Bhatia International v Bulk Trading SA (2002) 2 Supreme Court Cases 395 (SC)

Briefly stated the facts are as follows:

The Appellant entered into a contract with the 1st Respondent on 9th May, 1997. This
contract contained an arbitration clause which provided that arbitration was to be as per the
rules of the International Chamber of Commerce (for short ICC). On 23rd October, 1997 the
1st Respondent filed a request for arbitration with ICC. Parties agreed that the arbitration be
held in Paris, France. ICC has appointed a sole arbitrator

1st Respondent filed an application under Section 9 of the Arbitration and Conciliation Act,
1996 (hereinafter called the said Act) before the IIIrd Additional District Judge, Indore, M.P.
against the Appellant and the 2nd Respondent. One of the interim reliefs sought was an order
of injunction restraining these parties from alienating, transferring and/or creating third party
right, disposing of, dealing with and/or selling their business assets and properties. The
Appellant raised the plea of maintainability of such an application. The Appellant contended
that Part I of the said Act would not apply to arbitrations where the place of arbitration is not
in India. This application was dismissed by the IIIrd Additional District Judge on 1st
February, 2000. It was held that the Court at Indore had jurisdiction and the application was
maintainable. The Appellant filed a Writ Petition before the High Court of Madhya Pradesh,
Indore Bench. The said Writ Petition has been dismissed by the impugned Judgment dated
10th October, 2000. On behalf of the Appellants, Mr. Sen submits that Part I of the said Act
only applies to arbitrations where the place of arbitration is in India. He submits that if the
place of arbitration is not in India then Part II of the said Act would apply. He relies on sub-
section (2) Section 2 of the said Act which provides that Part I shall apply where the place of
arbitration is in India. He submits that sub-section (2) of Section 2 makes it clear that the
provisions of Part I do not apply where the place of arbitration is not in India.

One of the respondents had sought interim relief from the court under Part I of the Act. The
appellant objected that the application could not be allowed on the basis that Part I did not
apply to arbitrations seated outside India. The district judge held that the application was
maintainable. The matter eventually reached the Court on a second appeal.
The Court held that the provisions of Part I of the Act apply to all arbitrations, including
international commercial arbitrations seated outside India, unless the parties have expressly
or impliedly excluded its application. The Court's reasons for the finding were as follows:

If the Act does not assure parties to an arbitration governed by Part II the right to apply
for interim relief pursuant to section 9 (Part I), the parties will find themselves without a
remedy, as far as obtaining interim relief in India is concerned.

Section 2(2) of the Act provides that Part I will apply where the place of arbitration is in
India and section 2(4) of the Act uses the words 'every arbitration'. Section 2(5) refers to
'all arbitrations and to all proceedings relating thereto'. Section 2 is in Part I of the Act.
The Court was of the view that the finding that Part I applies to all arbitrations resolves
any apparent inconsistency between these provisions.

The Act is based on the UNCITRAL Model Law (the 'Model Law'). The provision of the
Model Law that is analogous to section 2(2) of the Act states that the law, with the
exception of certain provisions, will apply only if the arbitration takes place in the
territory of the state. The Court reads the omission of the word 'only' in section 2(2) as
further evidence of legislative intent to permit Part I of the Act to apply to arbitrations
that take place outside India.

Section 44 states that a foreign award is an award issued in a territory that is a signatory
to the New York Convention and that has been notified by the Government of India as a
reciprocating territory. Awards issued in arbitration proceedings that take place in
countries that are not signatories to the New York Convention and/or are not notified as
reciprocating territories ('non-Convention awards') are not foreign awards and are not
governed by Part II of the Act. Section 2(7) states that an arbitral award made under Part I
shall be considered a domestic award. The Court observed that there would be no need to
define an award as a domestic award unless the intention was to address awards that
would otherwise not be covered by this definition, such as non-Convention awards. The
Court was of the view that the legislature intended Part I to apply to all arbitrations. This
interpretation facilitates the enforcement of non-Convention awards in India.

The ratio in Bhatia was subsequently extended in other decisions to permit Indian courts to
set aside foreign awards1 and to appoint arbitrators in arbitrations seated outside India.2 
 Venture Global Engineering v Satyam Computer Services Ltd and Anr - 2008 (4)
SCC 190

On 20.10.1999, Appellant-Company and respondent No.1- Satyam Computer Services

Limited (in short SCSL), a registered company having its office at Mayfair Centre, S.P.
Road, Secunderabadh entered into a Joint Venture Agreement to constitute a company named
Satyam Venture Engineering Services Ltd. respondent No.2 herein (in short SVES) in which
both the appellant and respondent No.1 have 50 per cent equity shareholding. Another
agreement was also executed between the parties on the same day being the Shareholders
Agreement (in short SHA) which provides that disputes have to be resolved amicably
between the parties and failing such resolution, the disputes are to be referred to arbitration.
Section 11.05 of the SHA provides for certain terms and conditions as regards the resolution
of the disputes. In February, 2005, disputes arose between the parties. Respondent No.1
alleged that the appellant had committed an event of default under the SHA owing to several
venture companies becoming insolvent and they had exercised its option to purchase the
appellant-companys shares in SVES at its book value. On 25.07.2005, respondent No.1 filed
a request for arbitration with the London Court of International Arbitration which appointed
Mr. Paul B Hannon as sole arbitrator on 10.9.2005. The sole Arbitrator on 3.4.2006 passed an
award directing the appellant VGE to transfer the shares to respondent No.1. On 14.4.2006,
respondent No.1 filed a petition to recognize and enforce the award before the United States
District Court, Eastern District Court of Michigan (US Court). The appellant entered
appearance to defend this proceeding before the US Court by filing a cross petition. In the
said petition, it objected to the enforcement of the Award which ordered transfer of shares
which was in violation of Indian Laws and Regulations specifically the Foreign Exchange
Management Act, 1999 (in short FEMA) and its notifications. 

The appellant filed a suit before the Ist Additional Chief Judge, City Civil Court,
Secunderabad on 28.4.2006 seeking declaration to set aside the award and permanent
injunction on the transfer of shares under the Award. On 15.6.2006, the District Court passed
an ad-interim ex parte order of injunction, inter alia, restraining respondent No.1 from
seeking or effecting the transfer of shares either under the terms of the Award or otherwise. 
In a judgment delivered by Five Judge Constitutional Bench of the Supreme Court in Bharat
Aluminium v. Kaiser Aluminium Technical Services, the Court held that Part – I of Indian
Arbitration Act, 1996 (Act) will have no applicability over international commercial
arbitrations held outside India in respect of arbitration agreements entered into hereafter.

The court overruled its earlier judgments in Bhatia International and Venture Global
Engineering prospectively and made the law declared in the instant case applicable to all the
arbitrations agreements executed hereafter. 

The present judgment has put to rest the controversy by overruling the law laid down in
Bhatia International and Venture Global Engineering by inter alia holding as under:

Part-I of the Act would have no applicability to International Commercial Arbitration

held outside India;

Part-I of the Act shall apply to all arbitrations which take place within India;

there can be no overlapping or intermingling of the provisions contained in Part-I with the
provisions contained in Part-II of the Act;

In a foreign seated international commercial arbitration, no application for interim relief

would be maintainable under Section 9 or any other provision, as applicability of Part-I is
restricted to all arbitrations which take place in India;

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.

Bharat Aluminium Company and Ors v Kaiser Aluminium Technical Service, Inc.
and Ors. etc. etc. (2012)9 SCC 552- (Please Refer to The file Ma’am Sent)
 Harmony Innovation Shipping Ltd v. Gupta Coal India Ltd.  & Anr  2015 (3)
SCALE 295

BRIEF FACTS

On October 20, 2010, an agreement was entered between the Appellant and the First
Respondent in respect to Appellant’s 24 coal voyages from Indonesia to
India (“Agreement”)4. Thereafter, the First Respondent undertook only 15 coal voyages and
that resulted in a dispute, which ultimately was referred to arbitration. Consequently, an
addendum to Agreement was executed on April 3, 2013 as regards the remaining
voyages (“Addendum”). The Addendum did not make any changes to the arbitration clause
in the Agreement.

A dispute arose, arbitration proceedings were initiated and eventually an award was passed.
The arbitration was held in London.

The Appellant subsequently filed an application under Section 9 of the Arbitration and
Conciliation Act, 1996 (“Act”) before Learned Additional District Judge,
Ernakulam (“ADJ”)5 seeking security from the First Respondent.

The ADJ directed the First Respondent to furnish security for US$ 11,15,400 and as an
interim measure conditionally attached the cargo belonging to the First Respondent.

HIGH COURT

Aggrieved by the Order of the ADJ, the First Respondent preferred a writ petition before the
Kerala High Court (“High Court”) contending that the order of the ADJ was without
jurisdiction and hence unsustainable in law.

The High Court held that the law laid down in BALCO is declatory in nature and therefore it
cannot be said that it has only prospective effect. Accordingly, the High Court reversed the
decision of the ADJ stating that Section 9 of the Act has limited application to arbitration
taking place in India and cannot be applied to international commercial arbitrations as held in
BALCO.
ISSUES

The Supreme Court had to consider that in a scenario where:

a. The Agreement has been executed pre BALCO;

b. The Addendum has been executed post BALCO;

c. The Addendum amends only certain clauses of the Agreement, not the arbitration clause
contained in the Agreement;

Whether the arbitration clause in the Agreement should be interpreted in accordance with the
principles laid down in Bhatia International or BALCO.

After determination of the above issue, another aspect which required determination by
Supreme Court was whether the jurisdiction of the Indian Courts would be ousted applying
the principles of Bhatia International or BALCO, as the case may be.

APPELLANT

First, the Appellant relied on Bhatia International and Citation Infowares Ltd v. Equinox
Corp6, referred to the arbitration clause in the Agreement, and submitted that there was no
express exclusion, and therefore the jurisdiction of Indian Courts cannot be ousted and hence
the learned ADJ had not faulted in exercise of jurisdiction.

RESPONDENTS

The Respondents referred to the Agreement and contended that as the juridical seat is in
London, Part I of the Act would not be applicable. Further, reliance was placed on Reliance
Industries Limited and Anr. v. Union of India 7 and it was submitted that after the Agreement,
the Addendum was executed (which was in fact after pronouncement of the decision in
BALCO) and, therefore, the principles laid down in Bhatia International would not be
applicable and on the contrary the instant case should be governed by the seat centric
approach evolved in BALCO.

JUDGMENT

Supreme Court observed that BALCO was decided on September 6, 2012 and in BALCO,
Bhatia International and Venture Global Engg. v. Satyam Computer Services Ltd 8 was
overruled only prospectively. However, in the present case the Agreement was executed
before the decision in BALCO and only the Addendum came into existence afterwards.
Supreme Court held that as there is nothing in the Addendum to suggest any amendment to
the arbitration clause, and hence the same would continue to be controlled and governed by
the conditions of the Agreement, and therefore the principles laid down in BALCO would not
be applicable in the instant case.

However, the Supreme Court, after analyzing various decisions on applicability of the Act to
arbitrations seated outside India and relying on the ‘presumed intention’ test concluded that
in the instant case, the parties intended to keep the juridical seat of arbitration as London on
the basis of various phrases occurring in the arbitration clauses including the following:

a. “arbitration in London to apply”

b. Arbitrators are to be the members of “London Arbitration Association”

c. Contract “to be governed and construed according to English Law”

The Supreme Court further went on to hold that the implied exclusion principle as stated in
Bhatia International would be applicable i.e. (i) the parties intention to have London as the
juridical seat of arbitration (ii) arbitrators being members of London Arbitration Association
and (iii) the contract being governed by English Law, evidenced the parties intention to
exclude the applicability of Part 1 of the Act.

Thus, the ultimate finding of the Supreme Court was that though the High Court erred in
applying BALCO to the facts of the instant case, it’s conclusion that ADJ had no jurisdiction,
was correct.

Union of India v Reliance Industries (SPECIAL LEAVE PETITION) (CIVIL)

NO.11396 OF 2015 dated September 22, 2015

Two Production Sharing Contracts (hereinafter referred to as “PSC”) for the Tapti and Panna
Mukta Fields were executed between Reliance Industries Limited, the Union of India, Enron
Oil and Gas India Limited and the ONGC. The relevant clauses of the PSCs insofar as they
are applicable to the present controversy are as follows:-
“ARTICLE 32: APPLICABLE LAW AND LANGUAGE OF THE CONTRACT 32.1
Subject to the provisions of Article 33.12, this Contract shall be governed and interpreted in
accordance with the laws of India.

32.2 Nothing in this Contract shall entitle the Government or the Contractor to exercise the
rights, privileges and powers conferred upon it by this Contract in a manner which will
contravene the laws of India.

ARTICLE 33: SOLE EXPERT, CONCILIATION AND ARBITRATION 33.9 Arbitration

proceedings shall be conducted in accordance with the arbitration rules of the United Nations
Commission on International Trade Law (UNCITRAL) of 1985 except that in the event of
any conflict between these rules and the provisions of this Article 33, the provisions of
this Article 33 shall govern.

… 33.12 The venue of conciliation or arbitration proceedings pursuant to this Article, unless
the Parties otherwise agree, shall be London, England and shall be conducted in the English
Language. The arbitration agreement contained in this Article 33 shall be governed by the
laws of England. Insofar as practicable, the Parties shall continue to implement the terms of
this Contract notwithstanding the initiation of arbitral proceedings and any pending claim or
dispute.

34.2 This Contract shall not be amended, modified, varied or supplemented in any respect
except by an instrument in writing signed by all the Parties, which shall state the date upon
which the amendment or modification shall become effective.”

It needs to be mentioned that the PSCs were amended to substitute Enron Oil & Gas India
Limited with BG Exploration and Production India Limited on 10.1.2005. Since certain
disputes and differences arose between the Union of India and Reliance Industries Limited
sometime in 2010, the Union of India invoked the arbitration clause

In RIL v Union, the question was whether the Delhi High Court had jurisdiction to entertaina
petition under section 34 challenging an award made by a London-seated
Tribunal. The basis of the challenge was public policy and that certain
disputes under a Production Sharing Contract (‘PSC’) were not arbitrable. Questions of
arbitrability are normallyresolved by applying the law governing the
arbitration agreement (not lex arbitri).But it is important to notice that the question before
the Supreme Court was jurisdictional, that is, ‘does section 34 apply’ and not ‘are these
disputes arbitrable?’

Reliance Industries Limited and Anr. v. Union of India 6 which in turn relied upon Sulamerica
v. Enesa, High Court of Justice (England) which says that seat of the arbitration is an
important factor in determining proper law of the arbitration agreement. The Supreme Court
held that it has been settled for quite some time now that Part I of the 1996 Act is excluded
where the parties choose that the seat of arbitration is outside India and the arbitration is
governed by the law of a foreign country.

In view of the above, the Court held that the foreign award passed in London cannot be
interfered with under Section 34, which occurs in Part I of the 1996 Act

Imax Corporation v. E-City Corp 2017 SCC OnLine SC 239

Background

Imax Corporation (Imax) and E City Entertainment India Private Limited (E City) had
entered into an agreement dated 28 September 2000 for the supply of large format projection
systems in cinema theatres. The arbitration clause in the agreement read as follows:

"This Agreement shall be governed by and construed according to the laws of Singapore, and
the parties attorn to the jurisdiction of the courts at Singapore. Any dispute arising out of this
master agreement or concerning the rights, duties or liabilities of E-City or Imax hereunder
shall be finally settled by arbitration pursuant to the ICC Rules of Arbitration."

Imax filed a request for arbitration with International Chamber of Commerce (ICC). While
Imax suggested Paris or France to be the proposed venue for the arbitration, E City suggested
Singapore to be the venue for arbitration in their answer to request for arbitration. The ICC
court of arbitration considered the parties request for venue and under Article 14(1) of the
ICC Rules of Arbitration (ICC Rules) decided to fix London as the juridical seat of the
arbitration.

The arbitral tribunal passed 2 (two) partial final awards and 1 (one) final award. All the three
arbitral awards recorded that the juridical seat of arbitration is London. All the three arbitral
awards were belatedly challenged under Section 34 of the 1996 Act before the Hon'ble
Bombay High Court by E City along with an application for condoning the delay in
challenging the arbitral awards. The delay was condoned. The decision to condone the delay
was challenged before the Supreme Court.

While deciding the limited question of condoning the delay, the Supreme Court went a step
further and decided if the challenge to the arbitral awards filed under Section 34 of the 1996
Act was maintainable as that would ultimately also decide the question of condoning the
delay.

Judgment

The Supreme Court held that since the parties had agreed to settle the disputes through the
mechanism of ICC Rules, the ICC Rules would have to be construed as being part of the
arbitration clause.

Further it held that while the parties had not made a conscious choice regarding the place of
the arbitration, but by agreeing to have the disputes settled according to ICC Rules, the
parties had also accepted ICC's decision to choose London as the place of arbitration.
According to the Supreme Court this was a key indicator of the parties' intent to exclude Part
1 of the 1996 Act.

Even otherwise, the Supreme Court was of the view that since the parties had decided to have
the agreement governed by and construed according to the laws of Singapore, the parties had
agreed to exclude the applicability of Part 1 of the 1996 Act.

Supreme Court further emphasized that a significant determinant in each case is the
agreement of the parties as to the place of arbitration and where the arbitration actually took
place. Since the arbitration was held in London without any protest and the arbitral awards
were made in London, E City could not claim that Part 1 of the 1996 Act had any
applicability.
On the above parameters, the Supreme Court was of the view that the parties had clearly
agreed to exclude the provisions of Part I of the 1996 Act and resultantly it dismissed the
petition filed by E City under Section 34 of the 1996 Act before the Bombay High Court.