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2012 Supreme(Online)(SC) 98
SUPREME COURT
Markandey Katju, A.K. Patnaik, JJ
Bharat Aluminium Co. – Appellant
Versus
Kaiser Aluminium Technical Services Inc. – Respondent
Civil Appeal | CA No. 7019 of 2005
Mr. Soli Sorabjee, Mr. C.A. Sundaram, Mr. Gopal Subramanium, Dr. A.M. Singhvi
Mr. Ajit Kumar Sethi
The Arbitration and Conciliation Act, 1996 applies exclusively to arbitrations taking place in India, limiting the applicability of Part I and disallowing interim relief for those seated outside India, thus reinforcing the territorial principle.
Headnote:(A) Arbitration and Conciliation Act, 1996 - Sections 2(2), 2(4), 2(5), 2(7), 9, 34, 44, 48 - Applicability of Part I - The court rules that Part I of the Arbitration Act, 1996 is limited to arbitrations conducted within India. It finds that applications for interim relief under Section 9 are not maintainable for arbitrations seated outside India. This interpretation seeks to uphold the territorial principle recognized in the UNCITRAL Model Law. The judgment specifically reverses judgments in Bhatia International and Venture Global Engineering that contradicted this interpretation. (Paras 1, 194-198)
(B) Jurisdiction - The court delineates the jurisdictional boundaries of Indian courts concerning foreign seated arbitrations, emphasizing that no overlap exists between Part I and Part II of the Act. (Paras 50, 127, 168, 174, 195)
| Table of Content |
|---|
| 1. introduction of decisions and context (Para 1) |
| 2. factual background of the arbitration agreement (Para 2 , 3 , 4) |
| 3. challenging foreign awards and interim applications (Para 5 , 19 , 26) |
| 4. key arguments and legal interpretations (Para 6 , 7 , 10 , 11 , 12 , 16) |
| 5. counter-arbitration questions raised (Para 8 , 9 , 14) |
| 6. detailed discussions on legal subjects (Para 13 , 15 , 17 , 18) |
| 7. general overview of arbitration laws and history (Para 28 , 29 , 32) |
| 8. historical context of arbitration acts in india (Para 30 , 31 , 34 , 35) |
| 9. revisiting ratios in bhatia international and venture global engg. (Para 54 , 55 , 56) |
| 10. final conclusions on the scope of the arbitration act, 1996 (Para 57 , 58 , 59 , 60 , 61) |
1. Whilst hearing CA No. 7019 of 2005, a two - Judge Bench of this Court, on 16-1-2008, passed the following order: (Bharat Aluminium Co. v. Kaiser Aluminium Technical Services Inc., (2012) 9 SCC 649)
"In the midst of hearing of these appeals, the learned counsel for the appellant has referred to the three - Judge Bench decision of this Court in Bhatia International v. Bulk Trading S.A. /i>. ( (2002) 4 SCC 105 ) The said decision was followed in a recent decision of two - Judge Bench in Venture Global Engg. v. Satyam Computer Services Ltd. /i>, ( (2008) 4 SCC 190 ) My learned Brother Hon'ble Mr Justice Markandey Katju has reservation on the correctness of the said decisions in view of the interpretation of clause (2) of S.2 of the Arbitration and Conciliation Act, 1996 . My view is otherwise.
Place these appeals before the Hon'ble Chief Justice for listing them before any other Bench."
Pursuant to the aforesaid order, the appeal was placed for hearing before a three - Judge Bench, which by its order dated 1-11-2011 (Bharat Aluminium Co. v. Kaiser Aluminium Technical Services Inc., (2012) 9 SCC 648) directed the matters to be placed before the Constitution Bench on 10-1-2012.
2. Since the issue raised in the reference is pristinely legal, it is not necessary to make any detailed reference to the facts of the appeal. We may, however, notice the very essential facts leading to the filing of the appeal. An agreement dated 22-4-1993 was executed between the appellant and the respondent, under which the respondent was to supply and install a computer - based system for shelter modernisation at BALCO's Korba Shelter. The agreement contained an arbitration clause for resolution of disputes arising out of the contract. The arbitration clause contained in Art.17 and Art.22 was as under:
"17.1. Any dispute or claim arising out of or relating to this agreement shall be in the first instance, endeavoured 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.
17.2. The arbitration proceedings shall be carried out by two arbitrators, one appointed by BALCO and one by 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.
xxxx xxxx xxxx
22. Governing law. - This agreement will be governed by the prevailing law of India and in case of arbitration, the English law shall apply."
The aforesaid clause itself indicates that by reason of the agreement between the parties, the governing law of the agreement was the prevailing law of India. However, the settlement procedure for adjudication of rights or obligations under the agreement was by way of arbitration in London and the English arbitration law was made applicable to such proceedings. Therefore, the lex fori for the arbitration is English law but the substantive law will be Indian law.
3. Disputes arose between the parties with regard to the performance of the agreement. Claim was made by the appellant for return of its investment in the modernisati
