Alternative Dispute Resolution

Caravel Shipping Services Pvt. Ltd. v. Premier Sea Foods Exim Pvt. Ltd.

(2019) 11 SCC 461

Citation: (2019) 11 SCC 461
Court: Supreme Court of India
Date: 29 October 2018
Bench: R.F. Nariman and Navin Sinha, JJ.

Facts

Premier Sea Foods Exim Pvt. Ltd. engaged Caravel Shipping Services Pvt. Ltd. for carriage of goods.
A multimodal transport document or bill of lading governed the shipment.
The face of the document stated that the transaction was subject to the terms and conditions printed on its reverse side.
Clause 25 on the reverse contained an arbitration agreement.
A dispute later arose concerning the shipment.
Premier Sea Foods instituted a civil suit before the competent court.
Caravel applied under Section 8 of the Arbitration and Conciliation Act, 1996 and sought reference to arbitration.
Premier Sea Foods resisted the request.
It argued that:
it had not signed the reverse-side terms;
the arbitration clause was therefore not a written agreement signed by both parties; and
no valid arbitration agreement existed under Section 7.
The lower courts refused reference.
The matter reached the Supreme Court.

Issue

Whether an arbitration agreement must always bear the signatures of both parties.
Whether the reverse-side arbitration clause became part of the bill of lading through incorporation.
Whether a party relying on the transport document could reject its arbitration condition.

Rule

Section 7 requires an arbitration agreement to be in writing.
It does not prescribe signatures as the only method of proving written consent.
A written arbitration agreement may be established through:
a signed document;
exchange of communications;
pleadings in which existence is alleged and not denied; or
incorporation by reference under Section 7(5).
Where the face of a commercial document expressly states that reverse-side terms form part of the contract, those terms may bind the parties.
Acceptance may also be inferred from the parties’ conduct and reliance upon the document.

Application

The Supreme Court rejected the argument that every arbitration agreement must contain two physical signatures.
Section 7(4) describes multiple ways in which an agreement in writing may arise.
Signature is one strong form of proof, but it is not an inflexible statutory condition.
The Court examined the structure of the bill of lading.
Its face clearly informed the contracting party that the reverse-side conditions formed part of the transport arrangement.
Clause 25 was therefore not a hidden or unrelated term introduced later.
It was incorporated into the same written commercial document under which the goods were carried.
Premier Sea Foods relied on that bill of lading to assert contractual rights against Caravel.
It could not selectively accept:
the carriage obligations;
the description of goods;
the liability provisions; and
the right to claim damages, while rejecting only the arbitration clause contained in the incorporated terms.
Commercial documents such as bills of lading frequently operate through standard printed conditions.
Requiring a separate signature beside each term would disrupt settled shipping practice and go beyond Section 7.
The Court distinguished cases where a contract makes only a vague reference to another independent document.
Here, the arbitration clause formed part of the very transport document governing the parties’ transaction.
The reference on the face of the document was sufficient to alert the contracting party that the reverse conditions applied.
The Court also considered that Premier Sea Foods had not shown that:
the document was forged;
the reverse terms were added later;
it lacked notice of the conditions; or
the arbitration clause was otherwise invalid.
A valid written arbitration agreement therefore existed.
Once that agreement and the connection of the dispute with the contract were established, Section 8 required the judicial authority to refer the matter to arbitration.

Conclusion

The Supreme Court held that the arbitration clause contained in the reverse-side conditions of the bill of lading was validly incorporated.
The absence of signatures of both parties on the arbitration clause did not invalidate it.
The civil dispute was required to be referred to arbitration.
Use this case for: a written arbitration agreement need not always be separately signed where it is validly incorporated into and accepted as part of a commercial document.