Proceedings U/s 34 Arbitration & Conciliation Act Not Maintainable Against Foreign Award: Supreme Court

The Supreme Court has observed that the proceedings under Section 34 of the Arbitration and Conciliation Act is not maintainable to challenge a foreign award,

In this case, Jindal filed a petition  before the Bombay High Court under Section 34 of the Act challenging the partial award. Though the single bench dismissed this petition, the Division Bench, referring to the Supreme Court decisions in Bhatia International v. Bulk Trading S. A. & Anr and Venture Global Engineering v. Satyam Computer Services Ltd. & Anr, held that proceedings under Section 34 of the Act could be validly maintained to challenge a foreign award.

In appeal, the Apex Court bench noted that in Bhatia , and later, in Venture Global it was held that resort to remedies under Part I of the Act can be made in respect of foreign awards, despite the clear dichotomy in the enactment between domestic awards (covered by Part I) and foreign awards (covered by Part II). The bench observed that this understanding was re-visited in Bharat Aluminium Company vs Kaiser Aluminium Technical Services Inc  [BALCO] in which the following observations were made:

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 UNCITRAL Model Law. Section 2(2) makes a declaration that Part I of the Arbitration Act, 1996 shall apply to all arbitrations which take place within India. We are of the considered opinion that Part I of the Arbitration Act, 1996 would have no application to international commercial arbitration held outside India. Therefore, such awards would only be subject to the jurisdiction of the Indian courts when the same are sought to be enforced in India in accordance with the provisions contained in Part II of the Arbitration Act, 1996. In our opinion, the provisions contained in the Arbitration Act, 1996 make it crystal clear that there can be no overlapping or intermingling of the provisions contained in Part I with the provisions contained in Part II of the Arbitration Act, 1996." Having regard to the precedential unanimity, so to say, about the manner of applicability of BALCO in respect of agreements entered into and awards rendered earlier, with respect to the law of the seat of arbitration (or the curial law) excluding applicability of Part I of the Act, and the unambiguous intention of the parties in the present case (expressed in Clause 12.4.2) that the seat of arbitration was London, where the ICC arbitration proceedings were in fact held, and the awards rendered, this court is of the opinion that the impugned judgment cannot be sustained.

Later in Union of India v Reliance Industries,  the court noted, it was observed that  Part I is excluded by necessary implication if it is found that on the facts of a case either the juridical seat of the arbitration is outside India or the law governing the arbitration agreement is a law other than Indian law. Taking note of other judgments which followed BALCO, the bench observed thus:

Having regard to the precedential unanimity, so to say, about the manner of applicability of BALCO in respect of agreements entered into and awards rendered earlier, with respect to the law of the seat of arbitration (or the curial law) excluding applicability of Part I of the Act, and the unambiguous intention of the parties in the present case (expressed in Clause 12.4.2) that the seat of arbitration was London, where the ICC arbitration proceedings were in fact held, and the awards rendered, this court is of the opinion that the impugned judgment cannot be sustained.

Holding thus, the bench set aside the High Court order.

CASE: NOY VALLESINA ENGINEERING SpA vs. JINDAL DRUGS LIMITED & ORS [CIVIL APPEAL NO. 8607 OF 2010]

CORAM: Justices Indira Banerjee and S. Ravindra Bhat

COUNSEL: Sr. Adv Joydeep Gupta, Sr. Adv Jay Salva

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