I. Bhatia International v. Bulk Trading S.A.

(2002) 4 SCC 105

The parties to an international contract had resorted to arbitration in accordance with the rules

of ICC, Paris to be conducted in Paris. As the foreign party wanted to ensure that in the event

of a favourable award it would be able to recover its claim from the Indian party, it applied to

an Indian court for interim measures securing the property of the Indian party. The Indian party

objected to the application on the ground that the arbitration in question was being held in Paris,

and under the New York Convention there is no provision for interim measure being granted

by a court other than one in which the arbitration is being held. The High Court rejected the

contention. The Indian party then approached the Supreme Court, which upheld the High

Court's judgment.

HELD:

In brief, the Supreme Court of India held that Part I of the Arbitration and Conciliation Act,

1996, which gives effect to the UNCITRAL Model Law and which confers power on the court

to grant interim measures applied even to arbitration being held outside India. It also held that

Indian courts had exclusive jurisdiction to test the validity of an arbitral award made in India

even when the proper law of the contract is the law of another country.

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

The Appellants had entered into an agreement with the respondents whereby the respondents

were required to supply and install computer based system at one of the appellant premises.

The agreement was governed by the prevailing law of India but it contained an arbitration

clause that stated that any dispute that may arise in future shall be governed by the English

arbitration law and the venue shall be London. Thus the clause in the agreement stated that

settlement or adjudication of any dispute in relation to rights or obligations under the said
agreement shall be governed by English arbitration law and the venue for the arbitration

proceedings shall be London.

A dispute arose between the appellants and the respondents with respect to performance of

agreement and the matter was referred to arbitration. The arbitration proceeding were held in

England and two awards were passed in the proceeding. The Appellants thereafter filed

application under section 34 of Arbitration Act 1996 for setting aside awards. The district court

and the High Court of Chhattisgarh refused the setting aside of the awards and appellants filed

an appeal against the said order in the Supreme court of India.

HELD:

 Part I and Part II are applicable to different fields. Part I is applicable to all domestically

rendered arbitration proceedings that include arbitration proceeding with no foreign

party or arbitration proceedings with both foreign parties but held in India or

international commercial arbitration proceeding that are held in India.

 Part II of the Act applies only to enforcement of foreign awards in India.

 The territoriality principle of Model law upon which the Indian arbitration act 1996 has

been enacted has been enshrined in the Indian Arbitration act.

 All provisions of Part I [Section 1, 2 (4), (5), (7)] reinforce that Part I shall be applicable

to all arbitration proceedings held in India and cannot by purpose of interpretation be

extended to International commercial Arbitrations held outside India.

 Part I applies to all arbitration proceedings that are held in India and this extends also

to those arbitration proceedings that are held under any statutory legislation that is in

force in India.
 Section 2 (7) reinforce that Part I shall be applicable to all arbitration proceedings that

are held in India and distinguishes a domestically rendered award covered by Part I

from foreign award covered by Part II. Section 2 (7) excludes the possibility of the

award passed in arbitration proceedings held in India involving two foreign parties

being considered as non-domestic award by providing that such an award shall be

domestic award.

 The choice of the country as the seat of arbitration inevitably imports an acceptance

that the law of that country shall be applicable to the arbitration proceedings. “Seat” of

arbitration and “place” of arbitration are used interchanging but the seat shall remain

the place mentioned in the arbitration agreement. Parties of different nations are

involved in international commercial arbitration and hence the venue for arbitration

might change but the seat shall remain the same.

 Section 48 of Part II does not confer jurisdiction on two courts to annul the award and

is provided only to provide alternative to parties to challenge the award in case law of

the country where seat of arbitration is located has no provision for challenge of the

award.

 The words “set aside or suspend” in the section 48 does not mean that the foreign award

that is sought to enforced can be challenged on the merits by the Indian Courts and the

said provision merely recognizes courts of two nations who are competent to suspend

or annul the award and does not ipso facto confer any jurisdiction on the two courts to

annul the award that is made outside India. The Indian arbitration act 1996 does not

specifically provide conferment of jurisdiction on Indian court to set aside awards made

outside India.
  Interim relief under Section 9 can be awarded in case seat of arbitration in international

commercial arbitration is India and thus intervention under Section 9 can be sought

only with respect to domestic awards. Part II has no provision that grants interim relief

leading to the logical inference that Indian court cannot pass interim orders against

award rendered outside India.

 The arbitral awards awarded in international commercial arbitration with seat of

arbitration outside India shall be subject to the jurisdiction of Indian courts only when

they are sought to be enforced in India in accordance to Part II of the Act.

 Part I of the Act shall not be applicable to non –convention arbitral awards. The

definition of foreign awards has been intentionally limited to New York convention and

Geneva convention and hence, there is no provision in the Act in respect to enforcement

of non-convention arbitral awards and hence remedy with respect to the same cannot

be incorporated in Act and this can only be done on by necessary amendments that can

be introduced only by the Parliament.

 Many judgements have been delivered by relying on Bhatia trading case and hence the

said judgement shall be applicable prospectively on all arbitration agreements executed

post the date of 6-September 2012.

III. TDM Infrastructure Private Limited v. UE Development India Private Ltd (2008)

14 SCC 271.

The two parties to the dispute were companies registered under the Companies Act of 1956.

However, the directors and the shareholders of the petitioner company were residents of

Malaysia and the Board of Directors of the petitioner also sat in Malaysia. The respondent

entered into a contract with the petitioner, which also contained an arbitration clause. This
arbitration clause mandated that the law applicable in case of a dispute would be the Indian

Arbitration Act of 1940 and amendments thereafter.

Subsequently, differences arose between the parties. When the arbitration agreement was

resorted to, the Respondent proposed an amendment to the arbitration clause by changing the

venue of arbitration to Kuala Lumpur, Malaysia, and applying the law of Malaysia, and the

Malaysian Arbitration Act of 2005. This proposal was rejected by the petitioner, subsequent to

which both parties proposed nominees that were rejected by the other party. Therefore, an

application was made under Sections 11(5) and 11(6) of the Arbitration and Conciliation Act

of 1996 for the appointment of a sole arbitrator. Section 11 of the Arbitration & Conciliation

Act, 1996 deals with the procedure to appoint arbitrators. Section 11(12) states that only in

cases of International Commercial Arbitration, the Chief Justice of India can exercise

jurisdiction to appoint an arbitrator. In all other matters i.e. domestic arbitration, the

appointment of the arbitrator has to be carried out by Chief Justices of High Courts. Thus, the

matter hinged upon the issue whether this was a case of International Commercial Arbitration.

HELD:

The Court held that if both the companies are incorporated in India, the arbitration agreement

concluded between them shall be construed to be a domestic arbitration agreement and not an

International Commercial Arbitration. The Court also placed Section 2(1)(f)(ii) on a higher

pedestal than Section 2(1)(f)(iii) remarking that the latter will only be applicable in cases where

Section 2(1)(f)(ii) does not apply in its entirety. Thus, the Court limited the application of

Section 2(1)(f)(iii) to cases where the body corporate is an association or a body of individuals

unregistered or unincorporated under Indian Companies Act, 1956.

IV. Venture Global Engineering v. Satyam Computer Services Ltd

Venture Global Engineering (“Venture”) and Satyam Computer Services Ltd. (“Satyam”)

entered into a Joint Venture Agreement and a Shareholders Agreement to establish a company

called Satyam Venture Engineering Services (the “Company”). Thereafter the Company

entered into an agreement with TRW Inc. for IT services. Subsequently, a dispute on the

quantum of the retained receipts arose and the dispute were referred to arbitration. The

arbitrator, by an Award dated April 3, 2006, directed Venture to transfer its entire shareholding

in the Company to Satyam. Satyam filed a Petition for the recognition and enforcement of the

said Award before the U.S. District Court in Michigan. Following Satyam’s Petition, Venture

filed a Suit inter alia seeking a declaration to set aside the Award under Section 34 of the

Arbitration and Conciliation Act of 1996 (the “Act”). The Trial Court dismissed the Suit on the

grounds that the Award being a foreign Award could not be challenged under Section 34 of the

Act.

HELD:

Venture challenged the Trial Court’s Order before the Andhra Pradesh and which challenge

came to be dismissed. Venture preferred a Special Leave Petition wherein the Supreme Court

by its Judgment held that a foreign Award could be challenged under Section 34 of the Act and

remanded the case to the City Civil Court at Hyderabad, directing the parties to maintain status

quo in relation to the transfer of shares. The Court acknowledged that the legislative intent thus

suggested that any award that is induced or affected by fraud or corruption would be contrary

to the public policy of India. In the present case, it seemed that the Award was contrary to the

interests of justice because certain vital information was concealed from the Arbitrator and

therefore, was not taken into consideration in the making of the Award. The concept of public

policy is incapable of a precise definition and is a rather vexed notion. The Court, citing the
renowned Redfern and Hunter on International Arbitration, observed that an attempt should be

made to arrive at a somewhat acceptable standard by construing that something is opposed to

public policy where there is an excess of jurisdiction and a lack of due process.

Any award induced or affected by fraud will fall within the grounds of excess of jurisdiction

and a lack of due process and thus be against public policy. Hence, the Award in the present

case was fraudulently derived as the relevant facts which were concealed from the Arbitrator,

ran counter to Indian public policy. The aggrieved party, in this case Venture, must thereafter

be allowed to challenge the Award when such suppressed information came to his knowledge.

Accordingly, in the interest of justice and considering the fairness of procedure, the Court

allowed Venture to bring the new materials on record as those materials are not irrelevant and

they may have a bearing on Venture’s plea for setting aside the Award.

V. Addhar Mercantile Private Limited, v. Shree Jagdamba Agrico Exports Private

Limited 2015 SCC OnLine Bom 7752.

The Bombay High Court was dealing with a petition filed under Section 11(6) of the Arbitration

and Conciliation Act, 1996 ("Arbitration Act"), seeking appointment of an arbitrator, pursuant

to the invocation of the arbitration agreement that read "Arbitration in India or Singapore and

English law to be apply". The appellant contended that since both the parties are incorporated

in India, they cannot derogate from Indian law and choose the seat of arbitration to be

Singapore and apply English law to the arbitration proceedings. The appellant further

contended that the arbitration agreement also provided that arbitration shall be in India or

Singapore, and since both parties are from India, they cannot be allowed to derogate from

Indian law. The respondent, in furtherance of their objections to the court's jurisdiction,

contended that it is possible for two Indian parties to have the seat of arbitration at Singapore

and apply English law.

Held:

While dealing with these contentions, the Bombay High Court placed reliance on the TDM

case and held that Indian nationals should not be permitted to derogate from Indian law and

that the same is part of the public policy of the country. On the facts of the case and more

particularly the curiously worded arbitration clause that mentioned the seat of arbitration as

either India or Singapore, the Bombay High Court proceeded to constitute the arbitral tribunal

in India, to decide the disputes as per the substantive law of India in terms of Section 28 (1) (a)

of the Arbitration Act. Interestingly, the Bombay High Court observes in Para 8 of the judgment

that "... If the seat of the arbitration would have to be at Singapore, certainly English law will

have to be applied..." It would appear as if the Bombay High Court acknowledges that it would

be possible for two Indian parties to have foreign seated arbitration with applicable foreign

law, and that the bar on Indian nationals choosing foreign law is for arbitrations in India under

Section 28 of the Arbitration Act. However, at Para 12 of the judgment, the Bombay High

Court negates the argument of the respondent that Indian parties can have the seat of arbitration

in Singapore and choose English law. The judgment does lay down the law clearly, and relies

solely on the TDM case, while deciding the case.

VI. Sasan Power Limited v. North American Coal Corporation India Private Limited

2015 SCC Online MP 7417.

The MP High Court was presented with the question of whether or not two India

companies/parties can agree for arbitration in a foreign country, according to law of that

country. The court was deciding an appeal challenging the judgment and decree passed by the

lower court, whereby the suit filed by Sasan Power Limited ("Sasan") was dismissed,

upholding the objections raised by North American Coal Corporation India Private Limited

("NACCIPL") under Section 45 of the Arbitration Act, for referring the dispute to arbitration.
Similar contentions were taken by Sasan to the effect that two Indian companies cannot agree

for arbitration in a foreign country according to law of that country, as that would be violative

of public policy of India in terms of the law laid down in the TDM case. This contention was

rebutted by NACCIPL by relying on the judgment of the Supreme Court in Atlas Export

Industries v. Kotak ("Atlas Exports case"), where the Supreme Court permitted two Indian

companies to refer their disputes to refer their disputes to a foreign seated arbitration. The

Madhya Pradesh High Court treated the observations made in TDM case to be non-binding and

followed the judgment in Atlas Exports case that was passed by a larger bench. The court also

briefly examined the scope of Part I and Part II of the Arbitration Act, and its effect on the seat

of arbitration and the nationality of the parties, and held that two Indian companies /parties can

arbitrate out of India. However, while the court elaborately discussed the right of Indian

companies/parties to choose foreign seated arbitration, it did not make detailed findings on the

question of whether two Indian companies/parties can apply foreign law to the arbitration

proceedings.

VII. GMR Energy v Doosan Power 2017 SCC OnLine Del 11625.

GMR Chhattisgarh (“GCEL”) and Doosan India (“Doosan”) entered into 3 EPC contracts in

2010 (“EPC Contracts”) which provided for SIAC arbitrations in Singapore. GMR

Infrastructure Ltd. (“GIL”) furnished a corporate guarantee to Doosan, on behalf of GCEL in

2013 (“Corporate Guarantee”) containing an arbitration clause (SIAC administered, in

Singapore). Two MOUs were executed between Doosan and GMR Energy (“GE”) in 2015

where GE agreed to repay Doosan in installments for GCEL’s liability under the EPC contracts.

The MOUs did not contain arbitration clauses and were terminated before commencing

arbitration.
Doosan invoked SIAC arbitration under the EPC contracts and the Corporate Guarantee

making GCEL and GIL parties. Doosan sought GE’s joinder based on the MOUs and theories

of joinder of non-parties including alter ego, group companies’ doctrine, and common

directors, seeking repayment jointly and severally from GCEL, GIL and GE. In response, GE

filed a suit seeking a permanent injunction against Doosan from continuing arbitration since

GE was not a party to the arbitration agreement in the EPC Contracts and the Corporate

Guarantee. The Court stayed the constitution of the SIAC tribunal. Doosan sought vacation of

this order and applied under the Arbitration and Conciliation Act, 1996 (“AA”) to compel GE

to participate in the arbitration. In this hearing, GE’s motion for injunction and Doosan’s

motion for vacation and arbitral reference were heard together and decided.

JUDGMENT:

Delhi HC held that the Arbitration Proceedings would fall under Part II of the Act.

The Delhi HC affirmed the finding of the Supreme Court of India (“Supreme Court”) in Atlas

Exports, wherein the Supreme Court had to determine whether the fact of two Indian parties

having a foreign seated arbitration would be opposed to public policy under Section 23 read

with Section 28 of the Contract Act. The Supreme Court answered in affirmative, meaning that

there is no prohibition for two Indian parties to opt for a foreign seat of arbitration. The Madhya

Pradesh High Court also affirmed the ruling in Sasan Power which had relied on Atlas Exports

to reach the same conclusion.

The Delhi HC also dismissed GMR Energy’s contention that the decision in Atlas Exports is

under the 1940 Arbitration Act, hence not applicable under the Act. On this issue, reliance was

placed on the Supreme Court’s decision in Fuerst Day Lawson v. Jindal Exports Ltd14, wherein

it was held that the new statute is more favourable to international arbitration than its previous

incarnation.
The Delhi HC also held that the decision in Seven Islands Shipping and Aadhar Merchantile

are per incuriam as they had not considered Atlas Exports.

Delhi HC held that GMR Energy was correctly impleaded in the Arbitration Proceedings

The Delhi HC observed that in view of the fact that: (a) GCEL was a joint venture of GMR

Group, and the group company did not observe separate corporate formalities and comingled

corporate funds; (b) GMR Energy relied on the MOUs signed and discharged liability by

making part payment; and (c) at the time of entering into the MOUs, GMR Energy had acquired

GCEL; Doosan India has made out a case for proceeding against GMR Energy.

Before arriving at its decision, the Delhi HC considered the decision of the Supreme Court in

Chloro Control wherein it was held that the legal bases to bind alter ego to an arbitration

agreement are implied consent, third party beneficiary, guarantors, assignment or other transfer

mechanism of control rights, apparent authority, piercing of corporate veil, agent principle

relationship etc. Interestingly, the Delhi HC while discussing the principle of alter ego held that

the decision of Delhi HC in Sudhir Gopi is per incuriam, in so far as it failed to consider the

issue of arbitrability of alter ego and the decision was passed without taking into consideration

the decision of Supreme Court in A Ayyasamy v. A Paramasivam (“Ayyasamy”), wherein the

Supreme Court carved out instances which cannot be referred to arbitration.

ANALYSIS:

This decision, re-affirming that two Indian parties can seat their arbitration outside India and

setting a non-signatory to arbitration, is yet another testament to pro-arbitration approach of

Indian courts with the Delhi HC leading the charge.