Author: Dhruv Khurana, ICFAI Law School, Hyderabad.
Citation: (2012) 9 SCC 552
Date of Judgement: 6 September 2012
Bench: D.K. Jain, Surinder Singh Nijjar, Ranjana Prakash Desai, Jagdish Singh Khehar
Issues in Question:
- Whether the Arbitration and Conciliation Act, 1996 be applicable over arbitration held outside the territory of India?
Background of the Case:
- Bharat Aluminium Co. (Appellant) entered into the contract with Kaiser Aluminium Technical Service, Inc (Respondent) to supply technological equipment and upgradation of production facilities.
- They had an arbitration clause in the contract which stated that any dispute between the parties would be settled through the process of arbitration and they would follow English Arbitration Law. The location of the arbitration would be London.
- In the contract it stated that the agreement would follow the Indian law but the arbitration process will be conducted according to the governance of the English Law.
- The disputes arose between the parties which were held in London. The English arbitral tribunal passed the judgments but they were challenged in the district court of Bilaspur and also in the High Court. The High Court and the District court rejected the judgement made by the English arbitral tribunal.
- The Appellant, Bharat Aluminium Co., made the appeal to the Supreme Court of India.
- The court observed that Section 2(7) of the Arbitration and Conciliation Act, 1996 applies to only domestic awards and it states the difference between the domestic award and the foriegn award, not between domestic award and international award.
- The court held that Article 22 of the agreement states that only Indian law will be used to bind the agreement between the parties but Article 17.1 states that only English law will be used for the arbitration process. so, it would be impractical to use Indian law for the process of arbitration. The court upheld the decision of the High court.
- The apex court held that the Arbitration and Conciliation Act, 1996 would not be applicable in case the clause in the agreement states that only English law would be applicable. So, as per Section 34 of the Arbitration and Conciliation Act, 1996, the Indian courts cannot interfere between the awards of international cases. The apex court dismissed the judgment of the Bhatia International case, which allowed the court to interfere in the international matters and further said it was illogical.
- The apex court held that the Part 1 and 2 of the Arbitration and Conciliation Act, 1996 do not apply to the international cases and no relief would be provided to the people of international arbitration and the court dismissed the appeal and upheld the decision of the High Court.
- The above judgement provides the distinction between the seat and the venue of the arbitration. So, there might be different places for arbitration but some of the proceedings may be done in place or territories which may be convenient.
- The judgment also stated that the Indian courts cannot challenge the decision of the international courts according to Section 34 of the Arbitration and Conciliation Act, 1996 and the appeal would not be applicable to the individuals of the foriegn awards under the Act.
- There would be no interim relief provided to the individuals under the CPC, if the arbitration seat was provided outside the Indian territory as no foriegn courts and tribunals are enforceable in India and, therefore, relief would only be provided in international tribunals.