O.M.P./194/2009 of M/S SHAKTI BHOG FOODS LTD. Vs KOLA SHIPPING LTD. & ANR.

IN THE HIGH COURT OF DELHI AT NEW DELHIO.M.P. 194 of 2009

Reserved on: 26[th]July, 2012Decision on: 21[st]August, 2012

SHAKTI BHOG FOODS LTD.

..... Petitioner

Through: Mr. Neeraj Kaul, Senior Advocateand Mr. R.K. Sanghi, Advocate.

Versus

KOLA SHIPPING LTD & ANR

Through:

..... RespondentsMr. Amitava Mazumdar withMr. Arvind Kumar Gupta andMr.AdityaKrishnamurthy,Advocates.

CORAM: JUSTICE S. MURALIDHAR

J U M N T21.08.2012

1. The challenge in this petition under Section 34 of the Arbitration andConciliation Act, 1996 (‘Act’) by the Petitioner, Shakti Bhog FoodsLtd., is to an Award dated 11[th]February 2009 passed by the soleArbitrator (Respondent No.2) in the dispute arising between thePetitioner and Kola Shipping Ltd., Respondent No.1, arising out of avoyage Charter Party (‘CP’) (fixture note) dated 18[th]July 2005, claimedby Respondent No.1 to have been executed between it and the Petitionerto load 13,500 metric tonnes (‘MT’) of bagged sorghum on board M.V.Kapitan Nazarev at the port of Kakinada, India.

Background facts

2. The Petitioner is engaged in the business of manufacturing andexporting food products, cereals, grains etc. It states that in the firstweek of July 2005 it was negotiating deal with the Government ofNiger for export of Sorghum (Jowar), which was to be shipped to theport of Cotonou in Benin in West Africa. The Petitioner states that itwas looking for ship and at that time the Respondent No.1 contacted itand offered its services since it was already having vessel under timecharter with the head owners N.B. Two Shipping Ltd. (hereafter referredto as ‘head owners’). According to the Petitioner, it informed theRespondent No.1 that it might be in position to charter the vessel onlyif the deal with the Government of Niger came through. According tothe Petitioner, the deal did not come through despite negotiations and itkept Respondent No.1 apprised of the developments. According to thePetitioner since the Respondent No.1 was nevertheless insisting upon aregular CP (to be executed between them) and since the deal with theGovernment of Niger did not come yet through, the Petitioner offeredRespondent No.1 in the alternative of export of Sorghum through thevessel for which the Respondent No. 1 had time charter, consignmentof maize for Colombo. The Petitioner maintains that there was nosigned CP, and therefore no arbitration agreement between the parties.

3. The Respondent No.1 maintains that there existed concluded CPagreement between the Petitioner and Respondent No.1. It further statesthat the question as to the existence of the CP between the parties hasbeen examined in the earlier proceedings before this Court and the

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Supreme Court and similar contentions of the Petitioner have beennegated by both Courts. Respondent No.1 contends that it was notconcerned with the Petitioner’s deal with the Government of Niger.According to the Respondent No.1 it signed CP on 22[nd]July 2005 andsent the original to the Petitioner. Respondent No.1 claims that thePetitioner counter-signed the CP on 28[th]July 2005 and sent that copy byfax. Respondent No.1 has produced before this Court photocopy of thefax of the CP counter-signed by the Petitioner. Respondent No.1 relieson the arbitration clause forming part of the said agreement.

4. In para 2.6 of the petition, the Petitioner states that the vessel arrivedat Kakinada on 24[th]July 2005 and tendered Notice of Readiness(‘NoR’). According to the Petitioner on 26[th]July 2005 Respondent No.1handed over to the Petitioner back dated Bill of Lading (‘B/L’) dated20[th]July 2005 and made repeated entreaties to give Respondent No.1“some business” in case the deal for cargo to Cotonou did notmaterialize. The Petitioner claims that despite the uncertainty of theongoing negotiations with the Government of Niger, “the Petitionerdecided to load some cargo in the vessel and loaded anticipating that incase the deal came through, the Petitioner would load the balance12,400 MT, otherwise it would unload the 1100 MT”. The Petitionerstates that between 6[th]to 9[th]August 2005, it loaded 1100 MT of cargoworth Rs.1,02,36,540 on the vessel. The Petitioner states that on 9[th]August 2005, the deal with the Government of Niger fell through. Ittelephonically informed Respondent No.1 on 9[th], 10[th]and 11[th]August2005 that it would not be in position to load any further cargo and

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offered Respondent No.1 lump-sum amount of US Dollars (‘USD’)100,000 as good business gesture and without admitting any liability,subject to Respondent No.1 unloading the cargo. According toRespondent No.1, the Petitioner stopped the loading of cargo claimingthat the deal with the Government of Niger had not come through andagreed to pay Respondent No.1 compensation of USD 90,000. On 5[th]September 2005, the Petitioner sent an e-mail to Respondent No.1requesting it to unload the cargo from the vessel.

The Section 9 proceedings

5. Respondent No.1 filed OMP No.331 of 2005 in this Court underSection 9 of the Act seeking interim measures for discharge of 1100 MTof Sorghum loaded by the Petitioner on board the vessel. RespondentNo.1 pointed out that the lay time had expired in terms of the CP on 6[th]August 2005 and the Petitioner was liable to pay demurrage at the rateof USD 8,000 per day. By the time the Petitioner sent letter toRespondent No.1 on 24[th]August 2005 stating that it was not in aposition to provide any further cargo, the demurrage had gone up toUSD 232,000. Respondent No.1 stated that the compensation offered bythe Petitioner was totally inadequate. Respondent No.1 addressed aletter dated 1[st]September 2005 through their agents to the PortAuthorities at Kakinada for permission to discharge the cargo under lienand to store the said cargo in bonded warehouse stating that theywould bear the cost of discharge and storage. However, the CustomsAuthority at Kakinada informed Respondent No.1 by letter dated 6[th]September 2005 that since the cargo had been loaded by the Petitioner,

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the request for discharge of cargo would have to come from thePetitioner only.

6. Meanwhile, the Petitioner sent letter on 5[th]September 2005 to theMaster of the vessel stating that it would make the necessaryarrangement to discharge the cargo on board the vessel. RespondentNo.1 addressed letter to the Customs Authority at Kakinada Port on 8[th]September 2005 stating that they had no objection to the discharge ofthe cargo by the Petitioner at its own risks and costs, subject to thePetitioner surrendering the Mate Receipts (‘MR’) and the original tallysheets to the Master of the vessel, since the cargo was not being carriedby the vessel. It is stated by Respondent No.1 that despite this, thePetitioner did not take any steps for unloading the cargo as result thevessel continued to remain at Kakinada Port incurring demurrage whichon the date of filing of the petition was in excess of USD 737,577.

7. The case of Respondent No.1 is that the Petitioner did not permit it todischarge the cargo by making written request to the Customsauthorities at Kakinada for re-landing of the cargo to the port. Thedetention charges were increasing at the rate of USD 12,346.36 per day.In the circumstances, while expressing its readiness to refer the disputefor arbitration in London in respect of its claim for freight, dead-freight,demurrage and damages for detention, Respondent No.1 sought interimdirection to the Petitioner to forthwith discharge 1100 MT of Sorghumloaded on the vessel by the Respondent No.1. Alternatively, directionwas sought to the Respondent No.1 to request the port authorities at

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Kakinada in writing to grant permission for unloading the Petitioner’scargo on board at the risk and cost of the Petitioner.

8. In the said proceedings the Petitioner admitted to having loaded 1100MT of cargo on board the vessel. The Petitioner also admitted to signingthe fixture note but not the CP. The Petitioner also raised preliminaryobjection as to the territorial jurisdiction of the Delhi High Court toentertain the petition.

9. This Court by its order dated 28[th]September 2005 disposed of thepetition directing the Petitioner to forthwith unload the quantity of 1100MT of bagged Sorghum loaded by them on board the vessel ofRespondent No.1 at Kakinada or in the alternative, send request to theCustoms Authority at Kakinada to grant permission for re-landing of thePetitioner’s cargo on board the said vessel. The Petitioner was furtherdirected to surrender the MR to the Master of the vessel for appropriateaction within one week. This was without prejudice to the rights andcontentions of either party. Significantly, in determining that part ofthe cause of action arose in Delhi, and therefore it had territorialjurisdiction, the Court observed: “Respondent (i.e. the Petitioner herein)did not deny their signatures on the first page of charter party whichshows that the agreement was signed at New Delhi and place ofarbitration as London.”

10. The Petitioner filed an appeal being FAO (OS) No.324 of 2005 inthis Court on 7[th]October 2005 against the order dated 28[th]September

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2005 of the learned Single Judge allowing OMP No.331 of 2005. On 9[th]October 2005, the Petitioner discharged 1050 MT of cargo out of total1100 MT. On 10[th]October 2005 it stopped discharging the balance of50 MT.

11. On 19[th]October 2005, the Division Bench of this Court passed anorder in FAO (OS) No.324 of 2005 declining to stay the order dated 28[th]September 2005 of the learned Single Judge. Since the Petitioner had tillthen not complied with the said order, Respondent No.1 filed acontempt petition being CCP No.113 of 2005 on 20[th]October 2005.

12. On 26[th]October 2005, an order was passed by this Court in CCP No.113 of 2005 ordering the Petitioner to unload the balance cargo of 50MT by 28[th]October 2005, failing which the Respondent No.1 would beauthorized to discharge the balance cargo and store in the warehouse ofcustom thereof. Pursuant to the said order, discharge of the balancecargo of 50 MT was completed on 30[th]October 2005.

Appointment by Respondent No.1 of Mr. Alan Oakley as Arbitrator13. On 17[th]October 2005, counsel for Respondent No.1 issued noticeappointing Mr. Alan P. Oakley as their Arbitrator. Mr. Oakley acceptedhis appointment as an Arbitrator on the same day. On 25[th]October2005, the Petitioner wrote to Respondent No.1 through counsel denyingthat the CP had been entered into and declined to appoint an Arbitrator.

14. On 21[st]February 2006, Respondent No.1 through counsel requested

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the Petitioner to appoint an Arbitrator and further stated that if thePetitioner failed to appoint their Arbitrator within 14 days Mr. Alan P.Oakley would be the sole Arbitrator by default. On 9[th]March 2006,Respondent No.1 wrote to Mr. Alan Oakley appointing him as soleArbitrator on account of the failure by the Petitioner to appoint theirArbitrator within 14 days. On 9[th]March 2006 itself, Mr. Oakleyconfirmed his appointment as sole Arbitrator.

15. On 9[th]January 2007, the counsel for Respondent No.1 sent anotherletter and e-mail to the Petitioner granting another 14 days forappointment of an Arbitrator in accordance with Clause 19 of the CP.This was followed by another letter and e-mail on 20[th]February 2007. Athird letter was sent on 25[th]June 2007 giving the Petitioner finalopportunity till 25[th]July 2007 to appoint their Arbitrator. On 22[nd]August 2007, letter was sent to Mr. Alan Oakley requesting him to actas sole Arbitrator as the Petitioner was not willing to appoint itsArbitrator even when notices were sent to it. Mr. Oakley was againwilling to accept his appointment as sole Arbitrator.

Proceedings in the District Court in Kakinada

16. On 14[th]October 2005, the Petitioner filed OS No.44 of 2005 in theCourt of III Additional District and Sessions Judge (‘ADJ’), Kakinadaagainst Respondent No.1 for damages since according to the Petitionerat that time the cargo was retained by the Master of the vessel. It filed anapplication for interim injunction to restrain the vessel from leaving theKakinada Port. The Petitioner also filed an application to attach the ship.

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17. On 11[th]November 2005, the learned ADJ, Kakinada dismissed thePetitioner’s application for attachment of the vessel. On 14[th]November2005, the vessel sailed from Kakinada Port. On 12[th]December 2005, theHigh Court of Andhra Pradesh dismissed the Petitioner’s appeals beingCMA Nos.1079-1080 of 2005 filed against the order dated 11[th]November 2005 of the District Court on the ground that the appeals hadbecome infructuous.

18. Meanwhile, Respondent No.1 filed an application I.A. No.3861 of2005 in the Court of the ADJ, Kakinada under Section 45 of the Act,seeking reference of the disputes between the parties to arbitration inLondon under the provisions of the English Arbitration Act, 1996(‘EAA’) and to stay all further proceedings.

19. By detailed order dated 30[th]November 2006, the learned ADJ atKakinada allowed I.A. No.3861 of 2005 filed by Respondent No.1 andreferred the parties to arbitration in London under the provisions of theEAA. OS No.44 of 2005 was deferred till the disposal of the arbitration.In the said judgment positive finding was rendered by the learned ADJthat “from the documents like Ex.P-1 wherein the annexures to theapplication in OMP No.331 of 2005 clearly go to show that thereappears to be CP between the parties to the petition”. The operativeportion of the order reads as under:

“In the light of the discussion had above and also byrelying on the decisions referred to by the learned

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counsel for the Petitioners, it is clear that there appearsto be charter party entered into between the 1[st]Petitioner and the Respondent/Plaintiff and that as pertheprovisionsofSec.45oftheArbitrationandConciliation Act, 1996 this Court shall refer the partiesto arbitration under the charter party. So, the point isanswered accordingly in favour of the Petitioners.”

20. Aggrieved by the above decision, the Petitioner filed Civil RevisionPetition No.6618 of 2006 in the High Court of Andhra Pradesh. TheHigh Court in its order dated 15[th]June 2007 dismissed the said civilrevision petition taking note of the judgment of this Court dated 28[th]September 2005 in OMP No.331 of 2005 to the effect that “Respondentdid not deny the signatures on the first page of charter party whichshows that agreement was signed at New Delhi and place of arbitrationat London.” It further noticed that the appeal filed against the said orderbeing FAO (OS) No.324 of 2005 was disposed of on 22[nd]January 2007as having become infructuous. It was accordingly held that “thePetitioner cannot be permitted to contend that there is no arbitrationclause in the charter party agreement.”

21. Against the aforementioned judgment of the Andhra Pradesh HighCourt, the Petitioner filed Special Leave Petition (‘SLP’) (Civil)No.16109 of 2007. On 17[th]September 2007, notice was issued toRespondent No.1 in the SLP.

Proceedings before the Arbitrator

22. On 9[th]October 2007, the learned Arbitrator, Mr. Oakley, wrote to

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the Petitioner asking it to submit its defence submissions. On 10[th]October 2007, the Petitioner informed Respondent No.1 that sincenotice had been issued by the Supreme Court in the SLP, RespondentNo.1 should not continue with the arbitration. On the same day, counselfor Respondent No.1 informed the Petitioner that while notice wasreceived in the SLP, there was no stay of the arbitration proceedings. Bya letter dated 30[th]October 2007 one Mr. Ashvinder Kalra, Advocate forthe Petitioner, wrote letter to Mr. Oakley acknowledging receipt of theletter dated 22[nd]August 2007 from Respondent No.1 and requesting forextension up to six weeks for the Petitioner to file its defencesubmissions.

23. Respondent No.1 filed its statement of claim before Mr. Oakley on3[rd]October 2007 under the London Maritime Arbitrators Association(‘LMAA’), Rules against the Petitioner and another firm M/s. ShaktiInternational. On 9[th]October 2007 Mr. Oakley informed the Petitionerthat as was the normal practice in London maritime proceedings, hewould allow the Petitioner 28 days to serve defence submissions andthat, therefore, the defence submissions should be submitted by 5[th]November 2007.

24. On 30[th]October 2007 after receiving the letter from the Petitionerabout the pendency of the SLP in the Supreme Court and requesting himnot to proceed, Mr. Oakley wrote letter to the Petitioner on 31[st]October 2007, reproducing the order passed by him on 9[th]October 2007and stated:

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“As you should be aware, clause 74 of the Chaterparty makesprovision for any dispute between the parties to be settled byway of arbitration in London in accordance with English Law.Therefore, I am satisfied that I have jurisdiction on this matterregardless on the proceeding in the Indian court to which yourefer.

Therefore, my order of service of defence by latest 5[th]November 2007 remains in force and must be complied with.In the event that the respondents fail to comply with the order, Ishall, on the application of the claimants, make final andpreemptory order for the service of defence within 7 daysthereafter. The order will carry severe sanctions in the eventthat the respondents fail to comply.”

25. On 1[st]November 2007, the Petitioner wrote to Respondent No.1about the proceedings before the Supreme Court and requested that thearbitral proceedings may not be continued. On 6[th]November 2007,Respondent No.1 wrote to Mr. Oakley as under:

“We refer to the above matter. The Respondents havefailed to serve Defence.

Please be advised that the arbitration proceeding inLondon is being dealtwith by this office albeitproceedings in the Supreme Court are being dealt with byour Bombay office.

Our Bombay office has forwarded copies of the recentexchanges.

It is correct that an application made by the Respondentsis pending before our Supreme Court. The SupremeCourt did not grant stay of the arbitration proceedings.

The Respondents have alleged in correspondence withour Bombay office that the Supreme Court had indicated

that the arbitral tribunal in London would not be passingany adverse order and would be granting time. No suchindication was given at the hearing on 26[th]October 2007.

The matter is listed for hearing before our Supreme Courton 16[th]November 2007.

Solely on the basis of respect for our Supreme Court, wehereby advise that our clients are agreeable to theextension requested by the Respondents of six weeks.

The Respondents requested an extension of six weeks intheir letter of 30[th]October 2007. We calculate six weeksfrom 30[th]October 2007 expires on 11[th]December 2007,which allows the Respondents an exceedingly generousperiod of time in the context of an arbitration which is tobe conducted in London on LMAA terms.”

26. Thereafter the arbitral proceedings did not continue till the judgmentof the Supreme Court.

The Supreme Court order

27. On 23[rd]September 2008, the Supreme Court dismissed Civil AppealNo.5796 of 2008 thereby affirming the judgment dated 15[th]June 2007of the High Court of Andhra Pradesh dismissing the Petitioner’s CivilRevision Petition No.6618 of 2006. The Supreme Court held that theredid exist CP between the parties. Paras 23 to 25 of the said judgmentwhich are relevant for this purpose read as under:

“23. In the present case therefore, we conclude that thereexisted charter party between the parties to the suitwhichcan beidentified from thecorrespondencebetween the parties to that effect as also from the fixturenote and the bill of lading signed by the parties.existed charter party between the parties to the suitwhichcan beidentified from thecorrespondencebetween the parties to that effect as also from the fixturenote and the bill of lading signed by the parties.

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24. As per the provisions of the Section 45 of the Act, itis clear that at the request of one of the parties or anyperson claiming through or under him the court shallrefer the parties to arbitration unless it finds that the saidagreement is null and void, inoperative or incapable ofbeing performed. In the present case, there appears to beno such thing to say that the so called agreement enteredinto by the parties is in any way to be termed as null andvoid or inoperative or incapable of being performed. It isfurther observed by us that the claims raised by theappellant before us about the non-existence of thecharter party agreement can also be raised by the samebefore the arbitral tribunal at London. Under the EnglishArbitration Act 1996, as per Sections 30 and 31 of thesaid Act, the arbitral tribunal may rule on its ownjurisdiction and also can decide on the existence of avalid arbitration agreement. This is similar to theprovisions under Section 16 of the Act, whereby thearbitral tribunal can decide on its jurisdiction as also onthe existence or validity of the arbitration agreement.

25. In the light of the discussions above-mentioned, weare convinced that there is charter party agreementexisting between the parties and, that as per theprovisions of Section 45 of the Act, the High Court aswell as the trial court were fully justified in allowing theapplication preferred by the respondent and accordingly,impugned order must be affirmed.”

Events following the Supreme Court order

28. Within two days of the judgment of the Supreme Court, thePetitioner, on 25[th]September 2008, wrote the following letter toRespondent No.1:

“Under instructions from and on behalf of our clients M/sShakti Bhog Food’s Limited we address you as under:

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1. Without prejudice to all our client’s rights andcontentions including but not limited to the contentionthat there is no valid contract, no valid arbitration clauseand the arbitration clause as alleged is null, void,inoperative and incapable of being performed, our clientsin order to protect its rights has nominated and appointedJustice K. Ramaswami, Retd. Judge of the Hon’ble HighCourt of Delhi. This may however, be not construed tomean submission of our clients to any arbitration/validarbitrationoracceptancetotheallegedarbitrationclause/agreement/contract.Needlesstomentionthatcompetence, jurisdiction and the legal issues are to bedecided first as preliminary issue.2. This is without prejudice to our client’s rights andcontentions and our client reserve all its rights andcontentions.”

29. On 15[th]October 2008, Respondent No.1 filed suit for damages andcosts against the Petitioner in the South District Court of New York,USA and on the same day an ex-parte order of maritime attachment waspassed. On 18[th]October 2008, Respondent No.1 disputed the validity ofthe Petitioner nominating its Arbitrator and reiterated that Mr. Oakley’sappointment as sole Arbitrator stands. Referring to Section 17 of theEAA, it was stated by the counsel for Respondent No.1 in the said letterdated 18[th]October 2008 that it was not open to the Petitioner “to purportto appoint an Arbitrator at this stage”.

30. On 20[th]October 2008, Respondent No.1 wrote to Mr. Oakley askinghim to reconfirm his appointment as sole Arbitrator and marked copyof the said letter to the Petitioner. copy of the Petitioner’s letter dated

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25[th]September 2008 and the reply of Respondent No.1 thereto wereenclosed with the said letter. Immediately on receipt of the saidcommunication, Mr. Oakley sent letter on 21[st]October 2008 to thePetitioner with copy to counsel for Respondent No.1 confirming thathe had accepted his appointment as sole Arbitrator. He ordered thePetitioner to submit its defence submissions on or before 17[th]November2008, failing which final and voluntary order would result whichwould carry severe sanctions.

31. On 4[th]November 2008, counsel for the Petitioner wrote detailedletter to the counsel for Respondent No.1 disputing the validity of theappointment of Mr. Oakley as sole Arbitrator. It pointed out that as perthe arbitration clause in the CP, the parties were to agree on theappointment of the sole Arbitrator and thereafter to undertake theexercise of an Arbitrator being appointed by each party and the thirdArbitrator being appointed by the two Arbitrators. In particular, thePetitioner pointed out as follows:

“It may however be noted that your client’s proposal toMr. Alan P. Oakley to accept his appointment as soleArbitrator was time and again revoked / abandoned /waivedby Mr.Oakley irrespective ofhisearlieracceptance. As matter of fact Mr. Alan P. Oakley neveracted as sole Arbitrator and in fact agreed to await thejudgment of the Hon’ble Supreme Court on the SLP filedby our client and thus proceeded to agree to act as thealleged sole Arbitrator vide communication dated 20[th]October 2008 after the decision of the Hon’ble SupremeCourt on 23[rd]September 2008. Our client however,immediately after the judgment of the Hon’ble SupremeCourt dated 23[rd]September 2008 and prior to Mr.

Oakley’s acceptance as sole Arbitrator on 20[th]October2008, vide communication dated 25[th]September 2008appointed Mr. Justice K. Ramamoorthy (Retired Judge ofHigh Court of Delhi) (though wrongly and inadvertentlytyped in the letter dated 25[th]September 2008 as K.Ramaswamy). The acceptance of Mr. Alan P. Oakley assoleArbitratoron20[th]October2008aftertheappointment of Mr. Justice K. Ramamoorthy (Retd.) asArbitrator by our clients vide their communication dated25[th]September 2008 is bad in law, malafide and againstthe public policy.

It is also matter of record that the parties by agreement(kindly refer to your letter dated 6[th]November 2005)agreed to await the judgment of the Hon’ble SupremeCourtbeforeanyactionpursuanttotheallegedarbitration agreement is undertaken and our client withintwo days of the judgment of the Hon’ble Supreme Courtappointed Mr. Justice K. Ramamoorthy (Retd.) as theirArbitrator. It is noteworthy to mention that since validityof the alleged arbitration agreement itself was pendingbefore the Courts, no proceedings were held by Mr. AlanP. Oakley either as your Arbitrator or as alleged soleArbitrator.” (emphasis supplied)

32. Thereafter the Petitioner raised the question of impartiality of Mr.Oakley to act as an Arbitrator. The Petitioner referred to the ex-partecommunication between Mr. Oakley and Respondent No.1 as raisingdisputes and doubts about his independence and impartiality. It statedthat the unilateral appointment of Mr. Oakley as sole Arbitrator byRespondent No.1 was “contrary to public policy requirement for theequality between the parties in designating Arbitrators of three personArbitral Tribunal”. It concluded its letter as under:

“This is however, without prejudice to all the rights and

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contentions of our clients including the objection thatthere exist no Charter Party, Arbitration agreement andanobjectionthattheArbitrationTribunallackssubstantive jurisdiction which are required to be decidedat the outset of the proceedings by the properlyconstituted Arbitral Tribunal. The determination of thispreliminary point of jurisdiction attains significance in allthefactsandcircumstancesofthecase.Thiscommunication shall not be treated as submission to thejurisdiction of Mr. Alan P. Oakley as sole Arbitrator”.

33. Apart from marking copy of the above letter to Mr. Oakley, thePetitioner separately wrote to him on the same day as under:

“This is in response to your communication dated 20[th]October 2008. At the very outset we submit that neithercopy of the email dated 20[th]October 2008 nor copy ofthe application filed by Bose & Mitra of whichcognizance has been taken by you, has been sent to us orto our clients either by your goodself or by Bose & Mitra.

Inview ofthesubmissionsmadeby usinourcommunication to Bose & Mitra copy whereof isforwarded to you and is also attached herewith, since thealleged Arbitral Tribunal of your good office to act as thesole Arbitrator is not properly constituted, our clientreserve their right to seek appropriate legal remedy. Wereiterate that your good office lacks the substantivejurisdiction. The properly constituted Arbitral Tribunalhas to determine the preliminary point of jurisdictionincluding but not limited to existence and validity of theCharter Party and the alleged Arbitration agreement.

You will kindly appreciate that you ought to haveforwarded to us copy of the email of Bose & Mitra dated20[th]October 2008 as well as the application filed by Bose& Mitra which are referred in your communication dated20[th]October 2008 before any date for submission of

defence could have been fixed. This may however, be nottreated to be acceptance of your good office as soleArbitrator or this objection as any defence submission.We hereby reiterate our submission made in the attachedcommunication of the date addressed to Bose & Mitra.”

34. Mr. Oakley on 5[th]November 2008 wrote to the parties as under:“I refer to Sanghi & Company’s faxes of earlier today.Whilst I note that they represent Shakti Bhog Food’sLimited, I would ask whether they also represent ShaktiInternational.“I refer to Sanghi & Company’s faxes of earlier today.Whilst I note that they represent Shakti Bhog Food’sLimited, I would ask whether they also represent ShaktiInternational.

It would not be appropriate for me to comment on eitherof their faxes other than to say that I am satisfied that Ihave been properly appointed as sole Arbitrator in thisreference in accordance with the terms of the arbitrationclause in the Charterparty and the provisions of theArbitration Act, 1996.

I maintain my order that the Respondents must servetheirDefenceSubmissions(andCounterclaimsubmissions, if any) on or before 17[th]November 2008. Inthe event that the Respondents fail to comply with thisorder,theClaimantsmayapplyforafinalandperemptory order with appropriate sanctions.”

35. On 17[th]November 2008, an application was sent by the Petitionerby e-mail to Mr. Oakley. This was detailed application raising fourdistinct points as under:

“(i)Your good self lacks substantive jurisdiction; and

(ii)The proceedings are being improperly conducted;andand

(iii)That there has been failure to comply with thealleged arbitration agreement (the existence and /alleged arbitration agreement (the existence and /

or validity thereof is being denied and disputed);and

(iv)The Tribunal is not fully constituted as per thealleged arbitration agreement.”

36. As regards the constitution of the Tribunal it was pointed out by thePetitioner in the above application that Respondent No.1 had appointedMr. Oakley as Arbitrator without first undertaking the exercise ofappointment of the sole Arbitrator by consent. It was pointed out that “itis only after parties’ failure to agree upon sole Arbitrator next exerciseof appointment of one Arbitrator by each party and the third Arbitratorappointed by the two Arbitrators ought to have been undertaken”. Acopy of the said application was sent to counsel for the RespondentNo.1. The Petitioner made it clear that the filing of the said applicationshould not be construed as its submissions to the jurisdiction of Mr.Oakley. The Petitioner also requested for personal/oral hearing.

37. In its reply dated 18[th]November 2008 to the above application,Respondent No.1 took the stand that the Petitioner having failed to availthe opportunity of appointing its own Arbitrator, Mr. Oakley hadbecome the sole Arbitrator. It was maintained that since by letter dated30[th]October 2007, the Petitioner had sought time to file its defencesubmissions, it had submitted to the jurisdiction of the Arbitrator.

38. In response to the Petitioner’s application, Mr. Oakley wrote asunder:

“I refer to Sanghi & Company’s email of earlier today.However, my order of 4[th]November remains in force.Therefore, if the Respondents fail to comply with thatorder by today, the Claimants may make an applicationfor me to proceed to my final arbitration Award, when Iwill also address any issues raised by the Respondents inSanghi & Company’s email of earlier today.”

39. This was followed by letter addressed to Mr. Oakley on 18[th]November 2008 by counsel for Respondent No.1 requesting him toproceed to make “an order in final and peremptory terms in relation toservice of defence and counterclaim, if any, submissions.” It wassuggested that the final date should be 8[th]December 2008.

40. The Petitioner then filed OMP No.604 of 2008 in this Court on 17[th]November 2008 under Section 14 of the Act read with Sections 17 (3)and 24 (1) of the EAA requesting for terminating the mandate of Mr.Oakley. Notice was issued in the said petition on 18[th]November 2008.On the same day, Respondent No.1 wrote to Mr. Oakley withdrawing itsapplication for the final and peremptory order referring to the pendencyof the petition in this Court. On 18[th]November 2008, statement wasmade by the Respondent No.1 before this Court that it would notproceed with the arbitration. However, on the next date i.e. 26[th]November 2008, Respondent No.1 informed this Court that it would notbe able to continue the said statement. The petition was then fixed for3[rd]December 2008.

41. On 27[th]November 2008, Respondent No.1 informed Mr. Oakley

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that their application for peremptory order was renewed. On the otherhand, the Petitioner requested Mr. Oakley to await the decision of thisCourt. However, on 27[th]November 2008 after referring to both therequests, Mr. Oakley passed final and peremptory order that thePetitioner would serve Respondent No.2 its defence submissions andcounter-claims, if any, on or before 15[th]December 2008. In themeanwhile, on 17[th]December 2008 the hearing of OMP No.604 of 2008was adjourned by this Court. On 17[th]December 2008, Mr. Oakley notedthat he was proceeding to make his Award.

42. On 18[th]December 2008, an e-mail was sent by Mr. Oakley tocounsel for the Respondent No.1 as under:

“I refer to your email earlier today. I reviewed thesubmissions/evidence yesterday and have already starteddrafting my Award which I expected to finish latertoday—and to publish my Award later today. Given youremail I will delay any further action on this case.However, I refer you to Section 34(h) of the ArbitrationAct, 1996 as regards the issue of an oral hearing.

Kindly let me know how you wish me to proceed.”

43. Respondent No.1 then informed Respondent No.2 that they werestill awaiting instructions as regards whether it applied to the hearing.On 19[th]December 2008, Respondent No.1 wrote to Mr. Oakley interalia stating as under:

“Having regard to the history of delay tactics andvexatious proceedings brought by the Respondents inIndia, and having regard to the fact that any enforcementproceedings would be in India, we would respectfully ask

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that there be an oral hearing with view to putting an endtoanysuchfurtherdelaytacticsandvexatiousproceedings in India.

We would respectfully ask that the hearing be fixed forone day and the Respondents be invited to attend.”

44. On the same day, Mr. Oakley fixed the date for oral hearing inLondon on 28[th]January 2009 at the venue to be arranged by RespondentNo.1. In terms of the communication dated 16[th]January 2009 ofRespondent No.1 the date of hearing was fixed for 28[th]January 2009 atEssex Court Chambers, 24, Lincoln’s Inn Fields, London. It appears thatRespondent No.1 filed its written submissions before Mr. Oakley on28[th]January 2009. The Petitioner states that it was not served copy ofthe written submissions filed by Respondent No.1.

45. On 11[th]February 2009, the learned Arbitrator passed the impugnedAward. It appears that on the same day, Respondent No.1 also withdrewits claim against M/s. Shakti International by filing an application beforeMr. Oakley without prior notice to the Petitioner. M/s. ShaktiInternational in any event was not party to the CP.

The impugned Award

46. The learned Arbitrator in paras 19 to 30 of the impugned Awardconcluded that there was binding arbitration agreement between theparties. He referred to the fact that the fixture recap issued on 18[th]July2005 by Brisk Marine Services (‘BMS’), who were the brokers of thePetitioner, identified the Petitioner as the charterer. On 28[th]July 2005,

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BMS sent an e-mail to Respondent No.1 confirming that the Petitionerhad signed the front page of the CP and thereafter copy had been sentto Respondent No.1. After referring to the judgment of this Court dated28[th]September 2005, that of the District Court at Kakinada, the HighCourt of Andhra Pradesh and the Supreme Court, the learned Arbitratorheld that there was binding and valid arbitration agreement betweenthe parties which provided for arbitration at London in accordance withEnglish Law.

47. The learned Arbitrator then turned to the issue relating to properconstitution of the Tribunal. He referred to Part-II of the generalconditions (GENCON) form which provided for the applicability ofClause 19 (a) of Part-II. In terms of the said clause, on receipt by oneparty of the nomination in writing of the other party’s Arbitrator, thatparty shall appoint their Arbitrator within 14 days, failing which thedecision of the single Arbitrator appointed shall be final. The learnedArbitrator referred to Sections 30 and 31 of the EAA which enabled himto rule on his own jurisdiction. In relation to the claim of the Petitionerthat the Respondent No.1 had itself revoked its earlier appointment ofMr. Oakley by its subsequent request to him to re-confirm hisappointment, it was observed in para 50 of the impugned Award asunder:

“50. The Charterers also contended that the Ownersrevoked and/or abandoned my appointment as soleArbitrator on number of occasions. However, I disagreesince the arbitration clause i.e. Clause 19 (a) of Part II ofthe Charterparty, provides that in the event of the

Respondent’s failure to appoint an Arbitrator within 14days, the decision of the first Arbitrator shall be final. Inother words, following the Charterers’ failure to appointan Arbitrator within 14 days of the first notice given bythe Owners, i.e. on 17[th]October 2005, my decision wasthereafter binding on the parties, unless the parties agreedotherwise. As it was, the Owners then offered theCharterers number of opportunities to appoint their ownArbitrator within certain time limits, but they still chosenot to do so. The fact that the Owners offered theCharterersfurtheropportunitiestoappointtheirArbitrator does not negate my original appointment assole Arbitrator. Any later agreement to allow theCharterers to appoint an Arbitrator would, in effect, leadto my earlier appointment as sole Arbitrator being variedby agreement of the parties.”

48. As regards the charge of the Petitioner that he was neitherindependent nor impartial, the learned Arbitrator pointed out that he hadsent copies of all correspondence to the Petitioner. As regards to thePetitioner’s allegations that Mr. Oakley had not marked copy of hisacceptance of the invitation of Respondent No.1 to become soleArbitrator, he observed that “although my letter of 20[th]October 2008refers to an e-mail received earlier that day from the Owners’ legalrepresentative, I note that copies of both letters were sent to theCharterers and their legal representatives.” As regards to the Petitionerdoubting his impartiality, the learned Arbitrator observed as under:

“In any event, I refute any suggestion that I am notindependent or impartial. By way of background, I am afull time Arbitrator and Full Member of the LondonMaritimeArbitratorsAssociationandacceptapproximately 300 arbitration appointments annually. Ihave made more than 1,000 arbitration awards in the past

15 years. I am Fellow of both the Institute of CharteredShipbrokers and the Chartered Institute of Arbitrators. Iam also member of the Baltic Exchange in the City ofLondon (where I was Director for 10 years until 2005)and Grain and Feed Trade Association (GAFTA)Arbitrator. In addition, I have been Magistrate inEngland and Wales since 2006.”

49. In paras 53 and 54, the learned Arbitrator concluded:

“53. In conclusion, I am satisfied from the evidencebefore me that the Charterparty included an agreement torefer disputes to arbitration in London in accordance withEnglish law. I am also satisfied that the Owners gaveproper notices of arbitration to the Charterers and onnumerous occasions invited them to appoint their ownArbitrator, all of which were ignored. I therefore acceptthat I was properly appointed as sole Arbitrator in thereference in accordance with the terms of the arbitrationagreement and therefore have substantive jurisdiction inthe matter. The Charterers later attempted to appoint Mr.Justice K. Ramaswamy as their Arbitrator. However, hisappointment was made too late and was invalid.

54. Therefore, pursuant to Section 30 of the ArbitrationAct, 1996, I rule that there was valid arbitrationagreement and that the Tribunal was properly constitutedwith my appointment as sole Arbitrator. Since theCharterers have objected to my substantive jurisdictionand in circumstances where I have determined that I dohave power to rule on my own jurisdiction, I havetherefore dealt with the objection in this Award on meritspursuant to my powers under Section 31 of the Act.”

50. The learned Arbitrator then proceeded to decide the merits of thematter and concluded that the Petitioner failed to perform its obligationsunder the CP. It had detained the vessel unnecessarily and avoided

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responsibility. The Petitioner’s action led the vessel to be furtherdetained and it was only through intervention of the Court that thevessel was allowed to sail from Kakinada Port. The Petitioner was heldliable for the damages and losses suffered by Respondent No.1. USD1,635,772.88 along with interest on the said sum at commercial ratefrom 15[th]October 2005 was awarded to Respondent No.1.

Present proceedings

51. On 15[th]April 2009, the Petitioner filed the present petition in whichnotice was directed to be issued on 17[th]April 2009.

52. Although the arbitral record was requisitioned by the order dated20[th]August 2010, it was noticed by the Court that even on 2[nd]August2011 the arbitral record had not been received. reminder was directedto be sent for the next date. On 29[th]September 2011, it was againordered that the Registry shall summon the arbitral record fromRespondent No.2 by sending an international courier letter. ThePetitioner filed I.A. No.4902 of 2012 requesting compliance with theorder dated 29[th]September 2011. On 19[th]March 2012, following orderwas passed by this Court:

“1. At the outset Mr. Majumdar, learned counsel forRespondent No. 1 states that Respondent No. 1 has noobjection as regards the applicability of Part-I of theArbitration and Conciliation Act, 1996 to the Awardunder challenge in this petition. He also stated that thearbitral record has been filed by the Respondent underDiaryNo.1587630.Althoughtheofficenotingacknowledges that the filing of the said documents, they

are not part of the Court record. The Registry is directedto immediately trace the same out and place them onrecord.

2. Mr. R.K. Sanghi, learned counsel for the Petitioneracknowledged receipt of the copy of the documents filedby the Respondent.

3. Mr. Majumdar produces copy of the email dated 20[th]November 2011 sent by the learned Arbitrator to thePetitioner with copy marked to learned counsel forRespondent No. 1 where inter alia the learned Arbitratorhas stated that “since the Award was not appealed in theEnglish High Court within the statutory time limit, myfiles have been destroyed”. Mr. Majumdar further pointsout that copy of the Award was already served on thePetitioner on the basis of which the present petition hasbeen filed.Mr. Sanghi disputed this submission. Heinsisted that the Award was not served on the Petitionerin accordance with law. This issue will be considered onthe next date.

4. List for hearing on 17[th]May 2012 at 2.15 pm.”

53. Arguments on behalf of the Petitioner were begun by Mr. N.K.Kaul, learned Senior Advocate and continued by Mr. R.K. Sanghi,learned Advocate. Mr. Amitava Mazumdar, learned Advocate, madesubmissions on behalf of the Respondent No.1. Written submissionswere filed by both parties.

Existence and validity of the CP

54. The Petitioner submits that the impugned Award is liable to be setaside under Section 34 (2) (a) (ii) of the Act as there was no validarbitration agreement between the parties. The Petitioner questions the

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existence and validity of the CP dated 18[th]July 2005 and thereby thearbitration clause in the CP. It is in particular pointed out that theoriginal of the CP has not been produced by Respondent No.1 at anytime either in the arbitral proceedings or this Court.

55. As noticed earlier, in the previous rounds of litigation between theparties, the concurrent opinion of this Court, of the learned ADJ atKakinada, of the High Court of Andhra Pradesh and of the SupremeCourt was that there did exist valid CP, and therefore an arbitrationagreement, between the parties. However, the Petitioner contends thatthe observations of the Supreme Court were only prima facie view asexplained in Shin-Etsu Chemical Co. Ltd. v. Aksh Optifibre Ltd.(2005) 7 SCC 234. In para 24 of its judgment dated 23[rd]September2008, the Supreme Court granted the Petitioner the liberty of raising theissue about the non-existence of the CP before the arbitral Tribunal atLondon. It was observed that the said Tribunal could under Sections 30and 31 of the EAA also decide the question of validity of the arbitrationagreement.

56. The copy of the fixture note/CP signed by the Petitioner on thecover page as faxed to Respondent No.1 formed part of the record of theproceedings under Section 9 of the Act in this Court. The inability ofRespondent No.1 to produce the original of the CP is consistent with itscase that the original signed CP was not returned to it by the Petitioner.The signature on the front page of the fixture note was, as noted by thisCourt in the order dated 28[th]September 2005, not denied by the

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Petitioner. Further, the e-mail dated 28[th]July 2005 from the Petitioner’sbroker BMS to Respondent No.1, as noted by the learned Arbitrator,confirmed that the Petitioner had indeed signed the front page of thefixture note. Notwithstanding the decisions of the courts in this regard inthe earlier rounds of litigation, the learned Arbitrator has examined thisissue and concluded that there did exist valid CP between the parties.This was plausible view to take. This Court therefore rejects the pleaof the Petitioner that, in terms of Section 34 (2) (a) (ii) of the Act, therewas no valid CP, and therefore no valid arbitration agreement, betweenthe parties.

Constitution of the arbitral Tribunal

57. The next objection of the Petitioner, that the impugned Awardshould be set aside under Section 34 (2) (a) (v), concerns the properconstitution of the arbitral Tribunal. It is contended that even if onewere to assume that there was valid CP agreement, then Clause 19 (c)of the GENCON form would apply since the word ‘London’ was filledin Box 25. It is submitted that consequently the procedure underSections 15, 16 and 18 EAA would then apply and not Clause 19 (a)read with Section 17 as contended by Respondent No.1. The Petitionersubmits that in the first place no effort was made by Respondent No.1 toget the Petitioner to agree to sole Arbitrator. Respondent No.1straightaway nominated its Arbitrator and called upon the Petitioner tonominate its Arbitrator within fourteen days. The failure by thePetitioner to do so would require Respondent No.1 to apply to the Courtunder Section 18 EAA for the appointment of an Arbitrator. It is

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submitted that Section 17 EAA had no application because the partieshad not agreed that in the event of default of the Petitioner nominatingits Arbitrator, the one appointed by Respondent No.1 would be the soleArbitrator. Since Respondent No.1 did not under Section 18 EAAapproach the Court in London for the appointment of an arbitralTribunal, the declaration by Mr. Oakley that he had become the soleArbitrator was invalid.

58. Alternatively it is submitted by the Petitioner that even in terms ofClause 19 (a) read with Section 17 EAA, the Petitioner had not failed tonominate its Arbitrator. With Respondent No.1 seeking confirmationfrom Mr. Oakley even as late as 20[th]October 2008 that he was the soleArbitrator it was plain that Respondent No.1 was not relying on hisearlier confirmations to that effect. As far as the Petitioner wasconcerned, it waited for the conclusion of the proceedings in theSupreme Court. No sooner the position under Section 45 of the Actbecame final with the judgment of the Supreme Court on 23[rd]September 2008, the Petitioner on 25[th]September 2008 nominatedJustice Ramamoorthy as its Arbitrator. With Respondent No.1 havingsought confirmation of Mr. Oakley’s appointment only thereafter on20[th]October 2008, there was no failure on the part of the Petitioner tonominate its Arbitrator.

59. On the other hand, it is submitted by the counsel for RespondentNo.1 that since no figure was filled in Box 25 of the GENCON form,the default Clause 19 (a) would apply. Both under the said clause and

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Section 17 of the EAA unless the parties otherwise agree, where each oftwo parties to an arbitration agreement is to appoint an Arbitrator andone party refuses to do so, or fails to do so within the time specified, theother party, having duly appointed its Arbitrator, may give notice inwriting to the party in default that it proposes to appoint its Arbitrator toact as sole Arbitrator. The contention of Respondent No.1 is that it hadrepeatedly granted extension of time to the Petitioner to appoint itsArbitrator. Reference is made to the letters dated 21[st]February 2006, 9[th]January 2007, 27[th]February 2007 and 25[th]June 2007. Since thePetitioner failed to nominate its arbitrator, Mr. Oakley became the soleArbitrator by default. He confirmed his appointment as sole Arbitratoron 22[nd]August 2007.

60. The Court proceeds to consider the above submissions by beginningwith an examination of the copy of the fixture note/CP as produced byRespondent No.1. The relevant portion is Box No. 25 of Part I of theGENCON Form and it reads thus:

“25. Law and Arbitration (state 19 (a), 19 (b) or 19 (c) of Cl. 19; if 19(c) agreed also state Place of Arbitration) (if not filled in 19 (a)shall apply) (Cl. 19)” (emphasis supplied)

The space below the above lines is not left blank. The word “London”has been typed in that space. Going by the highlighted portion of theinstruction, even if the number 19 (c) was not stated it is obvious sincethe place of arbitration i.e. London was stated it was Clause 19 (c) thatapplied and not 19 (a). Yet from the copy of the CP that has beenproduced it is seen that Clauses 19 (b) and 19 (c) have been scored out,

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and this was perhaps not correct considering the choice of place as‘London’ was indeed indicated in Box 25. Clause 19 (c) reads: “Anydispute arising out this Charter Party shall be referred to arbitration atthe place indicated in Box 25, subject to the procedures applicablethere. The laws of the place indicated in Box 25 shall govern thischarter party” (emphasis supplied). Consequently it appears that thePetitioner is right in its contention that with the parties having agreed tobe governed by Clause 19 (c) it would be Sections 15, 16 and 18 EAAwhich would be the law governing the arbitration and not Clause 19 (a)and Section 17 EAA. Under Section 15 (3) EAA, “if there is noagreement as to the number of arbitrators, the tribunal shall consist of asole arbitrator”. Under Section 16 (3) EAA, where the tribunal is toconsist of sole arbitrator “the parties shall jointly appoint thearbitrator not later than 28 days after service of request in writing byeither party to do so.” Upon failure to so appoint sole Arbitrator thenunder Section 18 (2) EAA “any party to the arbitration agreement may(upon notice to the other parties) apply to the court to exercise itspowers under this section.” However the learned Arbitrator missednoticing the purport of the filling up Box No. 25 with the name of theplace as “London” and simply accepted the case of Respondent No.1that it was Clause 19 (a) read with Section 17 EAA that applied.Therefore, there was basic error in the constitution of the arbitralTribunal by resorting to Clause 19 (a) and not Clause 19 (c).

61. Even if one were to accept the case of Respondent No.1 that it wasClause 19 (a) read with Section 17 that applied, the constitution of the

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arbitral Tribunal with Mr. Oakley as sole Arbitrator was, for thereasons explained hereafter, legally flawed. Clause 19 (a) of the CPreads as under:

“19. Law and Arbitration

(a) This Charter Party shall be governed by and construedin accordance with English law and any dispute arisingout of this Charter Party shall be referred to arbitration inLondon in accordance with the Arbitration Acts 1950 and1979 or any statutory modification or re-enactmentthereof for the time being in force. Unless the partiesagree upon sole arbitrator, one arbitrator shall beappointed by each party and the arbitrators so appointedshall appoint third arbitrator, the decision of the three-man tribunal thus constituted or any two of them, shall befinal. On the receipt by one party of the nomination inwriting of the other party’s arbitrator, that party shallappoint their arbitrator within fourteen days, failingwhich the decision of the single arbitrator appointed shallbe final.”

62. Clause 19 (a) is similarly worded as Section 17 of the EAA whichreads as under:

“17. Power in case of default to appoint sole arbitrator.(1) Unless the parties otherwise agree, where each of twoparties to an arbitration agreement is to appoint anarbitrator and one party (“the party in default”) refuses todo so, or fails to do so within the time specified, the otherparty, having duly appointed his arbitrator, may givenotice in writing to the party in default that he proposesto appoint his arbitrator to act as sole arbitrator.

(2) If the party in default does not within 7 clear days ofthat notice being given-

(a) make the required appointment, and

(b) notify the other party that he has done so,

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the other party may appoint his arbitrator as solearbitrator whose award shall be binding on both parties asif he had been so appointed by agreement.

(3) Where sole arbitrator has been appointed undersubsection (2), the party in default may (upon notice tothe appointing party) apply to the court which may setaside the appointment.

(4) The leave of the court is required for any appeal froma decision of the court under this section”.

63. Under Clause 19 (a), where the parties failed to agree upon soleArbitrator, one Arbitrator was to be appointed by each party. There hadto be letter in the first instance from Respondent No.1 to the Petitionersuggesting the name of the sole Arbitrator. There appears to be no suchletter by Respondent No.1 to the Petitioner regarding the appointment ofa sole Arbitrator. The first letter from Respondent No.1 to the Petitionerwas on 17[th]October 2005 by which it issued notice of appointment ofMr. Alan P. Oakley as sole Arbitrator. The relevant portions of the saidletter read as under:

“Dear Sirs,

Re: M.V. Kapitan Nazarev C/P dated 18[th]July 2005

We act on behalf of Kola Shipping Limited, Cyprus thedisponent owners of the above vessel with whom youentered into the aforesaid Charterparty. Pursuant todisputes and differences which have arisen under the saidCharterparty, we hereby advise that we on behalf of ourclients have appointed Mr. Alan Oakley as arbitrator inrespect of all disputes arising out of the said Charter

party. Mr. Alan Oakley has confirmed acceptance of thisappointment.

We call upon you to appoint your arbitrator withinfourteen (14) days from receipt of this message, failingwhich as per the Charterparty Arbitration Clause thedecision of the single arbitrator appointed shall be finaland binding on both parties.”

64. Clearly Respondent No.1 appears to have proceeded with theprocedure contemplated by the second part of Clause 19 (a) perhaps onthe presumption that there might be no agreement between the partieson the appointment of sole Arbitrator. The letter dated 17[th]October2005 of Mr.Oakley was also not an acceptance of his appointmentstrictly in terms of Clause 19 (a), since he states that he is accepting theappointment in accordance with current LMAA terms. As alreadynoticed, on 25[th]October 2005 the Petitioner refused to recognise theabove appointment and denied that there was an arbitration clause.

65. On 21[st]February 2006, Respondent No.1 again asked the Petitionerto appoint its Arbitrator within 14 days. On 9[th]March 2006, it againwrote to Mr. Oakley appointing him as sole Arbitrator and asked for hisconfirmation. Mr. Oakley on 9[th]March 2006 confirmed that he had beenproperly appointed as sole Arbitrator in accordance with the arbitrationclause and the EAA. For third time Respondent No.1 wrote to thePetitioner on 20[th]February 2007 again referring to Clause 19 (a) andasked the Petitioner to appoint its Arbitrator within 14 days. Thisappears to have been repeated on 25[th]June 2007. There was no sanctity

attached even by Respondent No.1 to the time limit under Clause 19 (a).This cannot but be construed as waiver by Respondent No.1 of thesaid time limit. Also by its own conduct Respondent No.1 gave up itsearlier appointment of Mr. Oakley as Arbitrator since by its letter dated22[nd]August 2007 it asked him to “again accept appointment as soleArbitrator”. On the same day, Mr. Oakley again accepted hisappointment as sole Arbitrator. As will be presently seen, even thisappointment was not final. What was also missed in this process both byRespondent No.1 and also by the learned Arbitrator is that Clause 19 (a)of the CP required the parties to first fail to agree on the sole Arbitratorand then commence the process of appointing an Arbitrator each. Byrepeatedly seeking the confirmation of the appointment of Mr. Oakleyas sole Arbitrator, Respondent No.1 on its own failed to adhere to thetime limits in terms of Clause 19 (a) read with Section 17 EAA. Itadopted procedure not consistent with either provision.

66. Between 22[nd]August 2007 and 23[rd]September 2008 when thematter was pending in the Supreme Court of India, no arbitralproceedings took place. It appears that both Respondent No.1 and Mr.Oakley decided to await the outcome of those proceedings, as did thePetitioner, despite there being no stay as such of the arbitralproceedings. Within two days of the judgment of the Supreme Court,the Petitioner by its letter dated 25[th]September 2008 appointed Mr.Justice K. Ramamoorthy (Retd.) as its Arbitrator. copy of this letterwas sent to Mr. Oakley. In response to the said letter, Respondent No.1on 20[th]October 2008 wrote detailed e-mail to Mr. Oakley seeking “re-

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confirmation of his appointment as sole Arbitrator, albeit we appreciatethat this will be for the third time”. Respondent No.1 offered thefollowing explanation for doing so:

“You will find from your file that you first acceptedappointment as sole Arbitrator on 9[th]March 2006.Thereafter, the Respondents engaged in making variousapplications to the Indian Courts. The applications weredismissed by the High Court of Andhra Pradesh by anorder dated 15[th]June 2007 (a copy of which is at pages105 to 114 of the documents enclosed with the ClaimSubmissions). There has been no “stay” of the arbitrationproceedings as from the date of that order.

Following the above order the Respondents were given afinal opportunity to appoint their Arbitrator in our letterdated 25[th]June 2007. That letter stated that no furtheropportunity would be given. You will see from your filethat you reconfirmed your appointment as sole Arbitratoron 22[nd]August 2007.

Thereafter the Respondents filed an appeal in theSupreme Court of India and in the appellate proceedingsbefore the Supreme Court the Respondents did not obtainany stay of the arbitration proceedings in London. It isnow the case that the Supreme Court has dismissed theentirety of the Respondents’ applications and affirmedthe decision of the Andhra Pradesh High Court referredto above.

In light of the enclosed exchanges between the parties’solicitors, we suggest it would be helpful if you were toreconfirm your appointment as sole Arbitrator, albeit weappreciate that this will be for the third time.”

67. On 21[st]October 2008, Mr. Oakley simply obliged Respondent No.1by stating as under:

“I refer to Bose & Mitra’s email of earlier today andconfirm that I have accepted the appointment as soleArbitrator in the above reference.

In accordance with Bose & Mitra’s application I noworder the Respondents to serve defence submissions (andcounterclaim submissions, if any) on or before 17[th]November 2008.

Given the length of time that has elapsed since claimsubmissions were served, I expect the Respondents tocomply with this order. Failure to do so will, on theapplication of the Respondents, most likely result in afinal and peremptory order which will carry severesanctions in the event of non-compliance.

I now await the Respondents’ service of defencesubmissions as ordered.”

68. The above decision of Mr. Oakley was strange given the fact that hedid not react to the fact that the Petitioner had in the meantimeappointed its Arbitrator. He was certainly obliged to do so as itconcerned his jurisdiction to proceed to act as sole Arbitrator. The factthat even as on 20[th]October 2008 Respondent No.1 was seekingconfirmation that he was sole Arbitrator shows that the said positionwas not “final” as on that date even according to Respondent No.1. Itcan be seen from the above exchange of correspondence that the learnedArbitrator was fully aware of the nomination by the Petitioner of itsArbitrator and yet did not choose to acknowledge the consequences ofsuch nomination. If indeed even as of 20[th]October 2008 the positionregarding Mr. Oakley having become the sole Arbitrator by default wasadmittedly not final, then it could not be said that the Petitioner had by

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then not nominated or had failed to nominate its Arbitrator. It did so on25[th]September 2008, thereby satisfying the requirement of Clause 19(a) of the CP read with Section 17 EAA. In accepting his appointmentas sole Arbitrator for the fourth time on 21[st]October 2008, and notreferring to the nomination made almost month earlier by thePetitioner of its Arbitrator, Mr. Oakley acted contrary to both Clause 19(a) of the CP and Section 17 EAA.

69. The manner in which Mr. Oakley rejected the objections raised bythe Petitioner in its letter dated 4[th]November 2008 to his jurisdictionwas unsatisfactory. He simply stated: “It would not be appropriate forme to comment on either of their faxes other than to say that I amsatisfied that I have been properly appointed as sole arbitrator....” For asecond time when by letter dated 17[th]November 2008 the Petitionerraised detailed objections, Mr. Oakley said in his e-mail of 17[th]November 2008 that his “order dated 4.11.2008 remains in force” andthat if the Petitioner failed to comply with the order by that dayRespondent No.1 could make an application before him to proceed topass the final arbitration Award. In failing to give any reasons forrejecting the Petitioner’s objections as to his jurisdiction, Mr. Oakleyfailed to act reasonably.

70. In the impugned Award, the learned Arbitrator rejected theobjections to his appointment and concluded that “I was properlyappointed as sole arbitrator in the reference in accordance with the termsof the arbitration agreement and therefore have substantive jurisdiction

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in the matter.” He held that the fact that Respondent No.1 offered thePetitioner further opportunities to appoint an Arbitrator did “not negatemy original appointment as sole Arbitrator”. He however added that“any later agreement to allow the charterers to appoint an Arbitratorwould, in fact, lead to my earlier appointment as sole Arbitrator beingvaried by the agreement of parties”. He held that the failure byPetitioner to appoint an Arbitrator within 14 days of the first noticegiven by Respondent No.1 on 17[th]October 2005, led to decisionthereafter given by him being binding on the parties, “unless the partiesagree otherwise”. What was overlooked by Mr. Oakley was thatRespondent No.1 actually asked him to repeatedly re-confirm hisappointment as sole Arbitrator and continued to do that even on 20[th]October 2008. He failed to acknowledge that Respondent No.1 had onits own abandoned the procedure envisaged under Clause 19 (a) of theCP and Section 17 EAA. Clearly till 20[th]October 2008, even accordingto Respondent No.1, there was no finality to Mr. Oakley having becomea sole Arbitrator by default.

71. Mr. Oakley’s holding that the appointment by the Petitioner ofJustice K Ramamoorthy as its Arbitrator being “too late” and “invalid”was also untenable. Having decided to await the judgment of theSupreme Court before proceeding with the arbitration, and confirminghis appointment as sole Arbitrator nearly month thereafter, theexplanation given by Mr. Oakley that the nomination of JusticeRamamoorthy by the Petitioner as its Arbitrator was “too late” and,therefore, “invalid” is to say that least both unconvincing and

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unjustified. In the background of the facts narrated, when the arbitralproceedings had not even begun, and with Respondent No.1 stillseeking confirmation that Mr. Oakley was the sole Arbitrator, thequestion of such nomination by the Petitioner being “too late” did notarise. This also shows that Mr. Oakley did not apply his mindindependently. He simply accepted whatever request was made byRespondent No.1. The mere fact that in one solitary instance Mr. Kalraacting on behalf of the Petitioner sought time to file statement ofdefence did not mean that the Petitioner had waived its right to object tothe Arbitrator’s appointment or his jurisdiction. The correspondencebetween the Petitioner and the learned Arbitrator shows that at everystage it made it clear that it was not accepting the validity of hisappointment or his jurisdiction to act as such.

72. Apart from raising objections before the learned Arbitrator asregards the validity of his appointment, the Petitioner challenged it byfiling OMP No.604 of 2008 in this Court. Without awaiting the decisionin the said petition, Mr. Oakley proceeded to pass the final Award.However, in the final Award, he dealt with the challenge to hisappointment and jurisdiction unsatisfactorily. Mr. Oakley failed to dealwith the substantive legal objections of the Petitioner as to theapplicability of Clause 19 (a) of the CP and Section 17 EAA. He failedto address the submission that even in terms of the said provisions hisappointment as Arbitrator was not lawful. He merely set out his“conclusions” without supporting reasons.

73. In the circumstances, the Court concludes that the learned Arbitratorerred in rejecting the Petitioner’s objections as to the validity of hisappointment. The assertion by Mr. Oakley that he had become the soleArbitrator, on account of the failure by the Petitioner to nominate itsArbitrator, was for the reasons explained factually and legally flawed.The constitution of the arbitral Tribunal with Mr. Oakley as soleArbitrator is held to be invalid. The impugned Award is liable to be setaside under Section 34 (2) (a) (v) of the Act.

Failure by the Arbitrator to disclose interest

74. Another factor, and fairly serious one, that vitiates the impugnedAward is the failure by Mr. Oakley to make disclosure, at the time ofhis acceptance of his appointment as Arbitrator, and thereafter, that hehad acted as Arbitrator, on behalf of Respondent No.1, in relateddispute between the head owners and Respondent No.1.

75. Both at the time of arguments and in its written submissions thePetitioner pointed out that Mr. Oakley failed to disclose that he hadacted as co-Arbitrator of Respondent No.1 in related dispute betweenRespondent No.1 and the head owners of the same vessel involved inthis very transaction and passed an Award on 5[th]October 2006. copyof the said Award co-signed by Mr. Oakley has also been produced. It ispointed out that Mr. Oakley failed to disclose this fact (a) when heaccepted appointment as Arbitrator, (b) when he confirmed hisappointment as sole arbitrator, and (c) in para 17 of the impugnedAward where he mentions that an Award was earlier passed in the

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related dispute between Respondent No.1 and the head owners.

76. Respondent No.1 has not denied that Mr. Oakley acted as co-Arbitrator in the related dispute between it and the head owners and thathe failed to disclose this fact at any time prior to or during the arbitralproceedings. The stand taken in its written submissions by RespondentNo.1 is as follows:

“The arbitral proceeding between the Respondent No.1 and the HeadOwners was not relevant for adjudication of the disputes between thePetitioner and the Respondent No.1. The Respondent No.2 was notrequired to disclose to the Petitioner that he had acted as anArbitrator in the proceeding between the Respondent No.1 and theHead Owners. The Petitioner has not suffered any prejudice byreason of non disclosure by the Respondent No.2. There was noconflict of interest in Respondent No. 2 accepting appointment assole arbitrator in the arbitration between Respondent No.1 and theHead Owner and the arbitration between Respondent No.1 and thePetitioner. The Respondent No. 2 – Mr. Alan Oakley passed anaward dated 5 October 2006 against the Respondent No.1directingthem to remit sum of USD 740,000/- to the Head Owners.”

77. Reliance is placed by Respondent No.1 on the International BarAssociationGuidelinesonConflictsofInterestinInternationalArbitration. It is stated that Mr. Alan Oakley “is professional arbitratorand full Member of the London Maritime Arbitrators Association. Heaccepts approximately 300 arbitration appointments annually. He has tilldate passed over 1,000 arbitral awards over the past 15 years. He hasover 42 years experience as practicing shipbroker. He was Directorof The Baltic Exchange between 1993 and 2005. He has also been aMagistrate in England and Wales since 2006. This clearly demonstrates

that Mr. Alan Oakley has an impeccable record and that it would beinconceivable that Mr. Alan Oakley would act in connivance and/or tacitunderstanding with the Respondent No.1 and pass favourable award toRespondent No.1.” It is submitted that Mr. Oakley did not have anyfinancial interest or personal interest in the outcome of the arbitrationand had no personal relationship with Respondent No. 1 or their legalrepresentatives.

78. The above admission by Respondent No.1 that Mr. Oakley failed todisclose his having acted as an arbitrator nominated by it in thearbitration proceedings between Respondent No.1 and the head ownersof the vessel involved in this case has serious repercussions.

79. The requirement of an Arbitrator having to disclose his interest isstatutorily mandated in Section 12 (1) of the Act which states: “When aperson is approached in connection with his possible appointment as anarbitrator, he shall disclose in writing any circumstances likely to giverise to justifiable doubts as to his independence or impartiality.” UnderSection 12 (2) of the Act, there is mandatory obligation on theArbitrator “from the time of his appointment and throughout the arbitralproceedings”todisclosetotheparties“withoutdelay”“anycircumstances” that are likely to give rise to justifiable doubts as to hisindependence or impartiality. The Arbitrator can be challenged on theabove ground under Section 13 (3). If party has participated in thearbitration, he may challenge the Arbitrator “only for reasons of whichhe becomes aware after the appointment has been made.” Under Section

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13 (2) of the Act, party can within fifteen days after becoming awareof the above ground challenge the Arbitrator. Where the challenge fails,the Arbitrator has to under Section 13 (4) of the Act proceed to make theAward. The party failing in the challenge can under Section 13 (5) of theAct “make an application for setting aside such arbitral award inaccordance with Section 34.”

80. In Alcove Industries Ltd. v. Oriental Structural Engineers Ltd.2008 (1) Arb.LR 393 (Del), this Court explained:

“40. Section 12 of the Act casts duty on the Arbitrator todisclose in writing at the outset, such facts which may give riseto justifiable doubts as to his independence or impartially. Thisobligation continues throughout the arbitral proceedings i.e.whenever such facts come into being during the arbitralproceedings.Therefore,whatthelawstipulatesasadisqualification to become or remain an Arbitrator in givendispute, is not the existence of actual bias, but the existence ofsuch facts and circumstances as are "likely to give rise tojustifiable doubts as to his independence and impartiality". AnArbitrator may be challenged only on limited grounds i.e. ifcircumstances exist that give rise to justifiable doubts as to hisindependence or impartiality or that he does not possess thequalifications agreed to by the parties.”

81. In Satyendra Kumar v. Hind Constructions Ltd. AIR 1952 Bom227 it was observed:

“4. Now, in order to decide this question, we must try and laydown clear principles which should apply to the conduct ofarbitrators. There can be no doubt that an arbitrator must showuberrima fides to the parties whose disputes he is going toarbitrate and who have constituted him their domestic forum. Ina sense the position of an arbitrator is different from that of

Judge. If party goes to Court, he has got to submit to adecision of the Judge. He has no choice in the appointment ofthe Judge. But when parties go to domestic forum and wanttheir matters to be determined by arbitration; they have everychoice as to the person whom they should select as theirarbitrator, and therefore it is clear that highest faith should beshown by the arbitrator. It also follows that the arbitrator mustdisclose to the parties all facts which are likely or calculated tobias him in any way in favour of one or the other party. Acircumstance or fact may in fact not bias the decision of thearbitrator. The arbitrator may have too strong character, toodeep sense of justice to be influenced by any considerationextraneous to or foreign to the evidence which he has got toconsider. But the Question is not what is likely in fact tohappen, but what is likely to tend or is calculated to tend to aparticularresult.Therefore,if theCourtcomestotheconclusion that there are any facts or any circumstances whichare likely to affect the decision of the arbitrator which are likelyto bias him, it would be incumbent upon the arbitrator todisclose those facts to the parties. If he fails to disclose thosefacts, then his award would be liable to be successfullychallenged.”

82. In Neaman v. Kaiser Foundation Hospital (1992) 9 Cal. App. 4th1170, 11 Cal. Rptr. 2d 879 in situation where the arbitrator(Drummond) disclosed that he had acted earlier as an Arbitrator indisputes involving one of the parties (Kaiser) but not that he was theirparty Arbitrator, the Court observed:

“Inourcase,althoughDrummonddisclosedhepreviously had acted as an arbitrator in Kaiser matters, hefailed to disclose that on five of those prior occasions, hewas Kaiser's party arbitrator. While he had served in allcapacities in his experience as an arbitrator in Kaisermatters and may well, as he claims, enjoy reputation

forfairness,hisrelationshipwithKaiserwasasubstantial business relationship, and should have beenfully disclosed to the Neamans.”

83. The requirement of disclosure in Section 12 (1) and 12 (2) of the Actis consistent with Article 13 of the UNCITRAL Model Law. The scopeof the said provision can be further understood by referring to GeneralStandard 2 of the International Bar Association Guidelines on Conflictsof Interest in International Arbitration which describes ‘Conflicts ofinterest’ situations as follows:

“(2) Conflicts of Interest

(a) An arbitrator shall decline to accept an appointment or, ifthe arbitration has already been commenced, refuse to continueto act as an arbitrator if he or she has any doubts as to his or herability to be impartial or independent.

(b) The same principle applies if facts or circumstances exist,or have arisen since the appointment, that, from reasonablethird person’s point of view having knowledge of the relevantfacts, give rise to justifiable doubts as to the arbitrator’simpartiality or independence, unless the parties have acceptedthe arbitrator in accordance with the requirements set out inGeneral Standard

(c) Doubts are justifiable if reasonable and informed thirdparty would reach the conclusion that there was likelihoodthat the arbitrator may be influenced by factors other than themerits of the case as presented by the parties in reaching his orher decision.

(d) Justifiable doubts necessarily exist as to the arbitrator’simpartiality or independence if there is an identity between aparty and the arbitrator, if the arbitrator is legal representative

of legal entity that is party in the arbitration, or if thearbitrator has significant financial or personal interest in thematter at stake.”

84. General Standard 3 deals with “Disclosure by the Arbitrator”.Clause (a) states: “If facts or circumstances exist that may, in the eyes ofthe parties give rise to doubts as to the arbitrator’s impartiality orindependence, the arbitrator shall disclose such facts or circumstance tothe parties…prior to accepting his or her appointment or, if thereafter, assoon as he or she learns about them.” Part II of the above Guidelines istitled: “Practical Application of the General Standards” and sets out,inter alia, an ‘Orange List’ which “reflects situations that would fallunder General Standard 3 (a), so that the arbitrator has duty to disclosesuch situations.” Under the heading ‘Previous service for one of theparties or other involvement in the case’, is Clause 3.1.5 which talks of asituation where “the Arbitrator currently serves, or has served within thepast three years, as arbitrator in another arbitration on related issueinvolving one of the parties or an affiliate of one of the parties.” Thisbrooks no exception and is applicable in the present situation where Mr.Oakley acted as the nominated Arbitrator of Respondent No.1 in a“related issue” concerning the head owners of the vessel andRespondent No.1.

85. The fact that the Award of the three member Tribunal of which Mr.Oakley was member, gave an Award against Respondent No.1 and infavour of the head owners is not as relevant as the fact that Mr. Oakleyin that arbitration acted as nominated Arbitrator of Respondent No.1.

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The disclosure of this fact was mandatory and his failure to do so hasthe inevitable result of vitiating the impugned Award. In terms ofSection 12 (3) of the Act, it is not the existence of actual bias, but theexistence of such facts and circumstances as are “likely to give rise tojustifiable doubts as to his independence and impartiality”, that shoulddecide the question of impartiality and independence of the Arbitratorand whether the Award rendered by such Arbitrator is thereby vitiatedin law. The fact that Mr. Oakley was seasoned veteran Arbitratorshould subject him to higher degree of rectitude. It makes it even moreinexcusable that he overlooked this fundamental requirement in law.

86. The Court is of the view that Mr. Oakley’s failure to disclose thematerial fact concerning his having been an Arbitrator on behalf ofRespondent No.1 in the arbitration involving it and the head ownersgives rise to justifiable doubts as to his independence and impartiality.There was an express violation of the mandatory requirement of Section12 (1) and Section 12 (2) of the Act. Inasmuch as the Petitioner was notaware of this violation till after the making of the Award, it could nothave challenged the Arbitrator earlier. However, it is plain that anAward rendered by an Arbitrator about whose independence andimpartiality there are justifiable doubts is opposed to the public policyof India on collective reading of Sections 12 (3), 13 (5) and 34 of theAct. The impugned Award is thus liable to be set aside under Section 34(2) (b) (ii) as being opposed to the public policy of India.

Other grounds of challenge

87. There are many other grounds of challenge to the impugned Award.One is that the learned Arbitrator ought to have decided the preliminaryobjection awaiting the outcome of the petition (O.M.P. No. 604 of 2008)filed by the Petitioner under Section 14 of the Act before proceedingwith the arbitration. This objection is without merit for two reasons. Oneis that after Respondent No.1 did not continue its statement that it wouldnot proceed with the arbitration, this Court did not pass any orderrestraining the said proceedings. There was therefore no legal restrainton the learned Arbitrator. Secondly, the said petition was itself aswithdrawn after the impugned Award was passed permitting thePetitioner to raise the objections urged in the said petition.

88. The objection that the learned Arbitrator ought to have decided theobjections as to his jurisdiction as preliminary issue before decidingthe merits is also without merit. The decision in Maharishi DayanandUniversity v. Anand Coop. L/C Society Ltd. (2007) 5 SCC 295 supportsthe submission of the Respondent No.1 that the Arbitrator could decidethe issue “before proceeding to finally pronounce his award” and notnecessarily by way of separate Award. There was no doubt aconfusion created in the correspondence between the learned Arbitratorand the parties as to the applicability of the LMAA terms. In fact in oneof its letters, Respondent No.1 also referred to it. However, it was plainthat the LMAA terms were not applicable. The reference by the learnedArbitrator in his letter dated 31[st]October 2007 to the Petitioner to“clause 74 of the Charterparty” was also an obvious mistake. However,

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these errors by themselves were not so serious as to affect the validity ofthe impugned Award.

89. The Petitioner submitted that with Respondent No.1 having ‘elected’to file petitions in India under Sections 9 and 45 of the Act, in view ofSection 42 of the Act, it is only the Act which should apply to thearbitral proceedings and not the EAA. It is further submitted thatRespondent No.1 should have taken all further steps in the proceedings,including the appointment of the Arbitrator, only under the Act. Furtherit is submitted that with Respondent No.1 having filed suit in the courtin the U.S.A it has abandoned the arbitration clause. The Court is unableto accept this submission. The CP makes it clear that English law wouldbe the law governing both the contract and the arbitral proceedings.Even if Respondent No.1 had at the pre-Award stage invoked thejurisdiction of the courts in India for the purposes of Section 9 andSection 45 of the Act, the conduct of the arbitral proceedings thereafterhad to be under the laws of the United Kingdom. This position findssupport from the observations of the Supreme Court in YograjInfrastructure Limited v. Ssang Yong Engineering and ConstructionCompany Limited (2012) 3 SCC 425. The proceedings in the U.S.Awere for attachment of funds of the Petitioner held by garnishee banksand do not affect the right of Respondent No.1 to proceed with thearbitration for its substantive claims against the Petitioner.

90. The Petitioner contends that no valid service of copy of theimpugned Award was made on it in terms of the Hague Convention

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1965. The contention of Respondent No.1 that the Hague Conventiondoes not apply to arbitral proceedings may not be correct, since theConvention applies to service of both judicial and extra-judicialdocuments. Also, it does appear that India has made reservation to theConvention objecting to the service of documents by e-mail. However,as far as this aspect is concerned, the Court does not view the service ofa copy of the impugned Award on the Petitioner as per se constituting aground to invalidate it. The Petitioner has after all received copy of theimpugned Award and has not been precluded from challenging it inaccordance with law.

91. The Petitioner has made legitimate grievance about the learnedArbitrator failing to preserve the arbitral record. Mr. Oakley informedthe Petitioner that he had destroyed the record soon after the expiry ofthe 90 day period available to an aggrieved party under the English lawto challenge an Award. It will be recalled that by repeated orders in thepresent petition the Court had requested Mr. Oakley to transmit thearbitral record. The Court is constrained to express its disappointmentthat the learned Arbitrator has presented it with fait accompli. For anArbitrator as seasoned as Mr. Oakley it would not have been difficultfor him to expect that in international arbitration proceedings, where thePetitioner has been repeatedly raising challenge to his jurisdiction, andin fact had sought termination of his mandate by filing O.M.P. No. 604of 2008 in this Court even before he pronounced the Award, therewould be challenge by the Petitioner to the final Award. Despite this,the Court is willing to give Mr. Oakley the benefit of doubt as there is

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no requirement as such under the EAA that he should preserve theoriginal record. Also, Respondent No.1 filed in the Court in the presentproceedings copy of the entire record. As result, the challenge to theimpugned Award by the Petitioner has not been seriously prejudiced.Consequently, I.A. No. 17935 of 2011 (for summoning the arbitralrecord), I.A. No. 4902 of 2011 (for directions to Mr.Oakley to complywith orders of the Court), CCP (O) No. 120 of 2011 by the Petitionerseeking orders against Respondent No.2 for disobedience of the ordersof the Court and IA No. 9466 of 2012 for direction to Respondent No.1 to produce the original documents including the CP are disposed of inthe above terms.

92. However, there are certain other grounds, which though notindividually but collectively, give rise to serious doubts as to the legalityof the impugned Award. The correspondence between Mr. Oakley andthe parties at various stages reflect that he did not independently applyhis mind and was easily persuaded to accept what was suggested byRespondent No.1. This is also reflected in his decision on some of theclaims of Respondent No.1. For instance, he awarded legal costswithout noticing that the bills produced by Respondent No.1 includedthose for proceedings involving the head owners. The total of the billsproduced did not add up to the sum awarded by him. Also, it issurprising that he awarded interest on such sum from period prior tothe arbitral proceedings. It is highly doubtful that the learned Arbitratorcould have awarded Respondent No.1 the costs of the proceedings in theCourts in India. The awarding of interest at 7%, which is higher than the

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LIBOR or the prevailing commercial rate of interest, does not appear tobe justified. It is possible that the learned Arbitrator may have decidedtheseissuesdifferentlyhadthePetitionerparticipatedintheproceedings. But, for the reasons explained earlier, the Petitioner waswithin its rights to refuse to submit to the jurisdiction of the soleArbitrator.

Summary of Conclusions

93. To summarise the conclusions:

(a) The contention of the Petitioner that in terms of Section 34 (2) (a)(ii) of the Act, there was no valid CP, and therefore no valid arbitrationagreement, between the parties is rejected.

(b) The constitution of the arbitral Tribunal with Mr. Alan Oakley,Respondent No.2, as sole Arbitrator was invalid. The Award renderedby such Tribunal is liable to be set aside under Section 34 (2) (a) (v) ofthe Act.

(c) The failure by Mr. Alan Oakley to disclose the material factconcerning his having been an Arbitrator on behalf of Respondent No.1in the arbitration on related issue involving it and the head ownersgives rise to justifiable doubts as to his independence and impartiality.The impugned Award is opposed to the public policy of India on acollective reading of Sections 12 (3), 13 (5) and 34 (2) (b) (ii) of the Actand is required to be set aside on this ground.

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(d) The grounds mentioned in para 92 above when viewed collectivelyalso give rise to serious doubts as to the validity of the impugnedAward.

94. The impugned Award dated 11[th]February 2009 is set aside. Thepetition is allowed with costs of Rs.50,000 which will be paid byRespondent No.1 to the Petitioner within four weeks from today. Thepending applications are disposed of.

AUGUST 21, 2012bs

S. MURALIDHAR, J