India: Unsigned Arbitration Agreement Not Invalid In All Cases

Last Updated: 21 December 2018
Article by AMLEGALS  

IN THE SUPREME COURT OF INDIA
M/S Caravel Shipping Services Pvt. Ltd. v. M/S Premier Sea Foods Exim Pvt. Ltd.
Arising Out Of O.M.P Civil Appeal Nos. 10800 Of 2018 And 10801 Of 2018
DATED: 29.10.2018

FACTS

The Appellant in the present case is an Agent who facilitates transport. The Respondent is the Consignor/ Shipper.

The present appeal arose out of a document styled as "Multimodal Transport Document / Bill of Lading" dated 25.10.2018 (hereinafter referred to as the Bill of Lading). The Opening Clause of the Bill of Lading read as under:

"In accepting this Bill of Lading the Merchant expressly agrees to be bound by all the terms, conditions, clauses and exceptions on both sides of the Bill of Lading whether typed, printed or otherwise."

In 2009, the Respondent filed an O.S. No. 9/2009 before the Sub-Judge's Court in Kochi to recover a sum of Rs. 26,53,593/- in which the said Bill of Lading was stated to be a part of the cause of action.

Thereafter, I.A. No. 486/2009 was filed by the Appellant under Section 8 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as the Arbitration Act), in which it was pointed out that an Arbitration Clause was included in the printed terms annexed to the Bill of Lading.

Further, it was also mentioned in the same I.A. that a petition under Section 11 of the Arbitration Act had also been filed in Chennai, in accordance with Clause 25 of the printed terms.

The said I.A. was dismissed by the Sub-Court of Kochi on 08.01.2013 stating that no part of cause of action arose in Chennai and further stated that the printed conditions annexed to the said Bill of Lading would not be binding on the parties herein.

Aggrieved by this order, an Original Petition was further filed under Article 227 of the Constitution of India by the Appellant which was dismissed by the Hon'ble Court. Therein the High Court referred to certain provisions of the Multimodal Transportation of Goods Act, 1993 and also stated that the Arbitration Clause being in a printed condition, without an intention to arbitrate and nothing to show that Clause 25 was brought to the notice of the Respondent, the learned Sub-Court, Kochi had rightly dismissed the I.A. No. 486/2009.

Subsequently, a Review Petition was filed against the said judgment of the Hon'ble High Court which was dismissed on 14.06.2016.

The current appeal has been filed was filed in the Apex Court challenging the Judgment dated 14.06.2016.

ISSUES BEFORE SC

The issue before the Apex Court was that

whether the Arbitration Clause which was a part of the printed terms annexed to the said Bill of Lading would be binding on the parties herein.

OBSERVATION

This Hon'ble Court observed that the Bill of Lading made it clear that the term "Merchant" (which is defined in the Standard Conditions Governing Multimodal Transport Documents - Clause (1) (e) as meaning shipper, consigner or consignee) expressly agrees to be bound by all the terms, conditions, clauses and exceptions on both sides of the Bill of Lading whether typed, printed or otherwise.

This Court further went on to analyse Clause 25 of the said Bill of Lading which read as under:

"25. Jurisdiction/Arbitration:

The contract evidenced by the Bill of Lading shall be governed by the laws of India, and subject to the exclusive jurisdiction of Court in Chennai only. Disputes/difference arising out of this contract and/or connection with the interpretation of any of its clauses shall be settled by arbitration in India in accordance with the Arbitration & Conciliation Act, 1996. The No. of Arbitrators shall be three, the Arbitrators shall be commercial persons the venue for arbitration shall be Chennai."

It was observed that firstly, the Respondent had expressly agreed to be bound by the Arbitration Clause despite the fact that it was a printed condition annexed to the said Bill of Lading.

Secondly, the respondent had relied upon the said Bill of Lading as a part of the cause of action in O.S. No. 9/2009. Hence, the Respondent cannot deny the applicability of the printed terms on the parties herein for want of signatures of the parties concerned.

Reference was made by the Hon'ble Court to the case of Jugal Kishore Rameshwardas vs. Mrs. Goolbai Hormusji (AIR 1955 SC 812), where the Hon'ble Apex Court held that an Arbitration Agreement needs to be in writing even though it need not be signed. Hence, the only pre-requisite as per Section 7 is that the Arbitration Agreement should be in writing.

This Hon'ble Court also referred to Paras 22 and 24 of M.R. Engineers and Contractors Private Limited vs. Som Datt Builders Limited, [(2009) 7 SCC 696] read with Section 7(5) of the Arbitration Act and observed that the reference in the said Bill of Lading was such as to make the Arbitration Clause a part of the contract between the parties.

Supreme Court also noted that:

It had not delved into the provisions of the Multimodal Transportation of Goods Act, 1993 since the said Bill of Lading was governed by the provisions of the Act or not would not make any difference to the position that an arbitration clause forms part of an agreement between the parties or not. Hence, it should be governed by Section 7 of the Arbitration Act.

CONCLUDING VIEW

This Hon'ble Court, based on the aforementioned Judgment, the factual matrix and the conduct of the Parties held that the fact that the stage of the present suit was examination of witnesses would not come in the way of Section 8(3) application being allowed since the application was filed in the same year as that of the suit.

Thus, the petitions were dismissed. With an observation that this order shall in no way affect the proceedings filed by the Petitioner before the Competent Court of jurisdiction.

The judgments of the High Court were set aside and the present appeals were allowed.             

AMLEGALS REMARKS

The Hon'ble Supreme Court, in this case, has clearly established that the sine qua non for the validity of an Arbitration Agreementis that the Arbitration Agreement or the Arbitration Clause should be in writing.

The law has been set straight with regard to the validity of an Arbitration Agreement as per Section 7 of the Arbitration Act that it is not necessary for an Arbitration Agreement to be signed for it to be applicable and/or enforceable.

It is pertinent to note that computer generated or pre-printed invoices bearing no signature, also carry various clauses, will have binding effect in similar manner.

This content is purely an academic analysis under "Legal intelligence series".

© Copyright AMLEGALS.

Disclaimer: The information contained in this document is intended for informational purposes only and does not constitute legal opinion, advice or any advertisement. This document is not intended to address the circumstances of any particular individual or corporate body. Reade should not act on the information provided herein without appropriate professional advice after a thorough examination of the facts and circumstances of a particular situation. There can be no assurance that the judicial/quasi-judicial authorities may not take a position contrary to the views mentioned herein.

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