Court affirms the minority view, noting no provision for demurrage charges in the contract between Vizag Seaport Private Limited and Steel Authority of India Limited.
In a significant ruling, the Calcutta High Court dismissed an appeal by Vizag Seaport Private Limited (VSPL) and upheld a minority arbitral award in favor of Steel Authority of India Limited (SAIL). The court set aside a majority arbitral award that had imposed demurrage charges on SAIL, determining that such charges lacked contractual foundation.
The dispute originated from a Short Term Agreement (STA) signed in 2008, where VSPL was tasked with handling coal cargo for SAIL at Visakhapatnam Port. Disagreements arose over VSPL’s demand for demurrage charges for cargo allegedly stored beyond the contractual period. A three-member arbitral tribunal delivered a split verdict, with the majority supporting VSPL’s claim. However, SAIL contested this through the judicial system.
The division bench of Justices Arijit Banerjee and Om Narayan Rai, in their judgment, emphasized that the STA did not include any provision for demurrage charges. The court observed that the STA and related contractual documents did not mention the applicability of the Major Port Trusts Act, 1963, or TAMP guidelines for such charges. The court noted that demurrage charges, being compensatory in nature, must be explicitly stated in the contract, which was not the case here.
The court further remarked that the majority award had erroneously introduced terms not agreed upon by the parties, contravening the principles of arbitration. It was highlighted that the minority view correctly interpreted the contract as excluding demurrage charges and that any imposition of such charges without contractual basis was unjustified.
Moreover, the court pointed out that VSPL’s failure to raise the issue of demurrage charges during contractual review meetings amounted to an implied waiver of any right to claim such charges. This decision reinforces the principle that arbitral tribunals must strictly adhere to the terms of the contract and cannot introduce new terms post-facto.
This judgment underscores the judiciary’s role in ensuring that arbitral awards align with contractual agreements and statutory provisions, maintaining the sanctity of contractual obligations and arbitration processes.
Bottom line:-
Arbitration and Conciliation Act, 1996 - Section 34 - Majority arbitral award set aside as it imposed demurrage charges without contractual basis. Minority award upheld, finding no evidence or contractual stipulation for demurrage charges.
Statutory provision(s):
Arbitration and Conciliation Act, 1996 - Sections 34, 37
