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

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1 Bharat Aluminium Co. v. Kaiser Aluminium Technical Services Inc., (2012) 9 SCC 552 and Conciliation Act, 1996 Ss. 2(2), 2(1)(f) & 2(4), (5) & (7), 1, 9, 42, 37, Pt. I and Pt. II - International commercial arbitration whose juridical or legal seat of arbitration is outside India (foreign-seated ICA) - Inapplicability of Pt. I - Application for interim relief in courts in India in respect of foreign-seated ICA - Non-maintainability of under any provision of law - Clause in arbitration agreement which purports to apply Pt. I to foreign-seated ICAs - Extent to which effective - Held, Pt. I applies only to arbitrations (domestic as well as international) that have their juridical or legal seat within territory of India - If upon a construction thereof arbitration agreement is held to provide for seat of arbitration outside India, Pt. I would be inapplicable to the extent inconsistent with arbitration law of seat of arbitration, even if arbitration agreement purports to provide that 1996 Act shall govern arbitration proceedings [See in detail Shortnote B] - Awards made in foreign-seated ICAs are subject to jurisdiction of Indian courts only when same are sought to be enforced in India in accordance with, and only to the extent provided for by, provisions of Pt. II [See in detail Shortnotes M to S] - Further, no application for interim relief and no suit for interim injunction simpliciter is maintainable in India in respect of foreign-seated ICAs [See in detail Shortnotes V to Z] - Bhatia International, (2002) 4 SCC 105 and Venture Global Engg., (2008) 4 SCC 190, overruled prospectively - Reasons for, discussed in extenso - Law declared in this case, held, shall apply prospectively to all arbitration agreements executed after , (2012) 9 SCC 552-A and Conciliation Act, 1996 Ss. 2(2), 20, 7 and Pt. I - Juridical or legal seat of arbitration - Whether inside India or outside India - Construction of arbitration agreement to determine - agreement designating foreign country as seat/place of arbitration and also purporting to select 1996 Act as curial law/law governing arbitration proceedings - Resolution of such a situation to determine seat/place of arbitration and hence applicable curial law, held, is a matter of construction of the individual arbitration agreement - Court has to undertake a detailed examination to discern from arbitration agreement and surrounding circumstances, intention of parties as to whether particular place mentioned refers merely to a venue or does it refer to juridical seat of arbitration - Pt. I of 1996 Act would be applicable, held, only if arbitration agreement is construed to provide for juridical seat of arbitration in India (the foreign ``seat'' only being a choice of venue and not really the juridical seat, curial law in fact thus being 1996 Act) - On the other hand, if arbitration agreement on its construction is held to provide for juridical seat of arbitration outside India, Pt. I would be inapplicable to the extent inconsistent with arbitration law of juridical seat of arbitration, even if arbitration agreement purports to provide that 1996 Act shall govern arbitration proceedings - Choice of another country as juridical seat of arbitration imports an acceptance that law of that country relating to conduct and supervision of arbitrations will apply, (2012) 9 SCC 552-B and Conciliation Act, 1996 Ss. 2(2), (4) & (5) and Pt. I - Relative scope and inter-relationship between Ss. 2(2), (4) & (5), explained in detail - Scope of phrases ``every arbitration under any other enactment for the time being in force'' in S. 2(4) and ``all arbitrations'' in S. 2(5), explained - Held, said phrases do not make Pt. I of 1996 Act applicable to foreign-seated arbitrations i.e. arbitrations whose juridical seat is outside India - There is no conflict between S. 2(2) and Ss. 2(4) & (5) - ``Any other enactment'' in S. 2(4) contemplates only an Act made by Indian Parliament, hence arbitrations contemplated in Ss. 2(4) & (5) are arbitrations whose seat of arbitration is in India, but which may be governed partially or wholly by some other Indian statute or law, other than 1996 Act - Ss. 2(4) & (5) merely recognise that other than consensual arbitrations, there may be other types of arbitrations whose seat might be in India - Pt. I only applies to arbitrations whose juridical seat is in India, (2012) 9 SCC 552-C and Conciliation Act, 1996 Ss. 2(2), 2(1)(f), 2(7), 20 and 42 - Seat/Place/Situs of arbitration - Curial law/proper law governing arbitration - Territorial relationship between place of arbitration and law governing said arbitration - UNCITRAL Model Law - Applicability of territorial principle to 1996 Act - Discussed - Law of seat or place of arbitration, held, is normally the law to govern that arbitration - Effect of omission of word ``only'' from S. 2(2) of 1996 Act as compared with Art. 1(2) of UNCITRAL Model

2 Law, held, is irrelevant in coming to conclusion that Pt. I of 1996 Act applies only to arbitrations whose juridical seat is in India - Maxim expressum facit cessare tacitum (``what is expressed makes what is silent cease''), applied, (2012) 9 SCC 552-D and Conciliation Act, 1996 Ss. 20, 2(2), 2(1)(f) and 2(7) - Seat and venue of arbitration - Distinction between - Scheme of S. 20, explained in detail - Held, in international commercial arbitrations having their legal or juridical seat in India, hearings may be conducted outside India at venue fixed by parties - However, this would not have the effect of changing juridical seat of arbitration, which would remain in India, (2012) 9 SCC 552-E Jammu and Kashmir and Conciliation Act, 1997 Applicability of Pts. I and II of and Conciliation Act, 1996, explained, (2012) 9 SCC 552-F and Conciliation Act, 1996 Ss. 2(1)(e), 9, 17, 20, 34, 36, 37 and 42 - s with juridical seat in India - Courts which have jurisdiction - Held, vide scheme of S. 2(1)(e), legislature has intentionally given jurisdiction to two classes of courts: (i) court(s) which have jurisdiction at location(s) where cause of action has arisen, and (ii) court(s) which have jurisdiction where seat of arbitration is located - Illustrative example given, (2012) 9 SCC 552-G and Conciliation Act, 1996 S Freedom of parties to agree on ``place'' or ``seat'' of arbitration within India when juridical place of arbitration is in India - Extent of - Held, there are no restrictions on the same, (2012) 9 SCC 552-H and Conciliation Act, 1996 Ss. 2(1)(e) and 47 - Scheme of conferring jurisdiction under - Contrasted - S. 2(1)(e) which is limited to Pt. I of 1996 Act, confers jurisdiction to courts where seat of arbitration is located within India - On the other hand, S. 47 which is in Pt. II of 1996 Act defines ``court'' as a court having jurisdiction over subject-matter of the award i.e. court within whose jurisdiction asset/person is located, against which/whom enforcement of foreign award (under Pt. II) is sought, (2012) 9 SCC 552-I Interpretation of Statutes Basic Rules Introduction/Removal of new words - Rewriting/Alteration of language of statute when words of statute are manifestly clear - Supplying casus omissus - Impermissibility - Held, provisions in a statute must be construed by their plain language - Court cannot reconstruct a provision by adding certain words or rewriting said provision - Maxim expressum facit cessare tacitum (``what is expressed makes what is silent cease''), applied, (2012) 9 SCC 552-J Interpretation of Statutes Basic Rules Plain construction - Redundancy or tautology - Held, courts should not impute redundancy or tautology to Parliament,

3 (2012) 9 SCC 552-K and Conciliation Act, 1996 Ss. 28 and 2(1)(f) - Substantive law applicable to disputes being arbitrated - Scheme of S. 28, explained in detail - In cases which do not qualify as international commercial arbitrations (ICAs), and qualify purely as domestic arbitrations with their juridical seat in India, held, it is substantive Indian law that is applicable to substance of dispute - This is clearly to ensure that two or more Indian parties do not circumvent the substantive Indian law by resorting to arbitrations - On the other hand, in ICAs with their juridical seat in India, parties are free to agree to any other substantive law, and if not so agreed, then Arbitral Tribunal would determine the same, (2012) 9 SCC 552-L and Conciliation Act, 1996 Pts. I and II - Regulation of arbitrations - Stages envisaged - Relationship between Pts. I and II - Coverage of stages of arbitration by either Part, explicated in detail - Held, Pts. I and II are mutually exclusive of each other - Pt. I governs only arbitrations which have their juridical or legal seat within India (domestic arbitrations) - Pt. II governs arbitrations which have their juridical or legal seat outside India (foreign arbitrations) - Pt. I regulates domestic arbitrations at all four stages of an arbitration: (i) commencement of arbitration, (ii) conduct of arbitration, (iii) challenge to award, and (iv) recognition or enforcement of award - Pt. II however regulates foreign arbitrations only in respect of Stages (i) and (iv) - Thus, for foreign arbitrations, Stages (ii) and (iii) have to be regulated by arbitration law of country in which juridical seat of arbitration is located, (2012) 9 SCC 552-M and Conciliation Act, 1996 Ss. 2(1)(f) & 2(7), 34, 36, 44, 48, 53 and Pts. I & II - ``Domestic award'', ``international award'' and ``foreign award'' - Difference between, explained - ``Domestic award'' can either be an: (i) award made in India in a domestic arbitration, or (ii) award in an international arbitration whose juridical seat is in India - Both types of awards [(i) and (ii), above] are liable to be challenged under S. 34 and are enforceable under S ``Foreign award'' is an award in any arbitration whose juridical seat is outside India, which would be enforceable in India, if at all, under Pt. II and only to the extent provided therein - Pt. I is completely inapplicable to foreign awards, (2012) 9 SCC 552-N and Conciliation Act, 1996 Ss. 48, 44, 45, 53 & Pt. II and Ss. 2(1)(f), 9, 34, 37 & Pt. I - Foreign awards i.e. awards made in arbitrations whose juridical or legal seat of arbitration is outside India (foreign-seated arbitrations) - Extent of applicability of 1996 Act to foreign awards - Import of words ``set aside or suspended'' in S. 48(1)(e) - Held, Pt. I is completely inapplicable to foreign awards - Courts in India have no jurisdiction to consider validity of or to annul foreign awards - Foreign awards sought to be enforced in India cannot be challenged on merits in Indian courts - Indian courts can only refuse to enforce a foreign award on grounds specified in S. 48, (2012) 9 SCC 552-O and Conciliation Act, 1996 S. 48(1)(e) - Grounds on which enforcement of foreign award may be refused - Award set aside or suspended by competent judicial authority (JA) of (1) country in which award was made (Country 1), or (2) country under law of which award was made (Country 2) - Jurisdiction to set aside or suspend award made in Country 1 - Primacy of Country 1 JA - Exceptional circumstances in which Country 2 JA may exercise such jurisdiction to set aside or suspend award made in Country 1 - Possibility of concurrent jurisdiction, categorically rejected - Country 2 JA, held, may exercise such jurisdiction only if Country 1 JA cannot exercise such jurisdiction - Rationale for, explained in detail, (2012) 9 SCC 552-P

4 and Conciliation Act, 1996 S. 48(1)(e) - Grounds on which enforcement of foreign award may be refused - Award set aside or suspended by competent judicial authority (JA) of country ``under the law of which'' award was made [Country 2 under S. 48(1)(e) of 1996 Act/Art. V(1)(e) of 1958 Convention] - Connotation of ``under the law'' - Held, ``under the law which award was made'' refers to procedural law of the arbitration and not to substantive law governing underlying contract between the parties - This necessarily envisages the exceptionally rare situation where parties are permitted by legislation and courts to, and, have agreed upon, a procedural arbitration law other than that of the juridical arbitral seat, thus opening up possibility of award being annulled outside arbitral seat [Ed.: this was possible in India under dispensation under Bhatia International, (2002) 4 SCC 105 and Venture Global, (2008) 4 SCC 190, as thereunder procedural law of arbitration could be Indian law i.e. Pt. I of 1996 Act even when juridical seat of arbitration was outside India, a dispensation which has been overruled herein: after this ruling by a five-judge Bench, this is no longer possible in India] - Hence, Country 2 refers to country under whose procedural law of arbitration the award was made, not being the country where juridical seat of arbitration is situate, (2012) 9 SCC 552-Q and Conciliation Act, 1996 Ss. 48(1)(e), 45, Pt. II and S Annulment of foreign awards [award arising out of arbitration whose juridical seat is outside India] in India on basis that Indian law governed substance of dispute - Impermissibility of - Erroneous understanding of S. 48(1)(e) [Alternative 2], rectified - Alternative 2 providing that enforcement of foreign award in India could be refused if award was set aside or suspended by competent judicial authority (JA) of country ``under the law of which'' award was made - ``Under the law'' being erroneously construed in Bhatia International, (2002) 4 SCC 105 and Venture Global, (2008) 4 SCC 190 to mean law governing substance of dispute - Hence, based thereon Indian courts had annulled foreign awards in cases where Indian law governed substance of dispute - Held, foreign award cannot be annulled in India on basis that Indian law governed substance of dispute - Bhatia International and Venture Global overruled on this issue as well, (2012) 9 SCC 552-R and Conciliation Act, 1996 Ss. 5, 8 and 45 - ``Judicial authority'' specified therein - Meaning and implication of - Use of term ``judicial authority'' by legislature in all three sections, held, is a clear recognition that judicial control of commercial disputes is no longer in the exclusive jurisdiction of courts - There are many statutory bodies and tribunals which would have adjudicatory jurisdiction in commercial matters - Hence, policy of least intervention articulated in S. 5 is equally applicable to all ``judicial authorities'' that may have such adjudicatory jurisdiction over arbitrations - Clarified, that common use of term ``judicial authority'' in Ss. 5, 8 and 45 does not in any way imply that Pt. I of 1996 Act is applicable to arbitrations which have their juridical seat outside India, (2012) 9 SCC 552-S and Conciliation Act, 1996 S Non obstante clause in - Purpose of - Held, is abundant caution since 1996 Act is a consolidating Act, (2012) 9 SCC 552-T and Conciliation Act, 1996 S. 2(7) and Pt. I - Held, provisions of Pt. I are applicable to arbitration between two foreigners whose juridical or legal seat of arbitration is in India, even under any foreign Act - Nature of such an award explained, (2012) 9 SCC 552-U

5 and Conciliation Act, 1996 Ss. 9, 2(2), 44, 53 and Pts. I & II - Nature of S. 9 - Inapplicability of S. 9 in case of foreign-seated arbitrations i.e. arbitrations whose juridical seat is outside India - Inapplicability of 1996 to non-convention awards - agreement making 1996 Act the governing law even in a foreign-seated arbitration - Effect of - Held, Indian courts do not have power to grant interim measures in respect of foreign-seated arbitrations - S. 9 only empowers Indian courts to grant interim measures in respect of domestic arbitrations i.e. arbitrations whose juridical seat is within India - S. 9 is an integral part of Pt. I, which Pt. I as a whole as per S. 2(2) is completely inapplicable to foreign-seated arbitrations - Contentions to construe S. 9 as a stand alone or sui generis provision, comprehensively rejected - Fact that this might leave some parties with a more onerous remedy or even remediless, held, is not a valid ground to interpret S. 9 differently - Similarly, fact that 1996 Act did not cover non-convention awards i.e. awards made in foreign-seated arbitrations not covered by New York Convention, 1958 or Geneva Convention, 1923, was also not a reason to construe S. 9 differently - If these were lacunae in 1996 Act or left any party remediless, it was for Parliament to redress situation - Lastly, held, there is no existing provision in CPC or under 1996 Act for an Indian court to grant interim measures in terms of S. 9 of 1996 Act in foreign-seated arbitrations even though parties by agreement may have made 1996 Act as governing law of arbitration even in such arbitrations [Ed.: See also Shortnote B, above], (2012) 9 SCC 552-V S. 94 r/w Ors. 39 & 40 and S. 151 and Or. 7 R Inter partes suit simply for interim relief for limited purpose of restraining dissipation of assets pending foreign-seated arbitration i.e. whose juridical seat is outside India, held, is not maintainable since in Indian law suits only to obtain interim relief which is not in aid of or ancillary to main relief sought in suit is not maintainable - Since main dispute is to be decided by arbitrator in the pending foreign-seated arbitration, no substantive relief concerning merits of the arbitration could be claimed in a suit in India - Only relief that could be claimed in suit/interim injunction claim in India would be to safeguard property which plaintiff may or may not be entitled to proceed against; which itself would depend on outcome of said foreign-seated arbitration, over which Indian courts have no jurisdiction - Hence, there would be no existing cause of action - Plaint itself would be liable to be rejected under Or. 7 R. 11(a) - Furthermore, such a suit would be barred under S. 14(2), and again would not be maintainable under Ss. 38 & 39 of Specific Relief Act, If such a suit was to cross all these barriers, it would in all likelihood be stayed in view of Ss. 8 and 45 of 1996 Act - Thus, there is no existing provision in CPC or under 1996 Act for an Indian court to grant interim measures in terms of S. 9 of 1996 Act in foreign-seated arbitrations even though parties by agreement may have made 1996 Act as governing law of arbitration, (2012) 9 SCC 552-W S. 94 r/w Ors. 39 & 40 and Ss. 151 & 9 - Interim relief under Indian law - Claim for, when maintainable - Suit only to obtain interim relief - Non-maintainability of - Held, before interim relief can be claimed, CPC presupposes existence of a substantive suit for final relief wherein power to grant interim relief may be exercised till disposal thereof - Interim relief under Indian law can only be granted if it is in aid of and ancillary to main relief that may be available to a party on final determination of rights in a suit which must be based on a cause of action - Interim relief claimed itself must be a part of the substantive relief to which plaintiff's cause of action entitled him - A right to obtain interim relief is not a cause of action, hence a suit only to obtain interim relief is not maintainable, (2012) 9 SCC 552-X S. 94 r/w Ors. 39 & 40 and S Interim relief - Source of court's power in Indian law - Held, the same is traceable to S. 94 and in exceptional cases to S. 151, (2012) 9 SCC 552-Y S. 9 and Ors. 7 and 2 - Suit - Maintainability of - Held, existence of a cause of action is mandatory, (2012) 9 SCC 552-Z

SUPREME COURT OF INDIA Page 1 of 12 CASE NO.: Appeal (civil) 6527 of 2001

http://judis.nic.in SUPREME COURT OF INDIA Page 1 of 12 CASE NO.: Appeal (civil) 6527 of 2001 PETITIONER: BHATIA INTERNATIONAL Vs. RESPONDENT: BULK TRADING S. A. & ANR. DATE OF JUDGMENT: 13/03/2002 BENCH: