Bharat Aluminium Co. v. Kaiser Aluminium Technical Services Inc.

Facts

An arbitration agreement provided for arbitration seated outside India. The question arose whether an Indian court could grant interim measures under Section 9 of Part I in respect of a foreign-seated international commercial arbitration. The issue required reconsideration of the earlier decision in Bhatia International v. Bulk Trading S.A., which had held Part I applied to foreign-seated arbitrations unless excluded by agreement.

Issues

• Whether Part I of the Arbitration and Conciliation Act 1996 (and therefore Section 9) applies to international commercial arbitrations seated outside India.
• Whether an application for interim relief under Section 9 is maintainable in respect of a foreign-seated arbitration.

Arguments

The party seeking interim relief contended, relying on Bhatia International, that Part I applied to foreign-seated arbitrations unless expressly or impliedly excluded. The opposing party argued that Section 2(2) confines Part I to arbitrations seated in India, so Section 9 cannot be invoked for a foreign seat.

Held

A Constitution Bench of five judges overruled Bhatia International and held that Part I has no application to international commercial arbitrations held outside India, so no Section 9 application for interim relief is maintainable in such arbitrations. The Court reasoned that the seat of arbitration determines the curial law and that Part I is territorially confined to India-seated arbitrations. To do complete justice and because Bhatia International had been consistently followed since 2002, the Court applied its ruling only prospectively to arbitration agreements executed after 6 September 2012. Agreements executed before that date remained governed by Bhatia International unless Part I was expressly or impliedly excluded.

Ratio decidendi

Part I of the Act, being territorial, applies only to arbitrations seated in India; courts have no power under Section 9 to grant interim measures in aid of arbitrations seated outside India.

Significance

Landmark Constitution Bench decision restoring the territoriality principle and curtailing Indian court intervention in foreign-seated arbitrations. It created a gap (no interim relief for assets in India in foreign-seated arbitrations) which led to the Law Commission's 246th Report and the 2015 Amendment adding a proviso to Section 2(2) extending Sections 9, 27 and 37 to foreign-seated international commercial arbitrations unless excluded.

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