Appeal No.700 of 1998,Arbitration Petition No.122 of 1998

5th April, 2007

Petitioner Counsel: Shri. HIROO ADVANI,Ms. DEEPA P. CHAVAN,M/s. Little & Co.
Respondent Counsel: D. R. ZAIWALLA,K. J. PRESSWALA,M/s. Eastley Lam & Co.

Cases Cited:
Rajinder Krishan Khanna Vs. Union of India, (1998)7 SCC 129 [Para 4,18]
M/s. Konkan Railway Corporation Ltd. Vs. M/s. Rani Construction P. Ltd., 2002(2) ALL MR 232 (S.C.)=AIR 2002 SC 778 [Para 9]
Narayan Prasad Lohia Vs. Nikunj Kumar Lohia, 2002(2) ALL MR 600 (S.C.)=AIR 2002 SC 1139 [Para 9]

JUDGMENT

R. M. S. KHANDEPARKAR, J.:- This appeal arises from the order dated 30-4-1998 passed in Arbitration Petition No.122 of 1998. By the impugned order, the appellants' petition under Section 34 of the Arbitration and Conciliation Act, 1996, hereinafter called as "the said Act", has been dismissed. The challenge in the matter is three-fold. Firstly, that the award declared by the arbitrator is beyond the scope of the reference to arbitration. Secondly, the arbitrator failed to consider the important and relevant document, namely, the letter dated 15-7-1996 while the document, if considered, the conclusions arrived at by the learned arbitrator would have been different from those arrived at. Thirdly, the finding of the arbitrator about the shortage of 1350 metric ton (for short, M.T.) in loading the material is contrary to the materials on record in as much that in fact the shortage was only to the extent of 350 M.T..

2. The respondents herein received an order on 16-4-1996 from a French buyer S.I. Lessafre for export of 60,000 M.T. of molasses, to be shipped in three lots of 20,000 M.T. each. The buyer agreed to pay the actual freight and demurrage charges in addition to the price of US$ 40 per M.T. FOB, JNPT. Negotiations were held between the appellants and the respondents for handling and storage of the molasses in the tanks of the appellants at JNPT. Consequent to such negotiations, the appellants sent MoU dated 25-5-1996 to the respondents incorporating the terms and conditions in relation to such contract. The arrangement was to be for twelve months with a clause entitling termination by 30 days' notice by either of the parties. The storage charges were payable at the rate of Rs.250/- per M.T. in the first week of every month in advance and one month's charges were to be deposited with the appellants, to be returned after 30 days from the date of termination of the contract. On 30-5-1996 the respondents accepted the MoU subject to the modification suggested in Clauses 11 and 14 regarding the rate, guarantee for loading and for a bank guarantee for performance in lieu of deposit. The respondents also forwarded an amount of Rs.50,00,000/- towards the advance payment for the month of June, 1996 and after survey of the tanks, started storing molasses from the first week of June, 1996. On 5-6-1996 the respondents forwarded bank guarantee along with a letter stating that the tank would be vacated by 7-8-1996 and in the event of the respondents failing to do so, the bank would pay Rs.50,00,000/- being the rent for August, 1996. On 6-7-1996 and 19-7-1996 the respondents paid a sum of Rs.27,00,000/- and 20,00,000/- respectively to the appellants towards the storage charges. Consequent to the request by the appellants, the loading of molasses began by direct pipeline method from 24-7-1996 and it was completed on 1-8-1996. On 1-8-1996 the appellants issued a debit note for pumping charges at the rate of Rs.75/- per M.T.. The respondents under the letter dated 5-8-1996 disputed the liability for storage charges as also for pumping charges and also claimed about Rs.23,00,000/- being due from the appellants. The respondents also refused to pay any further amount to the appellants.

3. The respondents invoked the arbitration clause under the letter dated 3-9-1996 and referred the same to the sole arbitrator Shri. Justice M. L. Pendse (Retd.). On 23-10-1996 the respondents filed statement of claim for Rs.405,25,60,001/- on various grounds including sum of Rs.1,86,23,950/- being the value of the molasses lying in the tank. The appellants filed their reply and counter-claim on 1-11-1996. On 11-11-1996 leakage developed in one of the tanks and consequently the molasses started leaking out and they were transferred to another tank. The respondents applied for amendment of the claim and made further claim of Rs.3,32,01,792/- on the basis of loss of the quantity of molasses. The application for amendment was allowed. On 4-1-1997 the appellants made an application to the arbitrator for sale of the molasses during the pendency of the arbitration proceedings and the appellants were allowed to sell the molasses on condition that the sale proceeds should be deposited with the appellants' Solicitors. The respondents, however, on 3-2-1997 applied for review of the order dated 24-1-1997 which was allowed. In February, 1997 a sum of Rs.2,14,40,875/- was deposited with the appellants' Solicitors consequent to export of the molasses in terms of the order dated 3-2-1997. The respondents amended their statement of claim on 5-3-1997 and made additional claim in respect of shipment pursuant to the order dated 3-2-1997. The appellants filed their reply on 26-3-1997. On 27-3-1997, the appellants amended their counter-claim to Rs.5,83,85,081/- being the amount claimed by Bannari Amman on account of non-supply of goods. Under the award dated 8-12-1997, it was directed that:

(i) the appellants should pay to the respondents a sum of Rs.2,41,53,827/- along with interest @ 18% p.a. from the date of the award till realisation in addition to costs of Rs.10,000/-;

(ii) the respondents should pay to the appellants a sum of Rs.2,14,40,875/- along with interest @ 18% p.a. from the date of award till realisation and costs of Rs.20,000/-, and

(iii) the amount which was deposited by the respondents in terms of the order dated 3-2-1997 be allowed to be received by the respondents along with the interest accrued thereon;

The arbitrator corrected the award under Section 33 of the said Act on 23-1-1998 and reduced the amount from 2,41,53,827/- to Rs.2,18,48,176/- being payable by the appellants to the respondents. The appellants thereafter filed the Arbitration Petition No.122 of 1998 under Section 34 of the said Act which came to be dismissed by the impugned order. Hence, the present appeal.

4. The learned Advocate appearing for the appellants, drawing attention to the letter dated 3-9-1996 of the respondents invoking the arbitration clause, submitted that the reference to arbitration was confined to the points of dispute sought to be raised under the said letter and the same did not include any claim arising out of the second shipment and hence the dispute relating to the second shipment was beyond the scope of the reference. It being well-settled that the arbitrator cannot travel beyond the scope of the reference, the learned arbitrator, in the matter in hand, has misconducted himself in entertaining the claim arising out of the said second shipment in the arbitration proceedings, however, the same has been totally ignored by the learned single Judge. The scope of the dispute being confined to the reference made under the letter dated 3-9-1996, the award with reference to the dispute pertaining to the second shipment is beyond the scope of the reference and is ab initio bad-in-law. Reliance is sought to be placed in the decision in the matter of Rajinder Krishan Khanna and others Vs. Union of India and others, reported in (1998)7 SCC 129. Referring to the letter dated 15-7-1996, it is sought to be contended that the appellants had never guaranteed pumping rate of Rs.200/- M.T. per hour in the ship and there was no concluded contract in that regard between the parties and hence the arbitrator could not have presumed existence of any such agreement between the parties. The award to that extent is contrary to the materials on record and this aspect has been totally ignored by the learned single Judge. Thirdly, referring to the Fax message dated 1-8-1996 addressed to the respondents, it is sought to be contended that the acknowledgement by the shipper ex facie reveals that the quantity which was to be loaded was only 19,000 M.T. and there was shortage of 350 M.T. and being so the learned arbitrator could not have held that the shortage was of 1,350 M.T.. The finding is totally contrary to the materials on record and the same has also been ignored by the learned single Judge. In other words, it is the contention on behalf of the appellants that inspite of sufficient materials revealing the misconduct on the part of the arbitrator in awarding the claim to the extent it has been awarded, the learned single Judge erred in dismissing the arbitration petition.

5. To ascertain whether the learned single Judge erred in rejecting the challenge to the award in question and in refusing to set it aside on the grounds canvassed, it is necessary to consider the following points:

(i) Whether the point regarding the exclusion of the dispute arising out of the second shipment from the jurisdiction of the learned arbitrator was raised before the learned arbitrator ?

(ii) Whether the claim arising out of the second shipment was within or beyond the jurisdiction of the learned arbitrator for adjudication of the said dispute between the parties ?

(iii) Whether under the agreement between the parties, the appellants had guaranteed pumping rate of Rs.200/- M.T. per hour?

(iv) Whether the shortage in loading was 350 M.T. and not 1350 M.T., as contended by the appellants ?

6. Perusal of the impugned order nowhere discloses any objection regarding the scope of dispute for arbitration having been raised before the learned arbitrator. In fact, considering the rival contentions in the matter, issues were framed by the learned arbitrator which included the issue relating to the dispute arising out of the second shipment. The issue was never objected to by the appellants at any stage before the learned arbitrator. The contention that a particular claim cannot be considered because it had arisen after the specified period is different from the contention that the arbitrator could not have adjudicated upon the dispute on account of the fact that the same is beyond the scope of the reference. In a given case the arbitrator may not be entitled to adjudicate an issue on account of certain terms and conditions of the agreement between the parties or on account of the circumstances warranting exclusion of the claim from arbitration. But unless such terms and conditions of the agreement between the parties or the circumstances warranting the exclusion are clearly pleaded and established, mere submission that the claim relates to a particular period, that itself will not lead to the conclusion that the same is beyond the scope of reference.

7. The jurisdiction of an arbitrator depends upon the dispute referred to him for arbitration. However, the scope of arbitration is not always confined to the initial dispute referred to arbitration. By consent, either expressly or impliedly, it can be extended in the course of the proceedings before the arbitrator, firstly at the time of filing of the statement of claim and that of defence by the parties and secondly, by way of amendment. Section 7(4) of the said Act reads thus: provisions of law read thus :

"7(4) An arbitration agreement shall be in writing if it is contained in -

(a) a document signed by the parties;

(b) an exchange of letters, telex, telegrams or other means of telecommunication which provide a record of the agreement; or

(c) an exchange of statements of claim and defence in which the existence of the agreement is alleged by one party and not denied by the other."

Obviously therefore, even in the course of filing of the pleadings in the form of statement of claim or statement of defence, if the pleas are raised which originate from or relate to the subject-matter of dispute, then such pleas could form part of the dispute for adjudication before the arbitrator, unless in the statement of either of the parties it is specifically denied or objected to on the ground that the plea sought to be raised by the other party is beyond the scope of the dispute for adjudication by the arbitrator being outside the scope of reference. In other words, in case of enlargement of the scope of dispute in the statement of claim in comparison to the one referred to, and in the absence of any objection by the other party, it could be deemed to have been conceded to form the subject-matter of dispute for adjudication before the arbitral Tribunal. This is abundantly clear from Section 16(2) r/w Section 4 of the said Act. Undoubtedly, Section 16(2) refers to the point of jurisdiction. However, Section 16(2) r/w Section 16(1) would disclose that the point of jurisdiction thereunder would include any controversy as regards the existence or validity of arbitration agreement which would obviously cover any plea regarding exclusion of the subject-matter from arbitration. And in terms of Section 4 of the said Act, the party would be deemed to have waived the right to raise objection regarding the exclusion of the subject-matter from arbitration.

8. Section 23 of the said Act provides thus :

"23. Statement of claim and defence -

(1) ......

(2) The parties may submit with their statements all documents they consider to be relevant or may add a reference to the documents or other evidence they will submit.

(3) Unless otherwise agreed by the parties, either party may amend or supplement his claim or...."

Obviously therefore, the claim or defence can be amended during the pendency of the proceedings before the arbitrator. Therefore it cannot be said that the scope of arbitration would always remain restricted to the one initially referred to. On the contrary, it can be modified if not objected by the opposite party. It can also be modified by way of amendment.

9. It was clearly held by the Apex Court in M/s. Konkan Railway Corporation Ltd. and another Vs. M/s. Rani Construction P. Ltd., reported in AIR 2002 SC 778 : [2002(2) ALL MR 232 (S.C.)] that Section 16 of the said Act enables the arbitral Tribunal to rule on its own jurisdiction. Further in Narayan Prasad Lohia Vs. Nikunj Kumar Lohia and others, reported in AIR 2002 SC 1139 : [2002(2) ALL MR 600 (S.C.)], it was ruled that a party to the arbitration proceedings is free not to raise any objection about the jurisdiction of the arbitral Tribunal to adjudicate upon the dispute or any fact thereof within the time prescribed under Section 16(2), however, if the party chooses not to raise the objection, then there will be a deemed waiver of such objection in view of the provisions of law comprised under Section 4 of the said Act.

10. It is the contention of the learned Advocate for the appellants that there was a specific objection raised by the appellants in their statement of defence and in that regard attention was sought to be drawn to the following statement of defence filed on behalf of the appellants :

"In any event and without prejudice to the aforesaid, there was no agreement between the claimant and the respondent about the rate of pumping the second consignment and hence question of default does not arise. In any event and without prejudice to the aforesaid, the claim of demurrage is beyond the scope of arbitration agreement between the parties and hence beyond the scope of present arbitration."

11. The above quoted statement refers to the defence plea about the absence of liability on account of there being no agreement between the parties regarding the rate of pumping of the second consignment and it did not relate to exclusion of the subject-matter from the scope of arbitration. As regards the claim of demurrage, certainly there was specific submission that it was beyond the scope of the arbitration agreement and therefore the same being beyond the scope of arbitration. In other words, the defence was to the effect that the claim for demurrage was beyond the scope of arbitration proceedings since the same do not form part of the arbitration agreement between the parties.

12. The arbitration agreement between the parties is comprised under Clause 17 of the agreement between the parties and it reads thus:

"17. Arbitration : All dispute or difference whatsoever arising between the parties out of or relating to the contract/MOU meaning and operations or effects of the breach thereof, shall be settled by arbitration subject to the Bombay Jurisdiction in accordance with the rules of arbitration of India. Award made in pursuance thereof shall be binding on the parties to the contract/MOU."

13. The dispute was referred to arbitration in terms of Clause 17 of the agreement between the parties under the letter dated 3-9-1996. In the said letter, the disputes and differences were sought to be summarised as under :

(a) Whether TDS to be deducted at 23% or 2.3%;

(b) excess rental paid to the appellants for storage of 16.500 M.T. as against the provision for storage of 20,000 M.T. under the agreement;

(c) pumping of 100 M.T. from lorries to the storage tanks per day;

(d) pumping of 200 M.T. per hour from storage tanks to the ship;

(e) the detention charges paid by the respondents as a consequence of the appellants' failure to hold 20,000 M.T. as agreed upon; and

(f) other damages suffered by the respondents.

It was also stated in the said letter that by virtue of failure on the part of the appellants in pumping molasses on to the ship which was to have berthed on 31-8-1996, it could not do so and consequently the respondents incurred loss over a sum of Rs.17 lakhs per day. Further, that reconciliation of the accounts disclosed certain amount was due and payable to the respondents and that if the ship had to return with dead freight i.e. without loading due to refusal on the part of the appellants to pump the molasses on to the ship, the respondents would incur loss of US$ 99,00,00.00 which would be required to be reimbursed by the appellants to the respondents. Consequent to the said letter, the matter was referred to arbitration and during the pendency of the arbitration proceedings, the statement of claim making the total claim of Rs.405,25,6001/- was filed by the respondents on 23-10-1996 before the learned arbitrator. The appellants filed their reply on 1-11-1996 along with their counter-claim amounting to a sum of Rs.1,56,07,508/- and Rs.1,75,000/-. Both, the claim and the counter-claim were subsequently amended seeking additional amounts. During the pendency of the arbitration proceedings, the respondents moved for an interim relief by an application dated 29-11-1996 on the ground that the tank No.101 had started leaking and they proposed to transfer the molasses to another tank. The respondents requested that their surveyors be directed to carry out the survey to ascertain the conditions of the tank Nos.101 and 102 as also to ascertain the condition of the molasses and by consent order dated 4-12-1996 the learned arbitrator directed SGS India to inspect the tank No.101 and submit the report. On 17-1-1997 the appellants filed an application before the learned arbitrator requesting that the molasses for which lien was claimed should be sold through an independent agency while claiming that the quality of the molasses would be deteriorated if the storage thereof is prolonged. Thereupon the appellants were permitted under the order dated 24-1-1997 by the learned arbitrator to sell the molasses at the rate of US$ 35 per M.T. FOB. On 3-2-1997 the respondents filed an application for review of the said order expressing willingness to export the molasses at the rate of US$ 42 per M.T. FOB and consequently the said order was reviewed allowing the respondents to export the said molasses and to deposit the sale proceeds with the attorneys of the appellants after deducting Rs.2,00,000/- towards the expenses. Accordingly, 14,349 M.T. of molasses was exported in the first week of February, 1997. On complaint by the respondents about failure to deposit the amount of the sale proceeds by the respondents, on 31-3-1997 the learned arbitrator directed the respondents to deposit the entire sale price. On 22-4-1997 the respondents under their application sought direction for deposit of the amount of Rs.63,42,336/- towards the value of the molasses which had leaked from the tank No.102 and an amount of Rs.19,06,529.04 ps. towards the expenses incurred for export and Rs.36,60,000/- towards the demurrage in respect of the said export. The said application was rejected while holding that the claim in that regard would be considered at the time of passing of the award.

14. The learned arbitrator based on the pleadings and the contentions which were sought to be raised and canvassed by the parties, framed various issues and as regards the second shipment, he framed the issue No.15 as under:

"15. Whether the Claimants have suffered any loss arising out of the second shipment and if so, whether the Claimants are entitled to claim damages claimed in para 39 and 39-A of amended claim ?"

The above issue has been answered in the affirmative and it has been held that the claimants/respondents herein are entitled only to the demurrage, insurance and excise supervision charges.

15. Plain reading of the letter dated 3-9-1996, the award declared by the learned arbitrator and the settlement of claims and defences, applications for amendment and the amended claim, it is apparent that the parties voluntarily sought to expand the scope of arbitration which was initially referred to under the letter dated 3-9-1996 to include the disputes arising in relation to the second shipment also. As already seen above, under the provisions of law comprised under Section 7(4) of the said Act, the scope of arbitration need not be restricted to the dispute initially referred to arbitration and it can also include the dispute covered by the pleadings of the parties comprised of the statements of claim and defence. It is not in dispute that the parties went for adjudication of their disputes after completion of their pleadings in the form of statements of claim and defence, as amended prior to commencement of the actual adjudication proceedings in the form of consideration of evidence by the learned arbitrator, and there was no objection raised before the arbitrator for dealing with the disputes arising out of the second shipment which formed part of the pleadings by both the parties. In spite of the fact that no issue was framed as regards the contention about the point of demurrage being beyond the scope of arbitration, the appellants did not raise any objection on that count. The appellants did not insist for framing of the said issue and or for exclusion from adjudication of the issues arising out of the second shipment. Apart from making the statement quoted above, the appellants did not pursue the said objection any further. Obviously it must be held that the appellants had waived their objection in that regard. It is too late in the day for the appellants to raise dispute about the scope of arbitration and to insist that it cannot extend beyond the one referred under the letter dated 3-9-1996.

16. The appellants had not shown any objection or reluctance for participating in the adjudication process before the learned arbitrator in relation to the disputes arising out of the second shipment. On the contrary, the appellants volunteered to place on record the necessary materials in support of their allegations in answer to the claim made in that regard by the respondents, and there being no objection raised as regards the absence of any issue being framed by the arbitrator on the aspect of exclusion of the dispute in relation to the second shipment, it is to be held that the scope of arbitration included the disputes arising out of the second shipment. In view of Section 16 of the said Act, it cannot be disputed that the arbitral Tribunal is fully competent to rule on its own jurisdiction including on the objections which could be raised about the absence or validity of the arbitration agreement as also about the exclusion of any part of dispute from the arbitration proceedings. Obviously therefore, in case any party to the proceedings wants to contend that the dispute or any part thereof falls beyond the scope of arbitration in the proceedings before the learned arbitrator, it is necessary for such party to raise specific objection in that regard and invite the learned arbitrator to rule on such objection. Failure in that regard by such a party will have to be construed as waiver on the part of such a party to raise such objection.

17. If one peruses the MoU dated 25-5-1996 along with the letter dated 30-5-1996 by the respondents to the appellants, it is abundantly clear that there was a clear agreement between the parties that on the ship taking berth, the respondents had guaranteed minimum pumping rate of Rs.200/- per T/hour into the ship round the clock. The Clause 11 of the MoU r/w the letter dated 30-5-1996 makes it abundantly clear. It was never in dispute that the MoU was finalised on 30-5-1996 with the necessary modifications, as stated in the letter dated 30-5-1996. Being so, the objections which are sought to be raised with reference to the Clause stated above, are totally devoid of substance apart from the fact that the objections do not relate to the aspect of exclusion from the arbitral proceedings but they relate to the merits of the case. The objection which was raised as regards the entitlement of the party to claim amount related to a dispute about the exact rate of the pumping for the purpose of loading in the ship and not that the subject-matter was outside the scope of arbitration. If the dispute is covered by the agreement and on that count it falls within the scope of arbitration, certainly the learned arbitrator will have jurisdiction to deal with the subject. Whether on that subject, based on the materials placed before the arbitrator, the party would be entitled to claim the amount claimed or not is totally different from contending that the arbitrator cannot even entertain the dispute for arbitration. That was not the objection canvassed by the appellants before the learned arbitrator. On the contrary, the appellants had submitted themselves to the arbitration proceedings in relation to the dispute arising out of the second shipment also. Hence there is absolutely no substance in the first ground of challenge.

18. The learned Advocate for the appellants has sought to rely upon the decision of the Apex Court in Rajinder Krishan Khanna and others Vs. Union of India and others, reported in (1998)7 SCC 129 in support of the contention about the dispute being beyond the scope of reference. The decision is of no help to the appellants. The said decision was in the peculiar facts of that case. Therein, the matter was referred to arbitration pursuant to an order of the Court. The terms of arbitration in accordance with the order of the Court did not include any claim for damages for the loss of potential of the lands and there was no averment or particulars in that behalf disclosed in the order of reference. In those circumstances, the Apex Court had held that:

"It is difficult to see how, in the circumstances, the second respondent can be said to have acquiesced in the determination of damages for the alleged loss of potential of the appellants' land. All that was referred to by learned counsel for the appellants in this behalf was the statement in the award of the points for determination. That the first of the points relates to compensation for damages suffered by the appellants does not by itself support learned counsel's submission for compensation for damage to the appellants' residential house, crops and mango garden was within the scope of the reference. The first point must be read in the light of this restricted claim and not as encompassing the claim for compensation for the alleged lost potential of the land."

The para 13 of the said Judgment clearly discloses that :

"13. The grievance in the writ petition was that the overflow of effluents and slurry from a pond in the second respondent's premises due to breaches in the earthen bund thereof had damaged the writ petitioners' lands, crops, mango crops, houses, etc. The reliefs the writ petition sought, and this is most important, were:

(a) a direction to the second respondent to close its plant;

(b) damages from the second respondent in the sum of Rs.1 crore for the destruction of

(i) residential houses,

(ii) crops and

(iii) mango garden;

(c) a direction to the second respondent to reclaim the writ petitioners' agricultural lands that had been rendered unfit for cultivation; and

(d) a direction to the first and third respondents to take civil and criminal action against the second respondent."

Plain reading of the decision would disclose that the claim relating to damages for the alleged loss of potential of lands was out of the scope of arbitration and it was never referred to arbitration. In those circumstances, the Apex Court had held that the arbitrator could not have declared award in that regard. The said decision has no application to the facts of the case in hand, as stated above.

19. As regards the second ground of challenge pertaining to the failure on the part of the learned arbitrator to take into consideration the letter dated 15-7-1996, it is to be noted that the letter in question can have no impact whatsoever either on the analysis of the materials or the conclusions which have been arrived at by the arbitrator. It is pertinent to note that the letter dated 15-7-1996 was written after the parties had arrived at the agreement and had already acted upon the said agreement. Mere doubt or some difficulty expressed in the said letter about possibility of the appellants to pay the rate agreed upon nowhere discloses that there was any modification in the terms of the agreement. The letter merely stated that :

"You will appreciate that it is not possible for us to confirm the pumping rate. Needless to say we shall attempt to get as high a rate as possible."

20. With reference to the said letter, it is sought to be contended that the pumping rate of Rs.200/- per T/hour as was sought to be incorporated in the MoU under the letter dated 30-5-1996 was never accepted and agreed upon by the appellants and it was specifically informed so to the respondents under the said letter. The intimation that it is not possible to confirm the pumping rate and that they would attempt to get as high a rate as possible by itself, and that too after the agreement finalised on 30-5-1996 was acted upon by the parties, cannot amount to modification of Clause 11 of the MoU under the letter dated 30-5-1996. It is to be noted that consequent to the letter dated 30-5-1996 by which the MoU was sought to be finalised between the parties, there was no adverse reaction on the part of the appellants nor there was any act or action on the part of the appellants contrary to what was accepted by the respondents under the letter dated 30-5-1996 in relation to the terms of the MoU. On the contrary, the parties had acted upon the said agreement as the storage and the pumping of the molasses on to the ship had already commenced in the month of June itself in terms of the said agreement between the parties. The parties having acted upon the agreement as was finalised by the letter dated 30-5-1996, unless it is shown by the appellants that there was specific modification of the said MoU and that it was contrary to what was confirmed by the letter dated 30-5-1996, merely because the appellants wrote a letter dated 15-7-1996 expressing some difficulties about the rate in terms of Clause 11 of the MoU, that by itself cannot amount to saying that Clause 11 of the MoU was modified or that it was not agreed upon between the parties.

21. There is yet another reason to reject the contention sought to be raised on the basis of the letter dated 15-7-1996. The said letter apparently was written with reference to some fax message received by either of the letter on the same day from Mr. Pilani. However, the appellants are unable to point out what was the said fax message. Apparently, the letter has nothing to do with the modification of the MoU or the terms thereof. At the same time, the letter specifically states that "As per the original plan we were to locate ......" this apparently discloses a clear admission on the part of the appellants that there was already an "original plan" decided by the parties. Consequently it had to be in terms of the agreement finalised by the letter dated 30-5-1996 as except the said agreement no other agreement or plan is either pleaded or proved. Obviously therefore, there was a concluded contract in relation to the matter in issue and apart from the MoU dated 25-5-1996 r/w the letter dated 30-5-1996, no other MoU has been brought to our notice nor it is relied upon at any stage of the proceedings. Being so, the second ground of challenge also falls flat.

22. As regards the third ground of challenge, attention is drawn to the shipper's communication dated 1-8-1996 wherein the communication states that vessel was to receive 19,000 M.T. of cargo of molasses and whereas the quantity shipped was 18,619.589 M.T.. It is well-settled that to ascertain the agreed quantity to be loaded in a ship, one has to refer to the charter party document. The primary evidence regarding the capacity of the vessel to load depends upon the charter party and the information in that regard disclosed in such charter party. One fails to understand why no reference is being made by the appellants to the charter party and the secondary evidence in that regard is sought to be relied upon without ascertaining as to whether the letter dated 1-8-1996 refers to the total quantity to be loaded in terms of the charter party document or not. The letter dated 1-8-1996 cannot replace the contents of the charter party document which is the best evidence which could reveal the total quantity of the molasses which was required to be loaded in the ship in terms of the agreement between the parties. Considering the same, no fault can be found with the finding arrived at by the arbitrator as well as the learned single Judge while dealing with the objections in that regard filed by the appellants.

23. For the reasons stated above, and as no other ground of challenge is canvassed, there is no case for interference in the impugned order and therefore the appeal fails and is hereby dismissed with no order as to costs.

Appeal dismissed.