Bharat Aluminium Co. v. Kaiser Aluminium Technical Services Inc. (BALCO)

Facts

BALCO and Kaiser entered into an agreement for supply and installation of equipment with arbitration seated in England under English law. Disputes arose and awards were challenged in India under Section 34 of the 1996 Act. The question was whether Part I of the Act, and therefore Indian courts' supervisory and interim-relief jurisdiction, extended to a foreign-seated arbitration.

Issues

• Whether Part I of the 1996 Arbitration Act applies to arbitrations seated outside India
• Whether Indian courts can exercise supervisory jurisdiction (e.g. set aside under Section 34) over a foreign-seated award
• Whether interim relief under Section 9 is available for foreign-seated arbitrations

Arguments

BALCO contended that Part I applied unless expressly or impliedly excluded (relying on Bhatia International), permitting Indian courts to entertain a Section 34 challenge. Kaiser argued that the 1996 Act is territorial, that a foreign seat carries the supervisory law of the seat, and that Part I cannot apply to arbitrations outside India.

Held

The Constitution Bench overruled Bhatia International and Venture Global. It held the 1996 Act adopts the territoriality principle of the Model Law, so Part I applies only where the place/seat of arbitration is in India. Choosing a foreign seat inevitably imports an acceptance that the law of that country governs the conduct and supervision of the arbitration, ousting Indian courts' supervisory jurisdiction and Section 9 interim relief. The ruling was given prospective effect, applying to arbitration agreements executed after 6 September 2012.

Ratio decidendi

Part I of the 1996 Act is confined to India-seated arbitrations; the seat of arbitration determines the curial law and the courts with exclusive supervisory jurisdiction, so a foreign seat excludes Indian courts' supervisory and Section 9 powers.

Significance

Landmark Constitution Bench decision that restored the territoriality principle, ended a decade of excessive Indian judicial intervention in foreign-seated arbitrations (Bhatia/Venture Global), and entrenched the seat as the centre of gravity. Its core holding was reinforced and codified by the 2015 Amendment, which made Sections 9, 27 and 37(1)(b)/(3) available to foreign-seated international commercial arbitrations by proviso.

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