Holding

Section 2(2) limits Part I of the Arbitration and Conciliation Act, 1996 to arbitrations whose seat is in India, so Indian courts cannot grant interim relief or entertain inter‑parte suits for foreign‑seated arbitrations and such awards are dealt with only under Part II.

Summary

The dispute arose from a contract between Bharat Aluminium Co. and Kaiser Aluminium Technical Service, Inc. that provided for arbitration in London under English law, but governed the contract by Indian law. After two awards were rendered in England, the appellant sought to set aside the awards under Section 34 of the Arbitration and Conciliation Act, 1996, and also sought interim relief in Indian courts. The Constitution Bench examined whether Section 2(2) of the Act confines Part I to arbitrations whose seat is in India, and consequently whether Indian courts can grant interim measures or entertain inter‑parte suits for foreign‑seated arbitrations. Relying on the territoriality principle adopted from the UNCITRAL Model Law, the Court held that Part I applies only to arbitrations taking place within India and that Part II alone governs enforcement of foreign awards. Therefore, Indian courts have no jurisdiction to grant interim relief under Section 9 or to entertain suits for injunctions in respect of foreign‑seated arbitrations. The appeal was allowed, overturning the lower courts' orders and directing that the interpretation apply prospectively to future arbitration agreements.

Issues considered

The scope and meaning of Section 2(2) of the Arbitration and Conciliation Act, 1996 with respect to foreign‑seated arbitrations
Whether Part I of the Act applies to arbitrations held outside India
The jurisdiction of Indian courts to grant interim measures under Section 9 for foreign‑seated arbitrations
The maintainability of an inter‑parte suit for interim relief pending a foreign arbitration
The effect of Section 2(7), Section 48 and other provisions on the applicability of Part I and Part II

Legislation cited

Arbitration Act, 1940
Arbitration and Conciliation Act, 1996s. 1(2), s. 20, s. 2(2), s. 2(4), s. 2(5), s. 2(7), s. 28, s. 34, s. 45, s. 48, s. 9
Arbitration (Protocol and Convention) Act, 1937
Code of Civil Procedure, 1908s. 151, s. 94
Foreign Awards (Recognition and Enforcement) Act, 1961

Subjects

ArbitrationTerritoriality principleSection 2(2)Part I vs Part IIInterim measuresForeign award enforcementInter‑parte suitIndian courts jurisdiction

Judgment

[2012) 12 S.C.R. 327

BHARAT ALUMINIUM CO. A
v.
KAISER ALUMINIUM TECHNICAL SERVICE, INC.
(Civil Appeal No. 7019 of 2005)

SEPTEMBER 6, 2012
B
[S.H. KAPADIA, CJI. AND D.K. JAIN, SURINDER SINGH
NIJJAR, RANJANA PRAKASH DESAI AND JAGDISH
SINGH KHEHAR, JJ.]

Arbitration and Conciliation Act, 1996- ss.2(2) and 9; Part C
I and Part II - Interpretation of s. 2(2) - Scope of the provisions
of Part I and Part II of the Act- Territoriality principle - Whether
s. 2(2) bars application of Part I of the Act to Arbitrations which
take place outside India - Grant of interim measures by Indian
Courts where seat of arbitration is outside India - D
Maintainability of inter-parte suit for interim relief - Held: The
Act has accepted the territoriality principle which has been
adopted in the UNCITRAL Model Law - s.2(2) makes
declaration that Part I of the Act shall apply to all arbitrations
which take place within India - Part I of the Act would have no E
application to International Commercial Arbitration held
outside India - Therefore, such awards would only be subject
to 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 Act - No overlapping or
intermingling of the provisions contained in Part I with the F
provisions contained in Part II of the Act - S. 2(2) not in conflict
with any of the provisions either in Part I or in Part II of the Act
- In a foreign seated international commercial arbitration, no
application for interim relief would be maintainable u/s.9 or any
other provision, as applicability of Part I of Act is limited to all G
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
327 H
328 SUPREME COURT REPORTS [2012] 12 S.C.R.

A seat outside India - Part I of the Act applicable only to all the
arbitrations which take place within the territory of India - Law
declared to apply prospectively, to all the arbitration
agreements executed hereafter.

An agreement was executed between the appellant
8 and the respondent. The agreement contained an
arbitration clause for resolution of disputes arising out
of the contract. The arbitration clause itself indicated that
by reason of the agreement between the parties, the
governing law of the agreement was the prevailing law
C of India. However, the settlement procedure for
adjudication of rights or obligations under the agreement
was by way of arbitration in London and the English
Arbitration Law was made applicable to such
proceedings. Disputes arose between the parties with
D regard to the performance of the agreement. Negotiations
to reach a settlement were unsuccessful and a written
notice of request for arbitration was issued by the
respondent to the appellant. The disputes were duly
referred to arbitration which was held in England. The
E arbitral tribunal made two awards in England. The
appellant thereafter filed applications under Section 34
of the Arbitration and Conciliation Act, 1996 for setting
aside the aforesaid two foreign awards. The trial Court
held that the applications were not maintainable and
F dismissed the same. The order was upheld by the High
Court in appeal.
Whilst hearing of further appeal before a two Judge
Bench of this Court, counsel for the appellant referred
to the three-Judges Bench decision of this Court in
G Bhatia International which was followed in a recent
decision of two Judges Bench in Venture Global
Engineering. On account of difference of opinion
amongst the Hon'ble Judges on the correctness of the
said decisions in view of the interpretation of Clause (2)
H
BHARAT ALUMINIUM CO. v. KAISER ALUMINIUM TECHNICAL 329
SERVICE, INC.

of Section 2 of the Arbitration and Conciliation Act, 1996, A
the appeal was placed for hearing before a three Judge
Bench, which thereafter directed the matters to be placed
before the present Constitution Bench to consider the
true scope of the provisions of Part I and Part II of the
Arbitration Act, 1996. B

Answering the Reference, the Court

HELD:

Does Section 2(2) bar the Application of Part I to C
Arbitrations which take place outside India?

1.1. The omission of the word "only" in Section 2(2)
is not an instance of "CASUS OMISSUS". It is not the
funct.ion of the Court to supply the supposed omission, 0
which can only be done by Parliament. Legislative
surgery is not a judicial option, nor a compulsion, whilst
interpreting an Act or a provision in the Act. The
provision contained in Section 2(2) is to be construed
without adding the word "only" to the provision. It cannot E
be said that the omission of the word "only" from
Section 2(2) indicates that applicability of Part I of the
Arbitration Act, 1996 is not limited to the arbitrations that
take place in India. A plain reading of Section 2(2) makes
it clear that Part I is limited in its application to arbitrations
which take place in India. The Parliament by limiting the F
applicability of Part I to arbitrations which take place in
India has expressed a legislative declaration. It has clearly
given recognition to the territorial principle. Necessarily
therefore, it has enacted that Part I of the Arbitration Act,
1996 applies to arbitrations having their place/seat in G
India. [Paras 60, 62 and 63] [379-E-G; 381-C-F]

Does the missing 'onlv' indicate a deviation from Article
1(2) of the Model Law?
H
330 SUPREME COURT REPORTS [2012] 12 S.C.R.

A 1.2. The Arbitration Act, 1996 consolidates the law on
domestic arbitrations by incorporating the provisions to
expressly deal with the domestic as well as international
commercial arbitration; by taking into account the 1985
UNCITRAL Model Laws. It is not confined to the
s Convention on the Recognition and Enforcement of
Foreign Arbitral Awards ('New York Convention'), which
is concerned only with enforcement of certain foreign
awards. The Arbitration Act, 1996 seeks to remove the
anomalies that existed in the Arbitration Act, 1940 by
c introducing provisions based on the UNCITRAL Model
Laws, which deals with international commercial
arbitrations and also extends it to commercial domestic
arbitrations. UNCITRAL Model Law has unequivocally
accepted the territorial principle. Similarly, the Arbitration
Act, 1996 has also adopted the territorial principle, thereby
0
limiting the applicability of Part I to arbitrations, which take
place in India. [Para 66] [383-G-H; 384-A-B]

1.3. Article 1(2) of the UNCITRAL Model Laws is a
model and a guide to all the States, which have accepted
E the UNCITRAL Model Laws. The genesis of the word
"only" in Article 1(2) of the Model Law can be seen from
the discussions held on the scope of application of Article
1 in the 330th meeting, Wednesday, 19 June, 1985 of
UNCITRAL. This would in fact demonstrate that the word
F "only" was introduced in view of the exceptions referred
to in Article 1(2) i.e. exceptions relating to Articles 8, 9, 35
& 36 (Article 8 being for stay of judicial proceedings
covered by an arbitration agreement; Article 9 being for
interim reliefs; and Articles 35 & 36 being for enforcement
G of Foreign Awards). It was felt necessary to include the
word "only" in order to clarify that except for Articles 8,
9, 35 & 36 which could have extra territorial effect if so
legislated by the State, the other provisions would be
applicable on a strict territorial basis. Therefore, the word
H "only" would have been necessary in case the
BHARAT ALUMINIUM CO. v. KAISER ALUMINIUM TECHNICAL 331
SERVICE, INC.

provisions with regard to interim relief etc. were to be A
retained in Section 2(2) which could have extra-territorial
application. The Indian legislature, while adopting the
Model Law, with some variations, did not include the
exceptions mentioned in Article 1(2) in the corresponding
provision Section 2(2). Therefore, the word "only" would B
have been superfluous as none of the exceptions were
included in Section 2(2). [Para 68) [384-E-H; 385-A-8]

1.4. The omission of the word "only" in Section 2(2)
of the Arbitration Act, 1996 does not detract from the
territorial scope of its application as embodied in Article C
1(2) of the Model Law. The article merely states that the
Arbitration Law as enacted in a given state shall apply if
the ~bitration is in the territory of that State. The absence
of the word "only" which is found in Article 1(2) of the
Model Law, from Section 2(2) of the Arbitration Act, 1996 D
does not change the content/import of Section 2(2) as
limiting the application of Part I of the Arbitration Act, 1996
to arbitrations where the place/seat is in India. It cannot
be concluded that Part I would also apply to arbitrations
that do not take place in India. [Paras 75, 76) [390-A-D] E

1.5. India is not the only country which has dropped
the word "only" from its National Arbitration Law. The
word "only" is missing from the Swiss Private
International Law Act, 1987 Chapter 12, Article 176 (1 )(I). F
It is also missing in Section 2(1) of the 1996 Act (U.K.).
Section 2(2) is an express parliamentary declaration/
recognition that Part I of the Arbitration Act, 1996 applies
to arbitration having their place/seat in India and does not
apply to arbitrations seated in foreign territories. The G
provisions have to be read as limiting the applicability of
Part I to arbitrations which take place in India. If Section
2(2) is construed as merely providing that Part I of the
Arbitration Act, 1996 applies to India, it would be ex facie
superfluous/ redundant. No statutory provision is
H
332 SUPREME COURT REPORTS (2012) 12 S.C.R.

A necessary to state/clarify that a law made by Parliament
shall apply in India/to arbitrations in India. Another
fundamental principle of statutory construction is that
courts will never impute redundancy or tautology to
Parliament. Section 2(2) is not merely stating the obvious.
B Section 2(2) merely reinforces the limits of operation of
the Arbitration Act, 1996 to India. [Paras 77, 78 and 79]
[390-D-H; 391-A-C, F-G]

Is Section 2(2) in conflict with Sections 2(4) and 2(5) -
C 1.6. There is no doubt that the provisions of Section
2(4) and Section 2(5) would not be applicable to
arbitrations which are covered by Part II of the Arbitration
Act, 1996, i.e. the arbitrations which take place outside
India. There is no inconsistency between Sections 2(2),
D 2(4) and 2(5). It cannot be said that limiting the
applicability of part I to arbitrations that take place in India,
would make Section 2(2) in conflict with Sections 2(4) and
2(5). [Para 85] [394-G-H; 395-A-B]
Does Section 217) indicate that Part I applies to
E arbitrations held outside India?
1.7. Section 2(7) does not, in any manner, relax the
territorial principal adopted by Arbitration Act, 1996. It
certainly does not introduce the concept of a delocalized
F arbitration into the Arbitration Act, 1996. Section 2(7) does
not alter the proposition that Part I applies only where the
"seat" or "place" of the arbitration is in India. Section 2(7)
is enacted to reinforce the territorial criterion by providing
that, when two foreigners arbitrate in India, under a
Foreign Arbitration Act, the provisions of Part I will apply.
G Indian Courts being the supervisory Courts, will exercise
control and regulate the arbitration proceedings, which
will produce a "domestically rendered international
commercial award". It would be a "foreign award" for the
purposes of enforcement in a country other than India.
H [Paras 88, 93, 94] [395-E-F; 398-D, G-H, 399-A]
BHARAT ALUMINIUM CO. v. KAISER ALUMINIUM TECHNICAL 333
SERVICE, INC.

Party Autonomy A
1.8. The choice of another country as the seat of
arbitration inevitably imports an acceptance that the law
of that country relating to the conduct and supervision
of arbitrations will apply to the proceedings. It would,
8
therefore, follow that if the arbitration agreement is found
or held to provide for a seat I place of arbitration outside
India, then the provision that the Arbitration Act, 1996
would govern the arbitration proceedings, would not
make Part I of the Arbitration Act, 1996 applicable or
enable Indian Courts to exercise supervisory jurisdiction C
over the arbitration or the award. It would only mean that
the parties have contractually imported from the
Arbitration Act, 1996, those provisions which are
concerned with the internal conduct of their arbitration
and which are not inconsistent with the mandatory D
provisions of the English Procedural Law/Curial Law. This
necessarily follows from the fact that Part I applies only
to arbitrations having their seat I place in India. [Paras 121,
122] [418-G-H; 419-A-B]
E
Section 28 -

1.9. The only purpose of Section 28 is to identify the
rules that would be applicable to "substance of dispute".
In other words, it deals with the applicable conflict of law
rules. This section makes a distinction between purely F
domestic arbitrations and international commercial
arbitrations, with a seat in India. Section 28(1)(a) makes
it clear that in an arbitration under Part I to which Section
2(1)(f) does not apply, there is no choice but for the
Tribunal to decide "the dispute" by applying the Indian G
"substantive law applicable to the contract". This is
clearly to ensure that two or more Indian parties do not
circumvent the substantive Indian law, by resorting to
arbitrations. The provision would have an overriding
H
334 SUPREME COURT REPORTS [2012] 12 S.C.R.

A effect over any other contrary provision in such contract.
On the other hand, where an arbitration under Part I is an
international commercial arbitration within Section 2(1)(f),
the parties would be free to agree to any other
"substantive law" and if not so agreed, the "substantive
B law" applicable would be as determined by the Tribunal.
The section merely shows that the legislature has
segregated the domestic and international arbitration.
Therefore, to suit India, conflict of law rules have been
suitably modified, where the arbitration is in India. This
c will not apply where the seat is outside India. In that
event, the conflict of laws rules of the country in which
the arbitration takes place would have to be applied. [Para
123] [419-0-H; 420-A-B]

Part II
D
1.10. The regulation of conduct of arbitration and
challenge to an award would have to be done by the courts
of the country in which the arbitration is being conducted.
Such a court is then the supervisory court possessed of
E the power to annul the award. This is in keeping with the
scheme of the international instruments, such as the
Geneva Convention and the New York Convention as well
as the UNCITRAL Model Law. It also recognizes the
territorial principle which gives effect to the sovereign right
F of a country to regulate, through its national courts, an
adjudicatory duty being performed in its own country.
Having accepted the principle of territoriality, it is evident
that the intention of the parliament was to segregate Part I
and Part II. Therefore, any of the provisions contained in
G Part I cannot be made applicable to Foreign Awards, as
defined under Sections 44 and 53, i.e., the New York
Convention and the Geneva Awards. This would be a
distortion of the scheme of the Act. It is, therefore, not
possible to accept the submission that provisions
contained in Part II are supplementary to the provision
H
BHARAT ALUMINIUM CO. v. KAISER ALUMINIUM TECHNICAL 335
SERVICE, INC.
contained in Part I. The Parliament has clearly segregated the A
two parts. [Paras 128, 129] [423-8-D, G-H; 424-A-B]

Section 45
1.11. Section 45 falls within Part II which deals with
enforcement proceedings in India and does not deal with B
the challenge to the validity of the arbitral awards
rendered outside India. Section 45 empowers a judicial
authority to refer the parties to arbitration, on the request
made by a party, when seized of an action in a matter in
respect of which the parties have made an agreement C
referred to in Section 44. It cannot be said that the use
of expression "notwithstanding anything contained in
Part I, or in the Code of Civil Proced.ure, 1908", in Section
45 of the Arbitration Act, 1996 necessarily indicates that
provisions of Part I would apply to foreign seated D
arbitration proceedings. The existence of the non-
obstante clause does not alter the scope and ambit of the
field of applicability of Part I to include international
commercial arbitrations, which take place out of India.
[Paras 130, 133] [424-C-E; 426-G-H] E
Does Section 48(1 )(el recognize the jurisdiction of Indian
Courts to annul a foreign award. falling within Part II?

1.12. Section 48(1)(e) corresponds to Article V(1)(e)
of the New York Convention. Section 48(1) sets out the F
defences open to the party to resist enforcement of a
foreign award. The words "suspended or set aside", in
Clause (e) of Section 48(1) cannot be interpreted to mean
that, by necessary implication, the foreign award sought
to be enforced in India can also be challenged on merits G
in Indian Courts. The provision merely recognizes that
courts of the two nations which are competent to annul
. or suspend an award. It does not ipso facto confer
jurisdiction on such Courts for annulment of an award
made outside the country. Such jurisdiction has to be H
336 SUPREME COURT REPORTS [2012] 12 S.C.R.

A specifically provided, in the relevant national legislation
of the country in which the Court concerned is located.
So far as India is concerned, the Arbitration Act, 1996
does not confer any such jurisdiction on the Indian
Courts to annul an international commercial award made
B outside India. Such provision exists in Section 34, which
is placed in Part I. Therefore, the applicability of that
provision is limited to the awards made in India. If the
arguments of the appellants are accepted, it would entail
incorporating the provision contained in Section 34 of the
c Arbitration Act, 1996, which is placed in Part I of the
Arbitration Act, 1996 into Part II of the said Act. This is not
permissible as the intention of the Parliament was clearly
to confine the powers of the Indian Courts to set aside
an award relating to international commercial arbitrations,
which take place in India. [Paras 136, 138] [429-D-E; 430-
0
D-H; 431-A]

Interim measures etc. by the Indian Courts where the seat
of arbitration is outside India.

E 1.13. On a logical and schematic construction of the
Arbitration Act, 1996, the Indian Courts do not have the
power to grant interim measures when the seat of
arbitration is outside India. A bare perusal of Section 9
would clearly show that it relates to interim measures
F 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. Section 36 necessarily
refers to enforcement of domestic awards only.
Therefore, the arbitral proceedings prior to the award
G contemplated under Section 36 can only relate to
arbitrations which take place in India. The provision
contained in Section 9 is limited in its application to
arbitrations which take place in India. Extending the
applicability of Section 9 to arbitrations which take place
H outside India would be to do violence to the policy of the
BHARAT ALUMINIUM CO. v. KAISER ALUMINIUM TECHNICAL 337
SERVICE, INC.

territoriality declared in Section 2(2) of the Arbitration Act, A
1996. [Para 161, 163] [445-G-H; 446-A-B, F-G]

Is An lnter-Parte Suit For Interim Relief Maintainable -

1.14. It appears that as a matter of law, an inter-parte
suit simply for interim relief pending arbitrations, even if 8
it be limited for the purpose of restraining dissipation of
assets would not be maintainable. There would be
number of hurdles which the plaintiff would have to
cross, which may well prove to be insurmountable.
Pendency of the arbitration proceedings outside India C
would not provide a cause of action for a suit where the
main prayer is for injunction. It is patent that there is no
existing provision under the CPC or under the Arbitration
Act, 1996 for a Court to grant interim measures in terms
of Section 9, in arbitrations which take place outside D
India, even though the parties by agreement may have
made the Arbitration Act, 1996 as the governing law of
arbitration. [Paras 176, 179 and 197] [453-C-D; 454-D-E;
461-D-E]
E
Konkan Railway Corporation Ltd. & Anr. vs. Rani
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SBP & Co. Vs. Patel Engineering Ltd. & Anr. (2005) 8 SCC
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Labour Court (1990) 3 SCC 682: 1990 (3) SCR 111; National
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338 SUPREME COURT REPORTS (2012] 12 S.C.R.

A Pradesh Sunni Central WakfBoard & Ors. (2011) 2 SCC 741:
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Rayon Silk Mfg. (Wvg.) Co. Ltd. vs. Custodian of Vested
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Forests AIR 1990 SCC 1747: 1990 SCR 401; State of Orissa
vs. Madan Gopal Rungta AIR 1952 SC 12: 1952 SCR 28;
Cotton Corporation Limited vs. United Industrial Bank (1983)
4 SCC 625: 1983 (3) SCR 962 and Ashpk Kumar Unga/a
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Magor & St. Me/Ions RDC v. Newport Corporation 1951
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Naviera Amazonica Peruana S.A. Vs. Compania
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H Lane) Ltd. 1949 AC 530; Bergesen Vs. Joseph Muller
BHARAT ALUMINIUM CO. v. KAISERALUMINIUM TECHNICAL 339
SERVICE, INC.
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referred to.

"Guide to the UNCITRAL Model Law on lntemational
Commercial Arbitration, Legislative History and Commentary"
by Howard M. Holtzmann and Joseph E. Beuhaus -
referred to. F

CONCLUSION :-

2.1. The Arbitration and Conciliation Act, 1996 has
accepted the territoriality principle which has been
adopted in the UNCITRAL Model Law. Section 2(2) makes G
a declaration that Part I of the Arbitration Act, 1996 shall
apply to all arbitrations which take place within India. 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 H
340 SUPREME COURT REPORTS [2012) 12 S.C.R.

A 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.
The provisions contained in Arbitration Act, 1996 make
it crystal clear that there can be no overlapping or
B lntetmingling of the provisions contained in Part I with the
provisions contained in Part II of the Arbitration Act, 1996.
[Para 198] (461 ·F-H; 462-A]

2.2. The provision contained in Section 2(2) of the
C 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
D 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. [Para
199] (462-B·D]
E
2.3. Part I of the Arbitration Act, 1996 is applicable
only to all the arbitrations which take place within the
territory of India. In order to do complete justice, it is
hereby ordered, that the law now declared by this Court
F shall apply prospectively, to all the ar.bitration agreements
executed hereafter. [Paras 200, 201] (426-E-G]

Bhatia International Vs. Bulk Trading S.A. & Anr. (2004)
2 SCC 105 and Venture Global Engineering Vs. Satyam
Computer Services Ltd. & Anr. (2008) (4) SCC 190: 2008 (1)
G SCR 501 - overruled.
Case Law Reference:
2002 (1) SCR 728 referred to Para 15, 60

H
BHARAT ALUMINIUM CO. v. KAISER ALUMINIUM TECHNICAL 341
SERVICE, INC.

2005 (4) Suppl. SCR 688 referred to Para 15, 60 A

1953 SCR 533 referred to Para 16,60,1
68

1951 (2) All ER 839 referred to Para 16
B
1990 (3) SCR 111 referred to Para 16

(1980) 1 All ER 529 referred to Para 16, 61

1992 (3) SCR 106 referred to Para 17,26

2002 (1) LLR 645 referred to Para 18,124, c
165

[2008] EWHC 426 (TCC) referred to Para 20,50,
51,54

[2009] EWHC 957 referred to Para 20 D
(2004) 2 sec 105 overruled Para 23,199,
201
SA 1979 AC 210 referred to Para 23
E
2007 (1) All ER 1087 referred to Para 23
2007 (8) SCR 213 referred to Para 23

1952(1) SCR 28 referred to Para 23

1997 Suppl (1) sec 680 referred to Para 23 F
2004 (5) Suppl. SCR 74 referred to Para 23

2004 (3) SCR 920 referred to Para 23

2010 (13) SCR 1131 referred to Para 23 G
2008 (1) SCR 501 overruled Para 26, 199,
201

1987 (1) SCR 1024 referred to Para 26,51,
91 H
342 SUPREME COURT REPORTS [2012] 12 S.C.R.

A 1989 (2) SCR 1 referred to Para 26
2011 (6) SCR 1116 referred to Para 29
2008 (8) SCR 775 referred to Para 30
1982 (1) SCR 842 referred to Para 35
8
1988 (1) LLR 116 referred to Para 72,102,
111
1993 (3) LLR 48 referred to Para 73
c 1975 (1) SCR 918 referred to Para 78
1949 AC 530 referred to Para 78
710 F.2d 928 referred to Para 94

D (1970] A.C.583 referred to Para 105
A.G. [1981] 2 LR. 446 referred to Para 105 ·
[2007] EWCA Civ referred to Para 116
1282 (CA
E [2012 WL 14764 referred to Para 119
(2007] 1 LR 237 referred to Para 128
1991 (1) Suppl. SCR 387 referred to Para 132

F 335 F.3d 357 referred to Para 151
Ybk Comm Arb'n Vol. referred to Para 152
XXVlll (2003)
745 F Supp 172, 178 referred to Para 153
G (SONY 1990
(1992) VII Ybk Comm referred to Para 154
Arb 639
(1998] WLR 1896 at 913 referred to Para 165
H
BHARAT ALUMINIUM CO. v. KAISER ALUMINIUM TECHNICAL 343
SERVICE, INC.

[2001] 2 WLR 735 referred to Para 165 A

1990 (3) SCR 111 referred to Para 169
1990 SCR 401 referred to Para 175
1952 SCR 28 referred to Para 180
B
1983 (3) SCR 962 referred to Para 181
2011 (14) SCR 800 referred to Para 182

(1993) AC 334 referred to Para 190
c
CIVIL APPELLATE JURISDICTION: Civil Appeal No.
7019 of 2005.

From the Judgment and Order dated 10.08.2005 of the
High Court of Judicature at Bitaspur (Chhattisgarh) in Misc.
Appeal No. 889 of 2004. D
WITH
Civil Appeal No. 6284 of 2004
Civil Appeal No. 3678 of 2007.
Transferred Case (C) No. 35 of 2007.
E
S.L.P (C) Nos. 3589-3590 of 2009
S.L.P (C) Nos. 31526-31528 of 2009
S.L.P (C) Nos. 27824 & 27841 of 2011.
C.A. Sundaram, Soli J. Sorabjee, P.H. Parekh, Dr. A.M.
Singhvi, Harish N. Salve, Ciccu Mukhopadhya, Aspi Chenoy, F
S.K. Dholakia, Prashanto Chandra Sen, Ramesh Singh,
Preetesh Kapur, Mehernaz Mehta, Aanchat Yadav, Mohit
Sharma, Binu Tamta, Rohini Musa, Manu Krishnan, Prashant
Mishra, Subramonium Prasad, Hiroo Advani, Shashank Garg,
Animesh Sinha, ,II.par Gupta, Parmanand Pandey, E.R. Kumar, G
Sameer Parekh, Rukhmini Bobde, Subhasree Chatterjee,
Vishal Prasad, Utsav Trivedi, Nupur, Sharma (For Parekh &
Co.), Gopal Jain, R.N. Karanjawala, Manik Karanjawata,
Nandini Gore, Amit Bhandari, Debmalya Banerjee, Sachi
Lodha, Dhavel Vassonji, Ravi Gandhi, Sonia Nigam, Aditi Bhat, H
344 SUPREME COURT REPORTS [2012] 12 S.C.R.

A Abhiruchi Mengi, Premtosh Mishra (For Karanjawala & Co.),
Manu Nair, Abhijeet Sinha, Adit S. Pujari, Vaibhav Mishra,
Saransh Bajaj, Kirpa Pandit (For Suresh A. Shroff & Co.),
Anirudh Das, Saanjh N. Purohit, Prashant Kalra (For Suresh A
Shroff & Co.), Sanjay Kumar, Omar Ahmad (For Suresh A.
B Shroff & Co.), Anip Sachthey, Mohit Paul, Shagun Matta,
Prateek Jalan, Rohan Dakshini, Ruby Singh Ahuja, Jatin
Mongia, Siddhant Kochhar, Rashmikant, Shruti Katakey,
Vijendra Kumar, Shaikh Chand Saheb, Rameshwar Prasad
Goyal, A.V. Rangam, Buddy A. Ranganadhan, Richa
C Bharadwaj, Dharmendra Rautray, Tara Shahani, Ankit Khushu,
Pramod Nair, Divyam Agarwal, Dheeraj Nair, E.C. Agrawala,
Mahesh Agarwal, Rishi Agrawala, Radhika Gautam, Nakul
Dewal, V.P. Singh Raghav Dhawan, Tejas Karia, Nitesh Jain,
1

Aashish Gupta, Dushyant Manocha, Tarunima Vijra (For Suresh
A. Shroff & Co.), Ramesh Singh, A.T. Patra, Mohit Sharma,
0
(For O.P. Khaitan & Co.), Ramesh Babu M.R., Shekhar Prasad
Gupta, Sushrat Jindal for the Appearing Parties.

The Judgment of the Court was delivered by

E SURINDER SINGH NIJJAR, J. 1. Whilst hearing C.A.
No. 7019 of 2005, a two Judge Bench of this Court, on 16th
January, 2008, passed the following order:-

"In the midst of hearing of these appeals, learned counsel
for the appellant has referred to the three-Judges Bench
F decision of this Court in Bhatia International Vs. Bulk
Trading S.A. & Anr., (2002) 4 SCC 105. The said decision
was followed in a recent decision of two Judges Bench in
Venture Global Engineering Vs. Satyam Computer
Services Ltd. & Anr. 2008 (1) Scale 214. My learned
G brother Hon'ble Mr. Justice Markandey Katju has
reservation on the correctness of the said decisions in
view of the interpretation of Clause (2) of Section 2 of the
Arbitration and Conciliation Act, 1996. My view is
otherwise.
H
BHARAT ALUMINIUM CO. v. KAISER ALUMINIUM TECHNICAL 345
SERVICE, INC. [SURINDER SINGH NIJJAR, J.)

Place these appeals before Hon'ble CJI for listing them A
before any other Bench."

2. Pursuant to the aforesaid order, the appeal was placed
for hearing before a three Judge Bench, which by its order
dated 1st November, 2011 directed the matters to be placed B
before the Constitution Bench on 10th January, 2012.

3. Since the issue raised in the reference is pristinely legal,
it is not necessary to make any detailed reference to the facts
of the appeal. We may, however, notice the very essential facts
leading to the filing of the appeal. An agreement dated 22nd C
April, 1993 was executed between the appellant and the
respondent, under which the respondent was to supply and
install a computer based system for Shelter Modernization at
Balco's Korba Shelter. The agreement contained an arbitration
clause for resolution of disputes arising out of the contract. The D
arbitration clause contained in Articles 17 and 22 was as under:
"Article 17.1 - Any dispute or claim arising out of or relating
to this Agreement shall be in the first instance, endeavour
to be settled amicably by negotiation between the parties E
hereto and failing which the same will be settled by
arbitration pursuant to the English Arbitration Law and
subsequent amendments thereto.

Article 17 .2 - The arbitration proceedings shall be carried
out by two Arbitrators one appointed by BALCO and one F
by KATSI chosen freely and without any bias. The court of
Arbitration shall be held wholly in London, England and
shall use English language in the proceeding. The findings
and award of the Court of Arbitration shall be final and
binding upon the parties. G
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."
H
346 SUPREME COURT REPORTS [2012) 12 S.C.R.

A 4. The aforesaid clause itself indicates that by reason of
the agreement between the parties, the governing law of the
agreement was the prevailing law of India. However, the
settlement procedure for adjudication of rights or obligations
under the agreement was by way of arbitration in London and
B the English Arbitration Law was made applicable to such
proceedings. Therefore, the lex tori for the arbitration is English
Law but the substantive law will be Indian Law.
5. Disputes arose between the parties with regard to the
performance of the agreement. Claim was made by the
C 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 to reach
a· settlement of the disputes between the parties were
D 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
E 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 which were numbered as MJC Nos. 92 of 2003 and
14 of 2003, respectively. By an order dated 20th July, 2004,
F the learned District Judge, Bilaspur held that the applications
filed by the appellant under Section 34 of the Arbitration and
Conciliation Act, 1996 (hereinafter referred to as the
'Arbitration Act, 1996'} for setting aside the foreign awards are
not tenable and accordingly dismissed the same.
G 6. Aggrieved by the aforesaid judgment, the appellant filed
two miscellaneous appeals being Misc. Appeal Nos. 889 of
2004 and Misc. Appeal No.890 of 2004 in the High Court of
Judicature at Chattisgarh, Bilaspur. By an order dated 10th
August, 2005, a Division Bench of the High Court dismissed
H the appeal. It was held as follows:
BHARAT ALUMINIUM CO. v. KAISER ALUMINIUM TECHNICAL 34 7
SERVICE, INC. [SURINDER SINGH NIJJAR, J.]
"For the aforesaid reasons, we hold that the applications A
filed by the appellant under Section 34 of the Indian Act
are not maintainable against the two foreign awards dated
10.11.2002 and 12.11.2002 and accordingly dismiss
Misc. Appeal No.889 of 2004 and Misc. Appeal No.890
of 2004, but order that the parties shall bear their own B
costs."

The aforesaid decision has been challenged in this
appeal.

7. We may also notice that number of other appeals and C
special leave petitions as well as transferred case were listed
alongwith this appeal. It is not necessary to take note of the
facts in all matters.

8. We may, however, briefly notice the facts in Bharati 0
Shipyard Ltd. Vs. Ferrostaal AG & Anr. in SLP (C) No.27824
of 2011 as it pertains to the applicability of Section 9 of the
Arbitration Act, 1996. In this case, the appellant, an Indian
Company, entered into two Shipbuilding Contracts with
respondent No.1 on 16th February, 2007. The appellant was E
to construct vessels having Builders Hull No.379 which was to
be completed and delivered by the appellant to the respondent
No.1 within the time prescribed under the two Shipbuilding
Contracts. The agreement contained an arbitration clause. The
parties initially agreed to get their disputes settled through F
arbitral process under the Rules of Arbitration of the
International Chamber of Commerce (ICC) at Paris,
subsequently, mutually agreed on 29th November, 2010 to
arbitration under the Rules of London Maritime Arbitrators
Association (LMAA) in London. This agreement is said to have
been reached between the parties in the interest of !laving costs G
and time. Prior to agreement dated 29th November, 2010
relating to arbitration under LMAA Rules, respondent No.1 had
filed two requests for arbitration in relation to both the contracts
under Article 4 of ICC Rules on 12th November, 2010
H
348 SUPREME COURT REPORTS [2012] 12 S.C.R.

A recognizing that the seat of arbitration is in Paris and the
substantive law applicable is English Law. In its requests for
arbitration, respondent No.1 had pleaded in paragraphs 25 and
26 as under:

"Applicable Law:
B
25. The Contract Clause "Governing Law, Dispute and
Arbitration Miscellaneous" provides that the Contract shall
be governed by the Laws of England." The rights and
obligations of the parties are therefore to be interpreted
c in light of English Law (the applicable law).

26. In summary:

a) disputes arising out of the Contract between the parties
are to be resolved by arbitration under the ICC Rules;
D
b) the seat of arbitration is Paris; and

c) the substantive law to be applied in the arbitration shall
be English Law."
E 9. Subsequently, in view of the agreement dated 29th
November, 2010, the first respondent submitted two requests
for arbitration under LMAA Rules in London on 4th February,
2011. During the pendency of the aforesaid two requests, on
10th November, 2010, the first respondent filed two
F applications under Section 9 of the Arbitration Act, 1996 which
are numbered as AA.No.6/2010 and AA.No.7/2010 seeking
orders of injunction against the encashment of refund bank
guarantees issued under the contracts.
G 10. Learned District Judge, Dakshina Kannada,
Mangalore granted an ex parte ad interim injunction in both the
applications restraining the appellant from encashing the bank
guarantee on 16th November, 2010. The appellant appeared
and filed its statement of objections. After hearing, the learned
H District Judge passed the judgments and orders on 14th
BHARAT ALUMINIUM CO. v. KAISER ALUMINIUM TECHNICAL 349
SERVICE, INC. (SURINDER SINGH NIJJAR, J.]

January, 2011 allowing the applications filed by respondent A
No.1 under Section 9 of the Arbitration Act, 1996.

11. Both the orders were challenged in the appeals by the
appellant before the High Court of Karnataka at Bangalore. By
judgment and order dated 9th September, 2011, the High Court B
allowed the appeal and set aside the orders passed by the
District Judge dated 14th January, 2011. In allowing the appeal,
the High Court held as follows:

"From the above, it is clear that respondent No.1 is not
remedyless (sic). It is already before the Arbitral Tribunal C
at London. Thus, it is open for it to seek interim order of
injunction for the purpose of preserving the assets as per
Section 44 of the Arbitration Act, 1996 in Courts at
London.
D
Since the parties have agreed that substantive law
governing the contract is English Law and as the law
governing arbitration agreement is English Law, it is open
for respondent No.1 to approach the Courts at England to
seek the interim relief." E
12. This special leave petition was filed against the
aforesaid judgment of the High Court.

13. We have heard very lengthy submissions on all
aspects of the matter. All the learned counsel on both sides F
have made elaborate references to the commentaries of
various experts in the field of International Commercial
Arbitration. Reference has also been made to numerous
decisions of this Court as well as the Courts in other
jurisdictions. G
14. Mr. C.A. Sundaram, appearing for the appellants in
C.A. No. 7019 of 2005 submits that primarily the following five
questions would arise in these cases:- (a) What is meant by
the place of arbitration as found in Sections 2(2) and 20 of the H
Arbitration Act, 1996?; (b) What is the meaning of the words
350 SUPREME COURT REPORTS [2012] 12 S.C.R.

A "under the law of which the award is passed" under Section 48
of the Arbitration Act, 1996 and Article V(1 )(e) of the Convention
on the Recognition and Enforcement of Foreign Arbitral
Awards (hereinafter referred to as "the New York Convention")?;
(c) Does Section 2(2) bar the application of Part I of the
B Arbitration Act, 1996 (Part I for brevity) to arbitrations where
the place is outside India?; (d) Does Part I apply at all stages
of an arbitration, i.e., pre, during and post stages of the arbitral
proceedings, in respect of all arbitrations, except for the areas
specifically falling under Parts II and 111 of the Arbitration Act,
c 1996 (Part II and Part Ill hereinafter)?; and (e) Whether a suit
for preservation of assets pending an arbitration proceeding
is maintainable?

15. Mr. Soli Sorabjee, Mr. Sundaram, Mr. Gopal
Subramanium and Dr. AM. Singhvi, learned Senior Advocates
D for the appellants have in unison emphasised that Part I and
Part II are not mutually exclusive. They have submitted that the
Arbitration Act, 1996 has not "adopted or incorporated the
provisions of Model Law". It has merely "taken into account" the
Model Law. They have made a reference to the judgments of
E this Court in the case of Konkan Railway Corporation Ltd. &
Anr. Vs. Rani Construction Pvt. Ltd. 1 and SBP & Co. Vs. Patel
Engineering Ltd. & Anr. 2 It is emphasised that in fact the
Arbitration Act, 1996 differs from the UNCITRAL Model Law
on certain vital aspects. It is pointed out that one of the strongest
F examples is the omission of the word "only" in Section 2(2),
which occurs in corresponding Article 1(2) of the Model Law.
The absence of the word "only" in Section 2(2) clearly signifies
that Part I shall compulsorily apply if the place of arbitration is
in India. It does not mean that Part I will not apply if place of
G arbitration is not in India.
16. Mr. Sorabjee has emphasised that the omission of
word "only" in Section 2(2) is not an instance of "CASUS
1. (2002) 2 sec 388.
H 2. (2005) 8 sec 618.
BHARAT ALUMINIUM CO. v. KAISERALUMINIUM TECHNICAL 351
SERVICE, INC. [SURINDER SINGH NIJJAR, J.]
OMISSUS". The omission of the word clearly indicates that A
Model Law has not been bodily adopted by the Arbitration Act,
1996. All the learned senior counsel seem to be agreed that
the Arbitration Act, 1996 has to be construed by discerning the
intention of the Parliament from the words and language used,
i.e., the provisions of the said Act have to be construed literally B
without the addition of any word to any provision. Therefore, the
missing word "only" can not be supplied by judicial
interpretation. In support of the submission, reliance is placed
1

on Nalinakhya Bysack 'Vs. Shyam Sunder Haldar & Ors. 3 ,
Magor & St. Me/Ions RDC Vs. Newport Corporation4 , Punjab c
Land Devi. & Reclamation Corporation Ltd. Vs. Presiding
Officer, Labour Court6 and Duport Steels Ltd. Vs. Sirs6. It is
pointed out by Mr. Sorabjee that the doctrine of ironing out the
creases does not justify the substitution of a new jacket in place
of the old, whose creases were to be ironed out.
D
17. All the learned counsel for the appellants have
emphasised that the Arbitration Act, 1996 has not adopted the
territorial criterion/principle completely, party autonomy has
been duly recognized. This, according to the learned counsel,
is evident from the provisions in Sections 2(1)(e), 2(5), 2(7), E
20 and 28. It is submitted that restricting the operation of Part
I only to arbitration which takes place in India would lead to
reading words into or adding words to various provisions
contained in the Arbitration Act, 1996. It is emphasised that
restricting the applicability of Part I to arbitrations which take F
place only in India would render the provisions in Sections 2(5),
2(7) and 20 redundant. Mr. Sundaram has reiterated that
expression "place" in Sections 2(2) and Section 20 has to be
given the same meaning. Section 20 of the Arbitration Act, 1996
stipulates that parties are free to agree on the place of G

. 3. 1953 SCR 533.
4. 1951 (2) All ER 839.
5. (1990) 3 sec 682.
6. (1980) 1 All ER 529. H
352 SUPREME COURT REPORTS [2012] 12 S.C.R.

A arbitrati.on outside India. Therefore, arbitrations conducted
under Part I, may h,ave geographical location outside India.
Similarly, if Part I was to apply only where the place of arbitration
is in India then the words "Where the place of arbitration is
situated in India" in Section 28(1) were wholly unnecessary.
B Further, the above words qualify only Sub-section (1) of Section
28 and do not qualify Sub-section (3). The necessary
implication is that Sub-section (3) was intended to apply even
to foreign-seated arbitration so long as parties have chosen
Arbitration Act, 1996 as law of the arbitration, which could only
C p~ if Part I is to apply to such arbitration. Therefore, it is
submitted by the learned counsel that the 'seat' is not the
"centre of gravity" as far as the Arbitration Act, 1996 is
concerned. The Arbitration Act, 1996 is "subject matter centric"
and not "seat-centric". In support of this, the learned counsel
placed strong reliance on the provision contained in S'ection
D 2(1) (e), which provides that "jurisdiction to decide the questions
forming trni subject-matter of the arbitration if the same had
been the subject matter of a suit". This, according to the learned
counsel, is an essential precondition for a Court to assume
jurisdiction under Part I. The definition of Court in Section 2(1 )(e)
E would necessarily mean that two for!:!ign parties, in order ta
resolve a dispute arising outside India and governed by foreign
law cannot invoke jurisdiction of an Indian Court by simply
choosing India as the seat of arbitration. It is further submitted
that in the absence of Section 9 of the Arbitration Act, 1996,
F no interim relief can be granted unless it is in aid of final/
substantive relief that must be claimed in the suit. On the other
hand, a suit claiming any permarlent relief on the substance of
the dispute would tantamount to a waiver of the arbitration
clause by the plaintiff. It is, the~efore, submitted by the learned
G counsel that supplying word "or'IJy" in Section 2(2) will in many
cases leave a party remediles~" It is further submitted, that
Section 2(7) clearly shows that part I would apply eve~ to
arbitrations which take place outside India. If Section 2(7) was
to be restricted only to arbitrations which take place in India,
H there would be no need for such a provision. It is emphasised
BHARAT ALUMINIUM CO. v. KAISERALUMINIUM TECHNICAL 353
SERVICE, INC. [SURINDER SINGH NIJJAR, J.]

that the provision clearly states that it applies to an award made A
"under this part". The aforesaid term is a clear indication to an
arbitration which takes place outside India, where the parties.
have chosen the Arbitration Act, 1996 as the governing law of
the arbitration. Mr. Sorabjee relied on National Thermal Power
Corporation Vs. Singer Company & Ors. 7 , and submitted that B
Section 2(7) is a positive re-enactment of Section 9(b) of the
Foreign Awards (Recognition and Enforcement) Act, 1961
(hereinafter referred to as the '1961 Act'). It is emphasised that
Section 2(7) has been placed in Part I only to bring it in
conformity with Article V(1)(e) of the New York Convention, c
which has been incorporated and enacted as Section 48(1)(e).
The aforesaid section even though it is dealing with enforcement
of awards, necessarily recognizes the jurisdiction of courts in
two countries to set aside the award, namely, the courts of the
country in which arbitration takes place and the country under 0 .
the law of which the award was made. It is submitted that both
the expressions must necessarily be given effect to and no part
of the actor the section can be disregarded by describing them
as fossil. '

18. Mr. Sorabjee has emphasised that not giving effect to E
the words "under the law of which the award was made", will
allow many awards to go untested in Court. He has relied upon
certain observations made by the U.K. Court in the case of
Reliance Industries Ltd. Vs. Enron Oil & Gas India Ltd. 8
F
19. Mr. Sundaram points out that the Arbitration Act, 1996
departs from the strict territorial criterion/principle as not only it
retains the features of New York Convention but significantly
departs from Model Law. The Model Law has sought to bring
in an era of localized/territorial arbitration (Article 1(2)). On the G
other hand, the Arbitration Act, 1996 recognizes and provides
for de-localized arbitration. He emphasised that under Model

1. (1992) 3 sec 551.
8. 2002 (1) Lloyd Law Reports 645. H
354 SUPREME COURT REPORTS (2012] 12 S.C.R.

A Law, all provisions referred to localized arbitration except the
exceptions in Article 1(2). Under the Arbitration Act, 1996, all
provisions are de-localized, except where "place" qualification
has been provided for.

20. He further submitted that in all commentaries of
8 International Commercial Arbitration, the expression "place" is
used interchangeably with "seaf'. In many cases, the terms used
are "place of arbitration"; "the arbitral situs~ the "locus arbitri"
or "the arbitral forum". Relying on the judgment in Braes of
Daune Wind Farm (Scotland) Limited Vs. Alfred McA/pine
C Business Services Limited9 which has been affirmed in
Shashoua & Ors. Vs. Sharma 10 , he submitted that
internationally "seat" is interpreted as being the "juridical seat".
Therefore, when the parties opt for a given law to govern the
arbitration, it is considered to supplant the law of the
D geographical location of the arbitration. Therefore, the mere
geographical location is not the deciding factor of the seat. He
relies on the observations made by Gary B. Born in his book
'International Commercial Arbitration', which are as follows :
•A concept of central importance to the international arbitral
E
process is that of the arbitral seat (alternatively referred to
as the "place of arbitration·, the "siege• "ort", the arbitral
"situs· the "locus arbitri" or the arbitral "forum"). The arbitral
seat is the nation where an international arbitration has its
legal domicile, the laws of which generally govern the
F arbitration proceedings in significant respects, with regard
to both "internal" and "external" procedural matters.·
As discussed elsewhere, the arbitral seat is the location
selected by the parties (or, sometimes, by the arbitrators,
G an arbitral institution, or a court) as the legal or juridical
home or place of the arbitration. In one commentator's
words, the "seat" is in the vast majority of cases the country

9. [2008]EWHC 426 (TCC).
H 10. [2009] EWHC 957 (Comm.).
BHARAT ALUMINIUM CO. v. KAISER ALUMINIUM TECHNICAL 355
SERVICE, INC. [SURINDER SINGH NIJJAR, J.)
chosen as the place of the arbitration. The choice of the A
arbitral seat can be (and usually is) made by the parties in
their arbitration agreement or selected on the parties'
behalf by either the arbitral tribunal or an arbitral institution.'

21. He submits that whist interpreting the word "place" in B
Section 2(2), the provisions contained in Section 20 would have
relevance as Section 20 stipulates that the parties are free to
agree on the place of arbitration. The interpretation on the word
"place" in Section 2(2) would also have to be in conformity with
the provisions contained in Section 2(1) (e). Further more, C
Section 2(2) has to be construed by keeping in view the
provisions contained in Section 2(7) which would clearly indicate
that the provisions of Part I of the Arbitration Act, 1996 are not
confined to arbitrations which take place within India. Whilst
arbitration which takes place in India by virtue of Section 2(2)
would give rise to a "domestic award"; the arbitration which is D
held abroad by virtue of Section 2(7) would give rise to a
"deemed domestic award"; provided the parties to arbitration
have chosen the Arbitration Act, 1996 as the governing law of
arbitration.
E
22. Mr. Sundaram emphasised that if Section 2(2) had not
been on the Statute book there would be no doubt that if an
arbitration was governed by the Arbitration Act, 1996, Part I
would ipso facto become applicable to such arbitration, and
under Section 2(7), irrespective of where the arbitral F
proceedings took place, it would become a deemed domestic
award, giving rise to the incidence arising therefrom. By the
inclusion of Section 2(2), the legislature has also made the
Arbitration Act, 1996 and Part I applicable when the seat or
place of arbitration is in India even if not conducted in G
accordance with Indian Arbitral laws thereby domestic what
would otherwise have been a non-domestic award having been
conducted in accordance with a Foreign Arbitration Act. By
making such provisions, the Indian Parliament has honoured the
commitment under the New York Convention. He submits that
H
356 SUPREME COURT REPORTS [2012] 12 S.C.R.

A New York Convention in Articles V(1)(a) and V(1)(e) has
recognized that the courts in both the countries i.e. country in
which the arbitration is held and the country "under the law of
which the award is made" as a court of competent jurisdiction
to question the validity of the arbitral proceedings/award. He,
B however, points out that the jurisdiction of the domestic court
is neither conferred by the New York Convention nor under Part
II of the Arbitration Act, 1996, since Dart II merely deals with
circumstances under which an award may be enforced/may be
refused to be enforced. These circumstances include annulment
C proceedings in one of the two competent courts, whether or not
any of the two courts have jurisdiction to annul the proceedings/
award, would depend on the domestic law of the ~ountry
concerned. The Geneva Convention had brought with it the
predominance of the seat, particularly with reference to the
setting aside of the award. The two jurisdictions were inserted
0 in the New York Convention to dilute the predominance of the
."seat" over the party autonomy. He further submitted that the
apprehension that the two courts of competent jurisdiction could
give conflicting verdicts on the same award is unfounded. Even
if there were parallel proceedings, it would merely be a question
E of case management by the relevant courts in deciding which
proceedings should be continued and which stayed.

23. Learned counsel have submitted that the findings in the
case ofBhatia International Vs. Bulk Trading S.A. & Anr. 11
F (hereinafter referred to as "Bhatia International") that if Part I
was not made applicable to arbitrations conducted outside
India would render "party remediless" is wholly correct. It is not
open to a party to file a suit touching on the merits of the
arbitration, since such suit would necessarily have to be stayed
G in view of Section 8 or Section 45 of the Arbitration Act, 1996.
He submits that the only way a suit can be framed is a suit "to
inter alia restrict the defendant from parting with properties".· He
submits that if the right to such property itself is subject matter .
of an arbitration agreement, a suit for the declaration of such
H 11. (2004) 2 sec 105.
BHARAT ALUMINIUM CO. v. KAISER ALUMINIUM TECHNICAL 357
SERVICE, INC. [SURINDER SINGH NIJJAR, J.)
right can not be filed. All .that could then be filed, therefore, would A
be a bare suit for injunction restraining· another party from
parting with property. The interlocutory relief would also be
identical till such time as the injunction is made permanent.
Such· a suit would not be maintainable because :- (a) an
interlocutory injunction can only be granted depending on the B
institutional progress of some proceeding for substantial relief,
the injunction itself must be part of the substantive relief tb which
the plaintiffs cause. of action entitles him. In support of this
proposition, he relies ·on Siskina (~argo Owners) Vs. Distos
Compania Navieria SA 12, Fourie Ys:· Le Roux 13 and Adhunik c
Steels Ltd. Vs. Orissa Manganese and Minerals Pvt. Ltd. :4;
(b) the cause of action for any suit must entitle a party for a
substantive relief. Since the substantive relief can not be asked
for as the dispute is to be decided by the arbitrator, the only
relief that could be asked for would be to safeguard a property 0
which the plaintiff may or may not be entjtled to proceed
against, depending entirely on the outcome of another
proceeding, in another jurisdiction, or which the country has no
seisin; (c) in such a suit, there would be no pre-existing right to
give rise to a cause of action but the right is only contingent l E
speculative and in the absence of an existing I subsisting cause
of action, a suit can. not be filed; (d) the absence of an existing
I subsisting cause of action would entail the plaint in such a suit
to be rejected under Order VII Rule 11 a. Further, no interlocutory
injunction can be granted unless it is in aid of a substantive
relief and therefore a suit simply praying for an injunction would F
also be liable to be rejected under Order VII Rule 11; (e) no
interim relief can be granted unless it is in aid of and ancillary
to the main relief that may be available to the party on final
determination of rights in a suit. Learned counsel refers to State
of Orissa Vs. Madan Gopal Rungta 15 in support of the G

12. 1979 AC 210.
13. 2007 (1) WLR 320; 2007 (1) All ER 1087.
14.:2001 (7) sec 12s at 136.
15. 1952(1) SCR 28 . H

..
358 SUPREME COURT REPORTS [2012] 12 S.C.R.

A submission; (t) such a suit would be really in the nature of a suit
for interim relief pending an entirely different proceeding. It is
settled law that by an interim order, the Court would not grant
final relief. The nature of such a suit would be to grant a final
order that would in fact be in the nature of an interim order.
B Here the learned counsel refers to U.P. Junior Doctors' Action
Committee Vs. Dr. B. Sheetal Nandwani16 , State of Uttar
Pradesh Vs. Ram Sukhi Devi11 , Deoraj Vs. State of
Maharashtra & Ors. 18 and Raja Khan Vs. Uttar Pradesh Sunni
Central Wakf Board & Ors. 19 He submits that the intention of
c the Indian Parliament in enacting the Arbitration Act, 1996 was
not to leave a party remediless.

24. Mr. Gopal Subramanium submits that the issue in the
present case is that in addition to the challe"ge to the validity
of an award being made in courts where the seat is located,
D are domestic courts excluded f~om exercising supervisory
control by way of entertaining a challenge to an award? He
submits that the issue arises when it is not possible, in a given
case, to draw an assumption that the validity of the award is to
be judged according to the law of the "place· of arbitration. The
E Arbitration Act, 1996 has removed such vagueness. The
Arbitration Act, 1996 clearly states that in respect of all subject
matters over which Courts of Judicature have jurisdiction, the
National Courts will have residual jurisdiction in matters of
challenge to the validity of an award or enforcement of an
F award. He reiterates the submissions made by other learned
senior counsel and points out that the Arbitration Act, 1996 is
not seat centric. This, according to learned senior counsel, is
evident from numerous provisions contained· in Part I and Part
II. He points out all the sections which have been noticed earlier.
G According to learned senior counsel, the definition of

16. 1997 suppl (1) sec 680.
11. c2oos) (9) sec 733.
18. (2004) 4 sec 697.
H 19. c2011) 2 sec 741.
BHARAT ALUMINIUM CO. v. KAISER ALUMINIUM TECHNICAL 359
SERVICE, INC. [SURINDER SINGH NIJJAR, J.)
International Commercial Arbitration in Section 2(1 )(f) is party A
· centric. This definition is not indexed to the seat of arbitration.
Similarly, the definition in Section 2(1 )(e) is subject matter
centric. According to him, there is a crucial distinction between
the definition of international arbitration in the Model Law and
the definition of international commercial arbitration under the ·s
1961 Act. From the above, he draws an inference that seat of
arbitration being in India is not a pre-requisite to confer
jurisdiction on the Indian Courts under the Arbitration Act, 1996.
He points out that Section 2(1 )(e) contemplates nexus with "the
subject matter of the arbitration". The use of this expression in c
the definition gives a clear indication of the manner in which
jurisdiction is conferred. If an international arbitration takes
place, irrespective of the seat, and the subject matter of that
arbitration would otherwise be within the jurisdiction of an
Indian Court, such Indian Court would have supervisory
0
jurisdiction. Therefore, if "the closest connection" of the
arbitration is with India, and if the Indian Courts would normally
have jurisdiction over the dispute, the Indian Courts will play a
supervisory role in the arbitration. Restricting the applicability
of Part I of the Arbitration Act, 1996 to the arbitration where the E
seat is in India cannot, according to Mr. Subramanium, provide
a coherent explanation of sub-section 2(1)(e) without doing
violence to its language. He also makes a reference to the
opening words of Section 28 "where the place of arbitration is
situate in India". He then submits that if the legislature had
already made it abundantly clear that Section 2(2) of the F
Arbitration Act, 1996 operated as a complete exclusion of Part
I of the aforesaid Act to arbitrations outside India,· the same
proposition need not subsequently be stated as a qualifier in
Section 28.
G
25. Mr. Gopal Subramanium emphasised that Part II
. cannot be a complete code as it necessarily makes use of
provisions in Part I. He points out that Part I and Part II of the
Arbitration Act, 1996 would have been distinct codes in
themselves if they had provisions of conducting arbitration in H
360 · SUPREME COURT REPORTS [2012] 12 S.C.R.

A>. each part. However, Part I of the Arbitration Act, 1996
. ,prescribed the entire procedure for the conduct of an arbitration,·
whe~s Part 11 is only for recognition and enforcement of certain
fo113igh awards. Therefore, he submits that Part I and Part II
caiinpt be read separately but have to be read harmoniously
B · in order to make Arbitration Act, 1996 a complete code. He
points-'b.ut that even though certain provisions of Part I are
mirrored in Part II, at the same time, certain provisions of Part
I which are necessary for arbitration are not covered by Part II.
He points out that although Section 45, which is in part II,
C enables a court to make a reference to arbitration; there is no
other provision like Section 11 to resolve a situation when an
arbitrator is not being appointed as per the agreed arbitral .
procedure. Therefore, Section 11 (9) specially provides for
reference in an international commercial arbitration. He further
points out that the use of phrase "notwithstanding anything
D contained in Part I" clearly indicates that Section 45 is to apply,
irrespective of any simultaneous application of similar provision
in Part I. This section clearly contemplates that provisions of
Part I would apply to matters covered by Part II. Mr.
Subramanium then points out that there is no provision in Part
E II for taking the assistance of the court for interim relief pending
arbitration, like Section 9 in Part I. Section 27, according to Mr.
Subramanium, is another indication where the assistance of the
Indian Court would be taken in aid of arbitration both wiihin and
outside India. He reiterates that Sections 34 and 48 of the
F Arbitration Act,, 1996 are to be read harmoniously. He submits
various provisions of Part I are facilitative in character,
excepting Section 34 which involves a challenge to an award.
He points out that Section 2(4) and Section 2(5) also indicate
that the Arbitration Act, 1996 applies to all arbitration
G · agreements irrespective of the seat of arbitration. He submits
that the harmonious way to read Section 34 as well as Section
48 of the Arbitration Act, 1996 is that where a challenge lies to
an award, the legislature must have intended only one
challenge. Thus, if an attempt is made to execute an award as
H a decree of the court under Section 36 of Part I, there can be
BHARAT ALUMINIUM CO. v. KAISERALUMINIUMTECHNICAL 361
SERVICE, INC. [SURINDER SINGH NIJJAR, J.]
no doubt that if there is no adjudication under Section 34, there A
can still be a resistance which can be offered under Section
48. Similarly, by virtue of Section 48(3) if an award is
challenged under Section 34 before a competent court, the
enforcement proceeding would be adjourned and the court may
order suitable security. There will be only one challenge to an B
award, either under Section 34 or Section 48. Referring to
Section 51, Mr. Gopal Subramanium submits that the rights
available under Part II are in addition to rights under Part I. This
section firstly postulates a hypothesis that the Chapter on New
York Convention awards had not been enacted. It further makes c
mention, in such a scenario, of certain rights already occupying
the field that is intended to be covered by the chapter on New
York conventions. It also mentions that such rights are
coextensive with the rights under the chapter on the New York
Convention. Therefore, the fact that certain provisions in Part II
0
of the Arbitration Act, 1996 appear to function in the same field
as provisions in Part I, does not mean that the provisions of
Part I cease to have effect, or that the provisions of Part I are
no longer available to a party. This, according to Mr.
Subramanium, is in consonance with the history of New York E
Convention and the Model Law, which shows that the Model
Law was intended to fill the gaps left by the New York
Convention as well as function as a complete code. He,
therefore, urges that the sections which have come to be
considered essential for the success of arbitration, such as
Sections 9, 11 and 34, must be considered also available to F
the parties seeking recognition and enforcement of foreign
awards.
26. Finally, he submits that the decision in Bhatia
International (supra) is a harmonious construction of Part I and G
Part II of the Arbitration Act, 1996. He further submits that the
case of Venture Global Engineering Vs. Satyam Computer
Services Ltd. & Anr. 20 (hereinafter referred to as "Venture
Global Engineering") has been correctly decided by this Court.
20. 1200s (4) sec 1soi. H
362 SUPREME COURT REPORTS [2012) 12 S.C.R.

A Mr. Subramanium further pointed out that the judgments of this
Court in the case of ONGC Vs. Western Company of North
America21 and National Thermal Power Corporation Vs.
Singer Company & Ors. (supra) have appropriately set aside
the awards challenged therein even though the same were not
B made in India.

27. Mr. E.R. Kumar appearing in SLP (C) No. 31526-
31528 of 2009 has adopted the submissions made by Mr.
Subramanium. In addition, he submits that the National Arbitral
C Law, i.e., Part I of the Arbitration Act, 1996 necessarily applies
to all arbitrations arising between domestic parties and
pertaining to a domestic dispute. Thus, even if the parties in
such a case agree with the situs to be abroad, the same will
not ipso facto take such arbitrations outside the applicability
of Part I and operate to exclude the jurisdiction of Indian Courts ·
D therein. In other words, two Indian parties involved in a purely
domestic dispute can not contractually agree to denude the
Courts of this country of their jurisdictions with respect to a legal
dispute arising between them in India. He submits that such a
contract would be void under Section 23 and Section 28 of the
E Indian Contract Act.
28. He placed reliance on a judgment of this Court in the
case of ABC Laminart Pvt. Ltd. Vs. A.P. Agencies, Salem22.
He relies on Para 10 and 16 of the above judgment. He also
F relied on the case of lnterglobe Aviation Ltd. Vs. N.
Satchidanancf2 3 , wherein this Court has followed the decision
in ABC Laminart Pvt. Ltd. (supra).
29. He submits that the UNCITRAL Model Law has defined
the term "international" in a broad and expansive manner
G allowing full sway to "party autonomy". Under the Model Law,
it is open to the parties to give international flavour to an
21. 1987 (1) sec 496.
22. 1989 (2) sec 163.
H 23. 2011 (7) sec 463.
BHARAT ALUMINIUM CO. v. KAISER ALUMINIUM TECHNICAL 363
SERVICE, INC. [SURINDER SINGH NIJJAR, J.]
otherwise purely domestic relationship, merely by choosing a A
situs of arbitration abroad [Article 1(3)(b)(i)] or even merely by.
labelling the arbitration an international one. [Article 1(3)(c)].
30. The Indian law has consciously and correctly departed
from the same and chosen only the nationality test for defining B
an arbitration as "international" as is apparent from Section
2(1 )(f) of the Arbitration Act, 1996. Relying on the provision of
Sections 2(2), 20 and 28, he further submits that Arbitration Act,
1996 precludes Indian parties to a purely domestic dispute from
choosing a place of arbitration outside India. Mr. Kumar goes C
even further to submit that when both the parties are Indian, the
substantive law governing the dispute must necessarily be
Indian irrespective of the situs of the arbitration and irrespective
of any provision in the contract between the parties to the
contrary. He submits that the same principle applies with equal
force to the arbitration law too, that is to say, that if it is not open D
to two Indian parties with regard to an entirely domestic dispute
to derogate from the Indian laws of contract, evidence etc., it
is equally not open to them derogate from the Indian
arbitrational law either. He relies on judgment of this Court in
the case of TDM Infrastructure Pvt. Ltd. Vs. U.E. Development E
India Pvt. Ltd., 24 Paragraphs 19, 20 and 23. He, however, very
fairly points out that this was a case under Section 11 and the
point in issue here did not specifically arise for consideration
in the said case.
F
History of Arbitration in India -

31. Before we embark upon the task of interpreting the
provisions of the Arbitration Act, 1996, it would be apposite to
narrate briefly the history of Arbitration Law in India upto the
passing of Arbitration Act, 1996. This exercise is undertaken G
purely to consider: (i) what was the law before the Arbitration
Act, 1996 was passed; (ii) what was the mischief or defect for
' which the law had not provided; (iii) what remedy Parliament

24. 2oos (14) sec 211. H
364 SUPREME COURT REPORTS [2012] 12 S.C.R.

A has appointed; (iv) the reasons of the remedy.

32. Resolution of disputes "through arbitration wai; not
unknown in India everr in ancient times. Simply stated,
settlement of disputes through arbitration is the alternate system
B of resolution of disputes whereby the parties to a dispute get
the same settled through the intervention of a third party. The
role of the court is limited to the extent of regulating the process.
During the ancient era of Hindu Law in India, there were several
machineries for settlement of disputes between the parties.
These were known as Kulani (village council), Sreni
C (corporation) and Puga (assembly). 25 Likewise, commercial
matters were decided by Mahajans and Chambers. The
resolution of disputes through the panchayat was a different
system of arbitration subordinate to the courts of law. The
arbitration tribunal in ancient period would have the status of
D panchayat in modern lndia. 26 The ancient system of panchayat
has been given due statutory recognition through the various
Panchayat Acts subsequently followed by Panchayati Raj Act,
1994. It has now been constitutionally recognized in Article 243
of the Constitution of India.
E
33. However, we are concerned here with modern
arbitration law, therefore, let us proceed to see the legislative
history leading to the enactment of Arbitration Act, 1996.

The Indian Scenario -
F
34. The first Indian Act on Arbitration law came to be
passed in 1899 known as Arbitration Act, 1899. It was based
on the English Arbitration Act, 1899. Then'oame the Code of
Civil Procedure, 1908. Schedule II of the .Code contained the
G provisions relating to the law of Arbitration whicl\were extended
to the other parts of British India. Thereafter the Arbitration Act,
1940 (Act No.10 of 1940) (hereinafter referred to as the "1940

25. See P.V Kane History of Dharmasastra, Vol.Ill P.242.
H 26. See Justice S.Varadachariar Hindu Judicial System P.98.
BHARAT ALUMINIUM CO. v. KAISERALUMINIUM TECHNICAL 365
SERVICE, INC. [SURINDER SINGH NIJJAR, J.)
· Act") was enacted to consolidate and amend the law relating A
to arbitration. This Actcame into force on 1st July, 1940. It is
an exhaustive Code in so far as law relating to the domestic
arbitration is concerned. Under this Act, Arbitration may be
without the inter:vention of a Court or with the intervention of a
Court where there is no suit pending or in a pending suit. This B
Act empowered the Courts to modify the Award (Section 15),
remit the Award to the Arbitrators for reconsideration (Section
16) and to set aside the Award on specific grounds (Section
30). The 1940 Act was based on the English Arbitration Act,
1934. The 1934 Act was replaced by the English Arbitration c .
Act, 1950 which was subsequently replaced by the Arbitration
Act, 1975. Thereafter the 1975 Act was also replaced by the
Arbitration Act, 1979. There were, however, no corresponding
changes in the 1940 Act. The law of arbitration in India
remained static.
D
35. The disastrous results which ensued from the abuse
of the 1940 Act are noticed by this Court in the case of Guru
Nanak Foundation Vs. Mis. Rattan Singh & Sons. 27 Justice
D.A. Desai speaking for the court expressed the concern and
anguish of the court about the way in which the proceedings E
under the 1940 Act, are conducted and without an exception
challenged in courts. His Lordship observed : .

"Interminable, time consuming, complex and expensive
court procedures impelled jurists to search for an F
alternative forum, less formal, more effective and speedy
for resolution of disputes,avoiding procedural claptrap and
this led them to Arbitration Act, 1940 ("Act" for short).
However, the way in which the proceedings under the Act
are conducted and without an exception challenged in G
Courts, has made lawyers laugh and legal philosophers
weep. (Emphasis supplied). Experience shows and law
reports bear ample testimony that the proceedings under
the Act have become highly technical accompanied by
21. 19a1 (4) sec 634. H
366 SUPREME COURT REPORTS [2012] 12 S.C.R.

A unending prolixity, at every stage providing a legal trap to
the unwary. Informal forum chosen by the parties for
expeditious disposal of their disputes has by the decisions
of the Courts been clothed with 'legalese' of unforeseeable
complexity. This case amply demonstrates the same."
B
36. This was the arena of domestic arbitration and
domestic award.

International Scenario -

c 37. Difficulties were also being faced in the International
sphere of Trade and Commerce. With the growth of International
Trade and Commerce, there was an increase in disputes
arising out of such transactions being adjudicated through
Arbitration. One of the problems faced in such Arbitration,
0 related to recognition and enforcement of an Arbitral Award
made in one country by the Courts of other countries. This
difficulty was sought to be removed through various International
Conventions. The first such International Convention was the
Geneva Protocol on Arbitration Clauses, 1923, popularly
E referred to as "the 1923 Protocol". It was implemented w.e.f.
28th July, 1924. This Protocol was the product of the initiative
taken by the International Chamber of Commerce (ICC) under
the auspices of the League of Nations. The 1923 Protocol
sought to make arbitration agreements and arbitration clauses
in particular enforceable internationally. It was also sought to
F ensure that Awards made pursuant to such arbitration
agreements would be enforced in the territory other than the
state in which they were made. The 1923 Protocol proved to
be inadequate. It was followed by the Geneva Convention on
the execution of Foreign Arbitrated Awards, 1927 and is
G popularly known as the "Geneva Convention of 1927". This
convention was made effective on 25th July, 1929. India
became a signatory to both the 1923 Protocol and the 1927
Convention on 23rd October, 1937. It was to give effect to both
the 1923 Protocol and 1927 Convention that the Arbitration
H (Protocol and Convention) Act, 1937 was enacted in India.
BHARAT ALUMINIUM CO. v. KAISER ALUMINIUM TECHNICAL 367
SERVICE, INC. [SURINDER SINGH NIJJAR, J.]
Again a number of problems were encountered in the operation A
of the 1923 Protocol and the 1927 Geneva Convention. It was
felt that there were limitations in relation to their fields of
application. Under the 1927 Geneva Convention a party in
order to enforce the Award in the Country of an origin was
obliged to seek a declaration in the country where the B
arbitration took place to the effect that the Award was
enforceable. Only then could the successful party go ahead and
enforce the Award in the country of origin. This led to the
problem of "double exequatur", making the enforcement of
arbitral awards much more complicated. Jn 1953 the c
International Chamber of Commerce promoted a new treaty to
govern International Commercial Arbitration. The proposals of
ICC were taken up by the United Nations Economic Social
Council. This in turn led to the adoption of the convention on
the Recognition and Enforcement of Foreign Arbitral Awards D .
at New York in 1958 (popularly known as "the New York
Convention"}. The New York Convention is an improvement on
the Geneva Convention of 1927. It provides for a much more
simple and effective method of recognition and enforcement of
foreign arbitral awards. It gives much wider effect to the validity E
of arbitration agreement. This convention came into force on
7th June, 1959. India became a State Signatory to this
convention on 13th July, 1960. The Foreign Awards
(Recognition and Enforcement) Act, 1961 was enacted to give
effect to the New York Convention. Thus prior to the enactment
of the Arbitration Act, 1996, the law of Arbitration in India was F
contained in the Protocol and Convention Act, 1937, the
Arbitration Act, 1940 and the Foreign Awards (Recognition and
Enforcement} Act, 1961. There were no further amendments in
the aforesaid three acts. Therefore, it was generally felt that the
arbitration laws in India had failed to keep pace with the G
developments at the international level.

H
368 SUPREME COURT REPORTS [2012] 12 S.C.R.

A The Arbitration Act. 1996

The Objects and Reasons of the Act
38. The Statement of Objects and Reasons referred to the
fact that the existing legal framework was outdated and that the
B economic reforms in India would not be fully effective as "the
law dealing with settlement of both domestic and international
commercial disputes remained out of tune with such reforms".
It then refers to the Model Law and the recognition of the
general assembly of the United Nations that all countries give
due consideration to the Model Laws in view of the "desirability
C of uniformity of the law of arbitral procedures and the specific
needs of international commercial arbitration practice". Finally,
the Statement of Objects and Reasons states as follows:-
"3. Though the said UNCITRAL Model Law and Rules are
intended to deal with international commercial arbitration
D and conciliation, they could, with appropriate
modifications, serve as a model for legislation on domestic
arbitration and conciliation. The present bill seeks to
·consolidate and amend the law relating to domestic
arbitration, international commercial arbitration,
E enforcement of foreign arbitral awards and to define the
law relating to conciliation, taking into account the said
UNCITRAL Model Law and Rules."
The main objectives of the bill are as under:-
F "(i) to comprehensively cover international and
commercial arbitration and conciliation as also
domestic arbitration and conciliation;
(ii) to make provision for an arbitral procedure which
is fair, efficient and capable of meeting the needs
G of the specific arbitration;
(iii) to provide that the arbitral tribunal gives reasons for
its arbitral award;
(iv) to ensure that the arbitral tribunal remains within the
H limits of its jurisdiction:
BHARAT ALUMINIUM CO. v. KAISERALUMINIUM TECHNICAL 369
SERVICE, INC. [SURINDER SINGH NIJJAR, J.]
(v) to minimise the supervisory role of Courts in the A
arbitral process;

(vi) to permit an arbitral tribunal to use mediation,
conciliation, or other procedures during the arbitral
,proceedings to encourage settlement of disputes;
B
(vii) to provide that every final arbitral award is enforced
in the same manner as if it were a decree of the
Court;

(viii) to provide that a settlement agreement reached by c
the parties as a result of conciliation proceedings
will have the same status and effect as an arbitral
award on agreed terms on the substance of the
dispute rendered by an arbitral tribunal; and

(ix) to provide that, for purposes of enforcement of D
foreign awards, every arbitral award made in a
country to which one of the two International
Conventions relating to foreign arbitral awards to
which India is a party applies, will be treated as a
foreign award." E

The Act is o.ne "to consolidate and amend the law relating
to domestic arbitration, international commercial arbitration
and enforcement of foreign arbitral awards as also to define
the law relating to conciliation and for matters connected F
therewith or incidental thereto."
39. The Preamble to the Arbitration Act, 1996 repeats to
some extent what the Statement of Objects provide, materially:-
"AND WHEREAS the said Model Law and Rules make G
significant contribution to the establishment of a unified
legal framework for the fair and efficient settlement of
disputes arising in international commercial relations;

AND WHEREAS it is expedient to make law respecting H
370 SUPREME COURT REPORTS [2012] 12 S.C.R.

A arbitration and conciliation, taking into account the
aforesaid Model Law and Rules;"
Scheme of the Arbitration Act, 1996 -
40. The Arbitration Act, 1996 is divided into four parts.
B Part I which is headed "Arbitration"; Part II which is headed
"Enforcement of Certain Foreign Awards"; Part Ill which is
headed "Conciliation" and Part IV being "Supplementary
Provisions". We may notice here that it is only Parts I and II
which have relevance in the present proceedings.
c
41. We may further notice here that the 1961 Foreign
Awards Act was enacted specifically to give effect to the New
York Convention. The preamble of the 1961 Act is as follows:
"An Act to enable effect to be given to the Convention on
D the Recognition and Enforcement of Foreign Arbitral
Awards, done at New York on the 10th day of June, 1958,
to which India is a party and for purposes connected
therewith."

E 42. In the 1961 Act, there is no provision for challenging
the Foreign Award on merits similar or identical to the
provisions contained in Sections 16 and 30 of the 1940 Act,
which gave power to remit the award to the arbitrators or
umpire for reconsideration under Section 30 which provided the
F grounds for setting aside an award. In other words, the 1961
Act dealt only with the enforcement of foreign awards. The Indian
Law has remained as such from 1961 onwards. There was no
intermingling of matters covered under the 1940 Act, with the
matters covered by the 1961 Act.
G 43. Internationally, the Arbitration Law developed in
different countries to cater for the felt needs of a particular
country. This necessarily led to considerable disparity in the
National Laws on arbitration. Therefore, a need was felt for
improvement and harmonization as National Laws which were,
H
BHARAT ALUMINIUM CO. v. KAISER ALUMINIUM TECHNICAL 371
SERVICE, INC. [SURINDER SINGH NIJJAR, J.)
often, particularly inappropriate for resolving international A
commercial arbitration disputes. The explanatory note by the
UNCITRAL Secretariat refers to the recurring inadequacies to
be found in outdated National Laws, which included provisions
that equate the arbitral process with Court litigation and
fragmentary provisions that failed to address all relevant B
substantive law issues. It was also noticed that "even most of
those laws that appear to be up-to-date and comprehensive
were drafted with domestic arbitration primarily, if not
exclusively, in mind". It further mentions that "while this approach
is understandable in view of the fact that even today the bulk c
of cases governed by arbitration law would be of purely
domestic nature, the unfortunate consequence is that traditional
local concepts are imposed on international cases and the
needs of modern practice are often not met." There was also
unexpected and undesired restrictions found in National Laws,
0
which would prevent the parties, for example, from submitting
future disputes to arbitration. The Model Law was intended to
reduce the risk of such possible frustration, difficulties or
surprise. Problems also stemmed from inadequate arbitration
laws or from the absence of specific legislation governing
arbitration which were aggravated by the fact that National E
Laws differ widely. These differences were frequent source of
concern in international arbitration, where at-least one of the
parties is, and often both parties are, confronted with foreign
and unfamiliar provisions and procedures. It was found that
obtaining a full and precise account of the law applicable to the F
arbitration is, in such circumstances, often expensive,
impractical or impossible.
44. With these objects in view, the UNCITRAL Model Law
on International Arbitration ("the Model Law") was adopted by G
the United Nations Commission on International Trade Law
(UNCITRAL) on 21st June, 1985 at the end of the 18th Session
of the Commission. The General Assembly in its Resolution 40
of 1972 on 11th December, 1985 recommended that "all
States give due consideration to the Model Law on international H
372 SUPREME COURT REPORTS (2012] 12 S.C.R.

A commercial arbitration, in view of the desirability of uniformity
of the law of arbitral procedures and the specific needs of
international commercial arbitration practice".

45. The aim and the objective of the Arbitration Act, 1996
is to give effect to the UNCITRAL Model Laws.
8
46. Keeping in view the aforesaid historical background;
the objects and reasons of the Act and the elaborate
submissions made by the learned counsel for the parties, it
would now be necessary to consider the true scope of the
C provisions of Part I and Part II of the Arbitration Act, 1996.

47. Since the reference relates to the ratio in Bhatia
International (supra) and Venture Global Engineering (supra),
it would be appropriate to make a brief note about the reasons
D given by this Court in support of the conclusions reached
therein.

48. In Bhatia International, the appellant entered into a
contract with the 1st respondent on 9th May, 1997. This contract
contained an arbitration clause, which provided that arbitration
E was to be as per the rules of the International Chamber of
Commerce (for short "ICC"). On 23rd October, 1997, the 1st
respondent filed a request for arbitration with ICC. Parties
agreed that the arbitration be held in Paris, France. ICC
appointed a sole arbitrator. The 1st respondent filed an
F application under Section 9 of the Arbitration Act, 1996 before
the lllrd Additional District Judge, Indore, M.P. against the
appellant and the 2nd respondent. One of the interim reliefs
sought was an order of injunction restraining these parties from
alienating, transferring and/or creating third-party rights,
G 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 Arbitration Act, 1996 would not apply to arbitrations where
the place of arbitration is not in India. This application was
H dismissed by the Ill rd Additional District Judge on 1st February,
BHARAT ALUMINIUM CO. v. KAISER ALUMINIUM TECHNICAL 373
SERVICE, INC. [SURINDER SINGH NIJJAR, J.]
2000. It was held that the Court at Indore had jurisdiction and A
the application was maintainable. The appellant filed a writ
petition before the High Court of Madhya Pradesh, Indore
Bench. The said writ petition was dismissed by the judgment
dated 10th October, 2000, which was impugned in the appeal
before this Court. On behalf of the appellants, it was submitted B
that Part I of the Arbitration Act, 1996 only applies to arbitrations
where the place of arbitration is in India. It was also submitted
that if the place of arbitration is not in India then Part II of the
Arbitration Act, 1996 would apply. Reliance was also placed
on Section 2(1 )(f). With regard to Section 2(4) and (5), it was c
submitted that the aforesaid provisions would only apply to
arbitrations which take place in India. It was submitted that if it
is held that Part I applies to all arbitrations, i.e., even to
arbitrations whose place of arbitration is not in India, then sub-
section (2) of Section 2 would become redundant and/or 0
otiose. It was also pointed out that since Section 9 and Section
17 fall in Part I, the same would not have any application in
cases where lhe place of arbitration is not in India. It was
emphasised that the legislature had deliberately not provided
any provision similar to Section 9 and Section 17 in Part II. It E
was also submitted that a plain reading of Section 9 makes it
clear that it would not apply to arbitrations which take place
outside India. It was further submitted that Section 9 provides
that an application for interim measures must be made before
the award is enforced in accordance with Section 36, which
deals with enforcement of domestic awards only. On the other F
hand, provisions for enforcement of foreign awards are
contained in Part II. It was submitted that Section 9 does not
talk of enforcement of the award in accordance with Part 11. It
was further submitted that there should be minimum intervention
by the Courts in view of the underlying principle in Section 5 of G
the Arbitration Act, 1996. On the other hand, the respondents
· therein had made the submissions, which are reiterated before
us. In Paragraph 14 of the Judgment, it is held as follows:-

"14. At first blush the arguments of Mr Sen appear very H

" I
374 SUPREME COURT REPORTS (2012] 12 S.C.R.

A attractive. Undoubtedly sub-section (2) of Section 2 states
that Part I is to apply where the place of arbitration is in
India. Undoubtedly, Part II applies to foreign awards. Whilst
the submissions of Mr Sen are attractive, one has to keep
in mind the consequence which would follow if they are
B accepted. The result would:
(a) Amount to holding that the legislature has left a
lacuna in the said Act. There would be a lacuna as
neither Part I or II would apply to arbitrations held
in a country which is not a signatory to the New York
c Convention or the Geneva Convention (hereinafter
called "a non-convention country"). It would mean
that there is no law, in India, governing such
arbitrations.

D (b) Lead to an anomalous situation, inasmuch as 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.
E
(c) Lead to a conflict between sub-section (2) of
Section 2 on one hand and sub-sections (4) and (5)
of Section 2 on the other. Further, sub-section (2)
of Section 2 would also be in conflict with Section
1 which provides that the Act extends to the whole
F of India.

(d) · Leave a party remediless inasmuch as in
international commercial arbitrations which take
place out of India the party would not be able to
G 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."

49. It is held that the definition of international commercial
H arbitration under Section 2(1)(f) makes no distinction between
BHARAT ALUMINIUM CO. v. KAISER ALUMINIUM TECHNICAL 375
SERVICE, INC. [SURINDER SINGH NIJJAR, J.]
international commercial arbitrations held in India or outside A
India. Further it is also held that the Arbitration Act, 1996 no
where provides that its provisions are not to apply to
international commercial arbitrations which take place in a non-
convention country. Hence, the conclusion at Paragraph 14(a).
On the basis of the discussion in Paragraph 17, this Court B
reached the conclusion recorded at Paragraph 14(b). The
conclusions at Paragraph 14(c) is recorded on the basis of the
reasons stated in Paragraphs 19, 20, 21, 22 and 23. Upon
consideration of the provision contained in Sections 2(7), 28,
45 and 54, it is held that Section 2(2) is only an inclusive and c
clarificatory provision. The provision contained in Section 9 is
considered in Paragraphs 28, 29, 30 and 31. It is concluded
in Paragraph 32 as follows:-

"32. To conclude, I hold that the provisions of Part I would
apply to all arbitrations and to all proceedings relating D
thereto. Where such arbitration is held in India the
provisions of Part I would compulsorily 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 E
I would apply unless the parties by agreement, express or
implied, exclude all or any of its provisions. In that case
the laws or rules chosen by the parties would prevail. Any
provision, in Part I, which is contrary to or excluded by that
law or rules will not apply." F

50. In Venture Global Engineering (supra), this Court
relied on Paragraphs 14, 17, 21, 26, 32 and 35. It is concluded
in Paragraph 37 as follows:-

"37. In view of the legal position derived from Bhatia G
International we are unable to accept Mr. Nariman's
argument. It is relevant to point out that in this proceeding
we are not deciding the merits of the claim of both parties,
particularly, the stand taken in the suit filed by the appellant
herein for setting aside the award. It is for the court H
376 SUPREME COURT REPORTS [2012] 12 S.C.R.

A concerned to decide the issue on merits and we are not
expressing anything on the same. The present conclusion
is only with regard to the main issue whether the
aggrieved party is entitled to challenge the foreign award
which was passed outside India in terms of Sections 9/
B 34 of the Act. Inasmuch as the three-Judge Bench decision
is an answer to the main issue raised, we are unable to
accept the contra view taken in various decisions relied
on by Mr. Nariman. Though in Bhatia International the issue
relates to filing a petition under Section 9 of the Act for
c interim orders the ultimate conclusion that Part I would
apply even for foreign awards is an answer to the main
issue raised in this case."

51. As noticed above, the learned senior counsel for the
appellants have supported the ratio of law laid down in Bhatia
D International (supra) and Venture Global Engineering (supra).
They have also supported the decisions in ONGC Vs. Western
Company of North America (supra) and National Thermal
Power Corporation Vs. Singer Company & Ors. (supra).

E 52. In order to consider the issues raised and to construe
the provisions of the Arbitration Act, 1996 in its proper
perspective, it would be necessary to analyse the text of the
Arbitration Act, 1996 with reference to its legislative history and
international conventions. We shall take due notice of the stated
F objects and reasons for the enactment of the Arbitration Act,
1996.
53. Further, for a comprehensive and clear understanding
of the connotations of the terms used in the Arbitration Act,
1996, a brief background of various laws applicable to an
G International Commercial Arbitration and distinct approaches
followed by countries across the world will also be useful.
54. With utmost respect, upon consideration of the entire
matter, we are unable to support the conclusions recorded by
H this Court in both the judgments i.e. Bhatia International (supra)
BHARAT ALUMINIUM CO. v. KAISER ALUMINIUM TECHNICAL 377
SERVICE, INC. [SURINDER SINGH NIJJAR, J.]
and Venture Global Engineering (Supra). A
55. In our opinion, the conclusion recorded at Paragraph
14B can not be supported by either the text or context of the
provisions in Section 1(2) and proviso thereto. Let us consider
the provision step-by-step, to avoid any confusion. A plain B
reading of Section 1 shows that the Arbitration Act, 1996
extends to whole of India, but the provisions relating to domestic
arbitrations, contained in Part I, are not extended to the State
of Jammu and Kashmir. This is not a new addition. Even the
1940 Act states:
c
"Section 1 - Short title, extend and commencement -

(1) .................................... ..

(2) It extends to the whole of India (except the State of
Jammu and Kashmir)." D

56. Thus, the Arbitration Act, 1996 maintains the earlier
position so far as the domestic arbitrations are concerned.
Thereafter, comes the new addition in the proviso to Section
1(2), which reads as under: E
"Provided that Parts I, Ill and IV shall extend to the State
of Jammu and Kashmir only in so far as they relate to
international commercial arbitration or, as the case may
be, international commercial conciliation."
F
57. The proviso is necessary firstly due to the special status
of the State of Jammu & Kashmir, secondly to update the
Jammu and Kashmir Act, 1945. In our opinion, the proviso does
not create an anomaly. The aforesaid Act is almost a carbon
copy of the 1940 Act. Both the Acts do not make any provision G
relating to International Commercial Arbitration. Such a
provision was made under the Arbitration Act, 1996 by repealing
the existing three Acts, i.e., 1937 Protocol Act, 1940 Act and
the Foreign Awards Act, 1961. Therefore, the proviso has been
added to incorporate the provisions relating to International H
378 SUPREME COURT REPORTS [2012] 12 S.C.R.

A Commercial Arbitration. The Arbitration Act, 1996 would not
apply to purely domestic arbitrations which were earlier covered
by the Jammu and Kashmir Act, 1945 and now by the Jammu
& Kashmir Arbitration and Conciliation Act, 1997. We are also
unable to agree with the conclusion that in Jammu & Kashmir,
B Part I would apply even to arbitration which are held outside
India as the proviso does not state that Part I would apply to
Jammu & Kashmir only if the place of Arbitration is in Jammu
& Kashmir. Since Section 2(2) of Part I applies to all
arbitrations, the declaration of territoriality contained therein
C would be equally applicable in Jammu & Kashmir. The
provision contained in Section 2(2) is not affected by the
proviso which is restricted to Section 1(2). By the process of
interpretation, it can not be read as a proviso to Section 2(2)
also. It can further be seen that the provisions relating to
"Enforcement of Certain Foreign Awards" in Part II would apply
D without any restriction, as Part II has no relation to the
enforcement of any purely domestic awards or domestically
rendered international commercial awards. These would be
covered by the Jammu & Kashmir Act, 1997.

E 58. In view of the above, we are unable to discern any
anomaly as held in Bhatia International (supra). We also do
not discern any inconsistency between Section 1 and Section
2(2) of the Arbitration Act, 1996.

F Does Section 2(2) bar the Application of Part I to
Arbitrations which take place outside India?

59. The crucial difference between the views expressed
by the appellants on the one hand and the respondents on the
other hand is as to whether the absence of the word "only" in
G Section 2(2) clearly signifies that Part I of the Arbitration Act,
1996 would compulsorily apply in the case of arbitrations held
in India, or would it signify that the Arbitration Act, 1996 would
be applicable only in cases where the arbitration takes place
in India. In Bhatia International and Venture Global Engineering
H
BHARAT ALUMINIUM CO. v. KAISER ALUMINIUM TECHNICAL 379
SERVICE, INC. [SURINDER SINGH NIJJAR, J.)
(supra), this Court has concluded that Part I would also apply A
to all arbitrations held out of India, unless the parties by
agreement, express or implied, exclude all or any of its
provisions. Here again, with utmost respect and humility, we are
unable to agree with the aforesaid conclusions for the reasons
stated hereafter. B

60. It is evident from the observation made by this Court
in Konkan Railway Corporation Ltd. & Anr. (supra) that the
Model Law was taken into account in drafting of the Arbitration
Act, 1996. In Paragraph 9, this Court observed "that the Model C
Law was only taken into account in the drafting of the said Act
is, therefore, patent. The Arbitration Act, 1996 and the Model
Law are not identically drafted". Thereafter, this Court has given
further instances of provisions of the Arbitration Act, 1996, not
being in conformity with the Model Law and concluded that "The
Model Law and judgments and literature thereon are, therefore, D
not a guide to the interpretation of the Act and, especially of
Section 12 thereof. The aforesaid position, according to Mr.
Sorabjee has not been disagreed with by this Court in SBP &
Co. (supra). We agree with the submission of Mr. Sorabjee that
the omission of the word "only" in Section 2(2) is not an E
instance of "CASUS OMISSUS". It clearly indicates that the
Model Law has not been bodily adopted by the Arbitration Act,
1996. But that can not mean that the territorial principle has not
been accepted. We would also agree with Mr. Sorabjee that it
is not the function of the Court to supply the supposed F
omission, which can only be done by Parliament. In our opinion,
legislative surgery is not a judicial option, nor a compulsion,
whilst interpreting an Act or a provision in the Act. The
observations made by this_ Court in the case of Nalinakhya
Bysack (supra) would tend to support the aforesaid views, G
wherein it has been observed as follows:-
"It must always be borne in mind, as said by Lord Halsbury
in Commissioner for Special Purpose of Income Tax Vs.
H
380 SUPREME COURT REPORTS [2012] 12 S.C.R.

A PremseP8 , that it is not competent to any Court to proceed
upon the assumption that the legislature has made a
mistake. The Court must procee.(:I on the footing that the
legislature intended what it has said. Even if there is some
defect in the phraseology used by the legislature the Court
B cannot, as pointed out in Crawford Vs. Spoone~9 • aid the
legislature's defective phrasing of an Act or add and
amend or, by construction, make up deficiencies which are
left in the Act. Even where there is a casus omissus, it is,
as said by Lord Russell of Killowen in Hansraj Gupta Vs.
c Official Liquidator of Dehra Dun-Mussoorie Electric
Tramway Co., Ltd. 30 , for others than the Courts to remedy
the defect."

61. Mr. Sorabjee has also rightly pointed out the
observations made by Lord Dip lock in the case of Duport ·
D Steels Ltd. (supra). In the aforesaid judgment, the House of
Lords disapproved the approach adopted by the Court .of
Appeal in discerning the intention of the legislature, it is
observed that:-

E "... the role of the judiciary is confined to ascertaining from
the words that Parliament has approved as expressing its
intention what that intention was, and to giving effect to it.
Where the meaning of the statutory words is plain and
unambiguous it is not for the judges to invent fancied
F ambiguities as an excuse for failing to give effect to its
plain meaning because they themselves consider that
the consequences of doing so would be inexpedient, or
even unjust or immoral. In controversial matters such as
are involved in industrial relations there is room for
differences of opinion as to what is expedient, what is just
G
and what is morally justifiable. Under our Constitution it is

28. LR (1891) AC 531 at Page 549.
29. 6 Moo PC 1 : 4 MIA 179.
H 30. (1933) LR 60 IA 13; AIR (1933) PC 63.
BHARAT ALUMINIUM CO. v. KAISER ALUMINIUM TECHNICAL 381
SERVICE, -ING. {SYRINDER SINGH NIJJAR, J.]

Parliament's opinion on these matters that is paramount." A
(emphasis supplied)

In the same judgment, it is further observed:-

"But if this be the case it is for Parliament. not for the
judiciarv. to decide whether any changes should be made B
to the law as stated in the Act."

62. The above are well accepted principles for discerning
the intention of the legislature. In view of the aforesaid, we shall
construe the provision contained in Section 2(2) without adding C
the word "only" to the provision.

63. We are unable to accept the submission of the learned
counsel for the appellants that the omission of the word "only"
from Section 2(2) indicates that applicability of Part I of the
Arbitration Act, 1996 is not limited to the arbitrations that take D
place in India. We are also unable to accept that Section 2(2)
would make Part I applicable even to arbitrations which take
place outside India. In our opinion, a plain reading of Section
2(2) makes it clear that Part I is limited in its application to
. arbitrations which take place in India. We are in agreement with E
the submissions made by the learned counsel for the
respondents, and the interveners in support of the respondents,
that Parliament by limiting the applicability of Part I to
arbitrations which take place in India has expressed a
legislative declaration. It has clearly given recognition to the F
territorial principle. Necessarily therefore, it has enacted that
Part I of the Arbitration Act, 1996 applies to arbitrations having
their place/seat in India.
Does the missing 'only' indicate a deviation from Article G
1(2) of the Model Law?

64. As noticed earlier the objects and reasons for the
enactment of the Arbitration Act, 1996 clearly indicate that the
Parliament had taken into account the UNCITRAL Model Laws. ·
The statement of the objects and reasons of the Arbitration Act, H
382 SUPREME COURT REPORTS [2012] 12 S.C.R.

A 1996 clearly indicates that law of arbitration in India at the time
of enactment of the Arbitration Act, 1996, was substantially
contained in three enactments, namely, The Arbitration Act,
1940; The Arbitration (Protocol and Convention) Act, 1937 and
The Foreign Awards (Recognition and Enforcement) Act, 1961.
B It is specifically observed that it is widely felt that the Arbitration
Act, 1940, which contains the general law of arbitration, has
become outdated. It also mentions that the Law Commission
of India, several representative bodies of trade and industry
and experts in the fields of arbitration have proposed
C amendments to the Arbitration Act, 1940, to make it more
responsive to contemporary requirements. It was also
recognized that the economic reforms initiated by India at that
time may not become fully effective, if the law dealing with
settlement of both domestic and international commercial
dispute remained out of tune with such reforms. The objects and
0
reasons further make it clear that the general assembly has
recommended that all countries give due consideration to the
Model Law adopted in 1985, by the UNCITRAL, in view of the
desirability of uniformity of the law of arbitral procedures and
the specific needs of international commercial arbitration
E practice. Paragraph 3 of the statement of objects and reasons
makes it clear that although the UNCITRAL Model Laws are
intended to deal with Iinternational commercial arbitration and
conciliation, they could, with appropriate modifications, serve
as a Model Law for legislation of domestic arbitration and
F conciliation. Therefore, the bill was introduced seeking to
consolidate and amend the law relating to domestic arbitration,
international commercial arbitration, enforcement of foreign
arbitral award and to define the law relating to conciliation,
taking into account the UNCITRAL Model Law and Rules. We
G have set out the main objects of the bill a little earlier, Paragraph
3(5) of which clearly states that one of the objects is "to
minimize the supervisory role of Courts in arbitral process".

65. Much of the debate before us was concentrated on the
H comparison between Article 1(2) of UNCITRAL and Section
BHARAT ALUMINIUM CO. v. KAISER ALUMINIUM TECHNICAL 383
SERVICE, INC. [SURINDER SINGH NIJJAR, J.)
2(2). Learned counsel for the appellants had canvassed that A
the Parliament had deliberately deviated from Article 1(2) of
UNCITRAL to express its intention that Part I shall apply to all
arbitrations whether they take place in India or in a foreign
country. The word "only' is conspicuously missing from Section
2(2) which is included in Article 1(2) of UNCITRAL. This B
indicates that applicability of Part I would not be limited to
Arbitrations which take place within India. Learned counsel for
the appellants submitted that in case the applicability of Section
2(2) is limited to arbitrations which take place within India, it
would give rise to conflict between Sections 2(2), 2(4), 2(5), c
2(7), 20 and 28. With equal persistence, the learned counsel
for the respondents have submitted that Part I has accepted
the territorial principle adopted by UNCITRAL in letter and spirit.

66. Whilst interpreting the provisions of the Arbitration Act,
1996, it is necessary to remember that we are dealing with the D
Act which seeks to consolidate and amend the law relating to
domestic arbitration, international commercial arbitration and
enforcement of foreign arbitral awards. The aforesaid Act also
seeks to define the law relating to conciliation and for matters
connected therewith or incidental thereto. It is thus obvious that E
the Arbitration Act, 1996 seeks to repeal and replace the three
pre-existing Acts, i.e., The Arbitration Act, 1940; The Arbitration
(Protocol and Convention) Act, 1937 and the Foreign Awards
(Recognition and Enforcement) Act, 1961. Section 85 repeals
all the three Acts. Earlier the 1937 Act catered to the F
arbitrations under the Geneva Convention. After the 1958 New
York Convention was ratified by India, the 1961 Act was
passed. The domestic law of arbitration had remained static
since 1940. Therefore, the Arbitration Act, 1996 consolidates
the law on domestic arbitrations by incorporating the provisions G
to expressly deal with the domestic as well as international
commercial arbitration; by taking into account the 1985
UNCITRAL Model Laws. It is not confined to the New York
Convention, which is concerned only with enforcement of
certain foreign awards. It is also necessary to appreciate that H
384 SUPREME COURT REPORTS [2012] 12 S.C.R.

A the Arbitration Act, 1996 seeks to remove the anomalies that
existed in the Arbitration Act, 1940 by introducing provisions
based on the UNCITRAL Model Laws, which deals with
international commercial arbitrations and also extends it to
commercial domestic arbitrations. UNCITRAL Model Law has
B unequivocally accepted the territorial principle. Similarly, the
Arbitration Act, 1996 has also adopted the territorial principle,
thereby limiting the applicability of Part I to arbitrations, which
take place in India.

C 67. In our opinion, the interpretation placed on Article 1(2)
by the learned counsel for the appellants, though attractive,
would not be borne out by a close scrutiny of the Article. Article
1(2) reads as under:-

"Article 1(2): The provisions of this law, except Articles 8,
D 9, 17(H), 17(1), 17(J), 35 and 36 apply "only" if the place
of arbitration is in the territories of this State".

68. The aforesaid article is a model and a guide to all the
States, which have accepted the UNCITRAL Model Laws. The
E genesis of the word "only" in Article 1(2) of the Model Law can
be seen from the discussions held on the scope of application
of Article 1 in the 330th meeting, Wednesday, 19 June, 1985
of UNCITRAL. This would in fact demonstrate that the word
"only" was introduced in view of the exceptions referred to in
Article 1(2) i.e. exceptions relating to Articles 8, 9, 35 & 36
F (Article 8 being for stay of judicial proceedings covered by an
arbitration agreement; Article 9 being for interim reliefs; and
Articles 35 & 36 being for enforcement of Foreign Awards). It
was felt necessary to include the word "only" in order to clarify
that except for Articles 8, 9, 35 & 36 which could have extra
G territorial effect if so legislated by the State, the other provisions
would be applicable on a strict territorial basis. Therefore, the
word "only" would have been necessary in case the provisions
with regard to interim relief etc. were to be retained in Section
2(2) which could have extra-territorial application. The Indian
H
BHARAT ALUMINIUM CO. v. KAISER ALUMINIUM TECHNICAL 385
SERVICE, INC. [SURINDER SINGH NIJJAR, J.)

legislature, while adopting the Model Law, with some A
variations, did not include the exceptions mentioned in Article
1(2) in the corresponding provision Section 2(2). Therefore, the
word "only" would have been superfluous as none of the
exceptions were included in Section 2(2).
B
69. We are unable to accept the submission of the learned
counsel for the appellants that the omission of the word "only",
would show that the Arbitration Act, 1996 has not accepted the
territorial principle. The Scheme of the Act makes it abundantly
clear that the territorial principle, accepted in the UNCITRAL C
Model Law, has been adopted by the Arbitration Act, 1996.

70. That the UNCITRAL Rules adopted strict territorial
principle is evident from the Report of the UNCITRAL in
paragraphs 72 to 80.on the work of its 18th Session in Vienna
between 3rd to 21st June, 1985. The relevant extracts of these D
paragraphs are as under: ·

."72. Divergent views were expressed as to whether the
Model Law should expressly state its territorial scope of
application and, if so, which connecti119 faclor should be E
the determining criterion .............................. "

"73, As regards the connecting factor which should
determine the applicability of the (Model) Law in a given
State, there was wide support for the so-called strict
territorial criterion, according to which the Law would F
apply where the place of arbitration was in that
s~~ ....................................................... "
"74. Another view was that the place of arbitration should
not be exclusive in the sense that parties would be G
precluded from choosing the law of another State as the
law applicable to the arbitration procedure .................. "

"78. The Commission requested the secretariat to
prepare, on the basis of the above discussion, draft
H
386 SUPREME COURT REPORTS [2012) 12 S.C.R.

A provisions on the territorial scope of application of the
Model Law in general, including suggestions as to
possible exceptions of the general
scope ............................................................ "

"80. In discussing the above proposal, the Commission
B
decided that, for reasons stated in support of the strict
territorial criterion (see above, para 73), the applicability
of the Model Law should depend exclusively on the place
of arbitration as defined in the Model
Law ............................................................. "
c
"81. The Commission agreed that a provision
implementing that decision, which had to be included in
article 1, should be formulated along the following lines:
"The provisions of this Law, except articles 8, 9, 35 and
D 36 apply only if the place of arbitration is in the territory
of this State ...... .................................................. •

71. Similarly, the acceptance of the territorial principle in
UNCITRAL has been duly recognized by most of the experts
E and commentators on International Commercial Arbitration. The
aforesaid position has been duly noticed by Howard M.
Holtzmann and Joseph E. Beuhaus in "A guide to the
UNCITRAL Model Law on International Commercial Arbitration,
Legislative History and Commentary". Dealing with the territorial
F scope of application of Article 1(2) at Pages 35 to 38, it is
stated:-

"... in early discussions of this issue, Article 27, dealing
with court assistance in taking evidence was included in
the list of exceptions. At that time, the draft of that Article
G provided for such assistance to foreign arbitrations. The
provision was subsequently changed to its present format,
and, by virtue of Article 1(2), it applies only to arbitrations
in the enacting State. Assistance in taking evidence for
use in foreign arbitrations can be provided only under any
H

' "
BHARAT ALUMINIUM CO. v. KAISERALUMINIUM TECHNICAL 387
SERVICE, INC. [SURINDER SINGH NIJJAR, J.]
rules on the question in other laws of the State. A

"The Commission adopted the principle that the Model
Law would only apply if the place of arbitration was in the
enacting State - known as the "territorial criterion" for
applicability - only after extensive debate. The primary
8
alternative position was to add a principle called the
"autonomy criterion" which would have applied the Law
also to arbitrations taking place in another country if the
parties had chosen to be governed by the procedural law
of the Model Law State. Thus, if the autonomy criterion had C
been adopted, the parties would have been free, subject
to restrictions such as fundamental justice, public policy
and rules of court competence, to choose the arbitration
Jaw of a State other than that of the place of arbitration.
The courts of the Model Law State would then presumably
have provided any court assistance needed by this D
arbitration, including setting aside, even though the place
of arbitration was elsewhere. Such a system of party
autonomy is envisioned by the New York Convention, which
recognizes that a State may consider as domestic an
award made outside the State, and vice versa." E
"The Commission decided not to adopt the autonomy
criterion. It was noted that the territorial criterion was widely
accepted by existing national laws, and that where the
autonomy criterion was available it was rarely used." F
72. We are also unable to accept the submission of the
learned counsel for the appellants that the Arbitration Act, 1996
does not make seat of the arbitration as the centre of gravity
of the arbitration. On the contrary, it is accepted by most of the
experts that in most of the National Laws, arbitrations are G
anchored to the seaUplace/situs of arbitration. Redfern in
Paragraph 3.54 concludes states that "the seat of the
arbitration is thus intended to be its centre of gravity." This,
however, does not mean that all the proceedings of the
arbitration have to take place at the seat of the arbitration. The H
388 SUPREME COURT REPORTS [2012] 12 S.C.R.

A arbitrators at times hold meetings at more convenient locations.
This is necessary as arbitrators often come from different
countries. It may, therefore, on occasions be convenient to hold
some of the meetings in a location which may be convenient
to all. Such a situation was examined by the court of appeal in
B England in Naviera Amazonica Peruana S.A. Vs. Compania
lntemacionale De Seguros Del Peru3 1 therein at p.121 it is
observed as follows :

"The preceding discussion has been on the basis that
there is only one "place" of arbitration. This will be the place
c chosen by or on behalf of the parties; and it will be
designated in the arbitration agreement or the terms of
reference or the minutes of proceedings or in some other
way as the place or "seat" of the arbitration. This does not
mean, however, that the arbitral tribunal must hold all its
D meetings or hearings at the place of arbitration.
International commercial arbitration often involves people
of many different nationalities, from many different
countries. In these circumstances, it is by no means
unusual for an arbitral tribunal to hold meetings or even
E hearings in a place other than the designated place of
arbitration, either for its own convenience or for the
convenience of the parties or their witnesses ...... It may
be more convenient for an arbitral tribunal sitting in one
country to conduct a hearing in another country, for
F instance, for the purpose of taking evidence ..... In fact
circumstances each move of the arbitral tribunal does not
of itself mean that the seat of arbitration changes. The seat
of arbitration remains the place initially agreed by or on
behalf of the parties."
G
73. These observations were subsequently followed in
Union of India Vs. McDonnell Douglas Corp. 32

31. 1988 (1) Lloyd's Law Reports 116.
H 32. 1993 (3) Lloyd's Law Reports 48.
BHARAT ALUMINIUM CO. v. KAISER ALUMINIUM TECHNICAL 389
SERVICE, INC. [SURINDER SINGH NIJJAR, J.]

74. It must be pointed out that the law of the seat or place A
where the arbitration is held, is normally the law to govern that
arbitration. The territorial link between the place of arbitration
and the law governing that arbitration is well established in the
international instruments, namely, the New York Convention of
1958 and the UNCITRAL Model Law of 1985. It is true that the B
terms "seat" and "place' are often used interchangeably. In
Redfern and Hunter on International Arbitration, 5th Edn. (para
3.51 ), the seat theory is defined thus: ''The concept that an
arbitration is governed by the law of the place in which it is held,
which is the 'seat' (or 'forum' or locus arbitri) of the arbitration, C
is well established in both the theory and practice of
international arbitration. In fact, the 1923 Geneva Protocol
states: 'The arbitral procedure, including the constitution of the
arbitral tribunal, shall be governed by the will of the parties and
by the law of the country in whose territory the arbitration takes o
place.' The New York Convention maintains the reference to
'the law of the country where the arbitration took place "(Article
V(1 )(d))" and, synonymously to 'the law of the country where the
award is made' [Article V(1 )(a) and (e)]. The aforesaid
observations clearly show that New Yo1·k Convention continues E
the clear territorial link between the place of arbitration and the
law governing that arbitration. The author further points out that
this territorial link is again maintained in the Model Law which
provides in Article 1(2) that "the provision of this law, except
Articles 8, 9, 35 and 36 apply only if the place of arbitration is F
in the territory of the State". Just as the Arbitration Act, 1996
maintains the territorial link between the place of arbitration and
its law of arbitration, the law in Switzerland and England also
maintain a clear link between the seat of arbitration and the /ex
arbitri. Swiss Law states: "the provision of this chapter shall G
apply to any arbitration if the seat of the arbitral tribunal is in
Switzerland and if, at the time when the arbitration agreement
was concluded, at least one of the parties had neither its
domicile nor its habitual residence in Switzerfand. 33
33. See Swiss Private International Law Act, 1987, Chapter 12 Article 176 (1). H
390 SUPREME COURT REPORTS [2012] 12 S.C.R.

A 75. We are of the opinion that the omission of the word
"only" in Section 2(2) of the Arbitration Act, 1996 does not
detract from the territorial scope of its application as embodied
in Article 1(2) of the Model Law. The article merely states that
the Arbitration Law as enacted in a given state shall apply if
B the arbitration is in the territory of that State. The absence of
the word "only" which is found in Article 1(2) of the Model Law,
from Section 2(2) of the Arbitration Act, 1996 does not change
the content/import of Section 2(2) as limiting the application of
Part I of the Arbitration Act, 1996 to arbitrations where the place/
c seat is in India.

76. For the reasons stated above, we are unable to
support the conclusion reached in Bhatia International and
Venture Global Engineering (supra), that Part I would also
apply to arbitrations that do not take place in India.
D
77. India is not the only country which has dropped the word
"only" from its National Arbitration Law. The word "only" is
missing from the Swiss Private International Law Act, 1987
Chapter 12, Article 176 (1 )(I). It is also missing in Section 2(1)
E of the 1996Act (U.K.). The provision in Section 2(1) of the U.K.
Act reads as follows:- "2(1) - The provisions of this Part apply
where the seat of the arbitration is in England, Wales, or
Northern Ireland." The aforesaid sections clearly do not provide
for any exception which, in fact, are separately provided for in
F Section 2(2) and 2(3) of the Arbitration Act, 1996. Therefore,
we are in agreement with the submission made by Mr.Aspi
Chenoy that Section 2(2) is an express parliamentary
declaration/ recognition that Part I of the Arbitration Act, 1996
applies to arbitration having their place/seat in India and does
G not apply to arbitrations sealed in foreign territories.

78. We do not agree with the learned counsel for the
appellants that there would be no need for the provision
contained in Section 2(2) as it would merely be stating the
obvious, i.e., the Arbitration Act, 1996 applies to arbitrations
H having their place/seat in India. In our opinion, the provisions
BHARAT ALUMINIUM CO. v. KAISERALUMINIUMTECHNICAL 391
SERVICE, INC. [SURINDER SINGH NIJJAR, J.]
have to be read as limiting the applicability of Part I to A
arbitrations which take place in India. If Section 2(2) is
construed as merely providing that Part I of the Arbitration Act,
1996 applies to India, it would be ex facie superfluous/
redundant. No statutory provision is necessary to state/clarify
that a law made by Parliament shall apply in India/to arbitrations B
in India. As submitted by Mr. Sorabjee, another fundamental
principle of statutory construction is that courts will never impute
redundancy or tautology to Parliament. See observations of
Bhagwati, J. in Umed Vs. Raj Singh, 34 wherein it is observed
as follows: "It is well settled rule of interpretation that the courts c
should, as far as possible, construe a statute so as to avoid
tautology or superfluity." The same principle was expressed by
Viscount Simon in Hill Vs. William Hill (Park Lane) Ltd. 35 in
the following words:-

"11 is to be observed that though a Parliamentary enactment D
(like Parliamentary eloquence) is capable of saying the
same thing twice over without adding anything to what has
already been said once, this repetition in an Act of
Parliament is not to be assumed. When the legislature
enacts a particular phrase in a statute the presumption is E
that it is saying something which has not been said
immediately before. The Rule that a meaning should, if
possible, be given to every word in the statute implies that,
unless there is good reason to the contrary, the words add
something which has not been said immediately before." F

79. We quote the above in extenso only to demonstrate
that Section 2(2) is not merely stating the obvious. It would not.
be a repetition of what is already stated in Section 1(2) of the
Arbitration Act, 1~96 which provides that "it extends to the G
whole of India". Since the consolidated Arbitration Act, 1996
deals with domestic, commercial and international commercial
arbitrators, it was necessary to remove the uncertainty that the
34. 1975 (1) SCC 76 Para 37 at P.103.
35. 1949 AC 530 at P 546. H
392 SUPREME COURT REPORTS [2012] 12 S.C.R.

A Arbitration Act, 1996 could also apply to arbitrations which do
not take place in India. Therefore, Section 2(2) merely reinforces
the limits of operation of the Arbitration Act, 1996 to India.

80. Another strong reason for rejecting the submission
made by the learned counsel for the appellants is that if Part I
8
were to be applicable to arbitrations seated in foreign
countries, certain words would have to be added to Section
2(2). The section would have to provide that "this part shall apply
where the place of arbitration is in India and to arbitrations
C having its place out of India." Apart from being contrary to the
contextual intent and object of Section 2(2), such an
interpretation would amount to a drastic and unwarranted
rewriting/alteration of the language of Section 2(2). As very
strongly advocated by Mr. Sorabjee, the provisions in the
Arbitration Act, 1996 must be construed by their plain language/
D terms. It is not permissible for the court while construing a
provision to reconstruct the provision. In other words, the Court
cannot produce a new jacket, whilst ironing out the creases of
the old one. In view of the aforesaid, we are unable to support
the conclusions recorded by this Court as noticed earlier.
E
Is Section 2(2) in conflict with Sections 2(4) and 2(5) -

81. We may now take up the submission of the learned
counsel that Sections 2(4) and 2(5) specifically make Part I
applicable to all arbitrations irrespective of where they are held.
F This submission is again a reiteration of the conclusions
recorded in Bhatia International at Paragraph 14C and
reiterated in Paragraphs 21 and 22. We have earlier held that
Section 2(2) would not be applicable to arbitrations held 1

,

outside India. We are unable to accept that there is any conflict
G at all between Section 2(2) on the one hand and Sections 2(4)
and 2(5) on the other hand. Section 2(4) provides as under :

''This Part except sub-section (1) of Section 40, Sections
41 and 43 shall apply to every arbitration under any other
H enactment for the time being in force, as if the arbitration
BHARAT ALUMINIUM CO. v. KAISER ALUMINIUM TECHNICAL 393
SERVICE, INC. [SURINDER SINGH NIJJAR, J.]
were pursuant to an arbitration agreement and as if that A
other enactment were an arbitration agreement except in
so far as the provisions of this Part are inconsistent with
that other enactment or with any rules made thereunder."

82. It is urged by the appellants that Section 2(4) makes B
Part I applicable to "every arbitration" under any other
enactment, thereby makes it applicable to arbitrations wherever
held, whether in India or outside India. In our opinion, the
submission is devoid of merit. Section 2(4) makes Part I
applicable to "every arbitration under any other enactment for
the time being in force". Hence, there must be an enactment C
"for the time being in force" under which arbitration takes place.
In our opinion, "any other enactment" would in its ordinary
meaning contemplate only an Act made by the Indian
Parliament. By virtue of Article 245, "Parliament may make laws
for the whole or any part of India". Thus it is not possible to D
accept that "every arbitration" would include arbitrations which
take place outside India. The phrase "all arbitrations" has to be
read as limited to all arbitrations that take place in India. The
two sub-sections merely recognize that apart from the
arbitrations which are consensual between the parties, there E
may be other types of arbitrations, namely, arbitrations under
certain statutes like Section 7 of the Indian Telegraph Act, 1886;
or bye-laws of certain Associations such as Association of
Merchants, Stock Exchanges and differer~ Chamber of
Commerce. Such arbitrations would have to be regarded as F
covered by Part I of the Arbitration Act, 1996, except in so far
as the provision'3 of Part I are inconsistent with the other
enactment or any rules made thereunder. There seems to be
no indication at all in Section 2(4) that can make Part I
applicable to statutory or compulsory arbitrations, which take G
place outside India.

83. Similarly, the position under Section 2(5) would remain
the same. In our opinion, the provision does not admit of an
interpretation that any of the provisions of Part I would have any
H
394 SUPREME COURT REPORTS (2012] 12 S.C.R.

A application to arbitration which takes place outside India.
Section 2(5) reads as under:-

"Subject to the provisions of sub-section (4), and save
insofar as is otherwise provided by any law for the time
being in force or in any agreement in force between India
B
and any other country or countries, this Part shall apply to
all arbitrations and to all proceedings relating thereto."

84. This sub-clause has been made subject to sub-clause
(4) and must be read in the backdrop of Section 2(2) of the
C Arbitration Act, 1996. Section 2(2) of the aforesaid Act
provides that this part shall apply where the place of arbitration
is in India. Section 2(5) takes this a step further and holds that
this Part shall apply to all arbitrations and proceedings relating
thereto, where the seat is in India [a corollary of Section 2(2)]
D and if it is not a statutory arbitration or subject of an agreement
between India and any other country. The exception of statutory
enactments was necessary in terms of the last part of sub-
clause (4), which provides for non application of this Part to
statutory arbitrations in case of inconsistency. Thus, barring the
E statutory enactments as provided for under Section 2(4) of the
Arbitration Act, 1996 and arbitrations pursuant to international
agreement, all other arbitration proceedings held in India shall
be subject to Part I of the said Act. Accordingly, the phrase 'all
arbitrations' in Section 2(5) means that Part I applies to all
F where Part I is otherwise applicable. Thus, the provision has
to be read as a part of the whole chapter for its correct
interpretation and not as a stand alone provision. There is no
indication in Section 2(5) that it would apply to arbitrations which
are not held in India.
G 85. In view of the aforesaid observations, we have no doubt
that the provisions of Section 2(4) and Section 2(5) would not
be applicable to arbitrations which are covered by Part II of the
Arbitration Act, 1996, i.e. the arbitrations which take place
outside India. We, therefore, see no inconsistency between
H
BHARAT ALUMINIUM CO. v. KAISERALUMINIUMTECHNICAL 395
SERVICE, INC. [SURINDER SINGH NIJJAR, J.]
Sections 2(2), 2(4) and 2(5). For the aforesaid reasons, we are A
unable to agree with the conclusion in Bhatia lntemational that
limiting the applicability of part I to arbitrations that take place
in India, would make Section 2(2) in conflict with Sections 2(4)
and 2(5).
B
Does Section 2(7) indicate that Part I applies to
arbitrations held outside India?

86. We have earlier noticed the very elaborate
submissions made by the learned senior counsel on the
rationale, scope, and application of Section 2(7), to arbitrations C
having a seat outside India.

87. Having considered the aforesaid submissions, we are
of the opinion that the views expressed by the learned counsel
for the appellants are not supported by the provisions of the 0
Arbitration Act, 1996. Section 2(7) of the Arbitration Act, 1996
reads thus:

"An arbitral award made under this Part shall be
considered as a domestic award."
E
88. In our opinion, the aforesaid provision does not, in any
manner, relax the territorial principal adopted by Arbitration Act,
1996. It certainly does not introduce the concept of a
delocalized arbitration into the Arbitration Act, 1996. It must be
remembered that Part I of the Arbitration Act, 1996 applies not F
only to purely domestic arbitrations, i.e., where none of the
parties are in any way "foreign" but also to "international
commercial arbitrations" covered within Section 2(1)(f) held in
!ndia. The term "domestic award" can be used in two senses:
one to distinguish it from "international award", and the other G
to distinguish it from a "foreign award". It must also be
remembered that "foreign award" may well be a domestic
award in the country in which it is rendered. As the whole. of
the Arbitration Act, 1996 is designed to give different treatments
to the awards made in India and those made outside India, the H
396 SUPREME COURT REPORTS [2012] 12 S.C.R.

A distinction is necessarily to be made between the terms
"domestic awards" and "foreign awards". The Scheme of the
Arbitration Act, 1996 provides that Part I shall apply to both
"international arbitrations" which take place in India as well as
"domestic arbitrations· which would normally take place in India.
B This is clear from a number of provisions contained in the
Arbitration Act, 1996 viz. the Preamble of the said Act; proviso
and the explanation to Section 1(2); Sections 2(1 )(f); 11 (9),
11 (12); 28(1 )(a) and 28(1 )(b). All the aforesaid provisions,
which incorporate the term "international", deal with pre-award
c situation. The term "international award" does not occur in Part
I at all. Therefore, it would appear that the term "domestic
award" means an award made in India whether in a purely
domestic context, i.e., domestically rendered award in a
domestic arbitration or in the international context, i.e.,
domestically rendered award in an international arbitration.
0
Both the types of awards are liable to be challenged under
Section 34 and are enforceable under Section 36 of the
Arbitration Act, 1996. Therefore, it seems clear that the object
of Section 2(7) is to distinguish the domestic award covered
under Part I of the Arbitration Act, 1996 from the "foreign award"
E covered under Part II of the aforesaid Act; and not to distinguish
the "domestic award" from an "international award" rendered
in India. In other words, the provision highlights, if any thing, a
clear distinction between Part I and Part II as being applicable
in completely different fields and with no overlapping provisions.
F
89. That Part I and Part II are exclusive of each other is
evident also from the definitions section in Part I and Part II.
Definitions contained in Section 2(i)(a) to (h) are limited to Part
I. The opening line which provides "In this part, unless the
G context otherwise requires ...... ", makes this perfectly clear.
Similarly, Section 44 gives the definition of a foreign award for
the purposes of Part II (Enforcement of Certain Foreign
Awards); Chapter I (New York Convention Awards). Further,
Section 53 gives the interpretation of a foreign award for the
H purposes of Part II (Enforcement of Certain Foreign Awards);
BHARAT ALUMINIUM CO. v. KAISERALUMINIUMTECHNICAL 397
SERVICE, INC. [SURINDER SINGH NIJJAR, J.)
Chapter II (Geneva Convention Awards). From the aforesaid, A
the intention of the Parliament is clear that there shall be no
overlapping between Part I and Part II of the Arbitration Act,
1996. The two parts are mutually exclusive of each other. To
accept the submissions made by the learned counsel for the
appellants would be to convert the "foreign award" which falls B
within Section 44, into a domestic award by virtue of the
provisions contained under Section 2(7) even if the arbitration
takes place outside India or is a foreign seated arbitration, if
the law governing the arbitration agreement is by choice of the
parties stated to be the Arbitration Act, 1996. This, in our c
opinion, was not the intention of the Parliament. The territoriality
principle of the Arbitration Act, 1996, precludes Part I from
being applicable to a foreign seated arbitration, even if the
agreement purports to provide that the Arbitration proceedings
will be governed by the Arbitration Act, 1996.
D
90. The additional submission of Mr. Sorabjee is that
Section 9-B of the 1961 Act, which was in negative terms, has
been re-enacted as Section 2(7) of the Arbitration Act, 1996
in positive terms. Section 9-B of the 1961 Act, was as under:
E
"9. Saving - Nothing in this Act shall -

(b) apply to any award made on an arbitration agreement
governed by the law of India." F

91. We are of the opinion that the Section has been
intentionally deleted, whereas many other provisions of the
1961 Act have been retained in the Arbitration Act, 1996. If the
provision were to be retained, it would have been placed in Part G
II of the Arbitration Act, 1996. In our opinion, there is no link
between Section 2(7) of the Arbitration Act, 1996, with the
deleted Section 9-B of the 1961 Act. It was by virtue of the
aforesaid provision that the judgments in Singer Company &
Ors. (supra) and ONGC v. Western Company of North H
398 SUPREME COURT REPORTS [2012] 12 S.C.R.

A America (supra) were rendered. In both the cases the foreign
awards made outside India were set aside, under ihe 1940 Act.
By deletion of Section 9-B of the 1961 Act, the judgments have
been rendered irrelevant under the Arbitration Act, 1996.
Having removed the mischief created by the aforesaid
B provision, it cannot be the intention of the Parliament to
reintroduce it, in a positive form as Section 2(7) of the
Arbitration Act, 1996. We, therefore, see no substance in the
additional submission of Mr. Sorabjee.

92. We agree with Mr. Salve that Part I only applies when
C the seat of arbitration is in India, irrespective of the kind of
arbitration. Section 2(7) does not indicate that Part I is
· applicable to arbitrations held outside India.

93. We are, therefore, of the opinion that Section 2(7)
D does not alter the proposition that Part I applies only where the
"seat" or "place" of the arbitration is in India.

94. It appears to us that provision in Section 2(7) was also
necessary to foreclose a rare but possible scenario (as
E canvassed by Mr. Gopal Subramanium) where two foreigners
who arbitrate in India, but under a Foreign Arbitration Act, could
claim that the resulting award would be a "non-domestic" award.
In such a case, a claim could be made to enforce the award in
India, even though the seat of arbitration is also in India. This
curious result has occurred in some cases in other jurisdictions,
F e.g., U.S.A. In the case of Bergesen Vs. Joseph Muller
Corporation36 , the Court held an award made in the State of
New York between two foreign parties is to be considered as
a non-domestic award within the meaning of the New York
Convention and its implementing legislation. Section 2(7), in our
G opinion, is enacted to reinforce the territorial criterion by
providing that, when two foreigners arbitrate in India, under a
Foreign Arbitration Act, the provisions of Part I will apply. Indian
Courts being the supervisory Courts, will exercise control and

H 36. 710 F.2d 928.
BHARAT ALUMINIUM CO. v. KAISER ALUMINIUM TECHNICAL 399
SERVICE, INC. [SURINDER SINGH NIJJAR, J.]
regulate the arbitration proceedings, which will produce a A
"domestically rendered international commercial award". It
would be a "foreign award" for the purposes of enforcement in
a country other than India. We, therefore, have no hesitation in ·
rejecting the submissions made by the learned senior counsel
for the appellants, being devoid of merit. B

Party Autonomy

95. Learned counsel for the appellants have .submitted that
Section 2(1)(e), Section 20 and Section 28 read with Section
45 and Section 48(1)(e) make it clear that Part I is not limited C
only to arbitrations which take place in India. These provisions
indicate that Arbitration Act, 1996 is subject matter centric and
not exclusively seat centric. Therefore, ·seat" is not the "centre
of gravity" so far as the Arbitration Act, 1996 is concerned. We
are of the considered opinion that the aforesaid provisions have D
to be interpreted by keeping the principle of territoriality at the
forefront. We have earlier observed that Section 2(2) does not
make Part I applicable to arbitrations seated or held outside
India. In view of the expression used in Section 2(2), the maxim
expressum facit cessare taciturn, would not permit by E
interpretation to hold that Part I would also apply to arbitrations
held outside the territory of India. The expression "this Part shall
apply where the place of arbitration is in India" necessarily f
excludes application of Part I to arbitration seated or held
outside India. It appears to us that neither of the provisions F
relied upon by the learned counsel for the appellants would
make any section of Part I applicable to arbitration seated
outside India. It will be apposite now to consider each of the
aforesaid provisions in turn. Section 2(1)(e) of the Arbitration
Act, 1996 reads as under:
G
"2. Definitions
(1) In this Part, unless the context otherwise requires -

H
400 SUPREME COURT REPORTS [2012] 12 S.C.R.

A (e) "Court" means 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
B 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."

96. We are of the opinion, the term ·subject matter of the
arbitration" cannot be confused with "subject matter of the suit".
C The term "subject matter" in Section 2(1)(e) is confined to Part
I. It has a reference and connection with the process of dispute
resolution. Its purpose is to identify the courts having supervisory
control over the arbitration proceedings. Hence, it refers to a
court which would essentially be a court of the seat of the
D arbitration process. In our opinion, the provision in Section
2(1)(e) has to be construed keeping in view the provisions in
Section 20 which give recognition to party autonomy. Accepting
the narrow construction as projected by the learned counsel for
the appellants would, in fact, render Section 20 nugatory. In our
E view, the legislature has intentionally given jurisdiction to two
courts i.e. the court which would have jurisdiction where the
cause of action is located and the courts where the arbitration
takes place. This was necessary as on many occasions the
agreement may provide for a seat of arbitration at a place
F which would be neutral to both the parties. Therefore, the courts
where the arbitration takes place would be required to exercise
supervisory control over the arbitral process. For example, if
the arbitration is held in Delhi, where neither of the parties are
from Delhi, (Delhi having been chosen as a neutral place as
G between a party from Mumbai and the other from Kolkata) and
the tribunal sitting in Delhi passes an interim order under
Section 17 of the Arbitration Act, 1996, the appeal against such
an interim order under Section 37 must lie to the Courts of Delhi
being the Courts having supervisory jurisdiction over the
H arbitration proceedings and the tribunal. This would be
BHARAT ALUMINIUM CO. v. KAISERALUMINIUMTECHNICAL 401
SERVICE, INC. [SURINDER SINGH NIJJAR, J.]

irrespective of the fact that the obligations to be performed A
under the contract were to be performed either at Mumbai or
at Kolkata, and only arbitration is to take place in Delhi. In such
circumstances, both the Courts would have jurisdiction, i.e., the
Court within whose jurisdiction the subject matter of the suit is
situated and the courts within the jurisdiction of which the B
dispute resolution, i.e., arbitration is located.

97. The definition of Section 2(1 )(e) includes "subject
matter of the arbitration" to give jurisdiction to the courts where
the arbitration takes place, which otherwise would not exist. On c
the other hand, Section 47 which is in Part II of the Arbitration
Act, 1996 dealing with enforcement of certain foreign awards
has defined the term "court" as a court having jurisdiction over
the subject-matter of the award. This has a clear reference to
a court within whose jurisdiction the asseUperson is located, 0
against which/whom the enforcement of the international arbitral
award is sought. The provisions contained in Section 2(1)(e)
being purely jurisdictional in nature can have no relevance to
the question whether Part I applies to arbitrations which take
place outside India.
E
98. We now come to Section 20, which is as under:-

"20. Place of arbitration -

(1) The parties are free to agree on the place of F
arbitration.

(2) Failing any agreement referred to in sub-section (1 ),
the place of arbitration shall be determined by the
arbitral tribunal having regard to the circumstances
of the case, including the convenience of the G
parties.
(3) Notwithstanding sub-section (1) or sub-section (2),
the arbitral tribunal may, unless otherwise agreed
by the parties, meet at any place it considers H
402 SUPREME COURT REPORTS [2012] 12 S.C.R.

A appropriate for consultation among its members, for
hearing witnesses, experts or the parties, or for
inspection of documents, good or other property."
A plain reading of Section 20 leaves no room for doubt
8 that where the place of arbitration is in India, the parties are
free to agree to any "place" or "seat" within India, be it Delhi,
Mumbai etc. In the absence of the parties' agreement thereto,
Section 20(2) authorizes the tribunal to determine the place/
seat of such arbitration. Section 20(3) enables the tribunal to
meet at any place for conducting hearings at a place of
C convenience in matters such as consultations among its
members for hearing witnesses, experts or the parties.

99. The fixation of the most convenient "venue" is taken
care of by Section 20(3). Section 20, has to be read in the
D context of Section 2(2), which places a threshold limitation on
the applicability of Part I, where the place of arbitration is in
India. Therefore, Section 20 would also not support the
submission of the extra-territorial applicability of Part I, as
canvassed by the learned counsel for the appellants, so far as
E purely domestic arbitration is concerned.

100. True, that in an international commercial arbitration,
having a seat in India, hearings may be necessitated outside
India. In such circumstances, the hearing of the arbitration will
be conducted at the venue fixed by the parties, but it would not
F have the effect of changing the seat of arbitration which would
remain in India. The legal position in this regard is summed up
by Redfern and Hunter, The Law and Practice of International
Commercial Arbitration (1986) at Page 69 in the following
passage under the heading "The Place of Arbitration":-
G
"The preceding discussion has been on the basis that
there is only one "place" of arbitration. This will be the place
chosen by or on behalf of the parties; and it will be
designated in the arbitration agreement or the terms of the
H reference or the minutes of proceedings or in some other
BHARAT ALUMINIUM CO. v. KAISER ALUMINIUM TECHNICAL 403
SERVICE, INC. [SURINDER SINGH NIJJAR, J.]
way as the place or "seat" of the arbitration. This does not A
mean, however, that the arbitral tribunal must hold all its
meetings or hearings at the place of arbitration.
International commercial arbitration often involves people
of many different nationalities, from many different
countries. In these circumstances, it is by no means B
unusual for an arbitral tribunal to hold meetings - or even
hearings - in a place other than the designated place of
arbitration. either for its own convenience or for the
convenience of the parties or their witnesses ... It may be
more convenient for an arbitral tribunal sitting in one c
country to conduct a hearing in another country - for
instance, for the purpose of taking evidence ..... In such
circumstances, each move of the arbitral tribunal does not
of itself mean that the seat of arbitration changes. The seat
of the arbitration remains the place initially agreed by or
0
on behalf of the parties."
This, in our view, is the correct depiction of the practical
considerations and the distinction between "seat" (Section
20(1) and 20(2)) and "venue· (Section 20(3)). We may point
out here that the distinction between "seat" and "venue" would E
be quite crucial in the event, the arbitration agreement
designates a foreign country as the "seat"/"place· of the
arbitration and also select the Arbitration Act. 1996 as the curial
law/law governing the arbitration proceedings. It would be a
matter of construction of the individual agreement to decide F
whether:
(i) The designated foreign "seat" would be read as in
fact only providing for a "venue·/ "place· where the
hearings would be held, in view of the choice of G
Arbitration Act, 1996 as being the curial law- OR
(ii) Whether the specific designation of a foreign seat,
necessarily carrying with it the choice of that
country's Arbitration I curial law, would prevail over
H
404 SUPREME COURT REPORTS (2012] 12 S.C.R.

A and subsume the conflicting selection choice by the
parties of the Arbitration Act, 1996.

ONLY if the agreement of the parties is construed to provide
for the "seat" /"place" of Arbitration being in India - would Part
I.of the Arbitration Act, 1996 be applicable. If the agreement is
8
held to provide for a "seat" I "place" outside India, Part I would
be inapplicable to the extent inconsistent with the arbitration law
of the seat, even if the agreement purports to provide that the
Arbitration Act, 1996 shall govern the arbitration proceedings.

C 101. How complex the situation can become can be best
demonstrated by looking at some of the prominent decisions
on the factors to be taken into consideration in construing the
relevant provisions of the contract/arbitration clause.

0 102. In Naviera Amazonica Peruana S.A. (supra), the
Court of Appeal, in England considered the agreement which
contained a clause providing for the jurisdiction of Courts in
Lima Peru in the event of judicial dispute and at the same time
contained a clause providing that the arbitration would be
E governed by English Law and the procedural law of Arbitration
shall be English Law.

103. The Court of Appeal summarized the State of the
jurisprudence on this topic. Thereafter, the conclusions which
arose from the material were summarized as follows:-
F
•All contracts which provide for arbitration and contain a
foreign element may involve three potentially relevant
systems of law. (1) The law governing the substantive
contract. (2) The law governing the agreement to arbitrate
G and the performance of that agreement. (3) The law
governing the conduct of the arbitration. In the majority of
cases all three will be the same. But (1) will often be
different from (2) and (3). And occasionally, but rarely, (2)
may also differ from (3)."
H 104. It is observed that the problem about all these
BHARAT ALUMINIUM CO. v. KAISER ALUMINIUM TECHNICAL 405
SERVICE, INC. [SURINDER SINGH NIJJAR, J.]

formulations, including the third, is that they elide the distinction A
between the legal localization of an arbitration on the one hand
and the appropriate or convenient geographical locality for
hearings of the arbitration on the other hand.

105. On the facts of the case, it was observed that since
8
there was no contest on Law 1 and Law 2, the entire issue
turned on Law 3, "The law governing the conduct of the
arbitration. This is usually referred to as the curial or procedural
law, or the lex fori." Thereafter, the Court approvingly quoted
the following observation from Dicey & Morris on the Conflict C
of Laws (11th Edition): "English Law does not recognize the
concept of a de-localised" arbitration or of "arbitral procedures
floating in the transnational firmament, unconnected with any
municipal system of law". It is further held that "accordingly every
arbitration must have a "seat" or "locus arbitri" or "forum" which
subjects its procedural rules to the municipal law which is there D
in force". The Court thereafter culls out the following principle
"Where the parties have failed to choose the law governing the
arbitration proceedings, those proceedings must be
considered, at any rate prima facie, as being governed by the
law of the country in which the arbitration is held, on the ground E
that it is the country most closely connected with the
proceedings". The aforesaid classic statement of the Conflict
of Law Rules as quoted in Dicey & Morris on the Conflict of
Laws (11th Edition) Volume 1, was approved by the House of
Lords in James Miller & Partners Vs. Whitworth Street Estates F
(Manchester) Ltd. 37 · Mr. Justice Mustill in the case of Black
Clawson International Ltd. Vs. Papierlrke Waldhof-Aschaf-
fenburg A. G- 36 , a little later characterized the same proposition
as "the law of the place where the reference is conducted, the
lex fori". The Court also recognized the proposition that "there G
is equally no reason in theory which precludes parties to agree
that an arbitration shall be held at a place or in country X but

37. 11970] 1 Lloyd's Rep. 269; [1970] A.C.583.
38. 11981] 2 Lloyd's Rep. 446 at P. 453. H
406 SUPREME COURT REPORTS (2012] 12 S.C.R.

A subject to the procedural laws of Y". But it points out that in
reality parties would hardly make such a decision as it would
create enormous unnecessary complexities. Finally it is pointed
out that it is necessary not to confuse the legal "seat" of an
arbitration with the geographically convenient place or places
B for holding hearings.

106. On examination of the facts in that case, the Court of
Appeal observed that there is nothing surprising in concluding
that these parties intended that any dispute under this policy,
should be arbitrated in London. But ii would always be open to
C the Arbitral Tribunal to hold hearings in Lima if this were thought
to be convenient, even though the seat or forum of the
arbitration would remain in London.

107. A similar situation was considered by the High Court
D of Justice Queen's Bench Division Technol0gy and Construction
Court in Braes of Doune Wind Farm (Scotland) Limited v
Alfred McA/pine Business Services Limited (supra). In this
case the Court considered two applications relating to the First
Award of an arbitrator. The award related to an EPC
E (Engineering, Procurement and Construction) Contract dated
4th November, 2005 ("the EPC Contract") between the Claimant
("the Employer") and the Defendant (''the Contractor") whereby
the Contractor undertook to carry out works in connection with
the provision of 36 wind turbine generators (the "WTGs") at a
W site some 18 kilometres from Stirling in Scotland. This award
dealt with enforceability of the clauses of the EPC Contract
which provided for liquidated damages for delay. The claimant
applied for leave to appeal against this award upon a question
of law whilst the Defendant sought, in effect, a declaration that
G the Court had no jurisdiction to entertain such an application
and for leave to enforce the award. The Court considered the
issue of jurisdiction which arose out of application of Section
2 of the (English) Arbitration Act, 1996 which provides that -
"(1) The provisions of this Part apply where the seat of the
arbitration is in England and Wales or Northern Ireland." The
1H,.
BHARAT ALUMINIUM CO. v. KAISER ALUMINIUM TECHNICAL 407
SERVICE, INC. [SURINDER SINGH NIJJAR, J.]
Court notices the singular importance of determining the A
,, location of "juridical seat" in terms of Section 3, for the purposes
of Section 2, in the following words:-

"! must determine what the parties agreed was the "seat"
of the arbitration for the purposes of Section 2 of the
8
Arbitration Act 1996. This means by Section 3 what the
parties agreed was the "juridical" seat. The word "juridical"
"is not an irrelevant word or a word to be ignored in
ascertaining what the "seat" is. It means and connotes the
administration of justice so far as the arbitration is C
concerned. It implies that there must be a country whose
job it is to administer, control or decide what control there
is to be over an arbitration."

108. Thus, it would be evident that if the "juridical sear of
the arbitration was in Scotland, the English Courts would have D
no jurisdiction to entertain an application for leave to appeal.
The Contractor argued that the seat of the arbitration was
Scotland whilst the Employer argued that it was England. There
were to be two contractors involved with the project.
E
109. The material Clauses of the EPC Contract were:

1.4.1. The Contract shall be governed by and construed
in accordance with the laws of England and Wales and, subject
to Clause 20.2 (Dispute Resolution), the Parties agree that the
courts of England and Wales have exclusive jurisdiction to F
settle any dispute arising out of or in connection with the
contract.

(a) ... any dispute or difference between the Parties to
this Agreement arising out of or in connection with G
this Agreement shall be referred to arbitration.
(b) Any reference to arbitration shall be to a single
arbitrator. .. and conducted in accordance with the
Construction Industry Model Arbitration Rules
H
408 SUPREME COURT REPORTS [2012) 12 S.C.R.

A February 1998 Edition, subject to this Clause
(Arbitration Procedure) ...

(c) This arbitration agreement is subject to English Law
and the seat of the arbitration shall be Glasgow, ·
Scotland. Any such reference to arbitration shall be
B
deemed to be a reference to arbitration within the
meaning of the Arbitration Act, 1996 or any statutory
re-enactment.·

110. The Arbitration was to be conducted under the
C Arbitration Rules known colloquially as the "GIMAR Rules". Rule
1.1 of the Rules provided that:

"These Rules are to be read consistently with the
Arbitration Act 1996 (the Act), with common expressions
0 having the same meaning."
Rule 1.6 applied:

(a) a single arbitrator is to be appointed, and

E (b) the seat of the arbitration is in England and Wales or
Northern Ireland.
111. The court was informed by the parties in arguments
that Scottish Court's powers of control or intervention would be,
at the very least, seriously circumscribed by the parties'
F agreement in terms as set out in paragraph 6 of the judgment.
It was further indicated by the counsel that the Scottish Court's
powers of intervention might well be limited to cases involving
such extreme circumstances as the dishonest procurement of
an award.
G
112. In construing the EPC, the court relied upon the
principles stated by the Court of Appeal in Naviera Amazonica
Peruana SA (supra).

113. Upon consideration of the entire material, the Court
H formed the view that it does have jurisdiction to entertain an
BHARAT ALUMINIUM CO. v. KAISER ALUMINIUM TECHNICAL 409
SERVICE, INC. [SURINDER SINGH NIJJAR, J.]
application by either party to the contract in question under A
Section 69 of the (English) Arbitration Act, 1996. The court
gave the following reasons for the decision:-

(a) One needs to consider what, in substance, the parties
agreed was the law of the country which would juridically 8
control the arbitration.

(b) I attach particular importance to Clause 1.4.1. The
parties agreed that essentially the English (and Welsh)
Courts have "exclusive jurisdiction" to settle disputes.
Although this is "subject to" arbitration, it must and does C
mean something other than being mere verbiage. It is a
jurisdiction over disputes and not simply a court in which
a foreign award may be enforced. If it is in arbitration alone
that disputes are to be settled and the English Courts have
no residual involvement in that process, this part of Clause D
1.4.1 is meaningless in practice. The use of the word
"jurisdiction" suggests some form of control.
(c) The second part of Clause 1.4.1 has some real
meaning if the parties were agreeing by it that, although E
the agreed disputes resolution process is arbitration, the
parties agree that the English Court retains such
jurisdiction to address those disputes as the law of
England and Wales permits. The Arbitration Act, 1996
permits and requires the Court to entertain applications F
under Section 69 for leave to appeal against awards which
address disputes which have been referred to arbitration.
By allowing such applications and then addressing the
relevant questions of law, the Court will settle such disputes;
even if the application is refused, the court will be applying
its jurisdiction under the Arbitration Act, 1996 and providing G
resolution in relation to such disputes.

(d) This reading of Clause 1.4.1 is consistent with Clause
20.2.2 (c) which confirms that the arbitration agreement is
subject to English Law and that the "reference" is "deemed H
410 SUPREME COURT REPORTS (2012] 12 S.C.R.

A to be a reference to arbitration within the meaning of the
Arbitration Act, 1996." This latter expression is extremely
odd unless the parties were agreeing that any reference
to arbitration was to be treated as a reference to which
the Arbitration Act, 1996 was to apply. There is no
8 definition in the Arbitration Act, 1996 of a "reference to
arbitration", which is not a statutory term of art. The parties
presumably meant something in using the expression and
the most obvious meaning is that the parties were
agreeing that the Arbitration Act, 1996 should apply to the
c reference without qualification.

(e) Looked at in this light, the parties' express agreement
that the "seat" of arbitration was to be Glasgow, Scotland
must relate to the place in which the parties agreed that
the hearings should take place. However, by all the other
D references the parties were agreeing that the curial law or
law which governed the arbitral proceedings establish that,
prima facie and in the absence of agreement otherwise,
the selection of a place or seat for an arbitration will
determine what the curial law or "lex fori" or "lex arbitri" will
E be, we consider that, where in substance the parties agree
that the laws of one country will govern and control a given
arbitration, the place where the arbitration is to be heard
will not dictate what the governing or controlling law will be.

F (f) In the context of this particular case, the fact that, as both
parties seemed to accept in front of me, the Scottish
Courts would have no real control or interest in the arbitral
proceedings other than in a criminal context, suggests that
they can not have intended that the arbitral proceedings
were to be conducted as an effectively "delocalized"
G
arbitration or in a "transnational firmament", to borrow Lord
Justice Kerr's words in the Naviera Amazonica case.

(g) The CIMAR Rules are not inconsistent with my view.
Their constant references to the Arbitration Act, 1996
H suggest that the parties at least envisaged the possibility
BHARAT ALUMINIUM CO. v. KAISER ALUMINIUM TECHNICAL 411
SERVICE, INC. [SURINDER SINGH NIJJAR, J.]
that the Courts of England and Wales might play some part A
in policing any arbitration. For instarce, Rule 11.5
envisages something called "the Court" becoming involved
in securing compliance with a peremptory order of the
arbitrator. That would have to be the English Court, in
practice." B

114. These observations clearly demonstrate the detailed
examination which is required to be undertaken by the court to
discern from the agreement and the surrounding circumstances
the intention of the parties as to whether a particular place
mentioned refers to the "venue" or "seat" of the arbitration. In C
that case, the Court, upon consideration of the entire material,
concluded that Glasgow was a reference to the "venue" and the
"seat" of the arbitration was held to be in England. Therefore,
there was no supplanting of the Scottish Law by the English
Law, as both the seat under Section 2 and the "juridical seat" D
under Section 3, were held to be in England. Glasgow being
only the venue for holding the hearings of the arbitration
proceedings. The Court rather reiterated the principle that the
selection of a place or seat for an arbitration will determine
what the "curial law" or "lex fori" or "lex arbitri" will be. It was E
further concluded that where in substance the parties agreed
that the laws of one country will govern and control a given
arbitration, the place where the arbitration is to be heard will
not dictate what the governing law or controlling law will be. In
view of the above, we are of the opinion that the reliance placed F
upon this judgment by Mr.Sundaram is wholly misplaced.

115. The aforesaid ratio has been followed in Shashoua
& Ors. (supra). In this case, the Court was concerned with the
construction of the shareholders' agreement between the G
parties, which provided that "the venue of the arbitration shall
be London, United Kingdom". Whilst providing that the
arbitration proceedings should be conducted in English in
, accordance with ICC Rules and that the governing law of the
shareholders' agreement itself would be the law of India. The H
412 SUPREME COURT REPORTS [2012] 12 S.C.R.

A claimants made an application to the High Court in New Delhi
seeking interim measures of protection under Section 9 of the
Arbitration Act, 1996, prior to the institution of arbitration
proceedings. Following the commencement of the arbitration,
the defendant and the joint venture company raised a challenge
B to the jurisdiction of the arbitral tribunal, which the panel heard
as a preliminary issue. The tribunal rejected the jurisdictional
objection. The tribunal then made a cost award ordering the
defendant to pay $140,000 and £172,373.47. The English
Court gave leave to the claimant to enforce the costs award
c as a judgment. The defendant applied to the High Court of Delhi
under Section 34(2)(iv) of the Arbitration Act, 1996 to set aside
the costs award. The claimant had obtained a charging order,
which had been made final, over the defendant's property in
the UK. The defendant applied to the Delhi High Court for an
D order directing the claimants not to take any action to execute
the charging oJder, pending the final disposal of the Section
34 petition in Delhi seeking to set aside the costs award. The
defendant had sought unsuccessfully to challenge the costs
award in the Commercial Court under Section 68 and Section
69 of the 1996 Act (U.K.) and to set aside the order giving
E leave to enforce the award. Examining the fact situation in the
case, the Court obser\ted as follows:-

"The basis for the court's grant of an anti-suit injunction of
the kind sought depended upon the seat of the arbitration.
F An agreement as to the seat of an arbitration brought in
the law of that country as the curial law and was
analogous to an exclusive jurisdiction clause. Not only
was there agreement to the curial law of the seat, but also
to the Courts of the seat having supervisory jurisdiction
G over the arbitration, so that, by agreeing to the seat, the
parties agreed that any challenge to an interim or final
award was to be made only in the courts of the place
designated as the seat of the arbitration.

Although, 'venue' was not synonymous with 'seat', in an
H
BHARAT ALUMINIUM CO. v. KAISER ALUMINIUM TECHNICAL 413
SERVICE, INC. [SURINDER SINGH NIJJAR, J.)
arbitration clause which provided for arbitration to be A
conducted in accordance with the Rules of the ICC in Paris
(a supranational body of rules), a provision that 'the venue
of arbitration shall be London, United Kingdom' did amount
to the designation of a juridical seat..: ... ."
B
In Paragraph 54, it is further observed as follows:-

"There was a little debate about the possibility of the
issues relating to the alleged submission by the claimants
to the jurisdiction of the High Court of Delhi being heard
by that court, because it was best fitted to determine such C
issues under Indian Law. Whilst I found this idea attractive
initially, we are persuaded that it would be wrong in
principle to allow this and that it would create undue
practical problems in any ,event. On the basis of what I
have already decided, England is the seat of the D
arbitration and since this carries with it something akin
to an exclusive jurisdiction clause, as a matter of principle
the foreign court should not decide matters which are for
this court to decide in the context of an anti-suit
injunction. "[emphasis supplied] E

116. In making the aforesaid observations, the Court relied
on judgments of the Court of Appeal in C Vs. 03 9 • Here the
Court of Appeal in England was examining an appeal by the
defendant insurer from the judgment of Cooke, J. granting an
anti-suit injunction preventing it from challenging an arbitration
F
award in the U.S. Courts. The insurance policy provided "any
dispute arising under this policy shall be finally and fully
determined in London, England under the provisions of the
English Arbitration Act, 1950 as amended". However, it was
further provided that "this policy shall be governed by and G
construed in accordance with the internal laws of the State of
New York .... ". A partial award was made in favour of the
claimants. It was agreed that this partial award is, in English

39. [2007] EWCA Civ 1282 (CA). H
'
414 SUPREME COURT REPORTS [2012] 12 S.C.R.

A Law terms, final as to what it decides. The defendant sought
the tribunal's withdrawal of its findings. The defendant also
intimated its intention to apply to a Federal Court applying US
Federal Arbitration Law governing the enforcement of arbitral
award, which was said to permit "vacatur" of an award where
B arbitrators have manifestly disregarded the Jaw. It was in
consequence of such intimation that the claimant sought and
obtained an interim anti-suit injunction. The Judge held that
parties had agreed that any proceedings seeking to attack or
set aside the partial award would only be those permitted by
c English Law. It was not, therefore, permissible for the defendant
to bring any proceedings in New York or elsewhere to attack
the partial award. The Judge rejected the arguments to the
effect that the choice of the law of New York as the proper law
of the contract amounted to an agreement that the law of
England should not apply to proceedings post award. The
0
Judge also rejected a further argument that the separate
agreement to arbitrate contained in the Condition V(o) of the
policy was itself governed by New York Law so that
proceedings could be instituted in New York. The Judge
granted the claimant a final injunction. The Court of Appeal
E noticed the submission on behalf of the defendant as follows:-

"14. The main submission of Mr Hirst QC for the defendant
insurer was that the judge had been wrong to hold that the
arbitration agreement itself was governed by English law
F merely because the seat of the arbitration was London. He
argued that the arbitration agreement itself was silent as
to its proper law but that its proper law should follow the
proper law of the contract as a whole, namely New York
law, rather than follow from the law of the seat of the
G arbitration namely England. The fact that the arbitration
itself was governed by English procedural law did not
mean that it followed that the arbitration agreement itself
had to be governed by English law. The proper law of the
arbitration agreement was that law with which the
H agreement had the most close and real connection; if the
BHARAT ALUMINIUM CO. v. KAISER ALUMINIUM TECHNICAL 415
SERVICE, INC. [SURINDER SINGH NIJJAR, J.]
insurance policy was governed by New York law, the law A
with which the arbitration agreement had its closest and
most real connection was the law of New York. It would then
follow that, if New York law permitted a challenge for
manifest disregard of the law, the court in England should
not enjoin such a challenge." B

The Court of Appeal held:-

"16. I shall deal with Mr Hirst's arguments in due course
but, in my judgment, they fail to grapple with the central
point at issue which is whether or not, by choosing C
London as the seat of the arbitration, the parties must be
taken to have agreed that proceedings on the award
should be only those permitted by English law. In my view
they must be taken to have so agreed for the reasons
given by the judge. The whole purpose of the balance D
achieved by the Bermuda Form (English arbitration but
applying New York law to issues arising under the policy)
is that judicial remedies in respect of the award should be
those permitted by English law and only those so permitted.
Mr Hirst could not say (and did not say) that English judicial E
remedies for lack of jurisdiction on procedural irregularities
under sections 67 and 68 of the Arbitration Act, 1996 Were
not permitted; he was reduced to saying that New York
judicial remedies were also permitted. That, however,
' would be a recipe for litigation and (what is worse) F
confusion which cannot have been intended by the parties.
No doubt New York law has its own judicial remedies for
want of jurisdiction and serious irregularity but it could
scarcely be supposed that a party aggrieved by one part
of an award could proceed in one jurisdiction and a party G
aggrieved by another part of an award could proceed in
another jurisdiction. Similarly, in the case of a single
complaint about an award, it could not be supposed that
the aggrieved party could complain in one jurisdiction and
the satisfied party be entitled to ask the other jurisdiction H
416 SUPREME COURT REPORTS [2012] 12 S.C.R.

A to declare its satisfaction with the award. There would be
a serious risk of parties rushing to get the first judgment
or of conflicting decisions which the parties cannot have
contemplated.
17. It follows from this that a choice of seat for the
B
arbitration must be a choice of forum for remedies
seeking to attack the award"......... .

117. On the facts of the case, the Court held that the seat
of the arbitration was in England and accordingly entertained
C the challenge to the award. Again in Union of India Vs.
McDonnell Douglas Corp. (supra), the proposition laid down
in Naviera Amazonica Peruana S.A. (supra) was reiterated.
In this case, the agreement provided that:-

D "The arbitration shall be conducted in accordance with the
procedure provided iri the Indian Arbitration Act of 1940
or any reenactment or modification thereof. The arbitration
shall be conducted in the English language. The award of
the Arbitrators shall be made by majority decision and shall
be final and binding on the Parties hereto. The seat of the
E
arbitration proceedings shall be London, United Kingdom."

118. Construing the aforesaid clause, the Court held as
follows:-

F "On the contrary, for the reasons given, it seems to me that
by their agreement the parties have chosen English law
as the law to govern their arbitration proceedings, while
contractually importing from the Indian Act those provisions
of that Act which are concerned with the internal conduct
G of their arbitration and which are not inconsistent with the
choice of English arbitral procedural law."

119. The same question was again considered by the High
Court of Justice, Queen's Bench Division, Commercial Court
(England) in Sulamerica CIA Nacional de Seguros SA v.
H
BHARAT ALUMINIUM CO. v. KAISER ALUMINIUM TECHNICAL 417
SERVICE, INC. [SURINDER SINGH NIJJAR, J.]
Enesa Engenharia SA - Enesa. 40 The Court noticed that the A
issue in this case depends upon the weight to be given to the
provision in Condition 12 of the Insurance policy that "the seat
of the arbitr:ation shall be London, England." It was observed
that this necessarily carried with it the English Court's
supervisory jurisdiction over the arbitration process. It was B
observed that "this follows from the express terms of the
Arbitration Act, 1996 and, in particular, the provisions of Section
2 which provide that Part I of the Arbitration Act, 1996 applies
where the seat of the arbitration is in England and Wales or
Northern Ireland. This immediately establishes a strong c
connection between the arbitration agreement itself and the law
of England. It is for this reason that recent authorities have laid
stress upon the locations of the seat of the arbitration as an
important factor in determining the proper law of the arbitration
agreement." The court thereafter makes a reference to the 0
observations made in the case of C. vs. D by the High Court
as well as the Court of Appeal. In Paragraph 12, the
observations made have particular relevance which are as
under:
"In the Court of Appeal, Longmore W, with whom the E
other two Lord Justices agreed, decided (again obiter)·
that, where there was no express choice of law for the
arbitration agreement, the law with which that agreement
had its closest and most real connection was more likely
to be the law of the seat of arbitration than the law of the F
underlying contract. He referred to Mustill J. (as he then
was) in Black Clawsen International Limited v Papierwerke
Waldhof-Aschaffenburg AG [1981] 2 LLR 446 as saying
that it would be a rare case in which the law of the
arbitration agreement was not the same as the law of the G
place or seat of the arbitration. Longmore LJ also referred
to the speech of Lord Mustill (as he had then become) in
Chanel Tunnel Group Limi.ted vs. Balfour Beatty
Construction Limited [1993] 1 LLR 291 and concluded
40. [2012 WL 14764]. H
418 SUPREME COURT REPORTS [2012] 12 S.C.R.

A that the Law Lord was saying that, although it was
exceptional for the proper law of the underlying contract to
be different from the proper law of the arbitration
agreement, it was less exceptional (or more common) for
the. proper law of that underlying contract to be different
B from the curial law, the law of the seat of the arbitration.
He was not expressing any view on the frequency or
otherwise of the law of the arbitration agreement differing
from the l~aw of the seat of the arbitration. Longmore LJ
agreed with Mustill J's earlier dictum that it would .be rare
c for the law 01• the separable arbitration agreement to be
different from the law of the seat of the arbitration. The
reason was "that an agreement to arbitrate will normally
have a closer and more real connection with the place
where the parties have chose to arbitrate, than with the
place of the law of the underlying contract, in cases where
D
the parties have deliberately chosen to arbitrate, in one
place, disputes which have arisen under a contract
governed by the law of another place".

120. Upon consideration of the entire matter, it was
E observed that - "In these circumstances it is clear to me that
the law with which the agreement to arbitrate has its closest
and most real connection is the law of the seat of arbitration,
namely, the law of England". (Para 14). It was thereafter
concluded by the High Court that English Law is the proper law
F of the agreement to arbitrate. (Para 15)

121. The legal position that emerges from a conspectus
of all the decisions, seems to be, that the choice of another
country as the seat of arbitration inevitably imports an
G acceptance that the law of that country relating to the conduct
and supervision of arbitrations will apply to the proceedings.

122. It would, therefore, follow that if the arbitration
agreement is found or held to provide for a seat I place of
arbitration outside India, then the provision that the Arbitration
H Act, 1996 would govern the arbitration proceedings, would not
BHARAT ALUMINIUM CO. v. KAISER ALUMINIUM TECHNICAL 419
SERVICE, INC. [SURINDER SINGH NIJJAR, J.]
make Part I of the Arbitration Act,· 1995 applicable or enable A
Indian Courts to exercise supervisory jurisdiction over the
arbitration or the award. It would only mean that the parties have
contractually imported from the Arbitration Act, 1996, those
provisions which are concerned with the internal conduct of their
arbitration and which are not inconsistent with the mandatory B
provisions of the English Procedural Law/Curial Law. This
necessarily follows from the fact that Part I applies only to
arbitrations having their seat I place in India.

Section 28" •·
c
123. It was submitted by the learned counsel for the
appellants that Section 28 is another indication of the intention
of the Parliament that Part I of the Arbitration Act, 1996 was
not confined to arbitrations which take place in India. We are
unable lo accept the submissions made by the learned counsel D
for the parties. As the heading of the Section 28 indicates, its
only purpose is to identify the rules that would be applicable to
"substance of dispute". In other words, it deals with the
applicable conflict of law rules. This section makes a distinction
between purely domestic arbitrations and international E
commercial arbitrations, with a seat in India. Section 28(1)(a)
makes ii clear that in an arbitration under Part I to which Section
2(1 )(f) does not apply, there is no choice but for the Tribunal to
decide "the dispute" by applying the Indian "substantive law
applicable to the contract". This is clearly lo ensure that two or F
more Indian parties do not circumvent the substantive Indian
law, by resorting lo arbitrations. The provision would have an
overriding effect over any other contrary provision in such
contract. On the other hand, where an arbitration under Part I
is an international commercial arbitration within Section 2(1)(f), G
the parties would be free to agree to any other "substantive law''
and if not so agreed, the "substantive law" applicable would be
as determined by the Tribunal. The section merely shows that
the legislature has segregated the domestic and international
arbitration. Therefore, to suit India, conflict of law rules have H
420 SUPREME COURT REPORTS (2012] 12 S.C.R.

A been suitably modified, where the arbitration is in India. This
will not apply where the seat is outside India. In that eivent, the
conflict of laws rules of the country in which the arbitration takes
place would have to be applied. Therefore, in our opinion, the
emphasis placed on the expression "where the place of
B arbitration is situated in India", by the learned senior counsel
for the appellants, is not indicative of the fact that the intention
of Parliament was to give an extra-territorial operation to Part
I of the Arbitration Act, 1996.

C Part II

124. It was next submitted by the counsel for the appellants
that even some of the provisions contained in Part II would
indicate that Part I of the Arbitration Act, 1996 would not be
limited to the arbitrations which take place in India. It was
D pointed out that even though Part II deals specifically with
recognition and enforcement of certain foreign awards yet
provision is made for annulment of the award by two Courts,
i.e., Courts of the country in which the award was made or the
Courts of the country under the law of which the award was
E made. This, according to the learned counsel, recognizes the
concurrent jurisdictions of Courts in two countries to set aside
the award. They rely on Section 48(1)(e) of the Arbitration Act,
1996, which corresponds to Article V(1)(e) of the New York
Convention. Mr. Sorabjee has emphasised that both these
F expressions must necessarily be given effect to and no part of
the Act or section can be disregarded by describing the same
as a "fossil". This is in reply to the submission made by Mr.
Salve on the basis of the history of the inclusion of the term
"under the law of which" in Article V(1)(e). Mr. Sorabjee has
G emphasised that the word "under the law of which" were
specifically inserted in view of the Geneva Convention, which
limited the jurisdiction to only one Court to set aside the award
namely "the country in which the award was made." He,
therefore, submits that this specific intention must be given
H effect to. Not giving effect to the words "under the law of which
BHARAT ALUMINIUM CO. v. KAISER ALUMINIUM TECHNICAL 421
SERVICE, INC. [SURINDER SINGH NIJJAR, J.]
the award was made", will allow many awards to go untested. A
At this stage, Mr. Sorabjee had relied on Reliance Industries
Ltd. (supra). We must notice here that Mr. Sundaram in his
submissions has not gone so far as Mr. Sorabjee. According
to Mr. Sundaram, the jurisdiction of a domestic Court over an
arbitration is neither conferred by the New York Convention, nor B
under Part II, since Part II merely deals with circumstances under
which the enforcing court may or may not refuse to enforce the
award. That circumstance includes annulment of proceedings
in a competent court, i.e., the Court in the country where the
arbitration is held or the Court having jurisdiction in the country c
under the laws of which the arbitral disputes have been
conducted. According to Mr. Sundaram, providing two such
situs for the purposes of annulment does not ipso facto amount
to conferring of jurisdiction to annul, on any domestic Court. The
provision only provides that if the annulment proceedings are 0
before such Courts, the award may not be enforced. Therefore,
to see if an arbitral award can be annulled by the Court of the
country, one has to look at the jurisdiction of such Courts under
the domestic law. The relevance of New York Convention and
Article V(1 )(e) ends there, with merely recognizing possibility E
of two Courts having jurisdiction to annul an award. Mr.
Subram::mium emphasised that provisions contained in Part II
can not be said to be a complete code as it necessarily makes
use of the provisions of Part I. Since Part I prescribes the entire
procedure for the conduct of an arbitration and Part II is only to
give recognition to certain foreign awards, the two parts have F
to be read harmoniously in order to make the Indian Arbitration
Law a complete code. He submits that Part I can not be read
separately from Part II as certain provisions of Part I, which are
necessary for arbitrations are not covered by Part II. He gives
an example of the provision contained in Section 45, which G
empowers the term "judicial authority" to refer parties to
arbitration when seized of an action in a matter, in respect of
which parties have made an agre!!ment as referred to in Section
44. The aforesaid provision contains a non-obstante clause.
This clearly indicates that it is contemplated by the legislature H
422 SUPREME COURT REPORTS [2012] 12 S.C.R.

A that provisions of Part I would apply to matters covered by Part
II. He, therefore, points out that if Part I were to apply only to
arbitrations that take place in India, then Indian Courts would
not be able to grant any interim relief under Section 9 to
arbitrations which take place outside India. He also points out
B that there are a number of other provisions where Indian Courts
would render assistance in arbitrations taking place outside
India. Learned senior counsel has also pointed out the necessity
to read Sections 34 and 48 of the Arbitration Act, 1996
harmoniously. He points out that barring Section 34, which
c involves the challenge to an award, the other provisions in Part
I and Part II are facilitative in character.

125. We are unable to agree with the submission of the
learned senior counsel that there is any overlapping of the
provisions in Part I and Part II; nor are the provisions in Part II
D supplementary to Part I. Rather there is complete segregation
between the two parts.

126. Generally speaking, regul11tion of arbitration consists
of four steps (a) the commencement of arbitration; (b) the
E conduct of arbitration; (c) the challenge to the award; and (d)
the recognition or enforcement of the award. In our opinion, the
aforesaid delineation is self evident in Part I and Part II of the
Arbitration Act, 1996. Part I of the Arbitration Act, 1996
regulates arbitrations at all the four stages. Part II, however,
F regulates arbitration only in respect of commencement and
recognition or enforcement of the award.

127. In Part I, Section 8 regulates the commencement of
arbitration in India, Sections 3, 4, 5, 6, 10 to 26, 28 to 33
regulate the conduct of arbitration, Section 34 regulates the
G challenge to the award, Sections 35 and 36 regulate the
recognition and enforcement of the award. Sections 1, 2, 7,
9, 27, 37, 38 to 43 are ancillary provisions that either support
the arbitral process or are structurally necessary. Thus, it can
be seen that Part I deals with all stages of the arbitrations which
H take place in India. In Part II, on the other hand, there are no
BHARAT ALUMINIUM CO. v. KAISER ALUMINIUM TECHNICAL 423
SERVICE, INC. [SURINDER SINGH NIJJAR, J.]
provisions regulating the conduct of arbitration nor the challenge A
.. to the award. Section 45 only empowers the judicial authority
to refer the parties to arbitration outside India in pending civil
action. Sections 46 to 49 regulate the recognition and
enforcement of the award. Sections 44, 50 to 52 are structurally
necessary. B

128. Thus, it is clear that the regulation of conduct of
arbitration and challenge to an award would have to be done
by the courts of the country in which the arbitration is being
conducted. Such a court is then the supervisory court
possessed of the power to annul the award. This is in keeping C
with the scheme of the international instruments, such as the
Geneva Convention and the New York Convention as well as
the UNCITRAL Model Law. It also recognizes the territorial
principle which gives effect to the sovereign right of a country
to regulate, through its national courts, an adjudicatory duty D
being performed in its own country. By way of a comparative
example, we may reiterate the observations made by the Court
of Appeal, England in C Vs. D (supra) wherein it is observed
that "it follows from this that a choice of seat for the arbitration
must be a choice of forum for remedies seeking to attack the E
award." In the aforesaid case, the Court of Appeal had
approved the observations made in A Vs. B, 41 wherein it is
observed that:-

" ..... an agreement as to the seat of an arbitration is F
analogous to an exclusive jurisdiction clause. Any claim for
a remedy ...... as to the validity of an existing interim or final
award is agreed to be made only in the courts of the place
designated as the seat of arbitration." ·

• 129. Having accepted the 1Jrinciple of territoriality, it is G
evident that the intention of the parliament was to segregate
Part I and Part II. Therefore, any of the provisions contained in
' Part I can not be made applicable to Foreign Awards, as

41. [2007) 1 Lloyds Report 237. H
424 SUPREME COURT REPORTS [2012] 12 S.C.R.

A defined under Sections 44 and 53, i.e., the New York
Convention and the Geneva Awards. This would be a distortion
_of the scheme of the Act. It is, therefore, not possible to accept
.the submission of Mr. Subramanium that provisions contained
in Part II are supplementary to the provision contained in Part
B I. The Parliament has clearly segregated the two parts.

Section 45

130. We are unable to accept the submission that the use
of expression "notwithstanding anything contained in Part I, or
C in the Code of Civil Procedure, 1908", in Section 45 of the
Arbitration Act, 1996 necessarily indicates that provisions of
Part I would apply to foreign seated arbitration proceedings.
Section 45 falls within Part II which deals with enforcement
proceedings in India and does not deal with the challenge to
D the validity of the arbitral awards rendered outside India.
Section 45 empowers a judicial authority to refer the parties to
arbitration, on the request made by a party, when seized of an
action in a matter in respect of which the parties have made
an agreement referred to in Section 44. It appears that
E inclusion of the term "judicial authority" in Sections 5 and 8 of
the Arbitration Act, 1996, has caused much confusion in the
minds Of the learned counsel for the appellants. In our opinion,
there is no justification for such confusion. Such use of the term
"judicial authority", in Section 5 and Section 8 of the Arbitration
F Act, 1996, is not a recognition by the Parliament that Part I will
'apply to international commercial arbitrations held outside India.
The term "judicial authority" is a legacy from the 1940 Act. The
corresponding provision of Section 34 of the 1940 Act, which
covered· purely domestic arbitrations, between two or more
G Indian parties, within the territory of India, also refers to "judicial
authority". It is nobody's contention that by using the term·
"judicial authority", the Parliament had intended the 1940 Act
to apply outside India. In our opinion, the term "judicial authority"
has been retained especially in view of policy of least
intervemtion, which can not be limited only to the Courts. This
H
BHARAT ALUMINIUM CO. v. KAISER ALUMINIUM TECHNICAL 425
SERVICE, INC. [SURINDER SINGH NIJJAR, J.)
is clearly in recognition of the phenomenon that the judicial A
control of commercial disputes is no longer in the exclusive
jurisdiction of Courts. There are many statutory bodies, tribunals
which would have adjudicatory jurisdiction in very complex
commercial matters. Section 5 would be equally applicable to
such bodies. The use of the term "judicial authority" in no B
manner has any reference to arbitrations not held in India It is
in conformity with Clause M of the objects and reasons for the
Arbitration Act, 1996, which has been given statutory
recognition in Section 5.

131. The learned senior counsel had also pointed out that
c
since Section 19 of the Arbitration Act, 1996 clearly provides
that the arbitral tribunal shall not be bound by the Code of Civil
Procedure, 1908, there was no need for the non-obstante
clause. But the reason, in our view, is discernable from Section
3 of the 1961 Act, which also contains a non-obstante clause D
with reference to the Arbitration Act, 1940. Section 45 in the
Arbitration Act, 1996 is a repetition of the non-obstante clause
in Section 3 in the 1961 Act. It is not unusual for a consolidating
act to retain the expressions used in the previous Acts, which
have been consolidated into a form of Principal Act. A E
consolidating Act is described in Halsbury's law of England,
Fourth Edition Reissue, Para 1225 as under:-

"A consolidation Act is a form of principal Act which
presents the whole body of the statute law on a subject in F
complete form, repealing the former Acts. When drafting
a consolidation Act the practice is not to change the
existing wording, except so far as may be required for
purposes of verbal 'carpentry'. and not to incorporate court
rulings. This is known as 'straight' consolidation, the G
product being a form of declaratory enactment. The
difference between a consolidating Act and a codifying Act
is that the latter, unlike the former, incorporates common
law rules not previously codified. It can be determined from
the long title whether or not an Act is a consolidation Act." H
(emphasis supplied)
426 SUPREME COURT REPORTS [2012] 12 S.C.R.

A 132. Similarly, a certain amount of 'carpentry' has been
done in the Arbitration Act, 1996 whilst consolidating the earlier
three Acts. Therefore, in section 45 of the Arbitration Act, 1996,
the reference to 1940 Act has been replaced by reference to
Part I, which now covers the purely domestic arbitrations, earlier
B covered by the 1940 and the new additions, i.e. the
international commercial arbitrations, which take place in India.
It appears that the Parliament in order to avoid any confusion
has used the expression "notwithstanding anything contained
in Part I" out of abundant caution, i.e., "ex abundanti cautela".
c A three judge bench of this Court in R.S. Raghnath Vs. State
of Kamataka & Anr. 42 , considering the nature of the non-
obstante clause observed that:-

"11 .................. .

D But the non-obstante clause need not necessarily and
always be co-extensive with the operative part so as to
have the effect of cutting down the clear terms of an
enactment and if the words of the enactment are clear and
are capable of a clear interpretation on a plain and
E · grammatical construction of the words the non-obstante
clause cannot cut down the construction and restrict the
scope of its operation. In such cases the non-obstante
clause has to be read as clarifying the whole position and
must be understood to have been incorporated in the
F enactment by the legislature by way of abundant caution
and not by way of limiting the ambit and scope of the
Special Rules."
133. We are, therefore, of the opinion that existence of the
non-obstante clause does not alter the scope and ambit of the
G field of applicability of Part I to include international commercial
arbitrations, which take place out of India. We may further point
out that a similar provision existed in the English Arbitration Act,
1950 and the English Arbitration Act, 1975. Section 4(1) of the

H 42. (1992) 1 sec 335.
BHARAT ALUMINIUM CO. v. KAISER ALUMINIUM TECHNICAL 427
SERVICE, INC. [SURINDER SINGH NIJJAR, J.)
English Arbitration Act, 1950 was similar to Section 34 of the A
Arbitration Act, 1940 in India. Section 1(2) of the English
Arbitration Act, 1975 was similar to Section 3 of the Foreign
Awards Act, 1961.
134. In view of the above, it would not be possible to
accept the submission of the learned counsel for the appellants B
that the aforesaid non-obstante clause in Section 45 would
indicate that provisions of Part I would also be applicable to
arbitrations that take place outside India.
Does Section 48(1)(el recognize the jurisdiction of Indian c
Courts to annul a foreign award, falling within Part II?
135. Much emphasis has been laid by the learned counsel
for the appellants on the expression that enforcement of a
foreign award may be refused when the award "has been set
aside or suspended .... ." "under the law of which" that award D
was made. The aforesaid words and expressions appear in
Section 48, which is contained in Part II of the Arbitration Act,
1996 under the title "enforcement of certain foreign awards".
The Courts in India under Chapter I of Part II of the aforesaid
Act have limited powers to refuse the enforcement of foreign E
awards given under the New York Convention. It would be
apposite to notice the provisions of Section 48 at this stage,
which are as under:-

"48.Conditions for enforcement of foreign awards.-
F
(1) Enforcement of a foreign award may be refused, at the
request of the party against whom it is invoked, only if that
party furnishes to the court proof that---
(a) the parties to the agreement referred to in
section 44 were, under the law applicable to them, G
under some incapacity, or the said agreement is
not valid under the law to which the parties have
subjected it or, failing any indication thereon, under
the law ofthe country where the award was made;
or H
428 SUPREME COURT REPORTS [2012) 12 S.C.R.

A (b) the party against whom the award is invoked
was not given proper notice of the appointment of
the arbitrator or of the arbitral proceedings or was
otherwise unable to present his case; or

B (c) the award deals with a difference 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.
c Provided that, if the decisions on matters submitted
to arbitration can be separated from those not so
submitted, that part of the award which contains decisions
on matters submitted to arbitration may be enforced; or
D (d) the composition of the arbitral authority or the
arbitral procedure was not in accordance with tile
agreement of the parties, or, failing such
agreement, was not in accordance with the law of
the country where the arbitration took place ; or
E
(e) the award has not yet become binding on the
parties, or has been set aside or suspended by a
competent authority of the country in which, or under
the law of which, that award was made.
F
(2) Enforcement of an arbitral award may also be refused
if the court finds that-

(a) the subject -matter of the difference is not capable of
G settlement by arbitration under the law of India; or

(b) the enforcement of the award would be contrary to the
public policy of India.

Explanation.----Without prejudice to the generality of
H
BHARAT ALUMINIUM CO. v. KAISER ALUMINIUM TECHNICAL 429
SERVICE, INC. [SURINDER SINGH NIJJAR, J.)

clause (b), it is hereby declared, for the avoidance of any A
doubt, that an award is in conflict with the public policy of
India if the making of the award was induced or affected
by fraud or corruption.

(3) If an application for the setting aside or suspension of 8
the award has been made to a competent authority referred
to in clause (e) of sub-section (1) the Court may, if it
considers it proper, adjourn the decision on the
enforcement of the award and may also , on the
application of the party claiming enforcement of the award, C
order the other party to give suitable security." .

136. The party which seeks to resist the enforcement of
the award has to prove one or more of the grounds set out in
Section 48(1) and (2) and/or the explanation of sub-section (2).
In these proceedings, we are, however, concerned only with the D
interpretation of the terms "country where the award was made"
and "under the law of which the award was made". The
provisions correspond to Article V(1 )(e) of the New York
Convention, which reads as under:-
E
·1. Recognition and enforcement of the award may be
refused, at the request of the party against whom it is
invoked, only if that party furnishes to the competent
authority where the recognition and enforcement is sought,
proof that:
F
........................ ··~ ...... .
(e) the award has not yet become binding on the
parties, or has been set aside or suspended by a
competent authority of the country in which, or under G
the law of which, that award was made.

2. Recognition and enforcement of an arbitral award may
also be refused if the competent authority in the country
where recognition and enforcement is sought finds that:
H
430 SUPREME COURT REPORTS [2012] 12 S.C.R.

A (a) the subject matter of the difference is not capable
of settlement by arbitration under the law of that
country; or

(b) the recognition or enforcement of the award would
8 be contrary to the public policy of that country.

137. The aforesaid Article of the New York Convention has
been bodily lifted and incorporated in the Arbitration Act, 1996
as Section 48.

c 138. Thus, the intention of the legislature is clear that the
Court may refuse to enforce the foreign award on satisfactory
proof of any of the grounds mentioned in Section 48(1), by the
party resisting the enforcement of the award. The provision sets
out the defences open to the party to resist enforcement of a
D foreign award. The words "suspended or set aside", in Clause
(e) of Section 48(1) can not be interpreted to mean that, by
necessary implication, the foreign award sought to be enforced
in India can also be challenged on merits in Indian Courts. The
provision merely recognizes that courts of the two nations which ·
E are competent to annul or suspend an award. It does not ipso
facto confer jurisdiction on such Courts for annulment of an
award made outside the country. Such jurisdiction has to be
specifically provided, in the relevant national legislation of the
country in which the Court concerned is located. So far as India
is concerned, the Arbitration Act, 1996 does not confer any
F such jurisdiction on the Indian Courts to annul an international
commercial award made outside India. Such provision exists
in Section 34, which is placed in Part I. Therefore, the
applicability of that provision is limited to the awards made in
India. If the arguments of the learned counsel for the appellants
G are accepted, it would entail incorporating the provision
contained in Section 34 of the Arbitration Act, 1996, which is
placed in Part I of the Arbitration Act, 1996 into Part II of the
said Act. This is not permissible as the intention of the
Parliament was clearly to confine the powers of the Indian
H Courts to set aside an award relating to international
BHARAT ALUMINIUM CO. v. KAISER ALUMINIUM TECHNICAL 431
SERVICE, INC. [SURINDER SINGH NIJJAR, J.]
commercial arbitrations, which take place in India. A
139. As noticed above, this section corresponds to Article
V(1)(e) of the New York Convention. A reading of the Article
V(1)(e) [Section 48(1)(e)] makes it clear that only the courts in
the country "in which the award was made" and the courts
8
"under the law of which the award was made" (hereinafter
referred to as the "first alternative" and the "second alternative"
respectively) would be competent to suspend/annul the New
York Convention awards. It is clarified that Section 48(1)(e) is
only one of the defences on the basis of which recognition and C
enforcement of the award may be refused. It has no relevance
to the determination of the issue as to whether the national law
of a country confers upon its courts, the jurisdiction to annul the
awards made outside the country. Therefore, the word
"suspended/set aside" in Section 48(1 )(e) cannot be
interpreted to mean that, by necessary implication, the foreign D
awards sought to be enforced in India can also be challenged
on merits in Indian Courts. The provision only means that Indian
Courts would recognize as a valid defence in the enforcement
proceedings relating to a foreign award, if the Court is satisfied
that the award has been set aside in one of the two countries, E
i.e., the "first alternative" or the "second alternative".

140. Mr. Sundaram had submitted that the two countries
identified in "alternative one" and "alternative two", would have
concurrent jurisdiction to annul the award. In our opinion, F
interpreting the provision in the manner suggested by Mr.
Sundaram would lead to very serious practical problems.

141. In this context, it would be relevant to take note of
some of the observations made by Hans Smit, Professor of
Law, Columbia University in the Article titled "Annulment and G
Enforcement of International Arbitral Awards". The author points
out the reasons for incorporating the second forum for
annulment. He states that -

"While, therefore, there appears to be no justification, H
432 SUPREME COURT REPORTS (2012] 12 S.C.R.

A based in reason and principle, for providing for an
exception to the general rule of recognition and
enforcement for the forum at the place of arbitration, the
drafters of the Convention compounded their error by
providing for two fora for an annulment action. For Article
B V(1)(e) envisages that an annulment action may be
brought "in the country in which .... the award was made"
or "in the country .... under the law of which the award was
made." The disjunctive used in the Convention's text
naturally raises the question of whether the second forum
c is available only if the first is not or whether the party
seeking annulment has the option of selecting either or
even to try its luck in both. The legislative history of the
Convention sheds illuminating light on the issue.

The text of Article V(1)(e) originally proposed acknowledge
D only the bringing of an annulment action in the place in which
the award was made. One of the delegates at the Conference
devoted to the drafting of the Convention raised the question
of what would happen if the forum at the place of arbitration
would refuse to entertain an annulment action. The obviously
E correct answer to that question would have been that, in that
case, no annulment action could be brought and that the happy
consequence would be that only denial of recognition and
enforcement on grounds specified in the Convention would be
possible. Instead, the drafters of the Convention provided for
F an alternative forum in the country the arbitration laws of which
governed the arbitration. That choice was both most fateful and
most regrettable."
142. These observations militate against the concurrent
G jurisdiction submission of Mr.Sundaram. The observations
made by the learned author, as noticed above, make it clear
that the "secor.d alternative• is an exception to the general rule.
It was only introduced to make it possible for the award to be
challenged in the court of the "second alternative·, if the court
of the "first alternative" had no power to annul the award, under
H
BHARAT ALUMINIUM CO. v. KAISER ALUMINIUM TECHNICAL 433
SERVICE, INC. [SURINDER SINGH NIJJAR, J.]

its national legislation. In our opinion, the disjunction would also A
tend to show that the "second alternative" would be available
only if the first is not. Accepting the submission made by
Mr.Sundaram, would lead to unnecessary confusion. There can
be only one Court with jurisdiction to set aside the award. There
is a public policy consideration apparent, favouring the B
interpretation that, only one Court would have jurisdiction to set
aside the arbitral award. This public policy aspect was
considered by the Court of Appeal in England in the case of C
Vs. D (supra). The observation of the Court of Appeal in
Paragraph 16 of the judgment has already been reproduced c
earlier in this judgment.

143. It was pointed out by the Court of Appeal that
accepting more than one jurisdiction for judicial remedies in
respect of an award would be a recipe for litigation and
confusion. "Similarly, in the case of a single complaint about 'o
an award, it could not be supposed that the aggrieved party
could complain in one jurisdiction and the satisfied party be
entitled to ask the other jurisdiction to declare its satisfaction
with the award".
E
144. The creation of such a situation is apparent from the
judgment of this Court in Venture Global Engineering (supra).
In the aforesaid judgment, the award was made by the London
Court of International Arbitration on 3rd April, 2006. Respondent
No.1, on 14th April, 2006, filed a petition to recognize and F
enforce the award before the United States District Court,
Eastern District Court of Michigan, in the United States of
America (for short the 'US Court'). The appellant entered
appearance to defend this proceeding before the US Court by
filing a cross petition. In the said petition, it took objection to G
the enforcement of the award, which had directed transfer of
shares. The objection was that the direction was in violation of
Indian laws and regulations, specifically the Foreign Exchange
Management Act (in short the 'FEMA') and its notifications. Two
wesks later on 28th April, 2006, the appellant filed a suit in the H
434 SUPREME COURT REPORTS [2012] 12 S.C.R.

A City Civil Court, Secunderabad seeking declaration to set aside
the award and permanent injunction on the transfer of shares.
On 15th June, 2006, the District Court passed an ad interim
ex parte order of injunction, inter alia, restraining respondent
No.1 for seeking or effecting the transfer of shares either under
B the terms of the award or otherwise. Respondent No.1 filed an
appeal challenging the said order before the High Court of
Andhra Pradesh. The High Court admitted the appeal and
directed interim suspension of the order of the District Judge,
but made it clear that "respondent No.1 would not affect the
c transfer of shares till further orders".
145. On 13th July, 2006, in response to the summons,
respondent No.1 appeared in the court and filed a petition
under Order VII, Rule 11 for rejection of the plaint. The trial court
by its order dated 28th December, 2006, allowed the said
D application and rejected the plaint of the appellant. On 27th
February, 2007, the High Court dismissed the appeal holding
that the award cannot be challenged even if it is against public
policy and in contravention of statutory provisions. The judgment
of the High Court was challenged in appeal before this Court.
E The appeal was allowed. It was held as follows:

"31. On close scrutiny of the materials and the dictum laid
down in the three-Judge Bench decision in Bhatia
International we agree with the contention of Mr. K.K.
F Venugopal and hold that paras 32 and 35 of Bhatia
International make it clear that the provisions of Part I of
the Act would apply to all arbitrations including international
commercial arbitrations and to all proceedings relating
tt·.ereto. We further hold that where such arbitration is held
in India, the provisions of Part I would compulsorily apply
G
and parties are free to deviate to the extent permitted by
the provisions of Part I. It is also clear that even in the case
of il}lernational commercial arbitrations held out of India
provisions of Part I would apply unless the parties by
agreement, express or implied, exclude all or any of its
H
provisions. We are also of the view that such an
SH.A.RAT ALUMINIUM CO. v. KAISER ALUMINIUM TECHNICAL 435
SERVICE, INC. [SURINDER SINGH NIJJAR, J.]
interpretation does not lead to any conflict between any of A
the provisions of the Act and there is no lacuna as such.
The matter, therefore, is concluded by the three-Judge
Bench decision in Bhatia International

33. The very fact that the judgment holds that it would be 8
open to the parties to exclude the application of the
provisions of Part I by express or implied agreement, would
mean that otherwise the whole of Part I would apply. In any
event, to apply Section 34 to foreign international awards
would not be inconsistent with Section 48 of the Act, or any
other provision of Part II as a situation may arise, where, C
even in respect of properties situate in India and where an
award would be invalid if opposed to the public policy of
India, merely because the judgment-debtor resides
abroad, the award can be enforced against properties in
India through personal compliance of the judgment-debtor D
and by holding out the threat of contempt as is being
sought to be done in the present case. In such an event,
the judgment-debtor cannot be deprived of his right under
Section 34 to invoke the public policy of India, to set aside
the award. As observed earlier, the public policy of India E
includes - (a) the fundamental policy of India; or (b) the
interests of India; or (c) justice or morality; or (d) in
addition, if it is patently illegal. This extended definition of
public policy can be bypassed by taking the award to a
foreign country for enforcement. F

37. In view of the legal position derived from Bhatia
International we are unable to accept Mr. Nariman's
argument. It is relevant to point out that in this proceeding,
we are not deciding the merits of the claim of both parties, G
particularly, the stand taken in the suit filed by the appellant
herein for setting aside the award. It is for the court
concerned to decide the issue on merits and we are not
expressing anything on the same. The present conclusion
is only with regard to the main issue whether the H
436 SUPREME COURT REPORTS [2012] 12 S.C.R.

A aggrieved party is entitled to challenge the foreign award
which was passed outside India in terms of Sections 9/
34 of the Act. Inasmuch as the three-Judge Bench decision
is an answer to the main issue raised, we are unable to
accept the contra view ta~en in various decisions relied
B on by Mr. Nariman. Tho6gh in Bhatia lntemationa/1 the
issue relates to filing a petition under Section 9 of the Act
for interim orders the ultimate conclusion that Part I would
apply even for foreign awards is an answer to the main
issue raised in this case.
c 42. The learned Senior Counsel for the appellant submitted
that the first respondent Satyam Computer Services Ltd.
could not have pursued the enforcement proceedings in
the District Court in Michigan, USA in the teeth of the
injunction granted by the courts in India which also, on the
D basis of the comity of courts, should have been respected
by the District Courts in Michigan, USA. Elaborating the
same, he further submitted that the injunction of the trial
court restraining the respondents from seeking or effecting .
the transfer of shares either under the terms of the award
E or otherwise was in force between 15-6-2006 and 27-6-
2006. The injunction of the High Court in the following
terms-

"the appellant (i.e. Respondent 1) shall not effect the
F transfer of shares of the respondents pending further
orders" was in effect from 27-6-2006 till 28-12-2006. The
judgment of the US District Court was on 13-7-2006 and
31-7-2006 when the award was directed to be enforced
as sought by Respondent 1, notwithstanding the injunction
to the effect that the appellant (Respondent 1 herein) "shall
G
not effect the transfer of shares of the respondents pending
further orders". The first respondent pursued his
enforcement suit in Michigan District Courts to have a
decree passed directing - "... VGE shall deliver to
Satyam or its designee, share certificates in a form
H suitable for immediate transfer to Satyam evidencing all
BHARAT ALUMINIUM CO. v. KAISERALUMINIUMTECHNICAL 437
SERVICE, INC. [SURINDER SINGH NIJJAR, J.)

of the appellant's ownership interest in Satyam Venture A
Engineering Services (SVES), the party's joint venture
company". Further, ''VGE (the appellant herein) shall do all
that may otherwise be necessary to effect the transfer of
its ownership interest in SVES to Satyam (or its
designee)". It is pointed out that obtaining this order by B
pursuing the case in the US District Courts, in the teeth of
the prohibition contained in the order of the High Court,
would not only be a contempt of the High Court but would
render all proceedings before the US courts a brutum
fulmen, and liable to be ignored. Though Mr. R.F. Nariman c
has pointed out that the High Court only restrained the
respondent from effecting transfer of the shares pending
further orders by the City Civil Court, Secunderabad, after
the orders of the trial court as well as limited order of the
High Court, the first res·pondent ought not to have D
proceeded with the issue before the District Court,
Michigan without getting the interim orders/directions
vacated.

47. In terms of the decision in Bhatia International we hold
that Part I of the Act is applicable to the award in question E
even though it is a foreign award. We have not expressed
anything on the merits of claim of both the parties. It is
further made clear that if it is found that the court in which
the appellant has filed a petition challenging the award is
not competent and having jurisdiction, the same· shall be F
transferred to the appropriate court. Since from the
inception of ordering notice in the special leave petition
both parties were directed to maintain status quo with
regard to transfer of shares in issue, the same shall be
maintained till the disposal of the suit. Considering the G
nature of dispute which relates to an arbitration award, we
request the court concerned to dispose of the suit on
merits one way or the other within a period of six months
from the date of receipt of copy of this judgment. Civil
appeal is allowed to this extent. No costs." H
438 SUPREME COURT REPORTS [2012] 12 S.C.R.

A 146. With these observations, the matter was remanded
back to the trial court to dispose of the suit on merits. The
submissions made by Mr. K.K.Venugopal, as noticed in
paragraph 42, epitomize the kind of chaos which would be
created by two court systems, in two different countries,
B exercising concurrent jurisdiction over the same dispute. There
would be a clear risk of conflicting decisions. This would add
to the problems relating to the enforcement of such decisions.
Such a situation would undermine the policy underlying the New
York Convention.or the UNCJTRAL Model Law. Therefore, we
c are of the opinion that appropriate manner to interpret the
aforesaid provision is that "alternative two" will become
available only if "alternative one" is not available.
147. The expression "under the law" has also generated
a great deal of controversy as to whether it applies to "the Jaw
D governing the substantive contract" or "the Jaw governing the
arbitration agreement" or limited only to the procedural laws of
the country in which the award is made.
148. The consistent view of the international commentators
E seems to be that the "second alternative" refers to the
procedural J~w of the arbitration rather than "law governing the
arbitration agreement" or "underlying contract". This is even
otherwise evident from the phrase "under the law, that award
was made", which refers to the process of making the award
F (i.e., the arbitration proceeding), rather than to the formation or
validity of the arbitration agreement.

· 149. Gary B. Born in his treatise titled International
Commercial Arbitration takes the view in Chapter 21 that the
correct interpretation of Article V(1)(e)'s "second alternative" is
G that it relates exclusively to procedural law of the arbitration
which produced an award and not to other possible laws (such
as the substantive law governing the parties underlying dispute
or governing the parties' arbitration agreement). He further
notices that courts have generally been extremely reluctant to
H conclude that the parties have agreed upon a procedural law
BHARAT ALUMINIUM CO. v. KAISER ALUMINIUM TECHNICAL 439
SERVICE, INC. [SURINDER SINGH NIJJAR, J.]

other than that of the arbitral seat. Consequently, according to A
Born, although it is theoretically possible for an award to be
subject to annulment outside the arbitral seat, by virtue of Article
V(1 )(e)'s "second alternative", in reality this is a highly unusual
"once-in-a-blue-moon" occurrence. He further notices that a
number of national courts have considered the meaning of B
Article V(1)(e)'s "second alternative". Many, but not all, courts
have concluded that the alternative refers to "the procedural law
of arbitration", rather than the "substantive law applicable to the
merits of the parties' dispute or to the parties' arbitration
agreement." In our opinion, the views expressed by the learned c
author are in consonance with the scheme and the spirit in which
the New York Convention was formulated. The underlying
motivation of the New York Convention was to reduce the
hurdles and produce a uniform, simple and speedy system for
enforcement of foreign arbitral award. Therefore, it seems to
0
be accepted by the commentators and the courts in different
jurisdictions that the language of Article V(1 )(e) referring to the
"second alternative" is to the country applying the procedural
law of arbitration if different from the arbitral forum and not the
substantive law governing the underlying contract between the E
parties.

Case Law -

150. At this stage, it would be appropriate to consider the
manner in which the expression "under the law" has been F
interpreted judicially in different jurisdictions.

151. The aforesaid expression came up for consideration
in the case of Karaha Bodas Co. LLC Vs. Perusahaan
Pertambangan Minyak Dan Gas Bumi Negara, 43 the Federal
Court in the U.S. considered the provisions contained in Article G
V(1 )(e) and observed as follows:-
"Article V(1)(e) of the Convention provides that a court of

43. 335 F.3d 357. H
440 SUPREME COURT REPORTS [2012] 12 S.C.R.

A secondary jurisdiction may refuse to enforce an arbitral
award if it "has been set aside or suspended by a
competent authority of the country in which, or under the
law of which, that award was made." Courts have held that
the language, "the competent authority of the country ..... .
B under the law of which, that award was made" refers
exclusively to procedural and not substantive law, and more
precisely, to the regimen or scheme of arbitral procedural
law under which the arbitration was conducted, and not the
substantive law ..... applied in the case." ................ .
c "Under the New York Convention, an agreement specifying
the place of the arbitration creates a presumption that the
procedural law of that place applies to the arbitration.
Authorities on international arbitration describe an
agreement providing that one country will be the site of the
D arbitration but the proceedings will be held under the
arbitration law of another country by terms such as
"exceptional"; "almost unknown"; a "purely academic
invention"; "almost never use in practice"; a possibility
"more theoretical than real"; and a "once-in-a-blue-moon
E set of circumstances." Commentators note that such an
agreement would be complex, inconvenient, and
inconsistent with the selection of a neutral forum as the
arbitral forum ....... ."

152. Similarly, in the case of Karaha Bodas Co. LLC
F
(Cayman Islands) Vs. Perusahaan Pertambangan Minyak
Dan Gas Bumi Negara - Pertamina (Indonesia), 44 the
aforesaid legal proposition is reiterated. In this case, again the
Hong Kong Court considered Article V(1)(e) of the Convention
G at length. This was a case where the substantive law applicable
to the contract was Indonesian law and the country of the
arbitration i.e. seat of arbitration as per the arbitration
agreement was Switzerland. It was contended relying on the
second leg of Article V(1)(e) that the law under which the award
H 44. Yearbook Comm. Arb'n Vol. XXVlll )2003) Page 752.
BHARAT ALUMINIUM CO. v. KAISER ALUMINIUM TECHNICAL 441
SERVICE, INC. [SURINDER SINGH NIJJAR, J.]

had been made was Indonesian law and therefore Perlamina's A
challenge in Indonesia was valid. This was rejected. It was held
that Article V(1 )(e) referred to the procedural or curial law and
that because the seat of the arbitration was in Switzerland, the
lex arbitri or the curial or procedural law applicable to the
arbitration was Swiss law. Therefore, only the Swiss Courts had B
jurisdiction to set aside the award.

153. In International Electric Corporation Vs. Bridas
Sociedad Anonima Petroleva, Industrial Y Commercial, 45 the
New York Court held that the italicised words referred to the C
procedural law governing the arbitration, and not to the
substantive law governing the agreement between the parties,
since the situs of arbitration is Mexico, the governing procedural
law that of Mexico, only Mexico Courts have jurisdiction under
the Convention to vacate the award.
D
154. Redfern and Hunter (supra) at paragraph 11.96 state
that the court which is competent to sustain or set aside an
award is the court of the country in "alternative one" or
"alternative two". The authors, however, further state that "this
Court will almost invariably be the national court at the seat of E
the arbitration". They point out that the prospect of an award
being set aside under the procedural law of a State other than
that at the seat of arbitration is unlikely. They point out that an
ingenious (but unsuccessful) attempt was made to persuade
the US District Court to set aside an award made in Mexico, F
on the basis that the reference to the law under which that
award was made was a reference to the law governing the
dispute and not to the procedural law (Paragraph 11.96). The
Learned Authors had made a reference to the case
International Standard Electric Corp. (US) Vs. Bridas G
Sociedad Anonima Petro/era (Argentina). 46 The Court rejected
the aforesaid argument with the following observations:-

45. 745 F Supp 172, 178 (SONY 1990).
46. (1992) VII Ybk Comm Arb 639. H
442 SUF?REME COURT REPORTS [2012] 12 S.C.R.

A "Decisions of foreign courts under the Convention unifonnfy
support the view that the clause in question means
procedural and not substantive (that is, in most cases,
contract law) ....
Accordingly, we hold that the contested language in Article
B
V(1)(e) of the Convention ...... refers exclusively to
procedural and not substantive law, and more precisely
to the regimen or scheme of arbitral procedural law under
which the arbitration was conducted."
c 155. The Court went on to hold that since the quorum of
arbitration was Mexico, only the Mexican court had jurisdiction
to set aside the award.
156. The correct position under the New York Convention
D is described very clearly and concisely by Gary 8. Born in his
book International Commercial Arbitration (Kluwer Law
International, Vol. I), Chapter X Page 1260 as follows:

"This provision is vitally important for the international
arbitral process, because it significantly restricts the extent
E of national court review of international arbitral awards in
annulment actions, limiting such review only to the courts
of the arbitral seat (that is, the state where the award is
made or the state whose procedural law is selected by the
parties to govern the arbitration). In so doing, the
F Convention ensures that courts outside the arbitral seat
may not purport to annul an international award, thereby
materially limiting the role of such courts in supervising or
overseeing the procedures utilized in international
arbitrations.
G
At the same time, the New York Convention also allows
the courts of the arbitral seat wide powers with regard to
the annulment of arbitral awards made locally. The
Convention generally pennits the courts of the arbitral seat
to annul an arbitral award on any grounds available under
BHARAT ALUMINIUM CO. v. KAISER ALUMINIUM TECHNICAL 443
SERVICE, INC. [SURINDER SINGH NIJJAR, J.]

local law, while limiting the grounds for non-recognition of A
Convention awards in courts outside the arbitral seat to
those specified in Article V of the Convention. This has the
effect of permitting the courts of the arbitral seat
substantially greater scope than courts of other states to
affect the conduct or outcome of an international arbitration s
through the vehicle of annulment actions. Together with the
other provisions of Articles II and V, this allocation of
annulment authority confirms the (continued) special
importance of the arbitral seat in the international arbitral
process under the New York Convention." c
(emphasis supplied)

157. In our opinion, the aforesaid is the correct way to
interpret the expressions "country where the award was made"
and the "country under the law of which the award was made''. D
We are unable to accept the submission of Mr. Sundaram that
the provision confers concurrent jurisdiction in both the fora.
"Second alternative" is available only on the failure of the "first
alternative". The expression under the law is the reference only
to the procedural law/curial law of the country in which the E
award was made and under the law of which the award was
made. It has no reference to the substantive law of the contract
between the parties. In such view of the matter, we have no
hesitation in rejecting the submission of the learned counsel for
the appellants. F

158. At this stage, we may notice that in spite of the
aforesaid international understanding of the second limb of
Article V(1)(e), this Court has proceeded on a number of
occasions to annul an award on the basis that parties had
chosen Indian Law to govern the substance of their dispute. The G
aforesaid view has been expressed in Bhatia International
(supra) and Venture Global Engineering (supra). In our opinion,
accepting such an interpretation would be to ignore the spirit
underlying the New York Convention which embodies a
consensus evolved to encourage consensual resolution of H
444 SUPREME COURT REPORTS (2012] 12 S.C.R.

A complicated, intricate and in many cases very sensitive
International Commercial Disputes. Therefore, the interpretation
which hinders such a process ought not to be accepted. This
also seems to be the view of the national courts in different
jurisdictions across the world. For the reasons stated above,
B we are also unable to agree with the conclusions recorded by
. this Court in Venture Global Engineering (supra) that the
foreign award could be annulled on the exclusive grounds that
the Indian law governed the substance of the dispute. Such an
opinion is not borne out by the huge body of judicial precedents
c in different jurisdictions of the world.
Interim measures etc. by the Indian Courts where the seat
of arbitration is outside India.

159. We have earlier noticed the submissions made by
D the learned counsel for the parties wherein they had
emphasised that in case the applicability of Part I is limited to
arbitration which take place in India, no application for interim
relief would be available under Section 9 of the Arbitration Act,
1996, in an arbitration seated outside India. It was further
E emphasised that in such circumstances, the parties would be
left remediless. Dr. Singhvi, in order to get out of such a
situation, had submitted that remedy under Section 9 would still
be available. According to Dr. Singhvi, Section 9 is a stand
alone provision which cannot be effected by the limit contained
F in Section 2(2). He submits that the provisions contained in
Section 9 do not impede the arbitral process. Its only purpose
is to provide an efficacious, preservatory, interim, conservatory,
emergent relief necessary for protecting the subject matter of
arbitration, pending the conclusions of the proceedings. He also
G emphasised that interim orders of foreign courts are not, ipso
facto or ipso jure, enforceable in India and, absent Section 9,
a party will be remediless in several real life situations. He,
therefore, urged that this Court could give a purposive
interpretation of Section 9 to ensure that the Courts in India
have the jurisdiction to take necessary measures for
H preservation of assets and/or to prevent dissipation of assets.
BHARAT ALUMINIUM CO. v. KAISER ALUMINIUM TECHNICAL 445
SERVICE, INC. [SURINDER SINGH NIJJAR, J.]
Dr. Singhvi submitted that the decision in Bhatia International A
(supra) is correct, in so far as it relates to the grant of interim
injunction under Section 9 of the Arbitration Act, 1996. He did
not say before us that the courts in India would have any power
to annul the award under Section 34 of the Arbitration Act,
1996, in matters where arbitrations have taken place at abroad. B
But at the same time, he canvassed that the provisions
contained in Section 9 cannot be equated with the provisions
contained in Section 34. The remedy under Section 9 is interim
and subservient to the main arbitration proceedings, whereas
remedy under Section 34 would interfere with the final award. c
Further more, annulment of the award under Section 34 would
have extra-territorial operation whereas Section 9 being entirely
asset focused, would be intrinsically territory focused and intra-
territorial in its operation. He submitted that the ratio in Bhatia
International on the core issue, i.e., grant of interim measures
0
under Section 9, is correct. Although, he was not much
concerned about the other issues, of annulment or enforcement
of the award, he has reiterated the submissions made by the
other learned counsel, on Sections 2(2), 2(1 )(f) and 2(5).

160. We are unable to accept the submissions made by E
the learned counsel. It would be wholly undesirable for this Court
to declare by process of interpretation that Section 9 is a
provision which falls neither in Part I or Part II. We also do not
agree that Section 9 is a sui generis provision.
F
161. Schematically, Section 9 is placed in Part I of the
Arbitration Act, 1996. Therefore, it can not be granted J special
status. We have already held earlier that Part I of the Arbitration
Act, 1996 does not apply to arbitrations held outside India. We
may also notice that Part II of the Arbitration Act, 1996, on the G
other hand, does not contain a provision similar to Section 9.
Thus, on a logical and schematic construction of the Arbitration
Act, 1996, the Indian Courts do not have the power to grant
interim measures when the seat of arbitration is outside India.
A bare perusal of Section 9 would clearly show that it relates H
to interim measures before or during arbitral proceedings or
446 SUPREME COURT REPORTS [2012] 12 S.C.R.

A at any time after the making of the arbitral award, but before it
is enforced in accordance with Section 36. Section 36
necessarily refers to enforcement of domestic awards only.
Therefore, the arbitral proceedings prior to the award
contemplated under Section 36 can only relate to arbitrations
B which take place in India. We, therefore, do not agree with the
observations made in Bhatia International (supra) in paragraph
28 that "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
c reference to an application made "before" or "during the arbitral
proceedings". The text of Section 9 does not support such an
interpretation. The relevant part of the provisions is as under:

"9. Interim measures, etc. by Court -A party may, before
or during arbitral proceedings or at any time after the
D making of the arbitral award but before it is enforced in
accordance with Section 36, apply to a court .......... ."

162. A bare look at the aforesaid provision would indicate
that there is no break up of the sentence in between the two
E comas at the beginning and end of the sentence. Therefore,
the sentence cannot be broken into three parts as it is done in
paragraph 28 of Bhatia International (supra). The arbitral
proceedings mentioned in the aforesaid provision cannot relate
to arbitration which takes place outside India.
F
163. Therefore, we have no hesitation in declaring that the
provision contained in Section 9 is limited in its application to
arbitrations which take place in India. Extending the applicability
of Section 9 to arbitrations which take place outside India would
be to do violence to the policy of the territoriality declared in
G Section 2(2) of the Arbitration Act, 1996.

164. It was next submitted that if the applicability of Part I
is limited to arbitrations which take place in India, it would leave
many parties remediless in a number of practical situations.
H
BHARAT ALUMINIUM CO. v. KAISER ALUMINIUM TECHNICAL 44 7
SERVICE, INC. [SURINDER SINGH NIJJAR, J.)
165. In this connection, Mr. Sorabjee has relied upon the A
judgment of the English High Court in Reliance Industries
Limited (supra). In the aforesaid case, the contracts were
governed by the Indian law as their proper law. The disputes
were to be determined by the arbitration in London. The .
procedural law applicable was English Law. The distinction · 8
between the proper law of the JOA's and the procedural law
was known to the parties. At the arbitratron hearing, the parties
agreed that the principles of construction of contracts in Indian
Law were the same as in English Law. The parties further
agreed that the English Law principles on the construction of C
contracts were those set out by Lord Hoffmann in Investors
Compensation Scheme Ltd. vs. West Bromwich Building
Society, 47 as explained and expanded by Lord Hoffmann in
Bank of Credit & Commerce International SA vs. Ali & Ors. 48
In their awards, the three arbitrators stated (at paragraph 73)
that they would apply those principles to construe the contracts D
under consideration in making their Partial Arbitral Awards. The
question raised at the threshold was whether the applicant-
Reliance can apply for permission to appeal to the Commercial
Court in England and Wales "on a question of law arising out
of an award made in the proceedings" under Section 69 (1) of E
the Arbitration Act, 1996 (English). So the "threshold" issue was
whether any point of construction of the contracts, assuming that
would be a question of law at all, is a "question of law of
England and Wales" within Section 82(1) of the Arbitration Act,
1996. It was accepted by the applicant that unless the question F
of law concerned "the law of England and Wales, then leave to
appeal cannot be granted." The issue before the Court was as
to whether the questions of construction of JOA's are questions
of Indian Law because the 9ontracts are governed by Indian
Law. The parties did not, as a matter of fact, vary the proper G
law of the contracts for the purposes of arbitration hearing in
London. As the parties agreed that the Indian Law applied to

47. (1998] WLR 1896 at 913.
48. [2001] 2 WLR 735 at 749. H
448 SUPREME COURT REPORTS [2012] 12 S.C.R.

A the contracts, the arbitrators had to apply Indian Law when
construing the contracts. Although the parties agreed that Indian
Law and English Law principles of construction were the same,
ultimately the arbitrators were applying Indian Law rather than
English Law to construe the contract. The Court rejected the
8 submission of the applicant that the arbitrators had applied the
English Law. The Court observed that:-

"27. I am unable to accept the submissions of
Mr.Akenhead. The parties agreed that the contracts were
to be governed by Indian Law as their proper law. The
c parties also agreed that disputes should be determined
by arbitration in London. The parties were earful to ensure
that English Law would be the procedural law applicable
to arbitration proceedings that arose as a result of
disputes arising out of the JOAs. The distinction between
D the proper law of the JOAs and the procedural law was
also well in the minds of the arbitrators as they drew
particular attention to it in paragraph 26 of their Partial
Awards. The effect of those contractual provisions is, as
the arbitrators also recognized, that all procedural matters
E were to be governed by English law as laid down in Part
1 of the 1996 Act. The parties must be taken to have
appreciated that fact also.

28. The consequence is that if and when disputes under
the contracts were referred to arbitration, as a matter of
F the procedural law of the arbitrations (English Law). the
tribunal had to decide those disputes in accordance with
the proper law of the contracts as chosen by the parties -
unless the parties agreed to vary the contracts' terms,
which they did not. Therefore, if as in this case, the
G arbitrators had to decide issues of construction of the
JOAs, then they were bound to do so using principles of
construction established under the proper law of the
contracts, i.e. Indian law.

H 29. As it happens the parties agreed that the principles of
BHARAT ALUMINIUM CO. v. KAISER ALUMINIUM TECHNICAL 449
SERVICE, INC. [SURINDER SINGH NIJJAR, J.]

construction under the proper law of the contract equated A
with those principles under English law, as declared by the
House of Lords in two recent cases. What the arbitrators
did was to take those principles of construction and apply
them as principles of Indian law in order to construe the
contracts according to Indian law. The arbitrators had to B
do that, as a matter of the procedural law of the arbitration.
That is because under the English law of arbitration
procedure, the arbitrators were bound to construe the
contracts and determine the disputes between the parties
according to the proper law of the contracts concerned. c
30. Therefore, I think that it is wrong to say that the
arbitrators "applied English Law" when construing the
contracts. They applied Indian law, which happened to be
the same as English law on this topic."
D
166. On the basis of that, it was concluded that no question
of law of England and Wales arises out of the two partial
awards of the arbitrators. It was accordingly held that the English
Court does not have any power to grant leave to appeal under
Section 69 of the Arbitration Act, 1996. E
167. In our opinion, the aforesaid judgment does not lead
to the conclusion that the parties were left without any remedy.
Rather the remedy was pursued in England to its logical
conclusion. Merely, because the remedy in such circumstances
may be more onerous from the view point of one party is not
F
the same as a party being left without a remedy. Similar would
be the position in cases where parties seek interim relief with
regard to the protection of the assets. Once the parties have
chosen voluntarily that the seat of the arbitration shall be outside
India, they are impliedly also understood to have chosen the G
necessary incidents and consequences of such choice. We,
therefore, do not find any substance in the submissions made
by the learned counsel for the appellants, that if applicability of
Part I is limited to arbitrations which take place in India, it would
leave many parties remediless. H
450 SUPREME COURT REPORTS (2012112 S.C.R.

A 168. If that be so, it is a matter to be redressed by the
legislature. We may also usefully refer here to the observations
made in Nalinakhya Bysack (supra), Duport Steels Ltd. (supra)
and Magor & St. Me/Ions, RDC Vs. Newport Corporation
(supra), in which the attempt made by Lord Denning to construe
B legislation contrary to Parliament's intention just to avoid
hardship was disapproved by the House of Lords. It was
observed by Lord Simonds as follows:-

"The second part of the passage that I have cited from the
judgment of the learned Lord Justice is no doubt the logical
c sequel of the first. The court, having discovered the intention
of Parliament and of Ministers too, must proceed to fill in
the gaps. What the legislature has not written, the court
must write. This proposition, which restates in a new form
the view expressed by the Lord Justice in the earlier case
D of Seaford Court Estates Ld. V. Asher (tO which the Lord
Justice himself refers), cannot be supported. It appears to
me to be a naked usurpation of the legislative function
under the thin disguise of interpretation and it is the less
justifiable when it is guesswork with what material the
E legislature would, if it had discovered the gap, have filled
it in. If a gap is disclosed, the remedy lies in an amending
Act."

[emphasis supplied]
F 169. The aforesaid words in italics have been quoted with
approval by a Constitution. Bench of this Court in Punjab Land
Development and Reclamation Corporation Ltd., Chandigarh
Vs. Presiding Officer, Labour Court, Chandigarh & Others. 49

G 170. In view of the aforesaid, we are unable to agree with
the submission made by Dr. Singhvi that provision contained
in Section 9 can be made applicable even to arbitrations which
take place outside India by giving the same a purposive

H 49. (1990) 3 sec ea2.
BHARAT ALUMINIUM CO. v. KAISER ALUMINIUM TECHNICAL 451
SERVICE, INC. [SURINDER SINGH NIJJAR, J.)

interpretation. In our opinion, giving such an interpretation would A
be destructive of the territorial principles upon which the
UNCITRAL Model Laws are premised, which have been
adopted by the Arbitration Act, 1996.

171. We are further of the opinion that the approach
8
adopted by this Court in Bhatia /ntemationa/ to remove the
perceived hardship is not permissible under law. A perusal of
paragraph 15 would show that in interpreting the provisions of
the Arbitration Act, 1996, the court applied the following tests:

"Notwithstanding the conventional principle that the duty of C
Judges is to expound and not to legislate, the courts have
taken the view that the judicial art interpretation and
appraisal is imbued with creativity and realism and since
interpretation always implied a degree of discretion and
choice, the courts would adopt, particularly in areas such o
as, constitutional adjudication dealing with social and
defuse (sic) rights. Courts are therefore, held as "finishers,
refiners and polishers of legislation which comes to them
in a state requiring varying degrees of further processing"
(see Corocraft Ltd. v. Pan American Airways, All ER at E
p. 1071 D, WLR at p. 732, State of Haryana v. Sampuran
Singh, AIR at p. 1957). If a language used is capable of
bearing more than one construction, in selecting the true
meaning, regard must be had to the consequences,
resulting from adopting t~e alternative constructions. A F
construction that results in hardship, serious
inconvenience, injustice, absurdity or anomaly or which
leads to inconsistency or uncertainty and friction in the
system which the statute purports to regulate has to be
rejected and preference should be given to that G
construction which avoids such results."

172. From the above, it is evident that the provisions of
the Arbitration Act, 1996 were interpreted keeping in mind the
consequences in limiting the applicability of Part I to arbitrations
which take place in India. The Court also acted as "finishers", H
452 SUPREME COURT REPORTS [2012) 12 S.C.R.

A "refiners" and "polishers" of the Arbitration Act, 1996 assuming
that the Arbitration Act, 1996 required varied degrees of further
"processing". In our opinion, as demonstrated whilst discussing
the various provisions of the Arbitration Act, 1996 in earlier part
of judgment, the intention of the Parliament is available within
8 the text and the context of the provisions. As observed by Lord
Simonds in Mag or & St. Me/Ions Vs. Newport Corporation
(supra), if the gap or lacuna is disclosed, it would be for the
Parliament to rectify the same. Such a task cannot be
undertaken by the Court.

C 173. It was also submitted that Non-Convention Awards
would not be covered either by Part I or Part II. This would
amount to holding that the legislature has left a lacuna in the
Arbitration Act, 1996. This would mean that there is no law in
India governing such arbitrations.
D
174. We are of the opinion that merely because the
Arbitration Act, 1996 does not cover the non convention awards
would not create a lacuna in the Arbitration Act, 1996. If there
was no lacuna during the period in which the same law was
E contained in three different instruments, i.e. the Arbitration Act,
1940 read with 1961 Act, and the Arbitration (Protocol and
Convention) Act, 1937, it cannot be construed as a lacuna
when the same law is consolidated into one legislation, i.e. the
Arbitration Act, 1996.

F 175. It must further be emphasised that the definition of
"foreign awards" in Sections 44 and 53 of the Arbitration Act,
1996 intentionally limits it to awards made in pursuance of an
agreement to which the New York Convention, 1958 or the
Geneva Protocol, 1923 applies. It is obvious, therefore, that no
G remedy was provided for the enforcement of the 'non
convention awards' under the 1961 Act. Therefore, the non
convention award cannot be incorporated into the Arbitration
Act, 1996 by process of interpretation. The task of removing
any perceived lacuna or curing any defect in the Arbitration Act,
H 1996 is with the Parliament. The submission of the learned
BHARAT ALUMINIUM CO. v. KAISER ALUMINIUM TECHNICAL 453
SERVICE, INC. [SURINDER SINGH NIJJAR, J.]
counsel is, therefore, rejected. The intention of the legislature A
is primarily to be discovered from the language used, which
means that the attention should be paid to what has been said
and also to what has not been said. [See: Gwalior Rayon Silk
Mfg. (Wvg.) Co. Ltd. vs. Custodian of Vested Forests, [AIR
1990 SCC 1747 at page 1752]. Here the clear intention of the B
legislature is not to include the Non-convention Awards within
the Arbitration Act, 1996.

Is An lnter-Parte Suit For Interim Relief Maintainable -

176. It appears to us that as a matter of law, an inter-parte C
suit simply for interim relief pending arbitrations, even if it be
limited for the purpose of restraining dissipation of assets would
not be maintainable. There would be number of hurdles which
the plaintiff would have to cross, which may well prove to be
insurmountable. D

177. Civil Courts in India, by virtue of Section 9 of the
Code of Civil Procedure, 1908 (for short the 'CPC'), have the
jurisdiction to try all suits of a civil nature, excepting suits which
are either expressly or impliedly barred. Fundamental to the E
maintainability of a civil suit is the existence of a cause of action
in favour of the plaintiff. This is evident from the various
provisions contained in the CPC. However, it would be
appropriate to notice that Order VII Rule 1 gives the list of the
particulars which have to be mandatorily included in the plaint.
Order VII Rule 1(e) mandates the plaintiff to state the facts
F
constituting the cause of action and when it arose. Order VII
Rule 11 (a) provides the plaint shall be rejected where it does
not disclose a cause of action. A cause of action is the bundle
of facts which are required to be proved for obtaining relief
prayed for in the suit. The suit of the plaintiff has to be framed G
in accordance with Order II. Order II Rule 1 provides that every ----'
suit shall as far as practicable be framed so as to afford ground
for final decision upon the subjects in dispute and to prevent
further litigation concerning them. The aforesaid rule is required
to be read along with Rule 2 which provides that every suit shall H
454 SUPREME COURT REPORTS [2012) 12 S.C.R.

A include the whole of the claim which the plaintiff is entitled to
make in respect of the cause of action; but a plaintiff may
relinquish any portion of his claim in order to bring the suit within
the jurisdiction of any court. The aforesaid provisions read
together would lead to the firm conclusion that the existence of
B cause of action is a sine qua non for the maintainability of a
civil suit.

178. The provisions with regard to the temporary injunction
and interlocutory orders are contained in Order 39 and Order
40. In order to claim an injunction the existence of a pending
C suit is a pre requisite. It is in this background that one has to
examine as to whether an inter-parte suit for interim relief during
the pendency of arbitration proceedings outside India would be
maintainable.

D 179. In our opinion, pendency of the arbitration
proceedings outside India would not provide a cause of action
for a suit where the main prayer is for injunction. Mr.Sundaram
has rightly pointed out that the entire suit would be based on
the pendency of arbitration proceedings in a foreign country.
E Therefore, it would not be open to a party to file a suit touching
on the merits of the arbitration. If such a suit was to be filed, it
would in all probabilities be stayed in view of Sections 8 and
45 of the Arbitration Act, 1996. It must also be noticed that such
a suit, if at all, can only be framed as a suit to "inter alia restrain
F the defendant from parting with property." Now, if the right to
such property could possibly arise, only if the future arbitration
award could possibly be in favour of the plaintiff, no suit for a
declaration could obviously be fileo, based purely only on such
a contingency. All that could then be filed would, therefore, be
G a bare suit for injunction restraining the other party from parting
with property. The interlocutory relief would also be identical.
In our view, such a suit would not be maintainable, because an
interlocutory injunction can only be granted during the pendency
of a civil suit claiming a relief which is likely to result in a final
decision upon the subject in dispute. The suit would be
, H
BHARAT ALUMINIUM CO. v. KAISER ALUMINIUM TECHNICAL 455
SERVICE, INC. [SURINDER SINGH NIJJAR, J.]

maintainable only on the existence of a cause of action, which A
would entitle the plaintiff for the substantive relief claimed in the
suit. The interim injunction itself must be a part of the substantive
relief to which the plaintiffs cause of action entitled him. In our
opinion, most of the aforesaid ingredients are missing in a suit
claiming injunction restraining a party from dealing with the B
assets during the pendency of arbitration proceedings outside
India. Since the dispute is to be decided by the Arbitrator, no
substantive relief concerning the merits of the arbitration could
be claimed in the suit. The only relief that could be asked for
would be to safeguard the property which the plaintiff may or c
may not be entitled to proceed against. In fact the plaintiffs only
claim would depend on the outcome of the arbitration
• proceeding in a foreign country over which the courts in India
would have no jurisdiction. The cause of action would clearly
be contingenVspeculative. There would be no existing cause 0
of action. The plaint itself would be liable to be rejected under
Order VII Rule 11 (a). In any eveflt, as noticed above, no interim
relief could be granted unless it is in aid of and ancillary to the
main relief that may be available to a party on final determination
of rights in a suit. This view will find support from a number of E
judgments of this Court.

180. In the State of Orissa vs. Madan Gopal Rungta, 50 at
page 35 this Court held:

"....An interim relief can be granted only in aid or, and as F
ancillary to, the main relief which may be available to the
party on final determination of his rights in a suit or
proceeding ...... •
181. Following the above Constitution Bench, this Court
in Cotton Corporation Limited vs. United Industrial Ban/<5 1 G
held:
"10 ...... But power to grant temporary injunction was
50. AIR 1952 SC 12.
51. (1983) 4 sec 625. H
456 SUPREME COURT REPORTS [2012] 12 S.C.R.

A conferred in aid or as auxiliary to the final relief that may
be granted. If the final relief cannot be granted in terms as
prayed for, temporary relief in the same terms can hardly
if ever be granted. In State of Orissa v. Madan Gopal
Rungta a Constitution Bench of this Court clearly spelt out
B the contours within which interim relief can be granted. The
Court said that 'an interim relief can be granted only in aid
of, and as ancillary to, the main relief which may be
available to the party on final determination of his rights in
a suit or proceeding'. If this be the purpose to achieve
c which power to grant temporary relief is conferred, it is
inconceivable that where the final relief cannot be granted
in the terms sought for because the statute bars granting
such a relief ipso facto the temporary relief of the same
nature cannot be granted ..... "
D 182. The legal position is reiterated in Ashok Kumar
Unga/a vs. State of Karnataka. 52

183. In matters pertaining to arbitration, the suit would also
be barred under Section 14(2) of the Specific Relief Act.
E Although the provision exists in Section 37 of the Specific Relief
Act, 1963, for grant of temporary/perpetual injunction, but the
existence of cause of action would be essential under this
provision also. Similar would be the position under Section 38
of the Specific Relief Act.
F 184. Claim for a Mareva Injunction in somewhat similar
circumstances came up for consideration in England before the
House of Lords in Siskina (Cargo Owners) Vs. Distos
Compania Navieria SA (supra). In this case, cargo owners had
a claim against a Panamanian company. The dispute had no
G connection with England. The defendant's only ship had sunk
and there were insurance proceeds in England to which the
defendant was entitled. The cargo owners sought leave to serve
the writ on the defendant under what was then RSC Order 11,

H 52. c2012) 1 sec 321.
BHARAT ALUMINIUM CO. v. KAISERALUMINIUMTECHNICAL 457
SERVICE, INC. [SURINDER SINGH NIJJAR, J.]

Rule 1(1 )(i). Mocatta, J. gave leave and at the same time A
granted an injunction in the terms asked for in Paragraph 2 of
the writ petition. Subsequently, Kerr, J. set aside the notice of
the writ but maintained the injunction pending in appeal. On the
cargo-owners appeal, the Court of Appeal by a majority
reversed the judgment of Kerr, J. and restored the Mareva B
injunction as originally granted by Mocatta, J. The matter
reached the House of Lords by way of an appeal against the
majority judgment of the Court of Appeal. The House of Lords
on appeal held that there was no jurisdiction to commence
substantive proceedings in England. Therefore, the writ and all c
subsequent proceedings in the action had to be set aside.
Consequently there could be no Mareva injunction. It was held
that a Mareva injunction was merely an interlocutory injunction
and such an injunction could only be granted as " .... ancillary
and incidental to the pre-existing cause of action".
0
185. Lord Diplock observed that "it is conceded that the
cargo owners' claim for damages for breach of contract does
not of itself fall within any of the sub-rules of Order 11, Rule 1(1 );
nor does their claim for damages for tort." It is further observed
that ''what is contended by the counsel for the cargo-owners is E
that if the action is nevertheless allowed to proceed, it will
support a claim for Mareva injunction restraining the ship
owners from disposing of their assets within the jurisdiction until
judgment and payment of the damages awarded thereby; and
that this of itself is sufficient to bring the case within sub-rule (i) F
which empowers the High Court to give leave for service of its
process on persons outside the jurisdictions". Interpreting Order
11 Rule 1(i), it was held that the word used in sub-rule (i) are
terms of legal art. The sub-rule speaks of "the action" in which
a particular kind of relief, "an injunction" is sought. This pre- G
supposes the existence of a cause of action on which to found
"the action". A right to obtain an interlocutory injunction is not
a cause of action. It cannot stand on its own. It is dependent
upon there being a pre-existing cause of action against the
defendant arising out of an invasion, actual or threatened by H
458 SUPREME COURT REPORTS [2012] 12 S.C.R.

A him, of a legal or equitable right of the plaintiff for the
enforcement of which the defendant is amenable to the
jurisdiction of the Court. The right to obtain an interlocutory
injunction is merely ancillary and incidental to the pre-existing
cause of action. It is granted to preserve the status quo pending
B the ascertainment by the Court of the rights of the parties and
the grant to the plaintiff of the relief to which his cause of action
entitles him, which may or may not include a final injunction.

186. As noticed earlier, the position is no different in India.
Therefore it appears that under the law, as it stands today, an
C inter-parte suit simply for interim relief pending arbitration
outside India would not be maintainable.

187. It appears after the aforesaid observations were
made in Siskina (Cargo Owners) (supra), necessary
D amendments were made in the English Law viz. Section 37(1)
of the Supreme Court Act, 1981. The provision was sp,ecifically
made for grant of Mareva injunction by Section 25 of the Civil
Jurisdiction and Judgments Act, 1982.

E 189. The after effects of Siskina (Cargo Owners) (supra)
were duly noticed by Steven Gee QC MA (Oxon) in his book
titled Mareva Injunctions and Anton Piller Relief, Fourth Edition,
as under:-

(i) The English Court would not assert a substantive
F jurisdiction over a defendant just because he had
assets within the jurisdiction. The contrary
proposition would have had the unsatisfactory
consequence as observed by Lord Diplock in
Siskina that the Court would find itself asserting
G jurisdiction over a foreigner to decide the merits of
sub~lantive proceedings which had nothing to do
with England.

(ii) There was no jurisdiction to grant Mareva relief
unless and until the plaintiff had an accrued right of
H
action.
BHARAT ALUMINIUM CO. v. KAJSERALUMINIUM TECHNICAL 459
SERVICE, INC. [SURINDER SINGH NIJJAR, J.]
(iii) There was no jurisdiction to preserve assets within A
the jurisdiction of the Court which would be needed
to satisfy a claim against the defendant if it
eventually succeeded regardless of where the
merits of the substantive claim were to be decided.
According to the other, the position in relation to the s
free-standing interlocutory injunction relief has been
• eroded by a succession of developments .

190. Thereafter, in a subsequent judgment in Channel
Tunnel Group Ltd. & Anr. Vs. Balfour Beatty Construction Ltd.
& Ors., 53 Lord Mustill summed up the principle for grant of C
interim relief as follows:-

"For present purposes it is sufficient to say that the doctrine
of Siskina, put at its highest, is that the right to an
interlocutory injunction cannot exist in isolation, but is D
always incidental to and dependent on the enforcement of
a substantive right, which usually although not invariably
takes, the shape of a cause of action. If the underlying right
itself is not subject to the jurisdiction of the English Court,
then that Court should never exercise its power under E
Section 37(1) by way of interim relief." ·

191. However, on facts in the Channel Tunnel case
(supra), it was found that"if this is a correct appreciation of the
doctrine, it does not apply to the present case.•
F
192. From the above, it is apparent that the injunctive relief
was granted in Channel Tunnel case in view of the statutory
provisions contained in Section 37(1) of the Supreme Court
Act, 1981. This is made further clear by the following
observations:- G

"We are concerned here with powers which the Court
already possesses under Section 37 of the Act of 1981.

53. (1993) AC 334. H
460 SUPREME COURT REPORTS [2012] 12 S.C.R.

A The only question is whether the court ought permanently
and unconditionally to renounce the possibility of
exercising such powers in a case like the present. I am
unable to see why the fact that Parliament is contemplating
the specific grant of interim powers, not limited to
B interlocutory injunctions, in support of arbitrations but has
not yet chosen to do so should shed any light on the
powers of the court under existing law. It may be that if and
when section 25 is made applicable to arbitrations, the
court will have to be very cautious in the exercise of its
general powers under section 37 so as not to conflict with
c
any restraint which the legislature may have imposed on
the exercise of the new and specialized powers."

193. The decision in Channel Tunnel would not support the
proposition that injunctive relief could be granted under Section
D 9 of the Arbitration Act, 1996, as no corresponding provision
to Section 37(1) of the English Supreme Court Act, 1981 exists
under the Indian legislation.

194. Mr. Sorabjee has also referred to the principle that
E no suit allows for grant of interim injunction simplicitor and that
an interim injunction had to be granted only in aid of a final
injunction/principle relief claimed in the suit. He made a
reference to the Constitution Bench decision of this Court in
State of Orissa Vs. Madan Gopal Rungta (supra). He also
F referred to the judgment of the House of Lords in Fourie Vs.
Le Roux (supra). The House of Lords after referring to the
decision in Siskina and Channel Tunnel observed as follows:-

"On the other hand, if the leave had been upheld, or if the
defendant had submitted to the jurisdiction, it would still
G have been open to the defendant to argue that the grant
of a Mareva injunction in aid of the foreign proceedings in
Cyprus was impermissible, not on strict jurisdictional
grounds but because such injunctions should not be
granted otherwise than as ancillary to substantive
H proceedings in England." [emphasis supplied]
BHARAT ALUMINIUM CO. v. KAISERALUMINIUMTECHNICAL 461
SERVICE, INC. [SURINDER SINGH NIJJAR, J.)
195. However, the House of Lords pointed out in A
Paragraph 31 of the judgment that the relief can now be granted
under English Law by virtue of express provision contained in
Section 25 of the Civil Jurisdiction and Judgment Act, 1982,
as extended to the Civil Jurisdiction and Judgments Act (Interim
Relief) Order, 1997. This order enables the High Court "to grant B
interim relief' in relation to "proceedings that have been or are
about to be commenced in a foreign state".

196. So far as the Indian Law is concerned, it is settled
that the source "of a Court's power to grant interim relief is C
traceable to Section 94 and in exceptional cases Section 151
CPC. CPC pre-supposes the existence of a substantive suit
for final relief wherein tile power to grant an interim relief may
be exercised only till disposal thereof.

197. In this view of the matter, it is patent that there is no D
existing provision under the CPC or under the Arbitration Act,
1996 for a Court to grant interim measures in terms of Section
9, in arbitrations which take place outside India, even though
the parties by agreement may have made the Arbitration Act,
1996 as the governing law of arbitration. E
CONCLUSION :-

198. In view of the above discussion, we are of the
considered opinion that the Arbitration Act, 1996 has accepted
the territoriality principle which has been adopted in the F
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. G
·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 H
462 SUPREME COURT REPORTS [2012) 12 S.C.R.

A 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.

199. With utmost respect, we are unable to agree with the
conclusions recorded in the judgments of this Court in Bhatia
8
International (supra) and Venture Global Engineering (supra).
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
C application for interim relief would be maintainable under
Section 9 or any other provisi9n, as applicability of Part I of the
Arbitration Act, 1996 is limited to all arbitrations which take
place in li~dia. Similarly, no suit for interim injunction simplicitor
would be maintainable in India, on the basis of an international
D commercial arbitration with a seat outside India.

200. 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.
E
201. The judgment in Bhatia International (supra) was
rendered by this Court on 13th March, 2002. Since then, the
aforesaid judgment has been followed by all the High Courts
as well as by this Court on numerous occasions. In fact, the
F judgment in Venture Global Engineering (supra) has been
rendered on 10th January, 2008 in terms of the ratio of the
decision in Bhatia International (supra). 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.
G
202. The reference is answered accordingly.

B.B.B. Reference Answered.

H