Tribunal Is Master Of Evidence, Findings Cannot Be Scrutinised U/S 37 Of Arbitration Act As If Court Sitting In Appeal: Delhi HC

Brief Facts

Pec Limited (Appellant) issued a tender on 18.07.2008 for the import of 100,000 Metric Ton (MT) of Canadian Yellow Peas. Adm Asia Pacific Trading Pte. Ltd (Respondent) submitted a bid to supply 40,000 MT (+/- 10%). After negotiations, the Appellant awarded two Contracts dated 30.07.2008 to the Respondent for the supply of 20,000 MT (+/- 10%) each, totalling 40,000 MT (+/- 10%) on a Cost Insurance and Freight (C&F) Free Out basis.

The Appellant, as the buyer/importer, was responsible for discharging the cargo at the Indian ports, while the Respondent, as the seller/supplier, was responsible for shipping the cargo to India.

Thereafter, a dispute arose and the Respondent then proceeded to send out legal notices dated 08.06.2011 stating since the Appellant did not discharge cargo within the stipulated time, it was liable to pay damages at the agreed rate of USD 25,000/- per day for 16 days, 16 hours and 09 minutes amounting to USD 4,16,822.92. This demand was revised on 20.10.2011 to USD 420,312.50 arising out of the two Contracts. The notices also set out that a failure to make such payment would result in invocation of Arbitration by the Respondent.

Arbitral Tribunal passed a unanimous Award on 28.05.2014, holding that the Respondent was entitled to demurrage for 15 days, 16 hours, and 9 minutes. The Tribunal awarded USD 391,823 in demurrage to the Respondent, along with 5% interest from 15.11.2011 until the date of final payment. The Arbitral Tribunal held that in terms of the Counter-Claim of the Appellant as per the reworked lay time calculations, it was the Respondent who was entitled to a demurrage claim. Thus, the Counter-Claim of the Appellant was dismissed.

Challenge under section 34 of the Arbitration Act was also dismissed by a learned single judge who observed that the Contract has been correctly interpreted and the view taken by the Arbitral Tribunal is a plausible view and it is settled law that the Court will not interfere under Section 34 of the Arbitration Act and substitute its reasoning with the reasoning of an Arbitral Tribunal.

The Single Judge thus dismissed the objections filed under Section 34 of the Arbitration Act by the Appellant. This led to the filing of the present Appeal under section 37 of Arbitration Act.

Contentions

The appellant contended that the charter party is an inherent part of the clause on demurrage, and thus, any adjudication on demurrage would be incomplete without reference to the terms of the charter party.

It was further submitted that the ship owner has exempted the Respondent, from paying any Demurrages, and as such this benefit should flow to the Appellant, else it will amount unjust enrichment to the Respondent.

Per contra, the respondents submitted that Arbitral Tribunal has adequately dealt with all contentions of the Appellant including the contention on demurrage and that Courts have to be circumspect while exercising jurisdiction to set aside or modify the Arbitral Award.

It was further submitted that Clause 19 of the Charter Party Agreement provided the Charter Party's demurrage rate at USD 55,000 while the Respondent has been awarded at the Contract rate which is lower. Thus, it is beneficial to the Appellant as demurrage was calculated based on a lower value.

Lastly, it was submitted that Appellant's attempt to re-agitate the interpretation of the Contract clauses, both before the learned Single Judge and now before this Court, exceeds the scope of an appeal under Section 37 of the Arbitration Act.

Court's Analysis

The court referred to the Delhi High Court judgment in MMTC Ltd. v. International Commodities Export Corporation of New York (2013) wherein it was held that where a preestimate of damages is specified in a Contract between the parties and the parties agreed that demurrages would be calculated at such rate, the same would be the agreed rate. It was held that if the compensation set out in the Contract is a genuine pre-estimate of loss which the parties knew of at the time of executing the Contract, there is no question of proving actual loss nor is the party required to lead evidence.

The court further noted that if the clause of the Charter Party Agreement was taken into consideration, the entitlement of the Respondent would be more than double of what was awarded. Thus, the submission made by the Appellant does not achieve any purpose.

The court further addressed the contention of the appellant that since the Arbitral Tribunal limited its adjudication to the clause(s) under the Contract and did not examine the Charter Party Agreement thus the award is non-est, and found it to be without any merit.

The court referred to the Supreme Court judgment in Himalaya House Co. Ltd., Bombay v. The Chief Controlling Revenue Authority (1972) wherein it was held that before the terms and conditions of an agreement can be said to be incorporated into another document, the intention of the parties with regard to the incorporation must clearly be reflected.

The court further noted that no Clause reflecting such intention of the parties is available in the Contract/Annexure-II thereto. The Appellant has not been able to show us any such Clause or document. Nor is there any reference to the Contract/Annexure-II of the Contract at any place in the Charter Party Agreement either.

The further referred to the Supreme Court judgment in Hindustan Construction Co. Ltd. v. NHAI (2024) wherein it was held Courts should not customarily interfere with arbitral awards that are well reasoned, and contain a plausible view.

Based on the above, the court concluded that No document was placed on record by the Appellant to show that the terms of the Charter Party Agreement form part of the Contract entered into between the Appellant and the Respondent.

In view of the aforesaid discussions, this Court finds no infirmity with the findings of the Arbitral Tribunal which were affirmed by the learned Single Judge, that merit interference by this Court. The Appeal was accordingly dismissed.

Case Title: PEC LIMITED v. ADM ASIA PACIFIC TRADING PTE. LTD.

Case Reference: FAO(OS) (COMM) 38/2020

Court: Delhi High Court

Judgment Date: 23/10/2024