ALTERNATIVE DISPUTE RESOLUTION

TUTORIAL- I
Bharat Aluminium Co vs. Kaiser Aluminium Technical

[(2012) 9 SCC 552]

Mrigakshi Singh (15010323169)

Division -B

Submission In the month of

September, 2019

Under the guidance of

Sanu Rani Paul

Symbiosis Law School, Hyderabad

Symbiosis International University, Pune
Bharat Aluminium Co vs Kaiser Aluminium Technical (6 September, 2012)

Procedural History

The parties had entered into an agreement in relation to the supply of equipment, modernization
and up gradation of production facilities at their premises (BALCO). Certain disputes arose and
were referred to arbitration seated in England and awards were made in favour of the
Respondent. The Appellant had filed applications to set aside the award before the Chhattisgarh
High Court under Section 34 of the Act (which falls under Part I).

Facts of the case:

1) In the present case an agreement dated 22 April, 1993 was executed between BALCO
(appellant) and Kaiser (respondent), under which Kaiser was to supply and install a
computer based system at BALCO’s premises. The agreement was governed by the
prevailing law of India but it contained an arbitration clause that stated that any dispute
that may arise in future shall be governed by the English arbitration law and the venue
shall be London.
2) Thus the clause in the agreement stated that settlement or adjudication of any
dispute in relation to rights or obligations under the said agreement shall be
governed by English arbitration law and the venue for the arbitration proceedings
shall be London.
3) A dispute arose between the appellants and the respondents with respect to performance
of agreement and the matter was referred to arbitration. The arbitration proceeding were
held in England and two awards were passed in the proceeding. The Appellants thereafter
filed application under section 34 of Arbitration Act 1996 for setting aside awards. The
district court and the High Court of Chhattisgarh refused the setting aside of the awards
and appellants filed an appeal against the said order in the Supreme court of India.
4) The counsel of the appellants relied on previously held judgments of Bulk trading and
Venture Global and submitted that Part I of the Act is applicable to the arbitration
proceeding that were held in London and the awards by virtue of S. 34 of part 1 could be
set aside. The Appellants Counsels through their submissions tried to showcase a relation
 between the various provisions of the Act to conclude that Part I is applicable
to International Commercial Arbitration that were not held in India.
5) The dispute was with respect to the award passed in international Commercial Arbitration
held outside India with the subject matter that is assets situated in India and the most
importantly the agreement governed by Indian law but arbitration proceeding governed
by English Arbitration Law. These awards by virtue of Bulk trading and Venture Global
judgments could not be enforced in India and Indian party sought interim relief of
injunctions against such awards by making applications under section 9 and 34 of part I
of the Act to the court. BALCO appealed to Supreme Court of India.

Issues of the case:

1) Whether part–I of the act would apply to arbitrations where the place of arbitration
according to the agreement is not in India?
2) Whether interim relief is granted under section 9 of the arbitration act where the
place of arbitration is outside India?
Rules applicable:

Section 2(2) 2 [(e) “Court” means: (i) in the case of an arbitration other than international
commercial arbitration, the principal Civil Court of original jurisdiction in a district, and includes
the High Court in exercise of its ordinary original civil jurisdiction, having jurisdiction to decide
the questions forming the subject-matter of the arbitration if the same had been the subject-
matter of a suit, but does not include any Civil Court of a grade inferior to such principal Civil
Court, or any Court of Small Causes;

(ii) in the case of international commercial arbitration, the High Court in exercise of its ordinary
original civil jurisdiction, having jurisdiction to decide the questions forming the subject-matter
of the arbitration if the same had been the subject-matter of a suit, and in other cases, a High
Court having jurisdiction to hear appeals from decrees of courts subordinate to that High Court;]

(f) “international commercial arbitration” means an arbitration relating to disputes arising out of
legal relationships, whether contractual or not, considered as commercial under the law in force
in India and where at least one of the parties is— (i) an individual who is a national of, or
habitually resident in, any country other than India; or (ii) a body corporate which is incorporated
in any country other than India; or (iii) an association or a body of individuals whose central
management and control is exercised in any country other than India; or (iv) the Government of a
foreign country.

Sections 2(2): This Part shall apply where the place of arbitration is in India. 2 [Provided that
subject to an agreement to the contrary, the provisions of sections 9, 27 and clause (a) of sub-
section (1) and sub-section (3) of section 37 shall also apply to international commercial
arbitration, even if the place of arbitration is outside India, and an arbitral award made or to be
made in such place is enforceable and recognized under the provisions of Part II of this Act.]

Section 2(4) This Part except sub-section (1) of section 40, sections 41 and 43 shall apply to
every arbitration under any other enactment for the time being in force, as if the arbitration were
pursuant to an arbitration agreement and as if that other enactment were an arbitration
agreement, except in so far as the provision of this Part are inconsistent with that other enactment
or with any rules made there under;
Section 2 (5) Subject to the provisions of sub-section (4), and save in so far as is otherwise
provided by any law for the time being in force or in any agreement in force between India and
any other country or countries, this Part shall apply to all arbitrations and to all proceedings
relating thereto.

Section 2(7) : An arbitral award made under this Part shall be considered domestic award.

Section 8 Power to refer parties to arbitration where there is an arbitration agreement:-

2 [(1) A judicial authority, before which an action is brought in a matter which is the subject of
an arbitration agreement shall, if a party to the arbitration agreement or any person claiming
through or under him, so applies not later than the date of submitting his first statement on the
substance of the dispute, then, notwithstanding any judgment, decree or order of the Supreme
Court or any Court, refer the parties to arbitration unless it finds that prima facie no valid
arbitration agreement exists.] (2) The application referred to in sub-section (1) shall not be
entertained unless it is accompanied by the original arbitration agreement or a duly certified copy
thereof.

[Provided that where the original arbitration agreement or a certified copy thereof is not available
with the party applying for reference to arbitration under sub-section (1), and the said agreement
or certified copy is retained by the other party to that agreement, then, the party so applying shall
file such application along with a copy of the arbitration agreement and a petition praying the
Court to call upon the other party to produce the original arbitration agreement or its duly
certified copy before that Court.] (3) Notwithstanding that an application has been made under
subsection (1) and that the issue is pending before the judicial authority, arbitration may be
commenced or continued and an arbitral award made.

Section 9 (interim relief): Interim measures etc. by Court: 2 [(1)] A party may, before or
during arbitral proceedings or at any time after the making of the arbitral award but before it is
enforced in accordance with section 36, apply to a Court-

(i) for the appointment of a guardian for a minor or person of unsound mind for the
purposes of arbitral proceedings; or
 (ii) for an interim measure of protection in respect of any of the following matters,
namely:-
(a) The preservation, interim custody or sale of any goods which are the subject-
matter of the arbitration agreement;
(b) Securing the amount in dispute in the arbitration;
(c) the detention, preservation or inspection of any property or thing which is the
subject-matter of the dispute in arbitration, or as to which any question may arise
therein and authorizing for any of the aforesaid purposes any person to enter upon any
land or building in the possession of any party, or authorizing any samples to be taken
or any observation to be made, or experiment to be tried, which may be necessary or
expedient for the purpose of obtaining full information or evidence;
(d) Interim injunction or the appointment of a receiver;
(e) such other interim measure of protection as may appear to the Court to be just and
convenient and the Court shall have the same power for making orders as it has for
the purpose of, and in relation to, any proceedings before it.

[(2) Where, before the commencement of the arbitral proceedings, a Court passes an order for
any interim measure of protection under subsection

(1), the arbitral proceedings shall be commenced within a period of ninety days from the date of
such order or within such further time as the Court may determine.

(3) once the arbitral tribunal has been constituted, the Court shall not entertain an application
under sub-section (1), unless the Court finds that circumstances exist which may not render the
remedy provided under section 17 efficacious.]

Section 27 (court assistance for evidence) Court assistance in taking evidence:-

(1) The arbitral tribunal, or a party with the approval of the arbitral tribunal, may apply to the
Court for assistance in taking evidence.

(2) The application shall specify:-(a) The names and addresses of the parties and the arbitrators

(b) The general nature of the claim and the relief sought;
(c) the evidence to the obtained, in particular,

(i) The name and address of any person to be heard as witness or expert witness and a statement
of the subject-matter of the testimony required;

(ii) The description of a document to be produced or property to be inspected.

(3) The Court may, within its competence and according to its rules on taking evidence, execute
the request by ordering that the evidence be provided directly to the arbitral tribunal.

(4) The Court may, while making or order under sub-section (3), issue the same processes to
witnesses as it may issue in suits tried before it.

(5) Persons failing to attend in accordance with such process, or making any other fault, or
refusing to give their evidence, or guilty of any contempt to the arbitral tribunal during the
conduct of arbitral proceedings, shall be subject to the like disadvantages, penalties and
punishments by order of the Court on the representation of the arbitral tribunal as they would
incur for the like offences in suits tried before the Court.

(6) In this section the expression “Processes” includes summonses and commissions for the
examination of witnesses and summonses to produce documents.

Section 37(1) (a) (appeal able orders) Appealable orders:- (1) An appeal shall lie from the
following orders (and from no others) to the Court authorised by law to hear appeals from
original decrees of the Court passing the order, namely:--

[(a) refusing to refer the parties to arbitration under section 8;

(b) Granting or refusing to grant any measure under section 9;

(c) setting aside or refusing to set aside an arbitral award under section 34.]

(2) An appeal shall also lie to a Court from an order of the arbitral tribunal.-- (a) accepting the
plea referred in sub-section (2) or sub-section (3) of section 16; or

(b) granting or refusing to grant an interim measure under section 17.

(3) No second appeal shall lie from an order passed in appeal under this section, but nothing in
this section shall affect or take away any right to appeal to the Supreme Court.

Section 34 for setting aside the aforesaid two awards: Application for setting aside arbitral
award :-(1) Recourse to a Court against an arbitral award may be made only by an application
for setting aside such award in accordance with sub-section (2) and subsection (3).

(2) An arbitral award may be set aside by the Court only if— (a) the party making the application
furnishes proof that— (i) a party was under some incapacity, or

(ii) the arbitration agreement is not valid under the law to which the parties have subjected it or,
failing any indication thereon, under the law for the time being in force; or

(iii) the party making the application was not given proper notice of the appointment of an
arbitrator or of the arbitral proceedings or was otherwise unable to present his case; or

(iv) the arbitral award deals with a dispute not contemplated by or not falling within the terms of
the submission to arbitration, or it contains decisions on matters beyond the scope of the
submission to arbitration: Provided that, if the decisions on matters submitted to arbitration can
be separated from those not so submitted, only that part of the arbitral award which contains
decisions on matters not submitted to arbitration may be set aside; or

(v) the composition of the arbitral tribunal or the arbitral procedure was not in accordance with
the agreement of the parties, unless such agreement was in conflict with a provision of this Part
from which the parties cannot derogate, or, failing such agreement, was not in accordance with
this Part; or

(b) the Court finds that— (i) the subject-matter of the dispute is not capable of settlement by
arbitration under the law for the time being in force, or 28

(ii) the arbitral award is in conflict with the public policy of India. 1 [Explanation 1—For the
avoidance of any doubt, it is clarified that an award is in conflict with the public policy of India,
only if,— (i) the making of the award was induced or affected by fraud or corruption or was in
violation of section 75 or section 81; or (ii) it is in contravention with the fundamental policy of
Indian law; or
(iii) it is in conflict with the most basic notions of morality or justice. Explanation 2—For the
avoidance of doubt, the test as to whether there is a contravention with the fundamental policy of
Indian law shall not entail a review on the merits of the dispute.] 2[(2A) An arbitral award
arising out of arbitrations other than international commercial arbitrations, may also be set aside
by the Court, if the Court finds that the award is vitiated by patent illegality appearing on the
face of the award: Provided that an award shall not be set aside merely on the ground of an
erroneous application of the law or by re-appreciation of evidence.] (3) An application for setting
aside may not be made after three months have elapsed from the date on which the party making
that application had received the arbitral award, or, if a request had been made under section 33,
from the date on which that request had been disposed of by the arbitral tribunal: Provided that if
the Court is satisfied that the applicant was prevented by sufficient cause from making the
application within the said period of three months it may entertain the application within a
further period of thirty days, but not thereafter.

(4) On receipt of an application under sub-section (1), the Court may, where it is appropriate and
it is so requested by a party, adjourn the proceedings for a period of time determined by it in
order to give the arbitral tribunal an opportunity to resume the arbitral proceedings or to take
such other action as in the opinion of arbitral tribunal will eliminate the grounds for setting aside
the arbitral award.

(5) An application under this section shall be filed by a party only after issuing a prior notice to
the other party and such application shall be accompanied by an affidavit by the applicant
endorsing compliance with the said requirement.

(6) An application under this section shall be disposed of expeditiously, and in any event, within
a period of one year from the date on which the notice referred to in sub-section (5) is served
upon the other party.

Section 44 Definition:- In this Chapter, unless the context otherwise requires, “foreign award”
means an arbitral award on differences between persons arising out of legal relationships,
whether contractual or not, considered as commercial under the law in force in India, made on or
after the 11th day of October, 1960— (a) in pursuance of an agreement in writing for arbitration
to which the Convention set forth in the First Schedule applies, and (b) in one of such territories
as the Central Government, being satisfied that reciprocal provisions have been made may, by
notification in the Official Gazette, declare to be territories to which the said Convention applies.

Section 45 Power of judicial authority to refer parties to arbitration:- Notwithstanding

anything contained in Part I or in the Code of Civil Procedure, 1908 (5 of 1908), a judicial
authority, when seized of an action in a matter in respect of which the parties have made an
agreement referred to in section 44, shall, at the request of one of the parties or any person
claiming through or under him, refer the parties to arbitration, unless it finds that the said
agreement is null and void, inoperative or incapable of being performed.

Article 17 - Arbitration

17.1 Any dispute or claim arising out of relating to this agreement shall be in the first instance
endeavor to be settled amicably by negotiation between the parties hereto and failing which the
same will be settled by arbitration pursuant to the English Arbitration Law and subsequent
amendment thereto.

17.2 The arbitration proceedings shall be carried by two arbitrators, one appointed by the
Petitioner and one by the Respondent chosen freely and without any bias. The Court of
arbitration shall be wholly in London, England and shall use the English language in the
proceedings. The finding and award of the Court of Arbitration shall be final and binding.

17.3 Before entering upon the arbitration, the two Arbitrators shall appoint an Umpire. If the two
arbitrators are not able to reach an agreement on the selection of an Umpire, the Umpire shall be
nominated by the International Chamber of Paris.

Article 22 - Governing Law

This agreement will be governed by the prevailing law of India and in case of Arbitration, the
English Law shall apply.
Analysis:

The main object which is mentioned under section 2(7) of Arbitration and Conciliation Act is to
distinguish the domestic award of (part-I of the act) from the ‘foreign award’ (part-II of the act)
and not to distinguish between the ‘domestic award’ from an ‘International award’ rendered in
India. As it is also said that there is clear difference between part I and part II as being applicable
in completely different fields and with no overlapping provisions. Then the question about
whether the absence of the word ‘only’ from section 2(2) would make part I of the act applicable
to all the arbitrations which are held outside the Indian jurisdiction. It was also argued that there
was deviation from Article 1(2) of the UNICITRAL model laws in omitting the word ‘only’
from section 2(2). The court held that in the plain reading of section 2(2) which makes it very
clear that part I is limited in its application when it comes to arbitrations which are held in India.

This was followed as a literal rule of interpretation and held that the omission of the word ‘only’
which has no relevance in this context. Parliament also observed the applicability of part I and
has given utmost important to principle of territoriality. So, it therefore came to the conclusion
that part I of the arbitration act, 1996 applies to arbitration having their place or seat in India.

No conflict among section 2(4) and section 2(5) of the act:

There was a conflict between sections 2(2), 2(4) and 2(5). It was said that section 2(4) which
makes part I applicable to ‘every arbitration’ irrespective of the fact that where it was held, may
be in India or outside India. Section 2(4), shall apply to every arbitration under any other
enactment for the time being in force. Such any other enactments would in its ordinary sense
contemplate only an act made by an Indian parliament. And as, we further read the clause which
is section 2(5) which merely an extension to section 2(4) and both the section has to read
together to get the correct interpretation.

Award under section 2(7) of the act is a “Domestic Award”:

The court further stated that section 2(7) of the arbitration act in Indian jurisdiction do not relax
the territorial principal adopted by the Indian act. Indian courts who are to supervise over a
‘domestically rendered international commercial award’ which may be passed in arbitration
proceedings between two of the foreign parties within India.
The Bharat Aluminium decision carries additional weight for two reasons:

1) It was a consolidation of several cases appealing against first instance decisions

concerning the correct interpretation of the Arbitration Act. The Supreme Court
therefore had the opportunity to review application of the Act in a range of
circumstances; and
2) The Supreme Court sat as a special five-member “Constitutional Bench” and
delivered a unanimous verdict. The present case therefore represents a clear and firm
statement of judicial intent in India in relation to international arbitration which will
have the jurisdiction outside India if in agreement it is stated so.

Applicability of section 9 to foreign seated arbitration:

As, according to the provisions under section 9 of arbitration act it provides for the interim relief
given to the parties but only in cases where the arbitration is conducted in India. But in this
context the court clarified that where the seat of the arbitration is not in India, no interim relief is
granted to any of the parties under section of the arbitration act. The court has a different
interpretation of section 9 that would be somewhat destructive to the territorial principles upon
which the UNICITRAL model laws are stated which is being adopted by the Indian act. This
actually means that no civil suit can be instituted by any of the parties for the purpose of
attaining interim relief which is the subject matter of the arbitration proceedings. The Supreme
Court also held that section 34 of the act can only be invoked when the award needs to be
challenged and where the seat of arbitration is in India. Thus, Supreme Court overruled its ratio
which was laid down in the famous case of venture global engineering v. satyam computers
services1.

No relief for awards passed in Non-Convention Countries:

Awards passed in non-convention countries are not included within the ambit of the given Act.
The Court held that non-inclusion of the same does not amount to a lacunae or ambiguity as the
legislative intention needs to be understood from the language and aspects which are not
included therein and cannot be incorporated vide interpretation and applied thereto. The ability to
remove such defects is vested only with the Parliament and when parliament has some

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reasonable ground in doing so they can remove such defects and in its absence; applicability of
the Act is limited to awards passed under the Act and in convention countries.

The counsel for the appellants argued that part II of the arbitration act indicates that part I of the
act would not be limited to the arbitrations which are taking place in Indian jurisdiction. It was
stated that even though the part II which deals with enforcement of any foreign awards but there
is a provision for the invalidation of the awards by two of the courts. Thus, we can say that it
provides for the concurrent jurisdiction of courts in two countries. So, there is a complete
segregation between part I and part II of the act as part I deals with all four phases of arbitration
commencement, challenges, conduct of the parties, challenge whereas part II deals with
recognition and enforcement of foreign awards.
Conclusion:

The Supreme Court by its landmark judgment has overruled the laws which were mentioned in
Bhatia International case2, which says that part I of the arbitration act would only apply to
arbitrations held outside India. By this we can say that the provisions given under part I are not
limited to section 9(Interim measures by the court), section 11(Appointment of arbitrators),
section 20(place of arbitration) and section 34(Application for setting aside arbitral award), this
would only be available to any of the parties where the International commercial arbitration takes
place in India. Thus parts I will apply “only” apply to those arbitration proceedings which are
seated in India. This particular case has also over-ruled venture global case, which had followed
Bhatia International which held that a foreign award which is made outside India could be
challenged under section 34 of the act. Therefore, we can say that any award made in
International Commercial Arbitration which is being held outside India cannot be challenged
under section 34 of the Arbitration act.

The above mentioned cases which were overruled has been seen as a major changes in the
growth and development of Arbitration as a successful and effective mode preferred by people in
Alternative Dispute Resolution(ADR). The Bharat Aluminum company judgment will go a long
way to improve the diminished image of the Indian Arbitration System. However it is necessary
to note that the law lay down by the Supreme Court by this particular judgment which shall
apply prospectively. This means that all the arbitration agreements executed, all the arbitration
proceedings pending or any arbitration applications/petitions pending in the Indian Courts will
remain unaffected by this particular judgment.

The Apex Court has given clear picture and settled the law as regards the intervention of Indian
Courts in International Commercial Arbitration and has upheld the doctrine minimum
intervention of courts in arbitration, which is main underlying objective and core of the Indian
Act.

According to my understanding, the amendments which are brought to the 1996 Act are certainly
we can say that a positive step was taken towards making arbitration expeditious, efficacious and
a cost effective remedy for dealing with arbitration proceedings. The new amendments seek to

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(2002) 4 SCC 105
curb the practices leading to wastage of time and making the arbitration process prohibitively a
costly affair. The new law also makes the declaration by the arbitrator about his independence
and impartiality more realistic as compared to a bare formality under the previous regime under
arbitration act. Making the arbitrator responsible for delay in the arbitration proceedings, for the
reasons attributable to him, would ensure that the arbitrators do not take up arbitrations, which
are beyond their capacities and abilities to work efficiently. Such a deterrent would imbibe self-
discipline and control amongst the arbitrators. It can be said that the present amendments
certainly travel an extra mile towards reducing the interference of the Court in arbitration
proceedings that has been a consistent effort of the legislature since passing of the 1996 Act.

There was an important development in this case because it represents a paradigm shift away
from its previous laws and practices. The Supreme Court willingness to do so, in fact shows that
or gives the message that the Indian Courts will no longer take a step back to be guided by the
terms of the most relevant international conventions as they are always understood
internationally and if there is need to construe Indian legislation which is in conformity with the
same. The most significant thing arbitrations faces in India is the Indian Court’s which have
difficulty in being able to adapt and changes which are been made to arbitrations governed by
law based on the UNICITRAL Model Law, despite being enacted in 1996.

For over five decades prior to 1996, Indian arbitration was governed by the Arbitration Act of
1940, which was based on even older English statutes of Victorian vintage. The dilatory and
inefficient conduct of arbitrations under the 1940 Act laced together with the excessive
intervention of the courts made an Indian Supreme Court judge famously remark once that:

‘[The 1940 Act] has made lawyers laugh and legal philosophers weep. Experience shows and
law reports bear ample testimony that the proceedings under the [1940] Act have become highly
technical accompanied by unending prolixity, at every stage providing a legal trap to the
unwary.’(Guru Nanak Foundation v Rattan Singh & Sons3)

In light of the prospective applicability of the present judgment it is advisable that parties revise
their arbitration agreements and re-execute them, if they wish to bring them under the umbrella
of the new law and make the arbitration easy and less time consuming.

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