Permanent Imprint Leading Cases

SUIT FOR INTERIM INJUNCTION IS NOT MAINTAINABLE IN INDIA ON THE BASIS OF AN INTERNATIONAL COMMERCIAL ARBITRATION WITH A SEAT OUTSIDE INDIA

Bharat Aluminium Co. v. Kaiser Aluminium Technical Service Inc.
(2012) 9 SCC 552

JUDGES: S.H. Kapadia, CJI, D.K. Jain, S.S. Nijjar, R.P. Desai, J.S. Khehar, JJ.
Date of Decision: 6-9-2012

FACTS
Disputes arose between the parties with regard to the performance of the agreement. Claim was made by the 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 between the parties were 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 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. By an order dated 20th July, 2004, the District Judge, Bilaspur held that the applications filed by the appellant under section 34 of the Arbitration and Conciliation Act, 1996 for setting aside the foreign awards are not tenable and accordingly dismissed the same.
Aggrieved by the aforesaid judgment, the appellant filed two miscellaneous appeals in the High Court of Judicature at Chattisgarh, Bilaspur. By an order dated 10th August, 2005, a Division Bench of the High Court dismissed the appeal. This decision has been challenged in appeal before the Supreme Court.

ISSUES
1. Part I vis-à-vis Part II of the Arbitration and Conciliation Act, 1996.
2. Whether a suit for interim injunction simplicitor would be maintainable in India, on the basis of an international commercial arbitration with a seat outside India?
3. Bhatia International v. Bulk Trading S.A., (2002) 4 SCC 105 and Venture Global Engineering v. Satyam Computer Services Ltd., (2008) 4 SCC 190 overruled.

JUDGMENT
The Arbitration Act, 1996 has accepted the territoriality principle which has been adopted in the UNCITRAL Model Law. Section 2(2) makes a declaration that Part I of the Arbitration Act, 1996 shall apply to all arbitrations which take place within India. We are of the considered opinion that 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 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. In our opinion, the provisions contained in Arbitration Act, 1996 make it crystal clear that there can be no overlapping or intermingling of the provisions contained in Part I with the provisions contained in Part II of the Arbitration Act, 1996. With utmost respect, we are unable to agree with the conclusions recorded in the judgments of this Court in Bhatia International, (2002) 4 SCC 105 and Venture Global Engineering, (2008) 4 SCC 190. In our opinion, the provision contained in section 2(2) of the 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 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. We conclude that Part I of the Arbitration Act, 1996 is applicable only to all the arbitrations which take place within the territory of India.

The judgment in Bhatia International, (2002) 4 SCC 105 was rendered by the Supreme Court on 13th March, 2002. Since then, the aforesaid judgment has been followed by all the High Courts as well as by the Supreme Court on numerous occasions. In fact, the judgment in Venture Global Engineering, (2008) 4 SCC 190 has been rendered on 10th January, 2008 in terms of the ratio of the decision in Bhatia International, (2002) 4 SCC 105. Thus, in order to do complete justice, we hereby order, that the law now declared by this Court shall apply prospectively, to all the arbitration agreements executed hereafter.

Leave a Comment