Great Offshore Ltd vs Iranian Offshore Eng&Constn. Co

Great Offshore Ltd. ... Petitioner/Applicant

Versus

Iranian Offshore Engineering & Construction Company ...Respondent

JUDGMENT

Dalveer Bhandari, J.

1. Great Offshore Limited has filed a petition under section

11(5)((6)(9) and (12) of the Arbitration and Conciliation Act,

1996 whereby the applicant seeks the appointment of a sole

arbitrator. The applicant, Great Offshore Ltd., submits that it

has entered into a charter party agreement with the

respondent, Iranian Offshore Engineering & Construction

Company. The charter party agreement ("CPA") contains an

arbitration clause. Relying on this clause, the applicant has

asked this Court to appoint an arbitrator to resolve the 2

dispute. The respondent, however, contends that the two

parties had not progressed beyond the stage of negotiation

and that there is no concluded contract between them.

Therefore, it is argued that there is no question of referring the

dispute to arbitration.

2. Brief facts which are relevant to dispose of this

arbitration petition are recapitulated below.

3. The charter party agreement in dispute marks the

second time the parties have done business with each other.

The first time was in 2004. In March of that year, the

respondent entered into a contract with the Oil and Natural

Gas Corporation Limited ("ONGC") to carry out construction

work on ONGC's installations at Bombay High. On 26th

October, 2004, the applicant and the respondent entered into

a charter party agreement. Under this prior agreement, the

respondent hired a vessel combination from the applicant. The

respondent required a specialized offshore construction barge

known as a "Gal Constructor." It also required an anchor

handling tug, named "AHT Malaviya Five." The AHT Malaviya 3

is used in combination with the Gal Constructor. I shall refer

to the Gal Constructor and the AHT Malaviya as the "vessel

combination."

4. The respondent needed this combination to execute

offshore work for ONGC. This work was part of ONGC's

RSPPM project, Phase I. The first phase was completed in

November 2004.

5. In this case, the controversy is confined to the alleged

agreement relating to the second phase of ONGC's project.

6. In this arbitration petition, I need to decide whether the

parties have entered into a valid contract containing an

arbitration clause. To this end, it has become imperative to

review the relevant correspondence between them. Only then

will I be able to arrive at a conclusion as to whether there was

a concluded contract or whether the parties had never

progressed beyond the stage of negotiation.

7. After the parties expressed mutual interest in resuming

business for Phase II, the respondent faxed a letter to the 4

applicant. The letter is dated June 20th, 2005. In this letter,

the respondent expressed its intention to use the applicant's

vessel combination for 170 days pursuant to the same terms

as the preceding agreement. A few amendments, however,

were to be made to that agreement.

8. The applicant responded vide email the next day and

stated that it would like to "come to an agreement." After

meeting the respondent on 22nd June, the applicant faxed an

offer to the respondent on June 23rd, 2005.

9. In turn, the respondent faxed a letter of intent on June

23rd, 2005. The letter stated that it was "...a firm and

unconditional letter of intent (for short LIO) for award of

contract for charter hire of your barge Gal Constructor and

Malviya 5". Nevertheless, the very same letter contained a

contingency clause:

"This Agreement is subject to IOEC [respondent] providing a suitable barge and AHT acceptable to GE Shipping [applicant] for a period of 45-55 days on mutually agreed rates for commencement between 25th October and 10th November 05 for BHN MOL project works."

5 10. On July 1st, 2005, the respondent's minutes of meeting

indicate that the barge (vessel) was to be available for visual

examination "...until 25th of July after which the barge will

leave AJMAN port in UAE for the project in PG".

11. On August 4th, 2005, the applicant explained that it no

longer wanted the respondent to provide a barge for 45-55

days, as mentioned in the respondent's June 23rd letter of

intent. Because the parties could not agree on the rate for

this service, the applicant said that it would make alternate

arrangements.

12. On August 11th, the respondent sent a letter in regard to

modifying the Barge Gal Constructor so that it could function

as a riser installation barge. Based on its engineering

analysis, it sought to install "...5 davits in the port or STBD

side at the barge" as well as a "... working platform as an

extension to main deck in the aft quarter over one of the

anchor rests".

13. In response to a meeting on August 8th and the above

letters, the respondent faxed a letter to the respondent on 6

August 13th, 2005. The letter suggested that additional

provisions be incorporated in a new draft of the contract. The

respondent requested the right to modify the Gal Constructor,

thereby enabling it to perform a riser installation. The

respondent further asked the applicant to pay the outstanding

amount (USD 188,500) from the preceding contract. In

conclusion, the respondent stated that it would be willing to

finalize the contract before the 30th of August.

14. On 16th August, the parties met to discuss the proposed

changes. The applicant formally responded to the

respondent's suggestions in a letter dated August 22nd, noting

that the parties had come to the following agreement

regarding a number of outstanding issues:

S. No. Clause Agreement 1 Modifications for Riser Clause on the basis of Installation Addendum 3 to Charter Party dated 26th Oct 04 to be incorporated 2 Early Termination It was mutually agreed not to Clause include the clause suggested 3 Employment of vessel Clause as per Charter Party dated 26th Oct 04 to be incorporated

4 Sublet Clause Clause 17 of the charter party to be referred in additional clause pertaining to sublet 5 Credit note issue Addressed hereunder 7

... we confirm our acceptance of the credit note amounting to US$186,618 ... for subject vessel combination for charter party dated 26th Oct 2004. ..."

15. Before proceeding with the correspondence, it is

pertinent to note that the faxed charter party agreement

("faxed CPA") is dated August 22nd. After having settled a

number of outstanding issues vide the above letter, the

applicant allegedly sent the faxed CPA to the respondent on

the same day.

16. The faxed CPA officially entitled the "Charter Party for

Offshore Service Vessels Code Name `Supplytime 89'" dated

August 22nd, 2005 is reproduced, in relevant part. The

"charterer" is the respondent, and the applicant is the

"owner":

1. Place & Date. Mumbai, India. 22nd August 2005. ...

9. Period of Hire. 204 days firm / minimum ...

14. Early termination of charter (state amount of hire payable) (Cl. 26(a)) Not Applicable.

18. Employment of Vessel restricted to (state nature of service(s))

(Cl 5a)) Hook up, commissioning, accommodation and offshore Installation work such as I-Tube installation and Riser Installation and all other activities of RSPPM Project, within Vessel's natural Capabilities and safe practices/ 8

operations.

19. Charter Hire (state rate & currency) (Cl 10(a) & (d))

USD 31,000 ... PDPR ...

22. Payments ...

Payments shall be made against acceptable, unconditional, revolving and irrevocable Letter of Credit issued at sight by the Charterer's bank for USD 6,500,000 ...

These L/C(s) to be opened, latest by 15th September 2005. However draft of L/C(s) should be provided to the Owners by 1st September 2005.

33. Law and arbitration (state Cl 31(a) or 31(b) or 31(c), as agreed, If 31c agreed also state place of arbitration) (Cl.31)

Clause 31(c) - Indian Arbitration and Conciliation Act, 1996 at Mumbai

.... . "

17. I must provide some background before dealing with

other documents, as the faxed CPA sits at the center of this

dispute.

18. It appears that both parties signed the faxed CPA, and it

bears the applicant's seal. However, it does not bear the

respondent's seal. The applicant contends that it had sent the

original to the respondent on August 22nd. The respondent

did not return the original. Instead, on September 8th, the 9

respondent's head office faxed a copy of the CPA to its local

office. [The top of the said fax shows the date and time as well

as the place from and to which it was sent; it reads "08-SEP-

2005 13:52 FROM IOEC HEAD OFFICE TO ALLAHVERDI"].

This faxed copy is signed by the respondent's Project Director,

Mr. M. Sabbaghi.

19. The respondent's Mr. Ali Rahmati provided the applicant

the faxed CPA on October 12th, according to the applicant's

letter dated October 21st. In a letter dated October 26, the

respondent originally asserted that it never signed the faxed

CPA and that the document was forged.

20. Between the date on which the applicant sent the faxed

CPA - 22nd August - and the date on which the respondent

reportedly returned it to the applicant - 12th September,

ONGC had advised the respondent to get the vessel

combination certified before proceeding with a Riser

installation. ONGC's letter dated 30th August stated that the

vessel did not have any past track record with riser

installations.

10 21. The applicant later expressed concern that the

respondent's failure to return the original contract, i.e.,

charter party agreement, could result in undue delay. In an

email sent at 9:03 a.m. on 14th September, the applicant

stated, in relevant part, that:-

"... You would appreciate that it is imperative for us to have the charter party with us in order to initiate actions from various departments such as operations, fleet personnel, accounts etc to prepare for the said contract and in absence of this document we are not in a position to push for same. This will result in last minute hassles and delays. ..."

22. The respondent's email rejoinder came at 4:31 p.m. on

the same day. The relevant part reads as under:-

"...

The CPA of Gal Constructor and Malavya 5 is ready in our office and will be hand over to you.

..."

23. On September 15th, 2005, the applicant sent the

following email to the respondent. It reads in relevant part as

under:-

"1. Understand that charter party is ready in your office. However, we are yet to receive the same and 11

urgently require it to be circulated among the concerned departments so that they are prepared for the next contract. Will get in touch with your office again today for the same. ..."

24. The respondent faxed a letter dated September 23rd,

2005 to the applicant. The letter asks the applicant to issue a

cheque for the outstanding amount due from the parties'

Phase I work. It further demands that the applicant grant the

respondent the sole and absolute right to sublet the vessel to

its subcontractor(s) at the agreed charter party rate. It

concludes by saying that the respondent "... can not conclude

the charter party agreement until the above issue are settled."

25. On September 24th, the respondent met with Likpin

Engineers to discuss whether the applicant's vessel could be

converted to perform a riser installation. Likpin surveyed the

vessel on 23rd September 2005 and, in the following minutes,

concluded that:-

"Taking into account the number of problems associated with the vessel, it is the conclusion of Likpin and IOEC that the Gal Constructor is not suitable as a riser installation. ... the vessel size combined with the limited crane reach cannot be corrected or overcome and hence the vessel should not be chartered for riser installation operations."

12 26. In a letter dated September 27th, 2005, the respondent

again asked the applicant to issue a cheque or remit

$186,618. It once again demanded that it be granted the right

to sublet the vessel and that until those issues were settled, it

could not conclude the CPA.

27. In a letter dated September 29th, 2005, the respondent

reiterated its demands, namely, that the applicant remit

$186,618 and that it provide the respondent with the sole and

absolute right to sublet the vessel combination. It admitted

that this payment had nothing to do with Phase II of the

project and thus "... has no connection with the current

negotiations and should be closed out immediately, so that

Phase II can begin on a clean slate." It further stated that:

"... the sole and absolute right to sublet the vessel to IOEC subcontractors ... is an essential element in IOEC work plan for Phase II. ... Lack of, or delay in, the ability to exercise the sublet option will impact on IOEC work plan and also affect the cost schedule of RSPPM project and is not acceptable to IOEC. Please note that time is running short and in absence of GESCO's immediate compliance with above two requirements IOEC may be compelled to take recourse to other options. ..."

13 28. The applicant responded to the above with the following

letter dated 30th September 2005. The relevant part reads as

under:-

"... We are in the process of arranging funds to be remitted to you against the said amount and will confirm remittance as soon as possible. 2) Your request for sole and absolute right to sublet the vessel is not acceptable to us. The LOI for the contract has been issued by you on 23rd June 2005 after we mutually agreed on the terms and conditions of charter party. Thereafter, on your request, we have provided with you with signed originals of the charter party on 22nd August 2005 for your signatures. You have accepted the same and conformed to us vide your letter communique dated 14 September that he charter party has been signed and is ready in your office and will be handed over to us. Previous to that, you have also sent us letter saying that you confirm that the charter party will be finalized by 30 August 2005. While we have been provided a photocopy of the signed charter party by your office, it is now 30 September and rather than keeping your commitment and returning the original and issuing the L/C as promised, you are deliberately delaying the same.

29. The letter goes on to demand that the respondent

immediately issue the signed, stamped original charter party

agreement as well as the irrevocable line of credit. The

applicant further demanded that both tasks be completed by

1st October at 1200 hours.

14

30. Vide letter dated 10th October, the applicant informed the

respondent that the applicant's vessel combination arrived at

P & V Channel, Mumbai on October 6th. Because it had yet to

receive the line of credit, it informed the respondent that it

could not proceed further with the mobilization of the vessel

combination. The applicant provided the respondent with an

invoice for mobilizing its vessel combination. It gave the

respondent another chance to comply with the purported

contract: "please note that contractual hire will begin as and

from 0000 hours of the 11th October 2005. We on our party

stand ready and willing to comply with all our obligations."

31. In its October 10th letter, the respondent reiterated that

the terms of the agreement were still under negotiation and

that no contracted had been concluded. It objected to the

absence of a provision that provided the respondent with the

absolute right to sublet the vessel.

32. It also argued that the applicant's vessel combination

was not fit for the agreed purpose. This issue is beyond the

scope of this decision, which limits itself to deciding whether 15

or not a contract containing an arbitration clause was formed.

While I have made mention of some of the other issues, such

as whether the vessel was fit for the agreed purpose, I need

not rehash each and every one. All matters, save for whether

the alleged contract/arbitration clause was formed, would be

more appropriately addressed by an Arbitral Tribunal.

33. The letter goes on to state that it would still consider

hiring the applicant's vessel combination if it received the

right to sublet and also if the crane were made fit for the

purpose for which the respondent intended. On 18th October,

the respondent sent a letter in which it stated that it would

have to look for a vessel from an alternative provider. The

respondent said that it would treat the matter with the

applicant as "closed." It concluded by asking the applicant to

pay the amount due for Phase I. It sent a letter on 20th

October reiterating the same.

34. On 21st October, the applicant sent a letter detailing the

sequence of events that had occurred between the parties.

Para 5 of the said letter is reproduced as under:- 16

"The Charter Party Agreements, two originals duly signed and stamped by us, were submitted to your office on 22nd August 2005 requesting you to forward us one original after execution of the same from your side. You never returned one original for our records. However, your Mr. Ali Rahmati had handed over to us a fax copy of the formal Charter Party document signed by your Mr.M. Sabbaghi when we had a meeting with him on 12th September 2005. A copy of the same is enclosed herewith for your perusal."

35. In its 26th October 26th, the respondent once again

claimed that the charter party remained unconcluded. It

alleged that the faxed copy of the charter party agreement was

"forged and the story of delivery false and concocted."

Moreover, it stated that "since we have found the vessel

completely unfit for riser installation as the said vessel with

the present condition of the crane is not suitable at all,

therefore we thought fit to withdraw from the negotiation...."

It claimed that the applicant had misrepresented its vessel's

ability to perform a riser installation. Thus, it thought this

misrepresentation had vitiated the negotiations. At this point,

it appeared that their relationship had officially soured.

36. In its letter dated 16th November, the respondent

reiterated much of what is already provided above. Of interest, 17

it stated that:-

"You are aware that initially, we intended to hire the vessel combination for only 170 days. However, since you agreed to take barge and AHT from us for 45-55 days, we agreed to extend the intended hire period from 170 days to 200 days and accordingly in this background the said LOI was issued. However, since thereafter you unilaterally declined to take our barge and AHT on the ground of difference in rate levels offered by us, we, in view of the said condition and in the light of your refusal to accept our barge and AHT, asked you for absolute subletting right of the said vessels to compensate us/minimize our expenses for risk of additional days than the originally intended 170 days. The correspondences which were exchanged between us make it aptly clear that negotiations and change in terms and conditions from your side continued even after issuance of LOI and therefore the question of concluding the CPA in respect of RSPPM project phase-II does not arise at all."

37. In its December 2nd, 2005 letter, the respondent called

upon the applicant to arrange for a third party inspection of

the applicant's vessel, in order to determine whether or not it

was suitable for riser installation.

38. In response, on 23rd January 2006, the applicant served

the respondent with a notice of arbitration. On 2nd February

2006, the respondent replied to the same.

18

39. With the relevant correspondence outlined above, I turn

to the parties' main submissions. The applicant contends,

inter alia, that the faxed copy of the charter party agreement

("faxed CPA") dated 22nd August is a binding, concluded

contract. The applicant gives four reasons for this assertion.

40. First, the faxed CPA is signed by both parties. Second,

the applicant's statement to this effect was not denied in the

pleadings [See the last page of the respondent's

supplementary written submission of May 13th, 2005: ("...it

was not signed properly and but for the last page, the said fax

communication, did not bear signature on other page.")

41. Third, the respondent admitted in its letter dated 14th

September that the original CPA "... is ready in our office and

will be hand to you." The applicant argues that because the

applicant had already signed the original CPA, there was

nothing left for the respondent to do but sign. Hence, by

saying it was "ready", I may infer that it was signed.

42. Fourth, the respondent's letter of 10th October did not 19

deny the fact that the original CPA was signed by the

respondent and was waiting in the respondent's office, even

though the applicant had asserted as much in its letter dated

30th August. It was not until 26th October that the respondent

deemed it necessary to deny this fact.

43. The respondent contends that because the original

signed copy was never given to the applicant, the parties were

in negotiations at all times. With respect to the faxed CPA, it

points to the fact that the respondent did not sign every page.

It gives further weight to the fact that the faxed copy was not

sent vide fax from the respondent to the applicant; rather, it

was first sent vide fax from the respondent's main office to its

local branch.

44. Learned counsel for the respondent states in its written

submission that "...the respondent failed to even sign the

formal contract document that the applicant had sent to it for

its signature." It argues that because the original CPA was

not signed by the respondent, the Court will have to find a

contract, if any, in the correspondence. According to Mulla:- 20

"In construing whether or not a particular agreement does or does not amount to a contract, the court would look for the intention of the parties, the nature of the transaction, the language employed in the informal agreement and other relevant circumstances. None of these is conclusive in itself. ... The fact that the parties contemplate that the letters or an informal agreement would be superceded by a more formal one, does not prevent it from taking effect as a contract. If the letter of intent is acted upon, especially for a length of time, the court is likely to hold the parties bound by the contract." [See Mulla, Indian Contract and Specific Relief Acts, 13th Edition at pages 317-318].

45. In Dresser Rand S.A. v. M/s. Bindal Agro Chemical

Ltd. & Another, AIR 2006 SC 871 at page 884 at para 34, a

two-Judge Bench of this Court emphasized that whether

letters of intent rise to the level of being a contract hinges on

the terms of the letter itself. It observed as under:-

"It is no double true that a Letter of Intent may be construed as a letter of acceptance if such intention is evident from its terms. It is not uncommon in contracts involving detailed procedure, in order to save time, to issue a letter of intent communicating the acceptance of the offer and asking the contractor to start the work with a stipulation that the detailed contract would be drawn up later. If such a letter is issued to the contractor, though it may be termed as a Letter of Intent, it may amount to acceptance of the offer resulting in a concluded contract ... . But the question whether the letter of intent is merely an expression of intention to place an order in future or whether is a final acceptance of the offer thereby leading to a contract, is a matter 21

that has to be decided by reference to the terms of the letter."

[Emphasis added].

46. The respondent's main submission is that it never

actually concluded a contract and that, if anything, the

applicant mistakenly thought that the respondent's LOI of 23rd

June was an offer. Why else would the applicant have sent its

acceptance on 4th? Its attack against the LOI as a contract is

two-fold. First, it argues that the parties cannot leave a major

piece of the contract open for future negotiation. Second, it

contends that the parties were not eye-to-eye, or ad idem on

the points.

47. According to the respondent, the applicant's assumption

that the respondent's 23rd June LOI read with the applicant's

4th August letter is misplaced. The LOI of 23rd June read with

the applicant's letter of 4th August does not form a contract

because a contract cannot leave a major part of its terms open

to future negotiation. The respondent relies on May &

Butcher Limited v. The King (1934) 2 KB 17, for the

proposition that an agreement in which some critical part of 22

the contract matter is left undetermined is no contract at all.

48. In its assertion that the applicant's LOI of 23rd June was

conditional, it points to the following language from the same

LOI: "this agreement is subject to IOEC providing a suitable

barge and AHT acceptable to GE Shipping for a period of 45-

55 days on mutually agreed rates for commencement between

25th October and 10th November 05 for BHN MOL project

works." The respondent's supplying the barge to the applicant

for 45-55 days went unmet when the applicant said it would

not need this barge.

49. In addition, the respondent argues that this condition

was material to the contract, as evidenced by the fact that the

respondent only agreed to increase the duration of the work

from 170 to 200 days if it got paid for supplying the barge. By

doing so, the respondent was attempting to offset the costs it

would incur by having the applicant's vessel combination for

an extra 30 days.

50. Furthermore, the respondent claims that no contract

could arise from its LOI of 23rd June because the parties were 23

not ad idem, i.e., in agreement on each point. Along these

lines, Chitty on Contracts [29th Edn. Vol.1 at page 134] has

observed:-

"When parties carry on lengthy negotiations, it may be difficult to say when and whether a contract has been concluded. The court must then look at the whole correspondence and decide, whether on its true construction, the parties had agreed to the same terms."

51. In M/s. Rickmers Verwaltung Gimb H v. Indian Oil

Corporation Ltd., AIR 1999 SC 504 at page 509 para 12,

this Court reiterated this stand: "Unless from the

correspondence it can unequivocally and clearly emerge that

the parties were ad idem to the terms, it cannot be said that

an agreement had come into existence between them through

correspondence." [See also: Dresser Rand S.A. v. M/s.

Bindal Agro Chemical Ltd. & Another, AIR 2006 SC 871 at

page 879 para 21 (affirming the same)]

52. The respondent argues that they were still negotiating

the terms and conditions. It cites to its letter of 13th August

and the applicant's letter of 22nd August as evidence of

continued negotiations. In the respondent's letter dated 13th 24

August, it suggests that a number of changes be made to the

"new draft contract." [emphasis added]. "Draft" suggests that

nothing had been finalized. Moreover, the letter lists a

number of issues that were still open to negotiation. The

applicant's letter of 22nd August, however, addressed the

proposed changes.

53. The respondent concedes that while it said it would sign

and finalize the contract by 30th August, it changed its mind

on 27th August and conveyed the message that it would not

enter the agreement until all outstanding issues were

resolved.

54. Like the applicant's counsel, the respondent also makes

use of the fact that the applicant did not object to the

respondent's letter dated 13th August. The applicant should

have said that there was no question of finalizing the contract

when it had already been finalized. I note that this argument

seems unfair because the applicant could not have gotten the

faxed CPA from the respondent until 8th September at the

earliest, as that is the date that appears on the fax. According 25

to the applicant, it received the faxed copy on 12th September.

55. Of course, all of the respondent's arguments become

moot if the faxed CPA dated 22nd is valid. In the instant case,

the burden to prove that a valid contract containing an

arbitration clause existed first rested on the applicant, as it

was the applicant that was moving this Court. However, upon

producing the faxed CPA that, on its face, appears legitimate,

the onus shifted to the respondent to prove that it was forged.

It appears, prima facie, to be legitimate because it bears the

heading "08-SEP-2005 13:52 FROM IOEC HEAD OFFICE TO

ALLAHVERDI" (hereinafter the "fax header"). This is an

important piece of evidence that makes its genuineness more

probable than not. Hypothetically, the applicant could have

fabricated the fax header. But that is highly unlikely and

presumes much more than what is expected in normal human

conduct especially when that conduct concerns the forgery of

an executive officer's signature. It should not be forgotten

that this case is between sophisticated companies, not warring

family members that dispute the authenticity of a will. 26

56. The respondent could argue that it handed over an

unsigned copy of the faxed CPA and that the applicant forged

it after the fact. Such an assumption is equally dubious. Why

would the respondent go through the trouble of returning the

applicant's August 22nd CPA unsigned, when it had been

routed vide fax through its Head Office?

57. There is no evidence to suggest that the faxed CPA was

forged. To the contrary, the evidence we do have is the faxed

CPA bearing the parties' signatures coupled with

correspondence between the parties. The correspondence, as

it is more than just a pleading, adds additional weight to the

applicant's story. The applicant's letter of 21st October

corroborates the allegation that Ali Rahmati delivered the

faxed CPA to the applicant on 12th September. The date of

delivery of 12th September fits the timeline provided on the fax

header, as the respondent could only have delivered the faxed

CPA after 8th September. Moreover, it appears that having

received the faxed CPA on 12th September, the applicant was

prompted to ask for the original vide email on 14th September.

Once again, the dates match up.

27

58. The fax header, on its face, suggests that the document

is genuine. This conclusion is bolstered by the above-

mentioned correspondence. Thus, I find that the applicant

had discharged its initial burden of sufficiently proving that

the faxed CPA was not forged. The onus shifted to the

respondent to prove that its signature was forged. With no

evidence to support its assertion, the respondent cannot

discharge its onus. Therefore, I find that the faxed CPA is

legitimate and is not a product of forgery. As such, I need not

look for the existence of a contract on the basis of the LOI of

23rd June.

59. The question then becomes whether the faxed CPA is

valid under the relevant law. Here, the purported contract

provides that the Arbitration and Conciliation Act, 1996 (26 of

1996) is to be used. [page 3 of faxed CPA dated 22 August

2005]. In the preceding contract the same Act was used.

Therefore, it comes as no surprise that the parties have not

objected to the same in the instant case.

60. Section 7 of the Arbitration and Conciliation Act, 1996 28

(26 of 1996) provides:

(1)In this part, "arbitration agreement" means an agreement by the parties to submit to arbitration all or certain disputes which have arisen or which may arise between them in respect of a defined legal relationship, whether contractual or not.

(2)An arbitration agreement may be in the form of an arbitration clause or in the form of a separate agreement.

(3) An arbitration agreement shall be in writing.

(4) An arbitration agreement is in writing if it is contained in-

(a) a document signed by the parties;

(b) an exchange of letters, telex, telegrams or other means of telecommunication which provide a record of the agreement; or

(c) an exchange of statements of claim and defence in which the existence of the agreement is alleged by one party and not denied by the other.

(5)The reference in a contract to a document containing an arbitration clause constitutes an arbitration agreement if the contract is in writing and the reference is such as to make that arbitration clause part of the contract.

61. Section 7 squarely deals with the present controversy.

This Court has taken note of Section 7(3) & 7(A)(a)'s

requirement that the arbitration agreement be in writing and 29

signed by the parties. According to the learned counsel for the

applicant, affixing a seal under section 7 of the Act is not a

requirement. [See: Bihar State Mineral Development

Corporation & Another v. Encon Builders (1) (P) Ltd.,

(2003) 7 SCC 418 at page 423 para 13 (one of the essential

elements of an arbitration agreement is that "the parties must

agree in writing to be bound by the decision of such tribunal.") and K.K. Modi v. K.N. Modi & Others, (1998) 3 SCC 573 at

page 585 para 21 ("there are, of course, the statutory

requirements of a written agreement .... Vide Section 2

Arbitration Act, 1940 and Section 7 Arbitration and

Conciliation Act, 1996.")

62. The respondent makes much of the fact that the "faxed

CPA" of August 22nd is (1) a copy, not the original; (2) is

stamped by one, not by both parties; (3) one of the parties did

not sign every page; and (4) it was first sent vide fax.

63. Section 7 defeats all four assertions. First, there is no

requirement that the arbitration agreement be an original.

Where the statute has gone to great lengths to define exactly

what is meant by the term "in writing," we are precluded from 30

adding another term to definition. Indeed, "it is contrary to all

rules of construction to read words into an Act unless it is

absolutely necessary to do so." [See: Justice G.P. Singh's

Principles of Statutory Interpretation, 11th Edition, 2008, at page

62.63, citing to Renula Bose (Smt.) v. Rai Manmathnath

Bose, AIR 1945 PC 108, p. 110; Stock v. Frank Jones

(Tiptan) Ltd., (1978) 1 All ER 948, p.951; Assessing

Authority-Cum-Excise and Taxation Officer, Gurgaon &

Another v. East India Cotton Mfg. Co. Ltd., Faridabad

(1981) 3 SCC 531].

64. An exception to this rule can be made. But before

adding words to a statute, "... the Court must be abundantly

clear of three matters: (1) the intended purpose of the statute

or provision in question, (2) that by inadvertence the

draftsman and Parliament failed to give effect to that purpose

in the provision in question; and (3) the substance of the

provision Parliament would have used, had the error in the

Bill been noticed." [See: Justice G.P. Singh's Principles of

Statutory Interpretation, 11th Edition, 2008 at page 75 citing to 31

Inco Europe Ltd. v. First Choice Distribution (a firm) (2000) 2 All

ER 109, at page 115 (HL)]. As I mention below, one of the

main objectives of the Arbitration and Conciliation Act, 1996

is to minimise the role of the Court; adding additional

requirements to the Act is antithetical to such a goal.

65. Second, the plain language of Section 7 once again

governs my conclusion. Section 7 does not require that the

parties stamp the agreement. It would be incorrect to disturb

the Parliament's intention when it is so clearly stated and

when it in no way conflicts with the Constitution.

66. Third, nothing in Section 7 suggests that the parties

must sign every page. Once again, if I take the respondent's

argument to its logical conclusion, I would have no choice but

to read language into the Act that is not there. Even if the

faxed CPA is construed as a "document," it need only be

"signed by the parties" pursuant to Section 7(4)(a). Every page

does not need to be signed. If it is considered a "document,"

then this requirement would be met. As established above,

both parties signed the faxed CPA in the signature box at the 32

bottom of Part I. That said, the faxed CPA more closely fits

within Section 7(4)(b)'s requirements.

67. Fourth, Section 7(4)(b) states that an agreement is in

writing if it is contained in "an exchange of letters, telex,

telegrams or other means of telecommunication which provide

a record of the agreement." This section covers agreements

that are sent via facsimile ("fax") as they are "other means of

telecommunication". "Fax" is defined as "a machine that

scans documents electronically and transmits a photographic

image of the contents to a receiving machine by telephone

line" or "a document received by such a machine." [See:

Chambers 21st Century Dictionary, Allied Publisher's Limited

(1996)]. This definition clearly provides that a fax falls under

"other means of telecommunication." Thus, faxed agreements

are acceptable under Section 7 of the Act.

68. Section 7(4)(b) further requires us to ask whether a

record of the agreement is found in the telecommunication, in

this case a fax. What could be a better record of the agreement

than the signatures of the parties themselves? As noted above,

with no evidence to indicate that the respondent's signature 33

was forged, the faxed CPA stands on its own as the record of

agreement. Likewise, Section 7(4)(b) stands satisfied.

69. The court has to translate the legislative intention

especially when viewed in light of one of the Act's "main

objectives": "to minimise the supervisory role of Courts in the

arbitral process. [See: Statements of Objects and Reasons of

Section 4(v] of the Act].

70. If this Court adds a number of extra requirements such

as stamps, seals and originals, we would be enhancing our

role, not minimising it. Moreover, the cost of doing business

would increase. It takes time to implement such formalities.

What is even more worrisome is that the parties' intention to

arbitrate would be foiled by formality.

71. Such a stance would run counter to the very idea of

arbitration, wherein tribunals all over the world generally

bend over backwards to ensure that the parties' intention to

arbitrate is upheld. Adding technicalities disturbs the parties'

"autonomy of the will" (l' autonomie de la volonti), i.e., their

wishes. [For a general discussion on this doctrine see Law and 34

Practice of International Commercial Arbitration, Alan Redfern

and Martin Hunter, Street & Maxwell, London, 1986 at pages

4 and 53].

72. Technicalities like stamps, seals and even signatures are

red tape that have to be removed before the parties can get

what they really want - an efficient, effective and potentially

cheap resolution of their dispute. The autonomie de la volonti

doctrine is enshrined in the policy objectives of the United

Nations Commission on International Trade Law ("UNCITRAL")

Model Law on International Commercial Arbitration, 1985, on

which our Arbitration Act is based. [See Preamble to the Act].

The courts must implement legislative intention. It would be

improper and undesirable for the courts to add a number of

extra formalities not envisaged by the legislation. The courts

directions should be to achieve the legislative intention. The

courts must implement legislative intention. It would be

improper and undesirable for the courts to add a number of

extra formalities not envisaged by the legislation. The courts

directions should be to achieve the legislative intention. 35

73. One of the objectives of the UNCITRAL Model Law reads

as under:-

"the liberalization of international commercial arbitration by limiting the role of national courts, and by giving effect to the doctrine "autonomy of will," allowing the parties the freedom to choose how their disputes should be determined." [See Policy Objectives adopted by UNCITRAL in the preparation of the Model Law, as cited in Law and Practice of International Commercial Arbitration, Alan Redfern and Martin Hunter, Street & Maxwell, London (1986) at page 388 (citing UN doc.A/CN.9/07, paras 16-27].

74. It goes without saying, but in the interest of providing the

parties a comprehensive review of their arguments, I note that

once it is established that the faxed CPA is valid, it follows

that a valid contract and a valid arbitration clause exist. This

contract, the faxed CPA, does not suffer from a conditional

clause, as did the Letter of Intent. Thus, the respondent's

argument that the parties were not ad idem must fail.

75. I have heard the learned counsel appearing for the

applicant and the respondent at length. I have carefully

reviewed the entire correspondence between the parties. The

charter party agreement that had been signed by the applicant 36

and the respondent clearly indicated that the parties have

entered into a valid and concluded contract. The other

correspondence between the parties also leads to a definite

conclusion: the parties have entered into a valid contract

containing an arbitration clause. Since a dispute has arisen

between the applicant and the respondent, it needs to be

referred to the arbitrator.

76. On consideration of the totality of the facts and

circumstances, I am clearly of the opinion that the applicant is

entitled in law to an order for appointment of a sole arbitrator.

Consequently, I request Hon'ble Justice S.N. Variava, the

retired Judge of the Supreme Court, to accept this arbitration.

The learned arbitrator would be at liberty to fix his own fee. I

direct the parties to appear before the learned arbitrator on 8th

September, 2008 or any date convenient to the learned

arbitrator.

77. Before parting with this arbitration petition, I would like

to make it abundantly clear that the learned arbitrator shall

not be bound by any observations which have been made in 37

this judgment. The observations have been made only to

decide this arbitration petition.

78. The Registry is directed to communicate this order to the

learned arbitrator to enable him to enter upon the reference

and decide the matter as expeditiously as practicable.

79. Consequently, this arbitration petition is allowed and

disposed of. In the peculiar facts and circumstances of this

case, I direct the parties to bear their own costs.

.................................J. (Dalveer Bhandari) New Delhi;

August 25, 2008.