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M/S. Caravel Logisti... v. M/S. Premier Sea Foo...
Factual and Procedural Background
M/s. Premier Sea Foods Exim Pvt. Ltd., the respondent, is engaged in exporting seafood and arranged shipping of Tuna fish to M/s. Khanvadeh in Bander Abbas, Iran. The consignment, transported in containers of the petitioner (a logistics, shipping, and freight forwarding business), was stated to weigh 28,000 kgs, with an invoice weight of 28,107 kgs but a weighbridge measurement of 28,615 kgs, showing a discrepancy of 508 kgs. The petitioner alleged that the respondent improperly loaded the goods, exceeding the maximum cargo capacity of 28,425 kgs, which caused damage to the petitioner’s container. The petitioner claimed damages and detention charges based on alleged negligence by the respondent.
The contract between the parties contained an arbitration clause (Clause 25) specifying that disputes were to be governed by Indian law and resolved by arbitration in Chennai under the Arbitration and Conciliation Act, 1996, with three commercial arbitrators.
The petitioner invoked arbitration by letter dated 23.02.2009. The respondent replied stating that it had instituted a suit (Original Suit No. 9 of 2009) in the Sub Court, Kochi, and thus arbitration could not proceed. The petitioner then filed a petition under Section 11(6) of the Arbitration and Conciliation Act, 1996, seeking appointment of an arbitrator. Notice was issued to the respondent, but no reply was filed. The petitioner’s application under Section 8 of the Act in the suit was dismissed, but an appeal was pending with an interim stay granted by the High Court of Kerala.
Legal Issues Presented
- Whether the dispute between the parties is arbitrable under the arbitration clause in the contract despite the pending suit instituted by the respondent.
- Whether arbitration proceedings can be commenced or continued notwithstanding the pendency of judicial proceedings and an interim stay on the suit.
- Whether a sole arbitrator can be appointed instead of a three-member arbitral tribunal as stipulated in the contract, to save costs and expedite proceedings.
Arguments of the Parties
Petitioner’s Arguments
- The arbitration clause in the contract is valid and binding, mandating arbitration in Chennai under the Arbitration and Conciliation Act, 1996.
- The respondent’s suit in the Sub Court, Kochi, does not preclude arbitration, especially since the petitioner’s application under Section 8 was dismissed but is currently under appeal with an interim stay.
- Section 8(3) of the Arbitration and Conciliation Act allows arbitration to commence or continue notwithstanding pending judicial proceedings.
- To save costs and expedite resolution, a sole arbitrator may be appointed instead of the three arbitrators stipulated in the contract.
Respondent’s Arguments
- The respondent contended that arbitration could not proceed because it had already instituted a suit in the Sub Court, Kochi.
Table of Precedents Cited
No precedents were cited in the provided opinion.
Court's Reasoning and Analysis
The court observed that the arbitration clause in the contract is valid and its existence cannot be disputed given the absence of any reply from the respondent. The court noted that the respondent’s suit filings and pleadings were not placed before it, limiting insight into the respondent’s position. The court accepted the petitioner’s reliance on Section 8(3) of the Arbitration and Conciliation Act, 1996, which permits arbitration to commence or continue notwithstanding pending judicial proceedings. The court found no serious opposition from the respondent to this submission.
The court agreed that the dispute is liable to be referred to arbitration as per the arbitration clause. Since no arbitrators had been appointed by either party, the court considered the parties’ proposal to appoint a sole arbitrator to save costs and expedite proceedings. The court appointed Mr. N.C. Ramesh, Senior Advocate, as the sole arbitrator with directions to issue notices, hear parties, and pass an award preferably within six months. The arbitrator was also authorized to fix remuneration and incidental expenses to be borne equally by the parties.
Holding and Implications
The original petition under Section 11(6) of the Arbitration and Conciliation Act, 1996 is allowed.
The court directed the dispute to be referred to arbitration in accordance with the arbitration clause, appointing a sole arbitrator to conduct the proceedings. The parties were ordered to bear their own costs. This decision enforces the arbitration agreement despite pending litigation and interim stay, reinforcing the principle that arbitration can proceed concurrently with judicial proceedings under Section 8(3) of the Act. No new precedent was set; the ruling applies specifically to the parties’ case.
ORDER
M/s. Premier Sea Foods Exim Pvt. Ltd., respondent herein, is engaged in the business of exporting sea foods and with the object of arranging shipping of Tuna fish to M/s. Khanvadeh, at Bander Abbas, Iran, approached the petitioner, which carries on the business of Logistics, Shipping and Freight forwarding. The consignment is stated to have transported through the containers of the petitioner of 28,000 kgs. There is a controversy about the weighment of the consignment, as in terms of invoice, it was specified as 28,107 kgs, but as per the weight bridge weighment, it was 28,615 kgs., i.e a discrepancy of 508 kgs.
2. The allegation of the petitioner is that the goods were improperly loaded by the respondent, as the maximum cargo carrying capacity was of 28,425 kgs. and as a consequence thereof, the container was ripped apart in the bottom causing extensive damage to the container of the petitioner. The petitioner imputes negligence of the respondent and claims damages apart from detention charges.
3. The standard conditions covering the Multimodal Transport Document contains clause 25 setting out the methodology of resolution of disputes to arbitration as under:
“The contract evidenced by the Bill of Lading shall be governed by the laws of India and subject to the exclusive Jurisdiction of court in Chennai only. Disputes/difference arising out of this contract and/or in connection with the interpretation of any of its clauses shall be settled by arbitration in India in accordance with the Arbitration and Conciliation Act, 1996. The no. of Arbitrators shall be three, the Arbitrators shall be commercial persons, the venue for arbitration shall be Chennai.”
4. The petitioner invoked the aforesaid arbitration clause vide letter dated 23.02.2009, to which the respondent replied on 04.03.2009 stating that they have instituted Original Suit No. 9 of 2009 in the Sub Court, Kochi and thus, the arbitration could not be resorted to.
5. The petitioner, thereafter, filed the present petition under Section 11(6) of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as ‘the said Act’), in which notice was issued to the respondent, but no reply has been filed despite opportunity and thus, it is a case of no return.
6. Learned counsel for the parties pointed out that the petitioner had filed an application under Section 8 of the said Act in the suit proceedings, which was dismissed, but on an appeal being preferred in O.P No. 522 of 2013, before the High Court of Kerala at Ernakulam, there is interim stay vide order dated 07.02.2013, but appeal is still pending.
7. In view of what is being stated aforesaid and in the absence of reply, the existence of arbitration clause cannot be disputed. In what circumstances the respondent filed the suit is not available, as those pleadings have not been placed before the Court.
8. Learned counsel for the petitioner, in the aforesaid conspectus, seeks to draw strength from the provisions of sub-section (3) of Section 8 of the said Act to contend that the implication of stay by the learned Single Judge is that there is no adverse order in the case of the petitioner and at best, the issue of stay of suit can be said to be subjudice before the learned Single Judge. It is, thus, submitted that the arbitration proceedings are liable to be commenced and continued in such a situation. Section 8 reads as under:
8. Power to refer parties to arbitration where there is an arbitration agreement. - (1) A judicial authority before which an action is brought in a matter, which is the subject of an arbitration agreement, shall, if a party so applies not later than when submitting his first statement on the substance of the dispute, refer the parties to arbitration.
(2) The application referred to in sub-section (1) shall not be entertained unless it is accompanied by the original arbitration agreement or a duly certified copy thereof.
(3) Notwithstanding that an application has been made under sub-section (1) and that the issue is pending before the judicial authority, an arbitration may be commenced or continued and an arbitrat award made.
9. Learned counsel for the respondent cannot seriously oppose the aforesaid submission.
10. I am in agreement with the aforesaid view and thus, the dispute is liable to be referred to arbitration in terms of the arbitration clause.
11. The Arbitral Tribunal is to consist of a panel of three Arbitrators, but no Arbitrator was appointed by the respondent or for that matter, by the petitioner. It is suggested by learned counsel for the petitioner, to save costs, that there can be a single member Arbitration Tribunal.
12. In view of aforesaid and as proposed by learned counsel for parties, I appoint Mr. N.C Ramesh, Senior Advocate, residing at No. 6/47, North Road, West C.I.T Nagar, Behind Nandhi Statue, Chennai - 600 035, as the Sole Arbitrator to enter upon the reference and after issuing notice to the parties and upon hearing them, pass an award as expeditiously as possible, preferably within a period of six months from the date of receipt of the order. The learned Arbitrator is at liberty to fix the remuneration and other incidental expenses, which shall be borne by the parties equally.
6. The original petition is, accordingly, allowed, leaving the parties to bear their own costs.
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