Case Note & Summary
The Supreme Court of India, by a reference order dated 16 January 2008, directed the listing of Civil Appeal No. 7019 of 2005 and connected matters before a Constitution Bench to examine the correctness of the decisions in Bhatia International v. Bulk Trading S.A. and Venture Global Engineering v. Satyam Computer Services Ltd. regarding the applicability of Part I of the Arbitration and Conciliation Act, 1996 to arbitrations seated outside India. The lead appeal arose from a contract between Bharat Aluminium Co. (appellant) and Kaiser Aluminium Technical Service, Inc. (respondent) dated 22 April 1993 for supply and installation of a computer-based system. The agreement contained an arbitration clause providing for arbitration in London under English Arbitration Law, while the governing law of the contract was Indian law. Disputes led to two arbitral awards in England. The appellant filed applications under Section 34 of the Act before the District Judge, Bilaspur, to set aside the awards. The District Judge, and subsequently the High Court of Chhattisgarh, held that the applications were not maintainable against foreign awards. In another connected matter, Bharati Shipyard Ltd. entered into shipbuilding contracts with Ferrostaal AG, with arbitration initially under ICC Rules in Paris and later under LMAA Rules in London. The respondent sought interim relief under Section 9 of the Act to restrain encashment of bank guarantees. The District Judge granted interim injunction, but the High Court of Karnataka set it aside, holding that the respondent could seek relief in London. In the Supreme Court, a two-Judge Bench expressed reservations about Bhatia International, leading to a reference to a three-Judge Bench, which then referred the matter to the Constitution Bench. The primary legal questions framed for consideration were: (a) the meaning of place of arbitration under Sections 2(2) and 20; (b) the meaning of ‘under the law of which the award is passed’ under Section 48 and Article V(1)(e) of the New York Convention; (c) whether Section 2(2) bars application of Part I to arbitrations where the place is outside India; (d) whether Part I applies at all stages of arbitration except areas covered by Parts II and III; and (e) whether a suit for preservation of assets pending arbitration is maintainable. The appellants, through senior counsel, argued that Part I and Part II are not mutually exclusive, that the Arbitration Act did not adopt the UNCITRAL Model Law verbatim, and that the omission of the word ‘only’ in Section 2(2) indicates that Part I is not confined to India-seated arbitrations. They emphasized literal construction of the provisions without addition of words. The judgment excerpted here ends with the arguments, and the final decision on the reference is not included in the provided text. The case hence stood for determination by a Constitution Bench of the Supreme Court on the fundamental question of territorial reach of Part I of the Arbitration and Conciliation Act, 1996.
Headnote
A) Arbitration Law - Applicability of Part I to Foreign-Seated Arbitrations - Section 2(2) - Arbitration and Conciliation Act, 1996 - The Supreme Court referred to a Constitution Bench the issue of whether Part I of the Act applies to arbitrations seated outside India, in light of conflicting interpretations in Bhatia International v. Bulk Trading S.A. (2002) 4 SCC 105 and Venture Global Engineering v. Satyam Computer Services Ltd. 2008 (1) Scale 214 (Paras 1-2). B) Arbitration Law - Interim Relief under Section 9 - Applicability to Foreign-Seated Arbitrations - Arbitration and Conciliation Act, 1996, Section 9 - In Bharati Shipyard Ltd. v. Ferrostaal AG, the question arose whether an Indian court could grant interim injunction under Section 9 in an arbitration seated outside India; the High Court held that relief could be sought in London, leading to an appeal before the Supreme Court (Paras 8-12). C) Arbitration Law - Scope of Part I - Pre, During and Post-Arbitration Stages - Arbitration and Conciliation Act, 1996 - The appellants contended that Part I applies at all stages to all arbitrations except where Parts II and III specifically apply, and that the omission of 'only' from Section 2(2) signifies that Part I is not limited to India-seated arbitrations, as the Act did not bodily adopt the UNCITRAL Model Law (Paras 15-16).
Issue of Consideration
Whether Part I of the Arbitration and Conciliation Act, 1996 applies to arbitrations where the place of arbitration is outside India, and related questions regarding the meaning of place of arbitration, the law governing the award, the bar under Section 2(2), the stages of arbitration at which Part I applies, and the maintainability of a suit for preservation of assets pending arbitration.
Final Decision
Decision not clearly stated
Law Points
- Legal points not extracted
- interpretation of Section 2(2) Arbitration and Conciliation Act
- 1996
- applicability of Part I to arbitrations seated outside India
- meaning of place of arbitration under Sections 2(2) and 20
- scope of challenge under Section 34 to foreign awards
- availability of interim relief under Section 9 for foreign-seated arbitrations
- distinction between seat and venue
- law governing arbitration agreement
- omission of 'only' in Section 2(2) and its effect
