REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL ORIGINAL JURISDICTION

ARBITRATION PETITION NO. 10 OF 2009             

Trimex International FZE Ltd. Dubai       .... Petitioner(s)

Versus

Vedanta Aluminium Ltd., India             .... Respondent(s)

J U D G M E N T  

P. Sathasivam, J.

1) In  this  petition  the  Petitioner-Company  seeks  to  

invoke  arbitration  clause  under  Section  11(6)  of  the  

Arbitration & Conciliation Act, 1996 for appointment of an  

arbitrator as per the Arbitration Agreement contained in  

clause 6 of the Commercial Offer (purchase order) dated  

15.10.2007  and  clause  29  of  the  Agreement  exchanged  

between the parties on 08.11.2007.  

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2)  The case of the petitioner is as follows:

The  Petitioner-Company  is  registered  in  Dubai  and  

engaged in the business of trading in Minerals across the  

world.  Based on the orders from their purchasers, they  

procure  mineral  Ores  from the suppliers,  negotiate  and  

finalize shipments with the ship owners and arrange for  

the  shipment  of  Minerals  across  the  world.   The  

Respondent  is  a  Company  registered  in  India  using  

Aluminium  Ore  as  one  of  the  major  inputs  for  their  

operations.

3) On  15.10.2007,  the  petitioner  submitted  a  

commercial offer through e-mail for the supply of Bauxite  

to the respondent.   After several exchanges of e-mails and  

after agreeing on the material terms of the contract, the  

respondent conveyed their acceptance of the offer through  

e-mail  on  16.10.2007  confirming  the  supply  of  5  

shipments  of  Bauxite  to  be  supplied  from  Australia  to  

Vizag/Kakinada.  On the basis of the acceptance by the  

respondent,  the  petitioner  concluded  the  deal  with  the  

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Bauxite supplier in Australia on the same day and entered  

into  a  binding  Charter  Party  Agreement  with  the  ship  

owner  in  Oslo  on  17.10.2007.   A  meeting  was  held  

between  the  representatives  of  the  respondent  and  the  

petitioner  at  Lanjigarh,  Orissa  on  26.10.2007  and  the  

minutes  of  this  meeting  were  signed  by  them.   The  

acceptance of the offer is acknowledged by the respondent  

in these minutes.  A formal contract containing a detailed  

arbitration clause was also sent by the respondent to the  

petitioner  on  08.11.2007  which  was  accepted  by  the  

petitioner with some changes and returned the same to  

the  respondent  the  same evening.   On 09.11.2007,  the  

petitioner entered into a formal Bauxite sales Agreement  

with  Rio  Tinto  of  Australia  for  the  supply  of  225000  

tonnes  of  Bauxite.   On  12.11.2007,  the  respondent  

requested  the  petitioner  to  hold  the  next  consignment  

until  further  notice.  On  13.11.2007,  the  petitioner  

informed  the  respondent  that  it  was  not  possible  to  

postpone  the  cargo  and  requested  them  to  sign  the  

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Purchase  Agreement.   On  13.11.2007  itself,  the  ship  

owners  nominated  the  ship  for  loading  the  material  on  

28.11.2007.   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.   On  

19.11.2007,  the ship owners made a claim of  1 million  

US$ towards commercial settlement and 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. The respondent  

rejected  the  claim  of  the  petitioner  on  damages.   On  

compensation not  being paid,  the ship owners served a  

notice on the petitioner.  After negotiations, a settlement  

was arrived at between the ship owners and the petitioner  

to  pay  a  lump-sum of  600,000  US$ to  be  paid  in  two  

installments.   The  petitioner  paid  the  amount  in  two  

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installments  on  27.02.2008  and  31.03.2008.   On  

01.09.2008, the petitioner served a notice of claim-cum-

arbitration  on  the  respondent  to  make  the  payment  

immediately  otherwise  treat  the  notice  for  referring  the  

dispute to arbitration as per Clause 29 of the Purchase  

Order and 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.   On  

14.11.2008, the respondent rejected the arbitration notice  

stating that there was no concluded contract between the  

parties.  Hence, the petitioner filed the present petition for  

appointment of an Arbitrator.  

4) According  to  the  respondent,  as  seen  from  the  

counter  affidavit,  there  was  no  concluded  contract  

between the parties and the parties are still not ad idem in  

respect  of  various  essential  features  of  the  transaction.  

Further the draft contract received from the petitioner was  

yet  to  be  accepted/confirmed  by  the  respondent.   The  

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commercial  offer  provided  two  options  of  shipment  lot,  

namely,  2  shipments  and  5  shipments.   The  only  

understanding  that  had  been  arrived  at  between  the  

parties as a result of the correspondence subsequent to  

the receipt of the commercial offer from the petitioner was  

that the transaction would be in respect of 5 shipments.  

All other terms and conditions pivotal and essential to the  

transaction were under negotiation as is evident from the  

correspondence  between  the  parties.   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  that  are  at  large  and remain  

undecided.  In such a scenario, where the parties were not  

in one mind with respect to any aspect of the transaction,  

the  contention  of  the  petitioner  that  there  existed  a  

binding  contract  between  the  parties  as  also  a  binding  

arbitration agreement is wholly erroneous and misleading.  

Apart from the commercial offer dated 15.10.2007, subject  

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matter of the instant proceedings, the petitioner had sent  

another  commercial  offer  on  05.09.2007  bearing  No.  

TID/F/194/2007  also  for  45000  MTs  of  Bauxite  (of  

Australian origin) which offer had been followed up with a  

purchase  order  executed  by  and  between  the  parties.  

While the commercial offer, subject-matter of the instant  

petition, was being negotiated and the terms discussed, a  

shipment  of  Bauxite  covered  under  the  previous  

commercial  offer  dated  05.09.2007 was  received  by  the  

respondent  at  its  plant  on or  around 12.11.2007.   The  

product was being analysed to determine its utility value  

for  the  respondent  at  its  plant.   On  account  of  such  

analysis being conducted, the respondent on 12.11.2007  

wrote to the petitioner bringing the factum of the ongoing  

analysis to its notice and instructed the petitioner to defer  

the new shipments till the analysis was completed and the  

results  obtained with  respect  to  the  utility  value of  the  

said  product.   Despite  being  put  on  notice  by  the  

respondent  for  deferment  of  shipment,  the  petitioner  

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permitted the nomination of the Vessel to take place on  

13.11.2007.  Apart from there being no valid and binding  

contract/arbitration agreement between the parties, it  is  

the  stand  of  the  respondent  that  in  this  petition,  the  

petitioner  seeks  to  commence  proceedings  to  fasten  a  

liability  on  to  the  respondent  for  which  the  respondent  

was  not  responsible  in  any  manner  whatsoever  having  

informed the petitioner prior to the occurrence of the event  

giving rise to the alleged liability.

5) In the light of the above pleadings of both the parties,  

heard  Mr. K.K. Venugopal, learned senior counsel for the  

petitioner and Mr. C.A. Sundaram, learned senior counsel  

for the respondent.  

6) Mr.  K.K.  Venugopal,  learned senior  counsel  for  the  

petitioner, after taking me through the sequence of events  

which  took  place  on  15.10.2007  and  16.10.2007,  

submitted that the contract between the petitioner and the  

respondent stood concluded by acceptance of the offer for  

five  shipments  by  the  respondent  at  3.05  p.m.  on  

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16.10.2007.   He further  contended that  the commercial  

offer  of  16.10.2007 was pursuant  to  the  request  of  the  

respondent on 10.10.2007 and on the basis of a similar  

transaction  which  had  been  concluded  in  the  previous  

month between the parties.  By taking me through various  

e-mails exchanged between the parties, he contended that  

the charter was entered into a contract by the parties on  

17.10.2007 i.e.  the next day.  He finally submitted that  

from the materials it was established beyond doubt that  

the  intention of  parties  in  case  of  any dispute  between  

them arising out of the contract which was concluded on  

16.10.2007  at  3.06  p.m.  shall  be  settled  through  

arbitration.   On  the  other  hand,  Mr.  C.A.  Sundaram,  

learned senior counsel for the respondent contended that  

there was no concluded contract between the parties and  

that  the  agreement  between  the  petitioner  and  the  

respondent  was  only  in  respect  of  the  number  of  

shipments (two or five) and nothing more.  According to  

him, there is no arbitration agreement and that clause 6 is  

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vague and ambiguous.  He further contended that even in  

the  legal  notice  dated  01.09.2008  issued  by  the  

petitioner’s counsel, there is no specific reference to clause  

6 of the commercial offer but mentioned only clause 29 of  

the  purchase  order  exchanged  between  the  parties  on  

08.11.2007  but  the  present  petition  before  this  Court  

mentions  both  of  them.   He  also  pointed  out  that  the  

Charter Party Agreement (CPA) entered into between the  

petitioner and the ship owner is only a draft.   Further,  

there were differences in the purchase orders exchanged  

between the parties on 08.11.2007 and that it is only a  

draft form and prayed for dismissal of the present petition.  

7) It  is  the  categorical  claim  of  the  petitioner  that  a  

commercial  offer  containing  an  arbitration  clause  

conveyed through e-mail dated 15.10.2007 for the supply  

of bauxite to the respondent is a valid offer.  This offer was  

to expire by noon the following day i.e. on 16.10.2007.  It  

is  the  definite  case  of  the  petitioner  that  after  several  

exchanges of e-mails and agreeing on the material terms  

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of the contract, the respondent conveyed their acceptance  

of the offer through e-mail on 16.10.2007 confirming the  

supply of five shipments of bauxite to be supplied from  

Australia-Vizag/Kakinada.   Based on the  acceptance by  

the respondent, it is the claim of the petitioner that they  

concluded the deal with the Bauxite supplier in Australia  

on 16.10.2007 and entered into a binding Charter Party  

Agreement with the ship owner in Oslo on 17.10.2007.  It  

was  also  pointed  out  that  a  formal  contract  containing  

further  detailed arbitration clause was also sent  by the  

respondent  to  the  petitioner  on  08.11.2007  which  was  

accepted with some minor changes by the petitioner in the  

same evening.  Though exchange of e-mails were admitted  

by the respondent, it is their specific stand that there was  

no concluded contract and in the absence of the same, the  

petitioner  cannot  enforce  certain  obligations  reflected in  

those  e-mails  and  avail  arbitration  clause  as  if  the  

respondent has executed a formal agreement.  In the light  

of the controversy and in view of the fact that copies of e-

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mails exchanged between the officers of the petitioner and  

respondent on various dates which are placed in the form  

of  annexures,  it  is  useful  to  refer  the  relevant  

correspondence in order to understand their claim:  

A)

     Annexure P 1 Shanika From:  Swaminathan G [swami@trimexgroup.com] Sent:   Tuesday, October 09, 2007 2:37 PM To:  Rajesh Mohata; Swayam Mishra Cc: S R Subramanyam; Shanika

Subject: LM Grade Bauxite specs ‘1 (2). Doc Importance:  High Attachments: LM Grade Bauxite specs’1 (2). Doc

Dear Rajesh,

This has a reference to our earlier mails regarding the specs for the  fresh  cargoes.   After  discussions  with  RTA  their  comments  are  reproduced.

“Quote”

We  maintain  our  position  that  we  are  not  able  to  accurately  measure reactive silica at our Weipa lab for us to place a bonus/penalty  on and that any rejection criteria on silica is unreasonable.  It is for this  reason that we are only prepared to revise our offer on total silica with a  Base Grade of 4.5%.  We are prepared to increase this bonus/penalty to  US$1.50 per % total silica either side the Base Grade.  This we believe is  a fair compensation to Vedanta and is our final offer.

Unfortunately we cannot make this an open ended offer as we need  to fill  our shipping slots set aside for these cargoes in November and  December.  We have already lost the October opportunity.  Freight and  spot  prices  for  bauxite  have  all  moved  up  since  we  started  this  negotiation and we are making offers for 2008 cargoes at $4 higher than  your offer.  Therefore,  we have to put a validity on this until  close of  business Friday, 12 October after which this offer will be subject to re- confirmation.

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“Unquote”

We have prepared a revised schedule of specs which is attached.  This is not yet confirmed with RTA but once you agree to go by this then  we can take up with them.  Rejection points are also to be agreed by  them.   Further  the  freights  have  gone up substantially  since we last  made the shipment.  Hence we have to freeze the quality specs first and  then take up with RTA for confirmation and then get the vessel freight.

Hence we request you to revert urgently before closing today as  this area is all closed from Thursday

Best regards Swaminathan

        Low Monohydrate Grade Bauxite

                     Typical Analysis

Parameter Range Base spec Bonus/Penalty Rejection Trihydrate  alumina  (THA)

42-46% 45% Min. Bonus  US  $0.50  per  tonne  per  percentage  point  fraction  pro-rate  above 45%

Penalty  US$  0.50  per  tonne  per  percentage  point  fraction  pro-rate  below 45%

Penalty  US  $1.00  per  tonne  per  percentage  point  fraction  pro-rate  below 42%.

Below  41%

Monohydrate  alumina  (MHA)

3-5% 4.5%  Max.

Bonus  US  $0.50  per  tonne  per  percentage  point  fraction  pro-rate  below 4.5%.

Penalty  US$  0.50  per  tonne  per  percentage  point  fraction  pro-rate  

Above  5.0%

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above 4.5%. Total Silica 4-6% 4.5%  

Max. Bonus  US  $1.50  per  tonne  per  percentage  point  fraction  pro-rata  below 4.5%. Penalty  US$  1.50  per  tonne  per  percentage  point  fraction  pro-rata  above 4.5%

N/A

B)

Shanika From:  Swayam Mishra [swayam.mishra@vedanta.co.in] Sent:   Wednesday, October 10, 2007 11:16 AM To:  Swaminathan G Cc: Rajesh Mohata; Shanika; SR Subramanyam; Chinmayee Panda; N.  Chellappa; Hukum Chand Dahiya

Subject: Re: LM Grade Bauxite specs ‘1 (2). Doc Attachments: LM Grade Bauxite specs’1 (2). Doc

Dear Mr. Swaminathan,

Please find our observation in the attached sheet.  Kindly give your  confirmation for the same.

Thanks

Swayam Mishra Commercial Department Vedanta Aluminium Ltd., Lanjigarh Dist: Kalahandi Pin: 766027 Orissa 9937251390

C)

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Shanika From:  Swaminathan G [swami@trimexgroup.com] Sent:   Wednesday, October 10, 2007 1:30 PM To:  Swayam Mishra Cc: Rajesh Mohata; Shanika; SR Subramanyam; Chinmayee Panda; N.  Chellappa; Hukum Chand Dahiya

Subject: Re: LM Grade Bauxite specs ‘1 (2). Doc Importance: High

Dear Swayam,

We reviewed the reply below and this not acceptable to RTA or by  ourselves.

We are  unable  to  improve  on the  proposal  given  from our  side  which itself needs to be ratified by RTA.

Please also keep in mind the time limit and we need to have time  for obtaining freights which is the most difficult aspect in the present  market.

Your final  reply  may be given to us before  close of  office  hours  today.

Regards Swami

D) Shanika From:  Swayam Mishra [swayam.mishra@vedanta.co.in] Sent:   Wednesday, October 10, 2007 7:17 PM To:  Swaminathan G Cc:  Chinmayee  Panda;  Hukum  Chand  Dahiya  N.  Chellappa;  Rajesh  Mohata; Shanika; SR Subramanyam;   

Subject: Re: LM Grade Bauxite specs ‘1 (2). Doc

Dear Mr. Swaminathan,

Please  send your  rates  at  your  proposed quality  parameters  on  FOB basis and on CIF basis, separately.

We would also be interested to have separate rates for 2 shipments  and for the complete offer of 2 Lac MT.

Thanks

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Swayam Mishra Commercial Department Vedanta Aluminium Ltd. Lanjigarh Distt: Kalahandi Pin: 766 027 Orissa

E)      Annexure P-2

Shanika From:  Swaminathan G [swami@trimexgroup.com] Sent:   Monday, October 15, 2007 4:46 PM To:  Rajesh Mohata; Swayam Mishra Cc: S R Subramanyam; Shanika

Importance:  High Attachments: Offer for Mono Bxt.Pdf

Dear Rajeshji, Please find attached our offer for the two options as desired by you.  

Please note the validity of the offer until 1200 IST tomorrow.  Freights are  going up continuously and have jumped since we last gave you the offer.  A quick decision will be helpful otherwise we may lose this freight offer  too.

Awaiting an early response.

Best regards G. Swaminathan General Manager Trimex International P.O. Box 17056 Dubai-U.A.E. Tel:971-4-8835544 Ext. 209 Fax:-971-4-8836410 Mob:-971-50-6455819

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              TRIMEX The Mineral People

                        COMMERCIAL OFFER Company:  M/s  Vedanta  Alumina  Ltd.  

Lanjigarh

Kind Attn:  Mr.  Rajesh Mohata General  

Manager (Commercial)

Offer No: TID/F/223/2007

Date: October 15, 2007

Valid Until:  October 16, 2007  

1200 noon IST

Product  

Description*

Quantity Price  per  

tonne

Delivery Terms Payment  

Terms Low  

Monohydrate  

Grade  

Bauxite  

(Australian  

Origin)

OPTION  1  

(2)

Shipments  

of  45,000  

mt +/- 10%  

at  Shipper’s  

Option

OPTION II

(5)

Shipments  

of  45,  000  

mt +/- 10%  

at  Shipper’s  

option

US$93.50  

pmt  (US  

Dollars  

Ninety  

Three  and  

Cents Fifty  

only)

CIF  Free  Out  

Visakhapatnam,  

India (C)  clause  

Cargo cover

Irrevocable  

L/c  for  

100%  

Invoice  

value  to  be  

established  

30  days  

before  each  

shipment

-92.5%  

payable  at  

sight

-7.5%  

payable  

within  30  

days  after  

completion  

of discharge *Please see attached Annexure I for detailed product specifications

Shipment Discharge port Discharge Demurrage/Desp. Shipment

17

Lot rate OPTION I

(2)  

Shipments

OPTION II

(5)  

Shipments

(Non Oil  Mooring  

at  

Visakhapatnam,  

India)

8000mt PD

SHINC.

NOR

ATDN

SHINC

WIBON,

WIPON,

WCCON

WIFPON

12  hrs  

turntime  

USC  Any  

time  used  

to count

US$  75,000  per  

day  pro  rata  Half  

Despatch

OPTION I

In  Nov.  &  

Dec. 2007

OPTION II

From  Nov.  

07  to  

March 08.

Additional Information/Comments:

Vessel details (all about): age-Not over 25 years, 4 x 20 mt gears, 8-10  cbm grabs Draft: buyers to guarantee draft  of 12 mtrs, at discharge port Quantity: Draft survey at discharge port by mutually agree independent  surveyor will be final.

Quality: Invoice for initial payment as per Producer’s Quality Certificate  Balance 7.5% payment will be based on analysis done by Independent  surveyor Bonus/Penalty: As per Annexure I -----------------------------------------------------------------------

Wherever applicable any charges payable at discharge port (custom duty,  

taxes  etc.)  other  than  our  stated  sales  conditions  will  be  to  buyers  

account.

Conditions of sale- all sales are concluded on the following terms, unless  varied by written agreements between us.  Neither our agents nor our  associated companies are authorized to vary these terms.

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1.   We  shall  not  be  liable  by  reason  of  any  defect  (including  non- conformity with specification or sample) unless we receive written notice  of the defect within 15 days of delivery.  Our liability in that event will be  limited to product related compensation after discussions and suitable  joint analysis wherever applicable.  In case of joint analysis being agreed  upon  for  confirming  the  product  quality/penalty  determination,  the  above  should  be  arranged  by  the  buyer  within  30  days  of  product  delivery to the customer. 2.  We shall have no liability under this contract or by reason of any  representation,  warranty  or  duty  for  any  direct,  indirect,  special  or  consequential  loss  or  damage,  costs  or  expenses  arising  out  of  the  composition, supply, packaging, handling or use of products. 3.  Unless stated otherwise, products are sold strictly to the offered sale  condition and payments are due on the dates as applicable. 4.  Prices are valid upto 1200 hrs IST 16.10.2007 unless withdrawn by  notice from us during that period. 5.  Interest may be charged on overdue amount wherever applicable as  per our terms mentioned in commercial/payment invoice. 6.  This contract is governed by Indian Law & Arbitration in Mumbai  courts. For Trimex International FZE Name: G. Swaminathan (computerized offer-Signature not required)

TRIMEX INTERNATIONAL FZE  P.O. BOX 17056,  Jabel Ali, Dubai, UAI Tel:971-4-8835544 Fax:-971-4-8836410 Telex: (893) 47804 Email Trimex@emiratesnet.ac. www.trimexgroup.com F)

     Annexure P-3 Shanika From:  Swayam Mishra [swayam.mishra@vedanta.co.in] Sent:   Monday, October 15, 2007 5:34 PM To:  Swaminathan G Cc: Rajesh Mohata; Shanika; SR Subramanyam; Chinmayee Panda

Subject: Offer for imported Bauxite

Dear Mr. Swaminathan, We have the following observations related to your offer:

1. Bonus/Penalty Clause for THA: Penalty US $ 1.00 per tonne per  percentage point fraction pro-rata below 42%.

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1. Trimex will give its commercial offer within 20th Nov. 2007 to VAL.

Bauxite from Gujarat 1. VAL has asked Trimex to re-work the offer to provide a supply  

schedule till March 30th, 2008 against Trimex’s deadline of June  2008.

2. The  rate  offered  by  Trimex  is  Rs.  1250  PMT  (FOB)  Okha/Porbander).  VAL has asked for a decrease in rates.  Trimex  will provide its final offer by 29.10.2007.

3. For  the  existing  contract  of  supply  of  10000  MT  of  bauxite  through  rakes,  further  movements  will  ensue  after  the  due  discussions.  For the punitive charges levied by railways against  the 1st Rake moved from Okha, Trimex has been advised to take  up the issue with the Railways officials at Okha.

Imported Bauxite from Australia       1.  For the shipments under the proposed new contract of 2 Lacs MT.  Trimex requested to clearly mention the following clauses:

i)  As per Trimex offer No. TID/F/223/2007 dated 15th October 2007 and  accepted by VAL, the price is on CIF-FO basis.  As per Trimex under  such a situation the berthing responsibility should be with VAL. ii)  A copy of base Charter Party Agreement and fixture terms shall be  provided  by  Trimex,  which  should  be  deemed  incorporated  in  the  Purchase agreement. iii)   The  Discharge  rate  agreed  should  be  clearly  mentioned  in  the  Purchase agreement.

2. VAL  will  confirm on  the  feasibility  of  discharging  the  cargo  at  Kakinada  port  and  accordingly  TRIMEX  will  discuss  with  the  Vessel Owners.

3. For the demurrage incurred in the shipment of MV Nena C vide  Order No. VAL/OPRN/526 dated 10.09.07, Trimex claims that the  same  is  on  VAL’s  account  as  the  agreement  was  on  CIF- Visakhapatnam basis.  VAL will give its opinion on the same.

4. Trimex  has  asked  to  finalise  on  the  new  contract  and  the  demurrage by end of office hours on 30.10.2007.

    Sd/-   Sd/- (Rajesh Mohata) (G. Swaminathan)      Sd/-    Sd/- (N. Chellapa)   (SR Subramaniam)     Sd/- (Venkat Rao)      Sd/- (Sarika Singh)      Sd/- (Swayam Mishra)

28

PO NO: VAL/OPRN/719     Date-08.11.2007

                              PURCHASE ORDER

M/s Trimex International FZE Dubai

Sub: Purchase Order for supply of Low Monohydrate Grade Bauxite

Ref: Offer No. TID/F/223/2007, Dated 15.10.2007 and our subsequent  discussions held there on.

Dear Sir, With reference to the above offer and subsequent discussions we  

had with you, we are pleased to place this Purchase Order on you for  supply of 225000 +/- 10% MT Low Monohydrate Grade Bauxite as per  the following terms and conditions……….. …..Definition of Term 29. Arbitration The Parties hereto shall endeavour to settle all disputes and differences  relating to and/or arising out of the Contract amicably. In the event of the Parties failing to resolve any dispute amicably the  same shall be referred to Arbitration in accordance with the Arbitration  and Conciliation Act 1996, as is prevalent in India.  Each Party shall be  entitled to nominate an Arbitrator and the two Arbitrators so nominated  shall jointly nominate a third presiding Arbitrator.  The Arbitrators shall  give a reasoned award.

The place of  arbitration shall  be Mumbai,  Maharashtra in accordance  with Indian Law and the language of the arbitration shall be English.

The Parties further agree that any arbitration award shall be final and  binding upon both the Parties.

The Parties hereto agree that the Seller shall be obliged to carry out its  obligations under the Contract even in the event a dispute is referred to  Arbitration.

30. Governing Law This Contract shall be construed in accordance with and governed by the  laws of Indian and in the event of any litigation the Courts in Mumbai  shall have exclusive jurisdiction.

33

Subject:  Trimex-Imported_5 shipments 1.doc Importance :  High Attachments:  Trimex-Imported_5 shipments 1.doc

Dear Swayam,

Please  find  the  draft  contract  with  clarification  on  various  points  as  discussed in meetings and on phone today.

Please confirm the same in order.

Best regards

Swami.

AC)    Annexure P-12

From: Rajesh Mohata [mail to: Rajesh.Mohata@vedanta.co.in] Sent: Monday, November 12, 2007 2:18 PM To: Swaminathan G; Shanika; SR Subramanyam Cc: Venkateshwar Rao; Swayam Mishra; Umesh Mehta  

Subject:  Trimex International

Dear Mr. Swaminathan, We have recently received bauxite from first import congisnment at  

Plant.  Our operation team is in process to find out recovery and value  addition for using this bauxite in actual plant condition.  This may take  some time.  In view of this we may have to hold procurement for the next  consignment.   

We request you to put on hold the next consignment till further  advise.

Regards

Rajesh Mohata Vedanta Aluminium Ltd.

Mobile +91 99372 51229 (Please  note  with  immediate  effect  our  company  name  changed  to  “Vedanta Aluminium Ltd.”)

35

AD)

SHANIKA From: Swaminathan G [swami@trimexgroup.com] Sent: Monday, November 12, 2007 3:20 PM To: Rajesh Mohata Cc:  Venkateshwar  Rao;  Swayam Mishra;  Umesh  Mehta;  Shanika;  SR  Subramanyam  

Subject:  Re: Trimex International Importance :  High

Dear Mr. Rajesh, This is a bit shocking at this juncture as vessel nomination is due from  

the Owners any time now against the COA. First, we have to go them urgently and ask them to defer the first vessel  

by 15 days until 1st December as proposed by you on phone.  In that case there  will  be two vessels in December subject to RTA agreement.  There might be  claims from them.  But before we talk to them we need VAL’s confirmation that  any claims from Owners for the delay or cancellation of any or all shipment(s)  under this contract will be fully guaranteed to us and that VAL will pay the  amount without demur.

Matter urgent as we have to act fast before Owners nominate any vessel. As far as RTA is concerned we shall take-up and hope they will agree to a  

revised schedule as they are fully booked for December and thereafter this will  have also to be agreed with Owners.

Please respond by return mail for us to talk to RTA/Owners. We  shall  try  and  do  our  best  but  before  that  we  need  VAL’s  clear  

confirmation on above.

Regards

Swami

From  the  materials  placed,  it  has  to  be  ascertained  

whether there exists a valid contract with the arbitration  

clause.  It is relevant to note that on 15.10.2007 at 4.26  

36

p.m.  the  petitioner  submitted  commercial  offer  wherein  

clause 6 contains arbitration clause i.e. “this contract is  

governed  by  Indian  law  and  arbitration  in  Mumbai  

courts”.   At 5.34 p.m. though respondents offered their  

comments, as rightly pointed out by Mr. K.K.Venugopal,  

no comments were made in respect of ‘arbitration clause’.  

It is further seen that at 6.04 p.m. the petitioner sent a  

reply to the comments made by the respondent.  Again on  

16.10.2007, at 11.28 a.m. though respondents suggested  

certain additional information on the offer note, here again  

no suggestion was made with regard to arbitration clause.  

At  11.48  a.m.  the  petitioner  sent  an  e-mail  extending  

validity of the offer by another one hour.  At 01.38 p.m.,  

the  respondent  made  certain  suggestions  on  the  

demurrage  asking  the  petitioner  to  either  reduce  the  

freight rate or the demurrage rate.  On the same day at  

02.01 p.m., the petitioner sent a reply on the demurrage  

stating that the rates cannot be reduced any further.  At  

02.41 p.m.,  the respondent informed the petitioner that  

37

they  would  like  to  have  a  termination  clause  after  two  

shipments.   At  03.06  p.m.,  the  petitioner  sent  a  mail  

stating  that  “no  owner  will  accept  this  condition.  

Respondent  may accept  two  or  five  quickly”.   At  03.06  

p.m. the respondent accepted the offer for five shipments.  

In  response  to  the  same  at  03.49  p.m.,  the  petitioner  

thanked the respondent for acceptance and conveyed that  

it was “just in time” to go to the ship owners.  At 03.57  

p.m. the petitioner finalized the contract with the bauxite  

supplier  in  Australia.   Apart  from the  above  minute  to  

minute  correspondences  exchanged  between  the  parties  

regarding offer and acceptance, as rightly pointed out by  

Mr.  Venugopal  the  offer  of  15.10.2007  contains  all  

essential  ingredients  for  a  valid  acceptance  by  the  

respondents namely,  1).  Offer Validity period 2) Product  

Description  3)  Quantity  4)  Price  per  tonne  5)  Delivery  

Terms  (CIF)  6)  Payment  Terms  (Irrevocable  L/C)  7)  

Shipment Lots 8) Discharge Port       9) Discharge Rate  

with international shipping acronyms 10) Demurrage Rate  

38

11)  Period  of  Shipment  12)  Vessel  Details  13)  Draft  

(Port/Berth Capacity corresponding to height of cargo) 14)  

Stipulations as to Survey by Independent Surveyors 15)  

Quality  benchmark  16)  Bonus/Penalty  Rates  &  17)  

Applicable Laws (Indian Law) and Arbitration.  

The  minute  to  minute  correspondence  exchanged  

between the parties, all  the conditions prescribed which  

had been laid down, awareness of urgency of accepting the  

offer without any further delay to avoid variation in the  

freight or other factors, coupled with the e-mail sent on  

16.10.2007 at 3.06 p.m. under the subject “re: offer for  

imported bauxite” stated in unequivocal terms, i.e. “we  

confirm the deal for five shipments”, would clearly go to  

show  that  after  understanding  all  the  details  and  the  

confirmation by the respondent, the petitioner sent a reply  

stating that “thanks for the confirmation, just in time  

to go to the ship owners”.  All the above details clearly  

establish  that  both  the  parties  were  aware  of  various  

conditions  and  understood  the  terms  and  finally  

39

the charter was entered into a contract by the parties on  

17.10.2007.   

8)   Mr.  C.A.  Sundaram,  learned  senior  counsel  for  the  

respondent  taking  me  through  the  same  

emails/correspondence submitted that such clauses being  

unclear and ambiguous, cannot be permitted to stand on  

its own footing so as to deprive the respondent of its valid  

defence.    He  also  reiterated  that  in  the  absence  of  a  

concluded and binding contract between the parties, the  

arbitration clause contained in draft agreement cannot be  

relied on by the petitioner.  He further pointed out that the  

arbitration  clause  as  contained  in  the  commercial  offer  

suffers  from vice  of  being  unclear  and ambiguous and,  

therefore, is not capable of being enforced.   

9)  In the light of the details which have been extracted in  

the earlier paragraphs, I am unable to accept the stand of  

the  respondent.   It  is  clear  that  if  the  intention  of  the  

parties  was  to  arbitrate  any  dispute  which  arose  in  

relation to the offer of 15.10.2007 and the acceptance of  

40

16.10.2007,  the  dispute  is  to  be  settled  through  

arbitration.  Once the contract is concluded orally or in  

writing,  the  mere  fact  that  a formal  contract  has to  be  

prepared  and  initialed  by  the  parties  would  not  affect  

either the acceptance of  the contract  so entered into or  

implementation  thereof,  even if  the  formal  contract  has  

never been initialed.   

10)  The acceptance conveyed by the respondent, which  

has  already  been  extracted  supra,  satisfies  the  

requirements of Section 4 of the Indian Contract Act 1872.  

Section 4 reads as under:

“Communication when complete- The communication of an acceptance is complete…. as  against the acceptor, when it comes to the knowledge  of the proposer.”

As rightly pointed out by the learned senior counsel for  

the petitioner, when Mr. Swaminathan of Trimex opened  

the email of Mr. Swayam Mishra of Vedanta at 3:06 PM on  

16.10.2007, it came to his knowledge that an irrevocable  

contract was concluded.  Apart from this, the mandate of  

41

Section 7 of  the Indian Contract  Act  stipulated that  an  

acceptance must be absolute and unconditional has also  

been  fulfilled.   It  is  true  that  in  the  first  acceptance  

conveyed  by  the  respondent  contained  a  rider,  namely,  

cancellation  after  2  shipments  which  made  acceptance  

conditional.  However, taking note of the said condition,  

the  petitioner  requested  the  respondent  to  convey  an  

unconditional acceptance which was readily done through  

his email sent at 3:06 PM with the words “we confirm the  

deal  for  5  shipments”,  which  is  unconditional  and  

unqualified.  As rightly pointed out by the learned senior  

counsel  for  the  petitioner,  the  respondent  was  wholly  

aware of  the fact  that  its  agreement with the petitioner  

was interconnected with the ship owner.  In other words,  

once the offer of the petitioner was accepted following a  

very strict time schedule, the respondent could not escape  

from the obligations that flowed from such an action.   

42

11)  The Court of Appeal in the case of  Pagnan SPA vs.  

Feed Products Ltd., [1987] Vol.  2, Lloyd’s Law Reports  

619 observed as follows:

“It is sometimes said that the parties must agree on the  essential  terms  and  that  it  is  only  matters  of  detail  which can be left over.  This may be misleading, since  the word ‘essential’ in that context is ambiguous.  If by  ‘essential’ one means a term without which the contract  cannot be enforced then the statement is true:  the law  cannot enforce an incomplete contract.  If by ‘essential’  one means a term which the parties have agreed to be  essential for the formation of a binding contract, then  the  statement  is  tautologous.   If  by  ‘essential’  one  means  only  a  term  which  the  Court  regards  as  important as opposed to a term which the Court regards  as less important or a matter of detail, the statement is  untrue.  It is for the parties to decide whether they wish  to  be  bound  and,  if  so,  by  what  terms,  whether  important or unimportant.  It is the parties who are, in  the  memorable  phrase  coined  by  the  Judge,  “the  masters of their contractual fate”.  Of course, the more  important the term is the less likely it is that the parties  will have left it for future decision.  But there is no legal  obstacle which stands in the way of the parties agreeing  to be bound now while deferring important matters to  be  agreed  later.   It  happens  every  day  when  parties  enter into so-called ‘heads of agreement’.”

The above principle has been consistently followed by the  

English  Courts  in  the  cases  of  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  

43

and Food Industries Corporation, (1986) Vol. 1 Lloyd’s  

Law Reports 378 at p. 386.  In addition, Indian law has  

not evolved a contrary position.  The celebrated judgment  

of Lord Du Parcq in  Shankarlal Narayandas Mundade  

v.  The New Mofussil Co. Ltd. & Ors. AIR 1946 PC 97  

makes it clear that unless an inference can be drawn from  

the facts that the parties intended to be bound only when  

a formal agreement had been executed, the validity of the  

agreement would not be affected by its lack of formality.  

In the present case, where the Commercial Offer carries  

no  clause  making  the  conclusion  of  the  contract  

incumbent upon the Purchase Order, it is clear that the  

basic  and  essential  terms  have  been  accepted  by  the  

respondent, without any option but to treat the same as a  

concluded contract.

12)  Though Mr. C.A. Sundaram, learned senior counsel  

heavily relied on the judgment of this Court in  Dresser  

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

the  same  is  distinguishable  because  in  that  case only  

44

general conditions of purchase were agreed upon and no  

order  was  placed.   On  the  other  hand,  in  the  case  on  

hand, specific order for 5 shipments was placed and only  

some minor details  were to be finalized through further  

agreement.   This  Court  in  Dresser  Rand  S.A  (supra)  

rejected  the  contention  that  the  acceptance  of  a  

modification  to  the  General  Conditions  would  not  

constitute the conclusion of the contract itself.   On the  

other  hand,  in  the  present  case,  after  the  suggested  

modifications  had  crystallized  over  several  emails.  

Further  in  para  32  in  Dresser  Rand  S.A  (supra)  this  

Court held that “parties agreeing upon the terms subject  

to which a contract will be governed, when made, is not  

the same as entering into the contract itself” whereas in  

the case on hand, the moment the commercial offer was  

accepted  by  the  respondent,  the  contract  came  into  

existence.  Though in para 44 of the  Dresser Rand S.A  

(supra), it is recorded that neither the Letter of Intent nor  

the  General  Conditions  contained  any  arbitration  

45

agreement, in the case on hand, the arbitration agreement  

is found in clause 6 of the Commercial Offer.  In view of  

the same, reliance placed by the respondent on  Dresser  

Rand  S.A  (supra)  is  wholly  misplaced  and  cannot  be  

applied to the case on hand where the parties have arrived  

at a concluded contract.   

13)   Mr.  Venugopal  pointed  out  that  the  Charter  Party  

Agreements  are  governed  as  per  international  shipping  

practices.  The normal procedure is that the brokers from  

both sides first agree on the vital terms over phone/telex  

(these  terms  relate  to  Freight,  Type  of  Ship,  Lay  Can  

(Period of shipping), Demurrage Rate, Cranes, etc.)  At this  

stage, no agreement is formally signed but the terms are  

binding  on  both  the  parties,  as  per  the  Contract  of  

Affreightment  (CoA),  which  in  the  present  case  was  

entered  into  on the  next  day,  i.e.  17.10.2007.   Certain  

minor  modifications  could  go  on  from  either  side  on  

mutual  agreement  but  in  the  absence  of  any  further  

modification,  the originally  agreed terms of  the CoA are  

46

binding on both the parties.  Till the agreement is actually  

signed by both the parties, the term draft is used.  This  

does not mean that the terms are not binding as between  

the Petitioner and the Ship-owners.  Further, according to  

him,  the  existence  of  the  Charter  Party,  various  

international  shipping  practices  etc.  which  are  to  be  

pleaded in  detail  before  the  Arbitral  Tribunal  once it  is  

constituted and not  before  this  Court  since  this  means  

extensive  quoting  of  shipping  laws  and  decided  cases  

which cannot be done in the present arbitration petition.  

The above submissions cannot be under estimated.

14)  Both in the counter affidavit as well as at the time of  

arguments Mr. C.A. Sundaram, learned senior counsel for  

the  respondent  has  pointed  out  various  differences  

between the version of the respondent and the petitioner.  

However,  a close scrutiny of the same shows that there  

were  only  minor  differences  that  would  not  affect  the  

intention of the parties.  It is essential that the intention of  

the  parties  be  considered  in  order  to  conclude  whether  

47

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.

15)  Smita Conductors Ltd. vs. Euro Alloys Ltd. (2001)  

7 SCC 728 was a case  where a  contract  containing an  

arbitration  clause  was  between  the  parties  but  no  

agreement was signed between the paties.  The Bombay  

High  Court  held  that  the  arbitration  clause  in  the  

agreement was binding.  Finally, 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.

16)   In Shakti Bhog Foods Limited vs. Kola Shipping  

Limited, (2009) 2 SCC 134, this Court held that from the  

provisions made under Section 7 of the Arbitration and  

Conciliation Act, 1996 that the existence of an arbitration  

agreement can be inferred from a document signed by the  

48

parties, or an exchange of letters, telex, telegrams or other  

means of  telecommunication,  which provide  a record of  

the agreement.

17)  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.

18)   Though,  Mr.  C.A.  Sundaram,  relied  on  several  

decisions,  in  view  of  clear  materials  in  the  form  of  

emails/correspondence  between  the  parties,  those  

decisions are not germane to the issue on hand.   

19)   Before  winding  up,  it  is  useful  to  refer  the  latest  

decision of this Court about the object of Arbitration and  

Conciliation  Act,  1996.   In  Great  Offshore  Ltd.  vs.  

Iranian Offshore Engg. & Construction Co., (2008) 14  

SCC 240,  this  Court  while  considering  the  objects  and  

49

provisions of the Arbitration and Conciliation Act, 1996,  

held:

“59  The  court  has  to  translate  the  legislative  intention  especially  when  viewed  in  light  of  one  of  the  Act’s  “main  objectives”: “to minimize the supervisory role of courts in the  arbitral process.” [See Statements of Objects and Reasons of  Section 4(v) of the Act.] If this Court adds a number of extra  requirements such as stamps, seals and originals, we would  be enhancing our role, not minimizing it.  Moreover, the cost  of  doing  business  would  increase.   It  takes  time  to  implement such formalities.  What is even more worrisome is  that  the  parties’  intention  to  arbitrate  would  be  foiled  by  formality.  Such a stance would run counter to the very idea  of arbitration, wherein tribunals all over the world generally  bend over backwards to ensure that the parties’ intention to  arbitrate is upheld.  Adding technicalities disturb the parties’  “autonomy of the will” (1’ autonomie de la volonte’) i.e. their  wishes.  (For a general discussion on this doctrine see Law  and  Practice  of  International  Commerical  Arbitration,  Alan  Redfern and Martin Hunter, Street & Maxwell, London, 1986  at pp.4 and 53.)

60. Technicalities like stamps, seals and even signatures are  red tape that have to be removed before the parties can get  what they really want—an efficient, effective and potentially  cheap  resolution  of  their  dispute.   The  autonomie  de  la  volonte’  doctrine is enshrined in the policy objectives of the  United  Nations  Commission  on  International  Trade  Law  (UNCITRAL)  Model  Law  on  International  Commercial  Arbitration,  1985,  on  which  our  Arbitration  Act  is  based.  (See  Preamble  to  the  Act.)  the  courts  must  implement  legislative intention.  It would be improper and undesirable  for  the  courts  to  add  a  number  of  extra  formalities  not  envisaged by the legislation.  The courts’ directions should  be to achieve the legislative intention.

61. One of the objectives of the UNCITRAL Model Law reads  as under:

“the  liberalization  of  international  commercial  arbitration by limiting the role of national courts, and  by  giving  effect  to  the  doctrine  ‘autonomy  of  will’,  allowing the parties the freedom to choose how their  disputes should be determined”.  [See Policy Objectives  adopted by UNCITRAL in the preparation of the Model  

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Law,  as  cited  in  Law  and  Practice  of  International  Commercial  Arbitration,  Alan  Redfern  and  Martin  Hunter,  Street  & Maxwell,  London (1986)  at  p.  388  (citing UN doc.A/CN.9/07, Paras 16-27).]

62. It goes without saying, but in the interest of providing  the parties a comprehensive review of their arguments, I note  that  once it  is  established  that  the  faxed  CPA is  valid,  it  follows that a valid contract and a valid arbitration clause  exist.  This contract, the faxed CPA, does not suffer from a  conditional  clause,  as  did  the  letter  of  intent.   Thus,  the  respondent’s  argument  that  the  parties  were  not  ad  idem  must fail.”

20) In view of  the settled legal  position and conclusion  

based on acceptable documents, I hold that the petitioner  

has made out a case for appointment of an Arbitrator in  

accordance  with  Clause  6  of  the  Purchase  Order  dated  

15.10.2007 and subsequent materials exchanged between  

the parties.  Inasmuch as in respect of the earlier contract  

between the same parties, Justice B.N. Srikrishna, former  

Judge  of  this  Court  is  adjudicating  the  same  as  an  

Arbitrator at Mumbai, it is but proper and convenient for  

both parties to have the assistance of the same Hon’ble  

Judge.   

21) Accordingly,  Hon’ble  Mr.  Justice  B.N.  Srikrishna,  

former Judge of this Court is appointed as an Arbitrator to  

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resolve the dispute between the parties.  It is made clear  

that this Court has not expressed anything on the merits  

of  the  claim  made  by  both  parties  and  whatever  

conclusion  arrived  at  is  confined  to  appointment  of  an  

Arbitrator.   It  is  further  made  clear  that  it  is  for  the  

Arbitrator  to  decide  the  issue  on  merits  after  affording  

adequate  opportunity  to  both  parties.   In  terms  of  the  

Arbitration  clause,  the  place  of  Arbitration  is  fixed  at  

Mumbai. The Arbitrator is at liberty to fix his remuneration  

and other expenses which shall be borne equally by both the  

parties.

22) Arbitration  petition  is  allowed  on  the  above  terms.  

No costs.

...…………………………………J.   (P. SATHASIVAM)  

NEW DELHI; JANUARY 22, 2010.   

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