CASE BRIEF: VEDANTA LIMITED v. SHREEJI SHIPPING

CASE NAME	Vedanta Ltd. v. Shreeji Shipping, 2024 SCC OnLine Del 4871
CITATION	Arb. P. 342/2023
COURT	Delhi High Court
BENCH	Hon’ble Justice Jasmeet Singh
PETITIONER	Vedanta Limited
RESPONDENT	Shreeji Shipping
DECIDED ON	8th February, 2024

INTRODUCTION

The Indian Arbitration and Conciliation Act of 1996 and its application to arbitration law are at issue in the Vedanta Limited vs. Shreeji Shipping case. It primarily looks at how arbitration agreements should be interpreted, with particular attention to jurisdictional issues and the choice of the “seat” of arbitration. Section 29 of the Indian Contract Act of 1872, which deals with enforcing agreements that may be deemed ambiguous, is also examined concerning arbitration clauses. The Delhi High Court’s ruling upholds the arbitration’s fundamentals of party autonomy and offers guidance on the legality of contracts, including several possible arbitration venues. The ruling emphasizes clarity and the court’s location in establishing the arbitral proceedings’ supervisory authority.

FACTS OF THE CASE

To handle the shipment of coal from Kandla Port to Bhachau Plant and Bedi Port to Khambalia Plant, the parties executed a Purchase Order dated June 21, 2021, with No. 4800019319 (“Purchase Order”). Additionally, the Standard Terms and Conditions for Transport Agreement to the Purchase Order (referred to as the “Appendix”), which together form the “Contract,” were signed by the parties. The petitioner used the Arbitration Clause because there were discrepancies between the amount agreed to be transported and the amount transferred because of disagreements.

ISSUES RAISED

Whether the sole arbitrator can be appointed or is there a need for three arbitrators?
What will be the seat of arbitration?
Whether the claim of arbitrability and other issues be put before the Hon’ble Court?
If, in accordance with Section 29 of the Indian Contract Act, 1872, the arbitration clause, which included three possible arbitration locations (Delhi, Karnataka, and Goa), was void or valid for uncertainty.

ARGUMENTS FROM BOTH SIDES

Argument from the Petitioner

According to clause 10.1(ii), a review of the arbitration agreement, “local jurisdiction in Goa, local jurisdiction in Karnataka/Delhi,” will serve as the arbitration’s seat. Clause 11.2 contains the appropriate law and jurisdiction.
According to learned senior counsel Mr. Dutta, the petitioner submitted the purchase order in favor of the respondent by email on June 22, 2021. He adds that following the arbitration agreement, the petitioner submitted the respondent a mediation notice on August 18, 2022, and the parties also participated in mediation sessions.
Finally, he argues that the respondent’s invoices for the services rendered reference the purchase order. Accordingly, he claims that the parties have a written arbitration agreement as required by Section 7(4)(b) of the Arbitration and Conciliation Act of 1996.

Argument from the Respondent

According to Mr. Pahwa, the respondent’s knowledgeable senior counsel, the parties do not have an arbitration agreement. Additionally, he claims that the respondent never accepted the Purchase Order.
It is argued that the Petitioner issued a purchase order on June 21, 2021, and mailed it to the Respondent. The agreement was set to go into effect on 21 June 2021 and finish on October 31, 2021. Since the first vessel bringing the Petitioner’s coal had already arrived during the specified time frame, the Respondent had begun the unloading, handling, and delivering the coal before the provisions of the purchase order could even be read. The terms and conditions of the purchase order are identical to those of the letter of intent. Nevertheless, under Clause 10.1, an arbitration clause was added under the heading “Annexure-B Standard terms and conditions for Transport Agreement.”
It is argued that the Respondent never consented to be bound by any arbitration procedure and did not sign the purchase order. It is argued that the Respondent is forced to submit to arbitration under the guise of general terms and conditions. Nevertheless, the Respondent never executed the purchase order or engaged in any negotiations over it.
He adds that rather than in accordance with the Purchase Order, the respondent rendered the services in accordance with the Letter of Intent (LoI) dated 17.06.2021. The purchase order itself stated that it would only be enforceable and legitimate when both parties had properly signed it. To be honest, no one has ever signed the same.
The respondent’s learned counsel argues that Section 20 of the CPC should be used to establish jurisdiction because Clause 10.1(ii) is struck by Section 29 of the Indian Contract Act of 1872. He declares that no portion of the cause of action has emerged within this Court’s territorial jurisdiction and that the only courts with the authority to consider the Section 11 application are those in Gujarat, where the cause of action has arisen.

JUDGMENT

This Court does not have the authority to decide on the case’s merits at this point; it is only obligated to determine the existence of an arbitration agreement on its face. Admittedly, the petitioner emailed the respondent the purchase order on June 22, 2021, which the respondent denied. The letter dated June 22, 2021, contains the respondent’s email address, which is Shreeji@shreejishipping.in. The respondent’s invoices, which also make reference to the purchase order, likewise reflect this. As a result, the parties have an arbitration agreement.

In this instance, the arbitration clause expressly specifies that Goa, Karnataka, or Delhi will serve as the arbitration’s seat. It allows the parties to use one of these courts’ jurisdiction. Since the clause intended for the parties to select one of these jurisdictions to oversee the arbitration proceedings they invoked, it is clear and unambiguous. The same can be made sure of, or is assured of. Therefore, I believe that Section 29 of the ICA does not apply to arbitration clauses. The petition is granted for the aforementioned reasons, and the following guidelines are provided:

The Delhi International Arbitration Centre, Delhi High Court, Sher Shah Road, New Delhi, hereinafter referred to as the “DIAC,” will serve as the venue for the arbitration. The Fourth Schedule of the Arbitration & Conciliation Act 1996 will determine the learned arbitrator’s compensation.
Before beginning the reference, the learned arbitrator is asked to provide a declaration in accordance with Section 12 of the Act.
It is clear that the learned arbitrator has the authority to decide all of the parties’ rights and arguments, including those pertaining to the arbitrability of any claims, any other preliminary objections, and claims on the merits of either party’s dispute.

CONCLUSION

The case addresses how Section 29 of the Indian Contract Act of 1872 interacts with arbitration agreements and their enforceability under the Arbitration and Conciliation Act of 1996. The main question was whether an arbitration clause that offered Delhi, Karnataka, or Goa as possible seats generated ambiguity and was null and unlawful.

The Delhi High Court upheld the arbitration’s party autonomy concept. It emphasized that assigning several seats does not necessarily create ambiguity but rather offers flexibility, allowing parties to select the best jurisdiction in the event of a disagreement. The court cited the ruling in Indus Mobile Distribution v. Datawind Innovations, which established that the arbitration’s designated seat is an exclusive jurisdiction provision, giving the local courts supervisory power.

The Indian Contract Act’s Section 29, which declares contracts null and unenforceable if they are unclear or cannot be rendered certain, was also examined by the court. Since the parties could choose a seat from the specified possibilities, it was decided that the provision could be made certain in this instance. The ruling highlighted that the arbitration agreement’s adaptability aligns with business realities, especially when dealing with transactions involving many jurisdictions.

Since the court established the presumptive existence of a legitimate arbitration agreement, the clause was further validated by the appointment of an arbitrator under Section 11 of the Arbitration Act. This ruling demonstrates the judiciary’s support for arbitration and its desire to respect the parties’ intentions to settle disagreements outside the courtroom.

The decision in Vedanta Limited vs. Shreeji Shipping has important ramifications for commercial contract writing and arbitration law. It makes clear that arbitration agreements that offer several seats are not necessarily ambiguous if they include procedures for reaching a consensus on a particular seat. The case supports the effectiveness and adaptability of arbitration as a dispute resolution process by restating the legal precepts pertaining to the arbitration’s location and party autonomy. This ruling is consistent with India’s aim of strengthening the enforceability of business agreements and reducing judicial intervention in arbitration. It acts as a guide for practitioners creating arbitration clauses, ensuring they balance clarity and flexibility to pass legal muster.