The Supreme
Court has overruled Bhatia
International, and has once and for all held that the supposed omission of
the word “only” from section 2(2) has no significance (see below). Importantly,
it has also held that a party cannot file a civil suit in relation to the
subject matter of the arbitration agreement in order to obtain interim relief.
The Court has overruled these decisions prospectively, that is, the law declared today will apply only to arbitration agreements made (not suits/petitions
filed) after 06.09.2012. This means that any application for relief under
sections 9 or 34 in respect of foreign-seated arbitrations will continue to be
governed by the old law (including the law on implied exclusion) if existing
arbitration agreements are not amended.
Court has overruled Bhatia
International, and has once and for all held that the supposed omission of
the word “only” from section 2(2) has no significance (see below). Importantly,
it has also held that a party cannot file a civil suit in relation to the
subject matter of the arbitration agreement in order to obtain interim relief.
The Court has overruled these decisions prospectively, that is, the law declared today will apply only to arbitration agreements made (not suits/petitions
filed) after 06.09.2012. This means that any application for relief under
sections 9 or 34 in respect of foreign-seated arbitrations will continue to be
governed by the old law (including the law on implied exclusion) if existing
arbitration agreements are not amended.
For
a summary of the issues before the Court, readers may wish to refer to our account
of the judgments of the High Courts under appeal.
In today’s judgment, delivered by Nijjar, J. on behalf of the Constitution
Bench, the Court has made several important observations on these and other
issues of Indian arbitration law. The following summary briefly describes these
observations, with a reference to the paragraph number. We will have an
opportunity to comment in more detail in the days to come.
a summary of the issues before the Court, readers may wish to refer to our account
of the judgments of the High Courts under appeal.
In today’s judgment, delivered by Nijjar, J. on behalf of the Constitution
Bench, the Court has made several important observations on these and other
issues of Indian arbitration law. The following summary briefly describes these
observations, with a reference to the paragraph number. We will have an
opportunity to comment in more detail in the days to come.
- Section 2(2) and
the reasoning in Bhatia
International - The
omission of the word “only” does not mean that Parliament intended to make
Part I applicable to foreign-seated arbitrations. The reason for the
omission is explained by the 330th Meeting of the drafters of
the Model Law on 19 June 1985. The reason is that article 1(2) of the
Model Law had the words “except
articles 8, 9, 35 and 36”, and therefore had to insert the word “only”
to clarify that these provisions would apply also to domestic
arbitrations (Para 63, 68). - Section
2(2) does not conflict with section 2(4) or with section 2(5). Section 2(5)
only means that the Act applies to all arbitrations where it would be otherwise applicable (Para 85). - The
proviso to s 1(2), in relation to Jammu & Kashmir, does not mean that
the Act has extra-territorial application. It simply provides for the
application of the J&K law (Para
55) - There
is no “lacuna” in the Act therefore not applying to non-Convention
awards. Such awards cannot be enforced under Part I (Para 175) - Section
2(7), which uses the words “domestic
award”, contrasts domestic award with foreign award, not international
award; that is, an international commercial arbitration in India is not a foreign award. This in fact
indicates that Bhatia International was
wrongly decided (paras 88 and 94). - In
international arbitration, jurisdiction is generally determined by the “seat”
of arbitration. The “seat” is a juridical concept, which is not affected
by where hearings are conducted (Paras
72 and 100). In the rare case where the parties choose a seat of
arbitration and a lex arbitri which
do not coincide, it is a matter of construction whether the designation of
the foreign seat was in fact a reference to the place of arbitration. - The
two “alternatives” in section 48(1)(e), ie the court of the country in which the award was made (the
country of the seat) and the court of the country under the law of which the award was made do not confer
concurrent jurisdiction. The legislative history of art V(1)(e) of the NY
Convention shows that the objective was to provide for the second
alternative where the first
alternative is unavailable (ie, where the country of the seat does not
entertain a challenge to the award). Further, section 48 does not confer jurisdiction to set aside an
award: such jurisdiction must be found in the applicable national law.
Section 48 merely provides that a domestic court may decline to enforce an award if the conditions
in the provision are satisfied. In any event, the words “under the law of which” are a
reference to the lex arbitri,
not the law governing the substance of the agreement (Paras 137, 148). - Parts
I and II are mutually exclusive. The Indian Act, like the UNCITRAL Model
Law, is founded on the “territoriality principle”. Therefore, Sections 9
and 34 of the Act apply only if
the seat of arbitration is in India. This does not render a party seeking
interim relief remediless. Even if it does, that is a matter for the
legislature, not the courts (Para
167). - No
civil suit can be instituted purely for interim relief, because interim
relief is granted on the strength of the final relief sought on a
recognised cause of action. The prayer
for interim relief cannot itself constitute the cause of action for a suit
(Paras 187, 197)