THE OWNERS AND PARTIES INTERESTED IN THE VESSEL M.V. "BALTIC CONFIDENCE" AND ANR. versus STATE TRADING CORPORATION OF INDIA LTD. AND ANR.

Citation: [2001] SUPP. 1 S.C.R. 699 · Decided: 20-08-2001 · Supreme Court of India · Bench: AJAY PRAKASH MISRA · Disposal: Appeal(s) allowed

Judgment (excerpt)

THE OWNERS AND PARTIES INTERESTED 
A 
IN THE VESSEL M.V. "BALTIC CONFIDENCE" AND ANR. 
v. 
STATE TRADING CORPORATION OF INDIA LTD. AND ANR. 
AUGUST 20, 2001 
B 
[A.P. MISRA AND D.P. MOHAPATRA, JJ.] 
Arbitration : 
Arbitration and Conciliation Act, 1996-Section 45-Charter Party C 
Agreement-Arbitration Clause in agreement-Incorporation in Bill of 
Lading-Applicability to the disputes arising under the Bill of lading-Held, 
the intention of parties to be ascertained-If construction of the clause leads 
to no inconsistency or insensibility intention of the parties to be given effect 
and arbitration clause made binding on parties. 
Appellants are the owners and parties interested in a ship. Respondent 
No.2 is the charterer of the said sh.ip under the Charter Party Agreement. 
Five Bills of Lading were issued by the appellants wherein Respondent No. 
2 agreed to carry on board the stock. Respondent No. I is the holder and 
D 
endorsee of the Bills of Lading and the_ owner of the stock. 
E 
Respondent No. I filed admiralty suit in the High Court against the 
appellant and Respondent No. 2 alleging that they had negligently and in 
breach of their duties as bailees failed to deliver goods to plaintiff in good 
order and condition and in consequence thereof Respondent No.I suffered 
losses. Appellants and Respondent No. 2 filed application for stay of suit p 
proceedings and for reference to arbitraiQn under section 45 of the 
Arbitration and Conciliation Act, 1996 in terms of Clause 62 of the Charter 
Party Agreement which stipulated that any dispute arising out of the said 
charter party shall be referred to arbitration. Single Judge rejected the 
application holding that the arbitration clause in the Charter Party Agreement 
was not applicable to the alleged disputes arising from the Bills of Lading. G 
Division Bench upheld the order. Hence the present appeal. 
Allowing the appeal, the Court 
HELD: I.I. The intention of the parties to the Bill of Lading is to be 
699 
I-I 
700 
SUPREME COURT REPORTS (2001] SUPP. I S.C.R. 
A ascertained to consider whether the arbitration clause in a Charter Party 
Agreement was incorporated by reference in the Bill of Lading. The 
arbitration clause in the Charter Party Agreement is to be read in the manner 
provided in the incorporation clause of the Bill of Lading. While ascertaining 
the intention of the parties attempt should be made to give meaning and effect 
to the incorporation clause and not to invalidate or frustrate it giving a literal, 
B pedantic and technical reading of the clause. If on a construction of the 
arbitration clause of the Charter Party Agreement as incorporated in the Bill 
of Lading it does not lead to inconsistency or insensibility or absurdity then 
effect should be given to the intention of the parties and the arbitration clause 
as agreed should be made binding on parties to the Bill of Lading. If the 
C parties to the Bill of Lading being aware of the arbitration clause in the 
Charter Party Agreement have specifically incorporated the same in the 
conditions of the Bill of Lading than the intention of the parties to abide by 
the arbitration clause is clear. 1713-B, C, D, El 
Hamilton and Co. v. Mackie and Sons., Vol. V. 1888-9; The Times Law 
D Reports, page 677; T. W Thomas & Co. limited and Portsea Steamship 
Company, limited, 1912 Appeal cases page 1; In re: The "Marak", Lloyd's 
List Law Reports, 1964 Vol. 2; Astra Valiente Compania Naviera SA v. 
Pakistan Ministry of Food and Agriculture, (No. 2) The. Emmanuel 
Colocotronis (No2), The Queen's Bench Division (Commercial Court), (1982) 
E 
F 
1 All ER 823; Miramar Maritime Corporation and Ho/born Oil Trading 
ltd, (1984) Appeal Cases 676; Navigazione Alta Italia SPA v. Svenska 
Petroleum AB. (The "Nai Matteini"), 1988 Vol. I Lioyd's Law Reports 452; 
Pride Shipping Corporation v. Chung Hwa Pulp Corporation and Anr., (The 
Qinoussin Pride") 1991 Vol. 1 Lloyd's Law Reports 126; Dava/ Aciers 
D'usionor Et De Saci/or and Ors. v. Armare S.R.l. (The "Nerano") 1996 Vol 
I Lloyd's Law Reports page I; Atlas levante-linie Aktiengese/lschaft v. 
Gese/lschaji Fuer Getriedehandel A.G., and Bacher (The "Phonisien"), 1966 
Vol. I Lloyed's List Law Reports at p.150; Union of India v. D.M. Revri and 
Co., 119771 I SCR 483; A/imenta S.A. etc. v. National Agricultural 
Cooperative Marketing Federation of India ltd and Anr., 119871 I SCC 
G 615 and Dwarkadas and Co. v. Daluram Goganmull. AIR (38) (1951) Calcutta 
I 0

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