Vedanta Ltd v. Shreeji Shipping: Arbitration Case

INTRODUCTION

The Indian Arbitration and Conciliation Act of 1996 applies to arbitration law in the Vedanta Ltd v. Shreeji Shipping case. It examines how arbitration agreements should be interpreted, focusing on jurisdictional issues and the arbitration “seat” choice. Section 29 of the Indian Contract Act of 1872 deals with enforcing agreements that may be considered ambiguous. It is also examined concerning arbitration clauses. The Delhi High Court’s ruling upholds party autonomy in arbitration and provides guidance on contract legality. It includes 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 coal shipment from Kandla Port to Bhachau Plant and Bedi Port to Khambalia Plant, parties executed a Purchase Order. The Purchase Order was dated June 21, 2021, with No. 4800019319 (“Purchase Order”). Additionally, the parties signed the Standard Terms and Conditions for Transport Agreement to the Purchase Order. These terms form the “Appendix” and, together with the Purchase Order, create the “Contract.” The petitioner invoked the Arbitration Clause because disagreements caused discrepancies in the agreed and transferred shipment amounts.

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 claimed that the Petitioner mailed the Respondent a purchase order on June 21, 2021. The arrangement was effective June 21, 2021, and ended October 31, 2021. The Respondent unloaded, processed, and delivered the Petitioner’s coal before reading the purchase order, as the first vessel arrived on time Purchase order terms match 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.”
• The Respondent argues that it never consented to arbitration and did not sign the purchase order. The Respondent claims it is being forced into 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 requires the parties to select one jurisdiction for overseeing arbitration, it is clear and unambiguous. This can be ensured or assured. 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:

1. 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. 
2. Before beginning the reference, the learned arbitrator must declare compliance with Section 12 of the Act.
3. 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 offering Delhi, Karnataka, or Goa as possible seats created 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.

Enforceability Under Section 29 of the Indian Contract Act

The court examined Section 29 of the Indian Contract Act, which nullifies contracts if they are unclear or cannot be made certain. Since the parties could choose a seat from the given options, the court ruled that the provision was enforceable. The ruling highlighted that the arbitration agreement’s adaptability aligns with business realities, especially when dealing with transactions involving many jurisdictions.

Since the court presumed a valid arbitration agreement, the clause was validated by appointing an arbitrator under Section 11. This ruling shows judicial support for arbitration and respects the parties’ intent to settle disputes outside court.

Implications for Commercial Contracts and Arbitration Law

The decision in Vedanta Ltd vs. Shreeji Shipping has important ramifications for commercial contract writing and arbitration law. It clarifies that arbitration agreements with multiple seats are not ambiguous if they provide procedures for selecting one. The case reinforces arbitration’s effectiveness and adaptability by emphasizing legal principles on 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.​