while incorporating the conditions of the
Charter Party Agreement in the Bill of Lading, specific reference
has been made to the arbitration clause by use of the expression
“including the law and arbitration clause”. On
a fair reading of clause 62 of the Charter Party Agreement
(arbitration clause) and condition 1of the Bill of Lading
(incorporation clause) there is no manifest inconsistency
or insensibility. Such was not the case of the parties in
the suit nor any such finding recorded in the judgement of
the High Court (Single Judge or the Division Bench). Respondent
1 also did not contend before the Supreme Court that if the
arbitration clause in the Charter Party Agreement was implemented
in relation to disputes arising out of Bills of Lading, it
would result in an absurd/unworkable situation. It was also
not urged that the condition in the Bill of Lading incorporating
the arbitration clause of the Charter Party was null and void,
incapable of being performed. The main ground on which it
was contended by Respondent 1 that the clause is inoperative
is that the expression “Charter Party” in clause
62 of the Charter Party Agreement was not changed to “
Bill of Lading” while incorporating the same in the
latter. The Supreme Court rejected this contention stating
that it went against the intention of the parties as evident
from the incorporation clause. The Supreme Court also observed
that while ascertaining the intention of the parties, attempt
should be made to give meaning to the incorporation clause
and to give effect to it and not to invalidate or frustrate
it giving a literal, pedantic and technical reading of the
clause.
The judgement of the Division Bench of the High Court was
set aside and the appeal was allowed.
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