ABSENCE OF WRITTEN CONTRACT SHOULDN’T HAMPER DISPUTE SETTLEMENT: SUPREME COURT

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THE Supreme Court has ruled that the absence of a signed contract between the parties should not come in the way of arbitration for resolving the disputes. The intention of the parties forming such a contract is to be considered in order to decide the issue of arbitration, said apex court rejecting the plea of Vedanta Aluminium.

The apex court allowed the plea of Dubai-based minerals trading company, Trimex International EZE, seeking arbitration to resolve its dispute with Vedanta Aluminium, a subsidiary of London Stock Exchange-listed Vedanta Resources.

"Once the contract is concluded orally or in writing, the mere fact that a formal contract has to be prepared and initialled 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 initialled,” said Justice P Sathasivam.

The court turned down the plea of Vedanta which had opposed arbitration to resolve its dispute with the Dubaibased firm. Vedanta had taken the ground that there was no signed contract between them for arbitration.

"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 emails, letter, telex, telegrams and other means of telecommunication,” court said.

According to apex court, if the intention of the parties was to arbitrate any dispute which arose in relation to the offer made by the Dubai-based company on October 15, 2007 and the acceptance of Vedanta next day, the dispute is to be settled through arbitration.

It appointed Justice B N Srikrishna,the former apex court judge, as arbitrator to resolve the dispute between the parties.

The Dubai-based company, on October 15, 2007, submitted a commercial offer through email for the supply of bauxite to Vedanta. After several exchanges of emails and after agreeing on the material terms of the contract, Vedanta conveyed its acceptance of the offer through email on October 16, 2007 confirming supply of 5 shipments of bauxite from Australia to Vizag/Kakinada.

On the basis of the acceptance, Trimex concluded the deal with the bauxite supplier in Australia on the same day and entered into a binding charter party agreement with the shipowner in Oslo on October 17, 2007.

The acceptance of the offer was acknowledged by Vedanta in the minutes and a formal contract containing a detailed arbitration clause was also sent which was accepted by the Dubai-based firm.

On November 9, 2007, the Dubai-based company entered into a formal bauxite sales agreement with Rio Tinto of Australia for the supply of 225,000 tonnes of bauxite. Vedanta, on November 12, 2007, requested to hold the next consignment until further notice. Trimex, however, informed that it was not possible to postpone the cargo and requested to sign the purchase agreement.

On November 13, 2007, the shipowners nominated the ship for loading the material. The Dubai-based company then terminated the contract on November 16, 2007 reserving the right to claim for damages. It was conveyed to the shipowners about the cancellation of the carriage.

The shipowners made a claim of $1 million towards commercial settlement. The Dubai-based company on November 30, 2007, asked Vedanta to pay a sum of $1 million 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.

A claim-cum-arbitration notice was served by Trimex on Vedanta. It rejected the arbitration notice stating that there was no concluded contract between the parties. Against it, the Dubai-based company had come to the apex court.

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