Bhatia International vs. Bulk Trading S.A. & Anr.

Bhatia International vs Bulk Trading S. A. & Anr. (2002)

Contract contained an arbitration clause which provided that arbitration was to be as per the rules of the International Chamber of Commerce (ICC).

ISSUE: Whether Indian Courts have power to grant interim relief U/S 9 of the A&C Act 1996?

CONTENTIONS

Appellant

  1. Part I of the Act only applies to arbitrations where the place of arbitration is in India.
  2. Framing the said Act the legislature has purposely not adopted art 1(2) of the UNCITRAL Model Law. He submits that this clearly shows the intention of the legislature that they did not want part I to apply to arbitrations which take place outside India.
  3. Sec 2(f) of the said Act defines an international commercial arbitration. International commercial arbitration could take place either in India or outside India. If the international commercial arbitration takes place out of India then part I of the said Act would not apply.
  4. When arbitration is being held in Paris i.e. out of India. To such arbitrations part I does not apply. Sec 9 and 17 fall in part I. Therefore Sec 9 and 17 would not apply and cannot be used in cases where the place of arbitration is not in India.

OPINION OF THE COURT

The Court observed that accepting the arguments to the appellant amount to holding that the legislature has left a lacunae in the said Act. There would be a lacunae as neither part I or II would apply to arbitrations held in a country which is not a signatory to the New York Convention or the Geneva Convention (non-convention country). It would mean that there is no law, in India, governing such arbitration. It also leads to an anomalous situation, inasmuch part I would apply to Jammu and Kashmir in all international commercial arbitrations but part I would not apply to the rest of India if the arbitration takes place out of India. Furthermore, there can also be an apparent conflict between sub-s (2) of s 2 [CG1] on one hand and sub-ss (4) and (5) of s 2 on the other. In addition to this sub-s (2) of s 2 would also be in conflict with s 1 which provides that the Act extends to the whole of India. A party would be left remediless inasmuch as in international commercial arbitration which take place out of India the party would not be able to apply for interim relief in India even though the properties and assets are in India. Thus a party may not be able to get any interim relief at all.

HELD

  1. A construction that results in hardship, serious inconvenience, injustice, absurdity or anomaly or which leads to inconsistency or uncertainty and friction in the system which the statute purports to regulate has to be rejected and preference should be given to that construction which avoids such results.
  2. The definition makes no distinction between international commercial arbitrations held in India or outside India…The said Act nowhere provides that its provisions are not to apply to international commercial arbitrations which take place in a non-convention country.
  3. There would also be an anomaly inasmuch as even if an international commercial arbitration takes place outside India, part I would continue to apply in Jammu and Kashmir, but it would not apply to the rest of India.
  4. The wording of sub-s (2) of s 2 suggests that the intention of the legislature was to make provisions of part I compulsorily applicable to an arbitration, including an international commercial arbitration, which takes place in India. Parties cannot, by agreement, override or exclude the non-derogable provisions of part I in such arbitrations. By omitting to provide that part I will not apply to international commercial arbitrations which take place outside India the affect would be that part I would also apply to international commercial arbitrations held out of India. But by not specifically providing that the provisions of part I apply to international commercial arbitrations held out of India, the intention of the legislature appears to be to ally parties to provide by agreement that part I or any provision therein will not apply.
  5. The opening words of ss 45 and 54, which are in part II, read ‘notwithstanding anything contained in part I’. Such a non-obstante clause had to be put in because the provisions of part I apply to part II.
  6. The definition indicates that an award made in an international commercial arbitration held in a non-convention country is also considered to be a domestic award’.
  7. Thus s 28 does not provide for rules where the place of arbitration is out of India.

 [CG1]This Part shall apply where the place of arbitration is in India.

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