Say the ratio out loud before you open Reasoning — recalling it unprompted is exactly what the exam pays for.
Why it matters
This is the decision that fixed the seat as the organising idea of Indian arbitration law, and the one that removed Indian courts from foreign-seated arbitrations. Any question about the territorial reach of Part I is answered from here.
Facts
The question referred to the larger Bench was whether Part I of the 1996 Act applies to an international commercial arbitration where the seat of arbitration is outside India.
Held
Part I does not apply where the seat of arbitration is outside India. Bhatia International was overruled. Part I applies only to arbitrations seated in India, whether purely domestic or international commercial. It follows that Indian courts could not assert jurisdiction over foreign-seated arbitrations under ss. 9, 11 and 34. It also follows that parties need not expressly exclude Part I for a foreign-seated arbitration; the exclusion is territorial and automatic.
Reasoning
Step one — the seat, not the parties, fixes the supervisory court. The nationality of the parties determines whether an arbitration is an international commercial arbitration; it is the seat that determines which court supervises it. Once that distinction is taken, the Bhatia reading collapses.
Step two — read s. 2(2) territorially. Part I applies where the place of arbitration is in India. A statute that says so cannot be read as also applying where the place of arbitration is not in India.
Step three — accept the consequence. The Bench recognised the practical cost: a party to a foreign-seated arbitration could no longer obtain urgent interim relief from an Indian court over assets in India. That was treated as a matter for the legislature, and the legislature answered it.
Exam use
It opens: Explain the applicability of Part I to foreign-seated arbitrations — and it is the ruling half of the Bhatia/BALCO pair.
Always carry the sequel. The 2015 amendment inserted a proviso to s. 2(2) restoring ss. 9, 27 and 37(1)(a) and (3) to international commercial arbitrations seated outside India, unless the parties agree otherwise. A student who stops at BALCO states the law as it was between 2012 and 2015, not as it is.
In an essay on minimum judicial intervention, use BALCO as the counterexample to Saw Pipes: here the Court narrowed its own jurisdiction, and Parliament then restored a controlled part of it.
It does not decide the enforceability of a foreign award, which is governed by Part II and untouched; nor does it decide what counts as an implied choice of seat where the agreement is silent or contradictory.