P.E.C. Limited Through Its General Manager vs Austbulk Shipping Sdn Bhd

P.E.C. LIMITED .... Appellant Versus

AUSTBULK SHIPPING SDN BHD ….Respondent

JUDGMENT

L. NAGESWARA RAO, J.

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:

Signature Not Verified

“Box 8 Digitally signed by CHARANJEET KAUR Discharge Port(s) or Place (s) Date: 2019.01.19 12:06:41 IST Reason:

“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”.

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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 three-

monthly 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

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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 application 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

11 counsel for the 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 III 5 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 SCC132 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

17 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

18 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.

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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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