Axios Navigation Co. Ltd v. Indian Oil Corporation Limited

Limitation clauses are in consonance with the principles of international trade

Case name:Axios Navigation Co. Ltd v. Indian Oil Corporation Limited
Case number/Citation: Arbitration Petition No. 132 Of 2009
Court:High Court Of Judicature At Bombay
Decided on:January 04, 2012                                                                             
Relevant Act/Sections:Section 28 of Contract Act, Section 34 of Arb and Conciliation Act, 1996
  • By a Tanker Voyage charterparty dated 30 September 2002, the Respondents chartered the (Owners) Claimants vessel, M.T. Pride Independence (the vessel) on certain terms and conditions. Lay time under the Charterparty was 72 hours and demurrage payable was US $ 22,000 per day or prorata for the part of the day.
  • Since there was delay, the Petitioners made a claim of US $166,442.99 through their broker by invoice dated 29 November 2002 with 12% interest till realization, from 1 January 2003.3 The Respondents (Charterers) disputed the time barred demurrage claims of the Petitioners as it was admittedly received beyond the period of 45 days from the date of completion of the discharge of the vessel.
  • On 23 October 2007, after a period of more than five years, after the closure of evidence of the witnesses and during the course of oral submissions, the counsel on behalf of the Respondents tendered a substantially revised statement of their counter claims to the Arbitral Tribunal. No affidavit or any document was filed setting out the reasons for such revision in the claims.
  • There is no direct or substantial material provided by the Petitioners on record to show the claim was lodged and received by the Respondents are within agreed period. There is a finding given by the majority arbitrators that though the claimant’s invoice of demurrage is dated 29 November 2002, it was received through cover letter dated 3 January 2003 of Marshal Produce Co. Pvt. Ltd. Their broker, and the same was received by the Respondent on 6 January 2003. It was received beyond agreed period as contemplated in clause 24 of Charter Party.
  • On 13 October 2008, the copy of the Award received along with letter dated 7 October 2008 from the Indian Council of Arbitration, New Delhi. The majority of the Arbitrators viz. Shri Jagdish C. Sheth and Capt. V.K. Gupta dismissed the claims filed by the Petitioners on the ground that it being demurraged, was not presented to the Respondents within a period of 45 days. The majority Arbitrators did not deal with the merits or demerits of the claims of the Petitioners.
  • The counterclaim of the Respondents was allowed. The dissenter Arbitrator, however, upheld the claim of the Petitioners, by treating period of 45 days nonbinding and awarded the claim, by observing that there was no serious dispute on merit of the claim, and rejected the counterclaim of the Respondents in toto.
  • Whether the delay in filing of application under section 34 should be condoned?
  • The submission was made referring to above judgments by the counsel appearing for the Respondents that considering the amended provisions of Section 28 of the Contract Act, 1996 read with the agreed commercial document clauses between the parties, which are internationally well recognized and settled practice in such types of contract, need to be accepted.
  • The Court has power under Section 34 of the   Arbitration   Act   to   modify   the   claim   and/or   the   award   under Section   34   of   the   Arbitration   Act. 
  • There is no quarrel with the proportion that the majority award can only be set aside on what is stated therein if challenge is sustained and not on the basis of what is stated in the minority award.
  • It is also made clear that if there is a question of re­appreciation of documents and material on record, then it will be difficult for the Court under Section 34 to grant the award for the first time by re­appreciating the material on record, but if there is a question of law involved and/or only question of interpretation or clause and/or related aspects, whether appreciation of evidence is not necessary, the Court may pass and/or modify the award accordingly.
  • The court held that these types of restrictive clauses are regularly followed in national or international contracts specifically referring to claims of demurrage and/or related aspects in such charter party agreements/treaties, in Maritime laws related disputes. The parties, having agreed and in fact acted accordingly, were bound by such restrictive clauses. The opposite submission that such clauses are void as it restricts their rights to claim damages which are otherwise available under the Indian law of limitation was not held to be correct.
  • This court also held that such clause is not void as by such clauses right to claim damages or compensation in regular Court is not restricted. What is restricted is the claim or demand and/or assertion of their right, as agreed, within the period mentioned in such document. Therefore, such clause does not affect the right of the parties to enforce their rights by approaching the Court of law within normal period of limitation, but it should be subject to the assertion of their right within agreed period.
  • It was also observed that the provisions of Section 28 of the Contract Act and the terms in the agreement is relatable to the assertion of right so as to perfect that right and not in relation to enforcement of that right in the Court of laws. In the absence of a prescription and/or fixed period, the banking transaction will not serve the purpose and object of the business community.
  • The commercial transaction read with the agreed clauses based upon the laws and regulation, national and international needs to be respected. It was observed that the assertion of right within the prescribed period in no way destroy and/or affect the right of the parties to file Suit or raise claim within prescribed limitation under the general law.
  • It was further held that the Limitation Act itself permits for a shorter period of limitation if a particular statute and/or special Acts restrict the same. The special Acts, therefore, a prescribing shorter period of limitation than that provided under the limitation Act is not a foreign concept and/or against any public policy Act and/or Law.
  • Therefore, if the Constitution of India and law of the land contemplates and provides the freedom of contract in the matter of trade and/or commerce and further permits the parties to settle their disputes through the provisions of Arbitration and/or such other alternative modes as available and as referred under Section 89 of the Civil Procedure Code (for short, CPC), and the particular business or transaction and/or trade or practice if permits the parties to restrict and/or provide fixed period to assert their claims for damages or compensation and therefore, to say that such clause/clauses of Arbitration and/or agreement between the parties is against Section 28 (b), especially in Arbitration matter is unacceptable.
  • Such restriction will frustrate the whole purpose and object of Arbitration Act and also infringes the freedom of free trade and the commercial contract. It was observed that the prohibition as agreed by the parties was and in reference to the Arbitration proceedings whereby the Arbitrators are not permitted to pass or grant any demurrage if the application was not filed within 45 days upon the completion of discharge.
  • Hence, the Arbitrators are bound by the Agreement between the parties. Such Agreements as recorded above, if not against any public policy and in fact it is well within the purview of the trade and practice of the industry and the commercial persons, knowing fully the provisions of law and in fact voluntarily entered into such Agreement and invoked the Arbitration proceedings, the claims so raised beyond 45 days is time barred and/or cannot be granted, needed no interference.
  • It follows that the view expressed by the dissenting Arbitrator on this point is unacceptable. The Arbitrators were not empowered to direct the other parties to pay demurrages though not filed with agreed period. They were also bound by the clause.
  • The court modified the arbitral award under s.34 of the Arb and Conciliation Act, 1996.
  • Itset aside clause 1 and 2 of the award and maintained clause 3.

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