India: Foreign Arbitration - The New Road Ahead!

Last Updated: 5 November 2012
Article by Aziza Khatri and Ativ Patel


A path breaking judgment regarding the future implications of foreign award and foreign arbitration vis a vis jurisdiction of Indian Courts was passed on 6 September 2012 by the Constitutional Bench of the Hon'ble Supreme Court comprising Hon'ble Chief Justice S.H Kapadia, Justice Surinder Singh Nijjar, Justice D.K. Jain, Justice Mrs. Ranjana Desai, Justice Jagdish Singh Khehar. This landmark judgment passed in Civil Appeal No. 7019 of 2005 (Bharat Aluminium Co. vs. Kaiser Aluminium Technical Service, Inc.) along with 7 other Appeals lays down a new foundation in India in respect of foreign arbitrations and foreign awards passed in respect thereof.

The Indian Arbitration Act, 1996 ("said Act") is divided into four Parts with Part I dealing with arbitration held in India and Part II dealing with foreign awards. For the purposes of the above mentioned landmark judgment passed on 6 September 2012, we are concerned with Part I and Part II of the said Act.

Previous decisions of the Supreme Court:

Section 2(2) of Part I of the said Act provides that "this Part shall apply where the place of arbitration is in India", It is pertinent to note that Part I of the said Act contains provisions regarding grant of interim reliefs and setting aside of an arbitral award (Section 34 of the said Act). 1

In the case of Bhatia International vs. Bulk Trading S.A & Anr. (2004 2 SCC 105) (referred to as the "Bhatia International case"), it was held by the Hon'ble Supreme Court that Section 2(2) of Part I of the said Act did not provide that Part I shall apply "only" where the place of arbitration is India. It was held that Part I and Part II of the said Act must be construed harmoniously and that Part I is applicable to foreign arbitrations. The result of the Bhatia International case led to foreign awards being challenged in India. Thus, the scope of Part I of the said Act was extended to foreign arbitrations by virtue of the Bhatia International case.

Further, in the case of Venture Global Engineering vs. Satyam Computer Services Limited (2008 4 SCC 190), the Hon'ble Supreme Court relied on the judgment passed in the Bhatia International case and applied Section 34 of Part I of the said Act to set aside a foreign award.

The moot question in the present case before the Constitutional Bench of the Hon'ble Supreme Court was whether Part I of the said Act is applicable to foreign awards passed in foreign arbitrations.

Brief facts of the case:

Bharat Aluminium Co., ("BALCO") and Kaiser Aluminium Technical Service, Inc. ("KATSI") entered into an Agreement dated 22 April 1993 ("said Agreement") vide which KATSI was to supply and install a computer based system for shelter modernization for BALCO. The said Agreement contained an arbitration clause for resolution of disputes arising out of the contract. The arbitration clause was contained in Articles 17 and 22 of the said Agreement, which is reproduced for reference purposes (emphasis supplied):

"Article 17.1 - Any dispute or claim arising out of or relating to this Agreement shall be in the first instance, endeavor to be settled amicably by negotiation between the parties hereto and failing which the same will be settled by arbitration pursuant to the English Arbitration Law and subsequent amendments thereto.
Article 17.2 - The arbitration proceedings shall be carried out by two Arbitrators one appointed by BALCO and one KATSI chosen freely and without any bias.
The court of Arbitration shall be held wholly in London, England and shall use English language in the proceeding. The findings and award of the Court of arbitration shall be final and binding upon the parties.
Article 22 - Governing Law -
This agreement will be governed by the prevailing law of India and in case of Arbitration, the English law shall apply."

Disputes arose between BALCO and KATSI with regard to the performance of the said Agreement. The disputes were referred to arbitration held in England. The Arbitral Tribunal passed two Awards dated 10 November 2002 and 12 November 2002 in England. BALCO challenged the above mentioned Awards under Section 34 (Part I) of the said Act in the Court of Learned District Judge, Bilaspur, India.

The Learned District Judge, Bilaspur by an Order dated 20 July 2004 held that the applications filed by BALCO under Section 34 of Part I of the said Act for setting aside the aforementioned foreign awards are not tenable and accordingly the same were dismissed. BALCO filed an appeal against the Order of the Learned District Judge, Bilaspur before the Hon'ble High Court of Chattisgarh, Bilaspur. By an Order dated 10 August 2005, a Division Bench of the Hon'ble High Court of Chattisgarh dismissed the appeal. An appeal was filed before the Hon'ble Supreme Court against this decision by BALCO. It is pertinent to note that on account of disagreement between the two judges of the Hon'ble Supreme Court, the appeal was placed for hearing before a three Judge Bench, which by its Order dated 1 November 2011 directed the matter to be placed before the Constitutional Bench of the Hon'ble Supreme Court.

Ratio of the judgment:

In this case, the Constitutional Bench of the Hon'ble Supreme Court analyzed the English law in detail and its applicability to the said Act. Prior to going into the merits of the matter, the history of arbitration in India as well as the scenario pertaining to International Commercial Arbitration was examined at length. The objects of the said Act and the provisions of the UNCITRAL Model Laws, were taken into consideration. Decisions of various Indian courts, as well as courts of different countries on the aspect of enforcement of awards under foreign arbitral laws were considered by the Hon'ble Supreme Court in this case.

After such comprehensive analysis, the Constitutional Bench of the Hon'ble Supreme Court held that:

  • Part I of the said Act is applicable only to all arbitrations which take place within the territory of India.
  • There is no overlapping between the provisions contained in Part I and Part II of the said Act.
  • Section 2(2) of Part I of the said Act is not in conflict with any provisions of Part I or Part II of the said Act.
  • In an International Commercial Arbitration held outside India, no application for interim relief would be maintainable as applicability of Part I of the said Act is limited to arbitrations which take place in India.
  • No suit for interim injunction simpliciter would be maintainable in India on the basis of International Commercial Arbitration held outside India.

Consequences of this judgment:

  • In order to do justice and maintain equity, it is clarified by the Hon'ble Supreme Court that this judgment shall be applied prospectively to all arbitration agreements executed on or after 6 September 2012.
  • On account of the fact that Part I is applicable only to arbitrations held in India, it will be very difficult for foreign parties, whose seat of arbitration is outside India, to seek interim relief in India.
  • The judgments delivered by the Hon'ble Supreme Court in Bhatia International case and Venture Global Engineering case (mentioned hereinabove) are set aside with reference to arbitration agreements executed pursuant to the date of this judgment i.e. 6 September 2012. However, the judgment passed in Bhatia International case will still hold good where the arbitration agreements are executed prior to 6 September 2012.
  • The exclusion of Part I of the said Act in its application to foreign awards implies that the Hon'ble Supreme Court has negatived the concept of "long-arm jurisdiction". This will have far reaching implications. It will lead to a situation where an Indian party will have to challenge the foreign award in a foreign court, thereby restricting the supervisory jurisdiction of Indian Courts where the seat of Arbitration is outside India.


1 Section 34 of Part I of the said Act provides that recourse to a Court against an arbitral award may be made only by an application for setting side such award in accordance with Section 34(2) and 34(3) of the said Act.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.