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The Indian courts have consistently practiced greater involvement in commercial arbitrations held outside India especially after the Supreme Court’s decision in Bhatia International v Bulk Trading S.A. and Another. For that matter, the court in Venture Global Engineering v Satyam Computer Services Ltd. and Another went to the extent of assuming jurisdiction for hearings in cases challenging foreign awards.

This being detrimental to India’s global image, the apex court took a stronger stance in Bharat Aluminum Ltd. Co. v Kaiser Aluminum Technical Service Inc. (hereinafter “BALCO”) by holding that Part I and Part II of the Act are mutually exclusive and that Part I will not apply in cases where the seat of arbitration is chosen outside India. The Supreme Court went on to paralyze Indian courts for their interference with foreign awards in any manner except for enforcement.

The enormity of difficulties ensued post this decision as the interim relief was no longer made available to the parties in India. Even if sanctioned by the foreign arbitral tribunal, the relief became unenforceable in India since it ceased to be qualified as a “foreign award” under Part II of the Act. And therefore, the Act was amended in 2015 to restore the power of Indian courts to grant interim relief unless the parties themselves chose to opt-out of this provision. The amendment did not clarify if the arbitration agreement should expressly exclude the jurisdiction of Indian courts leading to confusion. If the jurisdiction is impliedly excluded, it would have defeated the purpose of the amendment. Moreover, if two Indian parties are involved in arbitration which is foreign seated, it remains blurred if at all any interim reliefs will be made available to them by the Indian courts.

The 2015 amendment adds more strength to the order of arbitral tribunal by alleviating it to the order of a civil court. Even for interim relief, the parties can no longer approach the civil court unless the tribunal fails. Much of the interventions by the judiciary were at the pre-litigation stage comprising of application to the court for seeking reference to arbitration in a proceeding pending under section 8 or for the appointment of arbitrators in the event of a deadlock between the Parties under section 11 of the Act. Under both of these sections, the ultimate word of the court determined the validity and jurisdiction of the arbitration agreement and thus, ousted the jurisdiction of arbitral tribunals.

The courts are now empowered to only determine the existence of the agreement to conclude validity. They can no longer tread on any other issues relating to the arbitration agreement. While a third party is also allowed to refer to section 8, it amends the existing position taken in Sukanya Holdings Pvt. Ltd v Jayesh H. Pandya & Another. In this case, non-signatories to the arbitration agreement were not allowed to refer the dispute to arbitration. The Supreme Court’s judgment in N. Radhakrishnan v Maestro Engineers & Others also stands clear as now the courts will have to direct the parties to arbitration where the arbitration agreement exists even in cases of fraud. However, the extent of judicial intervention went to the extreme before 2015, especially where the award was challenged on the grounds of public policy.

  • ADR
  • amendment in adr
  • 2015 amendment

BY : Dhatri Shukla

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