Holding

Section 47’s requirement to produce the arbitration agreement is directory, not mandatory; the word “shall” is to be read as “may”, and an unsigned charter party can still constitute a valid arbitration agreement under English law.

Summary

P.E.C. Limited chartered a vessel from Austbulk Shipping and a dispute arose over freight and demurrage. The parties had an arbitration clause in the charter party, and a sole arbitrator awarded US$150,362.18 to Austbulk. P.E.C. filed a petition for enforcement of the foreign award in the Delhi High Court, objecting that the arbitration agreement had not been filed at the time of the application, that the charter party was unsigned, and that the award was not a valid foreign award. The High Court dismissed the objections and ordered enforcement. On appeal, the Supreme Court held that Section 47 of the Arbitration and Conciliation Act, 1996 does not make the production of the arbitration agreement at the time of filing mandatory; the word “shall” must be read as “may” in view of the New York Convention and the Model Law. The Court also affirmed that under English law a charter party need not be signed to create a binding arbitration agreement. Consequently, the High Court’s order was upheld and the appeal dismissed.

Issues considered

Whether non‑production of the arbitration agreement at the time of filing an application under Section 47 of the Arbitration and Conciliation Act, 1996 warrants dismissal of the enforcement petition.
Whether a valid arbitration agreement exists when the charter party is not signed, under English law.
Interpretation of the word “shall” in Section 47 in light of the New York Convention and the UNCITRAL Model Law.

Legislation cited

Arbitration and Conciliation Act, 1996s. 44, s. 46, s. 47, s. 48
Foreign Awards (Recognition and Enforcement) Act, 1961

Subjects

ArbitrationForeign award enforcementSection 47Arbitration agreementNew York ConventionUNCITRAL Model LawCharter partyEnglish lawPro‑enforcement bias

Judgment

830 [2018] REPORTS
SUPREME COURT 13 S.C.R. 830 [2018] 13 S.C.R.

A 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 and
C execution of – Charter Party between appellant and respondent –
Dispute as regards payment of freight by appellant to respondent –
Respondent appointed its nominated Arbitrator – Appellant failed
to appoint its Arbitrator within stipulated time – The sole Arbitrator
awarded the freight as demanded by the respondent with interest @
8% P.A. – Petition for enforcement of the Award filed before High
D
Court in India – Objection by the appellant as to maintainability of
the petition on the ground that authenticated copy of the original
agreement was not filed at the time of presentation of the application;
that there was no arbitration agreement as the Charter Party was
not signed by the appellant; and that award was not a valid foreign
E award – High Court rejecting the objections, directed enforcement
and execution of the award – On appeal, Held: Production of the
arbitration agreement at the time of filing the application is not
mandatory – Article 35(2) of UNCITRAL Model Law on International
Commercial Arbitration (on the basis of which the Act is made) does
not provide for presentation of the copy of the arbitration agreement
F
– The object of New York convention is smooth and swift enforcement
of foreign awards – Keeping in view the object and purpose of New
York Convention, the word ‘shall’ in s. 47 of the Act has to be read
as ‘may’ – Therefore, signing of Charter Party is not necessary to
make it binding as the English Law (by which the contract is
G governed) there is no such requirement – United Nations Commission
International Trade Law (UNCITRAL) – UNICITRAL Model Law
on International Commercial Arbitration – Article 35(2) –
Convention on the Recognition and Enforcement of Foreign
Arbitration Awards, 1958 (New York Convention).
H
830
P.E.C. LIMITED v. AUSTBULK SHIPPING SDN BHD 831

Arbitration: A
Arbitral clause – Incorporation of – Held: Arbitral clause
need not be found in a contract or an arbitral agreement – It can
be included in the correspondence between the parties.
Interpretation of Statutes:
B
Provisions of statute – Whether directory or mandatory/
imperative – Determination of – Held: The scope and object of a
statute are the only guides in determining whether its provisions are
directory of imperative – It is duty of the court to get the real intention
of the legislature – The word “shall” though prima facie gives an
impression of being of mandatory character, is required to be C
considered in the light of the intention of the legislature by carefully
attending to the scope of the statute, its nature and design and
consequences that would flow from the construction thereof –
Legislative Intent.
Words and Phrases: D
‘Foreign award’ – Meaning of, in the context of Arbitration
and Conciliation Act, 1996.
‘Arbitration agreement’ – Meaning of.
‘Shall’ – Interpretation of. E
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 award
made in pursuance of an agreement in writing for arbitration, to
which the Convention on the Recognition & Enforcement of F
Foreign Arbitration Awards, 1958 (“New York Convention”) set
forth 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 party
applying for the enforcement of a foreign award, “shall” produce G
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,
H
832 SUPREME COURT REPORTS [2018] 13 S.C.R.

A and (c) Such evidence as may be necessary to prove that the
award is a foreign award.” [Para 10][840-C-D]
1.3 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
B 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. It is not correct that
in view of word ‘shall’ appearing in s. 47, production of the
arbitration agreement at the time of filing of the award is
mandatory. The word “shall” appearing in Section 47 of the Act
C relating to the production of the evidence as specified in the
provision 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 to
D mean “may”. The scope and object of a statute are the only
guides in determining whether its provisions are directory or
imperative. 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 construed. [Para 13][841-F]
E 1.5 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
F 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 public convenience would be sub served
or whether public inconvenience or general inconvenience may
ensue if it is held mandatory. [Para 14][841-G; 842-A-B]

G 1.6 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 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
H to be enforced. Article III restricts imposition of substantial
P.E.C. LIMITED v. AUSTBULK SHIPPING SDN BHD 833

onerous conditions for enforcement of the arbitral awards. Article A
IV requires the party applying for recognition and enforcement
to file an authenticated original award or duly certified copy
thereof and the original agreement referred to in Article II or a
duly certified copy thereof at the time of the application. The
word “shall” is employed in Article IV. [Para 15][842-C-D;
B
843-A-B]
1.7 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 the legal regime governing C
international commercial arbitration. [Para 16][843-C-D]
1.8 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 D
of the New York Convention. Excessive formalism in the matter
of enforcement of foreign awards has also been deprecated.
[Para 17][843-E]
1.9 The object of the New York Convention is smooth and
swift enforcement of foreign awards. Keeping in view the object E
and purpose of the New York Convention, the word “shall” in
Section 47 of the Act has to be read as “may”. 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, F
non-compliance of the production of the documents mentioned
in Section 47 should not entail in dismissal of the application for
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. [Para 19][844-B-E] G
1.10 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
H
834 SUPREME COURT REPORTS [2018] 13 S.C.R.

A 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) provides that the party
applying for enforcement of the award shall supply the original
award or a copy thereof. The Model Law does not lay down
procedural details of recognition and enforcement, which are left
B
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). [Para 18][843-F; 844-A-B]
1.11 Section 48 which refers to the grounds on which the
C 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
D mentioned in Section 47 at the time of application was not intended
to be mandatory. 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. [Paras 20, 21][844-F-G; 845-A]
2. There is no dispute that the contract is governed by the
E English law under which there is no requirement for the Charter
Party to be signed by the parties to make it binding. 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
F 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
G “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. There is no reason to differ
H
P.E.C. LIMITED v. AUSTBULK SHIPPING SDN BHD 835

from the view taken by the High Court on this point. A
[Para 22][845-D-G]
Rani Drig Raj Kuer v. Raja Sri Amar Krishna Narain
Singh, [1960] 2 SCR 431; Mohan Singh v. International
Airport Authority of India (1997) 9 SCC 132 : [1996] 8
Suppl. SCR 569 – relied on. B
Dardana Limited v. Yukos Oil Company [2002] 1 ALL
ER (Comm.) 819; Caldow v. Pixwell (1876) 2 C.P.D.
562 – referred to.
The New York Arbitration Convention of 1958 by
Albert van den Berg; Crates on Statute Law, 5th Edition; C
ICCA’S Guide to the Interpretation of the 1958 New
York Convention: A Handbook for Judges” (2011) p.
XI – referred to.
Case Law Reference
D
[1960] 2 SCR 431 relied on Para 13
[1996] 8 Suppl. SCR 569 relied on Para 13
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 4834
of 2007
From the Judgment and Order dated 18.02.2005 of the High Court E
of Delhi at New Delhi in Execution Petition No. 195 of 2002
Garvesh Kabra, Amit Singh, Mrs. Pooja Kabra, Mrs. Maithili
Shubhangi, Ravi Prakash Mehrotra, Advs. for the Appellant.
Manoj Kr. Khanna, M. K. Singh, R. K. Khanna,, Advs for the F
Respondent.
The Judgment of the Court was delivered by
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 G
“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:
H
836 SUPREME COURT REPORTS [2018] 13 S.C.R.

A “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.”
B 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
C working day not to count.”
Box 19
Demurrage and Despatch Rate of Load (Cl.16)
“USD 4,000 PD PR/half dispatch”
D Box 23
Demurrage and Despatch Rate at Discharge (Cl.27)
“USD 5,000 PD PR/half dispatch”
Box 24
E
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.”
F 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
G 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
H
P.E.C. LIMITED v. AUSTBULK SHIPPING SDN BHD 837
[L. NAGESWARA RAO, J.]

“Cargo is to be discharged free of expense to the Respondent at A
the average rate set out in Box 24”.
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 B
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 C
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 D
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 account showed that the Appellant had to pay the Respondent
US $150,362.18.
E
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 F
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, G
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 H
838 SUPREME COURT REPORTS [2018] 13 S.C.R.

A arbitration 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
B
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
C 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.
D 5. The Respondent filed a petition for enforcement of the award
dated 30.05.2001 passed by the sole Arbitrator 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
E 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
F 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
G 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 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
H with the application, the adjudicating forum has an obligation to return
P.E.C. LIMITED v. AUSTBULK SHIPPING SDN BHD 839
[L. NAGESWARA RAO, J.]

the same for compliance with the requirements of the Act. Re-filing of A
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 B
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 C
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 Court. He referred to
Part II of the Act and took us through the various provisions. He D
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 E
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 F
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
a) Whether an application for enforcement under Section 47 G
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? H
840 SUPREME COURT REPORTS [2018] 13 S.C.R.

A 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
B
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
C made;
(b) The original agreement for arbitration or a duly certified copy
thereof, and
(c) Such evidence as may be necessary to prove that the award
D 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,
E 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
F 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
G 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

H
P.E.C. LIMITED v. AUSTBULK SHIPPING SDN BHD 841
[L. NAGESWARA RAO, J.]

part of the award which contains decisions on matters submitted A
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 B
(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 C
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 D
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 counsel for the Appellant. We are of the opinion
that the word “shall” appearing in Section 47 of the Act relating to the E
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 F
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 G
being 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, 5 th Edition. H
842 SUPREME COURT REPORTS [2018] 13 S.C.R.

A 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 public convenience would be sub
served or whether public inconvenience or general inconvenience may
B
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
C 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
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 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
E 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
F 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.
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
G 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.
H
P.E.C. LIMITED v. AUSTBULK SHIPPING SDN BHD 843
[L. NAGESWARA RAO, J.]

copy thereof and the original agreement referred to in Article II7 or a 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:
B
“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.
C
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 the legal regime governing international commercial
arbitration9. D

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 E
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 F
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

8
“ICCA’S Guide to the Interpretation of the 1958 New York Convention: A Handbook G
for 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 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. H
844 SUPREME COURT REPORTS [2018] 13 S.C.R.

A of the award shall supply 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).
B
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
C 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
D application for enforcement, non-compliance of the production of the
documents mentioned in Section 47 should not entail in dismissal of the
application for 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.
E
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
F 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
G 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
H
P.E.C. LIMITED v. AUSTBULK SHIPPING SDN BHD 845
[L. NAGESWARA RAO, J.]

therein “at the time of the application”. We make it clear that the said A
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
B
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 C
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 D
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 E
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 F
“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 G
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

H
846 SUPREME COURT REPORTS [2018] 13 S.C.R.

A 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.

B
Kalpana K. Tripathy Appeal dismissed.

C

D

E

F

G

H