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Applicable Laws

Venture Global Engineering v. Satyam Computer Services Ltd. & Anr. 2008 (4) SCC 190

VENTURE GLOBAL ENGINEERING V. SATYAM COMPUTER SERVICES LTD.

Venture Global Engineering v. Satyam Computer Services Ltd. & Anr. 2008 (4) SCC 190

ISSUE:

  • Whether Indian courts can overturn a foreign arbitral ruling under the Arbitration and Conciliation Act of 1996?
  • Whether Part I of the Arbitration and Conciliation Act, 1996, applicable when the arbitration seat is outside of India? Under Section 34, read with Section 9 of the Act, is the aggrieved party entitled to challenge a foreign award made outside India?

RULE:

  • Part I of the Arbitration and Conciliation Act of 1996 applies to all arbitrations, including international commercial arbitrations, unless the parties expressly or implicitly exclude all or all of its terms by agreement.
  • Section 48(1)(e) of the Act, read together with Section 48(3) of the Act, states that an action to set aside a foreign award within the meaning of Section 44 of the Act must be brought before the competent authority of the country in which, or under the legislation of which, the award was issued.

FACTS:

  • Venture Global Engineering, a US corporation, and Satyam Computer Services Limited, an Indian company, formed a joint venture to form Satyam Venture Engineering Services Ltd.
  • A Shareholders Agreement (SHA) was also signed, which stated that conflicts between the parties should be resolved gently and, if not, should be referred to arbitration.
  • Respondent No.1 claimed that the Appellant violated the SHA and exercised the option to buy the Appellant’s shares in Satyam Venture Engineering Services Ltd.
  • Respondent No. 1 filed an arbitration request with the London Court of International Arbitration, which assigned an arbitrator.
  • The arbitrator ordered Venture Global Engineering to transfer the shares to respondent No. 1.
  • Respondent No.1 petitioned the United States District Court for the Eastern District of Michigan to recognize and enforce the award.
  • The Appellant challenged the award’s execution, arguing it violated Indian laws. In India, the Appellant filed a suit to vacate the award and secured an injunction.
  • Respondent No.1 appealed the injunction judgment, and the High Court suspended the injunction but barred the transfer of shares.
  • Respondent No.1 also requested that the Appellant’s complaint be dismissed.

HELD:

  • It was held by the Court that unless expressly excluded by the parties, the requirements of Part I of the Arbitration and Conciliation Act, 1996, apply to all arbitrations, including international commercial arbitrations.
  • In this situation, the Shareholders Agreement (SHA) included a non-obstante clause (Section 11.5(c)), which supersedes all other terms of the agreement, including the arbitration provision.
  • As a result, the arbitration ruling must be enforced in India, as stated by the SHA’s Section 11.5(c), even though the contract’s governing law was Michigan law.
  • It was held that Respondent No.1 breached the agreement by pursuing the execution of the award in the United States District Court rather than in India.
  • As a result, both the injunction order and the High Court judgment were reversed.
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Union of India v. Reliance Industries Ltd., (2015) 10 SCC 213

UNION OF INDIA V. RELIANCE INDUSTRIES LTD.

Union of India v. Reliance Industries Ltd., (2015) 10 SCC 213

ISSUE:

  • Whether Indian Courts and authorities can exercise jurisdiction over disputes with a foreign arbitration law under Part I of the Arbitration and Conciliation Act 1996?
  • Whether the petition filed under section 34 of the Arbitration and Conciliation Act, 1996 at the Delhi High Court is maintainable?

RULE:

  • Bhatia International v. Bulk Trading S.A. & Anr., (2002) 4 SCC 105, resurrected this doctrine of concurrent jurisdiction by holding that even where arbitrations are held outside India, unless the parties agree to exclude the application of Part-I of the Arbitration Act, 1996, either expressly or by necessary implication, the courts in India will exercise concurrent jurisdiction with the court in the country in which the foreign award was made.

FACTS:

  • Two contracts were signed between the Appellants and the Respondent for the Tapti and Panna Mukta Fields, wherein the governing seat of the contract was Indian Law, however, the venue for arbitration proceedings in case of a dispute was set to be London, England.
  • Since certain disputes and differences arose between the Union of India and Reliance Industries Limited sometime in 2010, the Union of India invoked the arbitration clause.
  • On 14.9.2011, the Union of India, Reliance Industries Limited and BG Exploration and Production India Limited, agreed to change the seat of arbitration to London, England and a final partial consent award was made and duly signed by the parties to this effect.
  • On 12.9.2012, the Arbitral Tribunal passed a final partial award which became the subject matter of a Section 34 petition filed in the Delhi High Court by the Union of India, dated 13.12.2012. The Delhi High Court by a judgment and order dated 22.3.2013 decided that the said petition filed under Section 34 was maintainable. The matter was then appealed before the Supreme Court of India.

HELD:

  • The Supreme court reversed the ruling of the High Court and held that Part I of the Arbitration and Conciliation Act 1996 was inapplicable in the said dispute since a foreign seat and a foreign law is in exclusion to the Act.
  • The court noted that the Arbitration Act, 1996 does not define or mention juridical seat. The term “juridical seat” on the other hand is specifically defined in Section 3 of the English Arbitration Act. Therefore, this would clearly indicate that the parties understood that the arbitration law of England would be applicable to the arbitration agreement and therefore the petition filed at the Delhi High Court was considered to be non-maintainable.
  • The Court highly referred to the principle devised in the Bhatia International case, stating that “it is only those cases in which agreements stipulate that the seat of the arbitration is in India or on whose facts a judgment cannot be reached on the seat of the arbitration as being outside India that would continue to be governed by the Bhatia principle.”
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Noy Vallesina Engineering Spa A v. Jindal Drugs Limited 2006 (3) ARBLR 510 Bom

NOY VALLESINA ENGINEERING SPA A V. JINDAL DRUGS LIMITED

Noy Vallesina Engineering Spa A v. Jindal Drugs Limited 2006 (3) ARBLR 510 Bom

ISSUE:

  • Whether foreign awards be challenged in Indian Courts?

RULE:

  • Regardless of when the contract was signed, only the foreign court located at the seat of the arbitration can rule on a substantive challenge to a foreign award.

FACTS:

  • Jindal and NV Engineering signed a contract for setting up a plant.
  • When disputes arose, the case was brought before the International Court of Arbitration in 1996 after the Appellant terminated the contract and demanded damages.
  • In 2000, the Tribunal ordered a partial award and Jindal then petitioned the Bombay High Court, and following this, the ICA passed the final award.
  • As a petition to challenge a foreign award through a petition was not maintainable under Section 34 of the Arbitration and Conciliation Act, 1996, the petition filed with the Bombay High Court was denied.
  • Jindal filed a plea and the Bombay High Court division bench granted it. The division bench reversed the single judge’s decision and determined that legitimate procedures under Section 34 of the Arbitration and Conciliation Act, 1996.
  • The Appellant approached the Apex Court.

HELD:

  • The Supreme Court held that a challenge to a foreign award is not maintainable.
  • The Supreme Court referred the judgment in Bharat Aluminium Company v. Kaiser Aluminium Technical Services, observed that even under the pre-BALCO regime, if parties have agreed that the seat of arbitration will be outside India, then Part – II of the Arbitration & Conciliation Act 1996 will not be applicable
  • Hence, in this case, the seat of arbitration between NV Engineering and Jindal was London therefore the award cannot be challenged under section 34 of the Act.
  • Regardless of when the contract was signed, a substantive challenge to a foreign award may only be decided upon by the foreign court located at the seat of the arbitration.
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PASL Wind Solutions Private Limited v. GE Power Conversion India Private Limited (2021) 7 SCC 1

PASL WIND SOLUTIONS PRIVATE LIMITED v. GE POWER CONVERSION INDIA PRIVATE LIMITED

PASL Wind Solutions Private Limited v. GE Power Conversion India Private Limited (2021) 7 SCC 1

ISSUE:

  • Whether two companies incorporated in India choose a forum for arbitration outside India?
  • Whether an award made at such a forum outside India can be enforceable?

RULE:

  • Part II of the Indian Arbitration and Conciliation Act 1996 (the “Arbitration Act”) applies to the enforcement of foreign awards in India
  • There are four criteria for an award to be considered a foreign award: (i) the dispute must be considered to be a commercial dispute under the law in force in India, (ii) it must be made under a written arbitration agreement, (iii) the dispute must arise between “persons” (without regard to their nationality, residence, or domicile), and (iv) the arbitration must be conducted in a New York Convention country.

FACTS:

  • The dispute arose between two Indian parties, PASL Wind Solutions Pvt. Ltd., the appellant, and GE Power Conversion India Pvt. Ltd., the Respondent, are both firms incorporated under the Indian Companies Act 1956, about the sale and warranties of specific converters.
  • Further, GE is a 99% subsidiary of General Electric Conversion International SAS, France, which in turn is a subsidiary of the General Electric Company, United States.
  • The settlement agreement’s arbitration clause said that the hearing would follow the ICC Rules and be held in Zurich but in terms of the settlement agreement, Indian law applied.
  • According to Claim 6 of the settlement agreement, when issues occurred between the parties, PASL sent an arbitration request to the International Chamber of Commerce.
  • The Tribunal issued an award and GE Power applied to enforce it in Gujarat. The Gujarat High Court ruled that the judgment was upholdable even though the two Indian parties had selected a foreign venue, but it also ruled that parties to such arbitration would not be eligible for preliminary injunctive relief in Indian courts.
  • The Supreme Court heard an appeal from PASL Wind Solutions.

HELD:

  • The Apex Court held that two Indian parties can choose a foreign arbitral seat and that parties to such foreign seated arbitrations will be able to obtain interim relief from the Indian courts.
  • The Court further observed that entities can now choose foreign arbitral seats – like London, Dubai, Singapore, and Hong Kong – in their arbitration agreements, even if the subject matter of their contracts and counterparties are entirely situated within India.
  • The Court gave four-factor criteria: (i) the dispute must be considered to be a commercial dispute under the law in force in India, (ii) it must be made under a written arbitration agreement, (iii) the dispute must arise between “persons” (without regard to their nationality, residence, or domicile), and (iv) the arbitration must be conducted in a New York Convention country and these criteria were met by the award in question
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Applicable Laws

Indus Mobile Distribution v. Datawind Innovation Pvt. Ltd. (2017) 7 SCC 678.

INDUS MOBILE DISTRIBUTION V. DATAWIND INNOVATION PVT. LTD

Indus Mobile Distribution v. Datawind Innovation Pvt. Ltd. (2017) 7 SCC 678.

ISSUE:

  • Whether a clause in the arbitration agreement specifying exclusive jurisdiction be nullified?

RULE:

  • If the arbitration agreement between the parties contains an exclusive jurisdiction clause that specifies a certain location as having jurisdiction over all issues related to the arbitration agreement, that provision by itself would nullify the jurisdiction of any other court in that matter.
  • Even if the entire cause of action does not occur at the location given exclusive jurisdiction, this will still be affirmed.

FACTS:

  • In this instance, Respondent was engaged in the manufacture, marketing, and distribution of mobile phones and tablets with its registered office in Amritsar and it was agreed upon between the Appellant and the Respondent that the latter would be the former’s retail chain partner.
  • The two parties got into an argument and when the Appellant failed to make payment and the Respondent exercised the arbitration provision of the agreement, the Appellant received a notification from the Respondent outlining the default of unpaid dues and interest within 7 days.
  • The Arbitration Agreement provided that the dispute shall be finally settled by arbitration and such arbitration shall be conducted in Mumbai and shall be subject exclusively to the Mumbai Court.
  • The Respondent filed two petitions before the Delhi High Court and the Delhi High Court disposed of both the petitions holding that since no part of the cause of action arose in Mumbai, only the courts of Delhi, Chennai, and Amritsar have jurisdiction over the matter. This is so irrespective of the exclusive jurisdiction clause as the courts in Mumbai would have no jurisdiction in the first place.
  • The Appellants approached the Supreme Court.

HELD:

  • The Supreme Court upheld the opinion that once the location of the arbitration is predetermined in the contract, it will only have exclusive jurisdiction there.
  • The Supreme Court affirmed that the phrase “juridical seat” and “legal place” for arbitration are the same.
  • As a result, it was held that no other court in the county would have any jurisdiction over the proceedings in this case and that only the Mumbai courts would have entire jurisdiction. As a result, the Delhi High Court’s decision was overturned.
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Harmony Innovation Shipping Ltd. v. Gupta Coal India Ltd. & Anr. 2015 (3) SCALE 295

HARMONY INNOVATION SHIPPING LTD. V. GUPTA COAL INDIA LTD.

Harmony Innovation Shipping Ltd. v. Gupta Coal India Ltd. & Anr. 2015 (3) SCALE 295

ISSUE:

  • Whether Indian courts had jurisdiction over issues from international arbitration agreements involving parties who had completed numerous contracts, some before and some after the landmark decision in Bharat Aluminium Co. v. Kaiser Aluminium Technical Services Inc. (BALCO)?
  • Whether the language and circumstances of the arbitration agreement impliedly precluded Indian courts from exercising jurisdiction, specifically whether London was designated as the arbitral seat?

RULE:

  • The decision in this case was primarily based on the interpretation of the arbitration agreement and the applicability of Indian arbitration law. The court reviewed the concepts of “express or implied exclusion” of Part I of the Arbitration and Conciliation Act, 1996, as well as the notion of “presumed intention” and the significance of attaining a “fair result.”

FACTS:

  • The case concerned a convoluted set of agreements between Harmony Innovation Shipping Limited (the Appellant) and Gupta Coal India Limited (the Respondent) concerning coal shipment voyages from Indonesia to India.
  • Disputes emerged between the parties, and arbitration proceedings were commenced by the agreements’ arbitration clause.
  • The initial agreement was signed before the BALCO decision, and an addition was signed after BALCO.
  • The central question was whether Indian courts had jurisdiction over disputes arising from these agreements and if the Part I provisions of the Indian Arbitration Act applied.

HELD:

  • The Supreme Court stated unequivocally that Indian courts lack jurisdiction over issues originating from international commercial arbitration agreements when the seat of arbitration is established to be outside of India.
  • Due to the parties’ determination to have London as the legal seat of arbitration, supported by many elements such as the employment of English law and the London Arbitration Association, the arbitration agreement impliedly excluded the jurisdiction of Indian courts.
  • It emphasized the significance of interpreting contracts holistically, considering the commercial environment, the parties’ circumstances, and the history preceding the agreement to determine the parties’ supposed intention.
  • Because the arbitration agreement in dispute was executed before BALCO, the Court used the principles of the Bhatia case, which was determined before BALCO.
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Imax Corporation v. M/S E-City Entertainment Corp. 2017 SCC OnLine SC 239

IMAX CORPORATION V. M/S E-CITY ENTERTAINMENT CORP.

Imax Corporation v. M/S E-City Entertainment Corp. 2017 SCC OnLine SC 239

ISSUE:

  • Whether awards passed outside India, be challenged in Indian Courts?

RULE:

  • The parties expressly agreed that the arbitration will be conducted outside India, Part II of the Arbitration and Conciliation Act, 1996 is excluded and, hence cannot be challenged in Indian Courts.

FACTS:

  • Under a Master Agreement (the Contract), IMAX, a Canadian company that specializes in the projection of big format films, leased six Projection Systems to E-City in India in 2000, and any disputes arising out of this Master Agreement or relating to the rights, obligations, or liabilities of E-City or IMAX thereunder shall be finally resolved by arbitration by the ICC Rules of Arbitration, as stated in the dispute resolution clause of the Contract
  • Both the location and the applicable law for the arbitration agreement were not chosen. The Secretariat to the International Commercial Court of Arbitration (ICC) indicated to the parties that because the Contract did not identify a venue or seat for arbitration, London was recommended as the seat of arbitration.
  • The arbitration resulted in a Partial Final Award on Liability in favour of Imax Ltd and interest and costs in February 2006 when issues occurred between the parties.
  • E-City filed a lawsuit in Mumbai, India in 2009 to contest the ICC awards. The Bombay High Court in India ruled that Indian law applies to the parties’ disagreement and that India is the proper jurisdiction to hear the parties’ challenge to the arbitration judgment.
  • The Appellants approached the Supreme Court.

HELD:

  • The Hon’ble Apex Court held that due to the Parties’ exclusion of the application of Part II of the Act through their selection of the ICC Rules and their decision to have the arbitration take place in London following consultation with the Parties conducted by the ICC Court of Arbitration, the plea to challenge to the ICC Awards rendered in London was not maintainable in India.
  • The Court held that the two reasons for Part II not being applicable were (i) Parties agreed that the seat may be outside India as may be fixed by the ICC, and (ii) It was admitted that the seat of arbitration was London and the award was made there.
  • As a result, the Court dismissed the petition as being maintainable in India and accepted the IMAX appeal.
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Bhatia International v. Bulk Trading SA (2002) 2 SCC 395

BHATIA INTERNATIONAL V. BULK TRADING SA

Bhatia International v. Bulk Trading SA (2002) 2 SCC 395

ISSUE:

  • Whether Indian courts have the authority to give interim relief in international commercial arbitrations if the seat of arbitration is in a foreign country and the arbitration agreement does not expressly exclude Indian court jurisdiction?
  • Whether interpreting the Indian Arbitration and Conciliation Act, 1996 allows Indian courts to exercise authority and intervene in foreign-seated arbitrations, and whether such intervention affects the enforceability of arbitration agreements and awards in international commercial contracts involving Indian parties?

RULE:

  • Indian courts can award temporary relief and intervene in international commercial arbitration matters, provided the parties’ arbitration agreement does not expressly or tacitly preclude such jurisdiction. The Bhatia International case allowed Indian courts to exercise jurisdiction in concerns about international commercial arbitration proceedings outside India to provide interim protection measures. In this case, Indian courts modified the circumstances under which they can intervene in disputes involving foreign parties.

FACTS:

  • Bhatia International, an Indian company, signed a contract to sell and purchase items with Bulk Trading SA, a Swiss corporation.
  • The two parties’ contract included an arbitration clause stating that any issues arising from the contract would be addressed through arbitration by the International Chamber of Commerce (ICC) norms, with the arbitration taking place in Paris, France.
  • When the parties disagreed, Bhatia International started arbitration procedures in India, seeking the appointment of an arbitrator and temporary relief from the Indian courts.
  • Bulk Trading SA challenged the Indian court’s jurisdiction, stating that the parties had agreed to hold the arbitration in Paris and that Indian courts should not meddle.

HELD:

  • In its decision, the Supreme Court of India addressed whether Indian courts had jurisdiction in matters of international commercial arbitration where the seat of arbitration was located outside of India.
  • The Court determined that Indian courts had the power to intervene and award interim relief in such situations, even if the seat of arbitration was in another country. The interpretation of the Indian Arbitration and Conciliation Act 1996 was used to make this judgment.
  • The Court concluded that Indian courts had the authority to grant interim measures of protection to support and facilitate the arbitration process, even though the seat of arbitration was located outside of India.
  • This judgment sought to balance the interests of parties involved in international commercial transactions while ensuring the efficacy of arbitration processes.
  • However, it is crucial to note that the Indian Supreme Court partially reversed this ruling in the case of Bharat Aluminium Co. v. Kaiser Aluminium Technical Services (2012) 9 SCC 552, which clarified the law on this subject
  • According to the Bharat Aluminium decision, Indian courts would only have the authority to intervene in arbitrations outside India if the parties agreed directly or implicitly.
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Aniket SA Investments LLC v. Janapriya Engineers Syndicate Private Limited and Ors. (Commercial Appeal No. 504 of 2019)

ANIKET SA INVESTMENTS LLC V. JANAPRIYA ENGINEERS SYNDICATE PRIVATE LIMITED AND ORS.

Aniket SA Investments LLC v. Janapriya Engineers Syndicate Private Limited and Ors. (Commercial Appeal No. 504 of 2019)

ISSUE:

  • Whether there is concurrent jurisdiction of two Courts, is the Impugned Order correct to hold that as a matter of party autonomy, the parties have made an express choice in conferring jurisdiction on the Courts?

RULE:

  • A choice of seat is itself an expression of party autonomy and carries with it the legal effect of conferring exclusive jurisdiction on the Courts of the seat.

FACTS:

  • A foreign investor named Aniket SA Investments LLC is the appellant, and a Telangana-based special-purpose vehicle named Janapriya Engineers and Syndicate Private Limited is the respondent.
  • A shareholders’ and share subscription agreement had been signed by the Respondent and the Appellant and due to disagreements between them, it led to a dispute notice to initiate arbitration.
  • The relevant clauses of the Agreement are Clause 20.3 (Governing Law and Jurisdiction) which provided jurisdiction to Courts at Hyderabad and Clause 20.4 which provided jurisdiction to Courts at Mumbai.
  • The Appellant then submitted a petition by Section 9 of the Arbitration and Conciliation Act, 1996.
  • As a point of party autonomy, the learned single judge of the Bombay High Court noted that the parties had explicitly chosen to give Hyderabad’s Court jurisdiction over their dispute. Therefore, Mumbai’s selection as a “seat” was ignored by the Impugned Order.
  • So, to contest the Impugned Order, an appeal was filed under Section 37 of the Act.

HELD:

  • The Hon’ble Division Bench set aside the order of the Learned Single Judge.
  • The act of selecting a venue is the party’s autonomy and has the legal consequence of granting the venue’s Court exclusive authority.
  • The arbitration clause has expressly been established to be “subject to” the Court of Choice in Hyderabad. Mumbai has been designated as the arbitral venue, according to the arbitration clause’s clear language. As a result, Mumbai would be the only Court with jurisdiction.
  • The choice of Courts at Hyderabad is made “subject to” the seat at Mumbai, which amounts to a choice of Courts at Mumbai, even if it were to be understood that two concurrent Courts would have jurisdiction.
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Bharat Aluminium Co. v. Kaiser Aluminium Technical Services Inc., (2012) 9 SCC 552

BHARAT ALUMINIUM CO. LTD. V. KAISER TECHNICAL SERVICES INC.

Bharat Aluminium Co. v. Kaiser Aluminium Technical Services Inc., (2012) 9 SCC 552

ISSUE:

  • Whether Part I of the Arbitration and Conciliation Act 1996 is applicable to arbitration held outside the territory of India?

RULE:

  • The Jurisdictional Theory of Arbitration or the Territorial Theory in UNCITRAL explains broadly the role of the Courts at the seat of Arbitration having supervisory powers and control over the proceedings taking place within the boundaries of its territory.

FACTS:

  • Vide an agreement dated April 22, 1993, executed between the Appellant (BALCO) and the Respondent (Kaiser), the Respondent was to supply and install a computer-based system in the premises of the Petitioners business.
  • The Agreement contained an Arbitration Agreement which stated that any dispute that arose between the two parties would be subject to be settled in accordance with the English law and the venue of said arbitration proceedings would be London. However, the agreement stated that the governing law would be Indian Law.
  • A dispute arose and was referred to the Arbitral Tribunal in England, which passed two awards and the same were to be challenged in India under Section 34 of the Arbitration and Conciliation Act 1996. The District Court of Bilaspur and the High Court rejected the order passed by the Arbitral Tribunal in England. The Appellant thus appealed to the Supreme Court.

HELD:

  • The Apex Court firstly held that there is a distinct difference between Part I and Part II of the Act, and the two must not be overlapped. The Court emphasized on the difference between a ‘seat’ and a ‘venue’ , and that the mere choice of conducting arbitration in another country signifies an acceptance to the law of that country, and thus, even if the agreement specifies Indian Law to be the governing law, Part I of the Act would not be rendered to be applicable and an Indian Court(s) cannot exercise supervisory jurisdiction for the same.
  • The Court further dismissed the judgement given in the Bhatia International case, and held that Indian Courts do not have the power to grant interim measures when the seat of Arbitration is located outside India. The Court concluded by stating that in international commercial arbitrations conducted in foreign locations, an application for interim relief would not be maintainable in India, by way or arbitration or by filing a suit.