Holding

Part I of the Arbitration and Conciliation Act, 1996 is impliedly excluded where the arbitration agreement is governed by English law, rendering Section 34 applications against foreign awards untenable.

Summary

Bharat Aluminium Company entered into a 1993 contract with Kaiser Aluminium Technical Services Inc. that contained an arbitration clause specifying that any disputes would be resolved under English arbitration law, while the contract itself was governed by Indian law. The arbitration was conducted in England, resulting in two awards in favour of the respondent. The appellant sought to set aside these foreign awards under Section 34 of the Arbitration and Conciliation Act, 1996, but the District Judge and the High Court dismissed the applications. The Supreme Court examined whether the parties, by express or implied agreement, excluded Part I of the Indian Arbitration Act, which would render Section 34 inapplicable to foreign awards. The Court held that the arbitration agreement was governed by English law, thereby implying the exclusion of Part I of the Act, and affirmed that the Section 34 applications were not maintainable. Consequently, the appeals were dismissed.

Issues considered

Whether the parties, by express or implied agreement, excluded the application of Part I of the Arbitration and Conciliation Act, 1996 to their arbitration proceedings.
Whether Section 34 of the Act can be invoked to set aside foreign arbitral awards when the arbitration agreement is governed by foreign law.

Legislation cited

Arbitration and Conciliation Act, 1996s. 34

Subjects

ArbitrationForeign awardSection 34Exclusion of Part IParty autonomyChoice of lawInterpretation of arbitration agreementEnglish lawIndian law

Judgment

[2016] l S.C.R. 364

A BHARAT ALUMINIUM COMPANY
v.
KAISER ALUMINIUM TECHNICAL SERVICES INC.
(Civil Appeal No. 7019 of2005)
B JANUARY 28, 2016
(ANIL R. DAVE, KURIAN JOSEPH AND
AMITAVA ROY, JJ.(
Arbitration and Conciliation Act, 1996 - Part I, s. 34 -
lnternationai commercial arbitration Challenge to foreign awards
c - Disputes between parties referred to arbitration -- Arbitration
proceedings in England - Foreign awards passed in favour of
respondent -Applications uls. 3./ by appellant-· Dismissed by District
Judge as also High Court - Issue as regards whether the parties by
agreement, express or implied, have excluded wholly or partly, Part
D
I of the Arbitration Act - Held: From the clauses of the arbitration
agreement, it is clear that law goveming the arbitration agreemel1/
is English Law, thus, there is a implied exclusion of Part I of the
Arbitration Act - View taken by the High Court that the applications
flied by appellant u/s. 3./ are not maintainable against the foreign
awards between the parties, upheld.
E
Interpretation - Interpretation of Act, Rule or Regulation!
deeds, treaties, settlements in court/documents made by laymen like
Wills - Approach by the court - Held: Court has to make dijferel1/
approaches depending i1pon the instrument falling for interpretation
- Legal quality or perfection of the document is comparatively low
F in the third category, high in second and higher in first -· In the
process of interpretation in the first category, the courts gather the
purpose of the legislation, its context and text - In the second
category also, the text as well as the purpose is important - In the
third category, intention alone of the executor is releva111.
G Dismissing the appeals, the Court.
HELD: 1.1 In the instant case, being a contract executed
between the two parties, the court cannot adopt an approach for
interpreting a statute. The terms of the contract would have to
be understood in the way the parties wanted and intended them
H
364
BHARAT ALUMINIUM COMPANY v. KAISER ALUMINIUM 365
TECHNICAL SERVICES INC.

to be. In that context, particularly in agreements of arbitration, A
where party autonomy is the grundnorm, how the parties worked
out the agreement, is one of the indicators to decipher the
intention, apart from the plain or grammatical meaning of the
expressions and the use of the expressions at the proper places
in the agreement. The respondent had invoked the provisions of
B
English law for the purpose of the initiation of the unsettled
disputes. It has hence, while interpreting an agreement, to be
kept in mind that the parties, intended to avoid impracticable
and inconvenient processes and procedures in working out the
agreement. [Para 10] [370-G-H] [371-A-B]
1.2 A close perusal of the terms between the parties would c
clearly show that in the first part of Article 22 of the Arbitration
Agreement, it is agreed between the parties that the proper law
of the contract will be governed by the prevailing law of India,
and in the case of arbitration, English Law would apply. In other
words, the agreement as a whole would be governed by Indian D
Law, and in case of arbitration, the English Law will apply. No
doubt, one should not strain too much to interpret an agreement
between two parties as in the case of a statutory interpretation.
The approach in analysing the terms of agreement should be
straight and plain but at the same time cohesive and logical. [Para
9) [370-C-D] E

1.3 The law applicable to arbitration agreement in the
instant case is English Law. Once it is found that the law governing
the arbitration agreement is English Law, Part I of the Arbitration
Act stands impliedly excluded. It cannot be said that the arbitration
agreement is to be governed by the Indian Law. There is no error F
in the view taken by the High Court that the applications filed by
the appellant under section 34 of the Arbitration Act are not
maintainable against the two foreign awards between the parties.
[Para 13, 14, 15] [371-H; 372-A, E, F]
Bharat Aluminium Company i: Kafrer Aluminium G
Technical Services Inc. (2012) 9 SCC 552:2012 (12)
SCR 327; Bhatia International v. Bulk Trading S.A.
and another (2002) 4 SCC 105:2002 (2) SCR 411;
Sumitomo Heavy Industries Limited v. ONGC Limited
and others (1998) 1 SCC 305: 2002 (2) SCR 411;
H
366 SUPREME COURT REPORTS [2016] I S.C.R.

A Reliance Jndu5tries Li111ited ancl another v. Union of
India (2014) 7 SCC 603:2014 (6) SCR 456; Aircraft
Employees· Housing Cooperative Society Limited v.
Secretary, Rural Development and Panchayat Raj,
Government ofKarnataka, Bangalore and others (1996)
11 SCC 475:1996 (4) Suppl. SCR 424; Cargill
B
International S.A. v. Bangladesh Sugar and Food
Jndu.~·tries Corporation (1998) 1 W.L.R. 461 CA; Union
of India v. Reliance Industries Limited and others
2015 (10) SCALE 149 - referred to.
Concise Oxford English Dictionary; The New Oxford
c Dictionary of English: Words and Phrases Permanent
Edn, Volume 35A - referred to.
CASE LAW REFERENCE
2012 (12) SCR 327 referred to. Para l
D 2002 (2) SCR 411 referred to. Para 1
1997 (6) Suppl. SCR 186 referred to. Paras
2014 (6) SCR 456 referred to. Paras
1996 (4) Suppl. SCR 424 referred to. Para8
E (1998) l W.L.R. 461 CA referred to. Para 10
2015 (10) SCALE 149 referred to. Para 13
CJVIL APPELLATE JURISDICTION: CIVIL APPEAL No.
7019 OF 2005
F From the Judgment and Order dated I 0.08.2005 of the Division
Bench. of the High Court of Judicature at Bilaspur (Chhatisgarh) in Misc.
Appeal No. 889 of2004
WITH
C. A. NO. 3678 OF 2007
G
C. A. Sundaram, Prashanto Chandra Sen, AnushrutiAnkita Saikia,
Rohini Musa, Abhishek Gupta, Faraz lnayat, (for Binu Tamta) for the
Appellant.
Saurabh Kirpal, Manu Nair, Anuj Berry, lshan Gaur, Arun Sehgal,
H (for Suresh A. Shroff & Co.), Dheeraj Nair, E. C. Agrawala, Ramesh
BHARAT ALUMINIUM COMPANY v. KAISER ALUMINIUM 367
TECHNICAL SERVICES INC.

Babu M. R., Mis. 0. P. Khaitan & Co. for the Respondent. A
The Judgment of the Cou11 was delivered by
KURIAN, J. 1. The residue of the Constitution Bench Judgment
in Bharat Aluminium Company v. Kaiser Aluminium Technical
Services Inc.' is the subject matter of the present appeal. At the instance
of the appellant, the Bench resolved the conflicting, if not, confusing B
views on the applicability of Part I of Arbitration and Conciliation Act,
1996 (hereinafter referred to as 'Arbitration Act') and held that " ...
Part I of the Arbitration Act is applicable only to all the arbitrations
which take place within the territory oflndia", overruling a three-Judge
Bench decision of this Court in Bhatia Intcruational v. Bulk Trading c
S.A. and another'. Exercising its the power under Article 142 of the
Constitution of India, the Constitution Bench however, held that the law
declared by it would only operate prospectively. In other words, all
agreements ·executed prior to 06.09.2012 were to be governed by the
decision in Bhatia International (supra}. '
D
2. In Bhatia International (supra). it was held that even in cases
of international commercial arbitrations held out of India, provisions of
Part I would apply unless the parties by agreement express or implied,
excluded all or any of its provisions. To quote paragraph-32:
"32, To conclude, we hold that the provisions of Part I would E
appl,fto 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 derogable provisions of Part I. In cases
of international commercial arbitrations held out oflndia provisions
of Part I would apply unless the parties by agreement, express or F
implied, exclude all or any of its provisions. In that case the laws
or rules chosen by the pai1ics would prevail. Any provision, in
Part I, which is contrary to or excluded by that law or rules will
not apply."
3. Therefore. the simple question before us is whether the parties G
by agreement, express or irnpl.ied, have excluded wholly or partly, Pait I
of the Arbitration Act.

1
(2012) 9 sec 552
1
(2002) 4 sec 105 H
368 SUPREME COURT REPORTS [2016] I S.C.R.

A 4. The bare necessary facts of the case are that an agreement
dated 22.04.1993 was executed between the appcl lant and the respondent
with relation to supply of equipment, and modernization and up-gradation
of the production facilities of the appellant at Korba in the state of
Chhattisgarh. Certain disputes arose between the parties and the same
were referred to arbitration. The arbitration proceedings were held in
B
England and the arbitral tribunal made two awards in favour of the
respondent dated 10.11.2002 and 12.11.2002. The appellant filed
applications, under Section 34 of the Arbitration Act before the District
Judge, Bilaspur, which were dismissed. Aggrieved, the appellant filed
appeals before the High Court ofChhattisgarh. The High Court dismissed
c the appeals.
5. Party autonomy being the brooding and guiding spirit in
arbitration, the parties are free to agree on application of three different
laws governing their entire contract - (I) proper law of contract, (2)
proper law of arbitration agreement and (3) proper law of the conduct
D of arbitration, which is popularly and in legal parlance known as curial
law. The interplay and application of these different laws to an arbitration
has been succinctly explained by this Court in Sumitomo Heavy
Industries Limited v. ONGC Limited and others', which is one of
the earliest decisions in that direction and which has been consistently
followed in all the subsequent decisions including the recent Reliance
E Industries Limited and another v. Union of India'.
6. In order to ascertain the applicable laws, we have to certainly
refer to the relevant clauses of the arbitration agreement, viz., Article 17
and Article 22. which read as follows:

F "Article 17 - ARBITRATION
17.1: Any dispute or claim arising out of or relating to this
agreement shall be in the first instance endeavour to be settled
amicably by negotiation between the parties hereto and failing
which the same will be settled by arbitration pursuant to the English
G Arbitration Law and subsequent amendment thereto.
Article 17.2: The arbitration proceedings shall be carried by two
arbitrators. one appointed by the Petitioner and one by Respondent

-' t 1998) 1 sec 305
'(201~)7SCC603
H
BHARAT ALUMINIUM COMPANY v. KAISER ALUMINIUM 369
TECHNICAL SERVICES INC. [KURIAN,J.]

chosen freely and without any bias. The Court of arbitration shall A
be wholly in London, England and shall use the English language
in the proceedings. The finding and award of the Court of
Arbitration shall be final and binding.
Article 17.3: Before entering upon the arbitration, the two
Arbitrators shall appoint an Umpire. If the two arbitrators are not B
able to reach an agreement on the selection of an Umpire, the
Umpire shall be nominated by the International Chamber of Paris.
Article 22: GOVERNING LAW
This agreement will be governed by the prevailing law of India
and in case of Arbitration, the English Law shall apply." c
7. In order to coherently analyse the situation, we shall first see
the proper law of contract, the law governing the arbitration agreement
and finally the law governing the procedure. Article 22 of the Arbitration
Agreement leaves no room for any doubt, and it has also not been disputed.
that the proper law of contract is Indian law. Therefore, crossing that D
gate, we shall now proceed to the door on the Arbitration Agreement.
8. Article 17 is solely on arbitration. A1ticle 17.1 clearly stipulates
that the disputes or claims arising out of or relating to the agreements. if
not amicably settled by negotiation, will be settled by the arbitration
pursuant to the English Arbitration Law and subsequent amendments E
thereto. The expression "pursuant to", according to Concise Oxford
English Dictionary means "in accordance with". The New Oxford
Dictionary of English has also given the same meaning to the expression.
Words and Phrases, Permanent Edition, Volume 35A, explains the
expression as "in conformity with". "The expressions "pursuant to or in
F
pursuance of' have a restrictive interpretation and have been regarded
as equivalent to "in conformity with", and imply that what is done is in
accordance with an instruction or direction".' In Aircraft Employees'
Housing Cooperative Society Limited v. Secretary, Rural
Development aud Panchayat Raj, Government of Karnataka,
Bangalore and others', though in the context of the pre-amended Land G
Acquisition Act, this court has dealt with the meaning of the expression
"in pursuance of'. It has been held -
5
. Words and Phrases, Pcnnanenl Edition. Volu1nc 35A, page 337. citing f'abianich v.
Harl. D. C. Mun /\pp .. 31 /\.2d 881. 883.
'"(1996) II SCC475 i-1
370 SUPREME COURT REPORTS [2016) I S.C.R.

A "'4 ....... In pursuance of' would mean under the authority of or by
virtue of or in the course of carrying out in accordance \vi th the
scheme or plan or direction or order or anything in consequence
or confonnable to or according to~ act of pursuing, carrying out
and performance, prosecution ...
B Therefore, it is clear that the parties have agreed in expressed
terms that the law of arbitration would be English Arbitration Law.
9. Article 22 has in fact two parts. In the first part of that Article,
it is agreed between the parties that the proper law of the contract will
be governed by the prevailing law of India, and in the case ofarbitration,
c English Law would apply. In other words, the agreement as a whole
would be governed by Indian Law, and in case ofarbitration, the English
Law will apply. No doubt, one should not strain too much to interpret an
agreement between two parties as in the case of a statutory
interpretation. The approach in analysing thetenns of agreement should
be straight and plain but at the same time cohesive and logical.
D
I 0. In the matter of interpretation, the court has to make different
approaches depending upon the instrument falling for interpretation.
Legislative drafting is made by experts and is subjected to scrutiny at
different stages before it takes final shape of an Act, Rule or Regulation.
There is another category of drafting by lawmen or document writers
E who are professionally qualified and experienced in the field like drafting
deeds, treaties, settlements in court, etc. And then there is the third
category of documents made by laymen who have no knowledge of law
or expertise in the field. The legal quality or perfection of the document
is comparatively low in the third category, high in second and higher in
F first. No doubt, in the process of interpretation in the first category, the
courts do make an attempt to gather the purpose of the legislation, its
context and text. In the second category also, the text as well as the
purpose is certainly impo1tant, and in the third category of documents
like wills, it is simply intention alone of the executor that is relevant. In
the case before us, being a contract executed between the two parties,
G the court cannot adopt an approach for interpreting a statute. The terms
of the contract will have to be understood in the way the parties wanted
and intended them to be. In that context, particularly in agreements of
arbitration. where party autonomy is the grundnonn, how the pa11ics
worked out the agreement, is one of the indicators to decipher the
intention, apait from the plain or grammatical meaning of the expressions
H
BHARAT ALUMINIUM COMPANY v. KAISER ALUMINIUM 371
TECHNICAL SERVICES INC. [KURIAN,J.]

and the use of the expressions at the proper places in the agreement. A
Contextually, it may be noted that in the present case, the respondent
had invoked the provisions of English law for the purpose of the initiation
of the unsettled disputes. It has hence, while interpreting an agreement,
to be kept in mind that the pa11 ;,.,_intended to avoid impracticable and
inconvenient processes and procL·dures in working out the agreement.
B
Potter J. made a similar observation in Cargill International S.A. v.
Bangladesh Sugar and Food Industries Corporation':
"As Lord Goff observed in another context in Palm Shipping v.
Kuwait Petroleum [ 1988] 1 Lloyds Rep 500 at 502: ·'Jt is not a
permissible method of construction to propound a general or
generally accepted principal ... (and) ... then to seek to force the c
provisions of the ... (the contract) ... into the straightjacket of that
principle." On the other hand, modern principles of construction
require the comt to have regard to the commercial background,
the context of the contract and the circumstances of the parties
and to consider whether, against that background and in that D
context, to give the words a particular or restricted meaning would
lead to an apparently unreasonable and unfair result."
11. A close perusal of the tenns between the parties would clearly
show that the first part of Article 22 is on the law governing the contract
and in the second part the parties intended to lay down the law applicable E
to the arbitration agreement, viz., the proper law of the agreement of
arbitration. It is unnecessary that after already agreeing on the procedural
law governing the arbitration in Article 17.1, the parties intended to state
the same again in a separate clause within the same contract in Article
22. Therefore. the intention of the parties to apply English Law to the
arbitration agreement also and not limit it to the conduct of the arbitration F
is fairly clear from Article 22.
12. Sumitomo (supra) is ofno avail to the appellant. In Sumitomo
(supra), there was no specific choice on the law ofarbitration agreement
and this court held that in absence of such choice, the law of arbitration
agreement would be determined by the substantive law of the contract. G
That is not the case in this .agreement.
13. It is clear that the law applicable to arbitration agreement in
the present case is English Law. Once it is found that the law governing

7
[1998] I W.L.R. 461 CA H
372 SUPREME COURT REPORTS [2016] I S.C.R.

A the arbitration agreement is English Law, Part I of the Indian Arbitration
Act stands impliedly excluded. This has been a long settled position and
the latest judgment in Union oflndia v. Reliance Industries Limited
and others' reaffirms the same. In the words of R.F. Nari man J .,
"20. The last paragraph of Bharat Aluminium's judgment has
B now to be read with two caveats, both emanating from paragraph
32 of Bhatia International itself-that where the Court·comes to
a determination that the juridical seat is outside India or where
law other than Indian law governs the arbitration agreement, Part-
! of the Arbitration Act, 1996 would be excluded by necessary
implication. Therefore, even in the cases governed by the Bhatia
c principle, it is only those cases in which agreements stipulate that
the seat of the arbitration is in India or on whose facts a judgment
cannot be reached on the seat of the arbitration as being outside
India that would continue to be governed by the Bhatia principle.
Also, it is only those agreements which stipulate or can be read to
D stipulate that the law governing the arbitration agreement is Indian
law which would continue to be governed by the Bhatia rule."
14. We are hence unable to be persuaded by the persuasive
argument advanced by Shri Sundaram, learned Senior Counsel appearing
for the appellant that the arbitration agreement is to be governed by the
E Indian Law.
15. Accordingly, we find no error in the view taken by the High
Court that the applications filed by the appellant under Section 34 of the
Indian Act are not maintainable against the two foreign awards dated
I 0.11.2002 and 12.11.2002 between the appellant and the respondent.
F 16. The appeals are accordingly dismissed. There shall be no order
as to costs.
Nidhi Jain Appeals dismissed.

'2015 (10) SCALE 149