In a judgment delivered by Five Judge Constitutional Bench of
the Supreme Court in Bharat Aluminium v. Kaiser Aluminium Technical
Services, the Court held that Part – I of Indian Arbitration
Act, 1996 (Act) will have no applicability over international
commercial arbitrations held outside India in respect of
arbitration agreements entered into hereafter.
The seat of arbitration will govern the jurisdiction and once
the parties have decided to have arbitration outside India, no
interim relief can be granted by Indian courts. The court further
clarified that a foreign arbitral award cannot be challenged under
Part-I of the Act.
Bhatia International v. Bulk Trading
S.A.1 decided by the Supreme Court in 2002,
unleashed the excessive interventionist role of the judiciary in
international commercial arbitrations, thereby negating the intent
and purport of the Arbitration Act, 1996.
While deciding a Section 9 petition (for interim measures) in an
ICC arbitration, a three judge bench of the Supreme Court
unanimously held that all provisions of Part-I, including Section
9, is applicable to international commercial arbitrations held
outside India. The Court further held that while in the case of
'domestic arbitrations', provisions of Part-I compulsorily
apply; in 'foreign arbitrations' Part I applies unless the
parties have expressly or impliedly excluded the provisions of the
However, Venture Global Engineering Case v. Satyam
Computer Services Ltd.2 (which relied upon
Bhatia International case) added to the misery of International
businesses and expounded the scope of Court's intervention in
enforcement of foreign arbitral awards. The Court effectively made
explicit what was otherwise implicit by holding that even though
there was no provision in Part-II of the Act providing for
challenge to a foreign award, it could not be construed that the
Legislature did not intend to provide the same since there was no
need for the Legislature to repeat what was already included in the
general provisions of Part-I unless and until it wanted to include
a contrary procedure.
By giving such an interpretation the Court effectively made the
Act extraterritorial in its operation. Part-I was made applicable
to international commercial arbitration held outside India unless
expressly or impliedly excluded by the parties.
Finally, the present judgment has put to rest the controversy by
overruling the law laid down in Bhatia International and Venture
Global Engineering by inter alia holding as under:
Part-I of the Act would have no applicability to International
Commercial Arbitration held outside India;
Part-I of the Act shall apply to all arbitrations which take
place within India;
there can be no overlapping or intermingling of the provisions
contained in Part-I with the provisions contained in Part-II of the
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 is restricted
to all arbitrations which take place in India;
No suit for interim injunction would be maintainable in India,
when the seat of arbitration is outside India;
As Part-I would have no applicability to international
commercial arbitration held outside India, the arbitral awards will
be subject to the jurisdiction of Indian courts when the same are
sought to be enforced in accordance with Part-II of the Act.
The court overruled its earlier judgments in Bhatia
International and Venture Global Engineering prospectively and made
the law declared in the instant case applicable to all the
arbitrations agreements executed hereafter. In respect of
arbitration agreements executed prior to the present judgment, the
present judgment won't apply and the law will be as it stood
prior to the present judgment i.e. Part – I will apply to
international commercial arbitrations held outside India unless
expressly and / or impliedly excluded.
It will be interesting to see what challenges prospective
applicability of this judgment poise for parties entering into
fresh arbitration agreements.
1 (2002) 4 SCC 105
2 (2008) 4 SCC 190
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 Mondaq.com.
Click to Login as an existing user or Register so you can print this article.
The Ministry of Corporate Affairs notified on June 5, 2015 that certain provisions of the Companies Act, 2013 shall not apply to private limited companies or shall apply with such exceptions or modifications as directed in the notification.
Whilst trade and barter have existed since early times, the modern practice of forming business relationships through the means of contract has come into existence only since the industrial revolution in the West.
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).