Judicial Intervention in Arbitral Process: A Paradigm Shift Post the “BALCO” Judgement

Judicial Intervention in Arbitral Process: A Paradigm Shift Post the “BALCO” Judgement

Authors: Arunav Bhattacharjya and Parvez Rahman, NLUJAA, Assam


The year 2012 saw a momentous decision by the Supreme Court of India, a five-judge bench overruled the former disputatious judgment pronounced in the Bhatia International v. Bulk Trading SA in the verdict of Bharat Aluminium Co. v. Kaiser Technical Services. In its ruling, the bench confined the scope of intervention by the Indian courts in the process of arbitration which are conducted outside the jurisdictional boundaries of India by leaving out the applicability of Part I of the Indian Arbitration and Conciliation Act, 1996. In the Bhatia, the Supreme Court reasoned on the issue on whether it could place to a request for episodic measures to an Indian court in the process of ICC arbitration which has its seat in Paris (outside the Indian territory). The appellant in Bhatia contented on the grounds that the Indian court had no competent jurisdiction and that Part I of the Arbitration and Reconciliation Act, did not apply to arbitration processes in which the seat of arbitration is outside the territorial boundary of India. The matter soon came up to the doors of the Apex Court. It was also held that the provisions of Part I of the Act are equally applicable in the processes of ICC arbitrations held outside India, unless there is any such provision which have been excluded by virtue of the contractual agreement between the parties, which is either expressly or impliedly stated.

Post-Bhatia Judgment Positions

The Indian Court in Venture Global Engineering v. Satyam Computers Services[1] intervened in an arbitration which had a foreign seat in the wake of the decision in the Bhatia case. The case dealt with an London Court of International Arbitration award, having its seat in England. The Supreme Court ruled that Part I of the Act practically applied to such a foreign award, and therefore the courts in India have competent jurisdiction to set aside the award with the applicability of Part I. Following this, in Indtel Technical Service Pvt. Ltd. v. W.S Atkins Plc[2], the Indian Court took up the power to appoint arbitrators in arbitral proceedings in which the seats are awarded outside India conformable to Section 11 of the Act. In a bid to restore the autonomous stature of a party, the court wanted to restrict the strict applicability of Part I of the Act in arbitrations with a foreign seat. The court demonstrated the effort to infer only implied exclusions of Part I where the parties had chosen a foreign seat outside of India and the jurisdiction is of foreign law to govern the arbitration. In the case of Videocon Industries Ltd. v. UOI[3], the Indian court ruled that, since the parties agreed to an arbitration clause to be governed by the English law, even though the main contractual agreement was governed by the Indian law, Part I of the Act was impliedly excluded.

In Yograj Infrastructure Ltd v. SSang Yong Engineering and Construction Co Ltd[4] the Supreme Court held that the nomination of a foreign seat of arbitration is sufficient in itself to result in exclusion of supervisory jurisdiction of the Indian Courts over the arbitral proceedings. The international arbitration community has been a long sufferer of this raucous situation which prevailed in India, and this happened to blur the country’s stance on the restoring party autonomy. This was a position that was clearly not the intention of the Indian Parliament when enacting this Act. Therefore in the light of the same, the BALCO judgment settled this orientation which was prevailing with respect to the arbitral proceedings that had a seat outside India and where Indian parties wanted the Indian Courts to intervene in setting aside foreign awards, thus making it non-enforceable in India which makes the entire arbitral proceedings fruitless.

Categorical changes post the BALCO Judgement

The Supreme Court of India initiated a direct inquiry on the rationality behind the applicable provisions of the New York Convention and the UNCITRAL Model Law. This was an essential development in the field as it represented a paradigm shift off from its previous practice. The Apex Court’s willingness to do so rang the message that Indian courts won’t longer be hesitated to be guided by the provisions of applicable international conventions and also construe with the Indian legislation in conformity with the same. This has proved to be important in the view of the fact that a major hurdle that arbitration practitioners face in India is the courts’ difficulty in adapting accordingly to arbitration processes governed by a law based on the UNCITRAL Model Law.[5]

Challenges Ahead in the Post-BALCO Landscape

The BALCO judgment was well received since Part I of the Act incorporated many provisions that allowed judicial interference by the Indian courts in the arbitral proceedings specially those having a foreign seat, which thereby keep up the entire process and makes the foreign parties hesitant to deal with Indian parties due to the invasive nature of the Judiciary. This nonetheless also equipped foreign investors with a renewed confidence in dealing with Indian parties. Furthermore, the principle of prospective application of the judgment also meant re-negotiation of the previous agreements to exclude the potential application of Bhatia. The BALCO decision therefore provided the requisite thrust to enable the Indian courts to make a firm start, even though there are numerous other issues that also need to be dealt with by the Indian courts in the wake of this decision in the BALCO.[6]

Another concern that arises is from the fact that the BALCO decision will apply prospectively only to arbitration agreements which are concluded on or after 6th September 2012.[7] This clearly means that Part I of the 1996 Act will only apply to arbitration agreements concluded prior to that date unless the parties have either expressly or impliedly agreed otherwise in their agreement. Considering the evidential delays in court proceedings of the country and the fact that it is a very common parlance for an Indian court to acquire a final decision after litigating for at least 8 to 10 years. The decision given out in the BALCO effectively means that despite Bhatia and Venture Global being expressly overruled, these precedents will unlikely to continue to be a precedent for any judgement by an Indian Court with respect to arbitration agreements which were entered into prior to September 6th 2012.[8] The aforesaid decisions make it obvious that the BALCO judgement is definitely not the cure for all the ills related to arbitration in India, but it has surely proved to be a head start by the Supreme Court in the right direction.[9] After the 2015 Amendment to the Arbitration and Conciliation Act, the Indian courts have stepped up from their usual methodological analysis of insignificant intervention in cases which concerns the requirement of foreign awards, and have also made significant strides to prevent enforcement just on strained grounds.

The manner in which the prevalent law on the enforcement of foreign awards which has been dependent solely upon these changes in the BALCO and the subsequently in the 2015 Amendment has made India an Arbitration centre, the courts have gone about to give impetus in the enforcement of awards. Whilst there will still be a long and toilsome road ahead, troubled with difficulties in legal and policy challenges when it comes to applicability and jurisdiction. India can only be truly be considered an arbitration-friendly nation when these challenges are over coated which the BALCO judgement has already instilled with a new ray of hope that a new found and promising era has begun for arbitral proceedings in India.

[1] Venture Global Engineering v. Satyam Computers Services [2008] 4 SCC 190

[2] Indtel Technical Service Pvt Ltd v. WS Atkins Plc [2008] 10 SCC 308

[3] Videocon Industries Ltd v. Union of India [2011] 6 SCC 161

[4] Yograj Infrastructure Ltd v. SSang Yong Engineering and Construction Co Ltd [2011] 9 SCC 735

[5] Ashish Chugh, The Bharat Aluminium Case: The Indian Supreme Court Ushers In a New Era, KLUWER ARBITRATION BLOG (September 26th, 2012) http://arbitrationblog.kluwerarbitration.com/2012/09/26/the-bharat-aluminium-case-the-indian-supreme-court-ushers-in-a-new-era/?doing_wp_cron=1596539681.5677900314331054687500  

[6] Id.

[7] Constitution of India 1950, Art. 142(1)

[8] Prof J. Martin Hunter and Ranamit Banerjee, Bhatia, Balco And Beyond: One Step Forward, Two Steps Back? (2013) Vol. 24(2)

[9] Id.


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