Annual Arbitration Review 2018

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

Reading Time: 3 minutes

Citation:2018 SCC OnLine SC 2549

Court:Supreme Court of India

Coram:  J. A.M. Khanwlkar and J. L. Nageshwar Rao.

Date of Judgment: 14-November-2018.

Issue: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?

Facts:

The Appellants (P.E.C) had entered into a Charter Party Agreement with the Respondents (Austbulk Shipping) to transport certain goods from Australia to India, and the agreement contained an Arbitration clause in it. There was a change made in the port of delivery from Delhi to Mumbai by the Appellants and they had agreed to indemnify the Respondents any loss or charges that would be incurred. The charges were not paid by the Appellants and hence Arbitration was invoked by the Respondent. Subsequently, an award was passed and the same was filed in the High Court for the enforcement of the award. There was a contention raised regarding the maintainability of the suit, because as per the three requirements of section 47 of the Arbitration Act while filing the enforcement suit the original arbitration agreement also needs to be filed and in this case it was filed on a later date. The High Court in its judgment stated that, “Re-filing of the Petition after curing defects is not barred by any law.” Later the execution was stayed by the Supreme Court.

Analysis:

The contentions made by PEC were as follows- i. As per Section 47 of the Arbitration and the Conciliation Act, 1996, it was mandatory for a party to produce the original arbitration agreement at the time of filing an enforcement suit. ii. Such applications ought to be dismissed in which there were no original documents produced at the time of filing and lastly there was no charter party agreement between the parties.

The Court rejected P.E.C contentions and stated that the word ‘shall’ in section 47 of the Act gives it a mandatory nature of requirements that ought to be done before filing or else the enforcement suit needs to be dismissed. But the word ‘shall’ should be interpreted as ‘may’ keeping in mind the legislative intent and the scope of the Act.

 

 

There was a reference also made to various Articles of the New York Convention.

  1. The Court referred to Article 3 of the Convention which states that restricts imposing of onerous conditions for the enforcement of arbitral awards and also mandates each contracting state to recognize the arbitral awards.
  2. The Court also lays emphasis on Article 4 of the Convention which also states that at the time of application for enforcement of an award the parties ‘shall’ produce the original arbitration agreement. But the court here also plays emphasis on the object and the role of the New York Convention issued by the International Council for Commercial Arbitration which is to ease the practice of International arbitration and also to facilitate the recognition and enforcement of arbitral awards. Hence the word ‘shall’ may be read as ‘may’.

The Court also looked over the UNCITRAL Model Law, in which Article 35(2) under chapter VIII, mandates supplying of an original arbitration award or a copy thereof. There were no procedural requirements laid down by this model for enforcement of awards and was left open for national laws and procedures. But, an amendment in the year 2006, removed the requirement of initial filing an arbitration agreement for the enforcement of an award.

Judgment:

The Supreme Court hence stated that the word ‘shall’ under section 47 of the Arbitration Act should be read as ‘may’ but this is only the case in the initial stages of filing of the case for enforcement and not thereafter.

Please follow and like us:

Leave a Reply

Your email address will not be published. Required fields are marked *

Enjoy this blog? Please spread the word :)