Arbitration and Conciliation Act, 1996:
ss.44, 46, 47 and 48 – Foreign award – Enforcement and 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 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 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 – 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 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). Arbitration:
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:
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 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:
‘Foreign award’ – Meaning of, in the context of Arbitration and 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 award made in pursuance of an agreement in writing for arbitration, to which the Convention on the Recognition & Enforcement of 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 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 (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 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 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 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]
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 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]
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 to be enforced. Article III restricts imposition of substantial onerous conditions for enforcement of the arbitral awards. Article 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; 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 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 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 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, 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]
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 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 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 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. 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 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 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. There is no reason to differ 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 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.
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; ICCA’S Guide to the Interpretation of the 1958 New York Convention: A Handbook for Judges” (2011) p. XI – referred to.
As published in the Supreme Court Reports, Supreme Court of India. Text from the Indian Supreme Court Judgments open data set (Dattam Labs), CC BY 4.0.
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