Arbitration Act Not Welldrafted

The Supreme Court commented last week that the Arbitration and Conciliation Act, 1996, "does not appear to be a well-drafted legislation".

The court had to decide whether the Act was applicable to Indian as well as foreign arbitration awards in certain cases. Since the legislation was not clear on this point, the court interpreted the provisions to conclude that it was applicable to both types of awards.

A Division Bench, headed by Justice G B Pattanaik, was deciding the appeal of Bhatia International against Bulk Trading SA in a dispute earlier decided by the Madhya Pradesh High Court.

In this case, the MP High Court had got the law right, and the contrary view expressed by the high courts of Bombay, Delhi, Madras and Orissa were declared wrong. The court said those high courts could not be faulted as the law was not welldrafted.

"However, in our view, a proper and conjoint reading of all the provisions indicates that Part I of the Act is also applicable to international commercial arbitrations which take place out of India, unless the parties by agreement, express or implied, exclude it or any conflict between any of the provisions of the said Act," the judgement clarified. When such arbitration is held in India, Part I would compulsorily apply.

In this case, the parties agreed that the arbitration would be held in Paris according to the rules of the International Chamber of Commerce. Bulk Trading later moved an application before the Indore judge seeking an interim injunction restraining the parties from alienating its assets.

Bhatia International then raised the question of jurisdiction. This was rejected and it was held that the court at Indore had jurisdiction. This view was upheld by the high court and now by the Supreme Court.

The apex court ruled that the aggrieved party could move the Indian courts even if the arbitration was held under the rules of the International Chamber of Commerce.