# 12 S.C.R. 327 BHARAT ALUMINIUM CO v. KAISER ALUMINIUM TECHNICAL SERVICE, INC

- **Citation:** [2012] 12 S.C.R. 327
- **Court:** Supreme Court of India
- **Decided:** 2012-09-06
- **Case number:** Civil Appeal No. 7019 of 2005
- **Bench:** S.H. Kapadia, D.K. Jain, Surinder Singh Nijjar, Ranjana Prakash Desai, Jagdish Singh Khehar
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/12-s-c-r-327-bharat-aluminium-co-v-kaiser-aluminium-technical-service-inc-28236
- **Pages:** 136

## Headnote

A
B
Arbitration and Conciliation Act, 1996- ss.2(2) and 9; Part C
I and Part II - Interpretation of s. 2(2) - Scope of the provisions
of Part I and Part II of the Act- Territoriality principle - Whether
s. 2(2) bars application of Part I of the Act to Arbitrations which
take place outside India - Grant of interim measures by Indian
Courts where seat of arbitration is outside India -
D
Maintainability of inter-parte suit for interim relief - Held: The
Act has accepted the territoriality principle which has been
adopted in the UNCITRAL Model Law -
s.2(2) makes
declaration that Part I of the Act shall apply to all arbitrations
which take place within India - Part I of the Act would have no
E
application to International Commercial Arbitration held
outside India - Therefore, such awards would only be subject
to jurisdiction of the Indian courts when the same are sought
to be enforced in India in accordance with the provisions
contained in Part II of the Act -
No overlapping or
intermingling of the provisions contained in Part I with the
F
provisions contained in Part II of the Act - S. 2(2) not in conflict
with any of the provisions either in Part I or in Part II of the Act
- In a foreign seated international commercial arbitration, no
application for interim relief would be maintainable u/s.9 or any
other provision, as applicability of Part I of Act is limited to all G
arbitrations which take place in India - Similarly, no suit for
interim injunction simplicitor would be maintainable in India,
on the basis of an international commercial arbitration with a
327
H
328
SUPREME COURT REPORTS
[2012] 12 S.C.R.
A seat outside India - Part I of the Act applicable only to all the
arbitrations which take place within the territory of India - Law
declared to apply prospectively, to all the arbitration
agreements executed hereafter.
An agreement was executed between the appellant
8 and the respondent. The agreement contained an
arbitration clause for resolution of disputes arising out
of the contract. The arbitration clause itself indicated that
by reason of the agreement between the parties, the
governing law of the agreement was the prevailing law
C 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. Disputes arose between the parties with
D regard to the performance of the agreement. Negotiations
to reach a settlement were unsuccessful and a written
notice of request for arbitration was issued by the
respondent to the appellant. The disputes were duly
referred to arbitration which was held in England. The
E arbitral tribunal made two awards in England. The
appellant thereafter filed applications under Section 34
of the Arbitration and Conciliation Act, 1996 for setting
aside the aforesaid two foreign awards. The trial Court
held that the applications were not maintainable and
F dismissed the same. The order was upheld by the High
Court in appeal.
Whilst hearing of further appeal before a two Judge
Bench of this Court, counsel for the appellant referred
to the three-Judges Bench decision of this Court in
G Bhatia International which was followed in a recent
decision of two Judges Bench in Venture Global
Engineering. On account of difference of opinion
amongst the Hon'ble Judges on the correctness of the
said decisions in view of the interpretation of Clause (2)
H
BHARAT ALUMINIUM CO. v. KAISER ALUMINIUM TECHNICAL 329
SERVICE, INC.
of Section 2 of the Arbitration and Conciliation Act, 1996, A
the appeal was placed for hearing before a three Judge
Bench, which thereafter directed the matters to be placed
before the present Constitution Bench to consider the
true scope of the provisions of Part I and Part II of the
Arbitration Act, 1996.
B
Answering the Reference, the Court
HELD:
Does Section 2(2) bar the Application of Part I to C
Arbitrations which take place outside India?
1.1. T

## Text

_Characters 0–39,982 of 275,394. This is a partial read: ask again with offset=39982 for what follows._

[2012) 12 S.C.R. 327
BHARAT ALUMINIUM CO.
v.
KAISER ALUMINIUM TECHNICAL SERVICE, INC.
(Civil Appeal No. 7019 of 2005)
SEPTEMBER 6, 2012
[S.H. KAPADIA, CJI. AND D.K. JAIN, SURINDER SINGH
NIJJAR, RANJANA PRAKASH DESAI AND JAGDISH
SINGH KHEHAR, JJ.]
A
B
Arbitration and Conciliation Act, 1996- ss.2(2) and 9; Part C
I and Part II - Interpretation of s. 2(2) - Scope of the provisions
of Part I and Part II of the Act- Territoriality principle - Whether
s. 2(2) bars application of Part I of the Act to Arbitrations which
take place outside India - Grant of interim measures by Indian
Courts where seat of arbitration is outside India -
D
Maintainability of inter-parte suit for interim relief - Held: The
Act has accepted the territoriality principle which has been
adopted in the UNCITRAL Model Law -
s.2(2) makes
declaration that Part I of the Act shall apply to all arbitrations
which take place within India - Part I of the Act would have no
E
application to International Commercial Arbitration held
outside India - Therefore, such awards would only be subject
to jurisdiction of the Indian courts when the same are sought
to be enforced in India in accordance with the provisions
contained in Part II of the Act -
No overlapping or
intermingling of the provisions contained in Part I with the
F
provisions contained in Part II of the Act - S. 2(2) not in conflict
with any of the provisions either in Part I or in Part II of the Act
- In a foreign seated international commercial arbitration, no
application for interim relief would be maintainable u/s.9 or any
other provision, as applicability of Part I of Act is limited to all G
arbitrations which take place in India - Similarly, no suit for
interim injunction simplicitor would be maintainable in India,
on the basis of an international commercial arbitration with a
327
H
328
SUPREME COURT REPORTS
[2012] 12 S.C.R.
A seat outside India - Part I of the Act applicable only to all the
arbitrations which take place within the territory of India - Law
declared to apply prospectively, to all the arbitration
agreements executed hereafter.
An agreement was executed between the appellant
8 and the respondent. The agreement contained an
arbitration clause for resolution of disputes arising out
of the contract. The arbitration clause itself indicated that
by reason of the agreement between the parties, the
governing law of the agreement was the prevailing law
C 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. Disputes arose between the parties with
D regard to the performance of the agreement. Negotiations
to reach a settlement were unsuccessful and a written
notice of request for arbitration was issued by the
respondent to the appellant. The disputes were duly
referred to arbitration which was held in England. The
E arbitral tribunal made two awards in England. The
appellant thereafter filed applications under Section 34
of the Arbitration and Conciliation Act, 1996 for setting
aside the aforesaid two foreign awards. The trial Court
held that the applications were not maintainable and
F dismissed the same. The order was upheld by the High
Court in appeal.
Whilst hearing of further appeal before a two Judge
Bench of this Court, counsel for the appellant referred
to the three-Judges Bench decision of this Court in
G Bhatia International which was followed in a recent
decision of two Judges Bench in Venture Global
Engineering. On account of difference of opinion
amongst the Hon'ble Judges on the correctness of the
said decisions in view of the interpretation of Clause (2)
H
BHARAT ALUMINIUM CO. v. KAISER ALUMINIUM TECHNICAL 329
SERVICE, INC.
of Section 2 of the Arbitration and Conciliation Act, 1996, A
the appeal was placed for hearing before a three Judge
Bench, which thereafter directed the matters to be placed
before the present Constitution Bench to consider the
true scope of the provisions of Part I and Part II of the
Arbitration Act, 1996.
B
Answering the Reference, the Court
HELD:
Does Section 2(2) bar the Application of Part I to C
Arbitrations which take place outside India?
1.1. The omission of the word "only" in Section 2(2)
is not an instance of "CASUS OMISSUS". It is not the
funct.ion of the Court to supply the supposed omission, 0
which can only be done by Parliament. Legislative
surgery is not a judicial option, nor a compulsion, whilst
interpreting an Act or a provision in the Act. The
provision contained in Section 2(2) is to be construed
without adding the word "only" to the provision. It cannot E
be said that the omission of the word "only" from
Section 2(2) indicates that applicability of Part I of the
Arbitration Act, 1996 is not limited to the arbitrations that
take place in India. A plain reading of Section 2(2) makes
it clear that Part I is limited in its application to arbitrations
which take place in India. The Parliament by limiting the F
applicability of Part I to arbitrations which take place in
India has expressed a legislative declaration. It has clearly
given recognition to the territorial principle. Necessarily
therefore, it has enacted that Part I of the Arbitration Act,
1996 applies to arbitrations having their place/seat in G
India. [Paras 60, 62 and 63] [379-E-G; 381-C-F]
Does the missing 'onlv' indicate a deviation from Article
1(2) of the Model Law?
H
330
SUPREME COURT REPORTS
[2012] 12 S.C.R.
A
1.2. The Arbitration Act, 1996 consolidates the law on
domestic arbitrations by incorporating the provisions to
expressly deal with the domestic as well as international
commercial arbitration; by taking into account the 1985
UNCITRAL Model Laws. It is not confined to the
s Convention on the Recognition and Enforcement of
Foreign Arbitral Awards ('New York Convention'), which
is concerned only with enforcement of certain foreign
awards. The Arbitration Act, 1996 seeks to remove the
anomalies that existed in the Arbitration Act, 1940 by
c introducing provisions based on the UNCITRAL Model
Laws, which deals with international commercial
arbitrations and also extends it to commercial domestic
arbitrations. UNCITRAL Model Law has unequivocally
accepted the territorial principle. Similarly, the Arbitration
0
Act, 1996 has also adopted the territorial principle, thereby
limiting the applicability of Part I to arbitrations, which take
place in India. [Para 66] [383-G-H; 384-A-B]
1.3. Article 1 (2) of the UNCITRAL Model Laws is a
model and a guide to all the States, which have accepted
E
the UNCITRAL Model Laws. The genesis of the word
"only" in Article 1 (2) of the Model Law can be seen from
the discussions held on the scope of application of Article
1 in the 330th meeting, Wednesday, 19 June, 1985 of
UNCITRAL. This would in fact demonstrate that the word
F
"only" was introduced in view of the exceptions referred
to in Article 1 (2) i.e. exceptions relating to Articles 8, 9, 35
& 36 (Article 8 being for stay of judicial proceedings
covered by an arbitration agreement; Article 9 being for
interim reliefs; and Articles 35 & 36 being for enforcement
G of Foreign Awards). It was felt necessary to include the
word "only" in order to clarify that except for Articles 8,
9, 35 & 36 which could have extra territorial effect if so
legislated by the State, the other provisions would be
applicable on a strict territorial basis. Therefore, the word
H "only" would have been necessary in case the
BHARAT ALUMINIUM CO. v. KAISER ALUMINIUM TECHNICAL 331
SERVICE, INC.
provisions with regard to interim relief etc. were to be
A
retained in Section 2(2) which could have extra-territorial
application. The Indian legislature, while adopting the
Model Law, with some variations, did not include the
exceptions mentioned in Article 1(2) in the corresponding
provision Section 2(2). Therefore, the word "only" would
B
have been superfluous as none of the exceptions were
included in Section 2(2). [Para 68) [384-E-H; 385-A-8]
1.4. The omission of the word "only" in Section 2(2)
of the Arbitration Act, 1996 does not detract from the
territorial scope of its application as embodied in Article
C
1 (2) of the Model Law. The article merely states that the
Arbitration Law as enacted in a given state shall apply if
the ~bitration is in the territory of that State. The absence
of the word "only" which is found in Article 1 (2) of the
Model Law, from Section 2(2) of the Arbitration Act, 1996
D
does not change the content/import of Section 2(2) as
limiting the application of Part I of the Arbitration Act, 1996
to arbitrations where the place/seat is in India. It cannot
be concluded that Part I would also apply to arbitrations
that do not take place in India. [Paras 75, 76) [390-A-D]
E
1.5. India is not the only country which has dropped
the word "only" from its National Arbitration Law. The
word "only" is missing from the Swiss Private
International Law Act, 1987 Chapter 12, Article 176 (1 )(I).
It is also missing in Section 2(1) of the 1996 Act (U.K.).
Section 2(2) is an express parliamentary declaration/
recognition that Part I of the Arbitration Act, 1996 applies
F
to arbitration having their place/seat in India and does not
apply to arbitrations seated in foreign territories. The
G
provisions have to be read as limiting the applicability of
Part I to arbitrations which take place in India. If Section
2(2) is construed as merely providing that Part I of the
Arbitration Act, 1996 applies to India, it would be ex facie
superfluous/ redundant. No statutory provision is
H
332
SUPREME COURT REPORTS
(2012) 12 S.C.R.
A necessary to state/clarify that a law made by Parliament
shall apply in India/to arbitrations in India. Another
fundamental principle of statutory construction is that
courts will never impute redundancy or tautology to
Parliament. Section 2(2) is not merely stating the obvious.
B Section 2(2) merely reinforces the limits of operation of
the Arbitration Act, 1996 to India. [Paras 77, 78 and 79]
[390-D-H; 391-A-C, F-G]
Is Section 2(2) in conflict with Sections 2(4) and 2(5) -
C
1.6. There is no doubt that the provisions of Section
2(4) and Section 2(5) would not be applicable to
arbitrations which are covered by Part II of the Arbitration
Act, 1996, i.e. the arbitrations which take place outside
India. There is no inconsistency between Sections 2(2),
D 2(4) and 2(5). It cannot be said that limiting the
applicability of part I to arbitrations that take place in India,
would make Section 2(2) in conflict with Sections 2(4) and
2(5). [Para 85] [394-G-H; 395-A-B]
Does Section 217) indicate that Part I applies to
E arbitrations held outside India?
1.7. Section 2(7) does not, in any manner, relax the
territorial principal adopted by Arbitration Act, 1996. It
certainly does not introduce the concept of a delocalized
F arbitration into the Arbitration Act, 1996. Section 2(7) does
not alter the proposition that Part I applies only where the
"seat" or "place" of the arbitration is in India. Section 2(7)
is enacted to reinforce the territorial criterion by providing
that, when two foreigners arbitrate in India, under a
Foreign Arbitration Act, the provisions of Part I will apply.
G Indian Courts being the supervisory Courts, will exercise
control and regulate the arbitration proceedings, which
will produce a "domestically rendered international
commercial award". It would be a "foreign award" for the
purposes of enforcement in a country other than India.
H [Paras 88, 93, 94] [395-E-F; 398-D, G-H, 399-A]
BHARAT ALUMINIUM CO. v. KAISER ALUMINIUM TECHNICAL 333
SERVICE, INC.
Party Autonomy
1.8. The choice of another country as the seat of
arbitration inevitably imports an acceptance that the law
of that country relating to the conduct and supervision
A
of arbitrations will apply to the proceedings. It would, 8
therefore, follow that if the arbitration agreement is found
or held to provide for a seat I place of arbitration outside
India, then the provision that the Arbitration Act, 1996
would govern the arbitration proceedings, would not
make Part I of the Arbitration Act, 1996 applicable or
enable Indian Courts to exercise supervisory jurisdiction C
over the arbitration or the award. It would only mean that
the parties have contractually imported from the
Arbitration Act, 1996, those provisions which are
concerned with the internal conduct of their arbitration
and which are not inconsistent with the mandatory D
provisions of the English Procedural Law/Curial Law. This
necessarily follows from the fact that Part I applies only
to arbitrations having their seat I place in India. [Paras 121,
122] [418-G-H; 419-A-B]
Section 28 -
1.9. The only purpose of Section 28 is to identify the
rules that would be applicable to "substance of dispute".
E
In other words, it deals with the applicable conflict of law
rules. This section makes a distinction between purely F
domestic arbitrations and international commercial
arbitrations, with a seat in India. Section 28(1)(a) makes
it clear that in an arbitration under Part I to which Section
2(1)(f) does not apply, there is no choice but for the
Tribunal to decide "the dispute" by applying the Indian G
"substantive law applicable to the contract". This is
clearly to ensure that two or more Indian parties do not
circumvent the substantive Indian law, by resorting to
arbitrations. The provision would have an overriding
H
334
SUPREME COURT REPORTS
[2012] 12 S.C.R.
A effect over any other contrary provision in such contract.
On the other hand, where an arbitration under Part I is an
international commercial arbitration within Section 2(1)(f),
the parties would be free to agree to any other
"substantive law" and if not so agreed, the "substantive
B law" applicable would be as determined by the Tribunal.
The section merely shows that the legislature has
segregated the domestic and international arbitration.
Therefore, to suit India, conflict of law rules have been
suitably modified, where the arbitration is in India. This
c will not apply where the seat is outside India. In that
event, the conflict of laws rules of the country in which
the arbitration takes place would have to be applied. [Para
123] [419-0-H; 420-A-B]
D
Part II
1.10. 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 supervisory court possessed of
E the power to annul the award. This is in keeping with the
scheme of the international instruments, such as the
Geneva Convention and the New York Convention as well
as the UNCITRAL Model Law. It also recognizes the
territorial principle which gives effect to the sovereign right
F of a country to regulate, through its national courts, an
adjudicatory duty being performed in its own country.
Having accepted the principle of territoriality, it is evident
that the intention of the parliament was to segregate Part I
and Part II. Therefore, any of the provisions contained in
G Part I cannot be made applicable to Foreign Awards, as
defined under Sections 44 and 53, i.e., the New York
Convention and the Geneva Awards. This would be a
distortion of the scheme of the Act. It is, therefore, not
possible to accept the submission that provisions
contained in Part II are supplementary to the provision
H
BHARAT ALUMINIUM CO. v. KAISER ALUMINIUM TECHNICAL 335
SERVICE, INC.
contained in Part I. The Parliament has clearly segregated the A
two parts. [Paras 128, 129] [423-8-D, G-H; 424-A-B]
Section 45
1.11. Section 45 falls within Part II which deals with
enforcement proceedings in India and does not deal with B
the challenge to the validity of the arbitral awards
rendered outside India. Section 45 empowers a judicial
authority to refer the parties to arbitration, on the request
made by a party, when seized of an action in a matter in
respect of which the parties have made an agreement C
referred to in Section 44. It cannot be said that the use
of expression "notwithstanding anything contained in
Part I, or in the Code of Civil Proced.ure, 1908", in Section
45 of the Arbitration Act, 1996 necessarily indicates that
provisions of Part I would apply to foreign seated D
arbitration proceedings. The existence of the nonobstante clause does not alter the scope and ambit of the
field of applicability of Part I to include international
commercial arbitrations, which take place out of India.
[Paras 130, 133] [424-C-E; 426-G-H]
E
Does Section 48(1 )(el recognize the jurisdiction of Indian
Courts to annul a foreign award. falling within Part II?
1.12. Section 48(1)(e) corresponds to Article V(1)(e)
of the New York Convention. Section 48(1) sets out the F
defences open to the party to resist enforcement of a
foreign award. The words "suspended or set aside", in
Clause (e) of Section 48(1) cannot be interpreted to mean
that, by necessary implication, the foreign award sought
to be enforced in India can also be challenged on merits G
in Indian Courts. The provision merely recognizes that
courts of the two nations which are competent to annul
. or suspend an award. It does not ipso facto confer
jurisdiction on such Courts for annulment of an award
made outside the country. Such jurisdiction has to be H
336
SUPREME COURT REPORTS
[2012] 12 S.C.R.
A specifically provided, in the relevant national legislation
of the country in which the Court concerned is located.
So far as India is concerned, the Arbitration Act, 1996
does not confer any such jurisdiction on the Indian
Courts to annul an international commercial award made
B outside India. Such provision exists in Section 34, which
is placed in Part I. Therefore, the applicability of that
provision is limited to the awards made in India. If the
arguments of the appellants are accepted, it would entail
incorporating the provision contained in Section 34 of the
c Arbitration Act, 1996, which is placed in Part I of the
Arbitration Act, 1996 into Part II of the said Act. This is not
permissible as the intention of the Parliament was clearly
to confine the powers of the Indian Courts to set aside
an award relating to international commercial arbitrations,
0
which take place in India. [Paras 136, 138] [429-D-E; 430D-H; 431-A]
Interim measures etc. by the Indian Courts where the seat
of arbitration is outside India.
E
1.13. On a logical and schematic construction of the
Arbitration Act, 1996, the Indian Courts do not have the
power to grant interim measures when the seat of
arbitration is outside India. A bare perusal of Section 9
would clearly show that it relates to interim measures
F before or during arbitral proceedings or at any time after
the making of the arbitral award, but before it is enforced
in accordance with Section 36. Section 36 necessarily
refers to enforcement of domestic awards only.
Therefore, the arbitral proceedings prior to the award
G contemplated under Section 36 can only relate to
arbitrations which take place in India. The provision
contained in Section 9 is limited in its application to
arbitrations which take place in India. Extending the
applicability of Section 9 to arbitrations which take place
H outside India would be to do violence to the policy of the
BHARAT ALUMINIUM CO. v. KAISER ALUMINIUM TECHNICAL 337
SERVICE, INC.
territoriality declared in Section 2(2) of the Arbitration Act,
A
1996. [Para 161, 163] [445-G-H; 446-A-B, F-G]
Is An lnter-Parte Suit For Interim Relief Maintainable -
1.14. It appears that as a matter of law, an inter-parte
suit simply for interim relief pending arbitrations, even if 8
it be limited for the purpose of restraining dissipation of
assets would not be maintainable. There would be
number of hurdles which the plaintiff would have to
cross, which may well prove to be insurmountable.
Pendency of the arbitration proceedings outside India
C
would not provide a cause of action for a suit where the
main prayer is for injunction. It is patent that there is no
existing provision under the CPC or under the Arbitration
Act, 1996 for a Court to grant interim measures in terms
of Section 9, in arbitrations which take place outside
D
India, even though the parties by agreement may have
made the Arbitration Act, 1996 as the governing law of
arbitration. [Paras 176, 179 and 197] [453-C-D; 454-D-E;
461-D-E]
Konkan Railway Corporation Ltd. & Anr. vs. Rani
E
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F
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G
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338
SUPREME COURT REPORTS
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BHARAT ALUMINIUM CO. v. KAISERALUMINIUM TECHNICAL 339
SERVICE, INC.
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A
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Vs. Papierlrke Wa/dhof-Aschaf-fenburg A.G. [1981) 2 Lloyd's
Rep. 446; C Vs. D [2007) EWCA Civ 1282 (CA); Sulamerica
CIA Nacional de Seguros SA v. Enesa Engenharia SA -
B
Enesa. [2012 WL 14764; A Vs. B, [2007] 1 Lloyds Report
237; Karaha Bodas Co. LLC Vs. Perusahaan Pertambangan
Minyak Dan Gas Bumi Negara 335 F.3d 357; Karaha Bodas
Co. LLC (Cayman Islands) Vs. Perusahaan Pertambangan
Minyak Dan Gas Bumi Negara - Pertamina (Indonesia) c
Yearbook Comm. Arb'n Vol. XXVlll (2003) International
Electric Corporation Vs. Bridas Sociedad Anonima Petroleva,
Industrial Y Commercial 745 F Supp 172, 178 (SONY 1990);
International Standard Electric Corp. (US) Vs. Bridas
Sociedad Anonima Petro/era (Argentina) (1992) VII Ybk 0
Comm Arb 639; Investors Compensation Scheme Ltd. vs.
West Bromwich Building Society [1998) WLR 1896 at 913;
Bank of Credit & Commerce lntemational SA vs. Ali & Ors.
[2001) 2 WLR 735; Channel Tunnel Group Ltd. & Anr. Vs.
Balfour Beatty Construction Ltd. & Ors. (1993) AC 334 -
E
referred to.
"Guide to the UNCITRAL Model Law on lntemational
Commercial Arbitration, Legislative History and Commentary"
by Howard M. Holtzmann and Joseph E. Beuhaus -
referred to.
F
CONCLUSION :-
2.1. The Arbitration and Conciliation Act, 1996 has
accepted the territoriality principle which has been
adopted in the UNCITRAL Model Law. Section 2(2) makes G
a declaration that Part I of the Arbitration Act, 1996 shall
apply to all arbitrations which take place within India. Part
I of the Arbitration Act, 1996 would have no application
to International Commercial Arbitration held outside
India. Therefore, such awards would only be subject to H
340
SUPREME COURT REPORTS
[2012) 12 S.C.R.
A the jurisdiction of the Indian courts when the same are
sought to be enforced in India in accordance with the
provisions contained in Part II of the Arbitration Act, 1996.
The provisions contained in Arbitration Act, 1996 make
it crystal clear that there can be no overlapping or
B lntetmingling of the provisions contained in Part I with the
provisions contained in Part II of the Arbitration Act, 1996.
[Para 198] (461 ·F-H; 462-A]
2.2. The provision contained in Section 2(2) of the
C Arbitration Act, 1996 is not in conflict with any of the
provisions either in Part I or in Part II of the Arbitration
Act, 1996. 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 of the Arbitration Act, 1996 is limited
D to all arbitrations which take place in India. Similarly, no
suit for interim injunction simplicitor would be
maintainable in India, on the basis of an international
commercial arbitration with a seat outside India. [Para
E
199] (462-B·D]
2.3. Part I of the Arbitration Act, 1996 is applicable
only to all the arbitrations which take place within the
territory of India. In order to do complete justice, it is
hereby ordered, that the law now declared by this Court
F shall apply prospectively, to all the ar.bitration agreements
executed hereafter. [Paras 200, 201] (426-E-G]
Bhatia International Vs. Bulk Trading S.A. & Anr. (2004)
2 SCC 105 and Venture Global Engineering Vs. Satyam
Computer Services Ltd. & Anr. (2008) (4) SCC 190: 2008 (1)
G SCR 501 - overruled.
Case Law Reference:
2002 (1) SCR 728
referred to
Para 15, 60
H
BHARAT ALUMINIUM CO. v. KAISER ALUMINIUM TECHNICAL 341
SERVICE, INC.
2005 (4) Suppl. SCR 688 referred to
Para 15, 60
A
1953 SCR 533
referred to
Para 16,60,1
68
1951 (2) All ER 839
referred to
Para 16
1990 (3) SCR 111
referred to
Para 16
B
(1980) 1 All ER 529
referred to
Para 16, 61
1992 (3) SCR 106
referred to
Para 17,26
2002 (1) LLR 645
referred to
Para 18,124, c
165
[2008] EWHC 426 (TCC)
referred to
Para 20,50,
51,54
[2009] EWHC 957
referred to
Para 20
D
(2004) 2 sec 105
overruled
Para 23,199,
201
SA 1979 AC 210
referred to
Para 23
2007 (1) All ER 1087
referred to
E
Para 23
2007 (8) SCR 213
referred to
Para 23
1952(1) SCR 28
referred to
Para 23
1997 Suppl (1) sec 680
referred to
Para 23
F
2004 (5) Suppl. SCR 74
referred to
Para 23
2004 (3) SCR 920
referred to
Para 23
2010 (13) SCR 1131
referred to
Para 23
G
2008 (1) SCR 501
overruled
Para 26, 199,
201
1987 (1) SCR 1024
referred to
Para 26,51,
91
H
342
SUPREME COURT REPORTS
[2012] 12 S.C.R.
A
1989 (2) SCR 1
referred to
Para 26
2011 (6) SCR 1116
referred to
Para 29
2008 (8) SCR 775
referred to
Para 30
8
1982 (1) SCR 842
referred to
Para 35
1988 (1) LLR 116
referred to
Para 72,102,
111
1993 (3) LLR 48
referred to
Para 73
c
1975 (1) SCR 918
referred to
Para 78
1949 AC 530
referred to
Para 78
710 F.2d 928
referred to
Para 94
D
(1970] A.C.583
referred to
Para 105
A.G. [1981] 2 LR. 446
referred to
Para 105 ·
[2007] EWCA Civ
referred to
Para 116
1282 (CA
E
[2012 WL 14764
referred to
Para 119
(2007] 1 LR 237
referred to
Para 128
1991 (1) Suppl. SCR 387 referred to
Para 132
F
335 F.3d 357
referred to
Para 151
Ybk Comm Arb'n Vol.
referred to
Para 152
XXVlll (2003)
745 F Supp 172, 178
referred to
Para 153
G
(SONY 1990
(1992) VII Ybk Comm
referred to
Para 154
Arb 639
(1998] WLR 1896 at 913
referred to
Para 165
H
BHARAT ALUMINIUM CO. v. KAISER ALUMINIUM TECHNICAL 343
SERVICE, INC.
[2001] 2 WLR 735
referred to
Para 165
1990 (3) SCR 111
referred to
Para 169
1990 SCR 401
referred to
Para 175
1952 SCR 28
referred to
Para 180
1983 (3) SCR 962
referred to
Para 181
2011 (14) SCR 800
referred to
Para 182
(1993) AC 334
referred to
Para 190
CIVIL APPELLATE JURISDICTION: Civil Appeal No.
7019 of 2005.
A
B
c
From the Judgment and Order dated 10.08.2005 of the
High Court of Judicature at Bitaspur (Chhattisgarh) in Misc.
Appeal No. 889 of 2004.
D
WITH
Civil Appeal No. 6284 of 2004
Civil Appeal No. 3678 of 2007.
Transferred Case (C) No. 35 of 2007.
S.L.P (C) Nos. 3589-3590 of 2009
S.L.P (C) Nos. 31526-31528 of 2009
S.L.P (C) Nos. 27824 & 27841 of 2011.
C.A. Sundaram, Soli J. Sorabjee, P.H. Parekh, Dr. A.M.
E
Singhvi, Harish N. Salve, Ciccu Mukhopadhya, Aspi Chenoy,
F
S.K. Dholakia, Prashanto Chandra Sen, Ramesh Singh,
Preetesh Kapur, Mehernaz Mehta, Aanchat Yadav, Mohit
Sharma, Binu Tamta, Rohini Musa, Manu Krishnan, Prashant
Mishra, Subramonium Prasad, Hiroo Advani, Shashank Garg,
Animesh Sinha, ,II.par Gupta, Parmanand Pandey, E.R. Kumar, G
Sameer Parekh, Rukhmini Bobde, Subhasree Chatterjee,
Vishal Prasad, Utsav Trivedi, Nupur, Sharma (For Parekh &
Co.), Gopal Jain, R.N. Karanjawala, Manik Karanjawata,
Nandini Gore, Amit Bhandari, Debmalya Banerjee, Sachi
Lodha, Dhavel Vassonji, Ravi Gandhi, Sonia Nigam, Aditi Bhat,
H
344
SUPREME COURT REPORTS
[2012] 12 S.C.R.
A Abhiruchi Mengi, Premtosh Mishra (For Karanjawala & Co.),
Manu Nair, Abhijeet Sinha, Adit S. Pujari, Vaibhav Mishra,
Saransh Bajaj, Kirpa Pandit (For Suresh A. Shroff & Co.),
Anirudh Das, Saanjh N. Purohit, Prashant Kalra (For Suresh A
Shroff & Co.), Sanjay Kumar, Omar Ahmad (For Suresh A.
B Shroff & Co.), Anip Sachthey, Mohit Paul, Shagun Matta,
Prateek Jalan, Rohan Dakshini, Ruby Singh Ahuja, Jatin
Mongia, Siddhant Kochhar, Rashmikant, Shruti Katakey,
Vijendra Kumar, Shaikh Chand Saheb, Rameshwar Prasad
Goyal, A.V. Rangam, Buddy A. Ranganadhan, Richa
C Bharadwaj, Dharmendra Rautray, Tara Shahani, Ankit Khushu,
Pramod Nair, Divyam Agarwal, Dheeraj Nair, E.C. Agrawala,
Mahesh Agarwal, Rishi Agrawala, Radhika Gautam, Nakul
1 Dewal, V.P. Singh Raghav Dhawan, Tejas Karia, Nitesh Jain,
Aashish Gupta, Dushyant Manocha, Tarunima Vijra (For Suresh
0
A. Shroff & Co.), Ramesh Singh, A.T. Patra, Mohit Sharma,
(For O.P. Khaitan & Co.), Ramesh Babu M.R., Shekhar Prasad
Gupta, Sushrat Jindal for the Appearing Parties.
E
F
G
H
The Judgment of the Court was delivered by
SURINDER SINGH NIJJAR, J. 1. Whilst hearing C.A.
No. 7019 of 2005, a two Judge Bench of this Court, on 16th
January, 2008, passed the following order:-
"In the midst of hearing of these appeals, learned counsel
for the appellant has referred to the three-Judges Bench
decision of this Court in Bhatia International Vs. Bulk
Trading S.A. & Anr., (2002) 4 SCC 105. The said decision
was followed in a recent decision of two Judges Bench in
Venture Global Engineering Vs. Satyam Computer
Services Ltd. & Anr. 2008 (1) Scale 214. 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 Section 2 of the
Arbitration and Conciliation Act, 1996. My view is
otherwise.
BHARAT ALUMINIUM CO. v. KAISER ALUMINIUM TECHNICAL 345
SERVICE, INC. [SURINDER SINGH NIJJAR, J.)
Place these appeals before Hon'ble CJI for listing them
A
before any other Bench."
2. Pursuant to the aforesaid order, the appeal was placed
for hearing before a three Judge Bench, which by its order
dated 1st November, 2011 directed the matters to be placed
B
before the Constitution Bench on 10th January, 2012.
3. 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 22nd
C
April, 1993 was executed between the appellant and the
respondent, under which the respondent was to supply and
install a computer based system for Shelter Modernization at
Balco's Korba Shelter. The agreement contained an arbitration
clause for resolution of disputes arising out of the contract. The
D
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
E
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
F
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.
G
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."
H
346
SUPREME COURT REPORTS
[2012) 12 S.C.R.
A
4. 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
B the English Arbitration Law was made applicable to such
proceedings. Therefore, the lex tori for the arbitration is English
Law but the substantive law will be Indian Law.
5. Disputes arose between the parties with regard to the
performance of the agreement. Claim was made by the
C appellant for return of its investment in the modernization
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 the parties were
D unsuccessful and a written notice of request for arbitration was
issued by the respondent to the appellant by a notice dated 13th
November, 1997. The disputes were duly referred to arbitration
which was held in England. The arbitral tribunal made two
awards dated 10th November, 2002 and 12th November, 2002
E in England. The appellant thereafter filed applications under
Section 34 of the Arbitration Act, 1996 for setting aside the
aforesaid two awards in the Court of the learned District Judge,
Bilaspur which were numbered as MJC Nos. 92 of 2003 and
14 of 2003, respectively. By an order dated 20th July, 2004,
F the learned District Judge, Bilaspur held that the applications
filed by the appellant under Section 34 of the Arbitration and
Conciliation Act, 1996 (hereinafter referred to as the
'Arbitration Act, 1996'} for setting aside the foreign awards are
not tenable and accordingly dismissed the same.
G
6. Aggrieved by the aforesaid judgment, the appellant filed
two miscellaneous appeals being Misc. Appeal Nos. 889 of
2004 and Misc. Appeal No.890 of 2004 in the High Court of
Judicature at Chattisgarh, Bilaspur. By an order dated 10th
August, 2005, a Division Bench of the High Court dismissed
H the appeal. It was held as follows:
BHARAT ALUMINIUM CO. v. KAISER ALUMINIUM TECHNICAL 34 7
SERVICE, INC. [SURINDER SINGH NIJJAR, J.]
"For the aforesaid reasons, we hold that the applications A
filed by the appellant under Section 34 of the Indian Act
are not maintainable against the two foreign awards dated
10.11.2002 and 12.11.2002 and accordingly dismiss
Misc. Appeal No.889 of 2004 and Misc. Appeal No.890
of 2004, but order that the parties shall bear their own B
costs."
The aforesaid decision has been challenged in this
appeal.
7. We may also notice that number of other appeals and C
special leave petitions as well as transferred case were listed
alongwith this appeal. It is not necessary to take note of the
facts in all matters.
8. We may, however, briefly notice the facts in Bharati 0
Shipyard Ltd. Vs. Ferrostaal AG & Anr. in SLP (C) No.27824
of 2011 as it pertains to the applicability of Section 9 of the
Arbitration Act, 1996. In this case, the appellant, an Indian
Company, entered into two Shipbuilding Contracts with
respondent No.1 on 16th February, 2007. The appellant was E
to construct vessels having Builders Hull No.379 which was to
be completed and delivered by the appellant to the respondent
No.1 within the time prescribed under the two Shipbuilding
Contracts. The agreement contained an arbitration clause. The
parties initially agreed to get their disputes settled through
F
arbitral process under the Rules of Arbitration of the
International Chamber of Commerce (ICC) at Paris,
subsequently, mutually agreed on 29th November, 2010 to
arbitration under the Rules of London Maritime Arbitrators
Association (LMAA) in London. This agreement is said to have
been reached between the parties in the interest of !laving costs G
and time. Prior to agreement dated 29th November, 2010
relating to arbitration under LMAA Rules, respondent No.1 had
filed two requests for arbitration in relation to both the contracts
under Article 4 of ICC Rules on 12th November, 2010
H
348
SUPREME COURT REPORTS
[2012] 12 S.C.R.
A recognizing that the seat of arbitration is in Paris and the
substantive law applicable is English Law. In its requests for
arbitration, respondent No.1 had pleaded in paragraphs 25 and
26 as under:
B
c
D
E
"Applicable Law:
25. The Contract Clause "Governing Law, Dispute and
Arbitration Miscellaneous" provides that the Contract shall
be governed by the Laws of England." The rights and
obligations of the parties are therefore to be interpreted
in light of English Law (the applicable law).
26. In summary:
a) disputes arising out of the Contract between the parties
are to be resolved by arbitration under the ICC Rules;
b) the seat of arbitration is Paris; and
c) the substantive law to be applied in the arbitration shall
be English Law."
9. Subsequently, in view of the agreement dated 29th
November, 2010, the first respondent submitted two requests
for arbitration under LMAA Rules in London on 4th February,
2011. During the pendency of the aforesaid two requests, on
10th November, 2010, the first respondent filed two
F applications under Section 9 of the Arbitration Act, 1996 which
are numbered as AA.No.6/2010 and AA.No.7/2010 seeking
orders of injunction against the encashment of refund bank
guarantees issued under the contracts.
G
10. Learned District Judge, Dakshina Kannada,
Mangalore granted an ex parte ad interim injunction in both the
applications restraining the appellant from encashing the bank
guarantee on 16th November, 2010. The appellant appeared
and filed its statement of objections. After hearing, the learned
H District Judge passed the judgments and orders on 14th
BHARAT ALUMINIUM CO. v. KAISER ALUMINIUM TECHNICAL 349
SERVICE, INC. (SURINDER SINGH NIJJAR, J.]
January, 2011 allowing the applications filed by respondent A
No.1 under Section 9 of the Arbitration Act, 1996.
11. Both the orders were challenged in the appeals by the
appellant before the High Court of Karnataka at Bangalore.