Bhatia International v. Bulk Trading S.A. (2002)

The question is the most important structural question in Indian arbitration: does Part I of the Act follow an Indian party abroad? Bhatia answered yes; BALCO later answered no. You cannot write on the seat of arbitration without both, and you must know that Bhatia is no longer the law except for the residue the 2015 amendment deliberately restored.

An international commercial arbitration was being conducted outside India under the rules of an arbitral institution. A party sought interim relief in India under s. 9, which sits in Part I. The objection was that Part I applies only to arbitrations held in India.

Part I of the 1996 Act applies also to international commercial arbitrations that take place outside India, unless the parties expressly or impliedly exclude it or any of its provisions. Interim relief under s. 9 was therefore available notwithstanding the foreign venue.

The steps are a good example of arguing from statutory structure.

Step one — the definition does not distinguish. The definition of international commercial arbitration in s. 2(1)(f) turns on the parties — a foreign national or habitual resident abroad, a body corporate incorporated abroad, an association whose central management and control is exercised from abroad, or a foreign Government. It says nothing about where the arbitration is held.

Step two — the gap in Part II. Part II applies only to arbitrations in a Convention country. But an international commercial arbitration may perfectly well be held in a non-Convention country. Nothing in the Act says Part I does not apply to those.

Step three — the object. The object of the Act is a uniform legal framework for the fair and efficient settlement of disputes arising in international commercial arbitration. A reading that left a party to a non-Convention arbitration with no forum for interim protection defeats that object.

Step four — party autonomy as the corrective. Because Part I is largely derogable, parties who do not want it can exclude it, expressly or by implication.

It opens: Does Part I apply to foreign-seated arbitrations? — and it is the first half of the answer.

You must complete it with BALCO, where a five-Judge Bench held that Part I does not apply where the seat is outside India, overruled Bhatia, and removed the need for parties to exclude Part I expressly. The consequence noticed at the time was that no interim relief was available in India in support of a foreign-seated arbitration — the gap the 2015 proviso to s. 2(2) then closed by restoring ss. 9, 27 and 37(1)(a) and (3) for such arbitrations unless the parties agree otherwise.

In an essay on judicial intervention, Bhatia is the standard example of an expansive reading that had to be corrected, and it sits beside ONGC v. Saw Pipes on the same list.

It does not decide anything about enforcement of foreign awards under Part II, which was never in doubt.