Indian courts can enforce foreign arbitration: SC

The Supreme Court on Thursday held that though Indian courts can enforce foreign arbitrations, they cannot decide merits of such awards.

A five-judge Constitution bench led by Chief Justice S H Kapadia settled the issue whether arbitration proceedings could be open to judicial scrutiny under the provisions of the Arbitration Act, 1996.

“We are of the considered opinion that Part I of the Arbitration Act, 1996, will have no application to International Commercial Arbitration held outside India. Therefore, such awards will only be subject to the jurisdiction of the Indian courts when the same are sought to be enforced in India in accordance with the provisions contained in Part II of the Arbitration Act, 1996,” the bench said.

The apex court set aside its earlier verdicts, which had held that Part I of the Act will be open for judicial scrutiny unless the parties by agreement, express or implied, excluded all or any of its provisions. The court decided against the plea of eight companies, including PSUs like the Bharat  Aluminium Company Ltd, Bharati Shipyard Ltd and Tamil Nadu Electricity Board, seeking legal sanction to challenge arbitration proceedings arrived offshore before the Indian courts.

The bench, also comprising, justices Surinder Singh Nijjar, D K Jain, Ranjana Prakash Desai and J S Khehar, said: “We are of the considered opinion that the Arbitration Act, 1996, has accepted the territoriality principle which has been adopted in the UN Commissions on International Trade law (UNCITRAL) Model Law.

“In our opinion, the provisions contained in Arbitration Act, 1996 make it crystal clear that there can be no overlapping or intermingling of the provisions contained in Part I (dealing with arbitration done in India) with the provisions contained in Part II (with regard to enforcement of foreign awards) of the Arbitration Act, 1996,” the bench said.