(V.M. Syam Kumar, Advocate, High Court of Kerala)
The
High Court of Kerala has in the judgment dtd. 8th September, 2015 in
Caravel Shipping Services Pvt. Ltd. v. Premier Sea Foods Exim Pvt. Ltd. [2015 (4) KLT 1035] held that the
existence of an Arbitration clause in a Multimodal Transport Document/ Bill of
lading by itself does not entitle the Carrier/ Multimodal Transport Operator to
seek a dispute arising from the said contract of carriage to be referred to Arbitration.
The
Carrier had the moved the Hon’ble High Court under Art. 227 of the Constitution
of India challenging the Order of the Subordinate Judge’s Court, Kochi wherein the
prayer for referring the dispute to arbitration under S.8 of the Arbitration and Conciliation Act, 1996
made by the Multimodal
Transport Operator was rejected by the Sub-Judge.
The
relevant facts as stated in the judgment of the High Court are as follows:
The plaintiff company had entrusted to
the defendant, a carrier, 28,000 kgs. Cargo of frozen sea food, stuffed in a
container, and covered by a bill dated 25.10.2008 for delivery at Port - Bandar Abbas,
Tehran, Iran. The Cargo was shipped on board from Cochin Port on the same day.
On 18th November 2008, it was informed by the office of the defendant that the
Cargo container got damaged and part of the Cargo perished. Consequently, the
proposed buyer refused to accept the consignment. Alleging that the plaintiff
sustained loss due to default of defendant, a claim for USD 53,959.80 with
interest was set up, and after issuing a notice, the suit was instituted
claiming `26,53,593.00 with 11.5% interest. The
defendant appeared and filed I.A. 486/2009 contending that the entrustment of
cargo and its transportation were governed by Ext.P3 which was a Multimodal
transport document as provided under the Multimodal Transportation of Goods
Act, 1993 (herein after referred as the “Multimodal Act”). Clause 25 of the document
specifically contemplated settlement of disputes by arbitration and
conciliation and the jurisdiction of Civil Courts stood ousted in view of S.26
of Multimodal Act. The plaintiff, in the counter affidavit disputed the above
and contended that, Ext.P3 was only a unilateral receipt and was not a
Multimodal transport document and there was no consensus ad-idem between
the parties to enter into an agreement for arbitration. The court below
negatived the contention of the defendant, holding that the Contract of
Carriage was not a Multimodal Transport document and that S.26 of the
Multimodal Act and the Arbitration Act have no application to the facts of the
case. The said Order of the Sub-Judge was challenged before the High Court.
It was contended by the Carrier based on Clause 25 of the Contract
of Carriage that the arbitration clause therein operated as a bar in
instituting a Civil Suit for enforcement of rights arising there from.
Clause 25 verbatim reads as follows:
“JURISDICTION/ARBITRATION:
The contract evidenced by the Bill of Lading shall be governed by the Laws of
India, and subject to the exclusive jurisdiction of Court in Chennai only.
Dispute/Difference arising out of this contract and/or in connection with the
interpretation of any of its clauses shall be settled by arbitration in India
in accordance with the Arbitration & Conciliation Act, 1996. The No.
Arbitrators shall be three, the Arbitrators shall be commercial persons. The
venue for arbitration shall be Chennai.”
It was contended by the carrier that he was a Multimodal Transport
Operator as defined under the Multimodal Act, having under taken a Multimodal
transportation with the plaintiff evidenced by Ext.P3 Multimodal transport
contract.
By virtue of Clause 25 extracted above, plaintiffs are bound by the
arbitration clause in the light of S.26 of the Multimodal Act. The plaintiff
contented that Ext.P3 was only a receipt evidencing a bill of lading,
there was no consensus ad-idem in relation to terms of Ext.P3 and that
it did not evidence a Multimodal contract.
It was contended by the Consignor that a multimodal transport contract should
involve undertaking of at least two different modes of transport, which was not
involved in this case. The reply of the Carrier was that the factory of the
plaintiff was at Alapuzha and empty container was delivered to the consignor,
who stuffed it at Alapuzha, transported by road to Cochin Port and thereafter
transported by sea, to Port Bandar Abbas by vessel OEL Dubai V029. Admittedly,
an empty container was delivered to the consignor, which is also seen endorsed
in Ext.P3, against the column of container no. According to Consignor, they
themselves stuffed the container with goods. Thereafter, it was inspected by
officials of State Live Stock, Marine and Agri products, and thereafter by
Lloyds Agency, Kochi and both issued necessary certificates. It was thereafter
handed over to Carrier with all records. In para 12 of the plaint, the cause of
action is stated to have arisen, when the Consignor entrusted the container to
the Carrier for shipment at a place within the jurisdiction of the Kochi court.
Court noted that evidently, the Consignor had specifically pleaded that though
the container was transported from Alapuzha, only the part of transportation by
sea alone was undertaken by Ext.P3. This pleading it was noted was not denied
by the Carrier.
As regards the nature of the document, ie., whether it is a Multimodal
Transport Document or a Bill of lading, the High Court concluded as follows: “ Ext.P3 shows that the column of Place of
Receipt is blank. However, Port of loading is shown as Cochin and place of
delivery as Bandar Abbas, Iran. The
entries indicate that Cargo was shipped on board the vessel on 25th October
2008. There is absolutely no reference in Ext.P3 that either the container was
entrusted at Alapuzha or that the freight charges included transportation from
Alapuzha. Evidently, though the cargo moved both by road and by sea, the
contract with defendant was for carriage of goods by sea alone.”
Based on the Multimodal Transportation of Goods Act,1993, the
learned Judge reasoned as follows:
“Under S.2(l), to be a Multimodal
transport contract, the Multimodal transport operator should undertake to
perform or procure the performance of Multimodal transportation. Under S.2(k)
Multimodal transportation means carriage of goods, by at least two different
modes of transport under a multimodal transport contract from the place of
acceptance of goods in India to a place of delivery outside India. A co-joint
reading of S.2(k) and 2(l) undoubtedly shows shows that to be a Multimodal
contract, the operator should undertake to transport by two modes. In
other words, under the contract or by virtue of the contract, the
transportation should involve two modes, from a place in India to a place of
delivery outside India. The terms “two different modes of transport” found in
S.2(k) does not qualify “carriage of goods” but refer to multimodal transport
contract. In the instant case, though the goods were transported by two modes,
only one part, that is the carriage by sea, alone was covered by Ext.P3.
Consequently Ext.P3 cannot be considered as a Multimodal transport contract.”
“It is true that Ext.P3 is captioned as a
Multimodal Transport document/Bill
of lading. From the nature of
the Caption, it could either be a Multimodal transport contract or a bill of lading. However, for the reasons stated above, it could not be
treated as a Multimodal transport contract.”
The Court then proceeded to consider the
crucial question regarding the binding nature of the Arbitration clause in the contract
of carriage.
The Consignor had contended that Ext.P3 did not evidence a
binding arbitration agreement. It was argued that it was not signed by the Consignor
and that there was no consensus ad-idem to enter into an agreement of
arbitration.
This was countered by the carrier contending that that it is
not essential that the agreement should be signed by the parties, if the terms
of the transaction discloses an intention to refer for arbitration and will be
satisfied if the clause of arbitration on an invoice is brought to the notice of
other party. It was argued by the learned counsel for the carrier that the
entrustment of the goods subject to the
terms and conditions laid in
Ext.P3, and by accepting a copy of the Ext.P3, by the Consignor, statutorily
constituted the creation of a valid arbitration agreement. It was further
contended that under S.7 of the Multimodal Act, a statutory liability is cast
on the Multimodal operator to issue the Multimodal agreement to the consignor
and by complying with that statutory liability, parties have voluntarily
entered into the agreement.
The learned Judge concluded that the
existence of an Arbitration clause in a Multimodal Transport Document/ Bill of
lading by itself does not entitle the Carrier/ Multimodal Transport Operator to
seek a dispute arising from the said contract of carriage to be referred to Arbitration
by the following reasoning:
“S.7 only enables a consignor who has
entered into a contract for Multimodal transportation, to issue a multimodal
document, at the option of the consignor. This presupposes entering into a
contract for multimodal transportation. The term contract used in the definition
of “Multimodal transport contract” and “Multimodal transport document” and in
other parts of the Multimodal Act has not been specifically defined. Though by
S.29 of the Multimodal Act, it shall have overriding effect over all other
enactments, not with standing anything contained in any other law, the term
contract shall by necessary implication can only have the meaning and content
of the term contract as defined under the Indian Contract Act, 1872. Hence all
the essentials required for entering in a valid contract will be required for
entering into a Multimodal contract. In the case at hand, apart from entering
into an agreement relating to the essential terms for transportation of goods
by sea and for the payment of freight charges, it does not appear that there
was consensus ad-idem for
entering into an arbitration agreement. There is nothing to show that Clause 25
was ever brought to the notice of plaintiff. Hence the contention of the
defendant does not appear to be sustainable.”
The High Court of Kerala thus held that there was no
illegality or irregularity in the application of law, or exercise of
jurisdiction by the court below warranting an interference under Article 227 of
the Constitution of India and hence dismissed the original petition by the
carrier.
The finding of the Learned Judge based
on facts that the document issued by the carrier which evidences only a single
mode of transportation will not come within the purview of the Multimodal Transportation of Goods Act,1993
is precisely correct.
However the the reasoning given in the judgment for holding
that the arbitration clause in the bill of lading does not bind the parties to
the carriage, viz., the Consignor & the Carrier appears to be insufficient and
requires closer examination.
The reasoning given by the learned judge is that the term contract of carriage whether a
Bill of lading or a Multimodal Transport Document can by necessary implication only
have the meaning and content of the term contract as defined under the Indian
Contract Act, 1872. Hence all the essentials required for entering in to a
valid contract will be required for entering into a Multimodal contract.
We cannot have a quarrel up till the above part of the reasoning
of the learned Judge.
However, subsequent part of the reasoned statement that “In the case at hand, apart from entering
into an agreement relating to the essential terms for transportation of goods
by sea and for the payment of freight charges, it does not appear that there
was consensus ad-idem for
entering into an arbitration agreement. There is nothing to show that Clause 25
was ever brought to the notice of plaintiff.” has been made totally overlooking
the nature and validity of the clauses on the reverse of the bill of lading
especially the Judgment of the Hon’ble Supreme Court in British India Steam Navigation Company v. Shanmughavilas Cashew.
The above judgment throws up very crucial legal questions
concerning the binding nature and validity of numerous clauses in the bill of
lading vis – a- vis the consensus ad idem
requirement under contract law.
If the arbitration clause in the bill of lading lacks consensus ad idem and is not binding, what
would be the status of the other clauses in the bill of lading including the Himalaya Clause, New Jason Clause etc.?
Would those terms on the reverse of the bill of lading which
are the result of the accumulated experience of the marine carriers though
centuries of operation and which have been tested in Hague, Hague-Visby,
Hamburg and Rotterdam Rules and approved in statutes like Indian Carriage of
Goods by Sea and the Bill of lading Act be negated by a single stroke of purported
lack of consensus ad idem?
Does consensus ad idem requirement have any
relevance at all in the case of titular documents like the Bill of lading and
Multimodal Transport Document which can be endorsed to third parties conferring
on them titular rights over the cargo covered?
What impact would the judgment have when in maritime law we frequently are confronted with the phenomenon of incorporation into a bill of lading the arbitration clause in a charter party ?
What impact would the judgment have when in maritime law we frequently are confronted with the phenomenon of incorporation into a bill of lading the arbitration clause in a charter party ?
The above are a few of the questions of legal relevance that
arise for consideration in the back drop of the judgment in Caravel Shipping Services Pvt. Ltd. v. Premier Sea
Foods Exim Pvt. Ltd. [2015 (4)
KLT 1035].
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