M/S RICKMERS VERWALTUNG GMB H versus THE INDIAN OIL CORPORATION LTD.

Citation: [1998] SUPP. 3 S.C.R. 42 · Decided: 19-11-1998 · Supreme Court of India · Bench: A.S. ANAND · Disposal: Dismissed

Judgment (excerpt)

A 
MIS RICKMERS VERWALTUNG GMB H 
v. 
THE INDIAN OIL CORPORATION LTD. 
NOVEMBER 19, 1998 
B 
[DR. A.S. ANAND, CJ. AND K. VENKATASWAMI, J.) 
Arbitration Act, 1940 : Section 33 
Arbitration-Charter party agreement for shipping of pipes between 
C appellant ad respondent-Agreement not signed by parties-Conditions for 
agreement-Execution of letter of credit and performance guarantee-
Contents of these two documents to be mutually agreed between the parties-
No agreement between parties as to contents of documents-Consequently 
cargo arrangements not made by appellant-Alternative arrangements by 
D respondent-Invocation of arbitration clause contained in the agreement by 
ap;,ellant-Claim that though no formal agreement was signed by parties yet 
a binding agreement had come into existence through correspondence-
Held entire correspondence indicated no enforceable contract came into 
existence·-Consequently clause relating to arbitration had no existence. 
E 
Contract-Though not signed by parties-Can be spelled out from 
correspondence exchanged between the parties-But it must clearly emerge 
from correspondence that parties were ad idem to the terms. 
The respondent-Corporation entered into an agreement with a Mexico 
Company for purchase of pipes which were to be delivered at Tempico port 
p in Mexico .. For the purpose of shipping of pipes negotiations were conducted 
with the appellant-vessel owners for entering into an agreement. Before 
execution of agreement the respondent-Corporation was to establish a 
stand-by letter of credit while the appellant was to furnish a performance 
bond. The format and contents of these two documents were to be mutually 
agreed upon by both the parties. A charter party agreement was drawn up 
G on November 11,1993 but it was not signed by the parties. However, no 
agreement was reached between the parties with regard to th~ contents of 
the s"tand-by letter of credit and performance guarantee. Therefore, the 
appellant did not make any shipping arrangements and the respondent-
corporation had to make alternative arrangements. Thereafter, appellant 
H tiled an ap(•lication before Indian Council of Arbitration invoking clause 53 
42 
RICKMERS VER WAL TUNG GMB H v. 1.0.C. LTD. 
43 
• of the Agreement of Affreightment relating to arbitration. This clause A 
provided that all disputes under the charter party were to be settled in India 
in accordance with the provisions of the Indian Arbitration Act, 1940 read 
with Maritimes Arbitration Rules of Indian Council of Arbitration. The 
respondent-Corporation contested the application on the ground that the 
agreement between the parties had not been signed since no agreement could B 
be reached at with regard to the contents of standby letter of credit and 
performance guarantee. Consequently reference of the dispute in question 
to Arbitration was unwarranted. However, the Indian Council of Arbitration 
appointed arbitrators and directed the respondent-Corporation to deposit 
expenses of arbitration. 
The respondent-Corporation filled a petition under Section 33 of the c 
Arbitration Act, 1940 seeking a declaration to the effect that reference of 
dispute to the Arbitrator was not maintainable as there existed no concluded 
agreement between the parties. A single Judge of the Delhi High Court held 
that no concluded, enforceable and binding contract came into existence 
between the parties and as such clause 53 of the charter party agreement D 
relating to arbitration had no existence in the eye of law. Accordingly the 
Single Judge restrained the appellant from proceeding with the arbitration. 
In appeal to this Court it was contended on behalf of the appellant that 
(1) a binding agreement had come into existence through correspondence 
and therefore non-signing of the charter party agreement was of no E 
consequence; and (2) even in the absence of an agreement about the format 
of letter of credit and of the performance guarantee, clause 48 of the 
agreement was attracted and recourse to arbitration was justified. 
Dismissing the appeal, the Court 
HELD : I. The Single Judge of the High Court was perfectly justified 
in holding that clause 53 of the Charter party relating to arbitration had no 
existence in the eye of law, because no concluded and binding contract ever 
came into existence between the parties. The finding recorded by him is 
based on a proper appreciation of evidence on the record and a correct 
F 
application of the lega

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