PEC Ltd v Asia Golden Rice Company Ltd [2014] EWHC 1583 (Comm)

Case No 2012-1382[2014] EWHC 1583 (Comm)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Venue Royal Courts of Justice, Strand, London, WC2A 2LLDate 20/05/2014
Before
MR JUSTICE ANDREW SMITH
Between
PEC LimitedClaimantsAsia Golden Rice Company LimitedDefendants
Michael Brindle QC and Janan Al-Asady(instructed by Zaiwalla & Co) for ClaimantsMichael Collett QC and Charlotte Tan(instructed by Clyde & Co LLP) for DefendantsHearing Hearing dates: 6, 7, 8, and 12 May 2014
Judgment
[1]This is an application under section 67 of the Arbitration Act 1996, the central issue being whether the claimants, PEC Limited (“PEC”), entered into an arbitration agreement in relation to a contract to buy rice. Asia Golden Rice Company Limited (“AGR”) contend(i) that on 15 May 2008 a Mr Pawan Jain of Pawan Jain & Sons (“PJS”) made an oral agreement committing PEC to buy 25,000 mt of rice from them and that the contract included an arbitration agreement, and(ii) the contract was confirmed by a written agreement dated 16 May 2008 that provided for arbitration “London as per GAFTA 125” and that was signed by a Mr Ravi Kumar, then Chief General Manager (“CGM”) at PEC, and sent by email to AGR by Mr Jain. PEC’s case is that neither Mr Jain nor Mr Kumar had authority to enter into the contract to buy the rice (the “Purchase Agreement”), and therefore they deny that they are party to any arbitration agreement.[2]The question whether the parties concluded an arbitration agreement is distinct from the question whether they concluded the Purchase Agreement: see Lord Hoffmann in Fiona Trust & Holding Corp and ors v Privalov and ors, [2007] UKHL 40 at para 17. But AGR do not argue that PEC and AGR concluded a discrete arbitration agreement if neither Mr Jain nor Mr Kumar had PEC’s (actual or apparent) authority to make the Purchase Agreement (and so no Purchase Agreement was made by PEC): they considered that this argument was precluded by an order of Hamblen J made on 12 October 2012 that the jurisdiction question be decided “by reference to all the issues relating to the conclusion and terms of the alleged contract”, and so they accepted that “the questions whether there was a binding matrix contract and whether there was an arbitration agreement stand or fall together”. They maintain(i) that Mr Jain had apparent authority (or PJS had apparent authority: it makes no different whether the arguments are considered on the basis that Mr Jain personally or PJS had apparent authority and for convenience I shall refer simply to Mr Jain in this judgment) to conclude the oral Purchase Agreement on PEC’s behalf;(ii) that Mr Ravi Kumar had their actual authority to conclude the Purchase Agreement in writing; and(iii) that Mr Jain had apparent authority to communicate PEC’s acceptance of the written Purchase Agreement. AGR expressly conceded that they cannot present a claim on the basis that Mr Ravi Kumar had any relevant apparent authority if he did not have actual authority. They advance no argument that Mr Jain had any relevant actual (rather than apparent) authority because it would have been conferred on him by Mr Ravi Kumar and this would depend on Mr Ravi Kumar having authority to make the Purchase Agreement himself. Nor do AGR advance any argument of ratification.[3]For their part PEC do not dispute that, if Mr Jain or Mr Kumar had (actual or apparent) authority to make the Purchase Agreement, that carried with it authority to make the arbitration agreement in respect of disputes relating to it. They do not accept that Mr Jain concluded any contractually binding agreement with AGR orally on 15 May 2008, and so do not accept that he made an arbitration agreement. In their pleaded case PEC say that the written Purchase Agreement was outside their capacity and contrary to the Indian Foreign Companies (Execution of Documents) Regulations, 2004, but those contentions were not pursued: PEC’s argument about the written agreement was that Mr Ravi Kumar did not have authority to make it.[4]It is common ground that (because previous dealings between AGR and PEC were governed by English law, this being the implication of their previous agreements for GAFTA arbitration in England) the governing law of the putative Purchase Agreement is English. AGR contend that therefore the issue about Mr Jain’s apparent authority is governed by English law. PEC dispute this, arguing that the issue of Mr Jain’s apparent authority is governed only by Indian law: that AGR must establish his apparent authority under Indian law, and is not enough for them to prove that he would have had apparent authority under English law. It is also common ground between the parties that a question whether an agent has actual authority to bind the principal to a contract with a third party is determined by the law governing the internal relationship between the principal and the agent (notwithstanding it is not covered by Rome I Regulation because of article 1(2)(g)). I shall proceed on this basis, although I see force in the observations in Bowstead and Reynolds on Agency (19th Ed, 2010) para 12-017 that question this. PEC being an Indian company, I therefore determine the issue about Mr Ravi Kumar’s actual authority by reference to the law of India.[5]A dispute arose when PEC did nothing to perform the Purchase Agreement, and specifically no letter of credit was opened and no vessel was nominated under it. AGR made a claim in a reference under the GAFTA arbitration procedure. PEC disputed the Tribunal’s jurisdiction. The GAFTA First Tier Tribunal found that the Purchase Agreement was concluded orally on 15 May 2008 because: i) Although Mr Jain did not have actual authority to make the Purchase Agreement for PEC, and ii) Although AGR had not established their case that Mr Jain had apparent authority to make the Purchase Agreement for PEC because of what PEC told AGR at a meeting on 3 May 2005, iii) Nevertheless they had established their alternative case that Mr Jain had apparent authority because of dealings before May 2008 between AGR and PEC.[6]In the reference, PEC raised no issue about Mr Ravi Kumar’s authority to bind PEC contractually, and the claim was not defended on that basis. Their case about the written agreement was that Mr Ravi Kumar had signed an agreement for the purchase of 2,500 mt, and not 25,000mt, of rice. It was rejected by the Tribunal. That case was originally advanced in these proceedings, but it has been abandoned. PEC now accept that Mr Ravi Kumar signed a contract to buy 25,000 mt of rice but say that he had no authority to make that contract on their behalf. Their original case has been discredited by evidence that shows that it must have been advanced with documents that were not genuine and evidence that was dishonest. Mr Michael Brindle QC, who represented PEC, did not advance any argument to the contrary.[7]The First Tier Tribunal concluded in an award dated 2 July 2012 that it had jurisdiction and that PEC were liable to pay AGR $6.25 million PEC have appealed against the award to the GAFTA Board of Appeal. However the GAFTA procedural rules provide for no appeal about the Tribunal’s finding that it had jurisdiction: see rule 8.1(b) of the GAFTA 125 rules. Accordingly, PEC have also brought these proceedings. Although Lord Mance JSC observed in Dallah v Ministry of Religious Affairs, [2010] UKSC 46 at para 31 that the court will consider the reasoning and conclusion of the Arbitral Tribunal, I am not bound or restricted by the Tribunal’s decision, and the hearing before me is not by way of an appeal but a new hearing of the issue about the Tribunal’s jurisdiction.[8]By a direction given by Cooke J on 21 December 2012 it was ordered that the parties be permitted to rely on any evidence served in the GATFA proceedings including transcripts of oral evidence, and that no oral evidence be permitted in these proceedings without further order. On 19 April 2013 Hamblen J permitted both parties to adduce expert evidence of Indian law, permitted AGR to call an expert on forensic document examination and permitted PEC to serve a witness statement about AGR’s case on the actual authority of Mr Ravi Kumar. In the event, PEC made clear before the hearing that they did not challenge what was said in the report of Dr Audrey Giles, which AGR served about forensic document examination and which went to the case that PEC no longer advance. The witnesses from whom I heard oral evidence were (by video-link) Mr A K Mirchandani, PEC’s “Chairman-cum-Managing Director” (“CMD”), and the parties’ Indian law experts: Mr Soli J Sorabjee, a Senior Advocate of the Indian Supreme Court and the Attorney General of India between 1989 and 1990 and between 1998 and 2004, gave evidence for PEC, and Mr Harish Salve, a Senior Advocate of the Indian Supreme Court and the Solicitor General of India between 1999 and 2002, gave evidence for AGR. Unsurprisingly in view of their distinction, the evidence of both was clear, authoritative and detached. Although my other conclusions mean that I do not need fully engage with their evidence, this does not detract from my gratitude for their assistance (or indeed from my interest in what they said).[9]Mr Michael Collett QC, who represented AGR, submitted that I should treat PEC’s evidence of fact with caution because during the arbitration they did not disclose any authentic documents, because they disclosed fraudulent documents relating to the Purchase Agreement (including two copies of what purported to be a contract to buy 2,500 mt of rice) and previous dealings with AGR, and because their evidence, including that of Mr Ravi Kumar, supported the dishonest and discredited contention that the written Purchase Agreement was to buy only 2,500 mt of rice. AGR also contend that PEC still have disclosed no genuine documents about the Purchase Agreement that pre-date its termination on 1 July 2008, and that many other documents disclosed by PEC are forgeries.[10]I accept the general thrust of that submission. However, in my judgment, Mr Mirchandani was an impressive, thoughtful and honest witness, who gave careful answers and was concerned not to be misunderstood. He was, unsurprisingly, asked in cross-examination about the history of the reference and how it came about that PEC had defended the claim in the reference and initially in these proceedings as they did. He said that before 2013 he had little if any information about AGR’s claim: I find it unsurprising that he, as CMD, was not involved personally with it, and there is no good reason to doubt his evidence about that. There is also no convincing reason to think that he was involved in any dishonesty or impropriety associated with the earlier conduct of the dispute.[11]I mention two specific points about this. First, when dispute arose between AGR and PEC about the Purchase Agreement, AGR’s lawyers sent a letter dated 25 August 2008 making their claim and giving notice of the reference to arbitration. It was addressed for the attention of PEC’s managing director and received by Mr Mirchandani. He acknowledged that he would have seen it in August 2008, and indeed he noted on it that it should be referred to Mr Ravi Kumar and Mr TPS Narang, a director of PEC: Mr Narang was responsible within PEC for trading of the kind with which this case is concerned. Mr Mirchandani explained that a good deal of correspondence is addressed to him as the managing director, but that he would not usually study it in detail, but would refer it to others in the expectation that “if it is important, they bring it back to me”. I accept that evidence, and that Mr Mirchandani referred AGR’s letter to Mr Narang, who was not only a director but was senior to him in age and who had longer experience than him, and he was not himself further involved with the dispute until 2013.[12]Secondly, AGR relied on the fact that PEC have not brought disciplinary proceedings against Mr Ravi Kumar, and indeed that after the claim was made he was appointed to PEC’s board. The implication, it was suggested, is that he did not exceed his authority or act without the approval of his superiors. Again, I found Mr Mirchandani’s evidence about this entirely credible. At the time of the appointment to the Board, AGR had made their claim but that in itself was no reason to stop his appointment. Thereafter, PEC thought that Mr Ravi Kumar’s assistance might be needed to defend the claim. Mr Mirchandani recognised that the allegations made by AGR about Mr Ravi Kumar’s conduct are very serious, but he insisted that before accepting them PEC would need to hold an inquiry or investigation into whether they are well-founded, and said that PEC intended to undertake any necessary investigation in light of the outcome of this case. (“You see, with due respect to everyone, there is a court case which is going on. It is sub judice. It is not fair for me to arrive at any conclusive position. When the Honourable Court does give us a decision, then we will go into it, we will abide by it.”) It is not relevant to my decision whether others might have taken earlier disciplinary steps, and whether Mr Mirchandani might have been expecting that my judgment in the proceedings would go further into the history of dispute and PEC’s defence to the claim than I propose to do. I accept that Mr Mirchandani gave an honest explanation about why PEC have has not yet initiated disciplinary action. I would suppose that PEC will now wish to do so, but that is not for me.[13]Mr Mirchandani was therefore the only witness to give oral evidence of fact before me, and as CMD he was not immediately involved in the dealings with AGR. Others with a closer involvement and more immediate knowledge did not give evidence. In particular, Mr Mirchandani confirmed that Mr Ravi Kumar is still employed by PEC and could have given evidence by video-link; that Mr Rajiv Chaturvedi is still employed and could have made a witness statement; and that Mr Narang, though no longer employed by PEC, could (as far as Mr Mirchandani knew) have also provided a statement. In Wisniewski v Central Manchester Health Authority, [1998] Lloyd's LR Medical 223 Brooke LJ explained the principles that govern whether the court should draw adverse inferences against a party who has not called a witness with potentially relevant evidence on an issue: when there is no explanation for it, a witness’s absence might go to weaken the effect of the evidence adduced on that issue, but it is not in itself a reason for an adverse finding: there must still be “a case to answer” on the issue.[14]PEC are a corporation wholly owned by the President of India, who appoints all the directors, and so they are a “Government company” within the meaning of the Indian Companies Act 1956, which so defines (inter alia) any company in which not less than fifty-one per cent of the paid-up share capital is held by the Central Government. They carry on business as an Indian public sector undertaking under the Minister of Commerce and Industry of India. Throughout the relevant period PEC had a board comprising a CMD, two “full time” (executive) directors and two “part-time” (as I understand it, non-executive) directors. Mr Mirchandani has been a director since 2002, and became CMD on 1 July 2007, succeeding Mr A K Srivastava, and until July 2007 the Board comprised Mr Srivastava, Mr Mirchandani and Mr Narang. After Mr Srivastava resigned, in October 2007 Mr Chaturvedi was appointed to the Board. The Chief General Manager Finance (“CGMF”) (or Head of Finance, as the official was sometimes called) attended Board meetings by invitation, but had no voting rights. (In Mr Mirchandani’s experience, in fact the Board have never voted and all decisions have been unanimous.) PEC also have a Committee of Management (“COM”), a committee of the Board, the membership of which is the CMD, the two executive directors and the CGMF. Until 31 December 2006 the position of CGMF was held by Mr Prem Kumar Amar, and his successor was Mr N P Chauhan. By October or November 2007 Mr Chauhan had been replaced and his role was fulfilled by two General Managers for Finance, Mr R S Agarwal and Mr R K Taneja. They both attended COM meetings. I observe that the minutes of a meeting of 5 November 2007 record Mr Agarwal present as a member of the COM and Mr Taneja present by invitation, but Mr Mirchandani’s unchallenged evidence was that “In 2007 [by which I take it that he meant after Mr Chauhan had been replaced] Mr Taneja and Mr Agarwal were both General Managers (Finance) and therefore either of them could have attended and approve a transaction as a member of COM”. Although the evidence is not wholly clear, I consider it likely that Mr Taneja and Mr Agarwal both had the powers and authority of a CGMF, and either of them had power to do anything that could have been done by a CGMF without notice to or reference to the other.[15]Under the Articles of Association, the business of PEC is to be managed by the Board, who, subject to irrelevant limitations, may exercise all the company’s powers. Article 65(2) specifically provides that the Directors are to have these powers (inter alia):• “To determine who shall be intitled to sign on the Company’s behalf bills, notes, receipts, acceptances, endorsements, cheques, releases, contracts and documents”.• “To appoint attorneys from time to time to provide for the management of the affairs of the Company in such manner as they see fit, and in particular to appoint any person to be attorneys or agents of the Company with such powers (including power to sub-delegate) and upon such terms as may be thought fit”.• “To enter into all such negotiations and contracts and rescind and vary all such contract and execute and do all such acts, deeds and things in the name of the Company as they may consider expedient for or in relation to any of the matters aforesaid or otherwise for the purpose of the Company”. The Articles of Association also provided, subject to an irrelevant qualification, that a resolution in writing circulated to all Directors or the Members of a Committee of Directors for the time being in India and approved by a majority of them should be valid and effectual as if passed at a meeting: article 78.[16]By article 67 of the Articles of Association, the Board may “sub-delegate any of the powers, authorities and discretion for the time being vested in it, subject, however, to the ultimate control and authority being retained by it”. Mr Mirchandani explained that under article 67 the Board had delegated some of its powers to officers or employees of the company according to their ranks. A schedule of delegated powers was approved by the Board at a meeting on 8 May 1992, and it has since been amended. There is in evidence a schedule (“the Schedule”) updated to 14 August 2007, which I accept sets out powers that were delegated throughout the immediately relevant period. The notes to the Schedule state that “In between the Board/COM meetings the CMD may, within the ambit of operational necessity and efficiency, assume full powers of the Board/COM provided that a report is made to the Board/COM soon after an ex-post-facto approval is obtained”. (I shall refer to this as the “operational power”.)[17]The powers that were delegated by the Board by way of “trade and business matters” included this: “submission of trade offers on the basis of back up offers from suppliers (including authorisation for issue of bid bonds/letters of credit) with a trading margin” specified according to the rank of the delegate. Inter alia, those with the rank of CGM were recorded as having delegated powers up a “value” of US$2 million with a “service charge” of not less than 2%; directors were recorded as having delegated powers up a “value” of US$5 million with a “service charge” of not less than 1%; and the CMD was recorded as having delegated powers up a “value” of US$7 million with a “service charge” of not less than 1%. Further, the COM had power to make contracts to any value and with any service charge. (Their powers in respect of “projects” were limited, but that is not relevant for present purposes).Mr Salve observed that this delegation included giving the delegate the power to sub-delegate, and the contrary was not suggested.[18]The Schedule also recorded that:• “Any development occurring during the course of execution which is likely to result in a loss should be put to the Board”;• The drafts of contracts were “to be vetted by Finance and Legal Divisions”;• Amendments to contracts could be made by the Authority “next higher” than that which had authority to make it; and• When a contract was made, it might be signed by the Chief Marketing Manager (“CMM”). (It was not suggested that this records a delegated power to make contracts, and it was acknowledged by Mr Collett that this was only to do with execution of agreements after they had been concluded.)[19]I return to the delegation of powers about “trade and business matters”. It is concerned with “trade offers on the basis of back up offers”: that is to say (as it was interpreted before me by both parties, to my mind correctly) it covers cases where PEC entered into back-to-back sale and purchase contracts. The Schedule does not specify what is meant by “value” or “service charge”, but, as I interpret it, this means that directors or employees are therefore authorised to enter into contracts on behalf of PEC provided, in the case of sale and purchase contracts,(i) the prices paid or received by PEC were not more than the “value” for one of their rank, and(ii) the transactions allowed PEC a trading margin or profit of at least percentage of the price specified as the “service charge”. Thus, as CGM of PEC, Mr Ravi Kumar was authorised to buy rice for up to $2 million provided that PEC’s profit was at least 2% of the price. (As well as being CGM, he was also an “Executive Director” of PEC, but this was only an honorary title, and is irrelevant to what powers were delegated to him. On 1 October 2008 he was appointed as a Director, a position that he held until 30 September 2013, but that appointment was made after the events with which I am concerned. He had apparently applied for the appointment in early 2008, but that does not affect his powers at the relevant time.)[20]I understand that in the end this interpretation of the Schedule is not controversial, but in their pleading AGR disputed it and contended that properly understood it does not, or might not, limit the authority to make contracts such as the Purchase Agreement by reference to their “value” but only by reference to PEC’s trading margin or profit margin. I am unable to accept that interpretation, which would strip of any significance the stipulations of value. To my mind it makes more business sense to limit delegated authority by reference to the value of the contracts to which PEC would be exposed and not only by their profit. Moreover, AGR’s pleaded interpretation would afford delegates extraordinarily extensive powers. The point was rightly abandoned by Mr Collett.[21]It is convenient to mention here that I accept Mr Sorabjee’s evidence that the Schedule is a document covered by the Indian Right to Information Act, 2005 (the “2005 Act”) and therefore PEC are obliged to provide information about “the powers and duties of its officers and employees” to those entitled under the 2005 Act. AGR are not themselves entitled to request information, that right being afforded under section 3 only to “all citizens” (ie Indian citizens), but it is unrealistic to suppose that AGR could not have used an agent to obtain it. But it does not follow that AGR could in practice have obtained such information when entering into the Purchase Agreement. Mr Salve observed that under section 7(1) of the 2005 Act the public authority has thirty days to respond to a request for information of this kind (ie one that does not concern the life or liberty of a person),and AGR were told that PEC wanted to buy rice urgently.[22]AGR are a Thailand-based rice trader. I should also introduce PJS, who are an unincorporated Indian rice trader based in New Delhi, who started to do business with PEC in 2002. They are one of many (apparently some two hundred, according to evidence given to the Tribunal by Mr Amar) associates of PEC, that is to say independent traders who conduct their business with access to credit of letter facilities and other financial services provided to Indian businesses by PEC in their public capacity. PEC say that PJS dealt with AGR with regard to the Purchase Agreement as agent for the ultimate purchaser of the rice, SSA General Trading LLC (“SSA”), a rice trader based in Dubai: I need not decide that.[23]But I should say something about how PEC generally provided support to PJS as an associate in dealings with AGR before the Purchase Agreement. Mr Jain and Ms Patcharin of AGR would agree by telephone the terms of a proposed contract for the sale and purchase of rice; PJS would bring the proposed terms to PEC, PEC would enter into an agreement with SSA or Peak Star Trading Co LLC (“Peak Star”), another Dubai importer, to sell the rice on to them, and into an “associateship agreement” with PJS in relation to the purchase from AGR; and then Mr Jain would meet Ms Patcharin in Bangkok and sign written purchase agreements. Under the “associateship agreements”, after recitals that PJS had “firmed up an arrangement” with AGR and would pay PEC an advance of 10% of the purchase price, it was provided that PEC would open a letter of credit and sell the rice to SSA or Peak Star, and that PJS would bear PEC’s expenses and give PEC an indemnity against any claim. Once PJS had paid the advance, PEC were obliged to them to open the letter of credit. They profited from a difference between the purchase price that they paid and the sale price that they received.[24]It is recorded in minutes of a meeting of 23 August 2004 that the COM approved a procedure whereby PJS were authorised to be one of their associates on the basis that procurement of rice from Thailand and export to Nigeria “shall be in association with” PJS. PEC and PJS were “jointly [to] negotiate with Thai suppliers for sourcing of Thai rice for shipment to Nigeria”, and PJS were to “negotiate and finalize the chartering of the vessel for shipment and the freights”. In one of his reports, Mr Salve said that the approval by the COM of this proposal “would constitute an express authority being conferred on PJS and the officers of PEC to negotiate and conclude such transactions”, but I do not so interpret the note. To my mind, it contemplates that negotiations will be conducted jointly by PEC and PJS, and certainly it does not contemplate that any contract should be made without PEC being themselves involved, nor cover who is to be authorised to act for PEC in that regard. Further, it was contemplated in the note:• That business would be conducted on the basis that PJS would keep a margin of 20% of the FOB value of the goods with PEC.• That “PEC’s anticipated trade margin shall be approximately 1%”.• That the cargo would be sold to Peak Star.• That “This is a trial transaction and on successful completion, repeat business on above lines can also be transacted with this or any other Associate/s and for other origins/destination”. I cannot infer from the COM’s approval of the procedure that they thereby approved “repeat business”: they simply recognised that this might follow if the “trial transaction” proved to be successful. If the note had contemplated only business with PJS and for arrangements with regard to Thai rice for export to Nigeria, this might have been a possible interpretation, but the repeat business under contemplation is much wider than that. Certainly I do not conclude that the note proposed or the COM approved business on terms other than those stated, such as business on the basis that the associate deposited only a 10% margin with PEC or in which PEC’s “trade margin” was less than the anticipated 1%.[25]After an introduction through brokers, Mr Douglas and Mr Boonchai Sukanchanawat, on 3 and 4 May 2005 Mr Amar, then CGMF, and Mr Jain met Mr Sarunyu of AGR and the brokers at AGR’s offices in Bangkok. AGR contend that at the meetings “Mr Jain was expressly held out as having authority to negotiate and conclude contracts in behalf of PEC”. On 4 May 2005 AGR and PEC entered into a contract (contract 001/2005, to adopt AGR’s references) for the sale and purchase of 19,000 mt (5% more or less at buyer’s option) of rice at $298 per mt, a total of $5,662,000, and it was signed at AGR’s offices by Mr Sarunyu and Mr Amar. It provided for GAFTA arbitration. The value of the contract meant that it was beyond the authority delegated to Mr Amar according to the Schedule. According to what appears to be a related associateship agreement with PJS signed by Mr Ravi Kumar, PEC’s services charges on the transaction were only 1%, which would mean that the contract was also outside what the Schedule stated to be Mr Amar’s authority, but AGR have not admitted that the associateship agreement is authentic and it has not been proved.[26]On 6 May 2005 PEC opened a letter of credit to pay for the rice, and Mr Jain advised AGR of this. More generally, AGR sent notice of shipment to PEC, but otherwise communicated with PJS (and not with PEC) about the transaction. Further,• On 4 May 2005 Mr Jain told Ms Patcharin of AGR that he would like to buy another 400 mt of rice and that this would be paid for by TT transfer. In the event no contract resulted, but apparently Ms Patcharin understood that Mr Jain was acting for PEC because she raised an invoice showing them as the buyers.• PEC’s option to buy a further 600 mt of rice under the contract of 4 May 2005 was exercised by Mr Jain, and PEC amended the letter of credit to reflect the increased quantity and paid for it.[27]There were no further transactions between AGR and PEC for over two years, but then they concluded four more contracts for the sale and purchase of rice for shipment to Nigeria before the Purchase Agreement that gives rise to this dispute. AGR disputed the authenticity of some of the documents relating to these transactions that were disclosed by PEC, and there was no evidence of their authenticity that persuades me to treat them as genuine, except in so far as they support AGR’s arguments. But in some ways they do, and therefore I refer to some of the disputed documents when describing these transactions.[28]Contract no PEC 001/2007 was signed in Bangkok on 23 August 2007 by Mr Jain under the notation “on behaf of PEC”. It was for 7,000 mt (5% more or less at PEC’s option) of rice for $446 per mt, or some $3.1 million. According to disputed documents, on 23 August 2007 Mr Ravi Kumar made on behalf of PEC an associateship agreement with PJS and a sale contract with SSA: the sale price was $448 per mt, and so the difference between PEC’s purchase price and their sale price would give them a return of 0.446%. PEC opened a letter of credit for payment on 28 August 2007, and it was amended on 6, 11 and 19 September 2007. The transaction was submitted to the COM for their approval on 27 August 2007 on a so-called “green sheet” together with a Note for the COM signed by Mr Taneja and Mr Ravi Kumar. The COM gave their approval at a meeting on 3 September 2007, which was attended by Mr Mirchandani, Mr Narang and Mr Chauhan. They were aware that Mr Ravi Kumar had already signed contracts with AGR, SSA and PJS before seeking their approval in that the note referred to the purchase contract with AGR being dated 23 August 2007 and the sale contact with SSA being dated 20 August 2007. The rice was shipped on 16 September 2007 and PEC were notified of shipment on 17 September 2007.[29]Contract no PEC 002/2007 was also signed in Bangkok on 23 August 2007 by Mr Jain under the same note “on behaf [sic] of PEC”. It was for 5,000 mt of rice (5% more or less at PEC’s option). The price was initially $446 per mt (or $2,230,000 for 5,000 mt). According to disputed documents, a corresponding contract for sale of the rice to SSA was dated 15 October 2007, and as with contract no PEC 001/07 the price was $448 per mt, and so the difference between PEC’s purchase price and their sale price would give them a return of 0.446%. An associateship agreement with PJS was signed by Mr Ravi Kumar on behalf of PEC and dated 22 October 2007. PEC opened a letter of credit for payment on 24 October 2007.[30]On 24 October 2007 Mr Jain agreed with Ms Patcharin to increase the price to $456 per mt, and she sent him an amended contract. On 17 November 2007 a Mr Kaushal of PJS wrote to Ms Patcharin that PJS had fixed a vessel and asked about the amendment required to the letter of credit for freight, and on 20 November 2007 Ms Patcharin sent Mr Jain a revised version of the contract. The price was now agreed at $481 per mt, or some $2.4 million. The price in the sale contract was increased to $483 per mt, and so the service charges remained at $2 per mt, now representing a return of 0.414%. PEC revised the letter of credit to reflect the amended contractual terms on 22 November 2007 and amended it again on 26 December 2007. The transaction had been submitted to the COM for approval on 22 October 2007, and approval had been given on 5 November 2007 at a meeting attended by Mr Mirchandani, Mr Narang, Mr Chaturvedi and Mr Agarwal, with Mr Taneja in attendance. The COM was again aware that Mr Ravi Kumar had signed contracts with AGR, SSA and PJS before seeking their approval.[31]Contract no PEC 003/2007 was for 10,000 mt (5% more or less at PEC’s option) of rice for $485.5 per mt CNF free out of Cotonou or Lagos, and on 26 October 2007 Mr Jain signed it under the note “PEC Limited”. Mr Ravi Kumar’s evidence before the Tribunal was that he knew that Mr Jain was making contracts in PEC’s name, and at some point (he did not remember when) he told him not to sign “on behalf of” PEC (as he had on contracts 001/2007 and 002/2007), but that he could write “PEC Limited” and then his name. Before shipment the terms of sale 003/2007 were amended to FOB Bangkok or Laemchabang, and the price reduced to $376.5 per mt, or a total of $3,765,000. According to disputed documents, on the same date Mr Ravi Kumar signed a sale agreement with SSA with a price of $374.5 mt, which would give services charges of $2 per mt or 0.531%. On 1 and 9 January 2008 PEC opened letters of credit to pay for the rice, on 21 January 2008 it was shipped and on 23 January 2008 AGR gave PEC notice of shipment.[32]Contract no PEC 001/2008 was concluded on or about 18 April 2008 at a meeting in Bangkok and signed by Mr Jain under the heading “PEC Limited”. It was for 2,500 mt of rice. Subsequently there were amendments to the destination (from Cotonou to Onne), and the freight was adjusted accordingly. The price was $1,045 per mt, or $2,612,500. According to disputed documents, the sale price under a corresponding contract with SSA was $1,015 per mt, which would give service charges of $5 per mt or 0.476%. PEC opened a letter of credit on 9 May 2008 and it was amended on or about 21 May, 26 May and 9 June 2008. AGR notified PEC of shipment on 21 and 28 May 2008 and addressed the invoices to PEC.[33]Thus, all of these four contracts were concluded after initial discussions on the telephone between Mr Jain and Ms Patcharin when Mr Jain later met AGR in Bangkok and signed the agreements (which were not stamped). The written contracts all provided for GAFTA arbitration. The margins or service charges varied between 0.4% and 0.55% of the contract values. As with contract 001/2005, AGR’s only direct contact with PEC in relation to these transactions was that they send PEC notices of shipment: otherwise they dealt only with PJS.[34]The position about who gave approval for PEC’s first transaction with AGR is a little obscure. Mr Amar went to Thailand in May 2005 because Mr Ravi Kumar was not available to go. He was briefed before going by Mr Narang (as I infer: the transcript of his evidence refers to “Mr DPS Marin”, but that must be wrong), and he spoke to Mr Narang from Thailand before signing the contract on 4 May 2005, and he acted on Mr Narang’s instructions. The letter of credit was opened on 6 May 2005. When he returned from Thailand a note to “management” was put up on 10 May 2005, which Mr Amar told the Tribunal would still be available “because it goes to the Board”. However, no such document has been disclosed, and the absence of this or any other record of Board or COM approval leads me to infer that the transaction was not approved by the Board or the COM before the contract was signed and the letter of credit opened, and that it was not formally endorsed afterwards. However, it is less clear whether anyone other than Mr Narang gave approval: Mr Mirchandani’s evidence about this was not assisted because the video-link to India broke down while he was being cross-examined about this. I conclude on balance that Mr Mirchandani probably did not give approval in advance, and therefore that, since its value was more than $5 million, the limit of Mr Narang’s authority according to the Schedule, it was not made in accordance with the delegated powers there set out. But the way that this contract was made is so different from subsequent contracts that in the end nothing turns on this.[35]Mr Collett also relied on three rice purchase contracts that PEC made and in which their service charges were less than 1%. He fairly observed that, in view of PEC’s failure to make proper disclosure, PEC might well have made more such contracts. The three contracts were: i) Contract TMT-PE-290806 with Thai Maparn Trading Co Limited (“TMT”) dated 29 August 2006, under which PEC bought 14,000 mt of rice for €248.104 per mt, a total of €3,473,456. The rice was for sale to Peak Star for €249.67 per mt, and so the profit was (ie PEC’s service charges were) €1.566 per mt or 0.627%. ii) Contract A2008-09 with Asia Paragon Co Limited (“APC”) dated 9 May 2008, under which PEC bought 1,500 mt of rice for $970 per mt or $1,455,000. The rice was sold to SSA for $975 per mt, and the service charges were therefore 0.51%. iii) Contract AGPE 210708 with Ameritech Group Co Limited (“AGC”) dated 21 July 2008, under which PEC bought 5,000 mt of rice for $820 per mt, or a total of $4,100,000. The rice was sold to SSA for $825 per mt, and so the service charges were 0.60%. It is clear that PEC entered into an associateship agreement with PJS in relation to the first and the third transactions. In the case of the second transaction, the evidence comprises only the purchase agreement with APC and the sale agreement with SSA, but I infer that PEC entered into an associateship agreement with PJS in respect of it.[36]Thus, in addition to the Purchase Agreement PEC entered into eight purchase agreements for rice, five with AGR and three with other sellers, and entered into corresponding sale contracts with Peak Star or SSA and associateship agreements with PJS. The values of all the contracts except for that with APC were over $2 million, the limit of a CGM’s authority according to the Schedule, and the values of all except the first contract with AGR were under $5 million, the limit of a director’s authority as recorded in the Schedule.[37]AGR are also entitled to have me proceed on this basis: i) That PEC had service charges of less than 1% in all the transactions other than the first contract with AGR made by Mr Amar in May 2005. ii) That COM gave their approval for transactions relating to contract 001/2007 and contract 002/2007 retrospectively, when it was apparent to them that purchase contracts had already been made and after letters of credit had been issued. iii) The increase in the price under contract 002/2007 was made under the authority of Mr Narang, and without the approval of Mr Mirchandani, the COM or the Board. iv) The other contracts were not submitted to the Board or the COM for approval or approved by them.[38]I should explain why I deal with the case on this basis: i) The service charges can be calculated on the basis of documents disclosed by PEC that state the price for which they sold the rice. Although AGR do not accept that they are authentic, there is no reason that the documents should understate the price received by PEC and so the service charges, and in any case it is not open to PEC to challenge their own documents. ii) In his witness statement Mr Mirchandani said that he “had strong reason to believe” that he had approved the transactions relating to contract 001/2007 and contract 002/2007 before the letters of credit were opened, but I conclude from his oral evidence that he did not do so. He accepted that, if the CGMF thought that transactions would be approved, he might have taken it upon himself to act on that basis, and open letters of credit. He also said that, if a transaction had been approved by the Board or the COM by circulating a resolution or decision, the members would annotate their approval on the note putting forward the proposal. On 21 December 2012 Cooke J ordered standard disclosure in these proceedings, but PEC have disclosed only unannotated copies of the notes for approval, although Mr J L Metha, who has been the CMM since December 2008, said that he had made careful searches to find documents that should be disclosed and although Mr Mirchandani said that PEC kept reports and notes to the Board and the COM safely. iii) The documents show that, when the price under contract 002/2007 was increased, on 21 November 2007 Mr Narang gave approval for a corresponding increase in the letter of credit, and Mr Mirchandani accepted in cross-examination that Mr Narang had apparently done so without referring the matter to him, the Board or the COM. iv) PEC disclosed no documents that indicate that other contracts between 2006 and 2008 were submitted to the Board, and in view of the evidence about how COM papers are kept and PEC’s disclosure, I infer that, had these transactions been submitted to the Board or the COM, it would have been reflected in the disclosed documents.[39]AGR’s alternative cases are that the Purchase Agreement was made in telephone conversations between Ms Patcharin and Mr Jain on 15 May 2008 or in a written agreement dated 16 May 2008; and that in either case it was for the sale and purchase FOB Bangkok and/or Kohsichang of 25,000 mt of rice for $1.060 mt, or $26,500,000, it was governed by English law and it provided for GAFTA arbitration. According to Ms Patcharin’s evidence, she confirmed in the conversations that it was agreed that terms not specifically discussed should be “as usual”, and AGR contend that therefore she and Mr Jain agreed upon GAFTA arbitration of disputes about the contract. At 16.57 (Bangkok time) on 15 May 2008 Ms Patcharin sent Mr Jain by email a contract that she had signed on behalf of AGR under the message, “as per our business conclusion now, please refer to contract 002/2008 attached herewith. Please return same duly stamped and signed by yourselves”. On 20 May 2008 PJS replied in an email headed “contract”, and attached a copy of the contract signed by Mr Ravi Kumar and bearing PEC’s stamp.[40]According to AGR, the market for rice of the kind sold fell from 26 May 2008. (The GAFTA Board of Appeal held that it was $1,030 per mt on 26 May 2008, $990 on 27 May 2008, and by 12 June 2008 only $888.) On 26 May 2008 AGR asked PJS to be advised about the letter of credit, and sent further “chasers” thereafter. On 3 June 2008, AGR say, Mr Jain agreed that the letter of credit would be opened by 11 June 2008, but PEC do not accept that he had (actual or apparent) authority to make this agreement: this does not bear on whether the parties made an arbitration agreement, and so is not directly relevant to what I am to decide. When no letter of credit was opened by 1 July 2008, 30 June 2008 being the last day for shipment, AGR wrote to Mr Jain holding PEC in default. By 16 July 2008, if not earlier, some at PEC were aware of the dispute. After further exchanges and unsuccessful settlement discussions with Mr Jain, AGR commenced a GAFTA reference against PEC by notice in their lawyers’ letter dated 25 August 2008 and received by PEC on 26 August 2008. PEC’s initial response on 5 September 2008 was that all terms were negotiated with PJS and terms and conditions settled with them, and that “PEC had an interlocutory role of opening L/C on behalf of [PJS]”. They advised AGR to pursue any claims with PJS. As I have explained, in their defence in the GAFTA reference served on 23 July 2009 PEC pleaded that PJS had been authorised to conclude a contract for only 2,500 mt of rice and Mr Ravi Kumar had signed a contract for 2,500 mt.[41]I consider first whether the arrangements made by Mr Jain on 15 May 2005 were contractually binding and included an arbitration agreement. Mr Brindle did not dispute the primary evidence adduced by AGR about what was said on the telephone and so did not dispute that Mr Jain and Ms Patcharin agreed all the terms of the Purchase Agreement in that they were “ad idem” about them. He did not accept, however, that their exchanges evinced an intention to be bound contractually by their oral exchanges.[42]It is well recognised that businessmen engaged in negotiations may evince an intention to conclude a contract orally although they expect or even expressly recognise that their agreement will later be incorporated into a written document, which will have more detailed terms than were orally agreed. The question whether they did so depends upon an objective test as to whether a reasonable man versed in the business would have understood the parties to have intended to conclude a contract, and this requires an assessment of the exchanges in light of (inter alia) their previous dealings. PEC submit that the wording of the email that Ms Patcharin sent Mr Jain after their conversations, and in particular the expression “business conclusion” (rather than contract) is resonant of an anticipated rather than a concluded contract. Moreover, an oral contract would have been a departure from the parties’ previous pattern of dealings by way of contracts made at meetings. However, Ms Patcharin explained in her evidence that Mr Jain told her that the transaction was “very urgent” because of a business opportunity that presented itself for imports to Nigeria, and there is to my mind no sufficient reason to reject her evidence that she and Mr Jain concluded a contract for the sale and purchase of the rice.[43]The evidence about whether AGR and Mr Jain made an arbitration agreement on 15 May 2008 was not very satisfactory, and at one time I doubted whether it was sufficient for AGR to establish that they did. In her witness statement, Ms Patcharin simply said that she “negotiated and concluded the business of [the Purchase Agreement] on the same terms as previously”. Her evidence in cross-examination went little further:
“Q … you say that: “Mr. Sarunyu told me the last price was USD1,060 per metric ton. Accordingly I negotiated and concluded the business of Contract 002/2008 with Mr. Pawan Jain on the same terms as previously”
. Do you mean by that that, in your discussions, you talked about price, quantity, shipment date, and you mutually agreed that the other many terms in the contract would be the same as you had before? A For example, many terms? Q I do not know, payment, arbitration, all those terms. A Normally, when we discuss or negotiate a contract, basically it is the commodities which is the quality, the rice quality, the shipment period, the quantity, price and trade term. It would be in a vessel or container, and the packing and payment term. Q On the 15th, the other terms were assumed, they were discussed, or what happened? A The other term means what? Like force majeure, like taxation? Q Arbitration, whatever, yes. A As usual.” However, by May 2008 there was an established pattern of the parties agreeing to sell and buy rice on the basis that disputes would be referred to GAFTA arbitration, and I conclude that, given that (as Mr Brindle did not dispute) there was uncontroversial reference in the exchanges to terms being “as usual”, that is sufficient to constitute an arbitration agreement. A For example, many terms? Q On the 15th, the other terms were assumed, they were discussed, or what happened? A The other term means what? Like force majeure, like taxation? A As usual.”

A The other term means what? Like force majeure, like taxation?

[44]Accordingly the case turns on whether Mr Ravi Kumar and Mr Jain (or one of them) had authority to make the Purchase Agreement for PEC. I first consider whether Mr Ravi Kumar had authority to make the written agreement. As I have explained, the issue for decision is whether AGR have shown that he had actual authority under Indian law. Mr Collett accepted that AGR have the legal burden of proving his authority, but submitted that in the circumstances of this case the evidential burden is on PEC. I agree: it is inherently more probable than otherwise that employees act within their proper authority (at least unless they have some recognisable motive to exceed it), and perhaps this proposition is the more telling in this case in that in May 2008 Mr Ravi Kumar had applied for appointment to PEC’s Board and, one might think, would not have wished to prejudice his application.[45]The Indian Contract Act, 1872 provides (at section 186) that an agent’s authority may be express or implied, and (at section 187) that “An authority is said to be express when it is given by words, spoken or written. An authority is said to be implied when it is to be inferred from the circumstances of the case; and things spoken or written or the ordinary course of dealing, may be accounted circumstances of the case”. The statute includes an “illustration” of how section 187 applies:
“A owns a shop in Serampore, living himself in Calcutta, and visiting the shop occasionally. The shop is managed by B, and he is in the habit of ordering goods from C in the name of A for the purposes of the shop, and of paying for them out of A’s funds with A’s knowledge. B has an implied authority from A to order goods in the name of A for the purpose of the shop.”
Section 188 prescribes that an agent having an authority to do an act has authority to do every lawful thing which is necessary to do such act. In the Supreme Court case of Harshad J Shah v Life Insurance Company of India (1997) 5 SCC 64, after explaining English law principles of agency Agrawal J said that “The position is not very different in India”.[46]In the English Court of Appeal in Hely-Hutchinson v Brayhead Limited, [1968] 1 QB 549, Lord Denning MR said this (at p.584) about implied authority:
“It is plain that [the putative agent] had no express authority to enter into these two contracts on behalf of the company: nor had he any such authority implied from the nature of his office. He had been duly appointed Chairman of the company, but that office in itself did not carry with it authority to enter into these contracts without sanction of the board. But I think he had authority implied from the conduct of the parties and the circumstances of the case … the judge finds that [the putative agent] acted as de facto managing director of [the defendant company]. The judge held that [the putative agent] had ostensible or apparent authority to make the contract, but I think his findings carry with it the necessary inference that he had also actual authority, such authority being implied from the circumstances that the board by their conduct over many months had acquiesced in his acting as their chief executive and committing [the company] to contracts without the necessity of sanction from the board...”
. Mr Sorabjee and Mr Salve agreed, and I accept, that this is generally also Indian law.[47]The starting point of PEC’s argument is the provisions of the Articles of Association that I have already set out. Their case is that Mr Ravi Kumar had no authority under the Articles themselves to make the Purchase Agreement, and that therefore he had authority only if and to the extent that the Board had exercised their power under article 67 to delegate. The Schedule does not record any applicable delegation: the Purchase Agreement was not covered by the delegation to him as CGM of powers relating to “trade and business matters” both because its “value” was (much) more than $2 million (being $26.5 million) and because its “service charges” were (much) less than 2% (being 0.469%). AGR do not dispute PEC’s argument thus far: as I have said, they do not pursue their pleaded argument about the proper interpretation of the Schedule. However, they submit that the Schedule is not necessarily an exhaustive record of the authorisations that the Board delegated under article 67, and that either it is to be inferred that Mr Ravi Kumar was given the necessary authority orally or that he had implied authority.[48]According to a witness statement of Mr Mehta, Mr Ravi Kumar had told him that he obtained approval to sign the Purchase Agreement from Mr Narang. This statement was made when PEC’s case was that Mr Ravi Kumar signed a contract for 2,500 mt of rice for $2,650,000, and as Director of PEC Mr Narang had authority to make contracts up to a value of $5 million. I observe that, according to the Schedule, Mr Narang was not authorised to enter into transactions if the “service changes” were less than 1%, and so according to the Schedule he would not have been empowered to enter into the Purchase Agreement. However, there is no contrary evidence that Mr Ravi Kumar did not speak to Mr Narang and I accept his evidence about that. But on any view Mr Narang could not have sub-delegated to Mr Ravi Kumar authority to buy 25,000 mt of rice for $26.5 million. Under the Schedule no delegate other than the COM had authority to make a contract of that value, unless Mr Mirchandani used the operational power. AGR’s pleaded case is therefore that it is to be inferred that Mr Narang obtained the necessary approval for the Purchase Agreement from the COM or from Mr Mirchandani. Mr Collett relies in this context on the criticisms of PEC’s disclosure, to which I have referred, and also that PEC had only called Mr Mirchandani to give oral evidence: Mr Narang did not give evidence in either the reference or in these proceedings. I see the force in these points, but I am unable to make the inference that AGR invite.[49]According to Mr Mirchandani, no proposal was submitted to the COM and no approval was given by the COM to make the Purchase Agreement. He had, he told me, spoken to both Mr Narang and Mr Chatturvedi, and this accords with their recollection. (He could not recall when he spoke to them, except that it was after January 2013, when Mr Taneja died. This is why he was unable to confirm his recollection with Mr Taneja as well.) Mr Mehta’s evidence was that he had checked PEC’s records and they include and refer to no such proposal or approval, and Mr Mirchandani said that any approval would have been recorded in the minutes of the COM’s meetings. I conclude that the COM did not give approval for the Purchase Agreement or authorise Mr Ravi Kumar to make it either at a meeting or by way of a circulated resolution or in any less formal manner.[50]I also accept Mr Mirchandani’s evidence that he did not exercise the CMD’s operational power for this purpose. He had no recollection of giving approval for the Purchase Agreement to either Mr Ravi Kumar or Mr Narang. He explained that, if he had exercised that power, he would have made a report to the Board or the COM to obtain ex post facto approval (as the Schedule stipulates). There is no record of this. Mr Mirchandani was, in my judgment, not only an honest witness but a careful and responsible official. In my judgment if he had authorised the Purchase Agreement he would have reported it to the COM, if not the Board, and he would also have remembered it.[51]Did Mr Ravi Kumar have implied authority to make the Purchase Agreement? AGR plead that he did so(i) because of the procedure approved by COM at the meeting on 23 August 2004 and(ii) because the Board and the COM knew that rice transactions had been concluded by persons, including Mr Ravi Kumar, who were not authorised to make them under the powers that the Schedule states were delegated to them, and had acquiesced in this. (AGR’s pleaded case was that the Board acquiesced in Mr Ravi Kumar’s conduct so as to confer implied authority on him, but in his submissions Mr Collett also argued that the COM did so. Mr Brindle raised no objection to him expanding the pleaded case, and nothing turns on that.) I have explained why I do not consider that what was said and agreed at the meeting on 23 August 2004 is sufficient in itself to prove implied authority, and Mr Collett did not contend that it was. He argued that it is the background against which I should assess whether the course of dealing and PEC’s approval and knowledge of it conferred implied authority on Mr Ravi Kumar. I need hardly say that the argument depends on the relationship between Mr Ravi Kumar and PEC and what intention PEC evinced by their conduct, and it is irrelevant for present purposes what AGR knew.[52]As I have concluded, the COM gave approval for two contracts with AGR (001/2007 and 002/2007) after they had been concluded although, because the service charges were less than 1% of the contract values, according to the Schedule nobody other than the Board or the COM had authority to make them, and this was known to the COM when they approved them. Further, these two contracts had values above the limit of Mr Ravi Kumar’s authority as stated in the Schedule, and again I infer that the COM knew this. Only the first contract with AGR had service charges of as much as 1%, and so only the COM could have made the other contracts with AGR and the other three traders in accordance with the delegated powers in the Schedule, and I have concluded that the COM neither authorised them nor gave their approval for them. Nevertheless all the contracts were executed by PEC, and there is no evidence that anyone took Mr Ravi Kumar to task for making unauthorised contracts or exceeding his authority, although he apparently signed the associateship agreements relating to them. AGR say (to cite their pleaded case) that therefore “Mr Kumar thereby had implied authority to approve or sign contracts for third party export of rice before seeking authorisation from the [COM] or Board as would otherwise have been required by the [Schedule]”. In response to this contention PEC(i) rely on the evidence of Mr Sorabjee that such authority cannot be implied as a matter of Indian law, and(ii) submit in any case the facts do not support AGR’s argument.[53]As I have said, what Lord Denning said about implied authority in the Hely-Hutchinson case (cit sup) states the position under Indian law. It was common ground between Mr Sorabjee and Mr Salve that generally a Government undertaking, like a private trading entity, can impliedly confer on an agent authority to contract on its behalf, and that such an implication can be drawn from an ordinary course of dealing by the Government undertaking. However, Mr Sorabjee considered that the law that governs trading companies is not applied without modification to Government body or public authorities. He cited the judgment of the Supreme Court in the Harshad J Shah case, in which (to risk accuracy for the sake of a succinct summary) an employee paid to an agent of the Life Insurance Company of India (“LIC”) premiums due under a life insurance policy, but the agent delayed in remitting the money to LIC. The policy lapsed and the employee died before it was reinstated. The issue therefore arose whether payment to the agent was to be treated as made to LIC. At para 19 of its judgment the Court said this:
“In disclaiming its liability the LIC is acting in accordance with the provision in Regulations/Rules framed by it whereby agents have been prohibited from collecting money on behalf of the LIC. The said provision has been made in the public interest in order to protect the Corporation from any fraud on the part of an agent. It cannot be said that in making such a provision in the Regulations/Rules and in acting in accordance with the same the LIC has not acted fairly or in consonance with its obligations under … the Constitution”
. The observation is not directly applicable to this case: as Mr Salve pointed out, (i) the Supreme Court was considering a contention of apparent authority and (ii) paragraph 19 is directly concerned with an argument that the claimants were assisted by provisions in the Indian Constitution which imposed a duty on the “State” to act fairly. But Mr Sorabjee considered that this observation reflects a reluctance that the Indian courts have shown to hold public authorities bound by the unauthorised acts of their agents, in accordance with the Courts’ policy to protect public institutions from being defrauded. This, Mr Sorabjee explained, is also illustrated by the cases of The Secretary of State for India in Council v Kasturi Reddi, (1903) ILR 26 Mad 268 and Murugesa Gramani v Province of Madras, AIR [1947] Med 74, in which the High Court of Madras (at p.279 and p.76 respectively) cited with approval this passage from Story’s Law of Agency:
“… in the case of public agents, the Government or other public authority is not bound unless it manifestly appears that agent is acting within the scope of his authority or he is held out as having authority to do the act or is employed in his capacity as public agent to make the declaration or representation for the Government. Indeed this rule seems indispensible in order to guard the public against losses and injuries arising from the fraud or mistake or rashness and indiscretion of their agents. By the law of agency at the common law there is difference between individuals and the Government – the former are liable to the extent of the power they have apparently given to their agents, while the Government is liable only to the extent of the power it has actually given to its officers. And there is no hardship in requiring from private persons dealing with public officers, the duty of inquiry as to their real or apparent power and authority to bind the Government …”
And similar thinking is found in the judgment of the Supreme Court of India in UP Rajkiya Nirman Nigam v Indure Pvt Ltd, (1996) 2 SCC 667, in which a government undertaking was held not to be bound by a contract unless it was executed in accordance with its articles of association, notwithstanding the doctrine of “indoor management” (the doctrine that persons dealing with a company are entitled to presume that internal requirements prescribed in the memorandum and articles have been properly observed). It was said (at para 18) that, “ … The doctrine of indoor management” cannot be extended to formation of the contract or essential terms of the contract, unless the contract with other parties is to be approved and signed on behalf of a public undertaking or the Government with its seal by an authorised or competent officer. Otherwise it would be hazardous for public undertakings or Government or its instrumentalities to deal on contractual relations with third parties”.[54]How is this said to apply to the issue about whether Mr Ravi Kumar had implied authority to commit PEC to the Purchase Agreement? Mr Sorabjee considered that, consistently with these principles, the Board and the COM could not impliedly confer authority on Mr Ravi Kumar to disregard the limitations on his authority (with regard to contract value and the minimum service changes) stipulated in the Schedule. This was not because he regarded the Schedule as necessarily an exhaustive statement of the powers delegated by the Board, and he recognised that the Board could rescind the limitations that it had imposed on the powers that it had delegated. This indeed is clear from article 67 itself: the power to sub-delegate was stated to be “subject … to the ultimate control and authority being retained by” the Board. However, in Mr Sorabjee’s opinion, PEC being a public entity, they could remove the limitations only expressly or, as he put it, by an “overt act” and not by implication or by way of an inference drawn from a course of dealing.[55]Mr Salve did not accept that there was any such absolute restriction how a course of dealings might affect an agent’s authority, whether his principal is a private company or a public authority. In either case, the question is one of fact:
“If a company has a delegation of powers, but then conducts itself in a series of transactions in a particular manner, allowing a particular manager to go and sign, honouring his signatures, allowing him to sign again, honouring his signatures, it may be possible for the court, seeing the overall facts and circumstances of the case, to come to a conclusion that he had implied authority”
. He distinguished cases, such the Harshad J Shah case, where the court was considering whether a government entity was bound notwithstanding restrictions in secondary legislation, and rejected Mr Sorabjee’s view that, as a matter of principle or a hard rule, Indian law treats private companies and government entities differently. In support of this, he cited the judgment of the Supreme Court in Sunil Pannalal Banthia v City & Industrial Development Corp of Maharashtra Ltd, (2007) 10 SCC 674, in which the Court considered English authorities to the effect that “different standards of contract for the people and public bodies could not ordinarily be permitted and the public body was not exempt from the liability to carry out its obligation arising out of representations made by it relying upon which a citizen had altered his position to his prejudice”, and said that similar sentiments had been voiced by the Indian courts. (Mr Salve recognised that the Supreme Court’s language was resonant of apparent authority, but considered it applicable also to implied actual authority.) However, although he considered that the same principles apply to private and government entities, Mr Salve accepted that in cases of apparent authority the Indian Courts have been reluctant to find that government authorities have through their conduct conferred apparent authority on an agent beyond his actual authority, particularly to carry out public as opposed to commercial functions, and I infer that he would take the same view about implied actual authority.[56]This difference of view between Mr Sorabjee and Mr Salve should not perhaps be a matter of surprise to English lawyers. It mirrors uncertainties in English law, reflected in the necessarily diffident discussion about apparent authority in Bowstead and Reynolds on Agency (19th Ed, 2010) para 8-04:
“Employees of the Crown are all servants of the Crown and do not employ each other. And apparent authority may be extremely difficult to prove in a Crown or other public agent, for in Att-Gen. for Ceylon v. Silva [[1953] AC 461, 479] it was said that: “no public officer, unless he possesses some special power, can hold out on behalf of the Crown that he or some other public officer has the right to enter into a contract in respect of the property of the Crown when in fact no such right exists.”
However, this was a clear case, inasmuch as the agent’s powers were limited by delegated legislation, and to hold otherwise would have been to give a Crown official a dispensing power to validate ultra vires acts. Another clear case occurs where to bind the Crown would be to permit an officer of the Crown to fetter the Crown’s freedom of action to do its public duty. Subject to these important reservations, however, it may be possible to establish apparent authority in the normal way; though where it is argued that one officer held out another as having authority, it will be necessary to establish the actual (or sometimes apparent) authority, of that officer to do so. It may also be difficult to distinguish this form of estoppel from other estoppels, e.g. as to whether the relevant authority has taken a decision or an immunity has been waived. Further, if the supposed doctrine of usual authority is accepted as a separate notion from that of apparent authority (which it has been suggested is not so), the Crown could perhaps be held liable under it, since no specific holding out is required – unless it be suggested that policy reasons still make the doctrine inapplicable to the Crown. The interaction of public and private law principles makes the area a difficult one. Apparent authority in a crown agent, even a Minister of Finance, cannot be established in the face of a constitutional restriction on powers.”[57]I am not persuaded that there is a hard rule of Indian law that prevents the court from inferring from an implied course of dealing that a government entity has conferred on an agent implied authority to act on its behalf notwithstanding express authority has been conferred in other and more limited terms, or that a government entity cannot similarly impliedly rescind limitations to an express authorisation (unless, of course, the restrictions reflect requirements of secondary legislation or other legal requirements). Even if I had been persuaded, I would not have accepted that PEC are a government entity to which such a rule applied. Although PEC are for some purposes treated as a public or governmental body, I cannot accept that their functions would justify different legal principles governing issues about whether they are bound by their agents’ acts. That said, the nature of government entities, and the bureaucratic and hierarchical organisation that they often have, might well make it more difficult to infer that authority has been given to an agent, particularly if the inference is not harmonious with a structure of powers that have been formally specified: that could be relevant when applying the legal principles to the facts of a particular case, and it might well be a decisive consideration.[58]Returning to the facts on which AGR rely in support of their case that Mr Ravi Kumar had implied authority to make the Purchase Agreement, I observe that Mr Sorabjee formulated the issue as being whether the restrictions placed on Mr Ravi Kumar’s authority in the schedule had impliedly been rescinded. I understood from his evidence that that is how the question would be approached as a matter of Indian law, and I accept his evidence about that. In any case, that seems to me the natural analysis of the position. This is important because, I would infer, the limitations stipulated by the Board could be rescinded only by the Board, and the Board did nothing that could be interpreted as rescinding the limitations. In particular I find it impossible to conclude that the Board acquiesced in PEC’s business being conducted (either by Mr Ravi Kumar specifically or more generally) without regard to the Schedule’s limitations on the authority of persons of different ranks. Mr Collett accepted that there is no evidence that the two non-executive directors knew that the limitations were not being observed, but submitted that it sufficed that the other three members of the Board, Mr Mirchandani, Mr Narang and Mr Chauhan, knew, and so a majority of the members of the Board were so aware. I accept that the three executive directors did know the pattern of trading: they were members of the COM. I do not accept that therefore the Board as a body acquiesced in how rice contracts were being made and so rescinded (or modified) the restrictions placed on what contracts Mr Ravi Kumar could conclude. The non-executive directors were entitled to participate in any decision of the Board, notwithstanding they did not command a voting majority, and the Board as a body did not evince, by anything they did or by acquiescence, an intention to expand the prescribed authority delegated to Mr Ravi Kumar.[59]However, my decision does not rest on this (perhaps rather technical) reasoning. Even if it be supposed that the COM could have conferred on Mr Ravi Kumar authority beyond that in the Schedule, I do not consider that they did so, and certainly do not consider that they conferred on him authority to make the Purchase Agreement. What change do AGR say that the COM intended to make to the powers set out in the Schedule (or, as it might more precisely be put, did they evince an intention to make)? If it be said that they intended simply to do away with the limitations in the schedule, on the face of it that would leave Mr Ravi Kumar with authority to make any contract by way of a “trade offer on the basis of back to back offers from suppliers”. But this is not a reasonable inference from the fact that the COM acquiesced in the dealings on which AGR rely. After all, that would have allowed him, for example, authority to commit PEC to contracts for large monthly purchases for an indefinite period. Mr Collett recognised this could not be implied, and submitted that Mr Ravi Kumar had implied authority to make contracts for a “reasonable” amount of rice, and that reasonableness is to be measured by the amount of a typical shipload, which, according to evidence given to the Tribunal, was 25,000 mt to 50,000 mt. Accordingly he said that Mr Ravi Kumar should be taken to have been given authority to make contracts to buy 50,000 mt of rice.[60]I was impressed by Mr Collett’s ingenuity but unpersuaded by his argument. It requires an inference that PEC evinced an intention to replace the limitations in Mr Ravi Kumar’s powers by reference to contract values and PEC’s returns with a limitation by reference to the quantity of rice. More remarkably, it requires an inference that PEC intended to confer on Mr Ravi Kumar greater authority than that of directors and even the CMD. I find it difficult to think that any trading company would do this, and it is quite impossible to attribute this implied intention to PEC, which, as is reflected in the Schedule and was apparent from Mr Mirchandani, had a distinctly hierarchical structure.[61]When I examine in more detail the facts on which AGR rely, I see more difficulties in their case. First, a minor point: two of the contracts on which AGR seek to rely, the first contract with AGR and the contract with TMT, ante-dated the Schedule and they are not part of a course of dealing from which modification of the schedule can be inferred; and the contract with AGC post-dates the Purchase Agreement and cannot be part of a course of dealing whereby PEC had conferred implied authority on Mr Ravi Kumar by the time that he entered into it. What can be inferred from the other transactions? Let me suppose (without deciding) that the COM evinced an intention to allow Mr Ravi Kumar to make contracts with a margin of less than that stipulated in the Schedule, I cannot infer that they evinced an intention to allow him to enter into contracts with a value of more than $2 million unless authorised to do so by a person of a rank authorised under the Schedule to make it. All the contracts other than the first with AGR had a value within the limits for a director. The most obvious explanation for Mr Ravi Kumar making contracts of these values, to my mind, is that he did so with the authority of Mr Narang, whose approval he apparently sought and obtained before making the Purchase Agreement. I do not readily draw this inference in the absence of evidence from Mr Ravi Kumar and Mr Narang, but I have concluded that this is what probably happened. This would undermine the factual basis for inferring that PEC acquiesced in the value limitation not being observed.[62]But in any event the facts are not, to my mind, strong enough to justify the argument that Mr Ravi Kumar had implied authority. The most that could be inferred is that the COM were content for Mr Ravi Kumar to make contracts comparable to those that he had previously made. Mr Collett implicitly recognised this by confining the authority that he invited me to infer to buy rice (and tailoring his submission about what was a reasonable amount accordingly). The Purchase Agreement was different from any previous contract, not only in the way that it was made but also (to my mind more importantly) in value.[63]I therefore conclude that Mr Ravi Kumar was not authorised by PEC to make the Purchase Agreement. It also follows that he did not have the power to authorise Mr Jain to make it. I must therefore consider whether PEC were bound by any agreement that Mr Jain made? As I have said, AGR did not advance any other argument that PEC conferred actual authority on Mr Jain. The question is whether he had apparent authority, and I consider it first on the basis that, as AGR contend, it is governed by English law. In order to show apparent authority, AGR have to establish that PEC or someone authorised by PEC made a representation (by words or conduct) that Mr Jain had the requisite authority, and that they acted on that representation. (The law is unclear as to whether they have to show that they acted to their detriment. They might well not: see Chitty on Contracts (31st Ed, 2012) para 31-057, and pace Kelly v Fraser, [2012] UKPC 25 para 18. But nothing turns on that.)[64]AGR’s pleaded case at the start of the hearing before me was that at the meeting on 4 May 2005 PEC expressly represented to AGR that “Mr Jain/PJS had authority to bind PEC and/or to convey PEC’s approval of the transaction”. If “the transaction” is the Purchase Agreement, this cannot be right: it cannot have been contemplated in 2005. This leads to the question exactly what authority, on AGR’s case, Mr Jain was represented to have had in May 2005. When I raised it, Mr Collett re-formulated AGR’s case (without making a formal amendment, which Mr Brindle did not suggest to be necessary), and submitted that Mr Jain was represented as having authority to negotiate and conclude “contracts for the purchase of rice from AGR”, and that the implication was that the contract should be “for a reasonable quantity of rice”.[65]PEC’s case about the meetings was clearer from the start: that Mr Amar had said that one of PEC’s functions was to arrange financial packages for traders who did not have them, that they would open a letter of credit to fund transactions, and that PEC’s public standing meant that AGR would be assured of payment if PEC approved a transaction. He had said that Mr Jain would negotiate contracts with AGR on behalf of the ultimate purchaser of the rice and, once a contract was negotiated, it could be brought to PEC, who might, if they approved it, enter into an associateship agreement with PJS, a purchase contract with AGR and a sale contract with the ultimate purchaser.[66]The Tribunal rejected AGR’s argument that in May 2005 PEC held out Mr Jain or PJS as having authority to commit them to contractual obligations. They concluded that they could not choose the recollection of one witness over that of any other, and that PEC “did not at the meeting in 2005 convey to [AGR] that PJS had authority to conclude contracts for and on their behalf”. They were, in my judgment, right to reject AGR’s argument. After all, apparently no notes of the exchanges were taken and no record was made. To my mind it is improbable that a public body such as PEC would so informally represent that a private trader had authority to commit them to contractual obligations, and the more improbable that they would do so without laying down any limits to or restrictions on the trader’s authority. Having read the transcript of Mr Amar’s cross-examination before the Tribunal, my distinct impression is that he would not have gone so far beyond his instructions as to make the representations alleged. I add only that, had I accepted the new formulation of PEC’s supposed representation, I would not have been satisfied that the Purchase Agreement was for a “reasonable quantity”. In my judgment, no evidence supports AGR’s implicit assertion that a contract for 25,000 mt was for a “reasonable quantity” against the background of the parties’ dealings and I would not have been prepared to infer it (notwithstanding Mr Collett’s argument about shiploads).[67]AGR’s successful argument before the Tribunal was based on the course of dealing after May 2005. The courts do not readily infer from a prior course of dealings that a principal has represented that a putative agent had authority to make contracts for it: the locus classicus might be the observations ofRomer LJ in Slingsby v District Bank Ltd, [1932] 1 KB 544, 566 (which was cited with approval, for example, by Robert Goff LJ in Armagas Ltd v Mundogas SA, [1886] 1 AC 717, 733B):
“… the fact that the [employer of the putative agent] had, even on numerous occasions, employed [the putative agent] to prepare cheques for signature cannot amount to a holding out by them of [him] as their general agent for that purpose”
. I have explained why I would be the more reluctant to draw such an inference against an apparently hierarchical entity such as PEC.[68]AGR’s case here is pleaded in two ways:(i) that, by their conduct in concluding contracts, PEC held Mr Jain out as their agent to negotiate and to conclude “contracts”; and(ii) that, by their acquiescence in the earlier contracts, PEC clothed Mr Jain with authority to negotiate and conclude contracts PEC 001/2007 and 002/2007. In his submissions Mr Collett also relied (without any objection from Mr Brindle that he was expanding the pleaded case) on the fact that PEC were apparently content to deal with AGR with regard to contracts and amendments to them (for example, amendments as to prices, shipping periods and destinations of the cargoes) through Mr Jain in particular and PJS more generally. Accordingly, he submitted, a third party in the position of AGR would reasonably have understood, and AGR did understand, that Mr Jain had authority to conclude contracts on PEC’s behalf.[69]It is not enough that AGR understood this to be the position and that they were reasonable to do so. The first question is whether PEC so presented Mr Jain by their words or conduct (including their silence or omissions), and here all that matters is what was done by someone who had actual or apparent authority to speak or act for PEC. Moreover, it is nothing to the point that PEC presented Mr Jain as having authority to conduct negotiations: the question is whether he was presented as having authority to conclude contracts, and more specifically a contract such as the Purchase Agreement. I accept that by a consistent and regular course of dealing in which they fulfilled contracts made in their name by a putative agent a principal could be taken to have represented to counterparties that the agent had authority to commit him to such contracts. However, given the courts’ reluctance to infer a representation of this kind, I am persuaded by Mr Brindle that no such inference is to be drawn in this case. As in Slingsby, the fact that PEC had on occasion in the past fulfilled contracts that had been made by Mr Jain purportedly on their behalf is not enough on the facts of this case to amount to a representation that Mr Jain had authority to conclude contracts for them. PEC’s conduct is readily, and to my mind more readily, explicable as a reflecting their decisions to ratify particular contracts made by Mr Jain in their name. In reaching this conclusion, I recognise that I am differing from a Tribunal with experience in the trade, but PEC are entitled to my independent decision on the point.[70]However, there is another answer to this argument, similar to that about Mr Ravi Kumar’s implied authority. If held out at all, “The authority will be that which the agent reasonably appeared to have to the third party, taking into account the manifestations of the principal, the implied authority normally applicable to the circumstances or to the person in the agent’s position, or both”: Chitty on Contracts, cit sup, para 31-057. This raises the immediate question, what contracts did PEC hold Mr Jain out as being authorised to make? At its highest, PEC might be said to have represented that Mr Jain had authority to enter into purchase contracts that were comparable to those in which he had previously been involved. The Purchase Agreement, however, was on a different scale from the previous ones: the quantity of rice and the price were far greater.[71]This is enough to reject the argument that Mr Jain had apparent authority to conclude contracts for PEC. But there is another point: the previous contracts made by Mr Jain were concluded after oral agreement in principle about the main terms of the deal, and when Mr Jain met Ms Patcharin in Bangkok to sign the contracts. Accordingly the previous pattern of dealing was significantly different from the circumstances of the Purchase Agreement. There had been no course of dealing that might represent (or even indicate) that Mr Jain had authority to make a contract on the telephone without discussion with PEC. I recognise Ms Patcharin’s evidence before the tribunal was that Mr Jain explained to her that he did not wish to come to sign a contract in Bangkok because the contract was urgent, but that does not assist AGR to show a representation that Mr Jain was authorised to make a contract in the way that, as AGR contend, the Purchase Agreement was concluded.[72]Accordingly, I reject AGR’s case that Mr Jain had apparent authority to make the Purchase Agreement even assuming(i) that AGR acted in reliance on some representation by PEC of Mr Jain’s authority, and(ii) that Mr Jain’s apparent authority is governed by English and not Indian law. I state my conclusions only briefly about these questions.[73]The question whether AGR could have proved reliance on any representation that PEC made about Mr Jain’s authority raises questions(i) whether AGR (through Ms Patcharin) believed that Mr Jain was authorised by PEC to make the Purchase Agreement orally, and(ii) whether they relied on the belief. If this is proved, it does not matter in English law that her belief was unreasonable, so long as it was not dishonest or irrational: see paras 51 et seq of Lord Neuberger’s judgment in Thanakharn v Akai, [2011] 1 HKLC 357, a case in the Court of Final Appeal in Hong Kong stating the law of Hong Kong, but based on an analysis of English (and Australian) authorities. Ms Patcharin’s evidence to the Tribunal was that she believed that Mr Jain had authority because of previous dealings (“I was sure that Mr Pawan Jain had the authority because so far the contract was executed, so far, so good”), and I accept that. I also accept that AGR acted on that belief, and (if necessary) that they did so to their detriment. It suffices for this purpose in cases of apparent authority that the third party simply did not take an alternative available course of action, and generally suffices that he entered into a contract in reliance on his belief that the agent was authorised: Bowstead & Reynolds on Agency (19th Ed, 2010) para 8-026. There is no reason not to adopt the general approach in this case. Believing that they had a contract with PEC, AGR pressed for it to be carried out and, no doubt, did not seek to sell the rice elsewhere.[74]Is the issue governed by Indian or English law? Dicey, Morris & Collins on The Conflict of Laws (15th Ed, 2012) state at para 33R-432 the general principle that, “The issue whether the agent is able to bind the principal to a contract with a third party, or a term of that contract, is governed by the law which would govern that contract, or term, if the agent’s authority were established”. Mr Collett submits that therefore the issue of Mr Jain’s apparent authority is governed by English law as the governing law of the (putative) Purchase Agreement. While recognising the general principle stated in Dicey, Mr Brindle submitted that it is not an absolute rule and that it should not be followed if it would work unfairness, any more than the putative proper law would then govern other questions of contract formation (whether under article 9 of the Rome Convention or at common law). He also submitted that the issue is governed by Indian law because that is the law most closely related to the issue whether PEC, an Indian government company, had held out Mr Jain, an Indian businessman, as having authority to make contracts for international trading in rice (there being no suggestion that his apparent authority was confined to authority to make contract about exports from Thailand).[75]I agree with Mr Brindle that if the issue were not decided by reference to the governing law of the putative contract, but the law most closely connected with the issue itself, that would be Indian law. I also have sympathy with his submission that the general principle stated in Dicey, Morris & Collins would not be applied if it resulted in distinct unfairness or there were other strong reason for modifying it. An obvious example might be if an agent chose a law unconnected with the contract simply to clothe himself with authority. As Mr Brindle pointed out, the rejection of an absolute rule would not compromise the rationale for the general principle explained by Dicey, Morris & Collins (loc cit) at para 33-436:
“Where A[gent] lacks actual authority from P[rincipal], it seems right, in principle, that the law applicable to the contract which A has concluded (or purported to conclude) with T should determine whether P is bound (or entitled). In effect in this situation, one is asking whether A had apparent or ostensible authority to bind P. Hence, if P in one country appoints A to act for him as regards certain matters, e.g. the sale and purchase of goods, in a specified or unspecified number of countries. A must be taken to have the authority to do any of the acts which an agent of his class may do under the law of the country with reference to the laws of which he contracts. This responds to the requirements of commercial intercourse.”
However, I am not persuaded that in this case fairness or any other reason demands that I depart from the general principle. Before May 2008 the parties had impliedly chosen that their dealings be governed by English law through agreeing to English arbitration. This is the very reason that, if Mr Jain had made the Purchase Agreement on 15 May 2008, it would have been governed by English law. It is entirely fair to decide whether Mr Jain had apparent authority to make the Purchase Agreement by reference to English law.[76]I add that I am not persuaded that here there is any significant difference between English law and Indian law. Mr Sorabjee accepted that under Indian law government entities can hold out agents so as to clothe them with apparent authority, but, as under English law, the courts do not readily infer that they have done so. He also explained, and I am inclined to accept, that under the law of India a third party cannot rely upon an agent’s apparent authority if he is unaware of limitations on the agent’s authority because he has not made enquiries that a “mercantile man of prudence” would have made. In this, Indian law apparently differs from what was said in Thanakharn v Akai Holdings Ltd (cit sup), but, like Lord Neuberger (at para 50) I am sceptical whether this would be reflected in different outcomes. With regard to the particular question whether because of the 2005 Act AGR are to be taken to know what the Schedule said, I cannot accept that a mercantile man of prudence would have invoked rights under the Act when conducting urgent contractual negotiations. My decision about Mr Jain’s authority would be the same if I had applied Indian law.[77]AGR have another arrow in their quiver: their argument that, even if Mr Ravi Kumar signed the written agreement without authority, Mr Jain had apparent authority to communicate to AGR that the contract was duly made by PEC: that is to say, apparent authority to convey to AGR the acceptance by PEC of AGR’s written contract. Notionally a principal can confer on an agent authority to communicate acceptance of a contract notwithstanding the agent does not himself have authority to make it: see Kelly v Fraser, (cit sup) at para 15. A familiar example is that of the company secretary with authority to convey board decisions, but in First Energy (UK) Ltd v Hungarian International Bank Ltd, [1993] 2 Lloyd’s LR 194 the manager in charge of a bank’s office was held to have such authority. However, the court’s reluctance to infer such authority from previous dealings was explained by Goff LJ in Armagas Ltd v Mundogas SA, [1986] AC 717, 732:
“… it does not follow from the mere fact that an agent has on previous occasions been entrusted by his principal with the task of communicating to a third party his principal’s approval to certain transactions, that the principal has thereby represented that the agent has authority to communicate such approval in relation to future transactions, with the effect that the principal will be bound by such communication”
. He also described (at p. 731A) as “a most surprising conclusion” the judge’s finding that an agent without apparent authority to contract had apparent authority to say that he had obtained actual authority to do so. He observed (at p.731B) “As a matter of common sense, this is most unlikely to be the law”, and in the House of Lords (loc cit at p.779F) Lord Keith agreed. In the Court of Appeal in the First Energy (UK) Ltd case Steyn LJ recognised that Lord Keith had given “valuable guidance, which Judges at every level will want to consider carefully when the occasion arises, but it does not amount to a rule or principle of law” (loc cit at 202). In concluding that nevertheless in that case the manager had apparent authority to convey an offer by the bank, he observed, “… Lord Keith’s observations about specific as opposed to general authority are not relevant to the case before us. The issue in the present case relates to the existence of a general apparent authority arising from the position in which [the bank] had placed [the manager]”.[78]As I see it, AGR’s contention is closer to one of specific authority: that PEC held Mr Jain out as having authority to convey that they accepted the written Purchase Agreement not because they appointed him to a position in which he would be expected to do so, but because of the specific role that they had allowed him to adopt when dealing with AGR. The guidance of Goff LJ and Lord Keith is fully applicable. I cannot accept that PEC presented Mr Jain as having such authority. They presented him as the route for conducting negotiations with a view to AGR and PEC concluding contracts or amending concluded contracts and also for carrying out contracts after they had been made, but that is different from presenting him as the route for communicating contractual offers or acceptances. He had not done that in the past: he had himself signed contracts at meetings in Bangkok that were presented to him by AGR at the meetings.[79]I reject the argument that Mr Jain had authority to convey PEC’s acceptance of the Purchase Agreement. I have dealt with it on the basis that issues about Mr Jain’s apparent authority are governed by English law, and I have explained why I consider it right to do so, but I have also explained why I would reach the same conclusion if Indian law applied.[80]I therefore conclude, despite my respect for the Tribunal’s award and the careful and attractive arguments advanced by Mr Collett, to which I pay tribute, that Mr Jain and Mr Ravi Kumar did not have actual or apparent authority to conclude the Purchase Agreement, and that PEC did not make any arbitration agreement relating thereto. I invite counsel’s assistance in drafting an order to give effect to this conclusion.

Cited in 2 later judgments