Bombay High Court Allows $200,733 Claim Against Victore Ships, Says Voluntary Absence Won't Bar Enforcement

The Bombay High Court on 5 August held that a party cannot claim it was unable to present its case when it voluntarily chose not to participate in arbitration, and allowed enforcement of a USD 200,733.01 foreign arbitral award, along with interest and costs, in favour of Osterreichischer Llyod Seereederei against Victore Ships Private Limited.

A Bench of Justice Arif S. Doctor held:

“Section 48(1)(b) is intended to protect a party who, for reasons beyond its control, was genuinely unable to present its case before the arbitral Tribunal. It is not meant to be used as a shield to resist enforcement by a party who has chosen not to appear before a Tribunal despite ample opportunity. In the present case, it is undisputed that the Respondent was duly served with notices of the arbitral proceedings and was repeatedly afforded opportunities to enter an appearance and file its Statement of Defence. The Respondent nevertheless chose not to do so. Such voluntary abstention can by no stretch of imagination be characterised as an inability to present one's case within the meaning of Section 48(1)(b). To accept such a contention would really be doing violence to the plain language of the provision.”

The dispute arose from a 10 December 2018 Charterparty Agreement under which Osterreichischer Llyod Seereederei chartered its vessel, MCP Villach, to Victore Ships for three months at USD 4,300 per day.

Under Clause 2 of the agreement, Victore Ships was required to bear the vessel's bunker or fuel charges. Osterreichischer Llyod claimed that Victore Ships failed to pay the charges, resulting in the vessel being arrested in Bangladesh. It then cleared the outstanding bunker dues to secure the vessel's release.

Osterreichischer Llyod invoked arbitration on 26 June 2019 under Clause 125(a), which provided for disputes to be governed by English law and resolved under the London Maritime Arbitrators Association Terms 2017. Victore Ships did not nominate its arbitrator within the contractual period of 14 days and did not participate in the proceedings despite being given repeated opportunities to do so.

The sole arbitrator passed the award on 23 March 2020 in favour of Osterreichischer Llyod. The award directed Victore Ships to pay USD 200,733.01, together with interest at 5% per annum, compounded at three-monthly rests from 3 July 2019, and USD 7,082.12 towards the costs of the award.

Victore Ships opposed enforcement of the foreign award under Section 48 of the Arbitration and Conciliation Act, 1996, which permits a Court to refuse enforcement on limited grounds. It argued that the arbitration proceeded in England despite Singapore being designated as the seat, that the agreement contemplated a three-member arbitral tribunal and that claims involving bunker supplier UMS fell outside the arbitration agreement.

It also contended that procedural unfairness and circumstances beyond its control had prevented it from presenting its case before the arbitral tribunal. It therefore argued that enforcement should be refused under Section 48(1)(b).

The Court rejected these objections. It held that the English Arbitration Act, 1996 provides a complete mechanism for raising jurisdictional objections before the arbitral tribunal and the supervisory Court. Since Victore Ships did not raise its objections concerning the seat or jurisdiction before the tribunal despite having ample opportunity, the Court held that it could not raise them at the enforcement stage. It observed:

“The English Arbitration Act, 1996, provides a complete statutory framework for raising jurisdictional objections before the Tribunal and, where necessary, before the supervisory Court. The Respondent consciously chose not to invoke any of these remedies and has elected to remain absent throughout the arbitral proceedings. Hence, for the Respondent to insinuate that the Tribunal has not acted fairly is as unfortunate as it is dishonest.”

The Bench also rejected Victore Ships' explanation based on the COVID-19 pandemic, noting that it had never challenged the award and had offered no explanation for its continued inaction after the pandemic ended. It added:

“Crucially, none of the aforesaid objections were ever raised before the Tribunal, despite the Tribunal granting ample opportunity to the Respondent.”

Further, it noted that Victore Ships had been duly served with notices of the arbitral proceedings and repeatedly given opportunities to appear and file its Statement of Defence, but chose not to participate. It held that treating such voluntary abstention as an inability to present one's case would defeat the object of Section 48(1)(b).

Accordingly, the High Court allowed Osterreichischer Llyod Seereederei's petition and ordered enforcement of the foreign arbitral award against Victore Ships with no order as to costs.

Appearances for petitioner (Osterreichischer Llyod Seereederei): Advocates Prathamesh Kamat, Ankita Sen and Arpeeta Paanvalkar i/b Renata Partners LLP.

Appearances for respondent (Victore Ships Private Limited): Advocates Anil Kumar Verma and Sheetal Mishra i/b Animesh Jadhav.