The appellants herein are the owners & parties interested in the Vessel M.V. Baltic Confidence (for short the ship). The 2nd respondent herein is the charterer of the said ship under the Time Charter Party Agreement entered between it and the appellants with effect from 8th of May, 1997. Five Bills of Lading all dated 26th May, 1997 were issued by the appellants wherein the respondent no.2 agreed and undertook to carry on board the said ship 11,433.510 metric tonnes of Canadian Yellow Peas (the peas for short) from the Port of Vancouver in Canada to the Port of Calcutta in good order and condition. The respondent no.1 herein is the holder and endorsee of each of the said Bills of Lading and the owner of the said stock of peas. The said respondent no.1 filed Admiralty Suit No.17 of 1997 in the High Court at Calcutta in its admiralty jurisdiction against the appellants and respondent no.2 alleging inter alia that the defendants had negligently and in breach of the contract of carriage and/or breach of their duties as bailees, failed to deliver goods to the plaintiff in good order and condition; the defendants have delivered part of the goods weighing 4,910 metric tonnes damaged by sea water and in consequence the plaintiff had suffered loss and damage at least in the sum of US $ 1,384,620 being the value of the said damaged quality. The plaintiff further alleged that it has suffered further loss and damages. It was in these circumstances that the plaintiff filed the suit.

The appellants and respondent no.2 herein as the 1st and 2nd defendants in the suit filed an application under Section 45 of the Arbitration and Conciliation Act,1996 (for short the Act) praying inter alia for staying of the proceedings in the suit and for referring the disputes to arbitration in terms of Clause 62 of the Charter Party Agreement which was specifically incorporated as a condition of the Bills of Lading. The said application was rejected by a single Judge of the Court by the order passed on 10th November, 1998 holding, inter alia, that the arbitration clause in the Charter Party Agreement was not applicable to the alleged disputes arising from the Bills of Lading and, therefore, the application filed by the defendants was not maintainable. On appeal by the defendants, the Division Bench of High Court confirmed the order passed by the single Judge vide the judgment dated 2nd August, 1999. The said judgment is under challenge in this appeal filed by the defendants.

The question that arises for determination is, whether the High Court, on construction of the terms and conditions of the Charter Party Agreement and the condition in the Bills of Lading incorporating the terms and conditions of the Charter Party Agreement into it was right, in holding that the parties in the suit are not bound by the agreement contained in Clause 62 of the Charter Party Agreement for purpose of arbitration of the disputes raised in the suit. Before proceeding to consider the question further it will be convenient to quote Clause 62 of the Charter Party Agreement and the relevant clause in the Bills of Lading. Clause 62 of the Charter Party Agreement is as follows :