Holding

The arbitration clause in the 1997 charter party remained effective despite the expiry of the charter period, as the parties’ conduct amounted to acceptance sub silentio, giving the arbitral tribunal jurisdiction.

Summary

Bharat Petroleum Corporation Ltd. (appellant) and Great Eastern Shipping Co. Ltd. (respondent) entered into a time charter party on 6 May 1997, which was extended to 31 August 1998. After the extension expired, the parties continued to use the vessel without a new written charter, and the respondent later invoked the arbitration clause of the 1997 charter party. The arbitral tribunal held it had no jurisdiction, reasoning that the charter party and its arbitration clause had terminated with the expiry date. The High Court set aside that award, holding that the parties’ conduct – the respondent’s letters and the appellant’s silence while continuing to use the vessel – amounted to acceptance sub silentio, keeping the charter party and its arbitration clause alive. The Supreme Court affirmed the High Court, stating that the arbitration agreement survived the expiry of the charter period and the arbitral tribunal had jurisdiction, and ordered a fresh arbitral tribunal to be constituted. The appeal was dismissed.

Issues considered

Whether the arbitration clause in the charter party dated 6 May 1997 survived the expiry of the charter period on 31 August 1998.
Whether the parties' conduct, including the appellant's silence, constituted acceptance sub silentio, thereby keeping the charter party in force.
Whether the arbitral tribunal had jurisdiction to adjudicate the dispute arising after the charter period.
Whether a fresh arbitral tribunal should be constituted to hear the claims.

Subjects

ArbitrationCharter PartySub SilentioArbitration ClauseContract ExpiryJurisdictionNon-RedeliveryContract Law

Judgment

J..
BHARAT PETROLEUM CORPORATION LTD. A
v.
THE GREAT EASTERN SHIPPING CO. LTD.

OCTOBER 12, 2007
B
[TARUN CHATTERJEE AND D.K. JAIN, JJ.]
-1

Arbitration-Arbitration agreement-Applicability-Time
" Charter Party agreement-For letting on hire vessels-To Oil
Corporation-Disputes arose between parties-After expiry of the c
agreement-Reference of dispute to Arbitral Tribunal-Tribunal
refused to adjudicate on the ground that the arbitration clause could
not be invoked after expity of the agreement-:-High Court set aside
the award of the Tribunal-On appeal, held: Arbitration clause
contained in the agreement could be invoked even after expiry of the p
agreement-Notwithstanding the expiry of the time fixed for the
;
agreement, the same did not get extinguished for the purpose of
,. determination ofthe disputes arising thereunder.
Contract-Acceptance ofoffer-Manner of-Held: General rule
that offer is not accepted by mere silence does not mean that it has to
E
be given in so many words-In certain circumstances, offeree's silence
coupled with his conduct taking form ofpositive act, may constitute
an acceptance sub silentio.
Doctrines/Principles-Principle ofSub Silentio-Applicability of F
--<
An agreement called 'Time Charter Party' was entered into
'f
between the appellant and the respondent on May 6, 1997 for letting
on hire, vessels by the respondent to the appellant. The agreement
was mutually extended till August 31, 1998. Thereafter tender was
floated inviting fresh bids. Some bidders filed Writ Petition against G
decision oflndian Oil Corporation (IOC) to invite revised price bids
after opening of the sealed tenders. During pend ency of finalization
of new Charter Party, respondent informed the appellant that they

117 H
i.\
118 SUPREME COURT REPORTS [2007] 11 S.C.R.

)
A were agreeable to apply new rates, for use ofthe vessel from July Al
1, 1998, provided all its nine vessels were used. By their letter dated
November 5, 1998, they also protested against revision of the rates
by the appellant downward for the vessel not being considered under
the new bid. There was no response by the appellant to the protest.
B The respondent by their letter dated January 4, 1999, expressed their
willingness to sign the new Charter Party based on the existing terms
and conditions indicating that usual practice is that pending >-
finalization of the new Charter Party, the existing terms and
conditions of Charter Party continued to apply. It was also suggested ---,

c that agreement could be signed for the period from September 1,
1998 until the matter was finally decided on the existing terms and
conditions. There was no response by the appellant, to this letter
also. There was no further exchange of correspondence between the
parties,- during the year. The Writ Petition was disposed of on August
D 20, 1999. Appellant continued to use the vessel under the Charter
Party May 6, 1997 till August 31, 1999. IOC informed the
respondentabout the evaluation of the tenders as per the High Court
--\
order. Respondent accepted the proposed rates except for two
vessels. They requested for revision of rates in respect of these two ).

vessels, but the same was turned down. Pursuant to some notices
E
and some subsequent correspondence, an Arbitral Tribunal was
constituted.
Arbitral Tribunal came to the conclusion that the Tribunal had
no jurisdiction to decide the reference because the Charter Party
F dated May 6, 1997, arbitration clause whereof was invoked, was
valid only tipfo August 31, 1998 and the dispute related to the period
';-
subsequent to August 31, 1998; and that Charter Party dated May
y
6, 1998 was superseded by fresh agreement according to which the
Charter hire rates were to be determined by the Oil Co-ordination
G Committee. Single Jµdge of High Court set aside the Award holding
that the Tribunal had the jurisdiction to adjudicate the dispute; and
that Tribunal failed to consider clauses 4.1and23 of Charter Party I

dated May 6, 1997, according to which Charter party was to come -1
to an end only on re-delivery of vessel and admittedly re-delivery
H did not take place after August 31, 1998 and thus it continued to be
BHARATPETROLEUMCORPORATIONLTD. v. GREAT 119
EASTERN SHIPPING CO.LTD.
hired in terms of Charter Party dated May 6, 1997. Hence the A -
present appeal.
The question for determination was whether on expiry of the
extended period of charter hire on August 31, 1998, Charter Party
dated May 6, 1997 come to an end and the arbitration agreement
B
perished with it.

__, Dismissing the appeal, the Court
HELD: 1. The general rule is that an offer is not accepted by
" mere silence on the part of the offeree, yet it does not mean that an
acceptance always has to be given in so many words. Under certain
c
circumstances, offerree's silence, coupled with his conduct, which
takes the form of a positive act, may constitute an acceptance of
an agreement sub silentio. Therefore, the terms of a contract
between the parties can be proved not only by their words but also
D
by their conduct. [Para 19] [128-E-F]

>- 2. The principle of sub silentio is clearly attracted in the present
case. The conduct of the parties, as evidenced in the correspondence
-~ between the parties, and in particular appellant's silence on
respond-ent's letters dated 5th November, 1998 and 4th January, E
1999, coupled with the fact that they continued to use the vessel,
manifestly goes to show that except for the charter rate, there was
no other dispute between the parties. They accepted the stand of
the respondent sub silentio and thus, continued to bind themselves
by other terms and conditions contained in the Charter Party dated F
6th May, 1997, which obviously included the arbitration clause.
----1
[Para 20) [128-G; 129-G-H; 130-A]
y

3. On a conjoint reading of clauses, 4.1and23 of the Charter
Party dated 6th May, 1997, it is plain thatthe appellant was under
G
an obligation to re-deliver the vessel as per the procedure
contemplated in the afore-noted clauses. Indisputably, the vessel
1 in question had not been re-delivered at least during the relevant
I
period and the appellant continued to use the vessel beyond 31st
August, 1998. Having failed to re-deliver the vessel in terms of
H
·-- --·- -·-·- ·--
120 SUPREME COURT REPORTS [2007] 11 S.C.R. +
A Clause 4.1 of the Charter Party, the appellant cannot plead that the
Charter Party had been fully worked out. It is clear from the
pleadings and the issue framed by the Arbitral Tribunal, that it was
respondent's consistent stand that since the hired vessel had not
been re-delivered at the end of the time charter party, the vessel
B would be governed by the terms and conditions in the Charter Party
dated 6th May, 1997. However, the Arbitral Tribunal.answered the
said issue against the respondent. Even the question in regard to
the effect and consequences of non-delivery of the vessel in terms
of the Clause 4.1and23 would by itself be a dispute arising under
C the said 'Charter Party'. A,rbitral Tribunal overlooked this aspect
of the matter. [Para 22] (130-H; 131-A-C)
4. Though performance of the Charter Party agreement dated
6th May, 1997 may have come to an end on 31st August, 199~i; but
D it was still in existence for some purposes, viz. the effect of vessel's
non re-delivery as per the prescribed mechanism and its continued
use beyond the stipulated time and, thus, the arbitration clause in
the said Charter Party operated in respect of these and other allied
purposes. Therefore, the factual scenario in the instant case !cads
E to an inescapable conclusion that notwithstanding the expiry of the
period fixed in the time charter party dated 6th May, 1997, the said
charter party did not get extinguished, inter alia, for the purpose of
determination of the disputes arising thereunder and the arbitration
clause contained therein could be invoked by the respondent.
p [Para23] (131-D-F]
5. It would be proper and expedient to constitute a fresh Arbltral
Tribunal. Accordingly, an Arbitral Tribunal is constituted consisting
of three former Judges of this Court to adjudicate upon the claim/
counter claim by the parties, subject to their consent and such terms
G and conditions as they may deem fit and proper.
(Para 25] [132-A-B]

CIVIL APPELLATE JURISDICTION : Civil Appeal No. 4829 of
2007.
H
BHARATPETROLEUMCORPORATIONLTD. v. GREAT 121
EASTERN SHIPPING CO. LTD. [D.K.JAIN,J.]
From the Judgment and final Order dated 1.3.2005 of the High A
Court at Bombay in Arbitration Petition No. 331 of2003.
Sudhir Chandra, Parijat Sinha, S.C. Ghosh, Soumitra Ghose
Chaudhuri, Reshmi Rea Sinha and Snehasish Mukherjee for the
AppeHant.
B
Shyam Divan, Mahesh Agarwal, Rishi Agrawala, E.C. Agrawala,
Gaurav Goel, Amit Sharma and Neha Aggarwal for the Respondent.
The Judgment of the Court was delivered by
D.K. JAIN, J. 1. Leave granted. c
2. This appeal by Special Leave arises out of a judgment and order
dated 1st March, 2005 rendered by the High Court of Judicature at
Bombay, whereby the learned Single Judge has set aside the order passed
by the Arbitral Tribunal, holding that they did not have jurisdiction to
entertain and try the claim and counter claim made by the parties. D
3. In order to appreciate the issue, requiring determination, a few
relevant facts may be stated.
The appellant - Mis. Bharat Petroleum Corporation Limited is a
Government oflndia Undertaking, under the administrative control of the E
Ministry of Petroleum & Natural Gas and is engaged in refining, distributing
and selling of petroleum products all over the country. The respondent-
M/s. Great Eastern Shipping Company Limited is engaged in the business
of shipping and allied activities and owns a fleet of tanker vessels for
charter, including the vessel known as "JAG PRAJA". F
4. An agreement, called the "Time Charter Party" in legal parlance,
was entered into between the appellant and the respondent on 6th May,
1997 for letting on hire vessels for a period of two years from 22nd
September, 1996 to 30th June, 1997 and from lst July, 1997 to 30th G
June, 1998, on the tenns and conditions set out in the said agreement.
However, before the Charter Party was to come to an end, on 29th Jw1e,
1998, the Indian Oil Corporation Limited (for short 'IOC'), acting as
agent of the appellant, issued a fax to various ship owners, including the
respondent herein, requesting them to extend the validity of the Charter H
122 SUPREME COURT REPORTS [2007] 11 S.C.R.

A Party Agreement dated 6th May, 1997 beyond 30th June, 1998 for a
period of one month from 1st July, 1998 with option for two further
extensions of 15 days each. The respondent agreed to the said proposal.
Accordingly, on 29th June, 1998 an addendum was signed between the
parties wh~reby the validity period of Charter Party was extended for
B one month with an option for two further extensions for a period of 15
days each. The terms and conditions; exceptions and exemptions
contained in the Charter Party dated 6th May, 1997 remained unaltered.
The parties are ad idem that the Charter Party dated 6th May, 1997 was
extended till 31st August, 1998.
c 5. It appears that since Charter Party dated 6th May, 1997 was
coming to an end on 31st August, 1998, the Oil Companies sought
permission of the Oil Co-ordination Committee, a wing of the Ministry
of Petroleum and Natural Gas for further extension of the Charter Party.
However, the Oil Coordination Committee, by their fax message dated
D 26th August, 1998, declined the request of the Oil Companies, including
the appellant, for further extension of Charter Party beyond 31st August;
1998. The said fax mt!ssage was an internal communication between the
Oil Coordination Committee and the Oil Companies.
:~

E 6. Thereafter, in September, 1998, the IOC for and on behalf of
the Oil Industry, floated a fresh tender for carriage of petroleum products
along the Indian coast on time charter basis· for a period of one year
commencing from 1st September, 1998 to 31st August, 1999, on the
terms and conditions set out in the tender document. In response to the
F said tender, the respondent and other vessel owners submitted their bids.
It seems that being aggrieved of the decision of the IOC to invite revised
price bids after opening of the sealed tenders, one of the bidders filed a
writ petition in the Bombay High Court, questioning the said decision. The
appellant intervened in the said matter. The writ petition was disposed of
F vide order dated 20th August, 1999. While disapproving in principle, the
action of the IOC in inviting fresh price bids after opening the bids, but
without recording final opinion on the merits of the issues raised in writ
petition, the Court disposed of the petition, inter alia, directing that (i)
the charter hire rates should be fixed by the Tender Evaluation Committee
and (ii) as the tender was for the period ending 31st August, 1999 and
G
BHARATPETROLEUMCORPORATIONLTD. v. GREAT 123
EASTERN SHIPPING CO. LTD. [D.K. JAIN, J.]
the writ petition was being decided on 20th August, 1999, the IOC will A
not be required to enter into a contract for the period from 1st September,
1998 to 31st August, 1999. It is not in dispute that the vessel "JAG
PRAJA", with which we are concerned, continued to be chartered by
the appellant till 31st August, 1999.
7. It appears that pending finalization of a new charter party for the ·B
period commencing 1st September, 1998, certain meetings took place
between the Oil Companies and the Ship Owners, including the respondent
herein. On 12th October, 1998, the respondent informed the IOC that if
all its nine vessels, mentioned in the letter, are used at a fair and reasonable
rate for one year, from 1st September, 1998 to 31st August, 1999 for C
which the tender had been floated, they were agreeable to apply the new
agreed rates for use of the said nine vessels from 1st July, 1998. On 31st
October, 1998 the IOC faxed to the respondent relevant portion of the
message received by them from Oil Co-ordination Committee, extending
the period of usage of the existing coastal tanker fleet for the month of D
October, 1998, at 80% charter hire rates, prevailing till 30th June, 1998,
on provisional basis, subject to adjustment of provisional charter hire with
retrospective date from 1st September, 1998 against the revised charter
hire, to be finalised by the Oil Industry in response to the tender floated
by IOC on 1st September, 1998. Respondent's consent was asked for. E
The respondent responded immediately vide their letter dated 5th
November, 1998, agreeing in principle that revised charter hire rates, as
and when finalized in response to tender floated by the IOC on 1st
September, 1998, would be applicable to the vessels which are selected
under the tender, retrospectively from 1st September, 1998. It was pointed F
out that the vessels which are not chartered under the tender floated would
be at a disadvantage. It was clearly stated that since the tender was not
finalized, the owners will be guided by the existing terms and conditions.
Some other objections, not relevant at this stage, were also indicated. As
such, all said and done, Oil Co-ordination Committee's proposal was not G
accepted. Nevertheless, some suggestions to resolve the controversy were
given.

8. Thus, the proposal by the Oil Co-ordination Committee was not
accepted by the respondent. In the alternative, it was suggested by the
H
124 SUPREME COURT REPORTS [2007] 11 S.C.R.

A respondent that the charter period be extended by six months on the
existing terms and conditions at a mutually discussed time charter rate.
Admittedly, the vessels continued to be chartered by the appellant beyond
the date of this letter.

9. Thereafter, for almost two months, there was no communication
B between the parties. It was only on 31st December, 1998 when the IOC
issued a fax to the respondent, enclosing draft letter regarding charter party
agreement to be signed between the charterers and owners (with minor
modification, if necessary), requesting the respondent to sign as per f
proposal by the 4th January, 1999, on which date the respondent
C expressed its disinclination, stating in reply fax that as per usual practice,
pending finalization of new charter, the existing terms and conditions of
the charter party continue to apply. Finally, it was suggested that:
"We, therefore, suggest that we sign an agreement with you for
the period from 1st September, 1998 until the matter is finally
D
decided by you under the tender on the existing terms and
conditions with the charter hire being provisionally paid on an ad
hoc basis at 90% of the rate ·which was prevailing under the
existing Charter Party.
E Kindly confirm in order to draw up a suitable agreement
accordingly."

[Emphasis supplied]

10. Vide letter of even date, i.e. 4th January, 1999, the appellant
F suggested to the respondent that in the absence of a formal charter party
with effect from 1st September, 1998, a provisional arrangement for a
period of four months eftective from 1st September, 1998 with an option
for extension of one month may be mutually agreed to by payment at the
rate of 80% on charter hire prevailing on 30th June, 1998, as ad hoc
' G hire. The respondent \:vas asked to convey their acceptance· to the said
suggestion. It appears that the respondent did not respond to the said
suggestion by the appellant but all the same its vessel continued to be on
charter with the appellant.

11. The writ petition was ultimately disposed of on 20th August,
H
BHARATPETROLEUMCORPORATIONLTD. v. GREAT 125
f EASTERN SHIPPING CO.LTD. [D.K. JAIN, J.]
1999. It was only after a gap of about seven months that on 15th March, A
2000, the IOC informed the respondent about the evaluation of the tenders
in terms ofthe order passed by the High Court. Charter hire rate worked
out by the Committee for vessel 'JAG PRAJA' for the period from 1st
September, 1998 to 31st August, 1999 was communicated to the
respondent. In response, the respondent, while expressing their B
disappumunent with the rate but purportedly, in view of their long business
-'\
relations with the appellant conveyed their acceptance of the proposed
'"\
rate in respect of each of the vessels' named in separate letters, all dated
1st May, 2000, with the expectation that their outstanding balance of the
hire shall be paid to them at the earliest. However, the respondent did c
not convey their acceptance of the charter hire rates for two vessels, viz.
"JAG PRAJA" and "JACiPRAYOG". It appears that the respondent
wrote various letters to the appellant for upward revision of the rate in
respect of these two vessels but seemingly their request was ultimately
tumed down on 2nd November, 2000, on receipt of which, the respondent
D
slammed a legal notice dated 6th November, 2000, on the appellant, inter
r
alia, re4uesting them to revise the rates on the basis of mutual discussions
~
and settle the accounts. Having failed to receive any reply to the said notice,
by another legal notice dated 1st December, 2000, the respondent called
upon the appellant to pay balance amount of Rs. 43,947,517/- to them
E.
as charter hire in respect of vessel "JAG PRAJA" for the period from
1st September, 1998 to 31st August, 1999 within 15 days from date of
receipt of the said notice or treat it as an arbitration notice. The name of
the arbitrator was also communicated to the appellant. It seems that
pursuant to the said notice and some subsequent correspondence
exchanged between the parties, an Arbitral Tribunal was constituted. F
--;
'y
12. Clain1s and counter claims were filed before the Arbitral Tribunal.
On the basis of the pleadings of the parties, the Arbitral Tribunal framed
as many as eight issues. However, arguments were heard only on the
following three issues: G
"Issue No.I:- Whether the Hon'ble Arbitral Tribunal has no
I jurisdiction to adjudicate upon the dispute between the Claimant
and the Respondent for the period September, 1998 to August,
1999 in respect of the vessel Jag Praja for the reasons stated in
H
~
126 SUPREME COURT REPORTS (2007] 11 S.C.R.
--"
A para 1 of the written statement?
Issue No.2:- Whether there is any common practice that if the
...
~
vessel is not re-delivered at the end of the period mentioned in
the time charter the vessel would be governed by the charter party
under which originally it was chartered?
B
Issue No.5:- Whether the time charter party dated 6th May, 1997 )-.
came to an end by eftlux of time on 30th August, 1998?"
-r
13. Vide order dated 12th May, 2003 the Arbitral Tribunal came
c tocontained
the conclusion that the appellant having invoked the arbitration clause
in charter party agreement dated 6th May, 1997, which was
valid upto 3 lst August, 1998 and as the dispute between the parties
related to the period subsequent to 31st August, 1998, they had no
jurisdiction to decide the Reference. The learned Tribunal found issue
No.2 in the negative and issue No. 5 in the affmnative. According to the
D Tribunal on and after 1st September, 1998, charter party agreement dated
6th May, 1997 was superseded by a fresh agreement and a term of the -(
agreement was that the charter hire rate would be determined by the Oil
~
Co-ordination Committee of the IOC. In nutshell, the Tribunal was of the
view that with the performance, original charter party dated 6th May, 1997
E got extinguished.

14. The respondent challenged the said Award before the High Court.
By the impugned order, the learned Single Judge has set aside the said
Award, inter alia, holding that Arbitral Tribunal has the jurisdiction to
F adjudicate the disputes between the parties as the vessel continued to be
hired by the appellant for the period subsequent to 31st August, 1998 'r
on the same terms and conditions, as were contained in the charter party y

dated 6th May, 1997, only subject to the revision or modification of the
rate of hire to be determined by the Oil Co-ordination Committee. The
G learned Judge also felt that the Tribunal had erred in totally excluding from
its consideration clauses 23 and 4 .1 of the charter party dated 6th May,
1997, whereunder the chatter party was to come to an end on re-delivery
of the vessel. Admittedly, after 3 lst August, 1998, re-delivery of vessel
~
did not take place and, therefore, in terms of clause 23, the vessel
continued to be hired on the same terms and conditions except the term
H
i
t
BHARATPETROLEUMCORPORATIONLTD. v. GREAT 127
EASTERN SHIPPING CO. LTD. [D.K. JAIN, J.]
as to the hire charges, on which there was disagreement between the A
parties. It was thus, held that .the charter party dated 6th May, 1997 did
not come to an end by efflux of time and it was extended by the parties
on the same terms and conditions except the rate of hire. Correctness of
this order of the High Court is questioned in this appeal.
15. Mr. Sudhir Chandra, learned senior counsel appearing on behalf B
of the appellant has assailed the impugned order on the sole ground that
the Charter Party dated 6th May, 1997 having come to an end by efflux
of time on 31st August, 1998, the arbitration clause contained in it also
perished and, therefore, in the absence of a fresh arbitration agreement,
claim of the respondent relating to the period 1st September, 1998 to C
31st August, 1999 could not be referred to arbitration by invoking
arbitration clause in Charter Party dated 6th May, 1997. Laying emphasis
on the fax message dated 26th August, 1998 addressed by the Oil Co-
ordination Committee to the oil companies, including the appellant, inter
alia, informing them that no further extension of the 'Current Charter Hire D
Rate' will be allowed, learned counsel submitted that the said message
made it clear to all concerned that Charter Party dated 6th May, 1997
would not be extended under any circumstance.
16. Mr. Shyam Divan, learned senior counsel appearing on behalf E
of the respondent, on the other hand, submitted that notwithstanding the
fact that the period fixed originally under the Charter Party or under the
Addendum dated 29th June, 1998 had come to an end, the subsequent
conduct of the parties goes to show that charter of the vessel by the
appellant beyond 31st August, 1998 continued to be governed by the
F
te1ms and conditions stipulated in charter party dated 6th May, 1997 and,
therefore, an arbitration agreement did exist between the parties. Learned
counsel argued that even otherwise till the vessel was not re-delivered in
terms of Clauses 4 and 23 of Charter Party dated 6th May, 1997, the
said agreement could not come to an end. It was pointed out that all the
obligations of the owners as well as of the charterers during the period G
the vessel was in use continued to be discharged under the Charter Party
j
dated 6th May, 1997 even after the expiry of the period of the Charter
Party. In support of the proposition that the concurrence of a party can
be gathered from his conduct, like continued user of the vessel in the
H
(

+
128 SUPREME COURT REPORTS [2007] 11 S.C.R.

A present case, without any objection to respondent's letter dated 4th
January, 1999, reliance is placed on a decision of this Court m The Godhrc:
Electricity Co. Ltd. & Anr. v. The State of Gujarat & Anr. 1• It was
also submitted that the view taken by the High Court being a plausible
view, interference m exercise of extra-ordmary jurisdiction under Article
B 136 of the Constitution is unwarranted.
17. Thus, the short question for determination is whether on the r-
expiry of the extended period of charter hire on 31st August, 1998,
Charter Party dated 6th May, 1997 came to an end and the arbitration -r "'
agreement between the parties perished with it?
c
18. Before we proceed to examine the rival stands, we may note,
at the outset, that neither the Arbitral Tribunal nor the High Court have
gone into the question whether the claim made by the respondent wpuld
otherwise fall within the ambit of the arbitration clause in the Charter Party
D or not. What is in dispute is whether the arbitration agreement between 'I
· the parties had got extinguished after 31st August, 1998, i.e. the date of
"· .
expiry of the e>.1ended period of the Charter Party. Therefore, we refrain
from expressing any opin.ion on the scope and ambit of the arbitration
clause though, prime facie, it appears to be quite widely worded.
E 19. It is, no doubt, true that the general rule is that an offer is not
accepted by mere silence on the part of the offerree, yerit does not mean
that an acceptance always has to be givenin so many words. Under
certain circumstances, offerree's silence, coupled 'vith his conduct, which
takes the form of a positive act, may constitute an acceptance - an
F agreement sub silentio. Therefore, the tem1s of a contract between the
parties can be proved not only by their words but also by their conduct. }--
20. In our view, the principle of sub silentio is clearly at.~acted in
the present case. As noted above, after the extended period of Charter
G Party dated 6th May, i997 had come to an end on 31st August, 1998
and the bids received pursuant to fresh invitation were pending finalization,
vide their letter dated 12th October, 1998, the respondent had informed
the appellant that they were agreeable to apply new rates for use of the
vessel from l st July, 1998 provided all the nine vessels are used. However,
on 31st October, 1998, the appellant faxed IbC's message informing
H
BHARAT PETROLEUM CORPORATION LTD. v. GREAT 129
EASTERN SHIPPING CO. LTD. [D.K. JAIN, J.]
them of the extension of the existing coastal tanker fleet for the month of A
October, 1998 at reduced rates, viz. 80% of the Charter Party rates
prevailing till 30th August, 1998. On receipt of the said letter, the
respondent vide their letter dated 5th November, 1998, protested against
the revision of the rates for the vessel not being considered under the new
bid and stated in unequivocal terms that it was not possible for them to B
accept the proposal of the Oil Co-ordination Committee, communicated
to them vide letter dated 12th October, 1998. Yet again while responding
to appellant's fax dated 31st December, 1998, whereby the respondent
was required to sign a provisional charter party by 4th January, 1999,
vide their letter dated 4th January, 1999, the respondent, pointed out to C
the appellant that usual practice is that pending finalization of the new
Charter, the existing terms and conditions of the Charter Party continue
to apply and, therefore, they were willing to sign the agreement as
contemplated by the appellant based on the existing terms and conditions.
It was suggested that an agreement may be signed between them for the D
period from 1st September, 1998 until the matter was finally decided by
the appellant under the tender, on the existing terms and conditions with·
the charter hire being provisionally paid on ad hoc basis at 90% of the ••
rate which was prevailing under the existing Charter Party. As noted
hereinabove, there was no response by the appellant to respondent's letter
dated 4th January, 1999 though it appears that vide their letter of even E
date, the appellant did suggest to the respondent that as a token of formal
agreement the said letter may be jointly signed by the charterers and the
vessel owners. Admittedly, no such agreement was signed between the
parties. Indubitably, there was no further exchange of correspondence
between the parties - during the year. Nevertheless, the appellant F
continued to use the vessel on hire with them under the time charter dated
6th May, 1997. The conduct of the parties, as evidenced in the said
correspondence and, in particular appellant's silence on respondent's
letters dated 5th November, 1998 and 4th January, 1999, coupled with
the fact that they continued to use the vessel, manifestly goes to show G
that except for the charter rate, there was no other dispute between the
} parties. They accepted the stand of the respondent sub silentio and thus,
continued to bind themselves by other terms and conditions contained in
the Charter Party dated 6th May, 1997, which obviously included the
H
130 SUPREME COURT REPORTS [2007] 11 S.C.R.

A arbitration clause.
21. We may examine the issue from another angle, based on
respondent's stand that charter party dated 6th May, 1997 continues to
be in vogue till the chartered vessel is re-delivered. In this context, it would
be appropriate to refer to Clauses 4 and 23 of the Charter Party dated
B 6th May, 1997. These are in the following terms:

"4. Delivery & Redelivery f-
.
,....
4.1. The vessel shall continue to be on charter to charterers in direct y

continuation from 2348 hrs. 22.09.1996 to 30.06.1998. The
c vessel shall be re-delivered by charterers to owners on
dropping last outward pilot at any port on west coast oflndia
at charterers option. Charterers to give owners 15 days notice
to probable port of re-delivery.
4.2 Charterers to load last three cargoes clean and re-deliver the
D
vessel in clean condition.
23. Final Voyage
-\
Should the vessel be on her voyage towards the port of redelivery
at the time of payment of hire is due, payment of hire shall be made '" f

E
for such length of time as Owners and Charterers may agree upon
as being estimated time necessary to complete the voyage, less any
disbursements made or expected to be made or expenses incurred
or expected to be incurred by Charterers for owners account and
less the estimated amount of bunker fuel remaining at the tennination
F of the voyage and when the vessel is redelivered any overpayment
'>-
shall be refunded by the owners or underpayment paid by
y
Charterers. Notwithstanding the provisions of clause 4 hereof
should the vessel be upon voyage at the expiry of the period of
this charter, Charterers shall have the use of vessel at the same
G rate and conditions for such extended time as may be necessary
for the completion of the round voyage on which she is engaged
and her return to a port ofredelivery as provided by the Charter." ~
'
22. On a conjoint reading of the said clauses, it is plain that the
H appellant was under an obligation to re-deliver the vessel as per the
BHARATPETROLEUMCORPORATIONLTD. v. GREAT 131
EASTERNSHIPPINGCO.LTD. [D.K.JAIN,J.]
procedure contemplated in the afore-noted clauses. Indisputably, the vessel A
in question had not been re-delivered at least during the relevant period
and the appellant continued to use the vessel beyond 31st August, 1998.
Having failed to re-deliver the vessel in terms of Clause 4.1 of the Charter
Party, the appellant cannot plead that the Charter Party had been fully
worked out. It is clear from the pleadings and issue No.2, framed by the B
Arbitral Tribunal, that it was respondent's consistent stand that since the
hired vessel had not been re-delivered at the end of the time charter party,
the vessel would be governed by the terms and conditions in the Charter
Party dated 6th May, 1997. However, the Arbitral Tribunal answered the
said issue against the respondent. It appears to us that even the question C
in regard to the effect and consequences of non-delivery of the vessel in
terms of the Clause 4.1and23 would by itself be a dispute arising under
the said 'Charter Party'. With respect, the learned Arbitral Tribunal
overlooked this aspect of the matter.
23. We are, therefore, of the opinion that though performance of D
the Charter Party agreement dated 6th May, 1997 may have come to an
end on 31st August, 1998 but it was still in existence for some purposes,
viz. the effect of vessel's non re-delive1y as per the prescribed mechanism
and its continued use beyond the stipulated time and, thus, the arbitn,ltion
clause in the said Charter Party operated in respect of these and other E
allied purposes. Therefore, the factual scenario in the instant case leads
to an inescapable conclusion that nomithstanding the expiry of the period
fixed in the time charter party dated 6th May, I997, the said charter party
did not get extinguished, inter alia, for the purpose of determination of
the disputes arising thereunder and the arbitration clause contained therein F
could be invoked by the respondent.
24. In view of the foregoing discussion, we do not find any infirmity
in the view taken by the High Court that Charter Party dated 6th May,
1997 had not come to an end by efflux of time and it got extended by
the conduct of the parties, warranting interference. G
25. Having come to the conclusion that an arbitration agreement
} existed between the parties, the question which remains to be considered
is whether the disputes between the parties should be referred to the same
Arbitral Tribunal which had come to the conclusion that in the absence of H
132 SUPREME COURT REPORTS [2007] 11 S.C.R.

A any arbitration agreement it did not have jurisdiction to entertain and try
the claims and counter claims. We feel that it would be proper and
expedient to constitute a fresh Arbitral Tribunal. Accordingly, we constitute
an Arbitral Tribw1al consisting of Justice M. Jagannadha Rao_ (Presiding
Arbitrator), Justice D.P. Wadhwa and Justice S.N. Variava, former Judges
B of this Court to adjudicate upon the claim/coWlter claim by the parties,
subject to their consent and such terms and conditions as they may deem
fit and proper. It goes without saying that the learned Tribunal shall deal
with the matter uninfluenced by any observations in this order on the
respective stands of the parties.
c 26. Resultantly, the appeal being devoid of any merit is liable to be
dismissed, which we do, leaving the parties to bear their own costs.
27. The Registry is directed to communicate this order to the learned
Members of the Arbitral TribWlal to enable them to enter upon the
D Reference and decide the ~atter as expeditiously as practicable.
K.K.T. Appeal dismissed.

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y