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ORDINARY ORIGINAL CIVIL JURISDICTION
COMMERCIAL ARBITRATION PETITION NO.1050 OF 2018
National Iranian Tanker Company ….Petitioner
Mr. Dhruva Gandhi a/w. Mr. Naishadh Bhatia & Mr. Heetkumar Vachhani i/b. Crawford Bayley & Co., Advocates for
Petitioner.
Mr. Pankaj Sawant, Senior Advocate for Respondent.
ORAL JUDGMENT
1. This is a Petition filed under Section 34 of the Arbitration and Conciliation Act, 1996 (“the Act”) challenging an Award dated February 5, 2018 passed by a Learned Arbitral Tribunal (“Impugned Award”). The Impugned Award is essentially a majority award, with one of three arbitrators dissenting.
2. The short question that would be dispositive of this Petition would be whether the claim presented by the Petitioner, National OCTOBER 08, 2025 Aarti Palkar Iranian Tanker Company (“NITC”) before the Learned Arbitral Tribunal against the Respondent, Bharat Petroleum Corporation Ltd. (“BPCL”), had been barred by limitation.
3. The claims relate to demurrage, said to have been suffered and charged by NITC on BPCL in respect of a Time Charterparty relating to a vessel MT Sima (“Vessel”), which was chartered by BPCL on July 5,
2010. The Vessel was loaded at Keoje Terminal, South Korea and was meant to discharge the cargo at Vadinar, Gujarat and at the Mumbai Port. The total “laytime” contracted by the parties was for 96 hours and it is common ground that the excess time for which the vessel landed up having to be engaged was beyond the contracted laytime. However, disputes and differences between the parties relate to whether the demurrage charged in respect of the wait at Mumbai Port, where the port movement was suspended on August 7, 2010 owing to a collision between two vessels, stand to the account of BPCL in terms of the demurrage charged by NITC.
4. According to BPCL, no demurrage ought to have been charged since the suspension of port operations owing to the vessel collision, constituted a force majeure event. According to NITC, there was no fault on the part of NITC and the demurrage was indeed payable.
5. On September 9, 2010, NITC shared a Laytime Statement with Stockholm Chartering AB, a Swedish broker representing BPCL. It was the claim of NITC that the total laytime ended up being 329 hours and 35 minutes as against the contracted permissible laytime of 96 hours. Therefore, the time on demurrage was computed at 233 hours and 35 minutes. Demurrage was claimed in the sum of USD 224,823.97. This was disputed by BPCL and it responded on September 29, 2010 with a revised demurrage calculation sheet whereby 192.[5] hours attributable to the wait in Mumbai Port was sought to be deleted. The revised demurrage calculation provided by BPCL led to a computation of an admitted liability of USD 41,406.67, and therefore, the only bone of contention between the parties that remained was whether the demurrage in respect of 192.05 hours at the Mumbai Port was a liability that BPCL ought to incur.
6. The parties exchanged correspondence thereafter and eventually a positive repudiation of claim was made by BPCL by an e-mail dated February 4, 2011, whereby BPCL took a position that the force majeure clause was explicit in its terms and that no demurrage whatsoever is payable. The factual backdrop described in this e-mail also narrated the incident that occurred at the Mumbai Port, and therefore, the discussion in this e-mail was entirely about the demurrage attributable to the 192.05 hours, which was the dispute between the parties.
7. At this stage, there is no reference in the e-mail about the admitted liability that had been communicated on September 29, 2010. The parties further corresponded without any change in their respective stances. Neither did NITC accept the contention that demurrage for 192.05 hours would not be chargeable nor did BPCL make any payment of the admitted liability holding up the dispute for a confirmation from NITC.
8. Thereafter, the correspondence between the parties that is relevant for purposes of these proceedings took place in June 2011, where the parties exchanged e-mail about various invoices that BPCL was attempting to pay and was unable to pay. This was due to the designated payee account details not being accessible owing to sanctions imposed in connection with the Islamic Republic of Iran. In this correspondence, BPCL, by e-mail dated June 10, 2011, indicated a specific amount of 12.[7] million Euros having been paid by BPCL for 8 voyages towards chartering for various vessels of NITC. However, since payment to Iranian companies was adversely affected owing to banking restrictions arising out of sanctions, payments to the designated payee, M/s Asan Shipping Enterprises returned unpaid. Therefore, BPCL called for a resolution of the matter to enable payment in such manner and to such payee as may be advised by NITC, so that the pending payments could be addressed. Whether such correspondence constitutes an acknowledgment of liability on the demurrage, and thereby revives the computation of limitation is one of the core issues that would emerge in adjudicating these proceedings.
9. In response to the aforesaid e-mail, NITC provided the details of one M/s Arta Shipping Enterprises Limited by its e-mail dated June 13,
2011. BPCL sought a specific new invoice drawn by such new beneficiary, to process the payment. The new invoices are said to have been sent to the same broker, namely, Stockholm Charter AB, on June 21, 2011 attaching a copy of the updated invoices concerning the various voyages that had been undertaken on behalf of BPCL by NITC.
10. The dispute in question that made its way to arbitration relates only to the demurrage issue, and therefore, it stands to reason that the other undisputed invoices were potentially paid to the newly designated beneficiary. At this distance of time, neither party is able to confirm that fact, but these proceedings focusing on the Impugned Award, which relates to the demurrage attributed to the Bombay Port closure and demurrage on MT Sima, nothing contained here is a comment or observation on anything else.
11. It is seen from the record that total of ten charter party agreements between NITC and BPCL were executed in 2010. A table compiling details of these charterparty agreements is found at Page 60 of the Compilation of Documents relied upon by the parties. It is seen that the charter of MT Sima on July 5, 2010 is Item No.6 in the said table. According to NITC, the exchange of correspondence in June 2011 also covered the charterparty of MT sima of July 5, 2010. Therefore, since BPCL had re-invited the issuance of the invoice, it constituted an admission of liability that the amount of demurrage charged by NITC including the demurrage attributable to laytime of 192.[5] hours at the Mumbai Port stood included in the request for the new invoice.
12. The receipt of fresh invoices on June 21, 2011 is denied by BPCL. However, it is seen from the record that the broker to whom these invoices were sent is the same broker to whom the original demurrage computation had been sent. Prima facie it could be concluded that BPCL would have received that invoice. However, what turns in the matter is whether the invoice was invited by BPCL and whether such invitation resulted in the earlier repudiation standing withdrawn by BPCL, constituting an acknowledgment that BPCL is liable to pay the demurrage denied until then i.e. the demurrage relating to the wait time of 192.[5] hours at the Mumbai Port that is subject matter of the dispute between the parties.
13. Thereafter, the parties exchanged correspondence and legal notices in 2014. NITC invoked arbitration by filing a statement of claim on June 18, 2014, in terms of the agreed arbitration procedures between the parties. NITC had served a legal notice dated February 10, 2014 on BPCL, which responded on March 5, 2014 that the claim was time barred and could not be pursued any further. This became one of the core issues for consideration by the Learned Arbitral Tribunal.
14. The very first issue framed by the Arbitral Tribunal was whether the demurrage claim made by NITC was barred by limitation. The Learned Arbitral Tribunal, after considering the submissions made by the parties, dealt with this issue upfront and also considered whether BPCL had requested NITC to raise the revised invoice in Euros in June 2011 and had thereby withdrawn its earlier repudiation of demurrage, or had at the least, reset the clock for computation of limitation. Impugned Award:
15. The Learned Arbitral Tribunal found that the claim on demurrage was time-barred. For doing so, the Learned Arbitral Tribunal took a view that the original invoice had been raised on September 9, 2010 and had been unambiguously disputed and denied on September 29, 2010. Therefore, the Learned Arbitral Tribunal considered September 29, 2010 to be the date from which the limitation clock would start to tick. Therefore, it was held that the initiation of arbitration on June 18, 2014 before the Indian Council of Arbitration was time barred, being well beyond the limitation period of three years, which ended on September 29, 2013.
16. According to the Learned Arbitral Tribunal, there was no room for adopting the principle of leaning in favour of a liberal approach when the denial and repudiation of demurrage claimed by BPCL had been clear and unambiguous way back on September 29, 2011. In these circumstances, the Learned Arbitral Tribunal went on to rule against NITC on the facet of limitation. The Learned Arbitral Tribunal also dealt with the facet of the undisputed component of the demurrage claim. The Learned Arbitral Tribunal held that the undisputed portion ought to have been paid by BPCL, but also ought to have been strongly demanded by NITC within time. None of that having taken place through the time that limitation ran out, the Impugned Award was in favour of BPCL on the premise that the claim of NITC was hopelessly barred by limitation. Analysis and Findings:
17. I have heard Mr. Dhruva Gandhi, Learned Advocate on behalf of the NITC and Mr. Pankaj Sawant, Learned Senior Advocate on behalf of the BPCL. With their assistance, I have been able to examine the material on record contained in the agreed common compilation relied upon by the parties.
18. The dates of actions and events being admitted, the narrow issue that is distilled for consideration is whether the e-mail of June 10, 2011, addressed by the Chief Finance Manager of BPCL, who himself referred to some payments having been made for eight voyages in October 20, 2011, and the difficulties faced owing to banking restrictions on Iranian companies’ accounts, and the promise to render full cooperation for an early resolution, constituted a waiver of the earlier objection and at the very least an acknowledgment of liability on the disputed demurrage, thereby resetting the limitation clock.
19. It is seen from the record that while the parties indeed corresponded in June 2011, the subject matter of their correspondence was a bunch of ten charterparty agreements and invoices for eight voyages, for which BPCL stated that it had already made payments. The Learned Arbitral Tribunal, upon examination of evidence, has come to a clear view that the invoices were paid with specific amounts being attributed to specific invoices rather than payment having been made on any lumpsum basis or on an on-account basis.
20. In these circumstances, in the absence of any other correspondence between the parties, to assert that the dispute over the invoice for demurrage relating to 192.[5] hours of wait time at Mumbai Port had been acknowledged by BPCL did not lend itself as a plausible view to the Learned Arbitral Tribunal. On the contrary, there having been a positive reiteration of the repudiation in 2014, without evidence of any pending dispute on the other invoices raised on newly designated beneficiary, the question to be asked is whether the view taken by the Learned Arbitral Tribunal is such an implausible view that it warrants interference under Section 34 of the Act.
21. At this stage, the scope of jurisdiction under Section 34 ought to be borne in mind. The jurisdiction under Section 34 is not an appellate jurisdiction for consideration of multiple competing plausible views could be considered to ascertain what is more plausible. Instead, the Section 34 Court cannot substitute a plausible view of an Arbitral Tribunal with a different plausible view which is more appealing to the Section 34 Court. Such an approach would be available only to an appellate forum and not to the Section 34 Court, which the Supreme Court has time and again declared, must not lightly disturb plausible findings of Arbitral Tribunals.
22. The scope of review by the Section 34 Court is well covered in multiple judgements of the Supreme Court including Dyna Technologies[1], Associate Builders[2], Ssyangyong[3], Konkan Railway[4] and OPG Power[5]. Even implied reasons that are discernible, may be inferred to support an outcome arrived at in arbitral awards that is just and fair. To avoid prolixity, I do not think it necessary to burden this judgement with copious quotations from these judgements. Suffice it to say (to extract from just one of the foregoing), in Dyna Technologies, the Supreme Court held thus:
23. Having examined the record and the manner of its interpretation by the Learned Arbitral Tribunal, I am afraid it would not be possible to take a view that the Impugned Award returns an implausible view. If the view taken by the arbitrator is a plausible one, it is not open to the Section 34 Court to substitute the wisdom of the Learned Arbitral Tribunal with the wisdom of a Section 34 Court to return a competing possible view.
24. Seen from this prism, it is quite plausible to conclude that the email correspondence exchanged between June 10, 2011 and June 13, 2011 covered the overall commercial relationship between NITC and BPCL and the commitment to pay the undisputed invoices. There is no positive evidence to indicate a change of mind by BPCL to admit to the disputed demurrage in question. In the absence of any specific reference in such correspondence of 2011 (or indeed in any intervening correspondence between the parties since the repudiation) to the disputed demurrage amount relating to the wait time of 192.[5] hours at Mumbai Port, it is plausible to hold that one cannot presume that BPCL positively acknowledged and admitted this liability in direct contrast to its earlier stance. Indeed, there were other charters of NITC vessels including MT Sima itself, and therefore the Learned Arbitral Tribunal’s view that the email exchange of June 2011 did not dispel the repudiation is a reasonable and plausible view.
25. Therefore, the view taken by the Learned Arbitral Tribunal appears to me to be a plausible view, obviating any intervention by the Section 34 Court. It cannot be said that the view adopted by the Arbitral Tribunal is perverse in a manner as to render it implausibly contrary to the evidence on record or to the terms of the agreement.
26. There is one observation by the Learned Arbitral Tribunal in Paragraph 11 at Page No.22 of the Award where the Learned Arbitral Tribunal has stated that NITC has failed to establish that BPCL requested NITC to raise a revised invoice in Euros. This has been assailed as being a perverse finding, being contrary to the e-mails on record. There is indeed correspondence on invoices being re-issued in Euros but that e-mail relates to the logistics of paying multiple invoices rather than the specific invoice under dispute. Therefore, this facet does not render the Impugned Award perverse.
27. Moreover, the e-mail generically refers to multiple voyages governed by multiple charterparty agreements. Therefore, it is a plausible inference to hold that a repudiation effected in September 2010 did not stand positively withdrawn in June 2011. Therefore, the Impugned Award does not lend itself to interference. Therefore, even if the Learned Arbitral Tribunal’s reading of the e-mail is contrary to how the e-mail is actually drafted, it would not be of much assistance to NITC. One would need something far more concrete in this e-mail of 2011 to disturb for inference drawn by the Learned Arbitral Tribunal.
28. In these circumstances, considering that the view taken by the Learned Arbitral Tribunal that in June 2011, the earlier repudiation was not withdrawn and that the limitation clock would not get reset by reason of acknowledgment of liability, is a plausible finding, no intervention is warranted in the facts of this case.
29. The Petition is therefore finally disposed of without disturbing the Impugned Award.
30. Before parting, it would be appropriate to record appreciation for the assistance given by Mr. Dhruva Gandhi, Learned Advocate for NITC, who professionally represented NITC’s interests without unnecessarily over-stating his case or undermining the Impugned Award. This has been of great assistance in deciding this Petition efficiently.
31. All actions required to be taken pursuant to this order shall be taken upon receipt of a downloaded copy as available on this Court’s website. [SOMASEKHAR SUNDARESAN, J.]