Shipping Corporation of India Ltd. Vs Mare Shipping Inc

REPORTABLE

IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION

SPECIAL LEAVE PETITION (C) No.19461 of 2006

SHIPPING CORPORATION OF INDIA LTD. … PETITIONER(s)

VS.

MARE SHIPPING INC. … RESPONDENT(s)

J U D G M E N T

ALTAMAS KABIR, J.

1. The Special Leave Petition arises out of the

Judgment and Order dated 24.10.2005 passed by the

learned Single Judge of the Bombay High Court in

A.P.No.531 of 2003 affirming the Award of the

Arbitral Tribunal dated 8.9.2005, and the judgment

and order dated 20.1.2006 passed by the Division

Bench dismissing A.N.No.1158 of 2005 filed by the

Petitioners herein.

2. On 9.11.1999 the Petitioners and the

Respondent(s) entered into a Charter Party in

respect of the Respondents’ vessel, “m.t.

Prestige”, for carriage of minimum 8150 metric

tonnes of crude oil from the Egyptian Red Sea port

of Ras Sukheir to one/two safe

anchorage(s)/lighterage points/SBM(s)/one/two safe

port(s)one/two safe berth(s) anywhere in India.

The vessel was described in Clause 41 of the

Charter Party as being fitted with “AK Tongue Type

Bow Chain Stopper of min SWL 2000 Mts.”

3. Clause 9 of the Charter Party provided for

settlement of all disputes arising out of the

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Charter Party by arbitration under the Arbitration

& Conciliation Act, 1996, and the Maritime

Arbitration Rules of the Indian Council of

Arbitration (ICA).

4. The vessel arrived at Ras Sukheir at 4.00 a.m.

on 19.11.1999 and tendered Notice of Readiness

(NOR). The loading commenced at 10 p.m. on

20.11.1999 and was completed by 3.15 p.m. on

21.11.1999. The total lay time provided for

loading and discharge of cargo was 72 running

hours. Out of the said lay time hours, the lay

time used at Ras Sukheir was 37 hours and 30

minutes. On account of a mishap involving the

vessel’s anchor and the submarine pipe-lines, the

vessel was delayed at Ras Sukheir for fourteen days

and could leave the port only on 4.12.1999. On

6.12.1999 while the vessel was sailing, the

Respondents nominated Vadinar Single Berth Mooring

(SBM) for discharge of the cargo. Port of

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discharge had not been nominated earlier. The

vessel arrived at Vadinar and the Master tendered

NOR at 8 p.m. on 15.12.1999. Since the vessel had

only one chain stopper/Bow Panama Chock, which had

been specified in the Charter Party, the vessel

could not be safely moored at the SBM and the

Master was asked by the Receiver, Indian Oil

Corporation on 21.12.1999 to take away the vessel

from the Vadinar SBM.

5. On 21.12.1999 a message was sent to the

Petitioners’ Agents, M/s. J.M. Baxi & Co. by the

Manager of the Respondents drawing attention to the

fact that the vessel could not be berthed at the

SBM and requesting that immediate steps be taken to

berth the vessel. In the absence of any positive

response to the said letter, the Respondents’

lawyer, Mr. Prashant Pratap, sent a legal notice to

the Petitioners on 24.12.1999 indicating that the

vessel continued to await discharge incurring

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demurrage for which the Petitioners were held

responsible. The Petitioners were also informed

that on account of the detention of the vessel at

Vadinar, there was a serious possibility of the

vessel missing its next engagement.

6. Finally a decision was arrived at on 28.12.1999

and Addendum No.1 to the Charter Party dated

9.11.1999 was drawn up and signed by the Owners and

the Charterers containing the following further

conditions agreed upon, namely,

a) m.t. Prestige will be diverted by the

Charterers from Vadinar to L.P.O. Mumbai for

discharge.

b) Charterers will pay freight basis Ras

Sukheir/LPO Mumbai where cargo will be

discharged into a daughter vessel and

Charterers will pay all the expenses of the

daughter vessel, M.T. Maharaja Agrasen.

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(c) Charterers will bear the cost of deviation

of m.t. Prestige basis Ras Sukheir/LPO Mumbai

v/s Ras Sukheir/Vadinar/LOP Mumbai which

included time at the demurrage rate.

d) The extra cost of bunkers incurred as a

result of the deviation will be on Charterers’

account, subject to the Owners submitting

documentary evidence.

(e) All direct expenses incurred by the Owners

at Vadinar towards pilotage, tugs and other

port expenses and Agency fees, will be settled

by the Charterers.

(f) Demurrage to be settled as per Charter

Party terms.

7. Pursuant to the above arrangement, m.t.

Prestige sailed from Vadinar at 1 a.m. on

29.12.1999 and arrived at Mumbai Lighterage point

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on 30.12.1999 at 2 p.m. The vessel tendered Notice

of Readiness at 2 p.m. on 30.12.1999 and completed

discharge at 3.30 p.m. on 1.1.2000. The

Respondents/Owners submitted their demurrage claims

along with supporting documents to the Charterers

on 3.2.2000. As the said claim was disputed,

arbitration was invoked by the parties under the

provisions of the Arbitration & Conciliation Act,

1996, hereinafter referred to as “the 1996 Act”.

Both the parties appointed their Arbitrators and

the two Arbitrators appointed a third as the

Presiding Arbitrator. The Arbitrators made and

published their Award dated 26.8.2003 by which they

allowed the Respondents’ demurrage claim in full.

Certain other amounts payable under the Addendum

dated 28.12.1999 were also awarded in favour of the

Claimants/Respondents.

8. The said Award was challenged by the

Petitioners/Charterers in the Bombay High Court on

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the ground that the Respondents had not proved that

the Notice of Readiness had been tendered at

Vadinar and consequently the Respondents were not

entitled to demurrage for the period that m.t.

Prestige was detained at Vadinar. The learned

Single Judge of the High Court accepted the

submission made on the Petitioners’ behalf and by

his order dated 25.4.2005 remitted the matter to

the Arbitration for a proper finding in this

regard, with leave to the Respondents/owners to

lead evidence to prove tender of the Notice of

Readiness to the Petitioners/Charterers.

9. After remand, the Arbitrators passed another

Award on 8.9.2005 after admitting fresh evidence,

including documentary evidence, holding that the

service of the Notice of Readiness by the Master of

the vessel on the Agents of the Petitioners at

Jamnagar had been duly proved in view of the

evidence of the Petitioners’ witness, Mr. Sunil

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D’Souza that he had asked Captain Jude D’Souza for

a copy of the Notice of Readiness sent by the

Master to the Petitioners’ Agents at Jamnagar. The

said fact was also confirmed by Mr. S.J. Joshi

during his evidence before the Tribunal. The

Arbitrators also noted that no attempt had been

made by the Charterers to rebut Mr. Sunil D’Souza’s

evidence by producing Captain Jude D’Souza.

10. The Tribunal accordingly held that the

Respondents/Owners were entitled to receive

demurrage in the amount of U.S. $220376.48,

together with interest and costs, as awarded in the

earlier Award of 26.8.2003.

11. On receiving a copy of the Award of the

Tribunal dated 8.9.2005, the Petitioners applied

for amendment of the Petition under Section 34 of

the 1996 Act. However, by order dated 24.10.2005

the learned Single Judge dismissed the Arbitration

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Petition No.531 of 2003. An appeal, being No.1158

of 2005, was filed by the Petitioners before the

Division Bench of the Bombay High Court which

dismissed the same on 20.1.2006.

12. The present Special Leave Petition has been

filed against the said Award of the Arbitration

dated 8.9.2005, as well as the judgments and orders

dated 24.10.2005 and 20.1.2006 passed by the

learned Single Judge and the Division Bench of the

Bombay High Court confirming the Award.

13. Mr. Bhaskar Gupta, learned Senior Advocate, who

appeared for the Petitioners, focused his

submissions on the sustainability of the

Respondents’ claim for demurrage. Urging that a

claim for demurrage can only arise after the expiry

of the “lay days”, namely, the time specified for

loading or discharging the cargo from the vessel,

Mr. Gupta submitted that the all-important question

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in respect of such a claim is when do the lay days

commence and when are they used up. Mr. Gupta

submitted that the commencement of lay days depends

on three factors :-

a) Firstly, the ship must be an “arrived

ship” in order to give Notice of

Readiness.

b) Secondly, she must have given the

prescribed notice to load or

discharge, as the case may be.

c) Thirdly, she must be ready to load or

discharge, as the case may be.

14. Mr. Gupta submitted that whether the ship is an

“arrived ship” or not depends on the point

designated as the destination in the mutual

understanding of the parties in the Charter Party

itself or the terms thereof – the degree of

precision being a matter of agreement between the

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parties. Mr. Gupta urged that in practice, the

destination is usually a part or a specified area

within the port such as a basin, a dock, or a buoy

at a certain distance from the shore or a river. A

still more precise point would be where the loading

or discharge is to take place, e.g., a particular

quay, pier, wharf or mooring. Mr. Gupta submitted

that a ship is said to be an “arrived ship” only

when she has reached the particular point and has

moored there. Mr. Gupta urged that the said

propositions are well-established and have been

laid down in (1) Leonis Steamship Company Ltd. Vs.

Rank Limited (1908) 1 K.B. 499; (2) Armament Adolf

Deppe Vs. John Robinson & Company Ltd. [1917] 2

K.B. 204; and (3) Owners of S.S. Plata Vs. Ford &

Co. (1917) 2 K.B. 593. We shall have recourse to

refer to the aforesaid decisions later in this

judgment.

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15. Mr. Gupta submitted that Clause ‘D’ of the

Charter Party dated 9.11.1999, specifies

“discharging port” as one/two safe

anchorage(s)/lighterage point(s)/SBM(s), 1/2 safe

Ports, 1/2 safe Berth(s) and full India. Mr. Gupta

also submitted that the Charter Party provides that

on arrival of the vessel for discharge at Vadinar,

the vessel was to maintain 70% of her deadweight on

board for safe mooring at a SBM.

16. Mr. Gupta urged that by a communication dated

6.12.1999, the Petitioners/Charterers designated

Vadinar SBM as the destination and not a ‘Port’.

The destination was, therefore, a specific point

and not a large area like a Port. Vadinar SBM,

therefore, became the destination as if

incorporated in the Charter Party itself. Mr.

Gupta submitted that inspite of the best efforts of

the Terminal Authorities, IOC, who were also the

receivers of the cargo, m.t. Prestige was unable to

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moor at the Vadinar Single Berth Mooring (SBM) on

account of the fact that it had only one bow chain.

It may be of interest to note that Vadinar is the

only SBM in the whole of India. Mr. Gupta urged

that inspite of the various attempts of the Port

Authorities, the vessel could not be berthed at the

Vadinar SBM and was asked to move away. Mr. Gupta

contended that since the vessel could not be moored

at Vadinar, it was not an “arrived vessel’ and “lay

time” could not be said to have commenced running

on 15.12.1999. The Notice of Readiness given by

the Petitioners could not, therefore, be treated as

valid and the period spent at Vadinar could not be

taken into consideration while computing the number

of lay days utilized.

17. In support of his aforesaid contention, Mr.

Gupta referred to and relied on the decision of the

House of Lords in the case of Johanna Oldendorff,

(1973) 11 LLR 285, in which Viscount Dilhorne laid

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down ten tests for determining when a ship is an

arrived ship. Mr. Gupta referred to the first and

fifth tests as being relevant in the context of

this case and the same are extracted hereinbelow :

(i) That under a port Charter Party to

be an “arrived ship”, that is to say

a ship at a place where a valid

Notice of Readiness to load or

discharge can be given, she must

have ended her voyage at the port

named; and

(ii) A vessel has not reached her port of

destination until it has ended its

voyage within the port, either in its

legal, or if it differs, in its

commercial sense. If it is refused

permission and ordered to wait

outside the port by the Port

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Authority, it is not an “arrived

ship”.

18. Mr. Gupta submitted that the mere fact that the

vessel had arrived near the SBM and had anchored

there would not make the vessel an “arrived ship”,

because the destination was the SBM and not the

port and the vessel could end her voyage only when

she was moored at the SBM, which the vessel was

unable to do. Mr. Gupta submitted that the

decision in Johanna Oldendorff’s case was an

affirmation of the Kings Bench decision in the case

of Leonis Steamship Company Ltd. Vs. Rank Limited

(1908) 1 K.B. 499. Mr. Gupta urged that not having

been allowed to berth at the SBM, the vessel could

not be categorized as an “arrived ship” for the

purpose of issuing Notice of Readiness, which Mr.

Gupta submitted had not been served on the

Petitioners in the first place.

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19. By way of an alternative argument, Mr. Gupta

submitted that under Clause 6 Part II of the

Charter Party, the delay at Vadinar could not be

counted as lay time, because it was the receivers

(I.O.C.) and not the Charterers who declared that

safe berthing of the vessel at Vadinar was not

possible because of infra-structural deficiencies

and not because of any fault on behalf of the

Petitioners since the Petitioners had no control

over the situation. Accordingly, the entire time

from the tender of the Notice of Readiness on

15.12.1999, if at all tendered, till the vessel

started discharge in Bombay, had to be excluded in

calculating lay time.

20. Mr. Gupta submitted that service of the Notice

of Readiness had not been proved even after remand,

as the only evidence tendered was that of Sunil

D’Souza which, in any event, did not prove anything

beyond the fact that he had been asked to get a

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copy of the Notice of Readiness from the Agent.

Furthermore, the entire evidence of Sunil D’Souza

was hearsay.

21. On the question of Safe Port Warranty, Mr.

Gupta contended that only after all attempts had

been made to berth the vessel at the SBM that it

was asked to move away from the mooring.

Consequently, even if the finding of the

Arbitrators that the Petitioners had failed to

designate a safe port was accepted, at best the

ship owners could be entitled to damages and not

demurrage and would be subject to the ordinary

rules as to remoteness, mitigation etc., as

available under Section 73 of the Contract Act.

Mr. Gupta submitted that the Respondents had

claimed damages before the learned Arbitrators who,

however, allowed demurrage in their Award on the

ground that demurrage is a genuine pre-estimate of

damages. Mr. Gupta submitted that even if there

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was a breach of warranty on the Petitioners’ part,

the same would give rise to a claim for damages and

not demurrage within the scope of Sections 73 and

74 of the Contract Act.

22. Mr. Gupta submitted that in the Addendum dated

28.12.1999 to the Charter Party dated 9.11.1999

since the Charterers had agreed to bear the cost of

deviation basis Ras Sukheir/LPO Mumbai vs Ras

Sukheir/Vadinar/LPO Mumbai, which included time at

the demurrage rate, there could not be a separate

claim for demurrage as that would amount to double

jeopardy. Mr. Gupta submitted that it is the said

provision contained in Clause (f) of the aforesaid

Addendum which has given rise to this arbitration.

Mr. Gupta submitted that although the Award has

relied on Clause 4(1) of Part II of the Charter

Party, which provides that extra expenses incurred

in connection with any change in loading or

discharging ports, has to be paid by the

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Charterers, and any time thereby lost to the vessel

shall count as used lay time, the said clause would

have to be read in the context of Clauses 4(a) and

4(b) where certain ports, other than any Indian

Port, have been named.

23. On the question of mitigation of damages, Mr.

Gupta urged that the Petitioners/Owners had done

everything in its power to safely berth the vessel

at the SBM Vadinar, which was perhaps the only SBM

in operation in India at the relevant point of time

and would otherwise have been ideal for discharge

of the cargo of crude oil. Mr. Gupta contended

that it was IOC, the receiver, who had taken almost

two weeks to decide to redirect the vessel from

Vadinar to Mumbai. Mr. Gupta submitted that it was,

in effect, the Respondents who did not take any

steps to mitigate the damages.

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24. On the quantum of demurrage or damages, Mr.

Gupta submitted that since the demurrage rate was

fixed at US $16000 per day and the same has really

a genuine pre-estimate of damages, the Tribunal

should have awarded damages at a reasonable rate,

instead of making its Award on the consideration of

damage as fixed in the Charter Party. Mr. Gupta

urged that the Tribunal had gone completely wrong

in giving a go-bye to the provisions of Sections 73

and 74 of the Contract Act in awarding compensation

in keeping with the provisions for fixed demurrage

in the Charter Party, particularly when all the lay

days had not been used up.

25. Mr. Gupta submitted that the scope of a

petition under Section 34 of the 1996 Act had been

considered by this Court in detail in Oil & Natural

Gas Corporation Ltd. Vs. Saw Pipes Ltd. [(2003) 5

SCC 705], and it was indicated therein that if the

Award passed by the Arbitral Tribunal was contrary

21

to any of the provisions of the Act or the

substantive law governing the parties or was

against the terms of the contract, the same could

be set aside. Mr. Gupta urged that even in the

instant case, the law had been misapplied by the

Arbitrators who had missed considering the all-

important issue that no valid Notice of Readiness

could have been tendered by a ship which was not an

“arrived ship”. In such circumstances, the

petition under Section 34 of the 1996 Act was

clearly not maintainable.

26. In conclusion, Mr. Gupta drew our attention to

the wording of Clause 6 of the Charter Party which

deals with Notice of Readiness and in particular,

to the last sentence thereof where delay in getting

a berth for a vessel after giving Notice of

Readiness, for any reason over which the Charterer

has no control, shall not count as used lay time.

Mr. Gupta submitted that the facts of the case

22

would clearly indicate that the Arbitral Tribunal

failed to take into consideration the facts in

their true sequence and ended up in a “cart before

the horse” situation, since no demurrage, which is

the consequence of using up all the lay time, could

have been awarded without a correct computation of

the used “lay time”.

27. Going to the heart of the matter, Mr. Prashant

Pratap, learned Advocate, submitted that the case

of the Petitioners/Charterers of the vessel

depended primarily on the terms and conditions of

the Charter Party on the basis whereof the Arbitral

Tribunal had awarded demurrage to the

Respondents/Owners of the vessel. As was also done

by Mr. Gupta, special emphasis was laid by Mr.

Prashant Pratap on Clause 6 of the Charter Party

relating to Notice of Readiness. Learned counsel

emphasized the fact that in terms of the said

clause, the Master of the vessel or his Agent would

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give the Charterer or his Agent notice by letter,

telegraph, wireless or telephone that the vessel is

ready to load or discharge cargo, berth or no

berth, and lay time would commence upon the

expiration of six hours from receipt of such notice

or upon the vessel’s arrival in berth, which would

mean finished mooring when at a sea loading or

discharging terminal and all fast when loading or

discharging alongside a wharf whichever first occurs. Then follows the rider that, however, where the delay is caused to the vessel getting

into berth after giving Notice of Readiness for any

reason over which the Charterer has no control, the

delay caused could not be counted as used lay time.

28. Mr. Prashant Pratap referred to Clauses 8 and 9

of the Charter Party dealing with Demurrage and

Safe Berthing Shifting. Clause 8 provides that the

Charterer shall pay demurrage per running hour and

pro rata for a part thereof at the rate specified

24

in Part I for all the time taken for loading and

discharging when the time taken for discharging the

cargo exceeds the allowed lay time specified. If,

however, delay in discharge of the cargo is caused

at the port of loading and/or discharge by reason

of fire or other unavoidable circumstances, the

rate of demurrage would be reduced to one-half of

the amount stated in Part I per running hour or pro

rata for part of an hour for demurrage so incurred.

It was also stipulated that the Charterer would not

be liable for demurrage for delay caused by strike,

lockout, stoppage or restraint of labour for

master, officers and crew of the vessel or tugboat

or pilots. Mr. Prashant Pratap also pointed out

that Clause 9 of the Charter Party which provides

for Safe Berthing Shifting indicates that the

vessel shall load and discharge at any safe place

or wharf, or alongside vessels or lighterage point

reachable on her arrival, which shall be designated

25

and procured by the Charterer, provided the vessel

could proceed thereto, lie at and depart therefrom

always safely afloat. Clause 9 also enables the

Charterer to shift the vessel at ports of loading

and/or discharge from one safe berth to another on

payment of towage and pilotage for shifting to the

next berth and other expenses and the time consumed

on account of such shifting would count as used lay

time, except as otherwise provided in Clause 15.

29. Mr. Prashant Pratap then contended that the

question as to whether M/s. m.t. Prestige was an

“arrived ship” or not at port Vadinar, had never

been raised either before the learned Single Judge

or the Division Bench of the High Court, nor was it

taken as a ground in the Special Leave Petition.

Learned counsel submitted that even the ground

taken with regard to the Notice of Readiness being

invalid, as the vessel was allegedly not ready in

all respects to discharge its cargo, was neither

26

argued before the learned Single Judge or the

Division Bench nor was the ground taken in the

Special Leave Petition before this Court.

30. Coming to the question as to what constitutes

an “arrived ship”, Mr. Prashant Pratap submitted

that the said question was extensively considered

by the House of Lords in the case of Johanna

Oldendorff (supra), which was also relied upon by

Mr. Gupta, where the House of Lords was of the view

that the vessel should have reached a position in

the port where she is at the immediate and

effective disposition of the Charterers and for

practical purposes it is so much easier to

establish that if the ship is at the usual waiting

place within the port where waiting vessels would

normally lie before proceeding to the berth

nominated by the Charterers for discharge of cargo.

If the vessel is at such a place, then the vessel

is considered to be an “arrived ship”. It is only

27

thereafter that the vessel can tender Notice of

Readiness. Furthermore, if the Charter Party

provides for the location where the vessel should

arrive and tender Notice of Readiness, then if the

vessel has reached that location, the vessel is

considered to be an “arrived ship”. Mr. Prashant

Pratap submitted that in the present Charter Party,

the parties have expressly agreed in Clause 6 for

the vessel to arrive at customary anchorage (emphasis supplied) at the port of loading or

discharge and tender Notice of Readiness.

Accordingly, once the vessel arrived at anchorage

at Vadinar, it became an arrived ship in terms of

Clause 6 of the Charter Party and was entitled to

tender Notice of Readiness.

31. Mr. Prashant Pratap submitted that it was not

disputed that M/s. m.t. Presitge was at customary

anchorage at Vadinar Port when Notice of Readiness

was tendered. Mr. Prashant Pratap also placed

28

emphasis on the expression “berth or no berth”,

included in Clause 6 of the Charter Party which

meant that even if a berth was not available or the

vessel had not reached the berth, the vessel is

entitled to tender Notice of Readiness. Mr.

Prashant Pratap submitted that the term had been

explained in the case of the NOTOs where dealing

with a clause identical to Clause 6 of the Charter

Party, it was held that the meaning of the said

words indicated that the Notice of Readiness could

be given upon arrival at the customary anchorage

and could take effect whether or not a berth was

then available or not for the vessel.

32. Mr. Prashant Pratap then argued that the

submission made on behalf of the

Petitioners/Charterers that since the destination

in the Charter Party had been shown as “SBM” and

the vessel had failed to be moored at the SBM, no

demurrage could be claimed, was wholly erroneous on

29

account of the fact that such notice could be

tendered on the arrival of the vessel at the

customary anchorage. The vessel is not, therefore,

required to be at the destination within the port

for the purpose of becoming an “arrived ship” and

for tendering of Notice of Readiness.

33. Referring to Mr. Gupta’s submissions that for

the purpose of tendering Notice of Readiness, the

vessel must be an arrived ship, Mr. Prashant Pratap

submitted that the vessel, therefore, must be at

the effective disposal of the Charterers who would

have unrestricted access to the vessel’s cargo

tanks and the vessel pumps must be in working order

to pump out the cargo upon the hoses being

connected, provided that the Charterers were ready

to receive the cargo. In this regard, Mr. Prashant

Pratap referred to the decision in the Leonis

Steamship Co. Ltd. (supra), where it was observed

by Lord Justice Kennedy that “the ship’s

30

obligations, therefore, under such a Charter Party

the performance of which much precede the

commencement of the lay days (as the fixed loading

period is commonly termed) are three : Firstly, the

ship must have arrived at her destination and so be

within the designation of an arrived ship. Till

then she is not entitled to give a Notice of

Readiness to load. Secondly, she must have given

the prescribed Notice of Readiness to load.

Thirdly, she must, in fact, be so far as she is

concerned, ready to load. The ship owner cannot

claim against the Charterer that the lay days begin

to count until the ship is an arrived ship; ……………”

Mr. Prashant Pratap submitted that the aforesaid

passage made it clear that the vessel has to be

ready to load or discharge, as the case may be.

The Tribunal’s findings are that the vessel was

ready, but the terminal was not. The Tribunal held

that the vessel was at the immediate and effective

31

disposition of the Charterers when Notice of

Readiness was given.

34. Mr. Prashant Pratap then urged that from the

Charter Party it is quite clear that the

responsibility of providing a berth where the

vessel could moor safely was that of the Charterers

and the same would be clear from the use of the

word “safe” in Clause D of Part I of the Charter

Party which precedes the words

“Ahchorage/Lighterage Points/SBM”. Even in terms

of Clause 9 of the Charter Party, the place of

discharge must be safe and has to be designated and

procured by the Charterers. Mr. Prashant Pratap

referred to various other judgments such as the Sea

Queen [(1988) Vol.1 KKR 500] and Fjordaas [(1988)

Vol.1 LLR 336]. In the later case, it has been

indicated that “reachable” or “arrival” are well-

known expressions and mean precisely what they

say. It was further observed that if the berth

32

cannot be reached on arrival, the warranty is

broken, unless there is some relevant protecting

exception. Such berth, in its term, is required to

have two characteristics: it has to be safe and it

also has to be reachable on arrival. By nominating

SBM at Vadinar as the destination of the vessel and

also the place for discharge of the cargo, it was

the responsibility of the Charterers to ascertain

as to whether the vessel could be moored there

safely and be in a position to discharge the cargo

safely.

35. Apart from the aforesaid questions regarding

the vessel being an arrived ship, Mr. Prashant

Pratap urged that service of the Notice of

Readiness by the Master on the Agents of the

Charterers have been duly proved and is a finding

based on appreciation of evidence by the

Arbitrators, which has been upheld by the learned

33

Single Judge and the Division Bench, whose orders

were under challenge in the Special Leave Petition.

36. Mr. Prashant Pratap urged that if the Notice of

Readiness was valid, as had been found not only by

the Arbitral Tribunal but also by the learned

Single Judge and the Division Bench of the Bombay

High Court, then lay time commenced six hours after

the tender of Notice of Readiness. Accordingly,

lay time expired on 17.12.1999, and, thereafter,

the vessel was on demurrage all throughout, till

discharge of the cargo was completed. Since in

the instant case, the Charterers had failed to

nominate a safe berth at which the vessel could

safely lie and discharge the cargo and failing to

provide a berth which was reachable upon arrival of

the vessel at Vadinar, the consequent delay in

berthing and discharge of the cargo, was the

responsibility of the Charterers for which

demurrage was payable by them. Mr. Prashant Pratap

34

pointed out that at no stage did the Charterers

question the validity of the Notice of Readiness

tendered at Vadinar either on the ground that the

vessel was not an arrived ship, or on the ground

that the vessel was not ready to discharge the

cargo. On the contrary, the Charterers signed the

Addendum dated 28.12.1999 by which they agreed to

bear all the expenses incurred by the vessel at

Vadinar and also agreed to pay additional freight

charges for discharge of cargo at Mumbai.

Significantly, the Charterers also agreed that the

time taken for the vessel to proceed from Vadinar

to Mumbai would count as demurrage time. Mr.

Prashant Pratap urged that the Charterers would not

have agreed to the terms and conditions of the

Addendum if it was their contention that the vessel

was not an arrived ship or that the Notice of

Readiness was invalid.

35

37. Mr. Prashant Pratap then submitted that the

only requirement as far as the vessel was concerned

was that it had to maintain 70% of the dead weight

on board for safe mooring at the SBM at Vadinar and

it is nobody’s case that the vessel did not conform

to such condition.

38. On the question of designation of the SBM as

the destination point within Vadinar Port by the

Charterers, Mr. Prashant Pratap contended that the

Charterers had been put on notice regarding the

berthing arrangement both in the Charter Party as

well as in the questionnaire setting out the

vessel’s mooring arrangements provided to the

Charterers. Learned counsel submitted that it was

for the Charterers to check the vessel equipment

vis-à-vis facilities available at the Port of

loading and discharge, before nominating the same.

Since the Charterers had failed to undertake such

an exercise, there was a resultant problem faced at

36

Vadinar whereby the vessel could not discharge its

cargo at Vadinar but had to be diverted to Mumbai.

Mr. Prashant Pratap also pointed out that while the

entire Indian coastline was available to the

Charterers to nominate a safe port for discharge of

the cargo, it made a conscious decision to nominate

the SBM at Vadinar which ultimately turned out to

be unsafe for mooring of the vessel, given the

equipment available on board the ship.

39. Mr. Prashant Pratap submitted that it had been

agreed on behalf of the Charterers that demurrage

is a genuine pre-estimate of damages and even if

the Charterers’ argument is to be accepted that the

owners are entitled to damages and not demurrage,

the calculation of such damages would have to be

the demurrage rate in the facts and circumstances

of the case.

37

40. Mr. Prashant Pratap, accordingly, submitted

that the award of the Arbitral Tribunal, as upheld

both by the learned Single Judge and the Division

Bench of the Bombay High Court, did not warrant any

interference and the Special Leave Petition was

liable to be dismissed with appropriate costs.

41. Having gone through the submissions made on

behalf of the respective parties in the background

of the facts as disclosed, it is clear that we are

required to consider two basic questions for the

purpose of deciding the present Special Leave

Petition, namely :-

(a) Whether on arriving at anchorage point at Port

Vadinar, despite the destination point being

the SBM mooring, it could be said that it was

an arrived ship which was competent under the

Charter Party dated 9.11.1999, to issue Notice

of Readiness of discharge of its cargo?

38

(b) If the finding of the Arbitral Tribunal that

the vessel was an arrived ship at Port Vadinar,

as upheld by the learned Single Judge and the

Division Bench of the Bombay High Court is

accepted, would the Respondents/Owners of the

vessel be entitled to damages or demurrage?

42. Various ancillary questions connected with the

aforesaid two questions also crop up, which we

shall consider shortly.

43. From the undisputed facts, the position that

emerges is as follows :-

(i) The Charter Party dated 9.11.1999 was in

respect of a transaction which provided for

carriage of crude oil from Ras Sukheir to a

safe port on the Indian coastline. The

Charterers were given the choice of

39

nominating such port for discharge of the

aforesaid cargo of crude oil.

(ii) In the absence of any named port of

destination in the Charter Party itself, it

was only after the vessel left Ras Sukheir

that an intimation was given by the

Charterers for discharge of the cargo at the

SBM at Port Vadinar in Gujarat.

(iii) That the aforesaid nomination was a

conscious decision on the part of the

Charterers, despite having knowledge of the

equipment available on board the vessel for

mooring at a SBM, and in keeping with such

decision m.t. Prestige set its course from

Ras Sukheir to Vadinar.

(iv) The fiasco at Vadinar was occasioned by the

fact that no prior checking had been done to

see whether with the mooring equipment on

40

board, the vessel would be able to safely

berth at the SBM for discharge of its cargo.

(v) Who was responsible for the detention of the

vessel at Vadinar since its arrival at the

anchorage point and its final departure from

the said Port? Whether there was

contributory negligence on the part of both

the parties in the cause of such delay?

44. The concept of an arrived ship in shipping

terminology requires that a vessel should reach a

destination in a port where she could be safely

berthed and thereupon be ready to either discharge

or load cargo from and on to the vessel. That is a

general concept, but the Charterers and the Owners

of the vessel could in the Charter Party agree to a

specific destination point within the port area for

discharging or loading of cargo. Once the vessel

arrived at the said spot and was ready to discharge

41

its cargo, it could be described as an “arrived

ship” with the authority to issue and tender Notice

of Readiness. In the instant case, the nominated

port for the arrival of the vessel was Vadinar

Port, but the destination point was the SBM where

the vessel was to be moored and was to discharge

its cargo of crude oil. In fact, in the Charter

Party dated 9.11.1999, Clause 6 specifically

provided for arrival of the vessel at the port of

loading or discharge and cast an obligation upon

the Master or his Agent to give the Charterer or

his Agent Notice of Readiness in relation to

discharge of the cargo. Since the decision in this

case will to a large extent depend on the

interpretation of Clause 6, the same is extracted

hereinbelow :

“Clause 6 Notice of Readiness :

Upon arrival at customary anchorage at each port of loading or discharge, the Master or his Agent shall give the

42

charterer or his Agent notice by letter, telegraph, wireless or telephone that the vessel is ready to load or discharge cargo berth or no berth and lay time as hereinafter provided shall commence upon the expiration of six (6) hours after receipt of such notice or upon the vessel arrival in berth – finished mooring when at a sea loading or discharging terminal and all fast when loading or discharging alongside a wharf which ever first occurs. However, where delay is caused to vessel getting – berth after giving notice of readiness for any reason over which charterer has no control, such delay shall not count as used lay time.”

45. As will be evident from the above clause, the

Master of the vessel was under an obligation to

give Notice of Readiness on arrival at the

customary anchorage at the port of discharge. It

is a possibility that since no specific port in the

Indian coastline had been mentioned in the Charter

Party, the Master of the vessel or his Agent was

required to give Notice of Readiness upon the

vessel arriving at customary anchorage. It is only

after the vessel sailed from Ras Sukheir that the

receiver, IOC, nominated Vadinar to be the port of

43

discharge with the specific destination point being

the SBM within the port. In giving such Notice of

Readiness upon arrival at the customary anchorage

at Vadinar, the Master of the Vessel duly complied

with the conditions of Clause 6 of the Charter

Party and in terms of the aforesaid clause

irrespective of whether a berth was available or

not, lay time commenced upon the expiry of six

hours after receipt of such notice. That the

vessel could not be moored at the SBM is a

different facet of the story. The Charterers had

full knowledge of the equipment on board m.t.

Prestige through the questionnaire provided by the

Respondents/Owners to the Petitioners/Charterers.

It could not be denied that despite having such

knowledge the IOC nominated the SBM as the

destination point for discharge of the cargo.

Obviously, the parties to the Charter Party had not

made any attempt to verify as to whether the

44

equipment on board the vessel was sufficient for

her to be safely moored at the SBM and to discharge

her cargo safely. As it turned out later on, the

vessel was not so equipped and could not,

therefore, be moored at the SBM and had to be

requested to move away therefrom. Although, an

attempt has been made on behalf of the Charterers

to convince us that it was really the duty and

responsibility of the Owner of the vessel to check

whether the vessel could be safely moored at the

SBM in Vadinar, we are unable to convince ourselves

that such a duty was that of the Owners of the

vessel and not the Charterers which had a choice of

all the ports in India for discharge of the cargo,

as was subsequently done in Mumbai port. As has

been held by the Arbitral Tribunal and subsequently

affirmed both by the learned Single Judge and the

Division Bench of the Bombay High Court, the

responsibility for the failure of the ship to moor

45

at the SBM in Vadinar must lie squarely with the

Charterers and the receiver as it was they who had

nominated the SBM for the safe mooring of the

vessel. The lay time must, therefore, be held to

have recommenced after the expiry of six hours from

the tendering of the Notice of Readiness upon the

vessel’s arrival at the customary anchorage at

Vadinar on 15.12.1999 in keeping with the

provisions of Clause 6 of the Charter Party. It was

not the case of the Charterers that the failure of

the vessel to discharge its cargo at the SBM at

Vadinar was for reasons beyond their control. It

cannot also be said that the owners of the vessel

contributed in any way to such failure since the

equipment on board the vessel had been made known

to the Charterers when the Charter Party was

signed.

46. In the face of the specific conditions

indicated in Clause 6 of the Charter Party, the

46

theoretical and/or academic exercise of what

constitutes an “arrived ship” loses much of its

relevance. The terms of the Charter Party were

agreed upon by the parties with their eyes wide

open. What is also significant and cuts at the

root of the submissions advanced on behalf of the

Charterers is that even after the vessel was denied

mooring at the SBM for safety reasons on

21.12.1999, no steps were taken on behalf of the

Petitioners to either arrange for an alternate safe

berthing in Vadinar or to give instructions as to

where the cargo was to be discharged. In fact, on

behalf of the Respondents/Owners a legal notice was

addressed to the Petitioners on 24.12.1999 pointing

out that the vessel continued to await discharge

incurring demurrage. It is only thereafter that

Addendum No.I to the Charter Party was drawn up and

signed on 28.12.1999 by the Owners and the

Charterers, whereby m.t. Prestige was diverted by

47

the Charterers from Vadinar to a Lighterage point

at Mumbai port for discharge and it was

specifically agreed that the Charterers would bear

all the costs of discharge, including freight

charges and the expenses of the daughter vessel,

m.t. Maharaja Agrasen. It was also agreed that

demurrage would be settled as per the terms of the

Charter Party. In our view, the various decisions

cited on behalf of the Petitioners/Charterers do

not help them in the facts of this case. We do

not, therefore, think it necessary to consider all

the decisions cited on behalf of the respective

parties and those referred to hereinbefore are

sufficient for our purpose. The decisions relied

upon by the parties lay down certain propositions

of law which are well-established and with which

there cannot be any disagreement, but for the

purposes of this case they are basically academic.

48

47. Once we have affirmed the finding that m.t.

Prestige was an arrived ship on reaching the

customary anchorage at Vadinar port and once we

have also held that it was the Charterers who

having the choice of a safe port, had selected the

SBM at Vadinar as the discharge point, the

suggestion made on behalf of the Charterers that it

was the responsibility of the Owners of the vessel

to check whether the ship could be safely moored at

the SBM, is untenable. The responsibility of the

Owners of the vessel ended with the declaration of

the equipment available on board for mooring and

berthing for the purpose of discharge of its cargo.

Consequently, all the other ancillary issues which

arise have to be answered in favour of the

Respondents herein. As indicated hereinbefore, the

fiasco at Vadinar was occasioned by the fact that

no prior checking had been done by the Charterers

to ascertain as to whether with the mooring

49

equipment on board the vessel she would be able to

moor safely at the SBM for discharge of her cargo.

Even the subsequent deviation of the vessel from

Vadinar to Mumbai was not on account of any laches

on the part of the Owners of the vessel who were

awaiting instructions once the vessel had been

asked to move away from the SBM. In fact, it took

a notice from the Owners of the vessel and a week

for the Charterers to galvanize themselves into

action, which ultimately resulted in the Addendum

No.1 dated 28.12.1999.

48. Read with Clause 6 of the Charter Party, the

Addendum dated 28.12.1999 makes it abundantly clear

that the Charterers had accepted the responsibility

for the failure of the vessel to discharge her

cargo at Vadinar and had agreed to bear all the

expenses for the delay in diversion of the vessel

from Vadinar to Mumbai, including the time spent at

50

Vadinar port and the expenses incurred towards

pilotage, tugs and other port expenses.

49. Apart from the above, Clause 4(1) of Part II of

the Charter Party specifically provides that extra

expenses incurred on account of any change in

loading or discharging ports, has to be paid by the

Charterers, and any time thereby lost to the vessel

shall count as used lay time. We are not inclined

to accept Mr. Gupta’s submission that the aforesaid

clause has to be read in the context of Clauses

4(a) and 4(b) which refer to ports other than

Indian Ports in a different context.

50. We, therefore, see no reason to interfere with

the Award of the Arbitral Tribunal and the

decisions, both of the learned Single Judge and the

Division Bench, confirming the Award of the

Arbitral Tribunal and, accordingly, dismiss the

Special Leave Petition. In the facts of the case,

51

the parties shall bear their own costs as far as

these proceedings are concerned.

…………………………………………J. (ALTAMAS KABIR)

…………………………………………J. (A.K. PATNAIK)

NEW DELHI DATED:JULY 13, 2011

52

SHIPPING CORPORATION OF INDIA LTD. Vs MARE SHIPPING INC

SHIPPING CORPORATION OF INDIA LTD. Vs MARE SHIPPING INC