The Supreme Court of India ("SC") has today delivered
an eagerly awaited judgment settling the law concerning
applicability of Part I of the Arbitration and Conciliation Act,
1996 ("Act") on international commercial arbitrations
held outside India. The controversy had taken a centre stage
following the judgments of the SC in Bhatia International vs. Bulk
Trading S.A. & Anr. and Venture Global Engineering vs. Satyam
Computer Services Ltd.
In the year 2002, the three Judges Bench of the SC in the matter
of Bhatia International held that the provisions of Part I of the
Act would apply to all arbitrations and to all proceedings relating
thereto, including the international commercial arbitrations held
out of India unless the parties by agreement, express or implied,
had excluded all or any of its provisions. Thereafter, in the year
2008 in the case of Venture Global, the SC not only discussed the
ratio and observations made in Bhatia International but also
extended its reasoning to explicitly hold that the "public
policy" provision of Section 34 in Part I of the Act, also
applies to the foreign awards.
Though the SC and the High Courts were following ratio of the
above two judgments while dealing with the aforesaid controversy,
there were certain ambiguities which were raised before the SC in a
number of cases, including Bharat Aluminium Co. vs. Kaiser
Aluminium Technical Service Inc., White Industries Australia Ltd.
vs. Coal India Ltd., Harkirat Singh vs. Rabobank International
Holding B.V. and Tamil Nadu Electricity Board vs. Videocon Power
Limited & Anr., etc.
The five Judges Bench of the SC has now settled the controversy
by passing a common judgment in eight cases involving the aforesaid
issue by concluding that, Part I of the Act would have no
application to international commercial arbitrations, held outside
India. Therefore, such awards would only be subject to the
jurisdiction of the Indian courts when the same are sought to be
enforced in India in accordance with the provisions contained in
Part II of the Act. The SC has further concluded that the
provisions contained in the Act, make it crystal clear that there
can be no overlapping or intermingling of the provisions contained
in Part I with the provisions contained in Part II of the Act. The
SC has also specifically clarified that in a foreign seated
international commercial arbitration, no application for interim
relief would be maintainable under Section 9 or any other
provision, as applicability of Part I of the Act is limited to all
arbitrations which take place in India.
While putting the controversy at rest, the SC has disagreed with
the ratio of Bhatia International and Venture Global and has
ordered that the law now declared by the SC shall apply
prospectively, to all the arbitration agreements executed
The judgment is expected to be hailed by the investors'
community. However, there are aspects of the judgment such as its
prospective applicability which may be a concern to the parties who
are already part of international commercial arbitration agreements
concerning their business or interest in India. We will examine the
judgment in detail and circulate an analysis of the judgment by the
next week for the benefit of our clients and associates.
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