1. 1
Compare the judgements of Bhatia and Balco and what in
your opinion is the correct law as laid down by SC
substantiate it with your own reasons. Secondly what in
your opinion is the effect of new amendments to the
Arbitration Act and what way it will help India to become
an International Arbitration Hub.
Guided By:
B. Gopalakrishnan
PREPARED BY:
SUNEETA MOHAPATRA
LLM, 1YEAR COURSE (3rd
Trisem)
ROLL NO. 06

2. 2
CONTENTS
Sl. No. Topic Pg No.
1.
BHATIA INTERNATIONAL VS. BULK
TRADING S. A. & ANR.
3-4
2.
Bharat Aluminium Company and Ors. etc. etc.
Vs. Kaiser Aluminium Technical Service, Inc. and
Ors. etc.
5-7
4. Comparison between Bhatia international and
BALCO Case. 8-11
5.
Opinion on the correct law, laid down by SC
with substantiate reasons.
12-13
6.
Opinion on the effect of new amendments to
the Arbitration Act and in what way it will
help India to become a international
Arbitration Hub.
14-20

3. 3
BHATIA INTERNATIONAL Vs. BULK TRADING S. A. & ANR.
Contract contained an arbitration clause which provided that arbitration was to be as per the
rules of the International Chamber of Commerce (ICC).
ISSUE:
Whether Indian Courts have power to grant interim relief U/S 9 of the A&C Act 1996?
CONTENTIONS:
Appellant
1. Part I of the Act only applies to arbitrations where the place of arbitration is in India.
2. Framing the said Act the legislature has purposely not adopted art 1(2) of the
UNCITRAL Model Law. He submits that this clearly shows the intention of the
legislature that they did not want part I to apply to arbitrations which take place
outside India.
3. Sec 2(f) of the said Act defines an international commercial arbitration. International
commercial arbitration could take place either in India or outside India. If the
international commercial arbitration takes place out of India then part I of the said Act
would not apply.
4. When arbitration is being held in Paris i.e. out of India. To such arbitrations part I
does not apply. Sec 9 and 17 fall in part I. Therefore Sec 9 and 17 would not apply
and cannot be used in cases where the place of arbitration is not in India.
OPINION OF THE COURT:
The Court observed that accepting the arguments to the appellant amount to holding that the
legislature has left lacunae in the said Act. There would be a lacunae as neither part I or II
would apply to arbitrations held in a country which is not a signatory to the New York
Convention or the Geneva Convention (non-convention country). It would mean that there is
no law, in India, governing such arbitration. It also leads to an anomalous situation, inasmuch
part I would apply to Jammu and Kashmir in all international commercial arbitrations but part
I would not apply to the rest of India if the arbitration takes place out of India. Furthermore,
there can also be an apparent conflict between sub-s (2) of s 2 [CG1] on one hand and sub-ss
(4) and (5) of s 2 on the other. In addition to this sub-s (2) of s 2 would also be in conflict
with s 1 which provides that the Act extends to the whole of India. A party would be

4. 4
left remediless inasmuch as in international commercial arbitration which take place out of
India the party would not be able to apply for interim relief in India even though the
properties and assets are in India. Thus a party may not be able to get any interim relief at all.
HELD:
1. A construction that results in hardship, serious inconvenience, injustice, absurdity or
anomaly or which leads to inconsistency or uncertainty and friction in the system
which the statute purports to regulate has to be rejected and preference should be
given to that construction which avoids such results.
2. The definition makes no distinction between international commercial arbitrations
held in India or outside India…The said Act nowhere provides that its provisions are
not to apply to international commercial arbitrations which take place in a non-
convention country.
3. There would also be an anomaly inasmuch as even if an international commercial
arbitration takes place outside India, part I would continue to apply in Jammu and
Kashmir, but it would not apply to the rest of India.
4. The wording of sub-s (2) of s 2 suggests that the intention of the legislature was to
make provisions of part I compulsorily applicable to an arbitration, including an
international commercial arbitration, which takes place in India. Parties cannot, by
agreement, override or exclude the non-derogable provisions of part I in such
arbitrations. By omitting to provide that part I will not apply to international
commercial arbitrations which take place outside India the affect 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 ally parties to provide by agreement that part I or any provision therein will not
apply.
5. The opening words of ss 45 and 54, which are in part II, read ‘notwithstanding
anything contained in part I’. Such a non-obstante clause had to be put in because the
provisions of part I apply to part II.
6. The definition indicates that an award made in an international commercial arbitration
held in a non-convention country is also considered to be a domestic award’.
7. Thus s 28 does not provide for rules where the place of arbitration is out of India.

5. 5
Bharat Aluminium Company and Ors. etc. etc. Vs. Kaiser Aluminium
Technical Service, Inc. and Ors. etc.
Introduction:
The long-awaited decision of the Indian Supreme Court in Bharat Aluminium Co v Kaiser
Aluminium Technical Services Inc was delivered on Thursday 6 September 2012. This
landmark judgment, delivered by a five-judge constitutional bench, restricts the ability of
local courts to interfere in international arbitrations seated outside India and overrules the
controversial decision of Bhatia International v Bulk Trading S.A.
However, whilst the decision is likely to be largely welcomed by the international arbitration
community, it is notable that the judgment only has prospective applicability and, as such,
there is no doubt for the foreseeable future that Bhatia will continue to have an impact in
commercial arbitrations where arbitration agreements have already been entered into.
A brief history:
In Bhatia, the Supreme Court considered a request for interim relief under Part I of the Indian
Arbitration and Conciliation Act 1996 (the “Act”). Part I confers significant powers on Indian
courts, including the ability to order interim measures and set aside awards. Even though Part
I seemingly only applied to domestic arbitrations, the Supreme Court interpreted the Act in a
manner that allowed Part I to be applied to foreign seated arbitrations, unless the parties opted
out of this arrangement.
Later decisions entrenched the precedent set by Bhatia. For example, in Venture Global v
Satyam Computer Services, the Supreme Court held that foreign awards could be set aside by
Indian courts under section 34 of the Act (which falls under Part I) for violating Indian
statutory provisions and being contrary to Indian public policy. It therefore set aside an LCIA
award rendered by a tribunal seated in London. Furthermore, in Indtel Technical Services v
W.S. Atkins Plc, the Supreme Court held that Indian courts could appoint arbitrators in
arbitrations seated outside India. Decisions such as these have since been heavily criticised.
Each gave further weight to the possibility of increased interference from Indian courts in
foreign seated arbitrations, and were dispiriting for the international arbitration community,
including Indian and foreign investors alike.
It is perhaps in light of such public criticism that there has been a growing trend amongst the
Indian judiciary to restrict the applicability of Part I of the Act. Cases such as Videocon
Industries v Union of India and Yograj Infrastructure v Ssang Yong Engineering have

6. 6
demonstrated the courts’ willingness to find an implied exclusion of Part I where a foreign
seat and foreign governing law have been chosen. As such, there has been a distinct move
away from Bhatia and Indian court interference in recent years, paving the way for Bharat
Aluminium and its final clarification on the issue.
Key implications of the Judgment:
Thursday’s Supreme Court ruling in the Bharat Aluminium case means that Indian courts will
no longer be able to set aside awards or issue interim measures in respect of arbitrations
seated abroad. This ends years of uncertainty for the international arbitration community and
allows arbitration to be seen as a much more viable method for dispute resolution in India.
The key favourable implications of the judgement are as follows:
 The Supreme Court has confirmed that there can be no “overlapping or intermingling” of
the provisions contained in Part I of the Act with the provisions contained in Part II (which
relates to the enforcement of foreign awards).
 Part I of the Act will have no application to international commercial arbitrations, seated
outside India.
 The seat or legal place of the arbitration is the “centre of gravity” in an international
arbitration.
 Awards rendered in commercial arbitrations seated outside India will only be subject to the
jurisdiction of the Indian courts when they are sought to be enforced in India in accordance
with the provisions contained in Part II of the Act.
 The Indian courts cannot order interim relief under Section 9 or any other provision of the
Act in support of foreign seated arbitrations. Parties will therefore need to rely on the relief
afforded by the courts of the jurisdiction in which the arbitration is seated. As the choice of
seat can have significant implications for the way an arbitration is conducted, parties should
carefully consider their choice at the drafting stage.
However, rather disappointingly, the decision of Bharat Aluminium only applies to arbitration
agreements entered into after 6 September 2012. It is not completely clear why this decision
has been taken, as the judgment provides very little explanation, other than to say that it is to
ensure “complete justice”.
Looking ahead:
The judgment is likely to be welcomed by the international arbitration community. It seems
to restore the original intention of the Act and provides much needed certainty for those
involved in Indian- related commercial contracts where arbitration is provided as the method
of dispute resolution. It should also have a positive impact on the way in which India is

7. 7
viewed from an international arbitration perspective; providing parties with a greater
incentive to arbitrate rather than being forced to resort to the protracted litigation in Indian
courts.
However, the fact that the judgment has only prospective applicability is likely to cause some
concern for those who have already entered into arbitration agreements involving business or
transactions in India. Since the earlier decision, experienced practitioners have been drafting
arbitration clauses to exclude Part I of the Act. Where this has not been dealt with in clauses
drafted before 6 September 2012 some uncertainty will remain.
Overall this is a positive development which should strengthen the Indian arbitration regime
and put India on the map of arbitration friendly nations.

8. 8
Comparison between Bhatia International and BALCO case:
The decision of the Constitutional Bench of the Supreme Court, in Bharat Aluminium Co v
Kaiser Aluminium Technical Service (“BALCO”), where the Supreme Court declared that
Part I of the Arbitration and Conciliation Act, 1996 (the “Act”) will not apply to arbitrations
conducted outside India, is likely to have an enormous impact not only on the arbitration and
commercial law jurisprudence in India but also on foreign investment flowing into India. In
brief, the issues involved in BALCO and why they are of such great significance, a
comparative analysis of the decisions in Bhatia International Case.
The reasons provided in Bhatia
case :
The counter in BALCO :
The word “only” was omitted from section
2(2) and such omission was not
unintentional. Such an omission would be
rendered redundant if the word “only” was to
be read in to the Section.
Relying on the discussions at the time of
drafting Article 1(2) of the Model Law, the
Supreme Court held that the use of “only”
was to ensure that the exceptions to Article
1(2) alone, i.e. Articles 8, 9, 35 & 36, had
extra territorial operation. Since Section 2(2)
of the Act, did not make any reference to
these exceptions, there was no requirement to
use the term “only”. Furthermore, the scheme
of the Act made it abundantly clear that the
Act was to only have territorial effect.
Section 1(2) states: “It extends to the whole
of India: Provided that Parts I, III and IV
shall extend to the State of Jammu and
Kashmir only in so far as they relate to
international commercial arbitration or, as the
case may be, international commercial
conciliation.” The anomalous situation that
The proviso is necessary to update the
Jammu and Kashmir Act, 1945, which does
not contain any provision relating to
International Commercial Arbitration. The
Proviso to Section 1(2) therefore incorporates
those provisions of the Arbitration and
Conciliation Act, 1996 which relate to

9. 9
would arise if it was held that Part I only
applies if the arbitration is held in India is
that Part I would apply to Jammu and
Kashmir with respect to all international
commercial arbitrations but Part I would not
apply to the rest of India if the arbitration
takes place out of India.
international commercial arbitrations into the
Jammu and Kashmir legislation. Owing to
Jammu and Kashmir’s special constitutional
status, all other aspects of arbitration in that
State are covered by a special statute
(originally the 1945 Act and now by the
Jammu & Kashmir Arbitration and
Conciliation Act, 1997).
Sections 2(4) and 2(5) state: “(4) This Part
except sub-section (1) of section 40, sections
41 and 43 shall apply to every arbitration
under any other enactment for the time being
in force, as if the arbitration were pursuant to
an arbitration agreement and as if that other
enactment were an arbitration agreement,
except in so far as the provisions of this Part
are inconsistent with that other enactment or
with any rules made thereunder. (5) Subject
to the provisions of sub-section (4), and save
in so far as is otherwise provided by any law
for the time being in force or in any
agreement in force between India and any
other country or countries, this Part shall
apply to all arbitrations and to all
proceedings relating thereto.” The reasoning
in Bhatia was that if Part I does not apply to
foreign arbitrations, there is a conflict
between Section 2(2) and Section 2(5), which
is made subject to Section 2(4) alone and not
Section 2(2). Consequently, Section 2(2)
would have to be interpreted in such a
manner that it did not contradict Section 2(5).
Section 2(2) does not conflict with section
2(4) or with section 2(5). Section 2(5) only
means that the Act applies to all arbitrations
where it would be otherwise applicable.
Section 2(5) does not indicate that it would
apply to arbitrations which are not held in
India.

10. 10
If Part I does not apply, an award of Tribunal
in a country that is party to neither the New
York nor the Geneva Convention will be
unenforceable in India because it is neither a
domestic or a foreign award, and this
“lacuna” could not have been intended by
Parliament.
The Parliament has intentionally not
provided a mechanism for enforcement of a
non-Convention award by not including such
an award within the definition of a “foreign
award” in Sections 44 and 53. That being so,
Courts cannot provide an enforcement
mechanism for such awards by deeming them
to be domestic awards. There is therefore no
lacuna that needs to be filled.
A party is entirely remediless if Part I does
not apply to arbitrations conducted outside
India as the party would not be able to apply
for interim relief in India even though the
properties and assets are in India. Thus a
party may not be able to get any interim
relief at all.
The parties will have a remedy before the
Courts at the seat of arbitration. Merely,
because this remedy may be onerous does not
mean that the party is left remediless. Since
the parties voluntarily chose the seat, they are
deemed to have voluntarily chosen the
consequences of such a selection. In
arguendo that the parties are left remediless,
that needs to be addressed by the Legislature
and not the Courts.
If Part I did not apply, there was no need to
have used the words “where the place of
arbitration is in India” in Section 28(1)
because if Part I does not apply when the seat
is abroad, neither will section 28.
The Supreme Court, while addressing this
argument held: “The section merely shows
that the legislature has segregated the
domestic and international arbitration.
Therefore, to suit India, conflict of law rules
have been suitably modified, where the
arbitration is in India. This will not apply
where the seat is outside India. In that event,
the conflict of laws rules of the country in
which the arbitration takes place would have
to be applied. Therefore, in our opinion, the

11. 11
emphasis placed on the expression “where
the place of arbitration is situated in India”,
by the learned senior counsel for the
appellants, is not indicative of the fact that
the intention of Parliament was to give an
extra-territorial operation to Part I of the
Arbitration Act, 1996.”
Use of the phrase “notwithstanding anything
contained in Part I, or in the Code of Civil
Procedure, 1908”, in Section 45, which is
contained in Part II of the Act indicates that
Part I and Part II can apply concurrently in
certain situations and since Part II only
applies where the place of arbitration is
abroad, it would mean that Part I could apply
in certain situations where the place of
arbitration is foreign.
The Supreme Court held: “It appears that the
Parliament in order to avoid any confusion
has used the expression “notwithstanding
anything contained in Part I” out of abundant
caution, i.e., “ex abundanti cautela”.

12. 12
Opinion on the correct law, laid down by SC with substantiate
reasons:
The Constitutional Bench of the Hon'ble Supreme Court, on 6 September 2012 passed a path
breaking judgment regarding the future implications of foreign award and foreign arbitration
a jurisdiction of Indian Courts through Bharat Aluminum Co. v. Kaiser Aluminum Technical
Services Inc .The Court overruled its earlier decision given in Bhatia International v. Bulk
Trading S.A and Venture Global Engineering v. Satyam Computer Services ltd. and held that
Indian Courts does not have jurisdiction to interfere in arbitral proceedings held outside India.
This Judgment of the honorable Court was well received by the Legal scholars around the
world.
A two judge bench of the Supreme Court comprising of Justices Dipak Misra & P.C.Pant has
held that Bhatia [Bhatia International v Bulk Trading S.A] is applicable to the cases where
the arbitration agreement was entered before the pronouncement of its overruling judgment
i.e. BALCO v Kaiser [06/09/2012]. Notably, Bhatia had held that Part I of the Arbitration
Act, 1996 is applicable to arbitrations held outside India unless the parties have either
expressly or impliedly excluded the provisions of the Act. The brief facts pertaining to the
issue can be summarised as that an agreement was entered on 20/10/2010 between the
appellant and first respondent in respect of coal voyages from Indonesia to India. Addendum
to contract was executed on 03/04/2013. Disputes arose, arbitration proceedings were
initiated and eventually an award was passed. The appellant subsequently filed an application
u/s 9 of the Arbitration Act, 1996 in ADJ court for conditional order of attachment in which it
succeeded. The High Court however reversed the decision stating that Sec. 9 had a limited
application to arbitration taking place in India and cannot be applied to International
Commercial Arbitrations as held in BALCO. The main contention of the appellants was that
as there was no express exclusion, the jurisdiction of Indian courts cannot be ousted & that
the other aspect of implied exclusion has to be examined on the ‘presumed intention’ test and
the intention of the parties needs to be ascertained. The respondent however opposed this
stating that as per BALCO, as the seat of arbitration is London Indian Courts have absolutely
no jurisdiction to the matter. Thus, there were two main aspects requiring the bench’s perusal

13. 13
 Whether on basis of construction placed on the said clause in the agreement it can be
stated that the ratio laid down in Reliance Industries Case would be attracted instead
of Bhatia
 Whether the execution of the addendum would attract BALCO and oust the
jurisdiction of Indian Courts.
The bench speaking through Justice Dipak Misra analyzed various decisions on applicability
of the 1996 Act to Arbitrations having seat and venue outside India and came to a conclusion
by calculating various clauses that based on the ‘Presumed Intention’ test, the parties
intended to keep the juridical seat of arbitration as London only and that it is a
proper/substantial clause and not a curial/procedural one. The implied exclusion principle as
stated in Bhatia was held to be applicable and though the High Court had approached the
issue from the angle of BALCO, the conclusion was correct. The appeal was thus disposed
off.

14. 14
Opinion on the effect of new amendments to the Arbitration Act and
in what way amendments will help India to become a international
Arbitration Hub:
In the past few years there have been significant developments to the Indian arbitration law,
bringing the Indian arbitration regime closer to global standards. These include :
 The restriction of the Indian court’s jurisdiction over foreign-seated arbitrations
through the Supreme Court’s BALCO decision in 2012.
 The 2014 Law Commission report calling for extensive amendments to Indian
arbitration law in light of the problems that “plague the present regime of arbitration
in India”
 The announcement of the government’s intention to amend and reform the Arbitration
and Conciliation Act 1996 (Act) in August 2015.
Building on these developments, on 23 October 2015 the government promulgated an
ordinance – the Arbitration and Conciliation (Amendment) Ordinance 20157 (Ordinance) – to
amend the Act with immediate effect. The Arbitration and Conciliation (Amendment) Bill,
2015 (Bill) was passed by the Lok Sabha (India’s lower house of parliament) on 17
December 2015 and the Rajya Sabha (India’s upper house of parliament) on 23 December
2015. It was held to come into force from 23 October 2015, the date of the Ordinance.
India’s aspirations to become a major international centre of arbitration have long been
hindered by its arbitration laws and their judicial interpretation. These developments signal a
welcome change in approach. The provisions of the Bill closely follow the recommendations
of the Law Commission and go a long way towards reforming Indian arbitration law.
The Indian Government promulgated the Arbitration and Conciliation (Amendment) Bill
2015 which was passed by the Lok Sabha on 17 December 2015 and the Rajya Sabha on 23
December 2015 to make arbitration a preferred mode for settlement of commercial disputes
by making arbitration more user-friendly and cost effective, hoping that that would lead to
the more expeditious disposal of cases. This, in turn, was intended to improve the ‘ease of
doing business’ in India and thereby instil confidence in investors who were previously wary
of choosing India as a seat of arbitration.
Law Minister D V Sadananda Gowda had said:

15. 15
"The benefit of becoming international hub for arbitration is that it can bring several
opportunities to lawyers of the country either by becoming the panel lawyers or by
becoming part of arbitration process and the potential financial benefits are much
higher than in domestic cases,"
Some of the major changes and there effects are outlined below:
 The first and foremost welcome amendment introduced by the ordinance is with
respect to definition of expression 'Court'. The amended law makes a clear distinction
between an international commercial arbitration and domestic arbitration with regard
to the definition of 'Court'. In so far as domestic arbitration is concerned, the
definition of "Court" is the same as was in the 1996 Act, however, for the purpose of
international commercial arbitration, 'Court' has been defined to mean only High
Court of competent jurisdiction. Accordingly, in an international commercial
arbitration, as per the new law, district court will have no jurisdiction and the parties
can expect speedier and efficacious determination of any issue directly by the High
court which is better equipped in terms of handling commercial disputes.
 Amendment of Section 2(2): A proviso to Section 2(2) has been added which
envisages that subject to the agreement to the contrary, Section 9 (interim measures),
Section 27(taking of evidence), and Section 37(1)(a), 37(3) shall also apply to
international commercial arbitrations, even if the seat of arbitration is outside India,
meaning thereby that the new law has tried to strike a kind of balance between the
situations created by the judgments of Bhatia International and Balco v. Kaiser. Now
Section 2(2) envisages that Part-I shall apply where the place of arbitration is in India
and that provisions of Sections 9, 27, 37(1) (a) and 37 (3) shall also apply to
international commercial arbitration even if the seat of arbitration is outside India
unless parties to the arbitration agreement have agreed to the contrary.
 Amendment to Section 8: (Reference of parties to the dispute to arbitration): In
Section 8, which mandates any judicial authority to refer the parties to arbitration in
respect of an action brought before it, which is subject matter of arbitration agreement
. The sub-section(1) has been amended envisaging that notwithstanding any judgment,
decree or order of the Supreme Court or any court, the judicial authority shall refer the
parties to the arbitration unless it finds that prima facie no valid arbitration agreement
exists. A provision has also been made enabling the party, who applies for reference

16. 16
of the matter to arbitration, to apply to the Court for a direction of production of the
arbitration agreement or certified copy thereof in the event the parties applying for
reference of the disputes to arbitration is not in the possession of the arbitration
agreement and the opposite party has the same.
 Amendment to Section 9 (Interim Measures): The amended section envisages that
if the Court passes an interim measure of protection under the section before
commencement of arbitral proceedings, then the arbitral proceedings shall have to
commence within a period of 90 days from the date of such order or within such time
as the Court may determine. Also, that the Court shall not entertain any application
under section 9 unless it finds that circumstances exist which may not render the
remedy under Section 17 efficacious.
The above amendments to Section 9 are certainly aimed at ensuring that parties
ultimately resort to arbitration process and get their disputes settled on merit through
arbitration. The exercise of power under Section 9 after constitution of the tribunal
has been made more onerous and the same can be exercised only in circumstances
where remedy under Section 17, appears to be non-efficacious to the Court concerned.
 Amendment to Section 11 (Appointment of Arbitrators): In so far as section 11,
"appointment of arbitrators" is concerned, the new law makes it incumbent upon the
Supreme Court or the High Court or person designated by them to dispute of the
application for appointment of arbitrators within 60 days from the date of service of
notice on the opposite party.
As per the new Act, the expression 'Chief Justice of India' and 'Chief Justice of High
Court' used in earlier provision have been replaced with Supreme Court or as the case
may be, High Court, respectively. The decision made by the Supreme Court or the
High Court or person designated by them have been made final and only an appeal to
Supreme Court by way of Special Leave Petition can lie from such an order for
appointment of arbitrator. The new law also attempts to fix limits on the fee payable
to the arbitrator and empowers the high court to frame such rule as may be necessary
considering the rates specified in Fourth Schedule.
 Amendment to Section 12: Amendment to Section 12, as per the new law makes the
declaration on the part of the arbitration about his independence and impartiality more
onerous. A Schedule has been inserted (Fifth Schedule) which lists the grounds that
would give rise to justifiable doubt to independence and impartiality of arbitrator and
the circumstances given in Fifth Schedule are very exhaustive. Any person not falling

17. 17
under any of the grounds mentioned in the Fifth Schedule is likely to be independent
and impartial in all respects. Also, another schedule (seventh schedule) is added and a
provision has been inserted that notwithstanding any prior agreement of the parties, if
the arbitrator's relationship with the parties or the counsel or the subject matter of
dispute falls in any of the categories mentioned in the seventh schedule, it would act
as an ineligibility to act as an arbitrator. However, subsequent to disputes having
arisen, parties may by expressly entering into a written agreement waive the
applicability of this provision. In view of this, it would not be possible for
Government bodies to appoint their employees or consultants as arbitrators in
arbitrations concerning the said Government bodies.
 Amendment to Section 14: Amendment of Section 14 aimed at filling a gap in the
earlier provision, which only provided for termination of mandate of the arbitrator. If
any of the eventualities mentioned in sub-section (1) arises. The new law also
provides for termination of mandate of arbitration and substitution and his/her
substitution by another one.
 Amendment to Section 17 (Interim Measures by Arbitral tribunal): The old Act
had lacunae where the interim orders of the tribunal were not enforceable. The
Amendment removes that lacunae and stipulates that an arbitral tribunal under Section
17 of the Act shall have the same powers that are available to a court under Section 9
and that the interim order passed by an arbitral tribunal would be enforceable as if it is
an order of a court. The new amendment also clarifies that if an arbitral tribunal is
constituted, the Courts should not entertain applications under Section 9 barring
exceptional circumstances.
 Amendment to Section 23: The new law empowers the Respondent in the
proceedings to submit counter claim or plead a set-off and hence falling within the
scope of arbitration agreement.
 Amendment to Section 24: It requires the arbitral tribunal to hold the hearing for
presentation of evidence or oral arguments on day to day basis, and mandates the
tribunal not to grant any adjournments unless sufficient causes shown. It further
empowers the tribunal the tribunal to impose exemplary cost where adjournment
 Insertions of new Section 29A and 29B( Time limit for arbitral award and Fast
Track Procedure) : To address the criticism that the arbitration regime in India is a
long drawn process defying the very existence of the arbitration act, the Amended Act
envisages to provide for time bound arbitrations. Under the amended act, an award

18. 18
shall be made by the arbitral tribunal within 12 months from the date it enters upon
reference. This period can be extended to a further period of maximum 6 months by
the consent of the parties, after which the mandate of the arbitrator shall terminate,
unless the Court extends it for sufficient cause or on such other terms it may deem fit.
Also, while extending the said period, the Court may order reduction of fees of
arbitrator by upto 5% for each month such delay for reasons attributable to the
arbitrator. Also, the application for extension of time shall be disposed of by Court
within 60 days from the date of notice to the opposite party.
The Ordinance also provides that the parties at any stage of arbitral proceeding may
opt for a fast track procedure for settlement of dispute, where the tribunal shall have
to make an award within a period of 6 months. The tribunal shall decide the dispute
on the basis of written pleadings, documents and submissions filed by the parties
without oral hearing, unless the parties request for or if the tribunal considers it
necessary for clarifying certain issues. Where the tribunal decides the dispute within 6
months, provided additional fees can be paid to the arbitrator with the consent of the
parties.
 Amendment to Section 25: The new Act empowers the tribunal to treat Respondent's
failure to communicate his statement of defence as forfeiture of his right to file such
statement of defence. However, the tribunal will continue the proceedings without
treating such failure as admission of the allegations made by the Claimant.
 Amendment to section 28: The new law requires the tribunal to take into account the
terms of contract and trade usages applicable to the transaction. In the earlier law, the
arbitral tribunal was mandated to decide disputes in accordance with the terms of the
contract and to take into account the trade usages applicable to the transaction. To that
extent, the new law seeks to relieve the arbitrators from strictly adhering to the terms
of the contract while deciding the case. However, the arbitrator can still not ignore the
terms of the contract. Therefore, the new amendment seems to bring in an element of
discretion in favour of the arbitrators while making of an award.
 Amendment to Section 31: This provides for levy of future interest in the absence of
any decision of the arbitrator, on the awarded amount @2% higher than current rate of
interest prevalent on the date of award. The current rate of interest has been assigned
the same meaning as assigned to the expression under Clause (b) of Section 21 of the
Interest Act, 1978.

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In addition, the new Act lays down detailed parameters for deciding cost, besides
providing that an agreement between the parties, that the whole or part of the cost of
arbitration is to be paid by the party shall be effective only if such an agreement is
made after the dispute in question had arisen. Therefore, a generic clause in the
agreement stating that cost shall be shared by the parties equally, will not inhibit the
tribunal from passing the decision as to costs and making one of the parties to the
proceedings to bear whole or as a part of such cost, as may be decided by the tribunal.
 Amendment of Section 34 (Limiting the gamut of Public Policy of India): As per
the new amendment, an award passed in an international arbitration, can only be set
aside on the ground that it is against the public policy of India if, and only if, – (i) the
award is vitiated by fraud or corruption; (ii) it is in contravention with the
fundamental policy of Indian law; (iii) it is in conflict with basic notions of morality
and justice. The present amendment has clarified that the additional ground of
"patently illegality" to challenge an award can only be taken for domestic arbitrations
and not international arbitrations. Further, the amendment provides that the domestic
awards can be challenged on the ground of patent illegality on the face of the award
but the award shall not be set aside merely on the ground of an erroneous application
of law or by re-appreciation of evidence. The new Act also provides that an
application for setting aside of an award can be filed only after issuing prior notice to
the other party. The party filing the application has to file an affidavit along with the
application endorsing compliance with the requirement of service of prior notice on
the other party. A time limit of one year from the date of service of the advance notice
on the other parties has been fixed for disposal of the application under Section 34.
Significantly, there is no provision in the new Act which empowers the court or the
parties to extend the aforesaid limit of one year for disposal of the application under
Section 34.
 Amendment to Section 36 (Stay on enforcement of award): The Ordinance
provides that an award would not be stayed automatically by merely filing an
application for setting aside the award under Section 34. There has to be a specific
order from the Court staying the execution of award on an application made for the
said purpose by one of the parties. The Ordinance aims to remove the lacunae that
existed in the previous Act where pending an application under Section 34 for setting
aside of arbitral award, there was an automatic stay on the operation of the award. The
new law also empowers the Court to grant stay on operation of arbitral award for

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payment of money subject to condition of deposit of whole or a part of the awarded
amount.
 Amendment to Section 37: Under Section 37(1), the new law makes provision for
filing of an appeal against an order of judicial authority refusing to refer the parties to
arbitration under Section 8.
 As regards enforcement of certain foreign awards, the new law seeks to add
explanation of Sections 48 and 57 thereby clarifying as to when an award shall be
considered to be in conflict within public policy of India. The parameters are the same
as are provided under Section 34. Similarly, the expression "Court" used in Sections
47 and 56 have been defined to mean only the High Court of competent jurisdiction.
Conclusion:
The amendment brought to the 1996 Act is certainly a positive step towards making
arbitration expeditious, efficacious and a cost effective remedy. The new amendments seek to
curb the practices leading to wastage of time and making the arbitration process prohibitively
a costly affair. The new law also makes the declaration by the arbitrator about his
independence and impartiality more realistic as compared to a bare formality under the
previous regime. Making the arbitrator responsible for delay in the arbitration proceedings,
for the reasons attributable to him, would ensure that the arbitrators do not take up
arbitrations, which are beyond their capacities. Such a deterrent would imbibe self-discipline
and control amongst the arbitrators. It can be said that the present amendments certainly
travel an extra mile towards reducing the interference of the Court in arbitration proceedings
that has been a consistent effort of the legislature since passing of the 1996 Act.