9911796707
TMI Blog2004 (8) TMI 734X X X X Extracts X X X X X X X X Extracts X X X X ..... between plaintiff and defendant be declared illegal, null and void, nonest, inoperative and incapable of being performed. It is also prayed that an injunction be issued restraining the defendant from taking an steps pursuant to the aforesaid arbitration clause. A declaration declaring the invocation of the Bank Guarantee illegal and void is also sought along with injunction directing the defendant to return the benefit of the Bank Guarantee wrongfully encased . 3. The plaintiff's case is that the plaintiff and defendant entered into a Charter Agreement dated 15th September, 2000, to which addenda dated 6th November, 2000 and 13th June, 2002 were also added. In terms of this Charter Agreement, the defendant was to provide a rig named Frontier Duchess to the plaintiff, which was required for drillship by the plaintiff in Indian waters. According to the plaintiff, this rig was required for the purposes of oil exploration. It was specifically agreed in Clause (6) of the Charter Agreement that the repairs of the latent and inherent defects in the rig would be the liability of the owner and during period of repairs no charter hire would be paid by the plaintiff. It is pleaded that l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tee by the defendant. It is pleaded that instead of paying the outstanding dues of the plaintiff the defendant vide letter dated 11th March, 2003, nominated an Arbitrator under the arbitration clauses stained in clause 24 of the Charter Hire Agreement. Defendant asked the plaintiff also to nominate its Arbitrator. Vide letter dated 17th March, 2003, the plaintiff sent a reply nominating its Arbitrator without prejudice to its rights and contentions regarding the legality of the arbitration clause. 8. The defendant's petition under Section 9 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as `the Act' only) which was filed in the High Court of Bombay is also referred to in which interim orders dated 13th March, 2003, have been passed restraining the present plaintiff not to withdraw, transfer or create lien in the money received from O.N.G.C. for charter hire for the month of January, 2003. The plaintiff has pleaded that the arbitration clause in the Charter Agreement dated 15h September, 2000, is illegal, void, unenforceable, bad in law and against public policy. Besides, it is also stated to be oppressive, inoperative and incapable of being performe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... were applicable only to those arbitrations where the place of arbitration is in India. It shows that the arbitration agreement was affirmed by the plaintiff and its main contention was that the Act was not applicable to the arbitral proceedings being held at London. It is pleaded that the controversies being raised by the plaintiff in regard to the latent and inherent defects in the rig and the consequent damages suffered by the plaintiff are subject matter of arbitration in London and the arbitration agreement is wide enough to cover all these disputes. It is, however, denied that the rig had any latent or inherent defects as alleged. It is also denied that the encashment of the Bank Guarantee by the defendant was illegal or fraudulent. The defendant has denied that the arbitration clause contained in the Charter Agreement is illegal, void, non-enforceable, bad in law or against public policy as alleged. It is also denied that the arbitration proceedings in London are oppressive or that the plaintiff would be unable to pursue the same as alleged. It is stated that the continuation of the present suit would be an abuse of the process of law in the face of the arbitration agreement ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... islature aiming at speedy reference of the disputes to arbitral Tribunal has left most of the matters relating to the existence and validity of the arbitration agreement to be decided by the arbitrators themselves. However, in the case of foreign arbitrations, Section 45 of the Act clearly provides that notwithstanding anything contained in part one or in the Code of Civil Procedure, 1908, a judicial authority may refer the parties to arbitration unless it finds that the agreements null and void, inoperative or incapable of being performed. The conditionality mentioned in Section 45 of the Act are conspicuously absent in Section 8 of the Act. In case of foreign arbitrations enormous expense and effort gets involved and as such the Legislature in its wisdom has thought that the questions relating to the validity of the arbitration agreement, its cooperativeness and capability of being performed should be examined by the Court itself instead of leaving those in the hands of Arbitrators in a foreign land. Therefore, this Court fully agrees with the submissions made by learned counsel for the plaintiff that in the present case before invoking Section 45 of the Act as prayed by the defe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng the Charter Agreement or the arbitration agreement. At the most, these were deficiencies in the equipment provided on the rig which in terms of Clause (6) of the Charter Agreement did not render the contract void and merely entitled the plaintiff to claim that the repairs thereof would be carried out in the account of the defendant and plaintiff would not be liable to pay hire charges during the repair period. 17. A distinction has to be drawn between a fraud going to the root of an agreement where a party would not have entered into the agreement but for the fraud or misrepresentations and a wrong information, over-statement or under-statement. Every wrong or misleading claim or misrepresentation does not go to the root of the contract entitling the opposite party to repudiate or rescind the contract. As an illustration, the case of the sale of immovable property may be taken. If the seller makes a false or misleading statement in regard to his title acting upon which the buyer purchases the property, it would be a case of fraud rendering the sale agreement void abs initial but in case a seller having good title makes a misleading statement in regard to some outstanding dues i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... back to the defendant which the plaintiff never wanted as it was using it all along. This Court, thus, has no hesitation in holding that prima facie the Charter Agreement between the parties was no hit by any fraud and as such it was neither void nor illegal. 19. Therefore, it can be safely held that the Charter Agreement between the parties was valid, legal, operative and capable of being performed. The Charter Agreement has been actually acted upon, performed, lasted its term and the plaintiff has taken full advantage under it. The rig was delivered back by the plaintiff to the defendant only after the filing of the suit and no action was taken earlier by the plaintiff to repudiate or terminate the Charter Agreement on the ground of fraud or illegality. This Court has no hesitation in concluding that the arbitration agreement also which is a part of a Charter Agreement is valid and capable of being performed. Nothing is stated in the plaint as to how the arbitration agreement between the parties is vitiate except attacking the main Charter Agreement on the ground of misrepresentations in regard to certain defects in the rig. It is neither pleaded nor argued that any fraudulent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ceedings by appointing its Arbitrator in terms of Clause 24 as contained in the Charter Agreement. This clause covers all disputes between the parties arising out of the Agreement and would take care of the claim of damages also if raised by the plaintiff on account of defective equipments, if any. There are no pre-contractual disputes between the parties which are beyond the scope of the arbitration clause. The plea of fraud as raised by the plaintiff is a totally sham plea which has been raised to scuttle arbitration at London. An action for fraud may be based on pre- contractual period and the Arbitrator may not have jurisdiction to go into this question but on bald and baseless averments of frau an Arbitrator cannot be divested of his jurisdiction. The judgment in Unicel Ltd. Vs. 1978( 2) S.T.C. 203 is not attracted in this case. In Renu Sagar Power Co. Vs . GEC reported in [1985]1SCR432 also a similar view was taken. This Court Therefore is fully satisfied that the arbitration agreement between the parties is valid, operative and capable of being performed. All the disputes between the parties arise out of the Charter Agreement and as such are covered by the arbitration clause ..... X X X X Extracts X X X X X X X X Extracts X X X X
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