Bhatia International vs. Bulk Trading S. A.          

Facts:

             The Appellant entered into a contract with the 1st Respondent which contained an arbitration clause which provided that arbitration was to be as per the rules of the International Chamber of Commerce. Parties agreed that the arbitration be held in Paris, France. 1st Respondent filed an application under Section 9 of the Arbitration and Conciliation Act, 1996 (hereinafter called the said Act) before the IIIrd Additional District Judge, Indore, M.P. against the Appellant and the 2nd Respondent. One of the interim relief’s sought was an order of injunction restraining these parties from alienating, transferring and/or creating third party right, disposing of, dealing with and/or selling their business assets and properties. The Appellant raised the plea of maintainability of such an application. The Appellant contended that Part I of the said Act would not apply to arbitrations where the place of arbitration is not in India. This application was dismissed by the IIIrd Additional District Judge. The Appellant filed a Writ Petition before the High Court of Madhya Pradesh, Indore Bench. The said Writ Petition has been dismissed by the impugned Judgment. Appellants relied on sub-section (2) Section 2 of the said Act which provides that Part I shall apply where the place of arbitration is in India. He submits that sub-section (2) of Section 2 makes it clear that the provisions of Part I do not apply where the place of arbitration is not in India.  The said Act is based on UNCITRAL Model Law on International Commercial Arbitration. He points out that Article 1(2) of UNCITRAL Model Law provides that the law would apply only if the Arbitration takes place in the territory of the State. It was also  submited that while framing the said Act the Legislature has purposely not adopted Article 1(2) of the UNCITRAL Model Law.  Appellant further submits that sub-sections (3), (4) and (5) of Section 2 would necessarily only apply to arbitration which take place in India. He submits that, therefore, even though the sub-section (4) of Section 2 uses the words "every arbitration" and sub-section (5) of Section 2 uses the words "all arbitrations and to all proceedings relating thereto", they must necessarily refer only to arbitrations which take place in India. Arbitrations whose place of arbitration is not in India, then Sub section (2) of Section 2 will not fit. Sections 9 and 17 would not apply and cannot be used in cases where the place of arbitration is not in India it’s from part I.

             By the said facts, appellants moved to Supreme Court as it was submitted by appellants following issues were raised :

Whether Part I of the Arbitration and Conciliation Act, 1996 will apply to arbitrations which take place outside India?

          Appellants affirmed that  provisions for enforcement of foreign awards are contained in Sections 48, 49, 57 and 58. He submits that it is very significant that Section 9 does not talk of enforcement of the award in accordance with Sections 48, 49, 57 and 58and it is  also clear that the provisions of Part I of the said Act do not apply to arbitrations which do not take place in India. Court in Indore and the High Court were wrong in rejecting the application of the Appellant and in holding that the Court had jurisdiction. Actually, Madhya Pradesh High Court, is the only one  which states that Part I applies to arbitrations which take place outside India, which has so held by the impugned Judgment.

Whether undoubtedly sub-section (2) of Section 2 states that Part I is to apply where the place of arbitration is in India and Part II applies to foreign arbitration?

         Appellants affirms that it would  lead to an anomalous situation, inasmuch Part I would apply to Jammu and Kashmir in all international commercial arbitrations but Part I would not apply to the rest of India if the arbitration takes place out of India, and it will also instigates a conflict between sub-section (2) of Section 2 on one hand and sub-sections (4) and (5) of Section 2. Further sub- section (2) of Section 2 would also be in conflict with Section 1 which provides that the Act extends to the whole of India. It leaves a party remediless inasmuch as in international commercial arbitrations and it would not be able to apply for interim relief in India even though the properties and assets are in India. Thus a party may not be able to get any interim relief at all.

      On the other hand, the act is not providing that Part I shall not apply where the place of arbitration is not in India. It is also not providing that Part I will "only" apply where the place of arbitration is in India . Thus Article 1(2) of UNCITRAL Model Laws uses the word "only" to emphasize that the provisions of that Law are to apply if the place of arbitration is in the territory of that State. Significantly in Section 2(2) the word "only" has been omitted. The omission of this word changes the whole complexion of the sentence. The omission of the word "only" in Section 2(2) indicates that this sub-section is only an inclusive and wider provision. As stated above it is not providing that provisions of Part I do not apply to arbitration which take place outside India. Thus there was no necessity of separately providing that Section 9 would apply.

Whether foreign awards from arbitration settlement can be enforced  by Indian courts?

      Under Section 9 a party could apply to the court before, during arbitral proceedings or after the making of the arbitral award but before it is enforced in accordance with Section 36. The words "in accordance with Section 36" can only go with the words "after the making of the arbitral award". It is clear that the words "in accordance with Section 36" can have no reference to an application made "before" or "during the arbitral proceedings". Thus it is clear that an application for interim measure can be made to Courts in India, whether or not the arbitration takes place in India, before or during arbitral proceedings. Once an Award is passed, then that award itself can be executed. Sections 49 and 58 provide that awards covered by Part II are deemed to be a decree of the Court. Thus "foreign awards" which are enforceable in India are deemed to be decrees. A domestic award has to be enforced under the provisions of Civil Procedure Code. All that Section 36 provides is that an enforcement of a domestic award is to take place after the time to make an application to set aside the award has expired or such an application has been refused. Section 9 does suggest that once an award is made an application for interim measure can only be made if the award is a "domestic award" as defined in Section 2(7) of the said Act.  Thus there cannot be applications under Section 9 for stay of arbitral proceedings or to challenge the existence or validity of arbitration agreements or the jurisdiction of the arbitral tribunal. All such challenges would have to be made before the arbitral tribunal under the said Act. In any event, an award passed in arbitral proceedings held in a non-convention country could not be enforced. Thus such a party would be left completely remediless. Appellants hold that the provisions of Part I would apply to all arbitrations and to all proceedings relating thereto. Where such arbitration is held in India the provisions of Part I would compulsory 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 It would apply unless the parties by agreement express or implied, exclude all or any of its provisions

Conclusion

       However, in our view a proper and conjoint reading of all the provisions indicates that Part I is to apply also to international commercial arbitrations which take place out of India, unless the parties by agreement, express or implied exclude it or any of its provisions. Such an interpretation does not lead to any conflict between any of the provisions of the said Act. On this interpretation there are no lacunae in the said Act. This interpretation also does not leave a party remediless.