An agreement dated 22nd April, 1993 ('Agreement') was executed between B Ltd. and K Ltd., under which K Ltd., was to supply and install a computer-based system at B Ltd.'s premises. As per the arbitration clause in the A

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An agreement dated 22nd April, 1993 ('Agreement') was executed between B Ltd. and K Ltd., under which K Ltd., was to supply and install a computer-based system at B Ltd.'s premises. As per the arbitration clause in the Agreement, any dispute under the Agreement would be settled in accordance with the English Arbitration Law and the venue of the proceedings would be London. The Agreement further stated that the governing law with respect to the Agreement was Indian law; however, arbitration proceedings were to be governed and conducted in accordance with English Law. Disputes arose and were duly referred to arbitration in England. The arbitral tribunal passed two awards in England which were sought to be challenged in India u/s 34 of the Act in the district court at Bilaspur. Successive orders of the district court and the High Court of Chhattisgarh rejected the appeals. Therefore, B Ltd. appealed to the Supreme Court ('Court'). The parties had initially agreed to get their disputes settled through arbitral process under the Rules of Arbitration of the International Chamber of Commerce, at Paris, subsequently, mutually agreed on 29 November, 2010 to arbitration under the Rules of London Maritime Arbitrators Association, in London. During the pendency of arbitration proceedings in London, an injunction application was made by appellants, BS Ltd., before the District Judge at Mangalore, against the encashment of refund bank guarantees issued under the contract (u/s 9 of the Act). The applications were allowed and were consequently challenged in High Court of Bangalore. The Bangalore High Court set aside the application so allowed on the grounds that the appellants had an alternative remedy (u/s 44 of the Act., being interim reliefs for international arbitration) in the courts of London and further since the substantive law governing the contract, as well as the arbitration agreement, is English law, the English courts should be approached. This was also challenged in this petition to the Supreme Court. The appeal filed by B Ltd. before the Division Bench of the Supreme Court was placed for hearing before a three Judge Bench. Decide the matters with reference to case laws and comment whether Foreign Arbitral Awards can be challenged in Indian Courts as Section 34 of the Arbitration and Conciliation Act, 1996 provides for setting aside of Domestic Arbitral Awards only.

Answer & Explanation:

The facts of the given situation are similar to the case of Bharat Aluminium Company. v. Kaiser Aluminum Technical Services Inc. In the matter, the Supreme Court of India decided as follows: Part I and Part II are applicable to different fields. Part I of the Arbitration and Conciliation Act, 1996 (Act) is applicable to all domestic awards, including to awards where both the parties to the dispute are Foreign Parties but the proceedings are held in India, or International Commercial Arbitration held in India. Part II of the Act of 1996 applies to enforcement of Foreign Awards in India. The principle of territoriality in Model Law is adopted in Act of 1996 Mutatis Mutandis. Section 48 of Part II of the Act does not confer jurisdiction on two courts to annul the award and is provided only to provide alternative to parties to challenge the award in case, Law of the country where seat of arbitration is located has no provision for challenge of the award. Interim Relief under section 9 can be awarded in case seat of arbitration in International commercial arbitration in India and thus intervention under section 9 can be sought only with respect to domestic awards. Part II has no provision that grants interim relief leading to the logical inference that Indian Court cannot pass interim orders against award delivered outside India. The Arbitral Awards awarded in International Commercial Arbitration with seat of Arbitration outside India shall be subject to the Jurisdiction of Indian Courts only when they are sought to be enforced in India in accordance with Part II of the Act. Part I of the Act shall not be applicable to non-convention arbitral awards. The definition of Foreign Award is limited to New York Convention and Geneva Convention and hence the Act does not provide for enforcement of non-convention Arbitral awards. Principle: It would be against the Provisions of the Arbitration and Conciliation Act, 1996, to interfere with the Foreign Arbitral Award as the Act of 1996 provides for challenging only Domestic Arbitral Awards under Section 34. The above decision makes it clear that Foreign Arbitral Awards cannot be challenged in Indian Courts as Section 34 of the Arbitration and Conciliation Act, 1996 provides for setting aside of Domestic Arbitral Awards only.

Topics: Foreign Arbitral Awards

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