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Bharat Aluminium Company v. Kaiser Aluminium Technical Services Inc.

Civil Appeal · Neutral citation not assigned (Civil Appeal No. 7019 of 2005)Decided 28 Jan 2016
Civil Appeal No. 7019 of 2005
Justice Anil R. Dave · Justice Kurian Joseph · Justice Amitava Roy

Background

Bharat Aluminium Company (BALCO) and Kaiser Aluminium entered a 1993 contract for supply of equipment and modernisation of BALCO's plant at Korba, Chhattisgarh. Their contract said Indian law governed the agreement generally, but that "in case of Arbitration, the English Law shall apply," and fixed London as the seat of arbitration. Disputes went to arbitration in England, and the tribunal issued two awards against BALCO in November 2002. BALCO's attempt to challenge those awards under Section 34 of India's Arbitration Act was rejected by the Bilaspur District Court and the Chhattisgarh High Court, on the ground that Indian courts had no power to interfere with a foreign-seated award governed by English law.

Decision Breakdown

This case was the leftover ("residue") of the Supreme Court's landmark 2012 Constitution Bench ruling in the same dispute, which held that Part I of India's Arbitration Act applies only to arbitrations seated in India, but only prospectively, so agreements made before 6 September 2012, like this one, remained governed by the older rule in Bhatia International. Under that older rule, Part I of the Indian Act could still apply to a foreign arbitration unless the parties had expressly or impliedly excluded it. Examining the contract's arbitration and governing-law clauses, the Court found the parties had specifically chosen English law to govern the arbitration agreement itself (distinct from the law governing the main contract), which impliedly excluded Part I of the Indian Act, including Section 34, the provision that lets Indian courts set aside an award. The Court therefore agreed with the High Court that BALCO's Section 34 challenge to the two foreign awards was not maintainable in Indian courts, and dismissed the appeals with no order as to costs.

Lesson Learnt

When a cross-border contract specifies a different law for the arbitration itself than for the main contract, that choice can determine whether Indian courts have any power at all to review the resulting award: parties entering international contracts should pay close attention to exactly which law their arbitration clause names, since it can be decisive if a dispute ever reaches a foreign award.

Official source (sci.gov.in)View Judgment (PDF)

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