RICKMERS VERWALTUNG GMBH Vs. INDIAN OIL CORPORATION LIMITED

JUDGEMENT

(1.) Leave granted.

(2.) The respondent, Indian Oil Corporation Ltd., entered into an agreement with M/s. Tubacero of Mexico for purchase of pipes for its Kandla-Bhatinda Pipeline project on September 16, 1993. According to the terms of the Agreement, M/s. Tubacero were to deliver the pipes to the respondent at Tampico Port in Mexico. In order to bring the pipes to India, the respondent, a Government Corporation, was required to go through M/s. Transchart, a department of the Ministry of Surface Transport, which brokers charter party arrangements with various vessel owners, for the purposes of shipping of pipes from Tampico Port. M/s. Transchart invited offers from various ship owners and the appellant was one of the ship owners who made an offer. In order to execute a contract between the parties, respondent No. 1 was to establish a standby letter of credit as per the format to be mutually agreed upon by the parties while the appellant was to furnish a performance bond also in a format to be mutually agreed upon by both the parties. Respondent No. 1 conveyed to the appellant on November 17, 1993 that loading of pipes at Tampico port should commence on December 14, 1993 and be completed by December 21, 1993. The appellant, however, did not proceed in the matter because the format and the language of the standby letter of credit in the form issued by its bankers was not approved by the first respondent. The draft letter of credit proposed by the first respondent was also not approved by the appellant and fresh proposals were exchanged between the parties. As a consequence, the appellant did not carry the pipes, as according to it, the formats of standby letter of credit and performing guarantee were not settled between the parties. The first respondent was, therefore, compelled to arrange for the carriage of first consignment of pipes received from M/s Tubacero at Mexico. Transchart by its telex dated December 24, 1993 apprised the appellant about the failure to carry out its obligation, despite repeated requests which had resulted in the Charterers to finalise alternative shipping arrangements. While the matter stood thus, the appellant filed a request for arbitration with the Indian Council of Arbitration on 11-6-1994. On June 28, 1994 the first respondent received a notice from the Indian Council of Arbitration intimating it that the appellant had filed an application dated June 16, 1994 invoking Clause 53 of the Agreement of Affreightment (AOA) relating to arbitration and that it had laid a claim of 1,031,668.77 US dollars. The first respondent was directed to deposit a sum of Rs. 83,200/- towards costs of the arbitration on or before July 28, 1994. On receipt of the communication from the Indian Council of Arbitration, the first respondent informed the Indian Council of Arbitration (second respondent) that there did not exist any binding contract between the first respondent and the appellant, much less any binding agreement to refer any dispute between the parties to arbitration according to the Rules of the Arbitration of the Indian Council of Arbitration. It was asserted that the agreement dated November 11, 1993 relied upon by the appellant in its statements of claim, as constituting the contract between the parties, had not been signed by the first respondent and the document was nothing more than a mere proposal made by the appellant, which was subject to the parties agreeing on the format and language of the standby letter of credit to be provided by the first respondent for the benefit of the appellant and was subject to the parties also agreeing to the format and language of performance guarantee to be established by the appellant in favour of the first respondent. It was maintained that since no agreement could be reached with regard to the contents of the aforesaid two documents, which were fundamental to arrive at a working relationship between the parties, the claim of the appellant regarding the conclusion of the contract between them was not maintainable. The first respondent also questioned the jurisdiction of the Indian Council of Arbitration to decide whether or not an arbitration agreement exists between the parties and asserted that in case the appellant considered that they had entered into a binding agreement between the parties, they could take steps to obtain a reference through a competent Court. Notwithstanding the stands of the first respondent, the Indian Council of Arbitration on January 3, 1995, intimated to the parties that it had appointed Mr. M. K. Chawla, a retired Judge of the Delhi High Court as an Arbitrator. It was also stated in the communication that the appellant had nominated Rear Admiral (Dr.) O.P. Sharma as their nominee as arbitrator. The first respondent was requested to file its statement of defence by January 15, 1995, which date was subsequently extended. The direction to deposit a sum of Rs. 83,000/- towards cost of expenses of the arbitration was reiterated. The first respondent, aggrieved by the communication from the Indian Council of Arbitration dated January 3, 1995, filed a petition under Section 33 of the Indian Arbitration Act, 1940, seeking a declaration from the Court that there did not exist any concluded arbitration agreement between the parties and the reference of the dispute in question to the Arbitration by the appellant was unwarranted and not maintainable. The application was resisted by the appellant, who maintained that a valid and subsisting agreement between the parties had come into existence and that the claim of the appellant was required to be adjudicated by the arbitrators in terms of Clause 53 of the "agreement". On the pleadings of the parties, a learned single Judge of the Delhi High Court framed the following issues :

(3.) During the pendency of the application the learned single Judge stayed further proceedings before the Arbitrator appointed by the Indian Council of Arbitration. Parties were directed to file evidence by way of affidavits in the Court. Documentary evidence and affidavit were consequently filed in the Court.