Does Section 2(2) bar the Application of Part I to C Arbitrations which take place outside India?
1.1. The omission of the word “only” in Section 2(2) is not an instance of “CASUS OMISSUS”. It is not the function of the Court to supply the supposed omission, which can only be done by Parliament. Legislative
surgery is not a judicial option, nor a compulsion, whilst interpreting an Act or a provision in the Act. The provision contained in Section 2(2) is to be construed without adding the word “only” to the provision. It cannot
be said that the omission of the word “only” from Section 2(2) indicates that applicability of Part I of the Arbitration Act, 1996 is not limited to the arbitrations that take place in India. A plain reading of Section 2(2) makes
it clear that Part I is limited in its application to arbitrations which take place in India. The Parliament by limiting the applicability of Part I to arbitrations which take place in India has expressed a legislative declaration. It has clearly given recognition to the territorial principle. Necessarily therefore, it has enacted that Part I of the Arbitration Act,
1996 applies to arbitrations having their place/seat in India. [Paras 60, 62 and 63] [379-E-G; 381-C-F]

Does the missing ‘onlv’ indicate a deviation from Article 1(2) of the Model Law?

1.2. The Arbitration Act, 1996 consolidates the law on domestic arbitrations by incorporating the provisions to expressly deal with the domestic as well as international commercial arbitration; by taking into account the 1985 UNCITRAL Model Laws. It is not confined to the
s Convention on the Recognition and Enforcement of Foreign Arbitral Awards (‘New York Convention’), which is concerned only with enforcement of certain foreign awards. The Arbitration Act, 1996 seeks to remove the anomalies that existed in the Arbitration Act, 1940 by introducing provisions based on the UNCITRAL Model Laws, which deals with international commercial arbitrations and also extends it to commercial domestic arbitrations. UNCITRAL Model Law has unequivocally accepted the territorial principle. Similarly, the Arbitration
Act, 1996 has also adopted the territorial principle, thereby limiting the applicability of Part I to arbitrations, which take place in India. [Para 66] [383-G-H; 384-A-B]

1.3. Article 1(2) of the UNCITRAL Model Laws is a model and a guide to all the States, which have accepted the UNCITRAL Model Laws. The genesis of the word “only” in Article 1(2) of the Model Law can be seen from the discussions held on the scope of application of Article
1 in the 330th meeting, Wednesday, 19 June, 1985 of UNCITRAL. This would in fact demonstrate that the word “only” was introduced in view of the exceptions referred to in Article 1(2) i.e. exceptions relating to Articles 8, 9, 35 & 36 (Article 8 being for stay of judicial proceedings
covered by an arbitration agreement; Article 9 being for interim reliefs; and Articles 35 & 36 being for enforcement of Foreign Awards). It was felt necessary to include the word “only” in order to clarify that except for Articles 8, 9, 35 & 36 which could have extra territorial effect if so
legislated by the State, the other provisions would be applicable on a strict territorial basis. Therefore, the word “only” would have been necessary in case the provisions with regard to interim relief etc. were to be retained in Section 2(2) which could have extra-territorial application. The Indian legislature, while adopting the Model Law, with some variations, did not include the exceptions mentioned in Article 1(2) in the corresponding
provision Section 2(2). Therefore, the word “only” would have been superfluous as none of the exceptions were included in Section 2(2). [Para 68) [384-E-H; 385-A-8]

1.4. The omission of the word “only” in Section 2(2) of the Arbitration Act, 1996 does not detract from the territorial scope of its application as embodied in Article 1(2) of the Model Law. The article merely states that the Arbitration Law as enacted in a given state shall apply if the ~bitration is in the territory of that State. The absence of the word “only” which is found in Article 1(2) of the Model Law, from Section 2(2) of the Arbitration Act, 1996 does not change the content/import of Section 2(2) as limiting the application of Part I of the Arbitration Act, 1996
to arbitrations where the place/seat is in India. It cannot be concluded that Part I would also apply to arbitrations that do not take place in India. [Paras 75, 76) [390-A-D]

1.5. India is not the only country which has dropped the word “only” from its National Arbitration Law. The word “only” is missing from the Swiss Private International Law Act, 1987 Chapter 12, Article 176 (1 )(I).
It is also missing in Section 2(1) of the 1996 Act (U.K.). Section 2(2) is an express parliamentary declaration/ recognition that Part I of the Arbitration Act, 1996 applies to arbitration having their place/seat in India and does not apply to arbitrations seated in foreign territories. The provisions have to be read as limiting the applicability of Part I to arbitrations which take place in India. If Section 2(2) is construed as merely providing that Part I of the Arbitration Act, 1996 applies to India, it would be ex facie superfluous/ redundant. No statutory provision is necessary to state/clarify that a law made by Parliament shall apply in India/to arbitrations in India. Another fundamental principle of statutory construction is that courts will never impute redundancy or tautology to
Parliament. Section 2(2) is not merely stating the obvious. Section 2(2) merely reinforces the limits of operation of the Arbitration Act, 1996 to India. [Paras 77, 78 and 79] [390-D-H; 391-A-C, F-G]

Is Section 2(2) in conflict with Sections 2(4) and 2(5) –

1.6. There is no doubt that the provisions of Section 2(4) and Section 2(5) would not be applicable to arbitrations which are covered by Part II of the Arbitration Act, 1996, i.e. the arbitrations which take place outside India. There is no inconsistency between Sections 2(2), 2(4) and 2(5). It cannot be said that limiting the applicability of part I to arbitrations that take place in India, would make Section 2(2) in conflict with Sections 2(4) and 2(5). [Para 85] [394-G-H; 395-A-B]

Does Section 217) indicate that Part I applies to arbitrations held outside India?
1.7. Section 2(7) does not, in any manner, relax the territorial principal adopted by Arbitration Act, 1996. It certainly does not introduce the concept of a delocalized arbitration into the Arbitration Act, 1996. Section 2(7) does not alter the proposition that Part I applies only where the
“seat” or “place” of the arbitration is in India. Section 2(7) is enacted to reinforce the territorial criterion by providing that, when two foreigners arbitrate in India, under a Foreign Arbitration Act, the provisions of Part I will apply. Indian Courts being the supervisory Courts, will exercise control and regulate the arbitration proceedings, which will produce a

“domestically rendered international
commercial award”.

It would be a “foreign award” for the purposes of enforcement in a country other than India. [Paras 88, 93, 94] [395-E-F; 398-D, G-H, 399-A]

Party Autonomy
1.8. The choice of another country as the seat of arbitration inevitably imports an acceptance that the law of that country relating to the conduct and supervision of arbitrations will apply to the proceedings. It would, 8
therefore, follow that if the arbitration agreement is found or held to provide for a seat I place of arbitration outside India, then the provision that the Arbitration Act, 1996 would govern the arbitration proceedings, would not make Part I of the Arbitration Act, 1996 applicable or
enable Indian Courts to exercise supervisory jurisdiction over the arbitration or the award. It would only mean that the parties have contractually imported from the Arbitration Act, 1996, those provisions which are concerned with the internal conduct of their arbitration
and which are not inconsistent with the mandatory provisions of the English Procedural Law/Curial Law. This necessarily follows from the fact that Part I applies only to arbitrations having their seat I place in India. [Paras 121, 122] [418-G-H; 419-A-B]

Section 28 –
1.9. The only purpose of Section 28 is to identify the rules that would be applicable to “substance of dispute”. In other words, it deals with the applicable conflict of law rules. This section makes a distinction between purely domestic arbitrations and international commercial arbitrations, with a seat in India. Section 28(1)(a) makes it clear that in an arbitration under Part I to which Section 2(1)(f) does not apply, there is no choice but for the Tribunal to decide “the dispute” by applying the Indian substantive law applicable to the contract”. This is clearly to ensure that two or more Indian parties do not circumvent the substantive Indian law, by resorting to arbitrations. The provision would have an overriding effect over any other contrary provision in such contract. On the other hand, where an arbitration under Part I is an international commercial arbitration within Section 2(1)(f), the parties would be free to agree to any other “substantive law” and if not so agreed, the “substantive law” applicable would be as determined by the Tribunal. 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. [Para 123] [419-0-H; 420-A-B]

Part II
1.10. The regulation of conduct of arbitration and challenge to an award would have to be done by the courts of the country in which the arbitration is being conducted. Such a court is then the supervisory court possessed of the power to annul the award. This is in keeping with the
scheme of the international instruments, such as the Geneva Convention and the New York Convention as well as the UNCITRAL Model Law. It also recognizes the territorial principle which gives effect to the sovereign right of a country to regulate, through its national courts, an adjudicatory duty being performed in its own country. Having accepted the principle of territoriality, it is evident that the intention of the parliament was to segregate Part I and Part II. Therefore, any of the provisions contained in Part I cannot be made applicable to Foreign Awards, as defined under Sections 44 and 53, i.e., the New York Convention and the Geneva Awards. This would be a distortion of the scheme of the Act. It is, therefore, not possible to accept the submission that provisions
contained in Part II are supplementary to the provision contained in Part I. The Parliament has clearly segregated the two parts. [Paras 128, 129] [423-8-D, G-H; 424-A-B]

Section 45
1.11. Section 45 falls within Part II which deals with enforcement proceedings in India and does not deal with the challenge to the validity of the arbitral awards rendered outside India. Section 45 empowers a judicial
authority to refer the parties to arbitration, on the request made by a party, when seized of an action in a matter in respect of which the parties have made an agreement referred to in Section 44. It cannot be said that the use
of expression “notwithstanding anything contained in Part I, or in the Code of Civil Procedure, 1908”, in Section 45 of the Arbitration Act, 1996 necessarily indicates that provisions of Part I would apply to foreign seated
arbitration proceedings. The existence of the nonobstante clause does not alter the scope and ambit of the field of applicability of Part I to include international commercial arbitrations, which take place out of India.
[Paras 130, 133] [424-C-E; 426-G-H]

Does Section 48(1)(e) recognize the jurisdiction of Indian
Courts to annul a foreign award. falling within Part II?

1.12. Section 48(1)(e) corresponds to Article V(1)(e) of the New York Convention. Section 48(1) sets out the defences open to the party to resist enforcement of a foreign award. The words “suspended or set aside”, in
Clause (e) of Section 48(1) cannot be interpreted to mean that, by necessary implication, the foreign award sought to be enforced in India can also be challenged on merits in Indian Courts. The provision merely recognizes that courts of the two nations which are competent to annul
. or suspend an award. It does not ipso facto confer jurisdiction on such Courts for annulment of an award made outside the country. Such jurisdiction has to be specifically provided, in the relevant national legislation of the country in which the Court concerned is located.
So far as India is concerned, the Arbitration Act, 1996 does not confer any such jurisdiction on the Indian Courts to annul an international commercial award made outside India. Such provision exists in Section 34, which is placed in Part I. Therefore, the applicability of that provision is limited to the awards made in India. If the arguments of the appellants are accepted, it would entail incorporating the provision contained in Section 34 of the Arbitration Act, 1996, which is placed in Part I of the Arbitration Act, 1996 into Part II of the said Act. This is not permissible as the intention of the Parliament was clearly to confine the powers of the Indian Courts to set aside an award relating to international commercial arbitrations, which take place in India. [Paras 136, 138] [429-D-E; 430-
D-H; 431-A]

Interim measures etc. by the Indian Courts where the seat
of arbitration is outside India.

1.13. On a logical and schematic construction of the Arbitration Act, 1996, the Indian Courts do not have the power to grant interim measures when the seat of arbitration is outside India. A bare perusal of Section 9 would clearly show that it relates to interim measures before or during arbitral proceedings or at any time after the making of the arbitral award, but before it is enforced in accordance with Section 36. Section 36 necessarily
refers to enforcement of domestic awards only. Therefore, the arbitral proceedings prior to the award contemplated under Section 36 can only relate to arbitrations which take place in India. The provision contained in Section 9 is limited in its application to arbitrations which take place in India. Extending the applicability of Section 9 to arbitrations which take place outside India would be to do violence to the policy of the territoriality declared in Section 2(2) of the Arbitration Act, 1996. [Para 161, 163] [445-G-H; 446-A-B, F-G]

Is An lnter-Parte Suit For Interim Relief Maintainable –
1.14. It appears that as a matter of law, an inter-parte suit simply for interim relief pending arbitrations, even if 8 it be limited for the purpose of restraining dissipation of assets would not be maintainable. There would be number of hurdles which the plaintiff would have to cross, which may well prove to be insurmountable. Pendency of the arbitration proceedings outside India would not provide a cause of action for a suit where the main prayer is for injunction. It is patent that there is no existing provision under the CPC or under the Arbitration Act, 1996 for a Court to grant interim measures in terms of Section 9, in arbitrations which take place outside India, even though the parties by agreement may have made the Arbitration Act, 1996 as the governing law of arbitration. [Paras 176, 179 and 197] [453-C-D; 454-D-E; 461-D-E]

2.1. The Arbitration and Conciliation Act, 1996 has accepted the territoriality principle which has been adopted in the UNCITRAL Model Law. Section 2(2) makes a declaration that Part I of the Arbitration Act, 1996 shall apply to all arbitrations which take place within India. Part I of the Arbitration Act, 1996 would have no application to International Commercial Arbitration held outside India. Therefore, such awards would 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 provisions contained in Arbitration Act, 1996 make it crystal clear that there can be no overlapping or lntetmingling of the provisions contained in Part I with the provisions contained in Part II of the Arbitration Act, 1996. [Para 198] (461·F-H; 462-A]

2.2. The provision contained in Section 2(2) of the Arbitration Act, 1996 is not in conflict with any of the provisions either in Part I or in Part II of the Arbitration Act, 1996. In a foreign seated international commercial
arbitration, no application for interim relief would be maintainable under Section 9 or any other provision, as applicability of Part I of the Arbitration Act, 1996 is limited to all arbitrations which take place in India. Similarly, no suit for interim injunction simplicitor would be maintainable in India, on the basis of an international commercial arbitration with a seat outside India. [Para199] (462-B·D]

2.3. Part I of the Arbitration Act, 1996 is applicable only to all the arbitrations which take place within the territory of India. In order to do complete justice, it is hereby ordered, that the law now declared by this Court shall apply prospectively, to all the arbitration agreements executed hereafter. [Paras 200, 201] (426-E-G]