Case Notes – Bharat Aluminum Restores Pro-Arbitration Regime

By Dipankar Vig

In its genuine effort to restore the pro-arbitration regime in India, the Constitutional Bench of the Hon’ble Supreme Court of India has delivered a conclusive judgement on the role of Indian courts in international commercial arbitrations rendered in a foreign seat. (“Bharat Aluminum”).

The Arbitration & Conciliation Act 1996 (‘the Act’), an enactment based on the UNCITRAL model has always provided for two regimes of dispute resolution depending on the seat of arbitration. Part-I provides for the domestic as well as international arbitrations where the seat of arbitration is in India and Part-II contains provisions for recognition and enforcement of awards rendered in a foreign jurisdiction.

The Bharat Aluminum case has overruled the apex Court’s earlier interpretation laid down in the case of Bhatia International, which was subsequently upheld in the case of Venture Global Engineering and Indtel Technical Services.

  1. Decision in Bhatia International, Venture Global and Indtel Technical Services

The Bhatia International ruling gave the Indian Courts a right to set aside an award made in a foreign seat. In Venture Global, applying the same principle, the Court set aside a London Court of International Arbitration (‘LCIA’) award rendered in London.

Therafter, in Indtel Technical Services, the Court held that it could appoint arbitrators in the case of a deadlock, even though the arbitration was to be conducted in a foreign seat.

  1. Highlights of the Bharat Aluminum Case
  1. Applicability of Part- I of the Act

The Hon’ble Supreme Court has categoricallly laid down that Part-I of the Act is applicable only to the arbitrations which take place within the territory of India and it would have no application to international commercial arbitrations rendered in a foreign seat. In other words, the Indian Courts will not be allowed to exercise their powers under Part-I of the Act in respect of arbitrations having a foreign seat.

  1. Interim Reliefs by Courts

The Hon’ble Court further held that in a foreign seated international commercial arbitration, no application for interim relief would be maintainable under Section 9 or any other provision, as the applicability of Part-I of the Act is limited to all arbitrations which take place in Similarly, no suit for interim injunction would be maintainable in India, on the basis of an international commercial arbitration with a seat outside India.

  1. No Annulment of Foreign Awards

The Hon’ble Court has clarified that the regulation of conduct of arbitration and challenge to an award would have to be done by the courts of the country in which the arbitration is being conducted. Such a court is then the regulatory court possessed of the power to annul the award.

Previously, a foreign award could be set aside on the ground that its enforcement would be opposed to “public policy”, in the context of Section 34 of the Act. However, subsequent to this judgement, a foreign award cannot be set aside in India under Section 34 of the Act.

  1. Prospective Application

The Hon’ble Court also held that the amended position shall apply prospectively from the date of judgement i.e it shall apply only to arbitration agreements made after September 06, 2012.

By this landmark judgement, the Hon’ble Supreme Court has put an end to the unwelcome judicial interference in foreign seated arbitrations and has put to rest the host of inconsistent judicial decisions on arbitration.

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