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P.E.C. Limited Vs. Austbulk Shipping SDN BHD - (Supreme Court) (14 Nov 2018)

At initial stage of filing of an application for enforcement, non-compliance of production of documents should not entail in dismissal of application



In present matter, the judgment of the High Court directing enforcement and execution of a foreign award is challenged. The High Court rejected the submissions made on behalf of the Appellant that, there was no arbitration agreement. Issue raised in present matter is whether an application for enforcement under Section 47 of the Arbitration and Conciliation Act, 1996 is liable to be dismissed if it is not accompanied by the arbitration agreement and that, whether there is a valid arbitration agreement between the parties and what is the effect of a party not signing the Charter Party.

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, Supreme Court is of the view that, the word "shall" in Section 47 of the Act has to be read as "may". At the initial stage of filing of an application for enforcement, non-compliance of the production of the documents mentioned in Section 47 of Act 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.

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 of Act. An application for enforcement of the foreign award can be rejected only on the grounds specified in Section 48 of Foreign Awards (Recognition and Enforcement) Act, 1961. The requirement to produce documents mentioned in Section 47 at the time of application was not intended to be mandatory.

Further, 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. The judgment of the High Court is upheld and the appeal is dismissed.


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