Concept of ADR

Discourage litigation, persuade your neighbours to compromise, whoever you can. Point out, the normal winner is often a real loser in fees, expenses and waste of time.-- Abraham Lincoln[1]
Conflicts of interest are part of human life. Human conflicts are unavoidable because society is a multifarious web of social relations where every human at some point deal with other members of the society. In human affairs disputes are likely to arise, we cannot avoid these disputes but an attempt must be made to resolve them. The dominant forum were the parties take their disputes/ conflicts for resolution is the court, but the mounting of cases in the courts, inordinate delays, has made the dispute resolution in India a tiring process. Litigation involves lot of delay given the appeals/revision/review including the constitutional remedies i.e. writs. Like soap-operas it goes on and on. Wasting time in the corridors of the court has become like a way of life for many Indians due to delay in getting justice through our judicial system. The existing Justice system is not able to cope up with the ever-increasing burden of civil litigations, but the problem is not of load alone but also include inefficient lawyers, Judges and all those who are concerned with the social justice.

Dispute resolution outside of courts is not a new method, society for centuries have been using this method to settle their disputes. In today's world we need the extensive promotion and escalation of ADR models, wider use of court-connected ADR, and the increasing use of ADR as a tool to realize goals broader than the settlement of specific disputes.[2]

Alternate Dispute Resolution system is not a new experience for the people of this country also. It has been prevalent in India since a long time. Legal history indicates that down the ages man has been experimenting with procedure for making it easy, cheap, unfailing and convenient to obtain justice[3]. Law is a measuring tool of the progress that a community has made in terms of social justice, public welfare and to provide freedom with security from the infringe groups. Village level institutions played the leading role, where disputes were resolved by elders, comprising Council of Village also known as Panchayats, which was an informal way of mediation as the elders decided any dispute occurring within their village or areas. In earlier days disputes hardly reached courts. Decisions given by the Panchayat however erroneous were respected by all.

There is no universally accepted definition of the expression Alternate Dispute Resolution, ADR is a general term used to define a set of appropriate measures, approaches and techniques aimed at resolving the dispute in a non-confrontational way between two parties. It covers a broad spectrum of approaches ranging from party-to-party engagement in negotiations as the most direct form to reach a mutually accepted resolution.

According to Karl Makie and Edward Lightburn, “ADR is a structured dispute resolution process whereby the parties to a dispute themselves negotiate their own settlement with the help of an independent intermediary called a mediator”. Under ADR the parties usually themselves control the outcome of the dispute in that any settlement represent their own dispute and not somebody’s else.

The primary objective of ADR movement was the avoidance of discontent, expense and delay and promotion of the ideal of “access to justice” to & for all. In other words, the ADR system seeks to provide cheap, simple, quick and accessible justice. The desirability and necessity of encouraging ADR on a large scale is hardly in dispute.[4]
These are the most important goals of ADR:
Resolve or limit the issues in dispute;
be accessible for the parties;
using resources efficiently and effectively;
resolve disputes as early as possible with a reasoned decision;
produce outcomes that are lawful, effective and acceptable to the parties and the Tribunal.

Ø 1.2 Historical background of Arbitration in India
1. Ancient India:
In India arbitration has been present since the ancient times though not codified; law of arbitration was very popular and were highly accessible. While dealing with such cases on arbitration, the awards were known as decisions of Panchayats or village councils, commonly known as Panchayats. The decisions of Panchayats were of binding nature in law in force in those times. The head of a family, the chief of a community or selected people living in a village or town might constitute collectively as members of Panchayat.[5]The village head is known as Sarpanch i.e head of panchayat.

In words of Martin, C.J., “arbitration was indeed a striking feature of ordinary Indian life and it prevailed in all ranks of life to a much greater extent than was the case of England. To refer matters to a Panch was one of the natural ways for deciding many disputes in India”.

The Bengal Regulation of 1781 imported the idea that it was the tribunal of the parties’ own choice, hence in the absence of misconduct the parties were bound by its decision. Accordingly, the only course left open to the aggrieved parties was that they had to impeach the awards on the grounds of misconducts of the Panchayats. The known misconduct was gross corruption or partiality. This caused the respectable persons to be reluctant to become Panches and the Panchayat system fell in disuse or public infancy. Then came the Regulation of 1787 which empowered the Courts to refer certain cases to arbitration, but no provisions were made in the Regulation for suits wherein if the difference of opinion among the arbitrators arose during the proceedings. To overcome the problems of Regulation of 1787 , the new Bengal Regulation of 1793 (XVI of 1793) came which empowered courts to refer matters to arbitration with the consent of the parties where the value of the suit did not exceed Rs. 200/- and the suits were for accounts, partnership, debts, non-performance of contracts, etc. In this Regulation, the procedure for conducting an arbitration proceeding was also provided. Similarly, the Regulation XXI of 1803 extended the Regulation XVI of the territory ceded the Nawab Vazeer.
Since then the Madras Regulation IV of 1816 and V of 1816 empowered the Panchayats to settle disputes by them. In Bombay Regulations IV and VII of 1827 similar provisions were made.

2.British Period:
Thereafter, the Civil Procedure Code, 1859; the Indian Contract Act, 1872 and the Specific Relief Act, 1877 mandated that no contract to refer the present or further differences to arbitration could specifically enforce. A party refusing to reform his part of the contract was debarred from bringing a suit on the same subject-matter. The Arbitration Act, 1877 came as a complete code in itself. It made rules as to appeals and the Code of Civil Procedure aforesaid was not applicable to matters covered by the Arbitration Act, or the second schedule to the Code of Civil Procedure. The Code of Civil Procedure, 1859 (VII of 1859), was the first Civil Code of British India. The law relating arbitration was incorporated in Chapter VI of the Code (Sections- 312 to 327). It was, however, not applicable to the Supreme Court or to the Presidency Small Cause Courts or to non- Regulation Provinces. This Act was repealed by Act X of 1877 which consolidation the law of Civil Procedure which was further replaced by Act XIV of 1882. The Code of Civil Procedure, 1908 (V of 1908), the present Code, replaced the earlier code. The Second Schedule of the Code comprised the law regarding arbitration.

The law of Arbitration in the British Rule in India was comprised in two enactments. One was the Indian Arbitration Act, 1899, which was based on the English Arbitration Act, 1899. Many sections of the Indian Act were the verbal reproduction of the schedule to the Code of Civil Procedure Code, 1908. The Arbitration Act, 1899 extended to the Presidency Towns and to such other areas as it might be extended by the appropriate Provincial Government. Its scope was confined to ‘arbitration’ by agreement without the intervention of a Court. The Schedule contained an alternative method also, whereby the parties to a dispute or any of them might file the concerned arbitration agreement before a Court having jurisdiction, which Court following a certain procedure referred the matters to an arbitrator.

The Arbitration Act, 1940 consolidated and amended the law relating to Arbitration very exhaustively. This Act repealed Section 89, clauses (a) to (f), of sub-section (1) of Section 104 and the Second Schedule to the Code of 1908. The Civil Justice Committee had recommended various changes in the Arbitration Law. Since the Arbitration Act of 1899 was based on the English Law then in force, to which several substantial amendments were affected by the Amendment Act of the British Parliament in 1934. The recommendations of the Civil Justice Committee were scrutinized together and the Arbitration Bill sought to consolidate and standardise the law relative to arbitration throughout British India in details. This Bill received the assent of the Governor-General on 11th March, 1940 and was called the Arbitration Act, 1940. This Act was passed mainly to consolidate and amend the law relating to arbitration.

The Arbitration Act, 1940 has been described in the often-quoted passage from the Guru Nanak Foundation vs. Rattan Singh and Sons[6]as follows-
“However, the way in which the proceedings under the act are conducted and without an exception challenged in courts, has made lawyers laugh and legal philosophers weep. Experience shows and laws reports bear ample example of testimony that the proceedings under the Act have become highly technical accompanied by unending prolixity, at every stage providing a legal trap to the unwary”.[7]
Endless & time consuming, complex & expensive court procedures compelled jurists to search for an alternative forum which was less formal, more effective and speedier for resolution of disputes avoiding procedural death trap and this led them to Arbitration Act, 1940.[8]

The system of resolving disputes by an Arbitrator was not only confined to India but elsewhere in the world also. Since ages, the practice was prevalent in several parts of the world. Greek and Romans attached greater importance to arbitration.[9]

The Arbitration Act, 1940 dealt only with domestic arbitration. In so far as international arbitration was concerned, there was no substantive law on the subject. However, enforcement of foreign awards in India was governed by two enactments, the Arbitration (Protocol and Convention) Act, 1937 and the Foreign Awards (Recognition and Enforcement) Act, 1961. These two statutes, in their entity, except for Section 3 (in both of them) did not deal with international arbitration as such but merely laid down the conditions for ‘enforcement of foreign awards’ in India.[10]

The Arbitration Act of 1940, though a good step of parliament towards codifying the arbitration, but in it reality it’s operation and implementation by all concerned i.e the parties, arbitrators, lawyers and the courts- proved ineffective as such. In M/S Guru Nanak Foundation v. M/S Ratan Singh & Sons,[11]the Hon’ble Supreme Court observed that the Act was ineffective and the way the proceedings under this Act were conducted in the Courts made the lawyers laugh and legal philosophers weep. Various judgements and law reports bear ample example of testimony that the proceedings under the Act have become highly technical accompanied by unending delay at every stage providing a legal trap to the unwary and a hinderance in deliverance of justice to the parties.

A few years later, the Court suggested simplification of the law of arbitration releasing the law from the shackles of technical rules of interpretation. The Hon’ble Court observed in Food Corporation of India v. Joginder pal Mohinder pal,[12]:
“We should make the law of arbitration simple, less technical and more adaptable to the actual realities of the situations, but must be responsive to the canons of justice and fair play and make the arbitrator adhere to such process and norms which will create confidence, not only by doing justice between the parties, but by creating sense that justice appears to have been done.”

3.Modern India:
The Arbitration Act, 1940 was holding the field for nearly half a century but with the phenomenal growth of commerce and industry the effect of globalization required substantial changes. The Alternative Dispute Redressal mechanism was increasingly attracting serious notice and that led to the enactment of Arbitration and Conciliation Act, 1996 and the incorporation of Section 89 of the Code of Civil Procedure, 1908 i.e. 1st July, 2002 as a part of this mechanism.[13]

The Arbitration Act, 1940 was not meeting the requirements of either the international or domestic standards of resolving disputes between parties. Extensive delays by arbitrators & parties and court’s intervention under the provisions, frustrated the very purpose of arbitration as a means for expeditious resolution of disputes. In a High Level conference of various Government officials and Judges, it was decided by them that since the entire burden of justice system cannot be borne by the courts alone as they already have various pending cases, an Alternative Dispute Resolution system should be adopted.

Alternative Dispute Resolution is being increasingly acknowledged in the field of law as well as in the commercial sector in recent times. The very reasons of Alternative Dispute Resolution are the tiresome process of litigation, costs and inadequacy of the court system. It offers to resolve matters of litigants, whether in business causes or otherwise, who are not able to start any process of negotiation and reach any settlement. Alternative Dispute Resolution has started gaining its ground as against litigation and arbitration.

In modern India for the first time Alternative Dispute Resolution as a method of conciliation was effectively introduced and recognised by law was in Labour Law, namely Industrial Dispute Act, 1947. Conciliation has been statutorily recognized as an effective method of dispute resolution in relation to disputes between workers and the management. All parties to an industrial dispute who have had the misfortune of going through litigation knew that it is a tedious process and one which could go well beyond the life time of some of the beneficiaries. It is this factor that has contributed greatly to the success of conciliation in industrial relations.[14]
Thus "The Arbitration and Conciliation Act, 1996" came into being. The law relating to Arbitration and Conciliation is almost the same as in the developed countries. Conciliation has been included and given statutory recognition as a means for settlement of the disputes in terms of this Act which was not given earlier. In addition to this, the new Act also guarantees independence and impartiality of the arbitrators towards the parties irrespective of their nationality. The new Act of 1996 brought in several changes to expedite the process of arbitration. This legislation has developed confidence among foreign parties who are interested to invest in India or want to go for joint ventures, foreign investment, transfer of technology and foreign collaborations.[15]The Act of 1996 provides not only for domestic arbitration but also include international commercial arbitration seated in or outside India in its ambit. The Indian law relating to enforcement of foreign arbitration awards provides for autonomy in arbitral process and limits judicial intervention to a narrower circumference than under the previous law (Konkan Rly Corpn. Ltd V. Mehul Construction co..,)[16]. The 1996 Act allows court’s intervention in 9 instances under the following sections:
i. Section 8
ii. Section 9
iii. Section 13
iv. Section 14
v. Section 27
vi. Section 34
vii. Section 36
viii. Section 37
ix. Section 39

The 1996 Act was enacted with a view to provide for speedy disposal of disputes relating to arbitration with least court’s intervention in the arbitral proceedings. With the passage of time some difficulties in the applicability of the Act have been noticed. The most controversial dispute was the applicability of Part 1 of the Act to foreign seated arbitration awards as the provisions contained in the Part 1 were for the domestic award. To resolve this, the Law Commission of India submitted a report and a new “Arbitration and Conciliation (Amendment) Bill 2003” was introduced in the Rajya Sabha. But there were various contentious provisions in the bill hence it was withdrawn. In order to attract foreign investment by projection India as an investor friendly country having a sound legal framework, the President gave his assent to the bill and the said bill came to be known as Arbitration and Conciliation (Amendment) Act 2015. Since the amendment was post-Balco, the provision of Section 9,27,37 shall now be applicable to international commercial arbitration. The provision for setting aside an award under section 34 on grounds of public policy has been modified.

The emergence of alternative dispute resolution has been one of the most significant movements as a part of conflict management and judicial reform, and it has become a global necessity. Such specially devised machinery can also be described as “Appropriate Dispute Resolution” or “Amicable Dispute Resolution” so as to stress upon its non-adversarial objectives. In disputes arising across national frontiers covering the field of private international law ADR is of special significance to combat the problems of applicability of laws and enforcement.[17]

Modern ADR is a voluntary system, according to which the parties enter a structured negotiation or refer their disputes to a third party for evaluation and/or facilitation of resolution. Especially in the light of the facts that the justice system is flooded by disputes of variable importance and complexity, and that the parties are almost invariably intimidated by the atmosphere in the courtroom and the litigation process itself. ADR has now become an acceptable and often preferred alternative to judicial settlement and an effective tool for reduction of arrears of case. The alternative modes of dispute resolution include arbitration, negotiation, mediation and conciliation. The ADR system by nature of its process is totally different from Lok Adalat.

Ø2.1 Arbitration and Conciliation Act 1996
“Arbitration is considered to be an important alternative dispute redressal process which is to be encouraged because of high pendency of cases in the courts and cost of litigation. Arbitration has to be looked up to with all earnestness so that the litigant public has faith in the speedy process of resolving their disputes by this process”
------ State of Jammu & Kashmir v. Dev Dutt Pandit[18]

The Act of 1996 brought in several changes to expedite the process of arbitration and to resolve the issues of the previous act. The Act of 1996 provides not only for domestic arbitration but also include international commercial arbitration too. The Indian law relating to enforcement of foreign arbitration awards provides for greater autonomy in arbitral process and limits judicial intervention to a narrower circumference than under the previous law (Konkan Rly Corpn. Ltd V. Mehul Construction co.., AIR 2000 SC 2821)[19].

The 1996 Act consist of 86 sections divided into four parts, beside the preamble and three schedules.

i. Part 1: Arbitration conducted in India and Enforcement of awards there under (Sections 2-43)
Part 1 of the 1996 Act is general in nature and comprise of 43 sections spread over 10 chapters. Part 1 provides for arbitration (domestic or ICA) conducted in India and enforcement of awards thereunder (whether domestic or international). Thus Part 1 of the Act contains the provisions for domestic and international arbitration seated in India. All arbitrations conducted in India would be governed by the Part 1 irrespective of the nationalities of the parties.

Chapter I: general provision (S2 -6)
Chapter II: Arbitration agreement (S7-9)
Chapter III: Composition of Arbitral Tribunal (S10-15)
Chapter IV: Jurisdiction of Arbitral Tribunal (S16-17)
Chapter V: Conduct of Arbitral Proceedings (S18-27)
Chapter VI: Making of Arbitral award and termination of proceedings (S28-33)
Chapter VII: Recourse against Arbitral award (S34)
Chapter VIII: Finality and enforcement of arbitral award (S35-36)
Chapter IX: Appeals (S37)
Chapter X: Miscellaneous (S38-43)

ii.Part 2: Enforcement of Foreign Awards (Section 44 to 60)
Part 2 contains chapter I & II containing sections 44 to 60. Chapter 1 of part 2 deals with “New York Convention Awards” and chapter 2 deals with “Geneva Convention Awards”. Thus, Part 2 of the Act is only restricted to enforcement of foreign awards of outside India seated arbitrations governed by the said two conventions only. Thus Part 2 by its very nature is not a complete code.

iii.Part 3: Conciliation (Sections 61 to 80)
it contains sections which deals with conciliation procedures.

iv.Part 4: Supplementary Provisions (Sections 82 to 86)
Part 4 contains section 82 to 86 which deals with supplementary provisions of the Act, such as power of High Court to make rules, provision for removal of difficulties, power to make rules, etc.


Ø2.1.1 Whether Arbitration and Conciliation Act, 1996 is Exhaustive?
when the Act itself stipulates that it is “an Act to consolidate and amend the law relating to domestic arbitration, international commercial arbitration and enforcement of foreign arbitral awards as also to define the law relating to conciliation and for matters connected therewith or incidental thereto”, it should therefore, leave no manner of doubt that the Act is intended to be an Exhaustive law on the subject and is a self-contained code.[20]

The 1996 Act consolidates and amends the law relating to domestic arbitration, interim reliefs, challenging arbitral award, international commercial arbitration, enforcement of foreign awards and defines the law relating to conciliation which provides for matters connected therewith and incidental thereto considering the UNCITRAL Model Law and Rules. The Act of 1996 in itself is a self-contained and exhaustive code.[21]


Ø2.2Arbitration and Conciliation (Amendment) Act 2015
The Arbitration and Conciliation (Amendment) Act 2015 came into force on 23rd October, 2015 with a view to facilitate quick enforcement of contracts, easy recovery of monetary claims, reduce the pendency of cases in courts and hasten the process of dispute resolution through arbitration, so as to encourage foreign investment by projecting India as an investor friendly country having a sound legal framework and ease doing business in India.
The Amendment Act has introduced insertion of new provisions in addition to amendments to the existing provisions governing the process of appointment of an arbitrator. It also clarified the grounds to challenge an arbitrator for the lack of independence and impartiality. As a welcome move, the Amendment Act provides for assistance from Indian courts, even in foreign seated arbitrations in the form of interim relief before the commencement of the arbitration. Further, with the introduction of ‘cost follow the event’ regime in the Act, it has brought it in line with the international standards. The process of enforcement and execution under the Act has also been streamlined so that challenge petitions do not operate as an automatic stay on the execution process.
Major Amendments introduced by the Amendment Act of 2015 are:

A. Pre-arbitral proceedings:
I. Appointment of Arbitrator- Applications for appointment of an arbitrator under section 11 should be endeavoured to be disposed of within a period of (60) sixty days from date of service of notice on the opposite party. Detailed schedule on the ineligibility of arbitrators have been put in place in the Act.

ii. Interim reliefs :
§Flexibility has been granted to parties with foreign-seated arbitrations to approach Indian courts for aid in foreign seated arbitration;
§Section 9 applications to be made directly before High Court in case of international commercial arbitrations seated in India as well as outside.
§Interim reliefs granted by arbitral tribunals seated in India are deemed to be order of courts and are thus enforceable in the new regime.
§Post grant of interim relief, arbitration proceedings must commence within 90 days or any further time as determined by the court.

B. Arbitral proceedings
I. Expeditious disposal:
§A twelve-month timeline for completion of arbitration seated in India has been prescribed.
§Expeditious disposal of applications along with indicative timelines for filing arbitration applications before courts in relation to interim reliefs, appointment of arbitrator, and challenge petitions (Section 9);
§Incorporation of expedited/fast track arbitration procedure to resolve certain disputes within a period of six months (section 29A &B)
ii. Costs:
§“Costs follow the event” regime has been introduced;
§Detailed provisions have been inserted in relation to determination of costs by arbitral tribunals seated in India (Fourth Schedule).

C. Post-arbitral proceedings
I. Challenge and enforcement:
§In ICA seated in India, the grounds on which an arbitral award can be challenged has been narrowed;
§Section 34 petitions to be filed directly before High Court in case of international commercial arbitrations seated in India.
§Section 34 petition to be disposed of swiftly and in any event within a period of one year from date on which notice is served on opposite party.
§Upon filing a challenge, under Section 34 of the Act, there will not be any automatic stay on the execution of award – and more specifically, an order has to be passed by the court expressly staying the execution proceedings.

Ø2.3Arbitration and Conciliation Amendment Bill 2018[22]
The Union Cabinet has recently cleared a bill proposing to amend the arbitration law. This is in tow with India’s aim of becoming a model international arbitration friendly jurisdiction. Some of the key features of the Bill are:
(a) formation of Arbitration Council of India (ACI), an independent body corporate for grading and accreditation of arbitral institutions and to promote and encourage arbitration and other alternate dispute resolution mechanisms;
(b) arbitral appointments would be made by the arbitral institutions (as recognized by the ACI), designated by the Supreme Court (for international commercial arbitrations), or the High Court (in other cases), thereby eliminating the requirement to approach the court for arbitral appointments;
(c) amendments have been proposed to the timelines involved in the conduct of arbitration. The Bill proposes the exclusion of international commercial arbitrations from the twelve-month period (for completion of the entire arbitration) specified in the Amendment Act. It further extends the timeline by stating that the timeline or period would start from the date of completion of pleadings as opposed to the date of constitution of the tribunal;
(d) new provisions are also being introduced with respect to confidentiality of the arbitral proceedings and immunity to the arbitrators…”

Ø3.1 International Commercial Arbitration – Meaning
Section 2(1)(f) of the Act defines an ICA as a legal relationship which must be considered commercial,[23]where either of the parties is a foreign national or resident or is a foreign body corporate or is a company, association or body of individuals whose central management or control is in foreign hands. Thus, under Indian law, an arbitration with a seat in India, but involving a foreign party will also be regarded as an ICA, and hence subjected to Part I of the Act.

Where an ICA is held outside India, Part I of the Act would have no applicability on the parties (save the stand-alone provisions introduced by the Amendment Act unless excluded by the parties, as discussed later) but the parties would be subjected to Part II of the Act.

The Amendment Act has deleted the words ‘a company’ from the purview of the definition thereby restricting the definition of ICA only “ to the body of individuals or association”. Therefore, by inference, it has been made clear that if a company has its place of incorporation as India then central management and control would be irrelevant as far as its determination of being an “international commercial arbitration” is concerned.

[24]‘Commercial’ should be construed broadly having regard to the manifold activities which are an integral part of international trade today (R.M. Investments & Trading Co. Pt. Ltd. v. Boeing Co.,).

The scope of section 2(1)(f) was determined by the Supreme Court in the case of TDM Infrastructure Pvt. Ltd. v. UE Development India Pvt. Ltd.,[25]wherein, despite TDM Infrastructure Pvt. Ltd. having foreign control, it was concluded by the SC that, “a company incorporated in India can only have Indian nationality for the purpose of the Act”. Though the Act recognizes that the companies which are being controlled by foreign national as a foreign body corporate, but the Supreme Court has excluded its application to companies which are registered in India and having Indian nationality i.e if a corporation has dual nationality, one based on foreign control and other based on registration in India, for the purpose of the Act, such corporation should not be regarded as a foreign corporation but as an Indian corporation.


Ø3.2 International Commercial Arbitration with seat in India
[26] The growth of international commerce has necessitated the creation of efficient methods of resolution of disputes like arbitration and enforcement of the consequent awards that determine the rights and obligations of the parties. In some situations, securing an award or a final judgment from the courts may only be a battle half won; this is especially true in the Indian context. We have come across situations where the opposite parties decide not to participate in the arbitral process or abandon it mid-way. The enforcement of these awards/judgments where the party is in absentia is sometimes more complicated than one where the opposite party has participated in the proceedings. In some situations, objections have been raised even against costs awarded by the tribunal or the jurisdiction of the tribunal or court, as the case may be. Therefore, the stage of execution of an award or decree warrants a high degree of caution. The procedure for enforcement and execution of decrees in India is governed by the Code of Civil Procedure, 1908 (“CPC”) while that of arbitral awards in India is primarily governed by the Arbitration & Conciliation Act, 1996 (“Act”) as well as the CPC. However, there is a distinction in the process for enforcement of an award based on the seat of arbitration. While the enforcement and execution of an India - seated arbitral award (“domestic award”) would be governed by the provisions of Part I of the Act, enforcement of foreign - seated awards (“foreign award”) would be governed by the provisions of Part II of the Act.

The laws applicable to ICA when seat of arbitration is in India are:
1. Notice of arbitration-
Arbitration is said to have commenced when the notice of arbitration requires the other party to take steps in connection with the arbitration or do something on his part in the matter of arbitration. Under Section 21 of the Act, a notice of arbitration has to be served to the other party, requesting that the dispute be referred to arbitration. The day on which the respondent receives the notice, arbitral proceedings commences under the Act. In a Notice of Arbitration, a party communicates:
a) its intention to refer the dispute for arbitration; and
b) the requirement that other party should do something on his part in that regard. This will generally suffice to define the commencement of arbitration under the Act.

§ Applicability of Amendment Act
The date of commencement of the arbitration in accordance with Section 21 of the Act is crucial with regards the applicability of the Amendment Act. In the event, the date of commencement is after October 23, 2015, the provisions of the Amendment Act will be applicable, as against the Act with respect to arbitral proceedings.

2. Interim reliefs
Under the Act, the parties can seek interim relief from courts and arbitral tribunals under Section 9 and 17 respectively. A party may before, or during arbitral proceedings or at any time after the making of the arbitral award but before it is enforced, apply to a court for seeking interim measures and protections including interim injunctions under Section 9 of the Act.
The Arbitral Tribunal in accordance with Section 17 can also provide interim measures of protection or ask a party to provide appropriate security in connection with the matter of dispute, as is found appropriate during the course of the arbitral proceedings. However, the powers of the Arbitral Tribunal were narrow as compared to the powers of the court under Section 9 of the Act. The difference between these two sections is that under Section 9 the party can seek interim measures “before” also whereas under section 17 only “during” or “after”.

§ Applicability of Amendment Act
The Amendment Act has made significant changes which will affect the granting of interim relief in an arbitration proceeding commenced after October 23, 2015.

A. Interim reliefs under Section 9[27]-
a. If an arbitral tribunal has been constituted, an application for interim protection under Section 9 of the Act will not be entertained by the court unless the court finds that circumstances exist which may render the remedy provided under Section 17 inefficacious.

b. Post the grant of interim protection under Section 9 of the Act, the arbitral proceedings must commence within a period of 90 (ninety) days from the date of the interim protection order or within such time as the court may determine.

B. Interim reliefs under Section 17[28]-
Section 17 has been amended to provide the Arbitral Tribunal the same powers as a ‘civil court’ in relation to the grant of interim measures. Notably, the Arbitral Tribunal would have the same powers to grant interim relief as stated in section 9 but before it is enforced under section 36. Further, the order passed by an Arbitral Tribunal in arbitrations seated in India will be deemed to be an order of the court and will be enforceable under the Code of Civil Procedure, 1908 (“CPC”) as if it were an order of the court, which provides clarity on its enforceability. The intention of the amendment appears to be to vest significant powers with the Arbitral Tribunal and reduce the burden and backlog before the courts.

3.Challenge to an award-
[29]Section 34 provides for the procedure and grounds for challenge of the arbitral award to be set aside. The time period for the challenge is before the expiry of 3 months from the date of receipt of the arbitral award (and a further period of 30 days on sufficient cause being shown for condonation of delay). If that period has expired, the award holder can apply for enforcement of the arbitral award as a decree of the court. But as long as the stipulated period has not elapsed, enforcement is not possible. Under Section 34 of the Act, a party can challenge the arbitral award on the following grounds only:
i. the parties to the agreement are under incapacity;
ii. the agreement is void;
iii. the award contains decisions on matters beyond the scope of the arbitration agreement;
iv. the composition of the arbitral authority or the arbitral procedure was not in accordance with the arbitration agreement;
v. the award has been set aside or suspended by a competent authority of the country in which it was made;
vi. the subject matter of dispute cannot be settled by arbitration under Indian law; or
vii. the enforcement of the award would be contrary to public policy of India.

The Supreme Court in Kinnari Mullick v. Ghanshyam Das Damani[30]has held that a court can relegate the parties to the arbitral tribunal, only if there is a specific written application from one party to this effect; and relegation has to happen before the arbitral award passed by the same arbitral tribunal is set aside by the court. Once the award is set aside by the court, the dispute cannot be remanded back to the arbitral tribunal[31].

§Applicability of Amendment Act
The Amendment Act has added an explanation to Section 34[32]of the Act. In the explanation, public policy of India has been clarified to mean only if the court finds that :
(a) the making of the award was induced or affected by fraud or corruption or was in violation of Section 75 or 81 of the Act; or
(b) it is in contravention with the fundamental policy of Indian law; or
(c) it is in contravention with the most basic notions of the morality or justice.
The Amendment Act clarifies that an award will not be set aside by the court merely on erroneous application of law or by re-appreciation of evidence.[33]

The court will not review the merits of the dispute in deciding whether the award is in contravention with the fundamental policy of Indian law or not but to decide on the basis of the facts that were presented before it .[34]The Amendment Act has also introduced a new sub section 34(2)(2A) providing that the award may be set aside if the court finds that it is vitiated by patent illegality i.e if it appears prima facie in the award in case of domestic arbitrations. For ICA seated in India, ‘patent illegality’ has been kept outside the purview of the arbitral challenge.[35]

The interpretation of Public Policy by the Supreme Court in various cases has led to some confusions as in some cases only ICA seated in India shall be eligible to apply for it whereas in some cases even if the ICA is seated outside India, Court can hear the application made under section 34 due to the wide interpretation of “Public Policy”. But the confusion was settled after the Amendment Act 2015 as it laid down what constitute Public Policy.

Ø 3.3 International Commercial Arbitration when seated in other country
With India’s progressive climb as a major international and global player in the world economy, it is pertinent to understand its credibility as an arbitration friendly nation from the perspective of the efficacy and efficiency of its award enforcement regime. Part 1 of the act remains only applicable to arbitration seated in India and not applicable if the arbitration is outside India. Only Part II is applicable to all the foreign awards which are sought to be enforced in India when the seat of arbitration was outside India under the New York convention or Geneva Convention.

In the case of Bhatia International v. Bulk trading[36], Supreme Court explicitly held that if an arbitral award has not been passed in a country under the convention then it will not be considered as a foreign award. Therefore, if a country is a mere signatory in the New York Convention, then it does not mean the award gets enforced in India. There is a total of 47 countries which are notified by Indian Government. Therefore, the given below conditions need to get satisfied to make an award valid as a foreign award[37];
# It should be arbitral award
# It must have been arising out a dispute between the parties
# The dispute should come out as a legal relation which should be commercial in nature.
# The award should pursuance of a written agreement on which New York Convention could be applied and should be applied and should have been made in anyone of those 47 countries.

A party is required to make an application in the court under competent jurisdiction, if it seeks enforcement of an award under a New York Convention. The application is accompanied by the following other document:
# Authentic copy of award
# Authentic copy of agreement
# Necessary evident that could ascertain that it is a foreign award.

Other needs to make a foreign arbitral award enforceable under the act is as follows:
i. Commercial Transaction: The concerned award should be as a difference between the parties out of commercial disputes. In the case of RM investment trading v. Boeing[38], Supreme Court held that the interpretation of the word commercial should be constructed liberally as it is an integral part of international trade.
ii. Written Agreement: The arbitral agreement (foreign) should be in writing as prescribed under the Geneva Convention, though the format is not specifically mentioned.
iii. Validity: The foreign arbitral award must arise out of a commercial agreement and must be valid. In the case of Kehardale Co. v. Raymon & Co[39], it was held by the Supreme Court that any arbitration clause cannot be eligible to be enforceable if it is illegal.
iv. Unambiguous: In the case of New York Convention award, under section 48 of the act, a court can deny to enforce such award if it comes under the scope of the following:
# Incapacities of the parties
# Void agreement
# Award passed on matters beyond scope of arbitration
# Non-compliance of arbitration agreement
# The competent authority has set aside the award
# Prejudice to public policy under section 48 (2) (b),

As held in the case of Renusagar Co. Ltd. V. General Electric Co[40], Supreme court held that directed three factors prejudicing the public namely; I) fundamental policy ii) public interest iii) justice and moral. In the case off Racquet Sport v. Mayor Ltd[41], the petitioner was an Arizona based company that sought to enforce the ICC award in India. The award was challenged by the respondent on the ground that it is contrary to the Indian public policy, the Delhi High court refused the objection raised by the respondent and allowed the enforcement of the foreign award because the award against an Indian Co. is not sufficient enough to act as a public policy of India. Under Section 50 of the Act, the parties can file an appeal against the order passed by the virtue of section 45 & 48, without any relief of second appeal.

Ø4.1 Seat of Arbitration
In case of an International Commercial Arbitration, many times the question arises as to what is the law governing the substance of dispute between the parties, the law governing arbitration which includes construction and validity of the Arbitration agreement and the procedure of Arbitration?[42]

The Seat of Arbitration determines the which law will be applicable in governing the Arbitration including the procedural aspects. When the parties specify an applicable law for the Arbitration in their arbitration agreement, that law governs the Arbitration including the procedural aspects of Arbitration. However, if the parties have not specifically chosen the law governing the conduct and procedure of Arbitration, expressly or by necessary implication, the conduct of the Arbitration will be determined by the law that is in place of the Seat of Arbitration.

The regulation for conduct of Arbitration, interim reliefs and challenge to an award would have to be done by the courts of the country in which the Seat of Arbitration is located as such Court would be the supervisory court possessed with the power to grant interim reliefs and to annul the award.

The law governing the Arbitration has importance because it determines the validity, effect and interpretation of the Arbitration agreement and such law is relied upon by the arbitrator to determine the scope of his powers and the procedure to be followed by the arbitral tribunal (unless the parties expressly agree to submit themselves to an institutional arbitration and follow the procedure prescribed by such institution which is different from the law governing the arbitration and procedural law of arbitration).

If the Arbitration agreement is found or state, to provide for a Seat / place of Arbitration outside India, then even if the contract itself specifies that the Indian Arbitration Act shall govern the arbitration proceedings, Indian courts cannot exercise supervisory jurisdiction over the Arbitration or the award. However, in the new proposed amendment Act 2015, to the Arbitration and Conciliation Act, 1996, the Law Commission Report has recommended that Part I of the Act, such as Section 9 (interim relief), Section 27 (court assistance for evidence), Section 37(1)(a) (appeal able orders), will remain available to parties in a foreign Seated Arbitration which now has been accepted by the Union Cabinet. Further, it is also mentioned in the report that the definition of Seat would be inserted to mean the juridical Seat of the Arbitration.


The Seat of Arbitration may very well be quite independent of the place or the venue where the hearings or other parts of the arbitral proceedings occur or take place. As the venue and Seat of an Arbitration can be different. The Seat of Arbitration is of vital importance, for it is the courts of the Seat and not the venue, that have the supervisory jurisdiction over the arbitral process. Identifying the Seat of Arbitration post Balco judgement has become one of the most important features of an arbitration clause as it made the Act Seat centric. The selection of the Seat determines the law governing the Arbitration procedure and often, more importantly, the process and rights relating to granting interim reliefs, challenging award or enforcement of the arbitration award. It is not necessary for the Seat of Arbitration and the venue of the Arbitration to be the same. Venue is the place or locality where the arbitration proceedings take place for example, in an arbitration agreement the parties decided to have Paris as the venue or place of arbitration while the seat of arbitration is India. Herein the governing law for arbitration would be of India.

In the case of Enercon (India) Ltd and Ors v Enercon Gmbh and Anr[43]before the Hon’ble Supreme Court of India a dispute arose about the non-delivery of supplies under an Intellectual Property License Agreement, (“IPLA”) containing an arbitration clause, entered into between parties. The relevant aspects of the arbitration clause in dispute were as under:
“The governing law of the IPLA was Indian law; the venue of the arbitration was London; and the provisions of the Indian Arbitration and Conciliation Act, 1996 were to apply.”

There was series of proceedings initiated both in India and in England seeking declarations on the validity of the arbitration clause and asking for anti-suit injunctions. The parties approached the Hon’ble Bombay High Court and, “it had concluded that though London was not the Seat of Arbitration, the English Courts would have concurrent jurisdiction since, venue of arbitration was London”. After this the matter was before the Hon’ble Supreme Court where the main issue was that assuming that the Seat of Arbitration was India, “whether the English Courts would have concurrent jurisdiction as the venue of arbitration is in London?”. The Hon’ble Supreme Court of India held that "the express mention in the arbitration clause that London was the venue of the arbitration could not lead to the inference that London was to be the Seat because although London was termed as the venue, the law governing the substantive contract, the law governing the arbitration agreement and the law governing the conduct of the arbitration were chosen to be Indian law and the closest and most real connection was with India. Once the Seat was in India, Indian Courts would have exclusive supervisory jurisdiction and English Courts cannot have concurrent jurisdiction"[44].

Ø 5.1Applicability of Part I
The real question is why Part I is so important in arbitration act. In this context, it is necessary to examine some important provisions, described in brief:
(a) section 9 gives the option to the parties to approach the court for interim relief in order to secure the amount or property in dispute;
(b) section 11 gives the parties the right to approach court for appointment of arbitrator in case one party fails to act in terms of the arbitration agreement pertaining to the appointment;
And
(c) section 27 gives power to the parties to apply to the court for taking its assistance during evidence.
Another important section of Part I is section 34 application for setting aside arbitral award, which has actually been the catalyst for the birth of Balco I[45]and Balco II[46]. Section 34 provides the conditions on the basis of which an award can be set aside by way of making an application before the competent court by the aggrieved party of the arbitral award. There are several conditions including, incapacity of party to execute an arbitration agreement, absence of proper notice of arbitrator’s appointment or of proceedings, award is on a subject which cannot be arbitrated and the award is contrary to public policy.

why does Part I have so much significance in the Arbitration Act?
As observed, despite an agreement to arbitrate and to avoid court interventions, Part I’s provisions enables parties to approach courts for interim remedies and more importantly, given the various judgments, well-reasoned awards have been subjected to challenge under section 34, thereby mocking the entire arbitration process which was meant to be free from the judicial intervention in order to redress the parties dispute in fair and timely manner. In contrast, a party can challenge a foreign award in Indian courts under sections 48 and 57 on only two grounds: (a) foreign award is contrary to public policy and/or (b) subject-matter of the dispute was not capable of settlement through arbitration.

In order to minimize challenges to an award under section 34, after Balco I, foreign parties preferred and negotiated to have the seat of arbitration outside India in international commercial transactions. The negative side, of course, was that when Part I was explicitly or implicitly excluded, parties were unable to secure any kind of interim relief from Indian courts. But by means of the Arbitration and Conciliation (Amendment) Act, 2015[47], a new proviso was now added to section 2 of the Act, whereby a narrow option has been provided for a foreign party for availing interim relief against an Indian party even in the foreign seated arbitration. This amendment ensures that contracting parties can carve out an exception to the blanket exclusion of Part I to the arbitral proceedings after the Balco judgment where the venue is outside India. In effect, this will provide an option to those parties who wish to apply to the Indian courts for interim relief or challenging to set aside arbitral award where it is necessary to secure something rapidly.

Ø 5.2 Part I: Inclusion or Exclusion
While examining the application of exclusion of Part I to foreign seated arbitrations, the Supreme Court considered earlier jurisprudence as well. In Videocon Industries Limited v. Union of India (“UoI”)[48], the Supreme Court was required to decide “whether the application of seeking interim reliefs under section 9 filed by U.o.I before the High Court of Delhi was maintainable in view of the fact that governing law for arbitration was English law as the seat of arbitration was England”. This issue was decided against U.o.I because the court took the view that Part I is excluded as arbitration was governed by foreign law in that case.

In 2014, in Reliance Industries Limited v. Union of India[49], the Supreme Court yet again had to determine the issue of Part I where governing law was foreign law and it observed as under:
“The provisions of the Part I of the Arbitration Act 1996 (India) are necessarily excluded; being wholly inconsistent with the arbitration agreement which provides “that arbitration agreement shall be governed by English law”. Thus, the remedy of the Respondent to challenge any award rendered in the arbitration proceedings would lie under the relevant provisions contained in Arbitration Act, 1996 of England and Wales”

Ø 5.3 Bhatia Regime (Pre- Balco)[50]
In the earlier years of the 21st century, a three-judge bench of the Indian Supreme Court considered whether it could accede to a request for interim measures to an Indian court in ICC arbitration with its seat in Paris. One of the parties had sought interim relief from the court under Part 1 of the Act. The other party objected that the court had no jurisdiction because part 1 did not apply to arbitrations in which seat of arbitration is outside India. The issue eventually reached Supreme Court.

The 3 judge Bench held:
“21. By failing to provide that Part I will not apply to international commercial arbitrations which take place outside India the effect would be that Part I would also apply to International commercial arbitrations held out of India. But by not specifically providing that the provisions of Part I apply to international commercial arbitrations held out of India, the intention of the legislature appears to be to [allow] parties to provide by agreement that Part I or any provision therein will not apply. Thus, in respect of arbitrations which take place outside India even the non- derogable provisions of Part I can be excluded. Such an agreement may be express or implied.”
“32. To conclude, we hold that the provisions of Part I would apply to all arbitrations and to all proceedings relating thereto. Where such arbitration is held in India the provisions of Part I would compulsorily apply and parties are free to deviate only to the extent permitted by the non- derogable provisions of Part I. In cases of international commercial arbitrations held out of India provisions of Part I would apply unless the parties by agreement, express or implied, exclude all or any of its provisions. In that case the laws or rules chosen by the parties would prevail. Any provision, in Part I, which is contrary to or excluded by that law or rules will not apply."

Ø5.4 Chaos Post Bhatia
·Following the judgment in Bhatia International, in Venture Global Engg v Satyam Computer Services Limited[51]the Supreme Court held that foreign awards can be challenged under Part I:
"On close scrutiny of the materials and the dictum laid down in the three-Judge Bench decision in Bhatia International we agree with the contention of Mr K.K. Venugopal and hold that paras 32 and 35 of Bhatia International make it clear that the provisions of Part I of the Act would apply to all arbitrations including international commercial arbitrations and to all proceedings relating thereto. We further hold that where such arbitration is held in India, the provisions of Part I would compulsorily apply and parties are free to deviate to the extent permitted by the provisions of Part I. It is also clear that even in the case of international commercial arbitrations held out of India provisions of Part I would apply unless the parties by agreement, express or implied, exclude all or any of its provisions. We are also of the view that such an interpretation does not lead to any conflict between any of the provisions of the Act and there is no lacuna as such. The matter, therefore, is concluded by the three-Judge Bench decision in Bhatia International."
·In Indtel Technical Service Pvt Ltd v. WS Atkins Plc[52], the court adopted the power to appoint arbitrators in arbitrations seated outside India pursuant to section 11 of the Act.

# Videocon Industries Ltd v Union of India[53], Issues was Whether the Delhi High Court could entertain the petition filed by the respondents under Section 9 of the Arbitration and Conciliation Act, 1996 (for short 'the Act') for grant of a declaration that Kuala Lumpur (Malaysia) is the contractual and juridical seat of arbitration and for issuance of a direction to the Arbitral Tribunal to continue the hearing at Kuala Lumpur in terms of Clause 34 of the Production Sharing Contract (PSC), is the question which arises for consideration in this appeal."

Held – “The parties had agreed that, notwithstanding Article 33.1, the arbitration agreement contained in Article 34 would be governed by English law. This necessarily implies that the parties had agreed to exclude Part I of the act. Here the parties choose to exclude the applicability of Part 1 of the Act.”

# Notably, in Hardy Oil and Gas Vs Hindustan Oil Exploration[54], the Gujarat High Court ruled that Part I of the Act was excluded implicitly by the parties nomination of a foreign law as the governing law of the arbitration.

Ø 5.5 New Era of Balco
Bharat Aluminium Co. v.Kaiser Aluminium Technical Services Inc.

Clauses:
# 17.1.Anydisputeor claim arising out of or relating to this agreement shall be in the first instance, endeavoured to be settled amicably by negotiation between the parties here to and failing which the same will be settled by arbitration pursuant to the English arbitration law and subsequent amendments there to.

# 17.2.The arbitration proceedings shall be carried out by two arbitrators, one appointed by Balco and one by Kaiser chosen freely and without any bias. The Court of Arbitration shall be held wholly in London, England and shall use English language in the proceeding. The findings and award of the Court of Arbitration shall be final and binding upon the parties.
# 22.Governinglaw. —This agreement will be governed byte prevailing law of India and in case of arbitration, the English law shall apply."

Brief Facts:
1. An agreement dated 22 April, 1993 (“Agreement”) was executed between BALCO and Kaiser, under which Kaiser was to supply and install a computer-based system at BALCO’s premises.

2. As per the arbitration clause in the Agreement, any dispute under the Agreement would be settled in accordance with the English Arbitration Law and the venue of the proceedings would be London. The Agreement further stated that the governing law with respect to the Agreement was Indian law; however, arbitration proceedings were to be governed and conducted in accordance with English Law.

3. Disputes arose and were duly referred to arbitration in England. The arbitral tribunal passed two awards in England which were sought to be challenged in India u/s. 34 of the Act in the district court at Bilaspur. Successive orders of the district court and the High Court of Chhattisgarh rejected the appeals. Therefore, BALCO appealed to the Supreme Court (“Court”).

4. Another significant issue to be adjudged, in the case of Bharti Shipyard Ltd. v/s Forrestal AG & Anr.[55](clubbed together with the above petition for hearing), was applicability of section 9 (interim measures) of the Act. The parties had initially agreed to get their disputes settled through arbitral process under the Rules of Arbitration of the International Chamber of Commerce, at Paris, subsequently, mutually agreed on 29 November, 2010 to arbitration under the Rules of London Maritime Arbitrators Association, in London.

5. During the pendency of arbitration proceedings in London, an injunction application was made by appellants, Bharti Shipyard Ltd., before the District Judge at Mangalore, against the encashment of refund bank guarantees issued under the contract (u/s 9 of the Act). The applications were allowed and were consequently challenged in High Court of Bangalore. The Bangalore High Court set aside the application so allowed on the grounds that the appellants had an alternative remedy (u/s 44 of the Act, being interim reliefs for international arbitration) in the courts of London and further since the substantive law governing the contract, as well as the arbitration agreement, is English law, the English courts should be approached. This was also challenged in this petition to the Supreme Court.

6. The appeal filed by Bharat Aluminium Co. before the Division Bench of the Supreme Court was placed for hearing before a three Judge Bench, as one of the judges in the Division Bench found that judgment in Bhatia International and Venture Global was unsound and the other judge disagreed with that observation.


What court said:[56]
“198. In view of the above discussion, we are of the considered opinion that the Arbitration Act, 1996 has accepted the territoriality principle which has been adopted in the UNCITRAL Model Law. Section 2(2)makes a declaration that Part I of the Arbitration Act, 1996 shall apply to all arbitrations which take place within India. We are of the considered opinion that Part I of the Arbitration Act, 1996 would have no application to International Commercial Arbitration held outside India. Therefore, such awards would only be subject to the jurisdiction of the Indian courts when the same are sought to be enforced in India in accordance with the provisions contained in Part II of the Arbitration Act, 1996. In our opinion, the provisions contained in Arbitration Act, 1996 make it crystal clear that there can be no overlapping or intermingling of the provisions contained in Part I with the provisions contained in Part II of the Arbitration Act, 1996.

“199. With utmost respect, we are unable to agree with the conclusions recorded in the judgments of this Court in Bhatia International (supra) and Venture Global Engineering (supra). In our opinion, the provision contained inSection 2(2)of the Arbitration Act, 1996 is not in conflict with any of the provisions either in Part I or in Part II of the Arbitration Act, 1996. In a foreign seated international commercial arbitration, no application for interim relief would be maintainable underSection 9or any other provision, as applicability of Part I of the Arbitration Act, 1996 is limited to all arbitrations which take place in India. Similarly, no suit for interim injunction simplicitor would be maintainable in India, on the basis of an international commercial arbitration with a seat outside India.”

“200. We conclude that Part I of the Arbitration Act, 1996 is applicable only to all the arbitrations which take place within the territory of India”.

Key Holdings of the Supreme Court of India in the BALCO case:

# Part I is not applicable to international commercial arbitration seated outside India:
The court held that the provisions contained in the Act makes it clear that there can be no overlapping between Part I and Part II of the Act. Part I of the Act would therefore have no application to international commercial arbitration seated outside India. Part I of the Act applies to domestic arbitration and ICA seated in India only, while Part II applies to international commercial arbitration seated outside India. However, Part I would apply to international commercial arbitrations seated in India.

# No interim relief:
The court further held that in international commercial arbitrations seated outside India, interim relief cannot be granted by Indian courts under Section 9 (which falls under Part I) or any other provision of the Act like section 17, 27 and 34 as applicability of Part I of the Act is limited to arbitrations which take place in India. Therefore, no civil suit can be instituted purely for interim relief.

# No challenging of setting aside of an international arbitral award under Section 34:
The court has also held that Section 34 of the Act (which provides for setting aside of an arbitral award on the grounds available under the said section), would apply only if the seat of arbitration is in India. This comes as a great relief for the foreign parties because earlier judgments of the Supreme Court could be interpreted to establish that foreign arbitral awards would also have to survive a broad and extensive review under the term “public policy” as stated in Section 34.

# Enforcement of an International Commercial Arbitration Award in India:
The court also held that enforcement of awards rendered in international commercial arbitration held outside India would only be subject to the jurisdiction of the Indian courts when such award is sought to be enforced in India in accordance with the provisions contained in Part II of the Act.

# Seat of arbitration: The seat of arbitration will decide governing law of arbitration. According to the Supreme court, the seat of arbitration would be the seat provided for in the arbitration agreement. However, the venue or place of the arbitration may be elsewhere. The court specifically held that the venue of arbitration may change, but it will have no effect on the seat of arbitration. The seat of the arbitration remains the place initially agreed by or on behalf of the parties. This made the arbitration seat centric as now the seat of arbitration would decide the applicability of either Part 1 or Part 2.

# Prospective overruling: The Court has specifically overruled the decisions in Bhatia International and Venture Global Engineering prospectively i.e the prior arbitration agreements will still be governed by the Bhatia regime. The court has held that the law declared by it in the present case “shall apply prospectively, to all the arbitration agreements executed hereafter”. This suggests that the law declared in Bharat Aluminium will apply only to arbitration agreements made after or on September 6, 2012.

The prospective ruling in Balco case made it clear that now there are 2 regimes under arbitration law, one is the Bhatia regime i.e. before 6.09.2012, meaning any arbitration agreement made before this would be covered under the rules of Bhatia case and another regime was the Balco i.e. after 6.09.2012, meaning any arbitration agreement after this would be governed by the law set under this case.

Impact
The BALCO decision was a positive development for India’s foreign investment and business climate, as it reduced the scope of interference by the Indian courts in foreign seated arbitration. Nonetheless, the interim relief which was provided earlier will remain a negative impact of the Balco judgement along with the prospective ruling decision.

Impact 1
Parties to older arbitration agreements still subject to the pre-BALCO regime
Parties which have arbitration agreements executed before September 6, 2012 are still subjected to the Bhatia Regime system. This is due to the reason that the judgment is phrased only to “…apply prospectively, to all arbitration agreements executed hereafter”. Therefore parties with arbitration agreements executed before September 6, 2012 shall remain subject to the Bhatia regime unless they explicitly or implicitly exclude the applicability of Part 1 of the Act.

The Indian courts have indicated a clear will to apply and develop the restrictive approach to judicial intervention in foreign seated arbitrations. In fact, the Supreme Court led the way in Vale Australia Pty Ltd Vs Steel Authority of India Limited[57], by refusing to reassess the merits of the dispute when dealing with a petition to set aside a foreign seated arbitral award.

Similarly, the Delhi High Court, in NNR Global Logistics Vs Aargus Global Logistics[58], rejected an application for a foreign award to be set aside under section 34 on the public policy grounds under Part I of the Act, although the agreement pre-dated the BALCO decision. The court reasoned that the governing/ applicable curial law was the law of the seat of arbitration.

The most assertive statement had been made by the decision of the Bombay High Court in Konkola Copper Mines (PLC) Vs Stewarts and Lloyds of India Ltd[59]. The Bombay High Court held that “it is only the determination of whether Part I of the Act would apply to an arbitration which would be made prospectively. However, it would be inappropriate to also determine that the meaning, scope and purport of various provisions of the Act as analysed by the Supreme Court in BALCO would apply only prospectively.”

Impact 2
Interim measures now not available in support of foreign seated arbitral proceedings
For parties entering into new arbitral agreements, to which the BALCO judgment applies and which are foreign seated arbitrations, the ability to apply to the Indian courts for interim measures in support of such proceedings – is no longer available.

In its judgment, the Supreme Court held that there is “complete segregation” between Part I and Part II of the Act, meaning that “…any of the provisions contained in Part I cannot be made applicable to Foreign Awards…”. Part I contains not only powers which can be used to delay the foreign seated arbitration proceedings but also those which can assist them, principally the power laid out in section 9 of Part I of the Act to order interim measures in support of arbitration proceedings.

While the Supreme Court acknowledged that this doctrine would prohibit Indian courts granting interim measures in support of foreign arbitrations, they observed that this issue could not be resolved by the Supreme Court but instead was “a matter to be redressed by the Parliament”. Until such reforms are implemented, parties to arbitration proceedings seated outside of India will be unable to apply to the Indian courts to preserve assets or evidence, compel attendance of a witness or obtain an order for security for costs in India or challenge an award to set aside.

·5.6 Post Balco

Pre-Balco (Bhatia Regime)	Post-Balco	Amendment Act
Unless impliedly or expressly excluded by the parties, Part I of the Act will apply even to a foreign seated arbitration.	Part I of the Act will not apply in case of foreign seated arbitration. The decision was given prospective effect and therefore applied to only arbitration agreements executed on or after September 6, 2012. If the arbitration agreement was executed prior to September 6, 2012, necessary modifications would have to be made in the arbitration agreement in order to be governed by the ruling in BALCO[60]else the Bhatia ruling will apply. Part 1 of the Act will not apply in case of foreign seated arbitration except Sections 9, 27 and 37 unless a contrary intention appears in the arbitration agreement.	The Amendment Act is applicable prospectively with effect from October 23, 2015 (i.e. the commencement of the arbitral proceedings, or the court proceeding should be on or after October 23, 2015)[61]

Sri Tufan Chatterjee vs Sri Rangan Dhar[62]
A Division Bench of the High Court heard an appeal on the question as to whether a court could entertain an application for interim relief under Section 9 of the 1996 Act post 23 October 2015 even if it was filed before the said date. The Division Bench of the Calcutta High Court held in the negative. The Court held that the arbitral proceedings commenced with notice invoking arbitration (or as provided under Section 21 and terminated as per Section 32 by the final arbitral award or by an order of the arbitral tribunal under Section 32(2). Hence, Section 26 did not apply to proceedings initiated under Section 9.

The Court held:
“A careful reading of the provisions of the 1996 Act, and in particular Sections 21 and 32 thereof, makes it amply clear that the expression 'arbitral proceedings' in Section 26 of the Amendment Act of 2015 cannot be construed to include proceedings in a Court under the provisions of the 1996 Act, and definitely not any proceedings under Section 9 of the 1996 Act, instituted in a Court before a request for reference of disputes to arbitration is made.”

Electrosteel Castings Limited vs Reacon Engineers (India) Private[63]
The short question involved was whether upon filing an application for challenge the award was automatically stayed. Under the unamended Section 36, there was an automatic stay on enforcement of arbitral award on filing of an application to set aside the award (“Where the time for making an application to set aside the arbitral award under section 34 has expired, or such application having been made, it has been refused, the award shall be enforced…”). However, under the amended Section 36 there is no automatic stay [Section 36(2) of the amended Act provides: “Where an application to set aside the arbitral award has been filed in the Court under section 34, the filing of such an application shall not by itself render that award unenforceable…”]

On facts, the award was passed in July 2015 and the petition for setting aside was filed in November 2015. The Single Judge of the Calcutta High Court held that since Section 26 of the amended Act did not make applicable the Amendment Act to arbitration which commenced prior to 23 October 2015, nothing in the Act applied to the arbitration, which was the subject matter of challenge.

Public Policy
BALCO limited the level of judicial interference in foreign seated arbitrations by taking away, inter alia, the power to grant interim relief and to set aside arbitral awards. However, it did not deal with the issue whether a foreign arbitral award can be refused enforcement by the Indian Courts on the ground of “public policy” as envisaged under section 48(2)(b)[64]of the Act, which is analogous to section 34 and contains objections which can be raised by a losing party.

The courts have been entertaining the applications pertaining to set aside an award on the ground of award being opposed to the public policy of India since the enforcement of the Act.
The term “Public Policy” before the Amendment Act 2015 was given wider interpretation by the Supreme court and High court in it’s rulings which led to confusions and in some cases the court interpreted the term in its narrower sense. But, in the case of Oil & Natural Gas Corporation Ltd. v. SAW Pipes Ltd.,[65]the landmark case in interpreting the term “Public Policy”, the Supreme Court delved into the expression “public policy” to decide that an award can be set aside under section 34 if it is contrary to the public policy, which includes:

i. fundamental policy of Indian law;
ii. the interest of India; or
iii. justice or morality, or
iv. patent illegality.

Since the expression “public policy” is used under both sections 34 and 48, the Supreme Court, in Phulchand Exports Limited v. O.OO. Patriot,[66]held that “public policy” under section 48 also carries the same meaning as given to it in SAW Pipes[67]case. It widened the scope of challenging the enforcement of foreign awards.

In the case of Shri Lal Mahal Ltd. v. Progetto Grano Spa,[68]the Supreme Court overruled Phulchand[69]case and gave narrower meaning to the expression “public policy” by omitting Patent Illegality as one of the grounds of public policy. Hence, enforcement of foreign award would be refused under Section 48(2)(b) only if such enforcement would be contrary to (i) fundamental policy of Indian law; or (ii) the interests of India; or (iii) justice or morality.

Therefore, the court has mitigated the consequences of its previously decided cases to an extent by excluding “patent illegality” from the scope of public policy. Though, this ground will still be available under section 34, but courts cannot refuse the enforcement of foreign arbitral awards seated outside in the garb of patent illegality

·Conclusion
A fast-growing economy requires a reliable and stable dispute resolution process in order to be able to attract foreign investment. With the extreme backlog before Indian courts, commercial players in India and abroad have developed a strong preference to resolve disputes via arbitration, mediation and conciliation. In spite of India being one of the original signatories to the New York Convention, arbitration in India has not always kept up with international best practices due to the controversial and restrictive judgments by the Indian Courts in various cases over the years. In India the major reforms or enactments for Arbitration has been the Acts of 1940, 1996 and 2015. The recent being the Arbitration and Conciliation ordinance bill 2018. The Act of 1940 was not meeting the requirements of the international standard of arbitration which led to the enactment of 1996 Act on the report of the Law Commission of India. The Amendment Act 2015 was introduced to clarify the controversial decisions of the Indian Courts, to limit the jurisdiction of Indian courts in arbitration seated outside India.

Seat centric arbitration is what now is followed in India as the seat of arbitration will govern the arbitration law as enumerated in various case laws. This clarified the position of Indian courts with respect to applicability of Part 1 and part 2 of the Act. Under the Bhatia Regime, the Supreme court of India held that Part 1 of the Act would also be applicable to foreign seated arbitrations unless impliedly or exclusively excluded by the parties, which opened a pandora box and led to confusion amongst the international and Indian parties. The sections 9, 17, 27, 34 of part 1 would now be applicable to foreign seated arbitrations which in a sense gave the parties a mere chance to delay the proceedings and cause undue wrong to another party. Following the chaos of Bhatia, the Supreme Court again in Venture Global, expanded the jurisdiction of Indian Courts with respect to setting aside arbitral award under section 34 of the Act. The international arbitration community took notice of the chaotic situation in India as it appeared that India has a blurred stance on the principle of party autonomy. The only way to circumvent this was for parties to renegotiate existing arbitration agreement expressly excluding the application of Part 1 of the Act.

It was the Balco case, decided by Supreme Court of India which somewhat gave clarity on the application of Part 1 to foreign seated arbitrations. The Supreme Court upheld the territorial principle and held that the arbitrations which are seated outside India will not attract Part I. However, the court held that arbitrations – including international arbitrations – which are seated in India will be governed by Part I. The BALCO judgment applied prospectively (i.e., to arbitration agreements signed after the BALCO judgment (September 6 2012[70]). Therefore, all arbitration agreements entered into before September 6 2012 were still governed by Bhatia Regime. The implication of the Balco case was that now the parties could not approach the Indian Courts for interim measures or challenging the award or setting aside the award and the prospective ruling which made the prior arbitration agreement to be governed by Part 1 of the Act unless excluded by the parties by modifying their agreement.

To overcome this issue, Amendment Act 2015 allowed that parties in a foreign-seated arbitration could approach the court under section 9, 27 and 37 unless to the contrary. This change provided much-needed relief to parties to seek relief. The Amendment Act is applicable prospectively with effect from October 23, 2015 (i.e. the commencement of the arbitral proceedings or the court proceeding should be on or after October 23, 2015)[71]

Now in India the arbitration is governed by 3 scenarios i.e.
1.Bhatia Regime (where part 1 is applicable to foreign seated arbitration),

2.Balco(to arbitration agreements signed after September 6, 2012, therefore any arbitration agreements entered into before September 6, 2012, were still governed byBhatia International.)

3.Amendment Act 2015(the commencement of the arbitral proceedings, or the court proceeding should be on or after October 23, 2015)

While India has improved itself in making it a viable choice for arbitration there are still some provisions of the Act which needs to be looked at as they are ambiguous. A significant change in the practice of Arbitration in India is required. There needs to be a change in the perspective with which arbitration is viewed by the parties, arbitrators, courts and the lawyers who are engaged in arbitrations. The pool of legal practitioners who specialize in the practice of arbitration has to grow with respect to UNCITRAL and Modal Law and to keep themselves updated with the ever-changing arbitration scenario in international community, to view arbitration as the priority rather than playing second fiddle to Indian court litigation work.

The arbitrators needs to grow as well in terms of handling the disputes, having the requisite knowledge and to timely dispose off matters. Unfortunately, the tendency to appoint retired Indian judges as Arbitrators is also hindering the growth of arbitration as a dispute resolution mechanism in India. Delay in the arbitration is another major area where work needs to be done. Prior to the Amendment Act there was no scope for fast track procedure which hindered the arbitration proceedings. There are cases which are pending for more than 8 years before arbitrators due to delay by parties, arbitrators or misuse of the measures as provided under Part 1 of the Act. What the arbitration community in India need is the growth of a community of arbitrators who are unfettered by the traditions of Indian Courts and focused on growing alternate dispute resolution mechanism in its own right.

The field of Arbitration needs to be developed with respect to international community. For foreign investors to invest in India they need a sense of security that Indian courts would not encroach into the arbitration proceedings. Though this study is not complete in itself but it gives the basic idea of how Arbitration has developed in India and is how still developing. The Supreme Court and High Courts have upheld their duty to protect the interest of the Indian parties, India’s Public policy while keeping in line with the international arbitration community.

The judgments of Bhatia International , Venture Global , Bharat Aluminium and Saw Pipes are the few which have helped in developing the arbitration in India.

Bibliography
1.Arbitration and Conciliation Act, 1996
2.Arbitration and Conciliation Amendment Act, 2015
3.http://www.nortonrosefulbright.com/knowledge/publications/108978/international-arbitration-in-india
4.http://www.nishithdesai.com/fileadmin/user_upload/pdfs/Research_Papers/International_Commercial_Arbitration.pdf
5.http://www.nishithdesai.com/fileadmin/user_upload/pdfs/Research%20Papers/Enforcement_of_Arbitral_Awards.pdf
6.http://psalegal.com/wp-content/uploads/2017/01/DisputeResolutionBulletin-IssueXVI.pdf
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9.http://www.nortonrosefulbright.com/knowledge/publications/108978/international-arbitration-in-india
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12.http://psalegal.com/wp-content/uploads/2017/01/ENewslineMay2016.pdf
13.https://singhania.in/pre-balco-arbitration-agreements-seat-of-arbitration/
14.http://www.nortonrosefulbright.com/knowledge/publications/70563/landmark-judgment-delivered-from-the-indian-supreme-court-in-bharat-aluminium-co-v-kaiser-aluminium-technical
15.http://almtlegal.com/articles-pdf/ALMT%20Newsflash%20-%20BALCO%20Judgement.pdf
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18.https://digitalcommons.wcl.american.edu/cgi/viewcontent.cgi?referer=https://www.google.co.in/&httpsredir=1&article=1034&context=ab
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24.https://www.internationallawoffice.com/Newsletters/Arbitration-ADR/India/Khaitan-Co/Implied-exclusion-of-Part-1-of-Arbitration-and-Conciliation-Act-tips-and-strategies#6
25.http://www.nishithdesai.com/fileadmin/user_upload/pdfs/Research%20Papers/Enforcement_of_Arbitral_Awards.pdf
26.http://www.nishithdesai.com/information/news-storage/news-details/article/indian-arbitration-act-is-this-the-end-of-the-applicability-debate-government-of-west-bengal-v-c.html
27.https://www.legallyindia.com/views/entry/part-ii-applicability-of-the-2015-arbitration-amendment-act-to-arbitration-related-court-proceedings
28.http://practicalacademic.blogspot.com/2016/04/applicability-of-2015-arbitration.html
29.Asian Dispute Review 2013
30.http://arbitrationblog.kluwerarbitration.com/2016/09/15/deciding-the-question-of-applicability-arbitration-amendment-act-2015/
31.https://www.legallyindia.com/views/entry/seat-of-arbitration
32.http://kja.nic.in/article/scopeOfADR.pdf
33.http://shodhganga.inflibnet.ac.in/bitstream/10603/10373/8/08_chapter%202.pdf
34.http://www.un.org/waterforlifedecade/water_cooperation_2013/mediation_and_dispute_resolution.shtml
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37.https://pxvlaw.wordpress.com/2012/09/07/bhatia-overruled-a-first-look-at-bharat-aluminium-v-kaiser-aluminium/

End-Notes
[1] https://www.nytimes.com/1991/07/12/opinion/l-persuade-your-neighbors-to-compromise-218791.html
[2] Alternative Dispute Resolution, Practitioners’ Guide, Centre for Democracy and Governance,
Washington, 1998
[3] Dr. Shraddhakara Supakar, Law of Procedure and Justice in Ancient India, Deep & Deep Publication,
New Delhi, 1986.
[4] Supra 12
[5]Tewari, O.P, The Arbitration & Conciliation Act with Alternative Dispute Resolution, 4th Edition (2005) Reprint 2007, Allahabad Law Agency, Faridabad, pp. 2- 4
[6]1981 AIR 2075, 1982 SCR (1) 842
[7]Sh. Venugopal K.K. “Rendering Arbitration in India Swift Effective”,NYAYA DEEP, Vol. VI, Issue: 01, Jan. 2006 at p. 125
[8]Popat D.M. “ADR And India: An Overview”, Dec. 2004, at p. 751, viewed atwww.globaljurix.com(last accessed on 06.10.2018)
[9]Medha Nishita “Alternative Dispute in India”, viewed atwww.fdrindia.org(last accessed on 06.10.2018)
[10]Ganguli A.K. “The Proposed Amendments to The Arbitration and Conciliation Act, 1996- A Critical Analysis”, 45 JILI (2003), pp. 3-4
[11](1981) 4 SCC 634
[12]1989 AIR 1263, 1989 SCR (1) 880
[13] Pasayat Arijit, Dr. J.; “Arbitration and Courts Harmony Amidst Disharmony, NYAYA DEEP, Vol. VIII, Issue: 4, Oct. 2007, pp. 36-37
[14]http://kja.nic.in/article/scopeOfADR.pdf
[15]DixitSujoy, “Alternative Dispute Resolution Mechanism”, viewed atwww.legalserviceindia.com(last accessed on 06.10.18)
[16]AIR 2000 SC 2821)
[17]Dr. Singh Avtar, Law of Arbitration and Conciliation (including ADR Systems), Eastern Book Company, Lucknow, 7th Edition (2006), p. 393
[18]AIR 1999 SC 3196
[19]AIR 2000 SC 2821)
[20]S.N. Srikanta and Co. v. Union of India, AIR 1967 Bom 347)
[21]Fuerst Lawson Ltd v. Jindal Exports Ltd., (2011) 8 SCC 333
[22]https://taxguru.in/corporate-law/arbitration-conciliation-amendment-bill-2018.html
[23]Commercial’ should be construed broadly having regard to the manifold activities which are an integral part of international trade today (R.M. Investments & Trading Co. Pvt. Ltd. v. Boeing Co., AIR 1994 SC 1136).
[24]AIR 1994 SC 1136
[25]2008 (14) SCC 271
[26]http://www.nishithdesai.com/fileadmin/user_upload/pdfs/Research%20Papers/Enforcement_of_Arbitral_Awards.pdf
[27]Section 9 of the Act
[28] Section 17 of the Act
[29] Section 34 of the 1996 Act
[30] AIR 2017 SC 2785
[31] http://nishithdesai.com/information/news-storage/news-details/article/once-the-award-is-set-aside-the-dispute-cannot-be-remanded-back-to-the-arbitral-tribunal-rule.html
[32] 2015 Amendment Act
[33] Proviso to section 34(2A) of the Act
[34] Explanation 2 to section 48 of the Act
[35] Section 34(2A) of the Act
[36] AIR 2002 SC 1432
[37] National Ability S.A. v. Tinna Oil Chemicals Ltd., 2008 (3) ARBLR 37
[38] AIR 1994 SC 1136
[39] AIR 1962 SC 1810
[40] (1994) 2 Arb LR 405
[41] 2011 (1) ArbLR 244
[42] http://www.rajaniassociates.net/media/de-jure/De-Jure-Seat-of-Arbitration.pdf
[43] SLP (C) No. 10924 of 2013
[44] SLP (C) No. 10924 of 2013
[45] (2012) 9 SCC 552
[46] (2016) 4 SCC 126
[47] The Amendment Act introduced some much-needed changes to the Act, which came in force from October 23, 2015.
[48](2011) 6 SCC 161
[49] (2014) 7 SCC 603
[50] (2002) 4 SCC 105.
[51] (2008) 4 SCC 190.
[52] (2008) 10 SCC 308 (Supreme court of India)
[53] (2011) 6 SCC 161.
[54] LAWS(GJH)-2005-7-42
[55] M.F.A.No.1735 of 2011 (AA) C/w. M.F.A.No.1736 of 2011 (AA)
[56] https://indiankanoon.org/doc/173015163/
[57] https://indiankanoon.org/doc/166216958/ , O.M.P. 414/2011
[58] Nos. 61 and 201 of 2012 , https://indiankanoon.org/doc/95830156/
[59] No.199 of 2013 in Arbitration Petition No.160 of 2013 with Notice of Motion (L) No.915 of 2013 and Appeal (L) No.223 of 2013 in Review Petition No.22 of 2013 in Arbitration Petition No.160 of 2013.
[60] Harmony Innovation Shipping Ltd v. Gupta Coal India Ltd.& Anr, 2015 (3) SCALE 295 (for our analysis please see: http:// www.nishithdesai.com/information/research-and-articles/ nda-hotline/nda-hotline-single-view/article/have-you- amended-your-arbitration-agreement-post-balco.html?no_ cache=1&cHash=05954678cd27f35dbcb4ce62517c1fc3)
[61] Board of Control for Cricket in India vs. Kochi Cricket Pvt. Ltd Civil Appeal Nos.2879-2880 (Arising out of SLP (C) Nos. 1954519546 of 2016.
[62] FMAT No.47 of 2016&CAN 308 of 2016
[63] AP No.1710 of 2015
[64] Conditions for enforcement of foreign award
[65] AIR 2003 SC 2629
[66] (2011) 10 SCC 300
[67] Oil & Natural Gas Corporation Ltd. v. SAW Pipes Ltd., AIR 2003 SC 2629
[68] Civil Appeal No. 5085 of 2013 arising from SLP(c) No. 13721 of 2012
[69] Phulchand Exports Limited v. O.OO. Patriot; (2011) 10 SCC 300
[70] 97. The judgment inBhatia Internationalwas rendered by this Court on 13-3-2002. Since then, the aforesaid judgment has been followed by all the High Courts as well as by this Court on numerous occasions. In fact, the judgment inVenture Global Engg.has been rendered on 10-1- 2008 in terms of the ratio of the decision inBhatia International. Thus, in order to do complete justice, we hereby order, that the law now declared by this Court shall apply prospectively, to all the arbitration agreements executed hereafter."
[71] Board of Control for Cricket in India vs. Kochi Cricket Pvt. Ltd Civil Appeal Nos.2879-2880 (Arising out of SLP (C) Nos. 1954519546 of 2016.