An article highlighting the key arbitration-related developments in India in 2011.
Top Developments of 2011
2011 continued to witness India's journey towards a pro-arbitration approach. However, these decisions have unfortunately been accompanied with a not-so savoury decision in which the Delhi High Court followed the controversial decision of the Supreme Court in Bhatia International v Bulk Trading S, Appeal (civil) 6527 of 2001, decided on 13th March 2002.
Pro-arbitration approach
A number of judgments in 2011 reinforced India's image as a pro-arbitration nation.
In State of Goa v Praveen Enterprises, Civil Appeal No. 4987 of 2011 (Arising out of SLP (C) No. 15337 of 2009), decided on 4th July 2011, the Supreme Court held that where the arbitration agreement provides for all disputes to be referred to arbitration, the arbitrator will have jurisdiction to entertain any counterclaim, even if it was not raised before the pleadings.
In Aitreya Limited v Dans Energy Pvt Ltd & Ors. (O.M.P. 819/2011 & and I.A. 19638/ 2011, decided on 23rd December 2011), the Delhi High Court relied on Bhatia International v Bulk Trading S, Appeal (civil) 6527 of 2001, decided on 13th March 2002 (Bhatia International) and held that Part I of the 1996 Act is applicable even when the seat of arbitration is outside India. The court ruled that, because the parties had neither expressly nor impliedly excluded Part I, the Indian courts had jurisdiction to entertain the petition under section 9 of the 1996 Act for granting interim relief.
Anticipated development in 2012
Consolidated appeals
The Supreme Court has recently referred a batch of consolidated appeals to a five judge Constitution Bench of the Supreme Court (Constitution Bench), which includes the Chief Justice of India. The Constitution Bench is hearing the appeals with the intention of reconsidering the correctness of the precedent laid down in the Bhatia International judgment. In Bhatia International, the Supreme Court deviated from the legislation by holding that the provisions of Part I of the 1996 Act would apply in the case of international commercial arbitrations held outside India unless the parties expressly or impliedly exclude all or any of its provisions. The judgment has been criticised as it increased judicial interference from the Indian courts in arbitrations held outside India.
The arguments in the appeals started on 10 January 2012. It is hoped that the forthcoming judgment will put an end to the issue of applicability of Part I of the 1996 Act. We will continue to report on future developments.
Proposed Amendments to the Arbitration Act – A Consultation Paper
As previously reported in Article, India: round up 2010/2011, the law ministry launched a Consultation Paper recommending changes to the 1996 Act. There have been no further developments with respect to this Consultation Paper in 2011. However, the intention to decrease the interventionist role of the Indian judiciary in arbitration is reflected by the reference of the Bhatia International judgment to the Constitutional Bench for reconsideration.
All in all, we hope that 2012 turns out to be a positive year for arbitration in India.