Finding Of The Tribunal Regarding The Existence Of The Arbitration Agreement Should Not Be Interfered With Unless It Is Manifestly Clear That There Was No Agreement: Calcutta High Court

The bench of Justice Shekhar B. Saraf held that the views of the arbitral tribunal regarding the existence of the arbitration agreement based on the appreciation of evidence cannot be substituted unless it is manifestly evident that there existed no agreement.

Facts

The award holder/petitioner, through an email dated 24.12.2009, offered its services to carry the award debtor’s cargo of iron ore from one port to another. The email contained detailed terms and conditions for the execution of the work.

On receipt of the email from the petitioner, the award debtor/respondent, made a counter offer to the petitioner. Pursuant thereto, the vessel arrived at the designated port and the notice of arrival was given by the petitioner to the respondent. Thereafter, the petitioner prepared the ‘Fixture Note No. 1’ which included the arbitration agreement and certain other terms and conditions. The respondent sent a revised ‘Fixture Note No.1’, however, in the meantime the parties continue to carry out work as per the original understanding and the respondent had also accepted the notice of vessel.

After receiving the revised fixture note 1, the petitioner sent the ‘Fixture Note No.2’ to the sister company of the respondent and all the subsequent invoices were raised against the sister concern of the respondent. However, during this time also, the parties continued to act as per the original understanding and substantial progress was made in the execution of the work such as the vessel completed the loading at one port, sailed and reached the other port and gave a notice of its readiness to load at the other port which was also accepted by the respondent.

A dispute arose between the parties due to failure of the respondent to discharge the ship within the agreed timeframe which resulted in the accrual of demurrage and damages to the petitioner. Accordingly, the petitioner invoked the arbitration in terms of the arbitration clause contained in the Fixture Note 1.

The arbitrator entered reference and a preliminary issue was framed regarding the existence of a valid contract and jurisdiction of the tribunal. The tribunal published a partial award published a partial award and held that the parties had a valid award and that it had jurisdiction to decide the claims of the petitioner. In the same award, the tribunal awarded damages to the in favour of the petitioner.

The petitioner applied for the enforcement of the award under Part-II of the A&C Act.

Objections to the enforcement of the award

The respondent raised several objections to the enforcement of the award, the broad heads of objections are as follows:

• Non-filing of original copy of the arbitration agreement: the respondent contended that the petitioner has not filed, with the arbitration award, a copy of the original arbitration agreement, therefore, the enforcement should be refused for violation of Section 47(1)(b) of the Act.
• No concluded agreement: the respondent argued that there was no concluded agreement between the parties as there was no consensus ad idem between the parties regarding the terms and conditions which is evident from the fact that there was a counter-offer to the offer made by the petitioner and the respondent had also made revisions to the Fixture Note 1 sent by the petitioner.
• No privity of contract: the respondent further contended that the Fixture Note 2 was executed between the petitioner and the sister concern of the respondent which is a separate legal entity, therefore, there was no privity of contract between the petitioner and respondent as the final concluded agreement was not between them. Accordingly, the tribunal erred in holding that there was a contract between the parties, ergo, the award must not be enforced as it violates Section 48(2)(a) of the Act.
• The award is passed without any jurisdiction as there was no contract between the parties and an award passed without jurisdiction is null and void and its enforcement would violate the public policy.

Analysis by the Court

The Court examined the objection regarding the non-filing of the original arbitration agreement at first. It rejected the objection as the petitioner had cured the defect by filing the certified copy of the agreement containing the arbitration clause i.e., Fixture Note 1.

Next, the Court examined the objection regarding the non-existence of the agreement and award being is contravention of the public policy of Indian law.

The Court observed that enforcement of a foreign award can be refused under Section 48(2)(a) if the Court finds that the difference is not capable of settlement by arbitration under the law of India. It held that a dispute is not capable of settlement in absence of an agreement between the parties. However, it reiterated that the threshold of enquiry under Section 48 would only be preliminary and the Court cannot re-examine the evidence, substitute the its view with the view of the tribunal and review the matter.

The Court held that the finding of the tribunal regarding the existence of the agreement between the parties is premised on a careful consideration of the circumstances of the case and examination of material evidence including the conduct of the parties.

The Court observed that the tribunal took into consideration the fact that even before the respondent sent the revised Fixture Note 1 or before the petitioner sent Fixture Note 2 to the sister concern, there were several progresses made in the execution of the agreed work as per the original understanding of the parties, ergo, there was indeed an agreement as is evident from the conduct and communication of the parties. Therefore, the argument that there was no concluded contract or that the contract was only with the third party does not hold any water.

The Court held that the Courts exercising powers under Section 48 of the Act should not interfere with the findings of the tribunal regarding the existence of the arbitration agreement unless it is ex-facie clear that there was no agreement.

Accordingly, the rejected the objections and ordered the award to be enforceable and executable as a decree of the Court.

Case Details: Jaldhi Overseas PTE Ltd v. Steer Overseas Pvt Ltd, EC 100 of 2022

Date: 23.03.2023

Counsel for the Petitioner/Award Holder: Mr. Tilak Bose, Sr. Adv. Mr. K. Thaker, Adv. Mr. Anurag Bagaria, Adv.

Counsel for the Respondent/Award Debtor: Mr. Joy Saha, Sr. Adv. Mr. Anuj Singh, Adv. Ms. Rashhmi Singhee, Adv. Mr. Aman Agarwal, Adv. Ms. Trinisha De, Adv Mr. Siddhartha Roy, Adv

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