An article highlighting the key arbitration-related developments in India in 2011.
2011 continued to witness India's journey towards a pro-arbitration approach. However, these decisions have unfortunately been accompanied with a not-so savoury decision in which the Delhi High Court followed the controversial decision of the Supreme Court in Bhatia International v Bulk Trading S, Appeal (civil) 6527 of 2001, decided on 13th March 2002.
A number of judgments in 2011 reinforced India's image as a pro-arbitration nation.
In Videocon Industries Ltd v Union of India, Civil Appeal No. 4269 of 2011 (Arising out of S.L.P. (C) No. 16371 of 2008, decided On: 11th May 2011) (www.practicallaw.com/2-506-6805), the Supreme Court of India (Supreme Court), relying on its own decision in Dozco India P. Ltd v Doosan Infracore Co. Ltd 2010 (9) UJ 4521 (SC), held that Part I of the Arbitration and Conciliation Act 1996 (1996 Act) would be impliedly excluded if the parties have agreed to a foreign law governing the arbitration and a foreign seat of arbitration, even if the law governing the contract is Indian law (see Legal update, Indian Supreme Court adopts a pro-arbitration approach (www.practicallaw.com/4-506-6791)).
In State of Goa v Praveen Enterprises, Civil Appeal No. 4987 of 2011 (Arising out of SLP (C) No. 15337 of 2009), decided on 4th July 2011, the Supreme Court held that where the arbitration agreement provides for all disputes to be referred to arbitration, the arbitrator will have jurisdiction to entertain any counterclaim, even if it was not raised before the pleadings.
In Fuerst Day Lawson v Jindal Exports, (2011)8 SCC 333 (www.practicallaw.com/7-507-1319), decided on 8th July 2011, the Supreme Court held that no letters patent appeal will lie against an order enforcing a foreign award. This is because section 50 of the 1996 Act provides for an appeal only against an order refusing to enforce a foreign award (see Legal update, Indian Supreme Court declines to allow letters patent appeal against order enforcing a foreign award (www.practicallaw.com/3-507-1316)).
In Yograj Infrastructure Ltd. v Ssang Yong Engineering and Construction Co. Ltd., Civil Appeal No. 7562 of 2011 (Arising out of SLP (C) No. 25624 of 2010) (www.practicallaw.com/9-508-8620) decided on 1st September 2011, the Supreme Court refused to entertain an appeal against an interim order of an arbitral tribunal seated outside India. The Supreme Court concluded that Part I of the 1996 Act was impliedly excluded because the seat of arbitration was outside India and the applicable law governing the arbitration was a foreign law (see Legal update, Yograj Infrastructure: Reinforcing India's position as an arbitration-friendly jurisdiction (www.practicallaw.com/5-508-8603)).
In Aitreya Limited v Dans Energy Pvt Ltd & Ors. (O.M.P. 819/2011 & and I.A. 19638/ 2011, decided on 23rd December 2011), the Delhi High Court relied on Bhatia International v Bulk Trading S, Appeal (civil) 6527 of 2001, decided on 13th March 2002 (Bhatia International) and held that Part I of the 1996 Act is applicable even when the seat of arbitration is outside India. The court ruled that, because the parties had neither expressly nor impliedly excluded Part I, the Indian courts had jurisdiction to entertain the petition under section 9 of the 1996 Act for granting interim relief.
The Supreme Court has recently referred a batch of consolidated appeals to a five judge Constitution Bench of the Supreme Court (Constitution Bench), which includes the Chief Justice of India. The Constitution Bench is hearing the appeals with the intention of reconsidering the correctness of the precedent laid down in the Bhatia International judgment. In Bhatia International, the Supreme Court deviated from the legislation by holding that the provisions of Part I of the 1996 Act would apply in the case of international commercial arbitrations held outside India unless the parties expressly or impliedly exclude all or any of its provisions. The judgment has been criticised as it increased judicial interference from the Indian courts in arbitrations held outside India.
The arguments in the appeals started on 10 January 2012. It is hoped that the forthcoming judgment will put an end to the issue of applicability of Part I of the 1996 Act. We will continue to report on future developments.
As previously reported in Article, India: round up 2010/2011 (www.practicallaw.com/9-504-6908), the law ministry launched a Consultation Paper recommending changes to the 1996 Act. There have been no further developments with respect to this Consultation Paper in 2011. However, the intention to decrease the interventionist role of the Indian judiciary in arbitration is reflected by the reference of the Bhatia International judgment to the Constitutional Bench for reconsideration.
All in all, we hope that 2012 turns out to be a positive year for arbitration in India.