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India: India and International Commercial Arbitration

Last Updated: 23 June 2017
Article by Anchit Oswal
Khaitan & Co
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INDIA AND INTERNATIONAL COMMERCIAL ARBITRATION[1]
The endeavour in the present article is to analyse and understand the Indian law concerning international arbitrations. The
analysis covers the recent amendments introduced in the Indian arbitration law and some recent judgements of the Indian
courts with an objective to sense the trend/ attitude of the two actors i.e. the Legislature and Courts towards international
arbitrations. The Article also endeavours to study the implications of Part I of the Arbitration and Conciliation Act, 1996 being
applicable to an international arbitration and to present a holistic perspective with respect to court's judgement on implied
exclusion of the said Part I and consequences thereof.
A.Introduction
1. Lately, there have been conscious efforts by the Indian Parliament and Indian courts to align the Indian arbitration
jurisprudence with international norms. The recent amendments introduced in the Arbitration and Conciliation Act, 1996 ("1996
Act") by way of Arbitration and Conciliation (Amendment) Act, 2015 ("2015 Amendment") is a step in this direction. The
motivation behind amending the 1996 Act seems to be twofold:
a. to update the 1996 Act in light of the changes adopted by other jurisdictions; and
b. to address specific issues faced by Indian courts while interpreting the original / unamended 1996 Act.
Some of the key changes introduced through the 2015 Amendment are as follows:
a. Only the High Courts and Supreme Court to jurisdiction in relation to international commercial arbitrations.[i]
b. Section 9 (Interim measures), Section 27 (Court assistance in taking evidence) and Sections 37(1) (a) and 37(3) (orders
which are appealable) of Part I of the 1996 Act made applicable to international arbitrations, unless expressly excluded
by the parties.[ii]
c. Non signatories to an arbitration agreement may seek reference to arbitration[iii]
d. Judicial scrutiny while referring the parties to arbitration limited to a prima facie finding of the validity of the arbitration
agreement.[iv]
e. Arbitration proceedings are to be commenced within ninety days after securing an interim order under Section 9.[v]
f. Time bound decisions to be made by courts on applications seeking constitution of the arbitral tribunal.[vi]
g. The fee of the arbitrators to domestic arbitrations (except where parties have agreed to determination of fees as per rules
of an arbitral institution) to be statutorily regulated.[vii]
h. Interim measure orders by a tribunal enforceable like an order of court, hence expediting enforcement.[viii]
i. The arbitral award to be made within a period of twelve months from the date on which the arbitral tribunal enters upon
the reference.[ix]
j. Fast track procedure introduced which requires the award to be rendered within six months from the date on which the
arbitral; tribunal enters the reference.[x]
k. no more automatic stay of award upon filing of objections to the same.[xi]
l. Public policy as a ground to review the awards narrowed and defined.[xii]
http://www.mondaq.com/india/x/604912/Arbitration+Dispute+Resolution/India+and+International+Commercial+Arbitration 1/27
2. Further, on 23 October 2015, the Commercial Courts, Commercial Division and Commercial Appellate Division of High
Courts Act, 2015 came into force. Under Section 10 of the said Act, where the subject matter of an arbitration is a commercial
dispute of a specified value, all applications or appeals arising out of an international commercial arbitration under the 1996
Act, shall be heard and disposed of by the specialised commercial courts under the said Act. This is another step to expedite
the hearing of matters arising out of international arbitrations.
3. The focus of national courts across jurisdictions world over, with respect to international arbitrations has been on party
autonomy and limiting the role of national courts in the arbitral process. Indian courts are also constantly moving in the same
direction. In India, a party has an occasion to approach the national courts in connection to an arbitral proceeding at all the
three stages i.e. prearbitration, during arbitration and post arbitration (enforcement of awards etc.). Indian courts have been
upholding the doctrines of minimum interference and party autonomy at all the three stages. In the prearbitration stage, a party
to an international arbitration can move a jurisdictional court seeking either an antisuit arbitration or an antiarbitration
injunction. Indian courts have constantly refused to issue an antiarbitration injunctions and have made parties to stick to their
bargain to arbitrate their disputes rather than litigating the same in national courts.[xiii] Indian courts have also refused to
interfere with the enforcement foreign arbitral awards.
3.1 In a recent case of Cruz City 1 Mauritius Holdings v. Unitech Limited[xiv] where one of the challenge to enforcement of
foreign arbitral award was that the same is in violation of the foreign exchange laws of India, the Delhi High Court refused to
interfere and observed as under:
"122. Even if it is accepted that the Keepwell Agreement was designed to induce Cruz City to make investments by offering
assured returns, Unitech cannot escape its liability to Cruz City. Cruz City had invested in Kerrush on the assurances held out
by Unitech and notwithstanding that Unitech may be liable to be proceeded against for violation of provisions of FEMA, the
enforcement of the Award cannot be declined.
123.... And thirdly, if Cruz City has been induced to make an investment on a false assurance of the Keepwell Agreement being
legal and valid, Unitech must bear the consequences of violating the provisions of Law, but cannot be permitted to escape their
liability under the Award"
3.2 In the case of NTT Docomo Inc v. Tata Sons Limited[xv], a similar objection has been raised by the Reserve Bank of India
(RBI)[xvi] with respect to breach of foreign exchange laws in India. The Delhi High Court has negated the objections raised by
RBI and rejected its intervention application. The Court inter alia held that RBI has no locus to object to the enforcement of the
award as the same is not a party to the arbitration. On the merits of the case, the Court held the subject agreement to be valid
and capable of being performed under the applicable laws of India. Interestingly, the Court has also upheld the settlement
between the parties, pursuant to which the objections filed by Tatas were withdrawn and the Court has enforced the terms of
the settlement agreement under its jurisdiction under Section 49 (Enforcement of foreign awards) of the 1996 Act. [xvii]
3.3 In another recent case of Zee Sports Ltd. v. Nimbus Media Pvt. Ltd.[xviii], wherein the Bombay High Court refused to
interfere with the arbitral award on merits relying on the judgement in McDermott International Inc. v. Burn Standard Co. Ltd[xix]
, where in the Supreme Court has observed that as under:
"52 The 1996 Act makes provision for the supervisory role of courts, for the review of the arbitral award only to ensure fairness.
Intervention of the court is envisaged in few circumstances only, like, in case of fraud or bias by the arbitrators, violation of
natural justice, etc. The court cannot correct errors of the arbitrators. It can only quash the award leaving the parties free to
begin the arbitration again if it is desired. So, the scheme of the provision aims at keeping the supervisory role of the court at
minimum level and this can be justified as parties to the agreement make a conscious decision to exclude the court's
jurisdiction by opting for arbitration as they prefer the expediency and finality offered by it."
The Bombay High Court refused to continue the stay against enforcement of the award and imposed a cost of Indian Rupees 2
lakhs.
3.4 Similarly, the Kerala High Court in Emmanuel Cashew Industries v. CHI Commodities Handlers Inc[xx], while dealing with
challenge to an arbitral award, interpreting Section 48 of the 1996 Act, which prescribes the conditions for enforcement of
foreign awards in India, observed that by merely filing of objections to the foreign award under Section 48 is not enough and
the objector has to furnish "proof" of circumstances to satisfy any of the conditions mentioned in Section 48 to refuse
enforcement of the foreign award.
4. Above cases are indicative of the trend that Indian courts are taking a pro arbitration stand at every stage of arbitration.
However, the applicability of Part I of the 1996 Act to international arbitrations is still a grey area. Part I of the 1996 Act, if held
to be applicable to international arbitration makes the arbitral process subject to the scrutiny by Indian courts including granting
stay orders against the arbitration proceedings in nature of antiarbitration injunctions and setting aside arbitral awards on the
grounds other than what may be permissible under internationally accepted convention like the New York Convention.
5. The law before the Balco judgement[xxi] was that the Part I of the 1996 Act would apply to both domestic and international
arbitration unless expressly or impliedly excluded by the parties. The Supreme Court, in the landmark Balco Judgement, inter
alia upheld the territorial principle and held that arbitrations which are seated outside India will not attract Part I. However, the
Balco Judgement has been made applicable prospectively i.e. only to those arbitration agreements which are entered into after
6 September 2012.
6. The Authors have previously analysed the possible scenarios where parties can be deemed to have excluded Part I of the
1996 Act by implication[xxii]. The following table endeavours to show the judicial trend in India with respect to applicability of
Part I of the 1996 Act to international arbitrations:
TITLE OF THE ARBITRATION
ISSUE FINDING OF THE COURT
CASE CLAUSE
"27. The proper law of the contract in the
present case being expressly stipulated to
be the laws in force in India and the
exclusive jurisdiction of the courts in
Delhi in all matters arising under the contract
having been specifically accepted, and the
parties not having chosen expressly or by
implication a law different from the Indian law
in regard to the agreement contained in the
[T]he laws applicable to
arbitration clause, the proper law governing
this Contract shall be the
the arbitration agreement is indeed the law in
laws in force in India.
force in India, and the competent courts of
The courts of Delhi shall
this country must necessarily have jurisdiction
have exclusive
over all matters concerning arbitration.
jurisdiction in all
Neither the rules of procedure for the
matters arising under
conduct of arbitration contractually
this contract." (7.2).
Issue: "7. The point for chosen by the parties (the ICC Rules) nor
consideration is whether the High the mandatory requirements of the
27.7 In the event of
foreign contractor, the Court was right in rejecting the procedure followed in the courts of the
appellant's application filed under country in which the arbitration is held
arbitration shall be
the provisions of the Arbitration can in any manner supersede the
conducted by three
arbitrators, one each to Act, 1940 and in holding that the overriding jurisdiction and control of the
award which was made in London Indian law and the Indian courts.
be nominated by the
NTPC v. Singer on an arbitration agreement was
owner and the contractor
Co.[xxiii] not governed by the law of India 51. In sum, it may be stated that the law
and the third to be
and that it was a foreign award expressly chosen by the parties in respect
named by the President
within the meaning of the Foreign of all matters arising under their contract,
of the International
Awards Act and beyond the which must necessarily include the
Chamber of
jurisdiction of the Indian Courts agreement contained in the arbitration
Commerce, Paris. Save
except for the purpose of clause, being Indian law and the exclusive
as above all rules of
recognition and enforcement jurisdiction of the courts in Delhi having
conciliation and
under the latter Act." been expressly recognised by the parties
arbitration of the
to the contract in all matters arising under
International Chamber of
it, and the contract being most intimately
Commerce shall apply to
associated with India, the proper law of
such arbitrations. The
arbitration and the competent courts are
arbitration shall be
both exclusively Indian, while matters of
conducted at such
procedure connected with the conduct of
places as the arbitrators
arbitration are left to be regulated by the
may determine
contractually chosen rules of the ICC to
the extent that such rules are not in
conflict with the public policy and the
mandatory requirements of the proper law
and of the law of the place of arbitration.
The Foreign Awards Act, 1961 has no
application to the award in question which
has been made on an arbitration agreement
governed by the law of India".
Sumitomo "17.0 Laws/Arbitration Issue: "7....What is the area of "11. The conclusion that we reach is that the

Heavy Industries operation of the curial law." curial law operates during the continuance of
17.1 Applicable Laws
Ltd. the proceedings before the arbitrator to
Vs. All questions, disputes or govern the procedure and conduct thereof.
differences arising under, ISSUE The courts administering the curial law have
FINDING OF THE COURT
ONGC Ltd. and
CASE CLAUSE
out of or in connection the authority to entertain applications by
Ors[xxiv]
with this contract shall be parties to arbitrations being conducted within
subject to the laws of their jurisdiction for the purpose of ensuring
India. that the procedure that is adopted in the
proceedings before the arbitrator conforms to
17.2 Arbitration
the requirements of the curial law and for
reliefs incidental thereto. Such authority of the
If any dispute, difference
courts administering the curial law ceases
or question shall at any
when the proceedings before the arbitrator
time hereafter arise
are concluded."
between the parties
hereto or their respective
17. The law which would apply to the filing
representatives or
of the award, to its enforcement and to its
assigns in respect of the
setting aside would be the law governing
construction of these
the agreement to arbitrate and the
presents or concerning
performance of that agreement. Having
anything herein
regard to the clear terms of Clause 17 of the
contained or arising out
contract between the appellant and the first
of these presents or as
respondent, we are in no doubt that the law
to the rights, liabilities or
governing the contract and the law governing
duties of the said parties
the rights and obligations of the parties
hereunder which cannot
arising from their agreement to arbitrate, and,
be mutually resolved by in particular, their obligation to submit
the parties, the same
disputes to arbitration and to honour the
shall be referred to
award, are governed by the law of India; nor
arbitration, the is there any dispute in this behalf.."
proceedings of which
shall be held at
London, U.K. Within 30
days of the receipt of the
notice of intention of
appointing arbitrators
each party shall appoint
an arbitrator of its own
choice and inform the
other party. Before
entering upon the
arbitration, the two
arbitrators shall appoint
an umpire. In case the
parties fail to appoint its
arbitrator within 30 days
from the receipt of a
notice from the other
party in this behalf or if
any dispute in selection
of umpire, the President
of International
Chamber of
Commerce, Paris, shall
appoint the arbitrator
and/or the umpire as the
case may be.
The decision of the
arbitrators and failing to
an agreed decision by
them, the decision of the
umpire shall be final and
binding on the parties.
The arbitration
proceedings shall be ISSUE FINDING OF THE COURT
CASE CLAUSE
held in accordance with
the provision of
International Chamber
of Commerce and the
rules made thereunder
as amended from time to
time. The arbitration
proceedings shall be
conducted in English
language."
"21. ... By omitting to provide that Part I will
not apply to international commercial
arbitrations which take place outside India the
effect would be that Part I would also apply to
International commercial arbitrations held out
of India. But by not specifically providing that
the provisions of Part I apply to international
commercial arbitrations held out of India, the
intention of the legislature appears to be to
ally (sic allow) parties to provide by
agreement that Part I or any provision therein
will not apply. Thus in respect of arbitrations
which take place outside India even the
nonderogable provisions of Part I can be
Arbitration was to be
excluded. Such an agreement may be
conducted as per ICC
Issue: Whether Part I of the 1996 express or implied.
Bhatia Rules at Paris. However,
Act applies to international
International[xxv] the actual clause is not
commercial arbitrations. 32. To conclude, we hold that the
reproduced in the
provisions of Part I would apply to all
Judgment.
arbitrations and to all proceedings relating
thereto. Where such arbitration is held in
India the provisions of Part I would
compulsorily apply and parties are free to
deviate only to the extent permitted by the
derogable provisions of Part I. In cases of
international commercial arbitrations held
out of India provisions of Part I would
apply unless the parties by agreement,
express or implied, exclude all or any of
its provisions. In that case the laws or rules
chosen by the parties would prevail. Any
provision, in Part I, which is contrary to or
excluded by that law or rules will not apply."
CASE CLAUSE
"7.... in the absence of express choice of the
law governing the contract as a whole or the
arbitration agreement as such having been
exercised by the parties, a presumption may
arise that the law of the country where the
arbitration is agreed to be held is the proper
law of the arbitration agreement. The
presumption is rebuttable. The parties have
the freedom to choose the law governing an
international commercial arbitration
agreement. Where there is no express choice
Shreejee Traco whether the Chief Justice of India
of the law governing the contract as a whole,
(I) (P) Ltd. v. "Any disputes or claims or his designate within the
or the arbitration agreement in particular,
Paperline will be submitted to meaning of Section 11 of the Act
there is, in the absence of any contrary
International Inc. arbitration in New York." would be competent to appoint an
indication, a presumption that the parties
[xxvi] arbitrator.[xxvii]
have intended that the proper law of the
contract as well as the law governing the
arbitration agreement are the same as law
of the country in which the arbitration is
agreed to be held. There is nothing in the
contract or correspondence between the
parties to rebut the ordinary presumption and
spell out an intention of the parties that they
intended proper law of India to govern
arbitration in spite of the place of arbitration
having been agreed to be at New York."
"17. Arbitration.—Any
dispute arising out of or
"9. ..... When read normally, the arbitration
in this connection with
clause makes it clear that the matter in
this contract or the
dispute shall be referred to and finally
execution thereof shall, Issue: "(i) Whether an arbitration
resolved by arbitration in accordance with the
to the extent possible, be
clause comes to an end, if the provisions of the Arbitration and Conciliation
settled amicably by
contract containing such Act, 1996 (or any statutory modification,
negotiation and mutual arbitration agreement, was
enactment or amendment thereof) and the
agreement between the abrogated?
venue of arbitration shall be Hong Kong. This
National seller and the buyer. If
interpretation does not render any part of the
Agricultural no settlement can be (ii) Whether Section 11 of the Act
arbitration clause meaningless or redundant.
Coop. Marketing reached in this way, the is inapplicable in regard to the
Merely because the parties have agreed that
Federation India matter in dispute shall arbitrations which are to take
the venue of arbitration shall be Hong Kong, it
Ltd. v. Gains then be referred to and place outside India?
does not follow that laws in force in Hong
Trading finally resolved by
(iii) Whether the appointment of Kong will apply. The arbitration clause states
Ltd[xxviii] arbitration in Hong
the arbitrator, and the reference that the Arbitration and Conciliation Act, 1996
Kong in accordance
arbitration are governed by the (an Indian statute) will apply. Therefore, the
with the provisions of
laws in force in Hong Kong and said Act will govern the appointment of
the Arbitration and
not by the Arbitration and arbitrator, the reference of disputes and the
Conciliation Act, 1996
Conciliation Act, 1996?" entire process and procedure of arbitration
or any other statutory
from the stage of appointment of arbitrator till
modification, enactment
the award is made and executed/given effect
or amendment thereof
to".
for the time being in
force."
CASE CLAUSE
(b) This agreement shall
be construed in
accordance with and
"44. The non obstante clause would override
governed by the laws of
the entirety of the agreement including
the State of Michigan,
Clause (b) which deals with settlement of the
United States, without
dispute by arbitration. Clause (c), therefore,
regard to the conflicts of
would apply to the enforcement of the award
law rules of such
which declares that, notwithstanding that the
jurisdiction. Disputes
proper law or the governing law of the
between the parties that
contract is the law of the State of Michigan,
cannot be resolved via
their shareholders shall at all times act in
negotiations shall be
accordance with the Companies Act and
submitted for final, whether the aggrieved party is
other applicable Acts/rules being in force in
binding arbitration to the entitled to challenge the foreign
Venture India at any time. ....."
London Court of award which was passed outside
Global[xxix]
Arbitration. India in terms of Sections 9/34 of
47. In terms of the decision in Bhatia
the Act[xxx]
International., we hold that Part I of the Act
(c) Notwithstanding
is applicable to the award in question
anything to the
even though it is a foreign award. We have
contrary in this
not expressed anything on the merits of claim
agreement, the
of both the parties. It is further made clear
shareholders shall at
that if it is found that the court in which the
all times act in
appellant has filed a petition challenging the
accordance with the
award is not competent and having
Companies Act and
jurisdiction, the same shall be transferred to
other applicable
the appropriate court."
Acts/rules being in
force, in India at any
time."
CASE CLAUSE
"13. Settlement of
disputes 13.1. This
agreement, its
construction, validity
and performance shall
be governed by and
construed in
accordance with the
laws of England and
36. "..... it is fairly well settled that when an
Wales;
arbitration agreement is silent as to the law
13.2. Subject to Clause "... primarily two questions were and procedure to be followed in implementing
13.3 all disputes or required to be answered in this the arbitration agreement, the law governing
differences arising out of, matter, namely: the said agreement would ordinarily be the
or in connection with, same as the law governing the contract itself.
(i) Whether Clauses 13.2 and 13.3
this agreement which The decisions cited by Mr Tripathi and the
of the memorandum of
cannot be settled views of the jurists referred to in NTPC
understanding can be construed
amicably by the parties support such a proposition. What, however,
to be an arbitration agreement;
shall be referred to distinguishes the various decisions and
and
adjudication; views of the authorities in this case is the
Indtel Technical
(ii) Whether having regard to fact that in Bhatia International this Court
Services (P) Ltd. 13.3. If any dispute or
Clause 13.1 of the memorandum laid down the proposition that
v. W.S. Atkins difference under this
of understanding indicating that notwithstanding the provisions of Section
Rail Ltd[xxxi] agreement touches or
the construction, validity and 2(2) of the Arbitration and Conciliation
concerns any dispute or
performance of the agreement Act, 1996, indicating that Part I of the said
difference under either of
would be governed by and Act would apply where the place of
the subcontract
constructed in accordance with arbitration is in India, even in respect of
agreements, then the
laws of England and Wales, this international commercial agreements, which
parties agree that such
Court would have jurisdiction to are to be governed by the laws of another
dispute or difference
appoint an arbitrator under country, the parties would be entitled to
hereunder will be invoke the provisions of Part I of the aforesaid
Section 11 of the Arbitration and
referred to the
Conciliation Act, 1996." Act and consequently the application made
adjudicator or the courts
under Section 11 thereof would be
as the case may be
maintainable."
appointed to decide the
dispute or difference
under the relevant sub
contract agreement and
the parties hereto agree
to abide by such
decision as if it were a
decision under this
agreement."
CASE CLAUSE
"26. In my opinion the scope of the
expressions in para 23 of NTPC case must
be held to be limited. There may be
presumption where the parties have agreed
to hold arbitration in a particular country. In
that circumstance, the presumption would
arise that the law of the country where the
arbitration is agreed to be held would apply
as a law of contract. Where there has been
"10. Any dispute no specific expression about the law of
contract, the situation is otherwise. In this
between the parties
case the law of contract is agreed upon as
hereto arising from this
the Californian law.
Agreement, or from an
individual agreement
27. However, there is no agreement in
concluded on the basis
respect of the law governing the procedure of
thereof, shall be finally
arbitration.
referred to a mutually "12. .... the question that has
agreed Arbitrator. arisen is whether this Court would 32...if the parties intended specifically in this
have the jurisdiction in the present case that the law governing the contract was
Citation
"10.1 Governing law factual scenario and on the Californian law, as expressed in Bhatia
Infowares Ltd. v.
This agreement shall backdrop of the fact that the International as well as in Indtel Technical
Equinox Corp. be governed by and parties vide the aforementioned Services case, an implied exclusion of Part I
[xxxii]
interpreted in Clause 10.1 had agreed that the should be presumed. I am afraid it is not
accordance with the governing law would be that of possible to read such an implied exclusion.
laws of California, USA California, USA."
Seeing the striking similarity between Clause
and matters of dispute, if
10.1 in the instant case and Clauses 13.1 and
any, relating to this
13.2 in Indtel case which have been quoted
agreement or its subject
above and further the view expressed by the
matter shall be referred
learned Judge in Indtel Technical Services
for arbitration to a
case regarding the exclusion, it is not
mutually agreed
possible to even distantly read such an
Arbitrator.
implied exclusion of Part I. It cannot be
forgotten that one of the contracting parties is
the Indian party. The obligations under the
contract were to be completed in India.
Further, considering the nature of the
contract, it is difficult to read any such implied
exclusion of Part I in the language of Clause
10.1. That argument of learned Senior
Counsel for the respondent therefore must be
rejected."
CASE CLAUSE
"33.1. Indian law to
govern.—Subject to the
provisions of Article
34.12, this contract shall
be governed and
interpreted in
accordance with the laws
of India.
.....
34.12. Venue and law of
"Whether the Delhi High Court
arbitration agreement.—
could entertain the petition filed by
The venue of sole
the respondents under Section 9
expert, conciliation or
of the Arbitration and Conciliation
arbitration proceedings
Act, 1996 (for short "the Act") for
pursuant to this article, 33. In the present case also, the parties had
grant of a declaration that Kuala
unless the parties agreed that notwithstanding Article 33.1,
Videocon Lumpur (Malaysia) is the
otherwise agree, shall be the arbitration agreement contained in
Industries Ltd. v. contractual and juridical seat of
Kuala Lumpur, Article 34 shall be governed by laws of
Union of arbitration and for issuance of a
Malaysia, and shall be England. This necessarily implies that the
India[xxxiii] direction to the Arbitral Tribunal to
conducted in the English parties had agreed to exclude the
continue the hearing at Kuala
language. Insofar as provisions of Part I of the Act.
Lumpur in terms of Clause 34 of
practicable, the parties
the Production Sharing Contract
shall continue to
(PSC), is the question which
implement the terms of
arises for consideration in this
this contract
appeal."
notwithstanding the
initiation of arbitral
proceedings and any
pending claim or dispute.
Notwithstanding the
33.1, the arbitration
agreement contained
in this Article 34 shall
be governed by the
laws of England."
CASE CLAUSE
Article 22. Governing
"20. In that view, my inferences are that:
Laws — 22.1: This
agreement shall be (i) The clear language of Articles 22 and 23 of
governed by and "5. The respondent, therefore, the distributorship agreement between the
construed in accordance parties in this case spells out a clear
contended that the petitioner
with the laws of The agreement between the parties excluding
would not be entitled to maintain
Republic of Korea. Part I of the Act.
the present proceedings in India
by invoking the provisions of the
Dozco India Article 23. Arbitration — (ii) The law laid down in Bhatia International
Act. The respondent specifically
Private Ltd. v. 23.1: All disputes arising v. Bulk Trading S.A. and Indtel Technical
disputes the stand of the petitioner
Doosan in connection with this Services (P) Ltd. v. W.S. Atkins Rail Ltd., as
that there is nothing in the
Infracore agreement shall be also in Citation Infowares Ltd. v. Equinox
agreement to deny the
Company finally settled by Corpn. is not applicable to the present case.
applicability of Indian procedural
Ltd[xxxiv] arbitration in Seoul,
law seeking appointment of (iii) Since the interpretation of Article 23.1
Korea (or such other
arbitrator. The respondent also suggests that the law governing the
place as the parties may
specifically contended that there is arbitration will be Korean Law and the seat
agree in writing),
express exclusion of Indian courts of arbitration will be Seoul in Korea, there
pursuant to the rules of
and/or the applicability of the Act. will be no question of applicability of
agreement then in force
Section 11(6) of the Act and the
of the International
appointment of arbitrator in terms of that
Chamber of
provision.
Commerce."
CASE CLAUSE
"27. Arbitration.
27.1 All disputes,
differences arising out of
or in connection with the
Agreement shall be
referred to arbitration.
The arbitration
proceedings shall be
conducted in English in
Singapore in "38. Having agreed to the above, it was no
longer available to the Appellant to contend
accordance with the
Singapore International that the "proper law" of the agreement would
apply to the arbitration proceedings. The
Arbitration Centre
(SIAC) Rules as in force decision in Bhatia International v. Bulk
Trading S.A., which was applied
at the time of signing of
subsequently in the case of Venture Global
this Agreement. The
arbitration shall be final "(i) whether the Indian courts Engg. v. Satyam Computer Services Ltd. and
and binding. would have jurisdiction to entertain Citation Infowares Ltd. v. Equinox

an appeal under Section 37 of the Corporation, would have no application once
27.2 The arbitration shall Arbitration and Conciliation Act, the parties agreed by virtue of Clause 27.1
Yograj take place in Singapore 1996, against an interim order of the Agreement that the arbitration

Infrastructure and be conducted in passed by the Arbitral Tribunal proceedings would be conducted in
English language. with its seat in Singapore? Singapore, i.e., the seat of arbitration
Ltd. v. Ssang
Yong Engg. and would be in Singapore, in accordance with
27.3 None of the Party (ii) whether the "law of arbitration" the Singapore International Arbitration
Construction shall be entitled to would be the International Centre Rules as in force at the time of
Co. Ltd[xxxv]
suspend the Arbitration Act, 2002, of signing of the Agreement.
performance of the Singapore? and
Agreement merely by ...In the instant case, once the parties had
reason of a dispute (iii) whether the "curial law" would specifically agreed that the arbitration
and/or a dispute referred be the laws of Singapore?" proceedings would be conducted in
to arbitration. accordance with the SIAC Rules, which
includes Rule 32, the decision in Bhatia
"32. Clause 28 of the International and the subsequent decisions
Agreement describes the
on the same lines, would no longer apply in
governing law and the instant case where the parties had
provides as follows:
willingly agreed to be governed by the SIAC
Rules."
This agreement shall
be subject to the laws
of India. During the
period of arbitration, the
performance of this
agreement shall be
carried on without
interruption and in
accordance with its
terms and provisions".
CASE CLAUSE
"17.1. Any dispute or
claim arising out of or
relating to this
agreement shall be in
the first instance,
endeavoured to be
settled amicably by
negotiation between the
194. In view of the above discussion, we are
parties hereto and failing
which the same will be of the considered opinion that the Arbitration
Act, 1996 has accepted the territoriality
settled by arbitration
pursuant to the English principle which has been adopted in the
Uncitral Model Law. Section 2(2) makes a
arbitration law and
declaration that Part I of the Arbitration Act,
subsequent
amendments thereto. 1996 shall apply to all arbitrations which take
place within India. We are of the considered
17.2. The arbitration opinion that Part I of the Arbitration Act, 1996
proceedings shall be would have no application to international
Bharat carried out by two Does Section 2(2) bar the commercial arbitration held outside India.
Aluminium Co. arbitrators, one application of Part I to arbitrations Therefore, such awards would only be
v. Kaiser appointed by Balco and which take place outside India? subject to the jurisdiction of the Indian courts
Aluminium one by Kaiser chosen when the same are sought to be enforced in
Technical freely and without any Does Section 2(7) indicate that India in accordance with the provisions
Services Inc. Part I applies to arbitrations held
bias. The Court of contained in Part II of the Arbitration Act,
[xxxvi] Arbitration shall be held outside India? 1996. In our opinion, the provisions contained
wholly in London, in the Arbitration Act, 1996 make it crystal
England and shall use clear that there can be no overlapping or
English language in the intermingling of the provisions contained in
proceeding. The findings Part I with the provisions contained in Part II
and award of the Court of the Arbitration Act, 1996.
of Arbitration shall be
196. We conclude that Part I of the Arbitration
final and binding upon
the parties. Act, 1996 is applicable only to all the
arbitrations which take place within the
*** territory of India.
22.Governing law.—This
agreement will be
governed by the
prevailing law of India
and in case of
arbitration, the English
law shall apply."
CASE CLAUSE
"32. Applicable law and
language of the contract:
32.1. Subject to the
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 60. In this case, the parties have by
Government or the agreement provided that the juridical seat
contractor to exercise of arbitration will be in London. On the
the rights, privileges and basis of the aforesaid agreement, necessary
powers conferred upon it amendment has been made in the PSCs. On
by this contract in a the basis of the agreement and the consent
manner which will of the parties, the Arbitral Tribunal has made
contravene the laws of the "final partial consent award" on 149
India. 2011 fixing the juridical seat (or legal
place) of arbitration for the purposes of
32.3. ..... arbitration initiated under the claimants'
"37. ...whether Part I of the
Reliance notice of arbitration dated 16122010 in
33. Sole expert, Arbitration Act, 1996 would be
Industries London, England. To make it even further
conciliation and applicable to the arbitration
Limited and clear that the award also records that any
arbitration: agreement irrespective of the fact
Another v. Union hearing in the arbitration may take place in
that the seat of arbitration is
of India[xxxvii] 33.12. The venue of Paris, France, Singapore or any other
outside India."
conciliation or location the Tribunal considers convenient.
arbitration proceedings Article 33.12 stipulates that arbitration
pursuant to this article, proceedings shall be conducted in English
unless the parties language. The arbitration agreement
otherwise agree, shall contained in Article 33 shall be governed by
be London, England the laws of England. A combined effect of
and shall be conducted all these factors would clearly show that
in the English language. the parties have by express agreement
The arbitration excluded the applicability of Part I of the
agreement contained in Arbitration Act, 1996 (Indian) to the
this Article 33 shall be arbitration proceedings.
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."
CASE CLAUSE
"This contract is subject
to the Rules of The
Refined Sugar
Association, London
as fully as if the same
had been expressly
inserted herein, whether
or not either or both
parties to it are Members
of the Association. "5. Since one of the terms and conditions of
the agreement makes the contract subject to
If any provision of this
the Rules of the Refined Sugar Association,
contract is inconsistent "The issue which falls for
London by treating the same to have been
Sakuma Exports with the Rules, said determination in the appeal is
expressly inserted in the agreement, Rule 8
v Louis Dreyfus provisions shall prevail." whether parties in this case by
of the Refined Sugar Association, London
Commodities their agreement, express or
"Arbitration: All disputes implied, have excluded all or any leaves no manner of doubt that the parties
Suisse
arising out of or in have not only accepted English law as the
S.A[xxxviii] of the provisions of PartI of the
conjunction with this law governing the contract but the
Act of 1996."[xxxix]
Contract shall be disputes and the arbitration shall also be
referred to the Refined governed by the law of England. The seat
Sugar Association, of Arbitration is admittedly England.
London for settlement in
accordance with the
Rules relating to
Arbitration. This
Contract shall be
governed by and
construed in
accordance with
English Law."
CASE CLAUSE
"17. Governing law
17.1 This agreement and
any dispute or claims
arising out of or in
connection with its
subjectmatter are
governed by and
construed in accordance
with the law of India.
18. Disputes and "114... curial law of England would become
arbitration applicable only if there was clear designation
of the seat in London. Since the parties
18.3 The proceedings in
have deliberately chosen London as a
such arbitration shall be venue, as a neutral place to hold the
conducted in English. meetings of arbitration only, it cannot be
The venue of the "71.5. (v) In case the arbitration
accepted that London is the seat of
arbitration proceedings clause is held to be workable, is arbitration. .... If seat is in London, then
shall be in London. The the seat of arbitration in London or
challenge to the award would also be in
arbitrators may (but shall in India? London. But the parties having chosen the
not be obliged to) award
Enercon (India) costs and reasonable 71.6. (vi) In the event it is held that Indian Arbitration Act, 1996—Chapters III, IV,
the seat is in India, would the V and VI; Section 11 would be applicable for
Ltd. v. Enercon expenses (including appointment of arbitrator in case the
GmbH[xl] reasonable fees of English courts have the
concurrent jurisdiction for taking machinery for appointment of arbitrators
counsel) to the party(ies) agreed between the parties breaks down.
that substantially prevail such measures as required in
support of the arbitration as the This would be so since the ratio laid down in
on merit. The Bhatia will apply i.e. Part I of the Indian
provisions of the venue for the arbitration
Arbitration Act, 1996 would apply even
Indian Arbitration and proceedings is London?
though the seat of arbitration is not in India.
Conciliation Act, 1996 This position has been reversed in Balco, but
shall apply.
only prospectively. Balco would apply to the
agreements on or after 692012. Therefore,
The reference of any
matter, dispute or claim to interpret that London has been designated
or arbitration pursuant to as the seat would lead to absurd results
this Section 18 or the
continuance of any
arbitration proceedings
consequent thereto or
both will in no way
operate as a waiver of
the obligations of the
parties to perform their
respective obligations
under this agreement."
CASE CLAUSE
"44. ...... As we perceive, it forms as a part of
the arbitration clause. There is ample
indication through various phrases like
"arbitration in London to apply", arbitrators
"The issue that has emanated for are to be the members of the "London
consideration in this appeal is
Arbitration Association" and the contract "to
whether in the obtaining factual be governed and construed according to
matrix, especially regard being English Law". It is worth noting that there is
"5. If any dispute or
had to the nature of the arbitration
difference should arise no other stipulation relating to the applicability
clause, the High Court is justified of any law to the agreement. There is no
under this charter,
in setting aside the order passed
general other clause anywhere in the contract. That
by the learned Additional District apart, it is also postulated that if the dispute is
average/arbitration in
Judge, Ernakulam on 25.9.2014 in
London to apply, one to for an amount less than US $ 50000 then, the
I.A. No. 4345 of 2014 in O.P.
be appointed by each of arbitration should be conducted in
(ARB) No. 802/2014 directing the accordance with small claims procedure of
the parties hereto, the
first respondent therein to furnish
third by the two so the London Maritime Arbitration
security for US$ 11,15,400 or its Association. When the aforesaid stipulations
chosen, and their
equivalent (approximate) Indian
decision or that of any are read and appreciated in the contextual
Rupees 6,60,00,000/ or to show perspective, "the presumed intention" of
two of them, shall be
cause on or before 01.10.2014, the parties is clear as crystal that the
final and binding, and
and as an interim measure
this agreement may, for juridical seat of arbitration would be
conditionally attaching the cargo London.
enforcing the same, be
belonging to the first respondent
Harmony made a rule of Court.
herein, while dealing with an 46. Thus, interpreting the clause in question
Innovation Said three parties to be
application moved under Section 9 on the bedrock of the aforesaid principles it is
Shipping Ltd. v. commercial men who are of the Arbitration and Conciliation vivid that the intended effect is to have the
the members of the
Gupta Coal India London Arbitrators Act, 1996 (for brevity, "the Act"), seat of arbitration at London. The
on the foundation that Section 9 of commercial background, the context of
Ltd. & Anr.[xli] Association. This
the Act is limited to the the contract and the circumstances of the
contract is to be
applications to arbitration that parties and in the background in which
governed and
takes place in India and has no the contract was entered into, irresistibly
construed according to
applicability to arbitration which lead in that direction. We are not impressed
English Law. For
takes place outside India in view by the submission that by such interpretation
disputes where total
of the pronouncement in Bharat it will put the respondent in an advantageous
amount claim by either
Aluminium Co. v. Kaiser position. Therefore, we think it would be
party does not exceed
Aluminium Technical Services Inc. appropriate to interpret the clause that it is a
USD 50,000 the
inasmuch as clause 5 of the proper clause or substantial clause and not a
arbitration should be
contract which is the arbitration curial or a procedural one by which the
conducted in accordance
clause clearly spells out that the arbitration proceedings are to be conducted
with small claims
contract is to be governed and and hence, we are disposed to think that
procedure of the
construed according to English the seat of arbitration will be at London.
London Maritime
law and if the dispute of the claim
Arbitration
does not exceed USD 50,000, the 47. Having said that the implied exclusion
Association." principle stated in Bhatia International (supra)
arbitration should be conducted in
accordance with small claims would be applicable, regard being had to the
clause in the agreement, there is no need to
procedure of the London Maritime
Arbitration Association." dwell upon the contention raised pertaining to
the addendum, for any interpretation placed
on the said document would not make any
difference to the ultimate conclusion that we
have already arrived at."
CASE CLAUSE
The question is whether the above
stipulations show the intention of the parties
to expressly or impliedly exclude the
provisions of Part I to the arbitration, which
was to be held outside India i.e. in London.
We think that the clause evinces such an
intention by providing that the English law
will apply to the arbitration. The clause
28. Any dispute arising expressly provides that Indian law or any
under this C.O.A. is to be other law will not apply by positing that
settled and referred to English law will apply. The intention is that
Arbitration in London. English law will apply to the resolution of
One Arbitrator to be any dispute arising under the law. This
employed by the means that English law will apply to the
Charterers and one by conduct of the arbitration. It must also
the Owners and in case follow that any objection to the conduct of
they shall not agree then the arbitration or the award will also be
24. Thus, the main question on
shall appoint an Umpire governed by English law. Clearly, this
which contentions were advanced
whose decision shall be implies that the challenge to the award
by the learned counsel for the
Eitzen Bulk A/S final and binding, the must be in accordance with English law.
parties is whether Part I of the
v. Ashapura Arbitrators and Umpire to There is thus an express exclusion of the
Arbitration Act is excluded from its
Minechem Ltd. be Commercial Shipping applicability of Part I to the instant arbitration
operation in case of a foreign
[xlii] Men. English Law to by Clause 28. In fact, Clause 28 deals with
award where the arbitration is not
apply. Notwithstanding not only the seat of arbitration but also
held in India and is governed by
anything to the contrary provides that there shall be two arbitrators,
foreign law
agreed in the C.O.A., all one appointed by the charterers and one by
disputes where the the owners and they shall appoint an umpire,
amount involved is less in case there is no agreement. In this context,
that USD 50,000/ (fifty it may be noted that the Indian Arbitration and
thousand) the Arbitration Conciliation Act, 1996 makes no provision for
shall be conducted in umpires and the intention is clearly to refer to
accordance with the an umpire contemplated by Section 21 of the
Small Claims Procedure English Arbitration Act, 1996. It is thus clear
of L.M.A.A. that the intention is that the arbitration should
be conducted under the English law i.e. the
English Arbitration Act, 1996. It may also be
noted that Sections 67, 68 and 69 of the
English Arbitration Act provide for challenge
to an award on grounds stated therein. The
intention is thus clearly to exclude the
applicability of Part I to the instant arbitration
proceedings.
7. Below is a matrix segregating components of arbitration agreements (or as interpreted by the court) and the applicability of
Part I in respect to the above cases:
PROPER LAW CURIAL/
PROPER LAW
OF THE MAIN PROCEDURAL
OF THE PLACE/ EXCLUSIVE APPLICABLITY
CASE CONTRACT/ LAW OF THE SEAT
ARBITRATION VENUE JURISDICTION OF PART I
SUBSTANTIVE ARBITRATION
AGREEMENT
LAW AGREEMENT
NTPC v. Singer
Co.[xliii]
Bench Strength: 2
Judges
√[xliv] (Indian √ (Courts of
√ (Indian law) √ (ICC Rules) None None Applicable
Proceedings: law) Delhi)
Sections 14, 30
and 33 of the
Arbitration Act,
1940
Sumitomo Heavy
Industries Ltd. v.
ONGC Ltd. and
Ors[xlv]
√ (Indian law) None √ (ICC Rules) None √ (London) None Applicable
Bench Strength: 3
Judges
Proceedings:
Appellate
Bhatia
International[xlvi]
Bench Strength: 3
Judges
Proceedings:
Appellate
None None √ (ICC Rules) None √ (Paris) None Applicable
proceeding
against rejection
of Petition under
Section 9 of the
1996 Act
(Rejection of
interim measure)
Shreejee Traco
(I) (P) Ltd. v.
Paperline
International Inc.
[xlvii]
Bench Strength:
None None None None √ (New York) None Applicable[xlviii]
Single Judge
Proceedings:
Section 11 of the
1996 Act
(Appointment of
Arbitrator)
National
Agricultural
Coop. Marketing
Federation India
Ltd. v. Gains
Trading Ltd[xlix]
√ (Hong
Bench Strength: None None √ (1996 Act) None None Applicable
Kong)
Single Judge
Proceedings:
Section 11 of the
1996 Act
(Appointment of
Arbitrator)
Venture Global[l]
Bench Strength: 2
Judges
Proceedings: In issue None None None None None Applicable

Appeal against
rejection to set
aside the arbitral
award.
Indtel Technical
Services (P) Ltd.
v. W.S. Atkins
Rail Ltd[li]
Bench Strength:
Single Judge √ (English law) None None None None None Applicable
Proceedings:
Section 11 of the
1996 Act
(Appointment of
Arbitrator)
Citation
Infowares Ltd. v.
Equinox Corp.[lii]
Bench Strength:
√ (Laws of
Single Judge
California, None None None None None Applicable
Proceedings: USA)
Section 11 of the
1996 Act
(Appointment of
Arbitrator)
Videocon
Industries Ltd. v.
Union of India[liii]
Bench Strength: 2 √(Kuala
Judges √(Indian law) √(English law) None None Lumpur, None Not applicable
Malaysia)
Proceedings:
Appeal against
Section 9
proceedings.
Dozco India
Private Ltd. v.
Doosan Infracore
Company Ltd[liv]
Bench Strength:
Single Judge √(Korean law) None √(ICC Rules) None √(Korea) None Not applicable
Proceedings:
Section 11 of the
1996 Act
(Appointment of
Arbitrator)
Yograj
Infrastructure
Ltd. v. Ssang
Yong Engg. and
Construction Co.
Ltd[lv]
√(Indian) None √(SIAC Rules) None √(Singapore) None Not applicable
Bench Strength: 2
Judges
Proceedings:
Appeal from
Section 37
Proceeding.
Reliance
Industries
Limited and
Another v. Union
of India[lvi]
√[lvii]
Bench Strength: 2 √(Indian law) √(English law) None √(London) None Not applicable
(London)
Judges
Proceedings:
Appeal from
Section 34
Proceeding
Sakuma Exports
v Louis Dreyfus
Commodities
Suisse S.A[lviii]
√(The Refined
Bench Strength: 2 Sugar
√(English law) None England None None Not applicable
Judges Association,
London)
Proceedings:
Appeal against
Section 34
proceeding.
Enercon (India)
Ltd. v. Enercon
GmbH[lix]
Bench Strength:
Single Judge √[lx]
√(Indian law) None √(1996 Act) √(London) None Applicable
(India)
Proceedings:
Section 11 of the
1996 Act
(Appointment of
Arbitrator)
Harmony
Innovation
Shipping Ltd. v.
Gupta Coal India
√(London
Ltd. & Anr.[lxi]
Maritime √[lxii]
√(English Law) None √(London) None Not applicable
Bench Strength: 2 Arbitration (London)
Judges Association)
Proceedings:
Sections 9/47 and
49 of the 1996 Act
8. New Cases On Applicability Of Part I Of The 1996 Act
8.1 After the decision of the Supreme Court in Harmony case, the issue of applicability of Part I of the 1996 Act arose in the
case of Eitzen Bulk A/S v. Ashapura Minechem Ltd.[lxiii] The arbitration clause in the Eitzen case is reproduced herein
below:
"28. Any dispute arising under this COA is to be settled and referred to arbitration in London. One arbitrator to be employed by
the charterers and one by the owners and in case they shall not agree then shall appoint an umpire whose decision shall be
final and binding, the arbitrators and umpire to be commercial shipping men. English law to apply. Notwithstanding anything to
the contrary agreed in the COA, all disputes where the amount involved is less than USD 50,000 (fifty thousand) the arbitration
shall be conducted in accordance with the small claims procedure of LMAA."
8.2 The Indian party contended that Indian courts will have jurisdiction under Part I of the 1996 Act and the award can be
challenged in India under the said Part I. Gujarat High Court and Bombay High Court gave a conflicting decision on the
jurisdiction of Indian courts under Part I of the 1996 Act. While the Gujarat High Court held that the Indian court shall have the
jurisdiction to adjudicate the foreign award under Part I of the 1996 Act, , the Bombay High Court ruled against applicability of
Part I of the 1996 Act.
8.3 If we break down the arbitration clause as per the above table, the variables would appear as under:
PROPER LAW CURIAL/
PROPER LAW
OF THE MAIN PROCEDURAL
CASE CONTRACT/ LAW OF THE SEAT
AGREEMENT
LAW AGREEMENT
Eitzen Bulk
A/S v.
Ashapura
Minechem
Ltd.
√(London
Bench
Maritime
Strength: 2 English law None London[lxiv] London None Not applicable
Arbitration
Judges
Association)
Proceedings:
Sections
34,47, 48 and
49 of the 1996
Act
8.4 From the analysis of the above variables and based on the Supreme Court's previous decisions, it is clear that Part I has
been impliedly excluded by the parties as the place of arbitration is outside India. The proper law governing the main contract
is defined as English law, which choice shall also extend to the arbitration agreement as its governing law and therefore the
challenge to award, if any has to be under English law in English courts and not in Indian courts. The Supreme Court
concluded that same and stated that since the choice made by the parties in terms of location of the arbitration is outside India,
it would be governed by English law. The Supreme Court went a step further and held that even the seat of arbitration in the
instant case would be at London and therefore, Part I has been "expressly" excluded by the parties.
8.5 The question again arose in a recent case of Imax Corporation v. M/s. ECity Entertainment (I) Pvt. Ltd[lxv] ("Imax
case"). In the Imax case, Imax Corporation, a company incorporated under the laws of Canada objected to the jurisdiction of
Indian courts under Section 34 of the 1996 Act which falls within the Part I of the 1996 Act and gives Indian courts jurisdiction
to set aside an arbitral award. The arbitration clause in the said case is reproduced herein below:
"This Agreement shall be governed by and construed according to the laws of Singapore, and the parties attorn to the
jurisdiction of the courts of Singapore. Any dispute arising out of this master agreement or concerning the rights, duties or
liabilities of ECity or Imax hereunder shall be finally settled by arbitration pursuant to the ICC Rules of Arbitration."
8.6 Let us test the variables in the arbitration clause in the Imax case.
PROPER LAW OF CURIAL/
PROPER LAW
THE MAIN PROCEDURAL LAW
CASE CONTRACT/ OF THE SEAT
AGREEMENT
LAW AGREEMENT
Imax
Singapore Law None ICC Rules London[lxvi] None None Not Applicable
Case
8.7 The Bombay High Court while deciding the matter, based on the law as then existed, inter alia observed that Part I of the
1996 Act would apply because of the following reasons:
a. the subject agreement was signed in India
b. the projects/machinery/services were required to be provided in India subject to approval/sanction of Indian laws
c. ICC rules does not bar the applicability of Part I of the 1996 Act
d. venue itself is not decisive factor to exclude PartI of the 1996 Act
8.8 In view of the above, the Bombay High Court invoked the doctrine of close nexus for interpreting the scope of dispute
resolution clause. It further observed that the agreement is vague and therefore, the surrounding circumstances must be
examined. . The court held that merely agreeing to Singapore law as the law governing the contract/ proper law of the contract,
will not suffice to oust the jurisdiction of Indian courts and since, the contract is more closely related to Indian law, Indian law
would govern parties and Part I of the 1996 Act would be applicable.
8.9. Proceedings before the Supreme Court
The only question that arose before the Supreme Court was whether the petition under Section 34 of the Arbitration Act is
maintainable before a court in India, and in this case, the Bombay High Court.
The Supreme Court relied on the judgment of NTPC[lxvii] and Sukuma Exports[lxviii], wherein the Supreme Court had held that
in absence of the intention to the contrary, the law governing the main contract i.e. proper law should extend to the arbitration
agreement as well. The Supreme Court further also observed that in the instant case the parties consented for the seat to be
at London. The Supreme Court observed that the decision of ICC to hold arbitration outside India is enough to infer that the
parties chose to exclude Part I of the 1996 Act. The Supreme Court, accepting the territorial principle, held that the place of
arbitration determines the law that will apply to the arbitration and related matters like challenges to the award etc. The
Supreme Court further upheld the proposition that law of the seat would be crucial factor in determining the law applicable to
the arbitration agreement and has further emphasised on venue of arbitration being outside India i.e. London to be a
circumstance to show nonapplicability of Part I of the Act.
9. Conclusion
While the judgements of Indian courts in post Balco and post amendments to the 1996 Act are clearly proarbitration, the
Indian courts have done a commendable job by keeping the spirit of arbitration law alive, respecting party autonomy and
minimising court's interference in cases where the arbitration agreement are signed prior to the Balco Judgment since such
cases still attract the ratio of Venture Global and Bhatia International, possibly making Part I applicable to international
commercial arbitrations.
The above analysis of the decisions of Indian Supreme Court clearly indicates its views on various permutation and
combinations possible of the different variables contained in an arbitration agreement. Foreign companies entering into
commercial transactions with an Indian company can expect a 'proarbitration' approach by courts in India. The uncertainty with
respect to the role of national courts and at times undue interference with the arbitration process has been minimised through
the recent amendments to the 1996 Act and various judicial precedents relating to applicability of Part I to international
arbitrations agreements. Applicability of Part I of the 1996 Act will depend on the facts and circumstances of each case. For
instance, in the Imax Case, parties consented to the seat of arbitration being at London. Likewise, determination of seat is a
material circumstance to rule on the applicability of Part I as was done in the case of Reliance Industries where the seat was
held to be at London by the tribunal. Similarly, in the cases of Harmony and Eitzen, the court ruled the seat of arbitrations at
London and therefore Part I was held inapplicable On the contrary, in the case of Enercon, seat was held to be in India and
therefore Part I was held to be applicable
Another recent example of not interfering with award passed in an international arbitration even when Part I is attracted is the
judgement of the Delhi High Court in Shaki Nath & Ors. v. Alpha Tiger Cyprus Investment No.3 Ltd & Ors.[lxix]. In the Alpha
Tiger judgement, the Delhi High Court has refused to interfere with the award and negated objections with respect to the
qualification of the arbitrator as being raised belatedly. The Court also held that the Tribunal was justified in awarding damages
in favour of the investor and the same does not amount to exercise of 'put option' (which is not allowed as per the Indian
foreign exchange laws). Shakti Nath has filed an appeal before the Division Bench of Delhi High Court, wherein arguments
have been heard and judgement is reserved.[lxx]The above analysis may benefit those parties who have a preBalco
arbitration agreement to make a judgement as to the applicability of Part I of the 1996 Act to the facts specific to their case.
That apart, the above analysis clearly brings out a pro arbitration attitude of the Indian courts as well as the Legislature. The
foreign investors entering into contract with Indian parties can confidently incorporate arbitration as the mode of dispute
resolution and be reasonably assured that Indian courts will support the arbitral process by respecting party autonomy and
keeping the intervention at the minimum threshold.
Footnotes
[1] Author is a Senior Associate with Khaitan & Co, New Delhi India and can be reached at anchitnliu@gmail.com. The views expressed in the present
article are author's personal views and does not necessarily reflect view/ position of Khaitan & Co.
[i] See Section 2(e) of the 1996 Act
[ii] See Section 2 (2) of the 1996 Act;
[iii] See Section 8 of the 1996 Act
[iv] See Supra
[v] See Section 9 of the 1996 Act
[vi] See Section 11(13) of the 1996 Act; 60 days
[vii] See Section 11 (14) of the 1996 Act
[viii] See Section 17(2) of the 1996 Act
[ix] See Section 29A of the 1996 Act
[x] See Section 29B of the 1996 Act
[xi] See Section 36(2) of the 1996 Act
[xii] Section 48
....
"Explanation 1.—For the avoidance of any doubt, it is clarified that an award is in conflict with the public policy of India, only if,—
(i) the making of the award was induced or affected by fraud or corruption
or was in violation of section 75 or section 81; or
(ii) it is in contravention with the fundamental policy of Indian law; or
(iii) it is in conflict with the most basic notions of morality or justice.
Explanation 2. —For the avoidance of doubt, the test as to whether there is a contravention with the fundamental policy of Indian law shall not entail a
review on the merits of the dispute.".
[xiii] Pl see Enercon (India) Ltd. v. Enercon Gmbh, (2014) 5 SCC 1; Chloro Controls India (P) Ltd. v. Severn Trent Water Purification Inc., (2013) 1 SCC
641; Mcdonald's India Private Limited v. Vikram Bakshi and Ors, 2016 SCC OnLine Del 3949 – the Delhi High Court observed as
"63. Courts need to remind themselves that the trend is to minimize interference with arbitration process as that is the forum of choice. That is also the
policy discernible from the 1996 Act. Courts must be extremely circumspect and, indeed, reluctant to thwart arbitration proceedings. Thus, while courts in
India may have the power to injunct arbitration proceedings, they must exercise that power rarely and only on principles analogous to those found in
sections 8 and 45, as the case may be, of the 1996 Act. We have already indicated that the circumstances of invalidity of the arbitration agreement or it
being inoperative or incapable of being performed do not exist in this case."
[xiv] 2017 SCC OnLine Del 7810
[xv] O.M.P.(EFA)(COMM.) 7/2016
[xvi] http://economictimes.indiatimes.com/news/company/corporatetrends/rbiopposestatamovetopaydocomosaysenforcementofawardwillleadto
transferofshareswhichisillegal/articleshow/57545356.cms
[xvii] http://lobis.nic.in/ddir/dhc/SMD/judgement/28042017/SMD28042017OMPENFCOMM72016.pdf
[xviii] 2017 SCC OnLine Bom 426
[xix] (2006) 11 SCC 181
[xx] MANU/KE/0329/2017
[xxi] Bharat Aluminium Co. v. Kaiser Aluminium Technical Services Inc., (2012) 9 SCC 552
[xxii] http://www.internationallawoffice.com/newsletters/detail.aspx?r=31489
[xxiii] (1992) 3 SCC 551
[xxiv] (1998) 1SCC 30
[xxv] (2002) 4 SCC 105
[xxvi] (2003) 9 SCC 79
[xxvii] Please see Para 5 of the Judgement
[xxviii] (2007) 5 SCC 692
[xxix] 2008) 4 SCC 190
[xxx] Please see Para 37 of the Judgement
[xxxi] (2008) 10 SCC 308
[xxxii] (2009) 7 SCC 220
[xxxiii] (2011) 6 SCC 161
[xxxiv] (2011) 6 SCC 179
[xxxv] (2011) 9 SCC 735
[xxxvi] (2012) 9 SCC 552 – this column has been added after the publication of preceding update available on
http://www.internationallawoffice.com/newsletters/detail.aspx?r=31489
[xxxvii] (2014) 7 SCC 603
[xxxviii] (2014) SCC Online SC 269
[xxxix] Sakuma Exports Limited v. Louis Dreyfus Commodities and Uisse S.A. 2013 (6) ABR 707
[xl] (2014) 5 SCC 1
[xli] (2015) 9 SCC 172
[xlii] (2016) 11 SCC 508; added in this Chapter
[xliii] (1992) 3 SCC 551
[xliv] The Court held the proper law of the arbitration agreement to be Indian law.
[xlv] (1998) 1SCC 30
[xlvi] (2002) 4 SCC 105
[xlvii] (2003) 9 SCC 79
[xlviii] "a presumption may arise that the law of the country where the arbitration is agreed to be held is the proper law of the arbitration agreement"
[xlix] (2007) 5 SCC 692
[l] (2008) 4 SCC 190
[li] (2008) 10 SCC 308
[lii] (2009) 7 SCC 220
[liii] (2011) 6 SCC 161
[liv] (2011) 6 SCC 179
[lv] (2011) 9 SCC 735
[lvi] (2014) 7 SCC 603
[lvii] Arbitral Tribunal vide a partial award decided seat as London
[lviii] (2015) 5 SCC 656
[lix] (2014) 5 SCC 1
[lx] Seat was held to be in India by the Bombay High Court and upheld by the Supreme Court stating as under:
135. In the present case, even though the venue of arbitration proceedings has been fixed in London, it cannot be presumed that the parties have intended
the seat to be also in London. In an international commercial arbitration, venue can often be different from the seat of arbitration. In such circumstances,
the hearing of the arbitration will be conducted at the venue fixed by the parties, but this would not bring about a change in the seat of the arbitration. This
is precisely the ratio in Braes of Doune [Braes of Doune Wind Farm (Scotland) Ltd. v. Alfred McAlpine Business Services Ltd., [2008] Bus LR D 137
(QBD) : 2008 EWHC 426 (TCC)] . Therefore, in the present case, the seat would remain in India." (Emphasis Added)
[lxi] (2015) 9 SCC 172
[lxii] Seat held to be at London (See Para 46 of the Judgment)
[lxiii] (2016) 11 SCC 508
[lxiv] Held to be London, see paragraphs 26 and 27 of the Judgment
[lxv] 2017 SCC OnLine SC 239
[lxvi] Chosen by ICC as the seat of arbitration by consent of both the parties; see para 7 of the Imax Case.
[lxvii] See Supra 35
[lxviii] See Supra 50
[lxix] 2017 SCC OnLine Del 6894
[lxx] Judgement reserved on 26 April, 2017 in FAO(OS) (COMM) 53/2017.
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