P.E.C. LIMITED versus AUSTBULK SHIPPING SDN BHD on 14 November 2018

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[2018] 13 S.C.R. 830

SUPREME COURT REPORTS

[2018] 13 S.C.R.

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P.E.C. LIMITED

v.

AUSTBULK SHIPPING SDN BHD

(Civil Appeal No. 4834 of 2007)

B

NOVEMBER 14, 2018

[A. M. KHANWILKAR AND L. NAGESWARA RAO, JJ.]

Arbitration and Conciliation Act, 1996:

ss.44, 46, 47 and 48 – Foreign award – Enforcement andCexecution of – Charter Party between appellant and respondent –Dispute as regards payment of freight by appellant to respondent –Respondent appointed its nominated Arbitrator – Appellant failedto appoint its Arbitrator within stipulated time – The sole Arbitratorawarded the freight as demanded by the respondent with interest @8% P.A. – Petition for enforcement of the Award filed before HighDCourt in India – Objection by the appellant as to maintainability ofthe petition on the ground that authenticated copy of the originalagreement was not filed at the time of presentation of the application;that there was no arbitration agreement as the Charter Party wasnot signed by the appellant; and that award was not a valid foreignEaward – High Court rejecting the objections, directed enforcementand execution of the award – On appeal, Held: Production of thearbitration agreement at the time of filing the application is notmandatory – Article 35(2) of UNCITRAL Model Law on InternationalCommercial Arbitration (on the basis of which the Act is made) doesnot provide for presentation of the copy of the arbitration agreementF– The object of New York convention is smooth and swift enforcementof foreign awards – Keeping in view the object and purpose of NewYork Convention, the word ‘shall’ in s. 47 of the Act has to be readas ‘may’ – Therefore, signing of Charter Party is not necessary tomake it binding as the English Law (by which the contract isGgoverned) there is no such requirement – United Nations CommissionInternational Trade Law (UNCITRAL) – UNICITRAL Model Lawon International Commercial Arbitration – Article 35(2) –Convention on the Recognition and Enforcement of ForeignArbitration Awards, 1958 (New York Convention).

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Arbitration:

Arbitral clause – Incorporation of – Held: Arbitral clauseneed not be found in a contract or an arbitral agreement – It canbe included in the correspondence between the parties.

Interpretation of Statutes:

Provisions of statute – Whether directory or mandatory/imperative – Determination of – Held: The scope and object of astatute are the only guides in determining whether its provisions aredirectory of imperative – It is duty of the court to get the real intentionof the legislature – The word “shall” though prima facie gives animpression of being of mandatory character, is required to beconsidered in the light of the intention of the legislature by carefullyattending to the scope of the statute, its nature and design andconsequences that would flow from the construction thereof –Legislative Intent.

Words and Phrases:

‘Foreign award’ – Meaning of, in the context of Arbitrationand Conciliation Act, 1996.

‘Arbitration agreement’ – Meaning of.

‘Shall’ – Interpretation of.

Dismissing the appeal, the Court

HELD: 1.1 Part II of the Arbitration and Conciliation Act,1996 deals with enforcement of foreign awards. An arbitral awardmade in pursuance of an agreement in writing for arbitration, towhich the Convention on the Recognition & Enforcement ofForeign Arbitration Awards, 1958 (“New York Convention”) setforth in the First Schedule of the Act applies, is defined to be a“Foreign Award”. [Para 10][840-A-B]

1.2 Section 47 of the 1996 Act postulates that the partyapplying for the enforcement of a foreign award, “shall” producebefore the Court at the time of application the following: (a) Theoriginal award or a copy thereof, duly authenticated in the mannerrequired by the law of the country in which it was made; (b) Theoriginal agreement for arbitration or a duly certified copy thereof, A

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Aand (c) Such evidence as may be necessary to prove that theaward is a foreign award.” [Para 10][840-C-D]

1.3 Admittedly, an authenticated copy of the arbitrationagreement was not placed on record by the Respondent at thetime of filing of the application for enforcement. It is clear fromBthe record that the appellant placed the arbitration agreementalong with its reply and thereafter the Respondent also filed theoriginal arbitration agreement in the Court. It is not correct thatin view of word ‘shall’ appearing in s. 47, production of thearbitration agreement at the time of filing of the award ismandatory. The word “shall” appearing in Section 47 of the ActCrelating to the production of the evidence as specified in theprovision at the time of application has to be read as “may”.[Para 12][841-C-E]

1.4 The word “shall” in its ordinary import is “obligatory”.But the Courts under different situations construed the word toDmean “may”. The scope and object of a statute are the onlyguides in determining whether its provisions are directory orimperative. It is the duty of the Courts of Justice to try to get atthe real intention of the Legislature by carefully attending to thewhole scope of the statute to be construed. [Para 13][841-F]E

1.5 The word “shall”, though prima facie gives animpression of being of mandatory character, is required to beconsidered in light of the intention of the legislature by carefullyattending to the scope of the statute, its nature and design andthe consequences that would flow from the construction thereofFone way or the other. The Court is required to keep in mind themischief that would ensue by the construction of the word “shall”as “may”. Whether the public convenience would be sub servedor whether public inconvenience or general inconvenience mayensue if it is held mandatory. [Para 14][841-G; 842-A-B]

G1.6 Section 46 of the Act makes a foreign award enforceableunder the Act as binding on the persons between whom it is made.Article III of the New York Convention provides for recognitionof arbitral awards by each contracting State as binding.Enforcement of the arbitral awards shall be in accordance withthe rules and procedure of the territory where the award is soughtHto be enforced. Article III restricts imposition of substantial onerous conditions for enforcement of the arbitral awards. ArticleIV requires the party applying for recognition and enforcementto file an authenticated original award or duly certified copythereof and the original agreement referred to in Article II or aduly certified copy thereof at the time of the application. Theword “shall” is employed in Article IV. [Para 15][842-C-D;843-A-B]

1.7 The object and purpose of the New York Convention isto facilitate the recognition of the arbitration agreement withinits purview and the enforcement of the foreign arbitral awards.This object and purpose must, in the first place, be seen in thelight of enhancing the effectiveness of the legal regime governinginternational commercial arbitration. [Para 16][843-C-D]

1.8 The approach of the Court for enforcement should behaving a strong pro enforcement bias, a pragmatic, flexible andnon formalist approach. The Courts in several countries havebeen liberal in interpreting the formal requirements of Article IVof the New York Convention. Excessive formalism in the matterof enforcement of foreign awards has also been deprecated.[Para 17][843-E]

1.9 The object of the New York Convention is smooth andswift enforcement of foreign awards. Keeping in view the objectand purpose of the New York Convention, the word “shall” inSection 47 of the Act has to be read as “may”. The object of theNew York Convention will be defeated if the filing of the arbitrationagreement 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 mentionedin Section 47 should not entail in dismissal of the application forenforcement of an award. The party seeking enforcement can beasked to cure the defect of non-filing of the arbitration agreement.The validity of the agreement is decided only at a later stage ofthe enforcement proceedings. [Para 19][844-B-E]

1.10 The Preamble of the Act wherein it is mentioned thatthe United Nations Commission on International Trade Law(UNCITRAL) has adopted the UNCITRAL Model law onInternational Commercial Arbitration (“Model Law”) in 1985 and AB

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Athat the Act is made taking into account the Model law and Rules.Chapter VIII of the Model Law governs the recognition andenforcement of Awards. Article 35 (2) provides that the partyapplying for enforcement of the award shall supply the originalaward or a copy thereof. The Model Law does not lay downprocedural details of recognition and enforcement, which are leftBto 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 longerrequired under Article 35 (2). [Para 18][843-F; 844-A-B]

1.11 Section 48 which refers to the grounds on which theCenforcement of a foreign award may be refused does not includethe non-filing of the documents mentioned in Section 47. Anapplication for enforcement of the foreign award can be rejectedonly on the grounds specified in Section 48. This would also lendsupport to the view that the requirement to produce documentsDmentioned in Section 47 at the time of application was not intendedto be mandatory. The said interpretation of the word “shall” as“may” is restricted only to the initial stage of the filing of theapplication and not thereafter. [Paras 20, 21][844-F-G; 845-A]

2. There is no dispute that the contract is governed by theEEnglish law under which there is no requirement for the CharterParty to be signed by the parties to make it binding. Abundantmaterial was examined by both the Arbitrator and the High Courtto record a finding that there existed a valid arbitration agreement.Article II of the First Schedule of the Act defines arbitrationagreement as including an arbitral clause in a contract or anFarbitration agreement, signed by the parties or contained in anexchange of letters or telegrams. The High Court found that theCharter Party which contained the arbitration agreement wasagreed to and entered upon by the parties and the same issupported by the correspondence between the parties. The termG“agreement in writing” in Article II is very wide. An arbitralclause need not necessarily be found in a contract or an arbitralagreement. It can be included in the correspondence betweenthe parties also. In the present case the arbitration agreementis found in the Charter Party which has been accepted by boththe Arbitrator and the High Court. There is no reason to differH

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from the view taken by the High Court on this point.[Para 22][845-D-G]

Rani Drig Raj Kuer v. Raja Sri Amar Krishna NarainSingh, [1960] 2 SCR 431; Mohan Singh v. InternationalAirport Authority of India (1997) 9 SCC 132 : [1996] 8 Suppl. SCR 569 – relied on.

B

Dardana Limited v. Yukos Oil Company [2002] 1 ALLER (Comm.) 819; Caldow v. Pixwell (1876) 2 C.P.D.562 – referred to.

The New York Arbitration Convention of 1958 byAlbert van den Berg; Crates on Statute Law, 5[th] Edition;ICCA’S Guide to the Interpretation of the 1958 NewYork Convention: A Handbook for Judges” (2011) p.XI – referred to.

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Case Law Reference

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 4834of 2007

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From the Judgment and Order dated 18.02.2005 of the High Courtof Delhi at New Delhi in Execution Petition No. 195 of 2002

Garvesh Kabra, Amit Singh, Mrs. Pooja Kabra, Mrs. MaithiliShubhangi, Ravi Prakash Mehrotra, Advs. for the Appellant.

Manoj Kr. Khanna, M. K. Singh, R. K. Khanna,, Advs for theRespondent.

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The Judgment of the Court was delivered by

L. NAGESWARA RAO, J. 1. The judgment of the High Courtof Delhi directing enforcement and execution of a foreign award dated30.05.2001 is challenged in this appeal. The Appellant chartered MV“Rubin Halycon” from the Respondent for transportation of a minimumquantity of 16,500 MT upto a maximum of 17,000 MT of chickpeas inbulk from Geraldton Port, Australia to Jawahar Lal Nehru Port, India(JNPT). The Charter Party dated 20.04.2000 provided, inter alia, thefollowing:

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A“Box 8

Discharge Port(s) or Place (s)

“ISP/1-2 SB JNPT See Cl.3 shifting time to control for 2[nd] berthas lay time at discharge port or time on demurrage.”

Box 14

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Laytime

“Nonreversible load/discharge 3,000 mt. PWWD. Sat noon/SHEXEIU/2000 mt PWWD Sat Noon SHEX EIU time from noon onSat or a day preceding legal holiday till 0800 hrs on Mon or nextworking day not to count.”

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Box 19

Demurrage and Despatch Rate of Load (Cl.16)

“USD 4,000 PD PR/half dispatch”

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Box 23

Demurrage and Despatch Rate at Discharge (Cl.27)

“USD 5,000 PD PR/half dispatch”

Box 24

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Cargo Discharge Rate – Metric Tonnes per weather WorkingDay of 24 Consecutive Hours (Cl.25)

“Sat noon SHEX EIU, Time from noon on Sat or a day precedinga legal holiday till 0800 hrs on Mon or next wkg day not to count.”

FClause 24

Time for Discharging

“Time for discharging shall commence twenty-four hours afternotice of readiness has been received by written/ telegraphic ortelefax notice during ordinary office hour as per the usual customof the port, whether in berth or not at the first or sole port ofdischarge provided vessel within port limits and ready in all respectsfor discharging her cargo….”)

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Clause 25

Discharging Rate

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P.E.C. LIMITED v. AUSTBULK SHIPPING SDN BHD[L. NAGESWARA RAO, J.]

“Cargo is to be discharged free of expense to the Respondent atthe average rate set out in Box 24”.

2. In accordance with the terms and conditions of the CharterParty, the lay time commenced at 0900 hours on 03.05.2000. The loadrate of 3,000 MT per day was valid in accordance with the CharterParty and the lay time allowed for loading equated to 5.5 days. Theloading of the Cargo commenced at Geraldton Port, Australia at 10.10hrs on 01.05.2000 and was completed on 12.40 hrs on 02.05.2000. TheVessel arrived at JNPT at 0305 hrs on 15.05.2000 at which time themaster tendered the notice of readiness. A request was made by theAppellant to take the vessel to a nearby port i.e. Mumbai. The requestmade by the Appellant was acceded to by the Respondent and the vesselwas taken to the Mumbai port. The time allowed for discharge wascalculated on the basis of discharge rate of 2,000 MT per day and thetime allowed for discharge was 8.25 days. Taking into account theCargo quantity being 16,500 MT, the Respondents calculated demurragefor a period of 20.9493 days at the rate of US $ 6250 per day andrequested the Appellants to make the payment. A final freight accountwas submitted by the Respondent on 22.06.2000 taking into considerationthe dispatch at Geraldton and the demurrage at Bombay. The finalfreight account showed that the Appellant had to pay the RespondentUS $150,362.18.

3. The Respondent appointed Mr. William Robertson Esq, 47Perrymount Road, Haywards Health, West Sussex, RH 16 3 BN astheir nominated Arbitrator and the Appellant was called upon to appointits Arbitrator. The Appellant did not appoint its Arbitrator within 14 daysas mentioned in the letter dated 19.09.2000. On 13.03.2001, theRespondent filed its claims with the supporting documents. The Arbitratordirected the Appellant to submit its defense together with counter claims,if any, before 17.04.2001. The Appellant submitted a brief response butdid not participate in the arbitration. The Arbitrator proceeded and finallyawarded US $ 150,362.18 to the Respondent with interest at the rate of8% per annum compounded at three-monthly intervals from 1[st] July,2000 till the date of payment.

4. The reasons for the final award were given by the Arbitratorseparately. The Arbitrator dealt with the submissions made on behalfof the Appellant in a detailed manner. The contention of the Appellantthat they did not sign the Charter Party and they did not agree for A

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Aarbitration by the London Maritime Arbitration Association was rejectedby the Arbitrator on the ground that there is no obligation that a CharterParty or contract has to be signed under English law. The Arbitratorreferred to the correspondence between Mr. Sasi Nair of Forbes GokakLimited, Palvolk Division (Appellant’s Brokers) and Mr. Ian Latimer ofSSY (Respondent’s brokers) which showed that the fixture was madeBfor the account of Appellant. Documents showing that the letter ofindemnity was issued on behalf of the Appellant and the freight was paidby the Appellant were relied upon by the Arbitrator to conclude that theAppellant’s brokers were authorized to act on its behalf. There wasother evidence on record which was referred to by the Arbitrator whichCshowed that the Appellant fully participated in the fixture by itself andalso paid the freight apart from providing a letter of indemnity when thevessel had to travel from JNPT to Mumbai Port. The Arbitrator acceptedthe calculations of the Respondent in support of its claim and held thatthe Respondent succeeded in proving its claim of US $150,362.18.

D5. The Respondent filed a petition for enforcement of the awarddated 30.05.2001 passed by the sole Arbitrator Mr. William Robertson,in the High Court of Delhi. The Appellant filed its objections to theenforcement petition. The High Court observed that the award soughtto be enforced was made at London and that United Kingdom was aparty to the New York Convention. The United Kingdom is also aEreciprocating territory and a notification was issued to that effect. TheHigh Court also took note of the fact that a duly certified copy of thearbitration agreement was placed on record by the Appellant along withthe reply filed by it. Further, the High Court observed that admittedlythe Respondent placed on record the original Charter Party agreementFwhich contained the arbitration clause during the course of theenforcement proceedings. The main point that was considered by theHigh Court was the maintainability of the petition for enforcement of theaward without an authenticated copy of the original agreement beingfiled at the time of presentation of the application. The High Court was of the view that there was substantial compliance with the provisions ofGthe Arbitration and Conciliation Act, 1996 (hereinafter referred to as the“Act”) as a certified copy of the arbitration agreement was placed onrecord by both the parties. According to the High Court, the applicationfiled for enforcement under Section 47 of the Act was in the nature ofan execution and in case the relevant documents were not filed alongHwith the application, the adjudicating forum has an obligation to return the same for compliance with the requirements of the Act. Re-filing ofthe Petition after curing defects is not barred by any law.

6. The High Court rejected the submissions made on behalf of theAppellant that there was no arbitration agreement. Apart from referringto the detailed discussion of the Arbitrator on this point, the High Courtanalyzed the correspondence exchanged between the parties and therelevant material placed on record to hold that there existed an arbitrationagreement. Finally, the High Court refused to accept the submission ofthe Appellant that the award sought to be enforced was not a validforeign award as defined under Section 44 of the Act.

7. The judgment of the High Court was passed on 18.02.2005 andnotice was issued by us in this appeal on 15.04.2005. We stayed theexecution on 29.08.2005.

8. Mr. Garvesh Kabra, learned counsel for the Appellant reiteratedthe points that were canvassed before the High Court. He referred toPart II of the Act and took us through the various provisions. Hesubmitted that it is mandatory for the party applying for enforcement ofa foreign award to produce the original agreement for arbitration beforethe Court at the time of filing the application. He contended that theapplication for enforcement ought to have been dismissed on the soleground that the arbitration agreement was not produced at the time offiling of the application. He also contended that the Appellant did notsign the Charter Party and there was no arbitration agreement betweenthe parties. According to him, the arbitral proceedings suffer from thevice of lack of jurisdiction. He made an attempt to convince us that theCharter Party agreement initially filed was not the original agreementand that there were certain discrepancies in the agreement presentedbefore Court. As this point was not considered either by the Arbitratoror the High Court, we informed him that we would not adjudicate uponthis issue.

9. The points that arise for our consideration in this case are

a) Whether an application for enforcement under Section 47of the Act is liable to be dismissed if it is not accompaniedby the arbitration agreement?

b) Whether there is a valid arbitration agreement between theparties and what is the effect of a party not signing theCharter Party?

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A10. The Foreign Awards (Recognition and Enforcement) Act, 1961was repealed by the Act. Part II of the Act deals with enforcement offoreign awards. An arbitral award made in pursuance of an agreementin writing for arbitration, to which the Convention on the Recognition &Enforcement of Foreign Arbitration Awards, 1958 (hereinafter referredto as the “New York Convention”) set forth in the First Schedule of theBAct applies is defined to be a “Foreign Award”. Section 47 postulatesthat 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 inthe manner required by the law of the country in which it wasCmade; (b) The original agreement for arbitration or a duly certified copythereof, and

(c) Such evidence as may be necessary to prove that the awardDis a foreign award.”

11. It is also necessary to refer to Section 48 of the Act whichprovides for certain conditions for enforcement of the foreign award.According to Section 48, the Court may refuse the enforcement of aforeign award at the request made by the party against whom it is invoked,Eprovided 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 thesaid agreement is not valid under the law to which the partieshave subjected it or, failing any indication thereon, under the lawof the country where the award was made; or F

(b) The party against whom the award is invoked was not givenproper notice of the appointment of the Arbitrator or of the arbitralproceedings or was otherwise unable to present his case; or

(c) The award deals with a difference not contemplated by or notGfalling within the terms of the submission to arbitration, or it containsdecisions on matters beyond the scope of the submission toarbitration: Provided that, if the decisions on matters submitted toarbitration can be separated from those not so submitted, that part of the award which contains decisions on matters submittedto arbitration may be enforced; or (d) The composition of the arbitral authority or the arbitralprocedure was not in accordance with the agreement of the parties,or, failing such agreement, was not in accordance with the law ofthe country where the arbitration took place; or (e) The award has not yet become binding on the parties, or hasbeen set aside or suspended by a competent authority of thecountry in which, or under the law of which, that award wasmade.”

12. Admittedly, an authenticated copy of the arbitration agreementwas not placed on record by the Respondent at the time of filing of theapplication for enforcement. It is clear from the record that the Appellantplaced the arbitration agreement along with its reply and thereafter theRespondent also filed the original arbitration agreement in the Court.The submission made by the Appellant is that production of the arbitrationagreement at the time of filing of the application is mandatory, the non-compliance of which ought to have resulted in the dismissal of theapplication. The Appellant sought support for this submission from theword “shall” appearing in Section 47. We do not agree with the submissionmade by the learned counsel for the Appellant. We are of the opinionthat the word “shall” appearing in Section 47 of the Act relating to theproduction of the evidence as specified in the provision at the time ofapplication has to be read as “may”.

13. The word “shall” in its ordinary import is “obligatory”. Butthere are many decisions wherein the Courts under different situationsconstrued the word to mean “may”[1]. The scope and object of a Statuteare the only guides in determining whether its provisions are directory orimperative[2]. It is the duty of the Courts of Justice to try to get at the realintention of the Legislature by carefully attending to the whole scope ofthe statute to be construed[3].

14. The word “shall”, though prima facie gives an impression ofbeing of mandatory character, is required to be considered in light of 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.

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Aintention of the legislature by carefully attending to the scope of theStatute, its nature and design and the consequences that would flowfrom the construction thereof one way or the other. The Court is requiredto keep in mind the mischief that would ensue by the construction of theword “shall” as “may”. Whether the public convenience would be subserved or whether public inconvenience or general inconvenience mayBensue if it is held mandatory[4].

15. Section 46 of the Act makes a foreign award enforceableunder the Act as binding on the persons between whom it is made.Article III[5] of the New York Convention provides for recognition ofarbitral awards by each contracting State as binding. Enforcement ofCthe arbitral awards shall be in accordance with the rules and procedureof the territory where the award is sought to be enforced. Article IIIrestricts imposition of substantial onerous conditions for enforcement ofthe arbitral awards. Article IV[6] requires the party applying for recognitionand enforcement to file an authenticated original award or duly certified D

4 Mohan Singh v. International Airport Authority of India, (1997) 9 SCC 132.

5 Each Contracting State shall recognize arbitral awards as binding and enforce them inaccordance 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 imposedsubstantially more onerous conditions or higher fees or charges on the recognition orEenforcement of arbitral awards to which this Convention applies than are imposed onthe recognition or enforcement of domestic arbitral awards.

6 1. To obtain the recognition and enforcement mentioned in the preceding article, theparty 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 thesaid award or agreement is not made in an official language of the country in which theFaward is relied upon, the party applying for recognition and enforcement of the awardshall produce a translation of these documents into such language. The translation shallbe certified by an official or sworn translator or by a diplomatic or consular agent.

7 1. Each Contracting State shall recognize an agreement in writing under which theparties undertake to submit to arbitration all or any differences which have arisen orwhich may arise between them in respect of a defined legal relationship, whetherGcontractual 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 anarbitration agreement, signed by the parties or contained in an exchange of letters ortelegrams. 3. The court of a Contracting State, when seized of an action in a matter inrespect 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 findsthat the said agreement is null and void, inoperative or incapable of being performed.H

copy thereof and the original agreement referred to in Article II[7] or aduly certified copy thereof at the time of the application. It is relevant tomention that the word “shall” is employed in Article IV. The object andpurpose of the New York Convention as summarized by the Guide toInterpretation of the New York Convention issued by the InternationalCouncil for Commercial Arbitration is as follows:

“The Convention is based on a pro-enforcement bias. It facilitatesand safeguards the enforcement of arbitration agreements andarbitral awards and in doing so it serves international trade andcommerce. It provides an additional measure of commercialsecurity for parties entering into cross-border transactions”[8].

16. The object and purpose of the New York Convention is tofacilitate the recognition of the arbitration agreement within its purviewand the enforcement of the foreign arbitral awards. This object andpurpose must, in the first place, be seen in the light of enhancing theeffectiveness of the legal regime governing international commercialarbitration[9].

17. According to the ICCA Guide, the approach of the Court forenforcement should be having a strong pro enforcement bias, a pragmatic,flexible and non formalist approach. The Courts in several countrieshave been liberal in interpreting the formal requirements of Article IV ofthe New York Convention[10]. Excessive formalism in the matter ofenforcement of foreign awards has also been deprecated.

18. It is relevant to take note of the Preamble of the Act whereinit is mentioned that the United Nations Commission on International TradeLaw (UNCITRAL) has adopted the UNCITRAL Model law onInternational Commercial Arbitration (“Model Law”) in 1985 and thatthe Act is made taking into account the Model law and Rules. ChapterVIII of the Model Law governs the recognition and enforcement ofAwards. Article 35 (2)[11] provides that the party applying for enforcement 8 “ICCA’S Guide to the Interpretation of the 1958 New York Convention: A Handbookfor Judges” (2011) p. XI (hereinafter, ICCA Guide).

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 theoriginal award or a copy thereof. If the award is not made in an official language of thisState, the court may request the party to supply a translation thereof into such language.

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Aof the award shall supply the original award or a copy thereof. TheModel Law does not lay down procedural details of recognition andenforcement, which are left to national procedural laws and practices.However, Article 35 (2) was amended in 2006 to liberalise formalrequirements. Presentation of a copy of the arbitration agreement is nolonger required under Article 35 (2).B

19. The object of the New York Convention is smooth and swiftenforcement of foreign awards. Keeping in view the object and purposeof the New York Convention, we are of the view that the word “shall” inSection 47 of the Act has to be read as “may”. The opposite view thatit is obligatory for a party to file the arbitration agreement or the originalCaward or the evidence to prove that the award is a foreign award at thetime of filing the application would have the effect of stultifying theenforcement proceedings. The object of the New York Convention willbe defeated if the filing of the arbitration agreement at the time of filingthe application is made compulsory. At the initial stage of filing of anDapplication for enforcement, non-compliance of the production of thedocuments mentioned in Section 47 should not entail in dismissal of theapplication for enforcement of an award. The party seeking enforcementcan 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 theenforcement proceedings.E

20. It is relevant to note that there would be no prejudice causedto the party objecting to the enforcement of the Award by the non-filingof the arbitration agreement at the time of the application for enforcement.In addition, the requirement of filing a copy of the arbitration agreementunder the Model Law which was categorized as a formal requirementFwas dispensed with. Section 48 which refers to the grounds on whichthe enforcement of a foreign award may be refused does not include thenon-filing of the documents mentioned in Section 47. An application forenforcement of the foreign award can be rejected only on the groundsspecified in Section 48. This would also lend support to the view thatGthe requirement to produce documents mentioned in Section 47 at thetime 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 awardneed not necessarily produce before the Court a document mentioned H

therein “at the time of the application”. We make it clear that the saidinterpretation of the word “shall” as “may” is restricted only to the initialstage of the filing of the application and not thereafter. It is clear fromthe decisions relied upon by the counsel for the Appellant that Courts incertain jurisdictions have taken a strict view regarding the filing of thedocuments for enforcement of a foreign award. Courts in many otherjurisdictions have taken the opposite view that the application forenforcement of the foreign awards does not warrant rejection for non-filing of the relevant documents including the award and the arbitralagreement. We need not adjudicate on this issue as the subject matterof this case does not relate to the non-filing of the arbitration agreementduring the enforcement proceedings. There is no dispute that thearbitration agreement has been brought on record by both the parties.

22. The learned counsel for the Appellant also submitted that theAppellant did not sign the Charter Party and cannot be treated as aparty to the agreement. There is no dispute that the contract is governedby the English law under which there is no requirement for the CharterParty to be signed by the parties to make it binding. We have no doubtin approving the conclusion of the High Court on this point and rejectingthe submission made on behalf of the Appellant. Abundant materialwas examined by both the Arbitrator and the High Court to record afinding that there existed a valid arbitration agreement. Article II of theFirst Schedule of the Act defines arbitration agreement as including anarbitral clause in a contract or an arbitration agreement, signed by theparties or contained in an exchange of letters or telegrams. The HighCourt found that the Charter Party which contained the arbitrationagreement was agreed to and entered upon by the parties and the sameis supported by the correspondence between the parties. The term“agreement in writing” in Article II is very wide. An arbitral clauseneed not necessarily be found in a contract or an arbitral agreement. Itcan be included in the correspondence between the parties also. In thepresent case the arbitration agreement is found in the Charter Partywhich 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 onthis point.

23. Pursuant to our order dated 10.10.2007, the principal amountawarded by the arbitrator was deposited in this Court and reinvested A

B

C

D

E

F

G

H

Afrom time to time in fixed deposit. The amount lying in the bank shall bepaid to the respondent.

24. For the aforementioned reasons, the judgment of the HighCourt is upheld and the appeal is dismissed. No costs.

B

Kalpana K. Tripathy

Appeal dismissed.

C

D

E

F

G

H