ORDER
M/s Trimex International FZE
Dubai
Sub: Purchase Order for supply of Low Monohydrate Grade Bauxite
Ref: Offer No. TID/F/223/2007, Dated 15.10.2007 and our subsequent discussions held there on.
Dear Sir,
With reference to the above offer and subsequent discussions we had with you, we are pleased to place this Purchase Order on you for supply of 225000 +/- 10% MT Low Monohydrate Grade Bauxite as per the following terms and conditions.....Definition of Term
29. Arbitration
The Parties hereto shall endeavour to settle all disputes and differences relating to and/or arising out of the Contract amicably.
In the event of the Parties failing to resolve any dispute amicably the same shall be referred to Arbitration in accordance with the Arbitration and Conciliation Act 1996, as is prevalent in India. Each Party shall be entitled to nominate an Arbitrator and the two Arbitrators so nominated shall jointly nominate a third presiding Arbitrator. The Arbitrators shall give a reasoned award.
The place of arbitration shall be Mumbai, Maharashtra in accordance with Indian Law and the language of the arbitration shall be English.
The Parties further agree that any arbitration award shall be final and binding upon both the Parties.
The Parties hereto agree that the Seller shall be obliged to carry out its obligations under the Contract even in the event a dispute is referred to Arbitration.
30. Governing Law
This Contract shall be construed in accordance with and governed by the laws of Indian and in the event of any litigation the Courts in Mumbai shall have exclusive jurisdiction.
This order is being issued in duplicate. You are requested to send the duplicate copy duly signed as a token of acceptance of the terms and conditions.
Thanking you
Yours faithfully
For Vedanta Alumina Limited Rajesh Mohata
GM-Commercial
AA)
Re: Draft Contract
SHANIKA
From: Swaminathan G [[email protected]]
Sent: Thursday, November 08, 2007 6:29 PM
Cc: SR Subramanyam; Shanika; [email protected]; [email protected]
Subject: Re: Draft Contract
In final stage
Shall send very soon
Regards
AB)
Annexure P-10
SHANIKA
From: Swaminathan G [[email protected]]
Sent: Thursday, November 08, 2007 7:30 PM
To: Swayam Mishra
Cc: [email protected]; [email protected];
SR Subramanyam; Shanika; [email protected];
[email protected]; Venkateshwar Rao
Subject: Trimex-Imported_5 shipments 1.doc
Importance : High
Attachments: Trimex-Imported_5 shipments 1.doc Dear Swayam,
Please find the draft contract with clarification on various points as discussed in meetings and on phone today.
Please confirm the same in order.
Best regards
Swami.
AC)
Annexure P-12
From: Rajesh Mohata [mail to: [email protected]]
Sent: Monday, November 12, 2007 2:18 PM
To: Swaminathan G; Shanika; SR Subramanyam
Cc: Venkateshwar Rao; Swayam Mishra; Umesh Mehta
Subject: Trimex International
Dear Mr. Swaminathan,
We have recently received bauxite from first import congisnment at Plant. Our operation team is in process to find out recovery and value addition for using this bauxite in actual plant condition. This may take some time. In view of this we may have to hold procurement for the next consignment.
We request you to put on hold the next consignment till further advise.
Regards
Rajesh Mohata
Vedanta Aluminium Ltd.
Mobile +91 99372 51229
(Please note with immediate effect our company name changed to 'Vedanta Aluminium Ltd.')
AD)
SHANIKA
From: Swaminathan G [[email protected]]
Sent: Monday, November 12, 2007 3:20 PM
To: Rajesh Mohata
Cc: Venkateshwar Rao; Swayam Mishra; Umesh Mehta; Shanika;
SR Subramanyam
Subject: Re: Trimex International
Importance : High
Dear Mr. Rajesh,
This is a bit shocking at this juncture as vessel nomination is due from the Owners any time now against the COA.
First, we have to go them urgently and ask them to defer the first vessel by 15 days until 1st December as proposed by you on phone. In that case there will be two vessels in December subject to RTA agreement. There might be claims from them. But before we talk to them we need VAL's confirmation that any claims from Owners for the delay or cancellation of any or all shipment(s) under this contract will be fully guaranteed to us and that VAL will pay the amount without demur.
Matter urgent as we have to act fast before Owners nominate any vessel.
As far as RTA is concerned we shall take-up and hope they will agree to a revised schedule as they are fully booked for December and thereafter this will have also to be agreed with Owners.
Please respond by return mail for us to talk to RTA/Owners.
We shall try and do our best but before that we need VAL's clear confirmation on above.
Regards
Swami
From the materials placed, it has to be ascertained whether there exists a valid contract with the arbitration clause. It is relevant to note that on 15.10.2007 at 4.26 p.m. the petitioner submitted commercial offer wherein Clause 6 contains arbitration clause i.e. 'this contract is governed by Indian law and arbitration in Mumbai courts'. At 5.34 p.m. though respondents offered their comments, as rightly pointed out by Mr. K.K.Venugopal, no comments were made in respect of `arbitration clause'. It is further seen that at 6.04 p.m. the petitioner sent a reply to the comments made by the respondent. Again on 16.10.2007, at 11.28 a.m. though respondents suggested certain additional information on the offer note, here again no suggestion was made with regard to arbitration clause. At 11.48 a.m. the petitioner sent an e-mail extending validity of the offer by another one hour. At 01.38 p.m., the respondent made certain suggestions on the demurrage asking the petitioner to either reduce the freight rate or the demurrage rate. On the same day at 02.01 p.m., the petitioner sent a reply on the demurrage stating that the rates cannot be reduced any further. At 02.41 p.m., the respondent informed the petitioner that they would like to have a termination clause after two shipments. At 03.06 p.m., the petitioner sent a mail stating that 'no owner will accept this condition. Respondent may accept two or five quickly'. At 03.06 p.m. the respondent accepted the offer for five shipments. In response to the same at 03.49 p.m., the petitioner thanked the respondent for acceptance and conveyed that it was 'just in time' to go to the ship owners. At 03.57 p.m. the petitioner finalized the contract with the bauxite supplier in Australia. Apart from the above minute to minute correspondences exchanged between the parties regarding offer and acceptance, as rightly pointed out by Mr. Venugopal the offer of 15.10.2007 contains all essential ingredients for a valid acceptance by the respondents namely, 1). Offer Validity period 2) Product Description 3) Quantity 4) Price per tonne 5) Delivery Terms (CIF) 6) Payment Terms (Irrevocable L/C) 7) Shipment Lots 8) Discharge Port 9) Discharge Rate with international shipping acronyms 10) Demurrage Rate 11) Period of Shipment 12) Vessel Details 13) Draft (Port/Berth Capacity corresponding to height of cargo) 14) Stipulations as to Survey by Independent Surveyors 15) Quality benchmark 16) Bonus/Penalty Rates & 17) Applicable Laws (Indian Law) and Arbitration.
The minute to minute correspondence exchanged between the parties, all the conditions prescribed which had been laid down, awareness of urgency of accepting the offer without any further delay to avoid variation in the freight or other factors, coupled with the e-mail sent on 16.10.2007 at 3.06 p.m. under the subject 're: offer for imported bauxite' stated in unequivocal terms, i.e. 'we confirm the deal for five shipments', would clearly go to show that after understanding all the details and the confirmation by the respondent, the petitioner sent a reply stating that 'thanks for the confirmation, just in time to go to the ship owners'. All the above details clearly establish that both the parties were aware of various conditions and understood the terms and finally the charter was entered into a contract by the parties on 17.10.2007.
8. Mr. C.A. Sundaram, learned senior counsel for the respondent taking me through the same emails/correspondence submitted that such clauses being unclear and ambiguous, cannot be permitted to stand on its own footing so as to deprive the respondent of its valid defence. He also reiterated that in the absence of a concluded and binding contract between the parties, the arbitration clause contained in draft agreement cannot be relied on by the petitioner. He further pointed out that the arbitration clause as contained in the commercial offer suffers from vice of being unclear and ambiguous and, therefore, is not capable of being enforced.
9. In the light of the details which have been extracted in the earlier paragraphs, I am unable to accept the stand of the respondent. It is clear that if the intention of the parties was to arbitrate any dispute which arose in relation to the offer of 15.10.2007 and the acceptance of 16.10.2007, the dispute is to be settled through arbitration. Once the contract is concluded orally or in writing, the mere fact that a formal contract has to be prepared and initialed by the parties would not affect either the acceptance of the contract so entered into or implementation thereof, even if the formal contract has never been initialed.
10. The acceptance conveyed by the respondent, which has already been extracted supra, satisfies the requirements of Section 4 of the Indian Contract Act 1872. Section 4 reads as under:
Communication when complete-
The communication of an acceptance is complete...as against the acceptor, when it comes to the knowledge of the proposer.
As rightly pointed out by the learned senior counsel for the petitioner, when Mr. Swaminathan of Trimex opened the email of Mr. Swayam Mishra of Vedanta at 3:06 PM on 16.10.2007, it came to his knowledge that an irrevocable contract was concluded. Apart from this, the mandate of Section 7 of the Indian Contract Act stipulated that an acceptance must be absolute and unconditional has also been fulfilled. It is true that in the first acceptance conveyed by the respondent contained a rider, namely, cancellation after 2 shipments which made acceptance conditional. However, taking note of the said condition, the petitioner requested the respondent to convey an unconditional acceptance which was readily done through his email sent at 3:06 PM with the words 'we confirm the deal for 5 shipments', which is unconditional and unqualified. As rightly pointed out by the learned senior counsel for the petitioner, the respondent was wholly aware of the fact that its agreement with the petitioner was interconnected with the ship owner. In other words, once the offer of the petitioner was accepted following a very strict time schedule, the respondent could not escape from the obligations that flowed from such an action.
11. The Court of Appeal in the case of Pagnan SPA v. Feed Products Ltd., [1987] 2 LLR 619 observed as follows:
It is sometimes said that the parties must agree on the essential terms and that it is only matters of detail which can be left over. This may be misleading, since the word `essential' in that context is ambiguous. If by `essential' one means a term without which the contract cannot be enforced then the statement is true: the law cannot enforce an incomplete contract. If by `essential' one means a term which the parties have agreed to be essential for the formation of a binding contract, then the statement is tautologous. If by `essential' one means only a term which the Court regards as important as opposed to a term which the Court regards as less important or a matter of detail, the statement is untrue. It is for the parties to decide whether they wish to be bound and, if so, by what terms, whether important or unimportant. It is the parties who are, in the memorable phrase coined by the Judge, 'the masters of their contractual fate'. Of course, the more important the term is the less likely it is that the parties will have left it for future decision. But there is no legal obstacle which stands in the way of the parties agreeing to be bound now while deferring important matters to be agreed later. It happens every day when parties enter into so-called `heads of agreement'.
The above principle has been consistently followed by the English Courts in the cases of Mamidoil-Jetoil Greek Petroleum Co. S.A. v. Okta Crude Oil Refinery AD (2001) 2 LLR 76 at p. 89; Wilson Smithett & Cape (Sugar) Ltd. v. Bangladesh Sugar and Food Industries Corporation, (1986) 1 LLR 378 at p. 386. In addition, Indian law has not evolved a contrary position. The celebrated judgment of Lord Du Parcq in Shankarlal Narayandas Mundade v. The New Mofussil Co. Ltd. and Ors. : AIR 1946 PC 97 makes it clear that unless an inference can be drawn from the facts that the parties intended to be bound only when a formal agreement had been executed, the validity of the agreement would not be affected by its lack of formality. In the present case, where the Commercial Offer carries no clause making the conclusion of the contract incumbent upon the Purchase Order, it is clear that the basic and essential terms have been accepted by the respondent, without any option but to treat the same as a concluded contract.
12. Though Mr. C.A. Sundaram, learned senior counsel heavily relied on the judgment of this Court in Dresser Rand S.A. v. Bindal Agro Chem Ltd. : (2006) 1 SCC 751, the same is distinguishable because in that case only general conditions of purchase were agreed upon and no order was placed. On the other hand, in the case on hand, specific order for 5 shipments was placed and only some minor details were to be finalized through further agreement. This Court in Dresser Rand S.A (supra) rejected the contention that the acceptance of a modification to the General Conditions would not constitute the conclusion of the contract itself. On the other hand, in the present case, after the suggested modifications had crystallized over several emails. Further in para 32 in Dresser Rand S.A (supra) this Court held that 'parties agreeing upon the terms subject to which a contract will be governed, when made, is not the same as entering into the contract itself' whereas in the case on hand, the moment the commercial offer was accepted by the respondent, the contract came into existence. Though in para 44 of the Dresser Rand S.A (supra), it is recorded that neither the Letter of Intent nor the General Conditions contained any arbitration agreement, in the case on hand, the arbitration agreement is found in Clause 6 of the Commercial Offer. In view of the same, reliance placed by the respondent on Dresser Rand S.A (supra) is wholly misplaced and cannot be applied to the case on hand where the parties have arrived at a concluded contract.
13. Mr. Venugopal pointed out that the Charter Party Agreements are governed as per international shipping practices. The normal procedure is that the brokers from both sides first agree on the vital terms over phone/telex (these terms relate to Freight, Type of Ship, Lay Can (Period of shipping), Demurrage Rate, Cranes, etc.) At this stage, no agreement is formally signed but the terms are binding on both the parties, as per the Contract of Affreightment (CoA), which in the present case was entered into on the next day, i.e. 17.10.2007. Certain minor modifications could go on from either side on mutual agreement but in the absence of any further modification, the originally agreed terms of the CoA are binding on both the parties. Till the agreement is actually signed by both the parties, the term draft is used. This does not mean that the terms are not binding as between the Petitioner and the Ship-owners. Further, according to him, the existence of the Charter Party, various international shipping practices etc. which are to be pleaded in detail before the Arbitral Tribunal once it is constituted and not before this Court since this means extensive quoting of shipping laws and decided cases which cannot be done in the present arbitration petition. The above submissions cannot be under estimated.
14. Both in the counter affidavit as well as at the time of arguments Mr. C.A. Sundaram, learned senior counsel for the respondent has pointed out various differences between the version of the respondent and the petitioner. However, a close scrutiny of the same shows that there were only minor differences that would not affect the intention of the parties. It is essential that the intention of the parties be considered in order to conclude whether parties were ad idem as far as adopting arbitration as a method of dispute resolution was concerned. In those circumstances, the stand of the respondent that in the absence of signed contract, the arbitration clause cannot be relied upon is liable to be rejected.
15. Smita Conductors Ltd. v. Euro Alloys Ltd. (2001) 7 SCC 728 was a case where a contract containing an arbitration clause was between the parties but no agreement was signed between the paties. The Bombay High Court held that the arbitration clause in the agreement was binding. Finally, this Court upholding the judgment of the Bombay High Court held that the arbitration clause in the agreement that was exchanged between the parties was binding.
16. In Shakti Bhog Foods Limited v. Kola Shipping Limited : (2009) 2 SCC 134, this Court held that from the provisions made under Section 7 of the Arbitration and Conciliation Act, 1996 that the existence of an arbitration agreement can be inferred from a document signed by the parties, or an exchange of letters, telex, telegrams or other means of telecommunication, which provide a record of the agreement.
17. It is clear that in the absence of signed agreement between the parties, it would be possible to infer from various documents duly approved and signed by the parties in the form of exchange of e-mails, letter, telex, telegrams and other means of tele-communication.
18. Though, Mr. C.A. Sundaram, relied on several decisions, in view of clear materials in the form of emails/correspondence between the parties, those decisions are not germane to the issue on hand.
19. Before winding up, it is useful to refer the latest decision of this Court about the object of Arbitration and Conciliation Act, 1996. In Great Offshore Ltd. v. Iranian Offshore Engg. & Construction Co. (2008) 14 SCC 240, this Court while considering the objects and provisions of the Arbitration and Conciliation Act, 1996, held:
59 The court has to translate the legislative intention especially when viewed in light of one of the Act's 'main objectives': 'to minimize the supervisory role of courts in the arbitral process.' [See Statements of Objects and Reasons of Section 4(v) of the Act.] If this Court adds a number of extra requirements such as stamps, seals and originals, we would be enhancing our role, not minimizing it. Moreover, the cost of doing business would increase. It takes time to implement such formalities. What is even more worrisome is that the parties' intention to arbitrate would be foiled by formality. Such a stance would run counter to the very idea of arbitration, wherein tribunals all over the world generally bend over backwards to ensure that the parties' intention to arbitrate is upheld. Adding technicalities disturb the parties' 'autonomy of the will' (1' autonomie de la volonte') i.e. their wishes. (For a general discussion on this doctrine see Law and Practice of International Commerical Arbitration, Alan Redfern and Martin Hunter, Street & Maxwell, London, 1986 at pp.4 and 53.)
60. Technicalities like stamps, seals and even signatures are red tape that have to be removed before the parties can get what they really want--an efficient, effective and potentially cheap resolution of their dispute. The autonomie de la volonte' doctrine is enshrined in the policy objectives of the United Nations Commission on International Trade Law (UNCITRAL) Model Law on International Commercial Arbitration, 1985, on which our Arbitration Act is based. (See Preamble to the Act.) the courts must implement legislative intention. It would be improper and undesirable for the courts to add a number of extra formalities not envisaged by the legislation. The courts' directions should be to achieve the legislative intention.
61. One of the objectives of the UNCITRAL Model Law reads as under:
the liberalization of international commercial arbitration by limiting the role of national courts, and by giving effect to the doctrine `autonomy of will', allowing the parties the freedom to choose how their disputes should be determined'. [See Policy Objectives adopted by UNCITRAL in the preparation of the Model Law, as cited in Law and Practice of International Commercial Arbitration, Alan Redfern and Martin Hunter, Street & Maxwell, London (1986) at p. 388 (citing UN doc.A/CN.9/07, Paras 16-27).]62. It goes without saying, but in the interest of providing the parties a comprehensive review of their arguments, I note that once it is established that the faxed CPA is valid, it follows that a valid contract and a valid arbitration clause exist. This contract, the faxed CPA, does not suffer from a conditional clause, as did the letter of intent. Thus, the respondent's argument that the parties were not ad idem must fail.
20. In view of the settled legal position and conclusion based on acceptable documents, I hold that the petitioner has made out a case for appointment of an Arbitrator in accordance with Clause 6 of the Purchase Order dated 15.10.2007 and subsequent materials exchanged between the parties. Inasmuch as in respect of the earlier contract between the same parties, Justice B.N. Srikrishna, former Judge of this Court is adjudicating the same as an Arbitrator at Mumbai, it is but proper and convenient for both parties to have the assistance of the same Hon'ble Judge.
21. Accordingly, Hon'ble Mr. Justice B.N. Srikrishna, former Judge of this Court is appointed as an Arbitrator to resolve the dispute between the parties. It is made clear that this Court has not expressed anything on the merits of the claim made by both parties and whatever conclusion arrived at is confined to appointment of an Arbitrator. It is further made clear that it is for the Arbitrator to decide the issue on merits after affording adequate opportunity to both parties. In terms of the Arbitration clause, the place of Arbitration is fixed at Mumbai. The Arbitrator is at liberty to fix his remuneration and other expenses which shall be borne equally by both the parties.
22. Arbitration petition is allowed on the above terms. No costs.