Tuesday, 20 November 2018

Whether application for enforcement of foreign arbitral award can be dismissed if necessary documents were not filed along with application?

 It is relevant to note that there would be no prejudice
caused to the party objecting to the enforcement of the
Award by the non-filing of the arbitration agreement at the
time of the application for enforcement. In addition, the
requirement of filing a copy of the arbitration agreement
under the Model Law which was categorized as a formal
requirement was dispensed with. Section 48 which refers
to the grounds on which the enforcement of a foreign
award may be refused does not include the non-filing of the
documents mentioned in Section 47. An application for
enforcement of the foreign award can be rejected only on
the grounds specified in Section 48. This would also lend
support to the view that the requirement to produce
documents mentioned in Section 47 at the time of
application was not intended to be mandatory.
21. Reading the word “shall” in Section 47 of the Act as
“may” would only mean that a party applying for

enforcement of the award need not necessarily produce
before the Court a document mentioned therein “at the
time of the application”. We make it clear that the said
interpretation of the word “shall” as “may” is restricted
only to the initial stage of the filing of the application and
not thereafter.
Reportable
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL No .4834 of 2007

P.E.C. LIMITED Vs AUSTBULK SHIPPING SDN BHD

L. NAGESWARA RAO, J.
Dated:NOVEMBER 14, 2018.


1. The judgment of the High Court of Delhi directing
enforcement and execution of a foreign award dated
30.05.2001 is challenged in this appeal. The Appellant
chartered MV “Rubin Halycon” from the Respondent for
transportation of a minimum quantity of 16,500 MT upto a
maximum of 17,000 MT of chickpeas in bulk from Geraldton
Port, Australia to Jawahar Lal Nehru Port, India (JNPT). The
Charter Party dated 20.04.2000 provided, inter alia, the
following:
“Box 8
Discharge Port(s) or Place (s)
“ISP/1-2 SB JNPT See Cl.3 shifting time to control
for 2nd berth as lay time at discharge port or time
on demurrage.”
1
Box 14
Laytime
“Nonreversible load/discharge 3,000 mt. PWWD.
Sat noon/SHEX EIU/2000 mt PWWD Sat Noon SHEX
EIU time from noon on Sat or a day preceding legal
holiday till 0800 hrs on Mon or next working day
not to count.”
Box 19
Demurrage and Despatch Rate of Load (Cl.16)
“USD 4,000 PD PR/half dispatch”
Box 23
Demurrage and Despatch Rate at Discharge
(Cl.27)
“USD 5,000 PD PR/half dispatch”
Box 24
Cargo Discharge Rate – Metric Tonnes per weather
Working Day of 24 Consecutive Hours (Cl.25)
“Sat noon SHEX EIU, Time from noon on Sat or a
day preceding a legal holiday till 0800 hrs on Mon
or next wkg day not to count.”
Clause 24
Time for Discharging
“Time for discharging shall commence twenty-four
hours after notice of readiness has been received
by written/ telegraphic or telefax notice during
ordinary office hour as per the usual custom of the
port, whether in berth or not at the first or sole
port of discharge provided vessel within port limits
and ready in all respects for discharging her
cargo….”)
Clause 25
Discharging Rate
“Cargo is to be discharged free of expense to the
Respondent at the average rate set out in Box 24”.
2
2. In accordance with the terms and conditions of the
Charter Party, the lay time commenced at 0900 hours on
03.05.2000. The load rate of 3,000 MT per day was valid in
accordance with the Charter Party and the lay time allowed
for loading equated to 5.5 days. The loading of the Cargo
commenced at Geraldton Port, Australia at 10.10 hrs on
01.05.2000 and was completed on 12.40 hrs on
02.05.2000. The Vessel arrived at JNPT at 0305 hrs on
15.05.2000 at which time the master tendered the notice of
readiness. A request was made by the Appellant to take
the vessel to a nearby port i.e. Mumbai. The request made
by the Appellant was acceded to by the Respondent and
the vessel was taken to the Mumbai port. The time allowed
for discharge was calculated on the basis of discharge rate
of 2,000 MT per day and the time allowed for discharge was
8.25 days. Taking into account the Cargo quantity being
16,500 MT, the Respondents calculated demurrage for a
period of 20.9493 days at the rate of US $ 6250 per day
and requested the Appellants to make the payment. A
final freight account was submitted by the Respondent on
22.06.2000 taking into consideration the dispatch at
Geraldton and the demurrage at Bombay. The final freight
3
account showed that the Appellant had to pay the
Respondent US $150,362.18.
3. The Respondent appointed Mr. William Robertson Esq,
47 Perrymount Road, Haywards Health, West Sussex, RH 16
3 BN as their nominated Arbitrator and the Appellant was
called upon to appoint its Arbitrator. The Appellant did not
appoint its Arbitrator within 14 days as mentioned in the
letter dated 19.09.2000. On 13.03.2001, the Respondent
filed its claims with the supporting documents. The
Arbitrator directed the Appellant to submit its defense
together with counter claims, if any, before 17.04.2001.
The Appellant submitted a brief response but did not
participate in the arbitration. The Arbitrator proceeded and
finally awarded US $ 150,362.18 to the Respondent with
interest at the rate of 8% per annum compounded at threemonthly
intervals from 1st July, 2000 till the date of
payment.
4. The reasons for the final award were given by the
Arbitrator separately. The Arbitrator dealt with the
submissions made on behalf of the Appellant in a detailed
manner. The contention of the Appellant that they did not
sign the Charter Party and they did not agree for arbitration
4
by the London Maritime Arbitration Association was
rejected by the Arbitrator on the ground that there is no
obligation that a Charter Party or contract has to be signed
under English law. The Arbitrator referred to the
correspondence between Mr. Sasi Nair of Forbes Gokak
Limited, Palvolk Division (Appellant’s Brokers) and Mr. Ian
Latimer of SSY (Respondent’s brokers) which showed that
the fixture was made for the account of Appellant.
Documents showing that the letter of indemnity was issued
on behalf of the Appellant and the freight was paid by the
Appellant were relied upon by the Arbitrator to conclude
that the Appellant’s brokers were authorized to act on its
behalf. There was other evidence on record which was
referred to by the Arbitrator which showed that the
Appellant fully participated in the fixture by itself and also
paid the freight apart from providing a letter of indemnity
when the vessel had to travel from JNPT to Mumbai Port.
The Arbitrator accepted the calculations of the Respondent
in support of its claim and held that the Respondent
succeeded in proving its claim of US $150,362.18.
5. The Respondent filed a petition for enforcement of the
award dated 30.05.2001 passed by the sole Arbitrator
5
Mr. William Robertson, in the High Court of Delhi. The
Appellant filed its objections to the enforcement petition.
The High Court observed that the award sought to be
enforced was made at London and that United Kingdom
was a party to the New York Convention. The United
Kingdom is also a reciprocating territory and a notification
was issued to that effect. The High Court also took note of
the fact that a duly certified copy of the arbitration
agreement was placed on record by the Appellant along
with the reply filed by it. Further, the High Court observed
that admittedly the Respondent placed on record the
original Charter Party agreement which contained the
arbitration clause during the course of the enforcement
proceedings. The main point that was considered by the
High Court was the maintainability of the petition for
enforcement of the award without an authenticated copy of
the original agreement being filed at the time of
presentation of the application. The High Court was of the
view that there was substantial compliance with the
provisions of the Arbitration and Conciliation Act, 1996
(hereinafter referred to as the “Act”) as a certified copy of
the arbitration agreement was placed on record by both the
6
parties. According to the High Court, the application filed
for enforcement under Section 47 of the Act was in the
nature of an execution and in case the relevant documents
were not filed along with the application, the adjudicating
forum has an obligation to return the same for compliance
with the requirements of the Act. Re-filing of the Petition
after curing defects is not barred by any law.
6. The High Court rejected the submissions made on
behalf of the Appellant that there was no arbitration
agreement. Apart from referring to the detailed discussion
of the Arbitrator on this point, the High Court analyzed the
correspondence exchanged between the parties and the
relevant material placed on record to hold that there
existed an arbitration agreement. Finally, the High Court
refused to accept the submission of the Appellant that the
award sought to be enforced was not a valid foreign award
as defined under Section 44 of the Act.
7. The judgment of the High Court was passed on
18.02.2005 and notice was issued by us in this appeal on
15.04.2005. We stayed the execution on 29.08.2005.
8. Mr. Garvesh Kabra, learned counsel for the Appellant
reiterated the points that were canvassed before the High
7
Court. He referred to Part II of the Act and took us through
the various provisions. He submitted that it is mandatory
for the party applying for enforcement of a foreign award to
produce the original agreement for arbitration before the
Court at the time of filing the application. He contended
that the application for enforcement ought to have been
dismissed on the sole ground that the arbitration
agreement was not produced at the time of filing of the
application. He also contended that the Appellant did not
sign the Charter Party and there was no arbitration
agreement between the parties. According to him, the
arbitral proceedings suffer from the vice of lack of
jurisdiction. He made an attempt to convince us that the
Charter Party agreement initially filed was not the original
agreement and that there were certain discrepancies in the
agreement presented before Court. As this point was not
considered either by the Arbitrator or the High Court, we
informed him that we would not adjudicate upon this issue.
9. The points that arise for our consideration in this case
are
8
a)Whether an application for enforcement under
Section 47 of the Act is liable to be dismissed if it is
not accompanied by the arbitration agreement?
b)Whether there is a valid arbitration agreement
between the parties and what is the effect of a party
not signing the Charter Party?
10. The Foreign Awards (Recognition and Enforcement)
Act, 1961 was repealed by the Act. Part II of the Act deals
with enforcement of foreign awards. An arbitral award
made in pursuance of an agreement in writing for
arbitration, to which the Convention on the Recognition &
Enforcement of Foreign Arbitration Awards, 1958
(hereinafter referred to as the “New York Convention”) set
forth in the First Schedule of the Act applies is defined to be
a “Foreign Award”. Section 47 postulates that the party
applying for the enforcement of a foreign award “shall”
produce before the Court at the time of application the
following:
“(a) The original award or a copy thereof, duly
authenticated in the manner required by the law of the
country in which it was made;
(b) The original agreement for arbitration or a duly
certified copy thereof, and
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(c) Such evidence as may be necessary to prove that
the award is a foreign award.”
11. It is also necessary to refer to Section 48 of the Act
which provides for certain conditions for enforcement of the
foreign award. According to Section 48, the Court may
refuse the enforcement of a foreign award at the request
made by the party against whom it is invoked, provided the
party furnishes proof to the Court that
“(a) The parties to the agreement referred to in
Section 44 were, under the law applicable to them,
under some incapacity, or the said agreement is not
valid under the law to which the parties have
subjected it or, failing any indication thereon, under
the law of the country where the award was made; or
(b) The party against whom the award is invoked was
not given proper notice of the appointment of the
Arbitrator or of the arbitral proceedings or was
otherwise unable to present his case; or
(c) The award deals with a difference not
contemplated by or not falling within the terms of the
submission to arbitration, or it contains decisions on
matters beyond the scope of the submission to
arbitration: Provided that, if the decisions on matters
submitted to arbitration can be separated from those
not so submitted, that part of the award which
10
contains decisions on matters submitted to arbitration
may be enforced; or
(d) The composition of the arbitral authority or the
arbitral procedure was not in accordance with the
agreement of the parties, or, failing such agreement,
was not in accordance with the law of the country
where the arbitration took place; or
(e) The award has not yet become binding on the
parties, or has been set aside or suspended by a
competent authority of the country in which, or under
the law of which, that award was made.”
12. Admittedly, an authenticated copy of the arbitration
agreement was not placed on record by the Respondent at
the time of filing of the application for enforcement. It is
clear from the record that the Appellant placed the
arbitration agreement along with its reply and thereafter
the Respondent also filed the original arbitration agreement
in the Court. The submission made by the Appellant is that
production of the arbitration agreement at the time of filing
of the award is mandatory, the non-compliance of which
ought to have resulted in the dismissal of the application.
The Appellant sought support for this submission from the
word “shall” appearing in Section 47. We do not agree
with the submission made by the learned counsel for the
11
Appellant. We are of the opinion that the word “shall”
appearing in Section 47 of the Act relating to the production
of the evidence as specified in the provision at the time of
application has to be read as “may”.
13. The word “shall” in its ordinary import is “obligatory”.
But there are many decisions wherein the Courts under
different situations construed the word to mean “may”1.
The scope and object of a Statute are the only guides in
determining whether its provisions are directory or
imperative2. It is the duty of the Courts of Justice to try to
get at the real intention of the Legislature by carefully
attending to the whole scope of the statute to be
construed3.
14. The word “shall”, though prima facie gives an
impression of being of mandatory character, is required to
be considered in light of the intention of the legislature by
carefully attending to the scope of the Statute, its nature
and design and the consequences that would flow from the
construction thereof one way or the other. The Court is
required to keep in mind the mischief that would ensue by
the construction of the word “shall” as “may”. Whether the
1 Rani Drig Raj Kuer v. Raja Sri Amar Krishna Narain Singh, [1960 (2) SCR 431]
2 Caldow v. Pixwell, (1876) 2 C.P.D. 562
3 Craies on Statute Law, 5th Edition.
12
public convenience would be sub served or whether public
inconvenience or general inconvenience may ensue if it is
held mandatory4.
15. Section 46 of the Act makes a foreign award
enforceable under the Act as binding on the persons
between whom it is made. Article III5 of the New York
Convention provides for recognition of arbitral awards by
each contracting State as binding. Enforcement of the
arbitral awards shall be in accordance with the rules and
procedure of the territory where the award is sought to be
enforced. Article III restricts imposition of substantial
onerous conditions for enforcement of the arbitral awards.
Article IV6 requires the party applying for recognition and
enforcement to file an authenticated original award or duly
certified copy thereof and the original agreement referred
4 Mohan Singh v. International Airport Authority of India, (1997) 9 SCC
5 Each Contracting State shall recognize arbitral awards as binding and enforce
them in accordance with the rules of procedure of the territory where the award is
relied upon, under the conditions laid down in the following articles. There shall not
be imposed substantially more onerous conditions or higher fees or charges on the
recognition or enforcement of arbitral awards to which this Convention applies than
are imposed on the recognition or enforcement of domestic arbitral awards.
6 1. To obtain the recognition and enforcement mentioned in the preceding article,
the party applying for recognition and enforcement shall, at the time of the
application, supply: (a) The duly authenticated original award or a duly certified
copy thereof; (b) The original agreement referred to in article II or a duly certified
copy thereof. 2. If the said award or agreement is not made in an official language
of the country in which the award is relied upon, the party applying for recognition
and enforcement of the award shall produce a translation of these documents into
such language. The translation shall be certified by an official or sworn translator or
by a diplomatic or consular agent.
13
to in Article II7 or a duly certified copy thereof at the time of
the application. It is relevant to mention that the word
“shall” is employed in Article IV. The object and purpose of
the New York Convention as summarized by the Guide to
Interpretation of the New York Convention issued by the
International Council for Commercial Arbitration is as
follows:
“The Convention is based on a pro-enforcement bias.
It facilitates and safeguards the enforcement of
arbitration agreements and arbitral awards and in
doing so it serves international trade and commerce. It
provides an additional measure of commercial security
for parties entering into cross-border transactions”8.
16. The object and purpose of the New York Convention is
to facilitate the recognition of the arbitration agreement
within its purview and the enforcement of the foreign
arbitral awards. This object and purpose must, in the first
place, be seen in the light of enhancing the effectiveness of
7 1. Each Contracting State shall recognize an agreement in writing under which
the parties undertake to submit to arbitration all or any differences which have
arisen or which may arise between them in respect of a defined legal relationship,
whether contractual or not, concerning a subject matter capable of settlement by
arbitration. 2. The term “agreement in writing” shall include an arbitral clause in a
contract or an arbitration agreement, signed by the parties or contained in an
exchange of letters or telegrams. 3. The court of a Contracting State, when seized
of an action in a matter in respect of which the parties have made an agreement
within the meaning of this article, shall, at the request of one of the parties, refer
the parties to arbitration, unless it finds that the said agreement is null and void,
inoperative or incapable of being performed.
8 “ICCA’S Guide to the Interpretation of the 1958 New York Convention: A Handbook for
Judges” (2011)
p. XI (hereinafter, ICCA Guide).
14
the legal regime governing international commercial
arbitration9.
17. According to the ICCA Guide, the approach of the
Court for enforcement should be having a strong pro
enforcement bias, a pragmatic, flexible and non formalist
approach. The Courts in several countries have been
liberal in interpreting the formal requirements of Article IV
of the New York Convention10. Excessive formalism in the
matter of enforcement of foreign awards has also been
deprecated.
18. It is relevant to take note of the Preamble of the Act
wherein it is mentioned that the United Nations
Commission on International Trade Law (UNCITRAL) has
adopted the UNCITRAL Model law on International
Commercial Arbitration (“Model Law”) in 1985 and that the
Act is made taking into account the Model law and Rules.
Chapter VIII of the Model Law governs the recognition and
enforcement of Awards. Article 35 (2)11 provides that the
party applying for enforcement of the award shall supply
9 Dardana Limited v. Yukos Oil Company, [2002] 1 ALL ER (Comm.) 819
10 The New York Arbitration Convention of 1958 – by Albert van den Berg
11 (2) The party relying on an award or applying for its enforcement shall supply
the original award or a copy thereof. If the award is not made in an official language
of this State, the court may request the party to supply a translation thereof into
such language.
15
the original award or a copy thereof. The Model Law does
not lay down procedural details of recognition and
enforcement, which are left to national procedural laws and
practices. However, Article 35 (2) was amended in 2006 to
liberalise formal requirements. Presentation of a copy of the
arbitration agreement is no longer required under Article 35
(2).
19. The object of the New York Convention is smooth and
swift enforcement of foreign awards. Keeping in view the
object and purpose of the New York Convention, we are of
the view that the word “shall” in Section 47 of the Act has
to be read as “may”. The opposite view that it is obligatory
for a party to file the arbitration agreement or the original
award or the evidence to prove that the award is a foreign
award at the time of filing the application would have the
effect of stultifying the enforcement proceedings. The
object of the New York Convention will be defeated if the
filing of the arbitration agreement at the time of filing the
application is made compulsory. At the initial stage of
filing of an application for enforcement, non-compliance of
the production of the documents mentioned in Section 47
should not entail in dismissal of the application for
16
enforcement of an award. The party seeking enforcement
can be asked to cure the defect of non-filing of the
arbitration agreement. The validity of the agreement is
decided only at a later stage of the enforcement
proceedings.
20. It is relevant to note that there would be no prejudice
caused to the party objecting to the enforcement of the
Award by the non-filing of the arbitration agreement at the
time of the application for enforcement. In addition, the
requirement of filing a copy of the arbitration agreement
under the Model Law which was categorized as a formal
requirement was dispensed with. Section 48 which refers
to the grounds on which the enforcement of a foreign
award may be refused does not include the non-filing of the
documents mentioned in Section 47. An application for
enforcement of the foreign award can be rejected only on
the grounds specified in Section 48. This would also lend
support to the view that the requirement to produce
documents mentioned in Section 47 at the time of
application was not intended to be mandatory.
21. Reading the word “shall” in Section 47 of the Act as
“may” would only mean that a party applying for

enforcement of the award need not necessarily produce
before the Court a document mentioned therein “at the
time of the application”. We make it clear that the said
interpretation of the word “shall” as “may” is restricted
only to the initial stage of the filing of the application and
not thereafter. It is clear from the decisions relied upon by
the counsel for the Appellant that Courts in certain
jurisdictions have taken a strict view regarding the filing of
the documents for enforcement of a foreign award. Courts
in many other jurisdictions have taken the opposite view
that the application for enforcement of the foreign awards
does not warrant rejection for non-filing of the relevant
documents including the award and the arbitral agreement.
We need not adjudicate on this issue as the subject matter
of this case does not relate to the non-filing of the
arbitration agreement during the enforcement proceedings.
There is no dispute that the arbitration agreement has been
brought on record by both the parties.
22. The learned counsel for the Appellant also submitted that
the Appellant did not sign the Charter Party and cannot be
treated as a party to the agreement. There is no dispute that
the contract is governed by the English law under which there

is no requirement for the Charter Party to be signed by the
parties to make it binding. We have no doubt in approving the
conclusion of the High Court on this point and rejecting the
submission made on behalf of the Appellant. Abundant
material was examined by both the Arbitrator and the High
Court to record a finding that there existed a valid arbitration
agreement. Article II of the First Schedule of the Act defines
arbitration agreement as including an arbitral clause in a
contract or an arbitration agreement, signed by the parties or
contained in an exchange of letters or telegrams. The High
Court found that the Charter Party which contained the
arbitration agreement was agreed to and entered upon by the
parties and the same is supported by the correspondence
between the parties. The term “agreement in writing” in
Article II is very wide. An arbitral clause need not necessarily
be found in a contract or an arbitral agreement. It can be
included in the correspondence between the parties also. In
the present case the arbitration agreement is found in the
Charter Party which has been accepted by both the Arbitrator
and the High Court. We see no reason to differ from the view
taken by the High Court on this point.

23. Pursuant to our order dated 10.10.2007, the
principal amount awarded by the arbitrator was
deposited in this Court and reinvested from time to time
in fixed deposit. The amount lying in the bank shall be
paid to the respondent.
24. For the aforementioned reasons, the judgment of the
High Court is upheld and the appeal is dismissed. No costs.
...................................J.
[ A.M. KHANWILKAR ]
..................................J.
[ L. NAGESWARA RAO ]
NEW DELHI,
NOVEMBER 14, 2018.

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