The Supreme Court of India overruled Bhatia International and Venture Global by its decision in Bharat Aluminum Co. dated 6th September 2012.
Substantial part of the judgment debates the omission of the word "only" in section 2 (2) of The Arbitration and Conciliation Act, 1996 ("the 1996 Act"). The SC held that the omission of the word "only" was not an instance of "CASSUS OMISSUS". It emphasized it was not permissible for courts to reconstruct provisions while construing a provision and added that the courts cannot produce a new jacket, whilst ironing out the creases of the old one.
After hearing extensive arguments of both sides and analyzing several judgments the SC opined that the 1996 Act had accepted the territorial principle adopted in the UNCITRAL Model law and held that Part I would have no application to International Commercial Arbitration having the seat of arbitration outside India and further concluded that Part I would be applicable only to the arbitrations which take place within the territory of India.
The SC however declared the application of this judgment would be prospective and apply to arbitration agreements executed after 6th September 2012. This would mean that on application of this judgment parties in disputes relating to international commercial arbitration will no longer have the right to apply under section 9 of Part I of the 1996 Act, for interim reliefs and protection. This is bound to raise difficulties for parties in obtaining interim orders and enforcing them in India. Parties henceforth whilst entering into international arbitration agreements will have to be careful whilst drafting the agreements and in making their choice, on the seat of arbitration, which will have an impact on how they obtain urgent reliefs and expeditious enforcement of such reliefs in India.
Some of the conclusions of this judgment that can be highlighted are,
- Non applicability of Part I to international commercial arbitration;
- Application of this decision to apply prospectively;
- The 1996 Act does not apply to awards from non convention countries;
- Clarifies Part I of the 1996 Act deals with the commencement, conduct of arbitration, challenge and recognition and enforcement whilst Part II deals with only commencement and regulation and enforcement.
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