Bharat Aluminium Co. v. Kaiser Aluminium Technical Services Inc.
"Part I of the Arbitration and Conciliation Act, 1996 applies only to arbitrations seated in India; the courts of the seat have exclusive supervisory jurisdiction, so an award made in a foreign-seated arbitration cannot be challenged under Section 34 in India, a rule applied to arbitration agreements made after 6 September 2012."
Issues Before the Court
- (i)
Whether Part I of the Arbitration and Conciliation Act, 1996, including the power to set aside an award under Section 34 and to grant interim measures under Section 9, applies to arbitrations seated outside India?
- (ii)
Whether Bhatia International v. Bulk Trading S.A., which held that Part I applies to foreign-seated arbitrations unless the parties exclude it, was correctly decided?
Law & Rules Applicable
- (i)
Arbitration and Conciliation Act, 1996, Section 2(2) (Part I applies where the place of arbitration is in India), Sections 9 and 34, and Part II (enforcement of foreign awards under the New York Convention).
- (ii)
The territorial principle of the UNCITRAL Model Law on International Commercial Arbitration, on which the Act is based.
Application to Facts & Circumstances
Under a 1993 agreement for the supply and installation of a computer-based system at BALCO's plant at Korba, disputes were to be arbitrated in London under English arbitration law, although the contract itself was governed by Indian law. Awards were made in England in 2002. BALCO applied to the District Court, Bilaspur under Section 34 to set them aside; the applications were dismissed as not maintainable, and the Chhattisgarh High Court agreed. In appeal, the correctness of Bhatia International was referred to a Constitution Bench.
Writing for the Constitution Bench, Nijjar J. held that the Act adopts the territorial principle of the Model Law. Section 2(2) confines Part I to arbitrations that take place in India; the absence of the word 'only' does not extend it to arbitrations seated abroad. The seat is the centre of gravity of the arbitration, and the courts of the seat alone exercise supervisory jurisdiction over it.
Consequently, an award made in a foreign-seated arbitration cannot be challenged under Section 34 in India; it can be resisted only when its enforcement is sought under Part II. Indian courts cannot grant interim measures under Section 9 in such arbitrations, and a civil suit seeking only an interim injunction in aid of a foreign arbitration is not maintainable, since it claims no substantive relief.
Bhatia International and Venture Global Engineering v. Satyam Computer Services Ltd., which had applied Part I to foreign-seated arbitrations and allowed foreign awards to be challenged in India, were overruled.
Conclusion & Ruling
- (i)
Part I of the Act, including Sections 9 and 34, does not apply to arbitrations seated outside India; foreign awards are subject only to the enforcement regime in Part II.
- (ii)
To avoid upsetting settled arrangements, the law declared was made to apply prospectively, to arbitration agreements executed after the date of the judgment (6 September 2012); earlier agreements remained governed by Bhatia International.
- (iii)
Parliament later added a proviso to Section 2(2) by the 2015 amendment, allowing Indian courts to grant interim measures and assistance in taking evidence (Sections 9 and 27, with the related appeal under Section 37) in foreign-seated arbitrations, unless the parties agree otherwise.
Authorities Cited
Full texts open on Indian Kanoon in a new tab.
- Bhatia International v. Bulk Trading S.A., (2002) 4 SCC 105Full text of Bhatia International v. Bulk Trading S.A. on Indian Kanoon
- Venture Global Engineering v. Satyam Computer Services Ltd., (2008) 4 SCC 190 : AIR 2008 SC 1061Full text of Venture Global Engineering v. Satyam Computer Services Ltd. on Indian Kanoon