Title: This is a landmark case which provides for the validity of the online arbitration agreement which constituted through emails and by the representatives of the parties and  not physically signed but acknowledged through  e-mails.

Case Name: Trimex International FZE Ltd. Dubai  v.Vedanta Aluminium Ltd., India

Citation: Arbitration Petition No. 10 Of 2009

Court: In The Supreme Court Of India, Civil Original Jurisdiction

Judge: Justice P. Sathasivam

Decided On: January 22, 2010.  

Case Laws:

·   Mamidoil-Jetoil Greek Petroleum Co. S.A. v. Okta Crude Oil Refinery AD, (2001) Vol. 2 Lloyd’s Law Reports 76 at p. 89

·   Wilson Smithett & Cape (Sugar) Ltd. vs. Bangladesh Sugar and Food Industries Corporation, (1986) Vol. 1 Lloyd’s Law Reports 378 at p. 386.

·   Shankarlal Narayandas Mundade v. The New Mofussil Co. Ltd. & Ors. AIR 1946 PC 97

·   Dresser Rand S.A. v. Bindal Agro Chem Ltd., (2006) 1 SCC 751

·   Smita Conductors Ltd. vs. Euro Alloys Ltd. (2001) 7 SCC 728

·   Shakti Bhog Foods Limited vs. Kola Shipping Limited, (2009) 2 SCC 134

·   Great Offshore Ltd. vs. Iranian Offshore Engg. & Construction Co., (2008) 14 SCC 240

Brief Facts of the case

1. The petitioner company was a Dubai based company and engaged in trading of minerals all around the world

2. Based on the orders from their purchasers they procure the minerals, negotiate the deal and ship the minerals across the world.

3. Respondent’s company was a India based company and mainly engaged in aluminium mineral for their major operations

4. On 15.10.2007 the Trimex International FZE Ltd. Dubai send an offer through an email to the Vedanta Aluminium Ltd., India for supplying bauxite mineral to them

5. On 16.10.2007after sending various emails the Vedanta Aluminium Ltd conveyed their acceptance for the supply of 5 shipments of Bauxite to be supplied from Australia toVizag/Kakinada.

6. On the basis of this acceptance both the  parties concluded the deal on the same day in Australia  and entered into a binding Charter Party Agreement with the ship owner in Oslo on 17.10.2007.

7. On 26.10.2007 representatives of both parties had a meeting regarding the deal at Lanjigarh, Orissa and minutes of the meeting was signed by them.

8. Acceptance of the offer was acknowledged by Vedanta Aluminium Ltd in this meeting as per the minutes of the meeting.

9. On 08.11.2007 a formal agreement was sent by the Vendanta Aluminium to Trimex International FZE Ltd. Dubai including the clause of arbitration which was accepted by the supplier co and sent back with some changes.

10.  On 09.11.2007 Trimex International FZE Ltd. Dubai entered into a formal agreement with Bauxite sales Agreement with Rio Tinto of Australia for the supply of 225000 tonnes of Bauxite.

11.  On 12.11.2007, vedanta aluminum requested the trimex international to hold the consignment until further notice.

12.  On 13.11.2007 trimex international informed to Vendanta aluminum that it not possible for them to hold the consignment and requested them to sign a purchase order.

13.  On 13.11.2007 itself, the ship owners nominated the ship for loading the material on 28.11.2007.

14.  The petitioner terminated the contract on 16.11.2007 reserving the right to claim for damages. On 18.11.2007, the petitioner formally informed the ship owners about the cancellation of the carriage.

15.  On 19.11.2007, the ship owners made a claim of 1 million US$ towards commercial settlement.

16.  On 30.11.2007,the petitioner informed the respondent to pay a sum of 1 million US$ towards compensation for loss on account of the estimated loss for five shipments and 0.8 million towards compensation for loss of profit and other costs and expenses for cancellation of the order.

17.  Vedanta Aluminum rejected the claims made by Trimex International FZE Ltd. Dubai.

18.  As the compensation not paid the ship owners sent a notice to Trimex International FZE Ltd. Dubai to pay a lump-sum of 600,000 US$ to be paid in two installments.

19.  Trimex International FZE Ltd. Dubai paid the amount to the ship owners in two installments on 27.02.2008 and 31.03.2008.

20.  On 01.09.2008 Trimex International FZE Ltd. Served a notice for the claim-cum arbitration to the Vedanta Aluminum to make the payment immediately otherwise treat the notice for referring the

dispute to arbitration as per Clause 29 of the Purchase Order .

21.  And they informed about nominating Mr. Shiv Shankar Bhatt, a retired Judge of the Karnataka High Court as the arbitrator from their side and requested the respondent to nominate their own arbitrator within 30 days.

22.  On 14.11.2008 Aluminum Ltd rejected the arbitration notice stating that there was no concluded contract between the parties.

23.   Hence the Trimex International FZE Ltd  filed the present petition for appointment of an Arbitrator.

Issue

·       Whether there exist a valid contract between the respondent and the petitioner?

·   Whether the arbitrator appointed by the petitioner is in accordance with the contract or not?

·   Whether the online arbitration agreement which is not physically signed is valid or not?

Contentions of the respondent

·   According to Aluminum Ltd as seen from the counter affidavit, there was no concluded contract between the parties.

·   The parties were not at ad idem in respect of various essential features of the transaction.

·   The draft contract received from the Trimex International FZE Ltd was yet to be accepted/confirmed by the respondent.

·   There were two options provided for the shipment and the respondent opted for the  shipments.

·   All other essentials and conditions like The product specifications, price, inclusions in the contract price,delivery point, insurance, commencement and conclusion dates of the contract, transfer of title, quality check and demurrage are all factors were into negotiation  which makes it evident that the contract was not concluded.

·   There were a lot ambiguities regarding the contract which were not clear till the end. which the respondent even informed through the mails.

·   They pointed out that the agreement between the ship owner and the petitioner was a mere draft and nothing else.

Contentions of the Petitioner

·   According to him that there existed a binding contract between the parties as also a binding arbitration agreement is wholly erroneous and misleading.

·   The purchase order made by the petitioner was because of the contract made between the petitioner and the respondent.

·   All the transaction made for acquiring bauxite from the supplier was made because of the agreement.

·   The product was being analysed to determine its utility value for the respondent at its plant on 12.11.2007 as they pleaded that things were under negotiation.

·   The petitioner has to suffer a lot due to this hence they initiated the arbitration proceedings to enforce the liability over them.

·   The counsel appearing on the behalf of the petitioner pleaded that the contract stood to be completed as there was a proper acceptance and offer of the contract.

Ratio

·   As after looking into various conversation held between the Petitioner and the respondent court was of the opinion that the agreement contain all the valid essentials of a contract.

·   All the conversation between the parties provides for that both of them were fully aware of the facts and conditions.

·   As there was a clear mentioning of the Arbitration clause the court provides for that there exist a valid agreement regarding arbitration between the parties

·   They stated that with the help of valid emails it can be establish that the respondent was fully aware regarding the shipment

·   There exists no Charter Party Agreements as minor changes does not constitutes that The agreement actually signed by the parties does not mean the draft does not exists.

·   All the evidences and the ratio of the court is that minor changes does not changes the intention of the parties

·   It is essential that the intention of the parties be considered in order to conclude whether parties were ad idem as far as adopting arbitration as a method of dispute resolution was concerned.

·   In those circumstances, the stand of the respondent that in the absence of signed contract, the arbitration clause cannot be relied upon is liable to be rejected.

·   This Court upholding the judgment of the Bombay High Court held that the arbitration clause in the agreement that was exchanged between the parties was binding.

·   It is clear that in the absence of signed agreement between the parties, it would be possible to infer from various documents duly approved and signed by the parties in the form of exchange of e-mails, letter, telex, telegrams and other means of tele-communication .

Held

·   Arbitration petition is allowed on the above terms and the  appointment of the Arbitrator was according to the contract.