Brief facts of the Case-
An agreement dated 22nd April, 1993 was executed between the appellant and the respondent, The agreement contained an arbitration clause for resolution of disputes arising out of the contract. The arbitration clause contained in Articles 17 and 22 was as under :
Article 17.1 Any dispute or claim arising out of or relating to this Agreement shall be in the first instance, endeavour 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.
Article 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.
Article 22 Governing Law This agreement will be governed by the prevailing law of India and in case of Arbitration, the English law shall apply.
Sec-2(2), 9 of Arbitration and Conciliation Act, 1996.
The landmark judgment of Bharat Aluminium v. Kaiser Aluminium Technical Services had, thus, put the controversy aside by overruling the doctrine laid down in Bhatia International and Venture Global Engineering by, inter alia, holding the following:
Part I of the Act would have no applicability to International Commercial Arbitration held outside India
The apex court concluded that Part I of the Arbitration Act, 1996 is applicable only to all the arbitrations which take place within the territory of India.
There can be no overlapping or intermingling of the provisions contained in Part I with that in Part II of the Act
In a foreign seated international commercial arbitration, no application for interim relief would be maintainable under any
provision, as applicability of Part I is restricted to all arbitrations which take place within India only
No suit for interim injunction would be maintainable in India, when the seat of arbitration is outside India
As Part I would have no applicability to international commercial arbitration held outside India, the arbitral awards will be
subject to the jurisdiction of Indian courts when the same are sought to be enforced in accordance with Part II of the Act.
The Arbitration Act, 1996 has accepted the territoriality principle which has been adopted in the UNCITRAL Model Law.
It was held by the Hon’ble Court that Part I of Indian Arbitration Act, 1996 will have no applicability over international commercial arbitrations held outside India with respect to arbitration agreements entered into thereafter.
Therefore, it is the seat of arbitration that now governs the jurisdiction and once the parties decide to have arbitration outside India, Indian courts can grant no interim relief to the concerned parties. The apex Court also added that no foreign arbitral award can be challenged under Part I of Indian Arbitration Act, 1996.
Until the present judgment came into effect, the ratio of the Bhatia International undermined the rationale that only the courts of the seat of the arbitration should be able to grant interim measure to parties relating to that arbitration. The Court, through its judgment in Bharat Aluminium, overruled its earlier judgments in Bhatia International and Venture Global Engineering prospectively and made the law declared in the present case applicable to all the arbitrations agreements executed thereafter. In respect of arbitration agreements executed prior to the instant judgment, the instant judgment will not apply and the law will be as it stood prior to the present judgment, i.e. Part I will apply to international commercial arbitrations held outside India unless expressly and / or impliedly excluded by the parties concerned.