Much has been said about the Supreme Court of India
["SCI"] judgment in Bharat Aluminium
Co. v. Kaiser Aluminium Technical
Service1which has perceivably changed the
arbitration regime in India. However, one may recall that the
judgment made no reference to the facts of the appeal and sought
only to resolve the legal questions that arose during arguments.
Recently in Bharat Aluminium Co. v. Kaiser Aluminium
Technical Services2 ["JUDGMENT/BALCO
II"], the SCI addressed the subject matter of the
The SCI in BALCO I had held that the judgment would apply only
prospectively and therefore the present dispute had to be resolved
as per the law as laid down in the Bhatia International v.
["Bhatia"] judgment. Under the Bhatia
regime, all the provisions of Part I of the Indian Arbitration
& Conciliation Act, 1996 ["Act"]
were to be applicable to all arbitration whether domestic or
foreign-seated unless the parties by agreement, express or implied,
had excluded wholly or partly, the provisions of Part I of the
The parties had entered into an agreement in relation to the
supply of equipment, modernization and upgradation of production
facilities. Certain disputes arose and were referred to arbitration
seated in England and awards were made in favour of the Respondent.
The Appellant had filed applications to set aside the award before
the Chhattisgarh High Court under Section 34 of the Act (which
falls under Part I).
Relevant Clauses of the Agreement
Article 17 - Arbitration
17.1 Any dispute or claim arising out of 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 amendment thereto.
17.2 The arbitration proceedings shall be carried by two
arbitrators, one appointed by the Petitioner and one by the
Respondent chosen freely and without any bias. The Court of
arbitration shall be wholly in London, England and shall use the
English language in the proceedings. The finding and award of the
Court of Arbitration shall be final and binding.
17.3 Before entering upon the arbitration, the two Arbitrators
shall appoint an Umpire. If the two arbitrators are not able to
reach an agreement on the selection of an Umpire, the Umpire shall
be nominated by the International Chamber of Paris.
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.
Judgment [BALCO II]
The court held that Article 22 is clear in providing that the
proper law of the contract is Indian law. They further held that
Article 17.1 provided for English law to be the law applicable to
the arbitration agreement and therefore it would be impracticable
and inconvenient to interpret Article 22 to mean that Indian law
would be the substantive law governing the contract but in case of
an arbitration, English law would govern. Therefore, the court
found that English law was the law applicable to the arbitration
agreement. In light of the same, the court upheld the decision of
the High Court dismissing the Section 34 applications.
The court read the arbitration clause in light of "party
autonomy" being the "grundnorm" of international
commercial arbitration and stated that when interpreting such an
agreement, it must be kept in mind that parties would have intended
to avoid impracticable and inconvenient processes and procedures.
The court therefore found that the proper law of contract was
clearly Indian law while English law was only the law governing the
This judgment is also significant in light of interpreting
arbitration clauses in contracts entered into before 6th
September 2012 i.e., those governed by the Bhatia regime.
The question therefore was whether Part I of the Act had been
impliedly excluded. The court cited Union of India v. Reliance
Industries4 where the Supreme Court of India held
that Part I of the Act would be considered impliedly excluded when
the juridical seat is outside India or where a foreign law is
chosen as the law governing the arbitration agreement. So saying
the court dismissed the Section 34 applications filed at the High
Court to set aside the arbitral awards.
1 Bharat Aluminium v. Kaiser Technical Services, Civ App
3678 of 2007 (6 September 2012)
2 Bharat Aluminium v. Kaiser Technical Services, Civ App
3678 of 2007 (28 January 2016).
3 Bhatia International v. Bulk Trading, (2002) 4 SCC
4 Union of India v Reliance Industries, 2015 (10) SCALE
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.
Singhania & Partners LLP, Solicitors and Advocates
Under the Arbitration and Conciliation (Amendment) Act, 2015. There are two avenues available for the enforcement of foreign awards in India, viz., the New York Convention and the Geneva Convention, as the case may be.
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).