The Hon’ble Supreme Court, on October 29, 2018, passed a judgement in Caravel Shipping Services Private Limited v. Premier Sea Foods Exim Private Limited (Civil Appeal Nos. 10800-10801 of 2018), setting aside a judgement dated September 8, 2015 of the High Court of Kerala. The Hon’ble Supreme Court in this case examined the scope of section 7 of the Arbitration and Conciliation Act, 1996 (“Act”).
The parties, in the present case, entered into an agreement, Multimodal Transport Document (“Bill of Lading”) dated October 25, 2008 stating that the Premier Sea Foods Exim Private Limited (“the Respondent”) will act as a consignor and Caravel Shipping Services Private Limited (“the Appellant”) will act as an agent facilitating transport of such consignment provided by the Respondent.
The Respondent filed a suit (O.S. 9 of 2009) before the Sub-Judge’s Court, Kochi to recover a sum of Rs. 26,53,593 (Rupees Twenty Six Lakhs Fifty Three Thousand Five Hundred and Ninety Three) from the Appellant. Pursuant to this, the Appellant filed an Interlocutory Application under Section 8 of the Act, stating that the Bill of Lading contained an arbitration clause and therefore, the dispute is to be referred to arbitration.
The Sub-Judge’s Court, Kochi, vide judgement dated January 8, 2013 dismissed the Interlocutory Application filed by the Appellants stating that the arbitration clause would not form a part of the Bill of Lading as it was printed in terms and conditions annexed to the Bill of Lading and, therefore would not be binding on the parties. Further, the Hon’ble High Court of Kerala, agreed with the Sub-Judge, Kochi and upheld the judgement dated January 8, 2013.
Hence, the present Appeal was filed before the Hon’ble Supreme Court, against the judgement of the High Court of Kerala.
The main issues before the Hon’ble Supreme Court were as follows:
The Counsel for the Appellant relying on the case of M.R Engineers and Contractors Private Limited v. Som Datt Builders Limited ((2009) 7 SCC 696), argued that the printed condition for the arbitration clause of the Bill of Lading were a part and parcel of the main contract and hence, both parties were bound by the same. The Bill of Lading expressly referred to the arbitration clause annexed to it. Since both the parties were bound by the main contract, they would also be bound by the annexed arbitration clause.
The Counsel for the Respondent, in addition to stating that the arbitration clause would not form a part of the Bill of Lading, argued that Section 7 (4) (a) of the Act requires an agreement to be in a document that is signed by the parties. As the Bill of Lading was not signed by the Respondent, he would not be bound by the annexed arbitration clause. Further, it was also argued that since the suit had passed the stage of framing issues and witnesses was being examined, the matter could not be referred to arbitration.
Supreme Court’s Analysis:
The Supreme Court held that, as per the terms of the Bill of Lading, the Merchant, defined in the Bill of Lading includes a shipper, consignor or consignee, expressly agreed to be bound by all the terms, conditions, clauses and exceptions on the Bill of Lading whether typed, printed or otherwise. Therefore, even though the arbitration agreement was a printed condition annexed to the Bill of Lading, the Respondent had bound himself to it by becoming party to the contract.
The Supreme Court also referred to its decision in the case of Jugal Kishore Rameshwardas v. Mrs. Goolbai Hormusji (AIR 1955 SC 812), wherein the Court held that the arbitration agreement needs to be in writing but need not be signed by the parties to the agreement. It was further held by the Court that Section 7(4) of the Act merely adds to requirement under Section 7(3) - it does not in any case provide that an arbitration agreement needs to be signed, in all cases. The only pre-requisite is that the arbitration agreement is to be in writing, as provided in Section 7(3) of the Act.
The Hon’ble Supreme Court also held that, a witness being examined would not come in the way of Section 8(3) being applied since the Section 8(3) application was filed in the same year as that of the suit.
Hence, the Hon’ble Supreme Court Bench, in the present case, held:
- that the printed condition for the arbitration clause of the Bill of Lading were part and parcel of the main contract and both parties were bound by the same.
- that the arbitration clause merely needs to be in writing and need not be signed by both the parties to the contract.
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