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2012 Supreme(Online)(SC) 152
SUPREME COURT
Mr Markandey Katju, Mr, JJ
Bharat Aluminium Co. – Appellant
Versus
Kaiser Aluminium Technical Services Inc. – Respondent
CA No. 7019 of 2005
For the Appellants/Petitioners: Mr C.A. Sundaram, Mr Soli Sorabjee, Mr Gopal Subramanium, Dr A.M. Singhvi
For the Respondents: Mr E.R. Kumar, Mr Nariman
The Arbitration Act, 1996 applies only to arbitrations held within India; provisions for interim relief do not extend to foreign-seated arbitrations.
Headnote:(A) Arbitration and Conciliation Act, 1996 - Sections 2(2), 2(4), 2(5), 9, 34, and 48 - Jurisdiction of Indian courts over foreign-seated arbitration - The Arbitration Act, 1996 applies only to arbitrations conducted within India, and provisions regarding interim relief under Section 9 do not extend to arbitrations held outside India or those involving foreign awards. The judgment clarifies that insisting on a territorial principle prevents confusion and potential conflicting decisions across jurisdictions. (Paras 2, 54, 96, 128, 196)
(B) Jurisdiction - Limitation on applicability of Part I - While the arbitration law recognizes party autonomy, it maintains the territorial principle enshrined by the UNCITRAL Model Law. (Paras 10, 195)
Facts of the case:
This case arose from multiple appeals regarding arbitration agreements with mixed governing laws and jurisdictions between the parties. The arbitration disputes were referred to arbitration in London, with the contention whether Indian courts have jurisdiction to intervene for interim relief. (Paras 2, 3, 10)
Findings of Court:
The court concluded that Section 2(2) is explicit that Indian arbitration provisions apply only within the territory of India, limiting Part I to domestic arbitrations while preventing dual jurisdiction for set-aside of awards under foreign law. (Para 196)
Issues: The main issue was whether the Arbitration Act, 1996's provisions, particularly for interim relief, apply to arbitrations conducted outside India. (Para 10)
Ratio Decidendi: The court noted that existing precedents erroneously allowed for ambiguity regarding the applicability of Indian arbitration law to foreign seated arbitrations. Clarification was necessary to uphold the territorial sovereignty of arbitration proceedings and promote coherence. (Paras 54, 195)
Result: The judgment declared that Part I of the Arbitration Act, 1996 does not apply to international commercial arbitrations conducted outside India, thus aligning the law prospectively with clarified jurisdictional principles.
| Table of Content |
|---|
| 1. court decision on appeal management (Para 1) |
| 2. arbitration agreement key facts (Para 2) |
| 3. disputes leading to arbitration (Para 3) |
| 4. judicial outcomes prior to appeal (Para 4) |
| 5. various legal arguments presented by counsel (Para 5 , 6 , 10 , 11 , 12 , 15 , 25 , 26) |
| 6. court reiterates procedural matters (Para 7 , 9 , 13 , 14 , 17 , 18) |
| 7. court's interpretation impacts future arbitration (Para 19 , 20 , 23 , 24) |
| 8. clarification of arbitration applicability law (Para 196 , 197 , 198) |
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 modernisation programme, loss, profits and other sums. The respondent made a claim for unclaimed instalments plus interest and damages for breach of intellectual property rights. Negotiations to reach a settlement of the disputes between
