Bhatia International v/s. Bulk Trading S.A. (2002)4 SCC 105

The judgment in Bhatia International v. Bulk Trading S.A. is one of the important judgments of the Supreme Court of India that is bound to attract attention from those interested in commercial and legal dealings with India. The relevant facts can be summarised thus: 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. 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. This short paper expresses doubts about the correctness of this conclusion on the ground that the UNCITRAL Model Law is designed to cover arbitrations, domestic or international, held within India and not outside India.

The Supreme Court gave several reasons for its conclusion. Each of them is summarized and commented upon below:
(a) The words "this Act" in Section 1 of the Arbitration and Conciliation Act, 1996 meant the entire Act. The entire Act applies to the whole of India, except that by virtue of the proviso to Section 1, the Act applies to the State of Jammu and Kashmir only for "international commercial arbitration" held in that State.

(b) Because of the said proviso, Section 2(2) of the Act, which states that Part I applies when the place of arbitration is India, cannot be given literal meaning.

(c) Giving literal meaning would imply that where "international commercial arbitration" takes place outside India, Part I would continue to apply in the State of Jammu and Kashmir but not in the rest of India. That would be "anomaly".

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