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Rameshwar Dass & Sons v. Caravel Logistics Pvt. Ltd.
Factual and Procedural Background
The plaintiffs instituted the suit CS(OS) 2492/2012 seeking recovery of Rs. 26,67,230/- for losses allegedly suffered due to fault attributed to the defendants. In IA No. 3075/2014 under Section 8 of the Arbitration and Conciliation Act, 1996, defendant No. 1 applied for a stay of the court proceedings on the ground that an arbitration agreement existed between the parties and that disputes were to be referred to arbitration within the limits of Chennai. The plaintiffs contested the existence and applicability of any arbitration agreement. The court heard arguments of counsel, sought supporting documents (including the Bill of Lading) from defendant No. 1, recorded legal submissions concerning Section 26 of the Multimodal Transportation of Goods Act, 1993, and ultimately dismissed the application. The matter was listed before the Roster Bench on 28.01.2015 for further directions.
Legal Issues Presented
- Whether there exists a valid arbitration agreement between the parties that would require a stay of court proceedings under Section 8 of the Arbitration and Conciliation Act, 1996.
- Whether the terms and conditions printed on invoices (and any Bill of Lading) constituted an arbitration agreement in writing accepted by the plaintiffs.
- Whether Section 26 of the Multimodal Transportation of Goods Act, 1993 makes any difference to the question of existence or enforceability of an arbitration agreement in this case.
- Whether the dispute raised in the suit (claim for demurrage paid) falls within the scope of any alleged arbitration agreement.
Arguments of the Parties
Defendant No. 1's Arguments
- There was an arbitration agreement between the parties providing that disputes be referred to arbitration within the limits of Chennai; this appears in various invoices filed on record under the heading 'Terms and Conditions'.
- The invoices filed by the plaintiffs (which were not disputed) illustrate the existence of the arbitration agreement and the plaintiffs concealed this fact in the plaint.
- Reference was made to the Bill of Lading — counsel stated that the Bill of Lading also contained an arbitration clause (the Bill of Lading was later not filed on record despite adjournment to enable filing).
- Reliance was placed on Section 8 of the Arbitration and Conciliation Act, 1996 and on Section 26 of the Multimodal Transportation of Goods Act, 1993; counsel also relied on the decision in Orchid Electronics v. Vinitec Electronics Pvt. Ltd., 2007 (supp.) ALR 266 (Delhi).
Plaintiffs' Arguments
- The plaintiffs contended there was no arbitration agreement between the parties at any time.
- The dispute raised in the suit was beyond the scope of any alleged arbitration agreement.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| Orchid Electronics v. Vinitec Electronics Pvt. Ltd., 2007 (supp.) ALR 266 (Delhi) | The opinion records that reliance was placed on this decision by defendant's counsel. | The court noted that reliance was placed on this case by defendant's counsel; the opinion does not elaborate the principle from this case or indicate that it led to acceptance of the application. |
| Chloro Controls India (P) Ltd. v. Severn Trent Water Purification Inc., (2013) 1 SCC 641 | Cited for three characteristics of a valid arbitration agreement: (a) it is consensual and based on parties' agreement; (b) it leads to a final and binding resolution of the dispute; and (c) it is a substitute for court litigation resulting in a binding award. | The court applied these characteristics to the facts and found that the three characteristics were lacking in the present case, supporting the conclusion that there was no valid arbitration agreement. |
Court's Reasoning and Analysis
The court's analysis proceeded in chronological and thematic steps, as follows:
- Nature of the claim and relief sought: The plaintiffs seek recovery for demurrage and other losses (Rs. 26,67,230/-) allegedly caused by the defendants' fault. Defendant No. 1 provided only shipping services.
- Documentary basis for alleged arbitration agreement: The defendant relied on various invoices filed on record that state under the head "Terms and Conditions" (Sl. No. 2) that "all disputes are subject to the Arbitration jurisdiction within the limit of Chennai." The application did not specify when or with whom any written contract containing an arbitration clause was executed — the invoices were issued after the oral order to import.
- Missing supporting document: The court specifically asked whether a contract was entered at the time of taking the consignment and whether the Bill of Lading contained an arbitration clause. Defendant's counsel said the Bill of Lading did contain such a clause and was to be filed; however, the Bill of Lading was not ultimately placed on record.
- Interpretation of Section 26 of the Multimodal Transportation of Goods Act, 1993: The court recorded that Section 26 does not provide for statutory arbitration; it only allows parties to include an arbitration clause in a multimodal transportation contract. The court observed that such freedom to agree does not by itself show that the parties actually agreed to arbitration in the present case.
- Requirements for a valid arbitration agreement: The court reiterated that an arbitration agreement must be consensual and in writing — for example in a document signed by the parties or in an exchange of communications that records agreement. Applying the three characteristics from Chloro Controls, the court found those characteristics absent here.
- On the invoices and acceptance: The court emphasized that the invoices were raised after the oral order and appear to have been issued to secure payment. There is nothing on record showing the plaintiffs accepted the printed terms and conditions (the invoices do not bear the plaintiffs' signatures accepting those terms). Payment in response to an invoice was treated by the court as an acknowledgement of receipt of goods rather than acceptance of unilateral contract terms.
- Consensus ad idem: The court found no "consensus ad idem" (meeting of minds) as required for an agreement. The defendant acted on the plaintiffs' oral order and later raised invoices; unilateral insertion of terms in printed invoices without evidence of the plaintiffs' acceptance did not create an arbitration agreement.
- Scope of the alleged arbitration clause: The court concluded that the particular dispute in the suit — a claim for demurrage paid by the plaintiffs due to alleged faults of defendant No. 1 — was beyond the scope of the alleged arbitration clause. There was no dispute with the supplier over delivery for which the order was placed through the defendant's shipping line.
Holding and Implications
Decision: The court held that the application under Section 8 of the Arbitration and Conciliation Act, 1996 was without merit and dismissed it. The opinion states: "The application is unmerited and is dismissed."
Implications:
- The direct effect is that no stay was granted under Section 8 and the court proceedings in CS(OS) 2492/2012 continue. The application to refer the dispute to arbitration was rejected on the factual and legal grounds summarized above.
- The court found that the invoices and the absence of a written, signed agreement or demonstrable acceptance by the plaintiffs did not establish a valid arbitration agreement; likewise, reliance on Section 26 of the Multimodal Transportation of Goods Act, 1993 did not change that conclusion.
- The opinion does not state or record any declaration that it sets a new legal precedent; it limits its conclusions to the facts and documents (or lack thereof) in this case.
S.P GARG, J.
IA No. 3075/2014 (u/S 8 of Arbitration Act)
1. The plaintiffs have instituted the instant suit for recovery of Rs. 26,67,230/- for the loss suffered on account of fault attributed to the defendants.
2. In the instant application the defendant No. 1 has averred that there was an arbitration agreement between the parties to refer the dispute within the limits of Chennai. This fact finds mention in various invoices filed on record by the plaintiffs. The claim is contested by the plaintiffs.
3. I have heard the learned counsel for the parties and have examined the file. Learned counsel for the defendant No. 1 urged that invoices filed on record by the plaintiffs, which are not in dispute, illustrate that there was an agreement between the parties to refer the disputes to arbitration. This fact was concealed by the plaintiffs in the plaint. The proceedings are liable to be stayed under Section 8 of the Arbitration and Conciliation Act, 1996. It is further stated that provisions of Section 26 of the Multimodal Transportation of Goods Act, 1993 (Act No. 28 of 1993) are applicable. Reliance has been placed on ‘Orchid Electronics v. Vinitec Electronics Pvt. Ltd.’, 2007 (supp.) ALR 266 (Delhi). Learned counsel for the plaintiffs contended that there was no arbitration agreement between the parties any time and the dispute raised in the instant suit is beyond the scope of the alleged arbitration agreement.
4. The application in hand does not disclose as to when and with whom any written contract containing arbitration clause was executed. It merely refers to various invoices where under the head ‘Terms and Conditions’ at Sl. No. 2, it is mentioned that “all disputes are subject to the Arbitration jurisdiction within the limit of Chennai.”
5. Admitted position is that defendant No. 1 had provided only shipping services to the plaintiffs. Specific question was put to learned counsel for the defendant No. 1 on 17.02.2014 as to whether any contract was entered into at the time of taking the consignment for shipping; whether there was any arbitration clause therein; when was the invoice on which the reliance was placed raised; and, whether the aforesaid clause could be said to contain any agreement for arbitration. The response was that Bill of Lading also contained an arbitration clause. It was further pointed out that the invoice was raised in the interregnum between taking the goods for shipping and delivering the same. At the request of the learned counsel for defendant No. 1, matter was adjourned to enable to file the Bill of Lading. It appears that the Bill of Lading was not filed on record. On 04.04.2014, reliance on Section 26 of the Multimodal Transportation of Goods Act, 1993 was placed. It was specifically recorded in the order that the said Act did not provide for statutory arbitration. It merely provided that the parties to a Multimodal Transportation Contract “may provide therein that any dispute which may arise in relation to multimodal transportation under the provisions of this Act shall be referred to arbitration.” It was further observed that merely because freedom was given to the parties to agree for arbitration, did not amount to the parties having agreed to arbitration.
6. In the present case, admittedly, no contract in writing for importing the goods through the shipping line of the defendant No. 1 was executed containing any arbitration clause. Emphasis has been laid on various invoices executed subsequent to the placing of the oral order for importing the goods. In my considered view, no inference can be drawn about existence of any arbitration agreement. Only purpose to raise invoice was to get payment of the amount detailed therein from the plaintiffs, which they did. There is nothing on record to show if at any time invoices containing terms and conditions including arbitration clause were ever accepted by the plaintiffs. The invoices even do not bear signatures on behalf of the plaintiffs to show if the terms and conditions incorporated unilaterally in the printed invoices were accepted by the plaintiffs. Three characteristics of a valid arbitration agreement enshrined in ‘Chloro Controls India (P) Ltd. v. Severn Trent Water Purification Inc.’, (2013) 1 SCC 641 i.e a) It is consensual and is based on the parties' agreement; b) It leads to a final and binding resolution of the dispute; and, c) It is regarded as a substitute for the court litigation and results in the passing of a binding award, are lacking here.
7. Arbitration agreement means an agreement by the parties to submit to arbitration all or certain disputes which have arisen, or which may arise between them in respect of a defined legal relationship, whether contractual or not. An arbitration agreement has necessarily to be in writing. It may contain, inter alia, in a document signed by the parties, or in an exchange of letters, telex, telegrams or any other means of telecommunication, which provide a record of the agreement. In this case, there is no arbitration agreement which could be described to be “contained in a document signed by the parties.” The so called arbitration agreement is contained in the printed invoices delivered by the defendant No. 1 subsequent to the placing of the order. For the existence of an agreement there has to be “consensus at idem” between the parties i.e they should agree to the same thing in the same sense. The terms and conditions mentioned in the invoices were never accepted by the plaintiffs. The defendant No. 1 acted upon the previous offer of the plaintiffs by effecting supply of the goods in compliance of the oral order and raised the various invoices from time to time. Mere payment pursuant to the receipt of invoices by the plaintiffs did not bind them to the unilateral terms and conditions entered in the invoices by the defendant No. 1. It was an acknowledgement of receipt of goods and nothing more.
8. Besides above, in my considered view, the dispute raised in the instant suit against the defendants is beyond the scope of the alleged arbitration agreement. The plaintiffs have instituted the suit for claiming demurrage paid by them due to the alleged faults of the defendant No. 1. No dispute had arisen with the supplier over the delivery of the goods for which the order was placed through the shipping line of the defendant No. 1.
9. The application is unmerited and is dismissed.
CS(OS) 2492/2012
List before the Roster Bench on 28.01.2015 for further directions.
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