Austbulk Shipping Sdn Bhd vs P.E.C. Limited on 18 February, 2005

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IN THE SUPREME COURT OF INDIA

P.E.C Limited. v. Austbulk Shipping Sdn Bhd

[civil appeal no. 4834 of 2007]

dated: 14.11.2018

Bench - Mukundakam Sharma, J.

FACTS

The Appeal was filed against the Delhi High Court order dated 18.02.2005. The order was in the favor of an enforcement petition of AUSTBULK SHIPPING SDN BHD (the Respondent) regarding a Foreign Arbitral award dated 30.05.2001. In the present case, P.E.C Limited (the Appellant) had chartered a bulk carrier from the Respondent for transportation of certain quantity of chickpeas in bulk from Geraldton Port, Australia to Jawahar Lal Nehru Port, India (JNPT). The Respondent invoked arbitration after certain disputes reared up between the parties on the issue of final freight amount to be paid by the Appellant. While the Respondent filed its claim and supporting documents before the Ld. Arbitrator, the Appellant submitted a brief response contending that the Appellant did not sign the Charter Party and they did not agree for arbitration by London Maritime Arbitration Association. The Arbitrator proceeded with the Arbitration proceedings and finally awarded USD 150,362.18 to the Respondent with interest @8% per annum compounded at three-monthly intervals from 1st July, 2000 till the date of payment by the order dated 30.05.2001. The Respondent filed a petition for enforcement of the said award in Delhi High Court and the Appellant filed its objections to the enforcement petition. 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 Arbitration agreement being filed at the time of presentation of the application. The High Court took the view that there was substantial compliance with the provisions of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as the "Act") as the certified copy of the arbitration agreement was placed on record by both the parties. According to the Honorable 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. The High Court also rejected the submissions made on behalf of the Appellant that there was no arbitration agreement. For this, the High Court referred to the discussion & findings of the Arbitrator and analyzed the correspondence exchanged between the parties and the relevant material placed on record. The Supreme Court had issued a notice in this appeal and had subsequently stayed the proceeding on 29.08.2005. The present appeal was heard and decided by Supreme Court bench comprising of J. A.M Khanwilkar and J. L. Nageswara Rao.

ISSUES BEFORE SC

Two issues were for consideration before the Court

&

FIRST ISSUE For determining the 1st issue, the Honourable Supreme Court referred to Section 47 of the Act which postulates that: "......the party applying for the enforcement of a foreign award "shall" produce before the Court at the time of application the following: The original award or a copy thereof, duly authenticated in the manner required by the law of the country in which it was made;

In response to the contention of the Appellant that the "production of the arbitration agreement at the time of filing of the award is mandatory, the non-compliance of which ought to have resulted in the dismissal of the application", the Court observed 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". In the light of above observation, the Court has also referred to Article II, III and IV of the New York Convention, ICCA Guide and UNCITRAL Model Law on International Commercial Arbitration and observed that the scheme of the Act also provides for a 'smooth' and 'swift' enforcement of foreign awards. The Court observed that no prejudice would be 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. Further, the Court also observed that 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, and an application for enforcement of the foreign award can be rejected only on the grounds specified in Section 48.

SECOND ISSUE For determining the 2nd issue, the Supreme Court observed that: "There is no dispute that the contract is governed by the English law under which there is no requirement for the Charter Party to be signed by the parties to make it binding." Supreme Court also noted that: "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."

CONCLUDING VIEW

The Supreme Court upheld the judgment of the High Court and dismissed the appeal with the observation that: "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 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."

However, the Court also made it clear:

"Reading the word "shall" in Section 47 of the Act as "may" would only mean that a party applying for enforcement of the award need not necessarily produce before the Court a document mentioned therein "at the time of the application". We make it clear that the said interpretation of the word "shall" as "may" is restricted only to the initial stage of the filing of the application and not thereafter"

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