Part I of the Arbitration and Conciliation Act 1996 (Act) deals with domestic arbitration and section 2(2) provides that Part I shall apply where the place of arbitration is India.

Section 9 of the Act provides for interim measures by a court before or during arbitral proceedings, or at any time after the making of the arbitral award, but before enforcement of the arbitral award.

A Production Sharing Contract (PSC) was entered into between the Union of India (respondent) and a consortium of four Indian companies, including Videocon Industries Limited (appellant). The respondent granted a licence to the four Indian companies to explore and produce hydrocarbon resources that it owned. The PSC provided that disputes would be resolved by arbitration in Kuala Lumpur, that the arbitration agreement would be governed by English law and that the PSC would be governed by Indian law. Disputes arose between the appellant and the respondent, which were referred to an arbitral tribunal. Due to the outbreak of the SARS epidemic, the arbitral tribunal shifted the seat of the arbitration, with the consent of the parties, to London.

The tribunal made a partial award, which was challenged by the respondent in the High Court of Malaysia. The appellant raised objections as to the jurisdiction of the High Court of Malaysia on the ground that, as stated in the PSC, only English courts had jurisdiction. Meanwhile, the respondent also filed a petition in the High Court of Delhi (Delhi High Court) under section 9 of the Act, to stay the arbitral proceedings. The appellant also reiterated its objection over jurisdiction before the Delhi High Court.

The Delhi High Court dismissed the objection and held that it had jurisdiction to entertain the petition filed by the respondent, under section 9 of the Act, relying on Bhatia International v Bulk Trading (2002) 4 SCC 105. The appellant then filed a Special Leave Petition in the Supreme Court of India (Supreme Court).

Regarding the issue of the juridical seat of arbitration, the Supreme Court held that mere change in the physical venue of the hearing from Kuala Lumpur to London did not amount to a change in the juridical seat of arbitration. The Supreme Court relied on its decision in Dozco India Pvt. Ltd v Doosan Infracore Co. Ltd 2010 (9) UJ 4521 (SC) in which it held that "each move of the arbitral tribunal does not of itself mean that the seat of the arbitration changes. The seat of the arbitration remains the place initially agreed by or on behalf of the parties" (see Legal update, Excluding Part I of the Indian Arbitration and Conciliation Act 1996: is it necessary?). To decide this issue, the Supreme Court also referred to the provisions of the English Arbitration Act 1996, as English law was the designated arbitration law. The Supreme Court observed that there was no written agreement signed by the parties to the PSC which amended the PSC so as to shift the juridical seat of arbitration from Kuala Lumpur to London. Thus, the juridical seat of arbitration was Kuala Lumpur and not London.

In deciding whether the Delhi High Court had jurisdiction to entertain the petition filed by the respondent under section 9 of the Act, the Supreme Court first analysed its judgments in Bhatia, Venture Global Engineering v Satyam Computer Services Limited (2008) 4 SCC 190 and the Gujarat High Court judgment in Hardy Oil and Gas Ltd v Hindustan Oil Exploration Co. Ltd. (2006) 1 GLR 658. On analysing these judgments, which concerned the exclusion of Part I of the Act (whether express or implied), the Supreme Court held that by choosing English law as the governing law of the arbitration agreement, the parties had impliedly excluded the provisions of Part I of the Act. Therefore, the Supreme Court allowed the appeal and held that the Delhi High Court did not have jurisdiction to entertain the petition filed by the respondent under section 9 of the Act.

This judgment is a step forward in reinforcing India's image as an arbitration-friendly jurisdiction. The Supreme Court appears to have held that an express exclusion of Part I of the Act is not required and that it will be sufficient if the applicable law governing the arbitration agreement is a foreign law and the seat of arbitration is outside India. This is apparent even though the Supreme Court did rely on the Bhatia judgment, where "express" exclusion of Part I of the Act was always understood to mean the specific inclusion of a clause in an arbitration agreement to that effect (that is, a sub-clause that Part I will not apply).

Videocon Industries Limited v. Union of India (UOI) and another, Civil Appeal No. 4269 of 2011, decided on 11th May 2011.