1. Bharat Aluminium Co vs Kaiser Aluminium Technical on 6 September, 2012
Ria Tandon
B.A. LL.B, (Hons.)
Section- B

2. Index 1.Supreme Court Judgment in Bhatia Trading and Venture Global
2. Facts of the Case
3.Issues Involved
4. Observation of Issues Involved
5. Related Sections Dealt
6. Facts of the Case
7. Ratio Decindi
8. Implication of the Case
9. Amendment to Arbitration and Conciliation Act 2015
Conclusion

3. Supreme Court Judgment in Bhatia Trading and Venture Global
Bhatia International v/s Bulk Trading (2002) 4 SCC 105
The Supreme Court held that Part I of the Indian Arbitration and Conciliation Act 1996 applies to foreign awards passed by the International Commercial arbitration proceedings that are outside India. The Court observed that section 2(2) of the Indian Arbitration Act has not expressly or impliedly excluded the application of Part I with respect to International Commercial Arbitrations held outside India thus, Part I shall be applicable to International Commercial arbitration held outside India.

4. Continued…
Venture Global Engineering v/s Satyam Computers ( AIR 2008SC1061)
The Supreme Court in this case passed interim orders under Section 34 of Part I of the Act against the award passed in International Commercial Arbitration held outside India relying on Bhatia Trading Judgment.
Section 34 : Application for the setting Aside of Arbitral Tribunal
Application to be made based on the sub sec 2 and 3
When set aside (a) 1. Incapacity 2. Arbitration agreement not valid under the law of arbitration 3. Proper notice was not provided 4. the arbitral award does not deal with the dispute related to arbitration 5. The composition of the Arbitral tribunal is not in accordance with the arbitration arbitration agreement.
b. 1. Subject Matter is such that it cannot be dealt by law 2. Arbitral award is in conflict with the public policy

5. Main Sections Involved
Part I
Section 2 : Definition
Section 9 and Order 39 of Code of Civil Procedure (interim injunction
Section 34: Setting Aide of the Arbitral Award
Part II
Section 44- Foreign Award/ Section 3 of Foreign Awards (recognition and enforcement) Act 1961
Section 48: Condition for the enforcement of
Section 49: Enforcement of foreign Award
Section 53 Interpretation
Section 57 : Enforcement of Foreign Award
Conventions Referred: New York and Geneva
Section 44: Foreign Award
It is the Verbatim reproduction of Section 2 of the Foreign Awards ( Recognition and Enforcement ) Act , Foreign Award means an arbitral award on differences between persons arising out of legal relationship , whether contractual or not, which are considered commercial under the law in force in India, made on or after 11th October, Thus Foreign Award: 1. Parties are national of Foreign Country 2. Subject-matter of arbitration is international in Character 3. Award is made in foreign Country.

6. Facts of the Case
That on 22nd April, 1993 : An agreement was executed between BALCO (herein referred as appellant) and Kaiser (herein referred as respondent) as per which Kaiser had to supply and install computer system at one of the appellant’s premises.
That as per arbitration clause in the Agreement it stated that if any dispute arises in future then it will be settled as per the English Arbitration law and the venue for the same Shall be London but the agreement was to be governed by Indian Law.
That a dispute arose between the appellant and the respondent with respect to the performance of agreement and matter was referred to arbitration in England.

7. Section 34: Application for the Setting Aside arbitral award.
Continued..
That a Dispute had arise and it was referred for arbitration in England. The Arbitral tribunal had passed two awards in England .
That the Appellant filed the application under the section 34 of the Indian Arbitration Act for the setting aside of these awards in the district court of Bilaspur .The District court and the High Court of Chattisgarh refused for the setting aside of the awards thus, the appellant filed an appeal against the said order in the Supreme Court of India
That another issue was raised in the case of Bharti Shipyard Ltd. v/s Ferrostaal AG & Anr. ( clubbed together with the above petition for hearing in the Supreme Court) with respect to Section 9 (interim measures) of the Act. The Parties earlier agreed to get the dispute settled through ICC but subsequently agreed to go for arbitration under the Rules of London Maritime Arbitrators Association , in London in 2010.
Section 34 : Application for setting aside arbitral award
(1) Recourse to a Court against an arbitral award may be made only by an application for setting aside such award in accordance with sub-section (2) and sub-section (3).
(2) An arbitral award may be set aside by the Court only if—(a) the party making the application furnishes proof that—(i) a party was under some incapacity, or
(ii) the arbitration agreement is not valid under the law to which the parties have subjected it or, failing any indication thereon, under the law for the time being in force; or
(iii) the party making the application was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings or was otherwise unable to present his case; or
(iv) the arbitral award deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration, or it contains decisions on matters beyond the scope of the submission to arbitration:
Provided that, if the decisions on matters submitted to arbitration can be separated from those not so submitted, only that part of the arbitral award which contains decisions on matters not submitted to arbitration may be set aside; or(v) the composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties, unless such agreement was in conflict with a provision of this Part from which the parties cannot derogate, or, failing such agreement, was not in accordance with this Part; or
(b) the Court finds that—(i) the subject-matter of the dispute is not capable of settlement by arbitration under the law for the time being in force, or
(ii) the arbitral award is in conflict with the public policy of India.
Explanation. —Without prejudice to the generality of sub-clause (ii) it is hereby declared, for the avoidance of any doubt, that an award is in conflict with the public policy of India if the making of the award was induced or affected by fraud or corruption or was in violation of section 75 or section 81.
(3) An application for setting aside may not be made after three months have elapsed from the date on which the party making that application had received the arbitral award or, if a request had been made under section 33, from the date on which that request had been disposed of by the arbitral tribunal: Provided that if the Court is satisfied that the applicant was prevented by sufficient cause from making the application within the said period of three months it may entertain the application within a further period of thirty days, but not thereafter.
(4) On receipt of an application under sub-section (1), the Court may, where it is appropriate and it is so requested by a party, adjourn the proceedings for a period of time determined by it in order to give the arbitral tribunal an opportunity to resume the arbitral proceedings or to take such other action as in the opinion of arbitral tribunal will eliminate the grounds for setting aside the arbitral award.

8. Continued..
During the pendency of the arbitration proceeding in London , an injunction application was made by Bharti Shipyard Ltd (appellant) , before the District judge at Manglore ( encashment of refund bank guarantees issued under the contract). The Application was allowed and was consequently challenged in the High Court of Banglore. The Banglore High Court had set aside the application ( since the alternative remedy of relief was available for international arbitration ) in the courts of London and also because the substantive as well as the arbitration agreement talked about the English Law.
The appeal was filed by Bharat Aluminium Co. Before the division bench of the Supreme Court was placed for hearing before the three Judge Bench, wherein one of the judge in the Division Bench had found the judgment in Bhatia International and Venture Global was unsound and the other judges dissented from his views.

9. Issues Involved
1. Whether omission of the word "only" would show that provisions of the Act had not accepted territorial principle?
2. Whether Section 2(2) of the Act was in conflict with Sections 2(4) and 2(5) of Act?
3. Whether Part I of the Act applied only to arbitrations having their seat / place in India?
.4. Whether limiting the applicability of Part I of the Act to arbitrations that take place in India would leave many parties remediless in a number of situations?
5. Whether there was overlapping or intermingling of provisions contained in Part I with provisions contained in Part II of Act?
6. Whether Section 9 of the Act would be applicable to international commercial arbitration held outside India?

10. Observation of Issues Involved
1. The word “only” from the Section 2(2) of the Arbitration Act has been omitted even though it is present in Article 1(2) of UNCITRAL Model Law. Court opined that word “only” is not of importance since the exception have not been included and even other countries have dropped the word only (e.g- Section 2(1) of UK’s Act and Swiss Private International Act Article 176 ).
2. Supreme Court opined that Sec 2(4) and 2(5) have to read along with Section 2(2) that is the whole chapter should be read rather than as stand alone and nowhere section 2(5) states that it will not apply to the arbitration held in India.

11. Continues…
3. Court opined that a distinction was between the domestic award under Part I of the Act and the Foreign award under Part II of the Act which was the object of section 2(7). Thus arbitration happening in India whether International will be domestic in nature because of Section 2(2) [place of arbitration is India] and Section 2 (7) [Arbitral Awards made under Part I will be domestic award].When arbitration outside India then it is foreign award as per Section 44 and Section 53.
4. The parties in question agreed that contracts were to be governed by Indian Law as their proper law and that disputes should be determined by arbitration in London.
5.The Arbitration Act, 1996 accepted the territoriality principle, which was adopted in the UNCITRAL Model Law and Section 2(2) 2(7) of Act made the declaration that Part I of Act should apply to all arbitrations that took place within India .

12. Continued…
6.No interim relief u/s 9 of the Act or Order 39 of the CPC, pertaining to injunction and interim reliefs, would be available where the seat of arbitration is outside India. Since there was a clear intention of the Parliament to keep the power of the Indian Courts confined to the International Commercial Arbitration which takes place inside India.

13. Ratio Decindi
1. Part I of the said Act is applicable only to all arbitrations which take place within the territory of India
2. There is no overlapping between the provisions which is contained in Part I and Part II of the said Act.
3. Section 2(2) of Part I of the said Act is not in Conflict with any provisions of Part I and Part II of the Act.
4. In an International Commercial Arbitration which is held outside India, no application of interim relief would be maintained as applicability of Part I of the said Act is limited to arbitration which takes place in India.
5. No suit for Interim injunction would be maintainable in India on the basis of International Commercial Arbitration held outside India.

14. Supreme Court’s Decision
The judgment basically deals with the provisions of various section in the Act and the applicability of Part I to the International Commercial Arbitration . The important observations made are as follow:
1. Part I and Part II of the Act are applicable to different fields. Part I is applicable to all domestic rendered arbitration (No foreign party or foreign parties but held in India : basically the seat of Arbitration and the International Commercial Arbitration proceeding that is held in India).
3. The territoriality principle of Model law upon which the Indian arbitration Act 1996 has been enacted has been enshrined in the Indian Arbitration Act.
5. Part I applies to all the arbitration proceeding that held in India and this also extends to the arbitration proceedings that are held under the statutory legislation that isn’t force in India.
2. Part II of the Act applies only to enforcement of the foreign awards in India.
4. All the provisions of Part I [ Sec 1,2 (4) ,2(5),2(7)] reinforces that Part I shall be applicable to all arbitration held in India and cannot for the purpose of interpretation be extended to international commercial arbitration which is held outside India.
6. It was observed that in Section 2(7) of the Act, it distinguishes the “domestic award “(Part I) from the and “ foreign award “ rendered in India.

15. Continued…
7. The Choice of the country as the seat of arbitration inevitably imports an acceptance that law of that country shall be applicable to the arbitration proceedings. “Seat” of arbitration and place of arbitration are used interchanging but the seat shall remain the place mentioned in arbitration agreement. Parties of different nations are involved in international commercial arbitration and hence the venue for arbitration might change but the seat shall remain same.
9. Part I of the Act “shall” not be applicable to non-convention arbitral award. The definition of foreign awards has been intentionally been limited to New York Convention and Geneva thus there is no provision in the Act . Thus it cannot be incorporated in the Act and incorporation is only possible by the amendment.
13. Seat of the arbitration shall have the upper hand when it comes to the ruling provision the whole agreement
8. Section 48 of Part II does not confer jurisdiction of two courts to annul the award and does not ipso facto confer any jurisdiction on the two courts to annul the award that is made outside India. The act does not provide for conferment of jurisdiction on Indian Court to set aside award outside India.
10. The arbitral awards awarded in international commercial arbitration with seat of arbitration outside India shall be subject to jurisdiction of Indian courts only when are sought to be enforced in India in accordance to that of Part II of the Act.
12. Many judgments have been delivered by relying onto the case of Bhatia trading case and thus the said judgment shall be applicable (prospectively) on all arbitration agreements executed post the date of 6the September ,2012.

16. Implications
This Judgment “shall” be applicable prospectively (i.e to all the arbitration agreements executed after 6th September, 2012).
As a result of this judgment, the seat of arbitration has now gained paramount importance for determining the applicability of Part I of the Act.
This Judgment also draws a distinction between the seat of arbitration and place of arbitration, that some proceedings themselves may be conducted in other territories as may be convenient to all.
This judgment also ensures that foreign award ( an award which is passed outside India) can no longer be challenged by an Indian entity under section 34 of the Act and that the party which seeks to resist the enforcement of the award has to prove one or more grounds set out in Section 48 of the Act.
Section 48:

17. Continued..
5. No interim relief under section 9 of the Act or Order 39 of the Code of Civil Procedure ( both dealing with injunction) would be available where the seat of arbitration is outside India. As interim orders from foreign courts and arbitration tribunals are not enforceable in India such a situation would leave foreign parties with no remedies.

18. Indian Arbitration and Conciliation Act 2015
The Highlights are as follows:
International Commercial Arbitration will now be dealt by the High Court.
When Place of Arbitration is not in India
Sec 9 : Which deals with interim measures by the Court
Sec 27 : It deals with Court assistance in Taking Evidence
Sec 37 : Second Appeal
3. Under Sec 9 the arbitral proceeding must commence within 90 days

19. Conclusion: Status Quo
The Seat of Arbitration will have an upper hand or more importance than the venue or the governing Law when stated in the Arbitration agreement.
“Even if” the arbitration agreement is found or held to provide for a Seat outside India wherein the governing law is stated to be India . Indian courts cannot exercise the controlling or the supervisory function. Now Part I will also apply to the arbitration which takes place outside India.
The new proposed amendment to the Act , Law Commission report stated that the Part I of the Act , such as section 9 (interim injunction), section 27 (court assistance for evidence) will remain available to the parties in the Foreign Seated Arbitration. Seat is now considered to juridical seat of Arbitration.

20. Thank you !!