An award passed by an arbitral tribunal in arbitration held ‘outside India’ following the rules (say) of the ICC is sought to be set aside under Section 341 of the Arbitration and Conciliation Act, 1996 (“the Act”); can this be done?

A bare perusal of the Act could tempt one to give a ‘negative’ answer to the above question. To the ‘naked eye’, the scheme of the Act would appear fairly simple and unambiguous. Part I of the Act (containing Section 34) shall apply where the place of arbitration is in India2 and Part II of the Act would deal with the enforcement of certain foreign awards, namely New York Convention Awards and Geneva Convention Awards. So, in the case of an arbitral award, as the one above, it should follow that Section 34 would not apply. Also, since special provisions for enforcement of foreign awards have been made in Part II of the Act, the applicability of general provisions of Part I would stand excluded in reference to foreign awards. On the face of it, the above conclusion seems logicaland reasonable, leaving not much room for complexity or controversy; really?

It is, as it turns out, not all that simple. In the case of Jindal Durga Ltd. v. NoyVallesina Engineering Spa3 , an award passed in London was not allowed to be challenged under Section 34. The court held that the only remedy available was to challenge the enforcement of the award under Section 48 of the Act (i.e., Part II). Although several High Courts like Chhattisgarh High Court4 , the Bombay High Court5 and the Delhi High Court6 gave more or less similar decisions, dissenting ‘observations’ were also made by the Gujarat High Court and the Karnataka High Court not ruling out the applicability of Section 34 in setting aside foreign arbitral awards. The divergence of judicial opinion on this issue was finally settled by the Supreme Court in Venture Global Engineering v. Satyam Computer Services Ltd.7 by a judgment having far reaching implications. In this case the award in question was made in London under the rules of the LCIA and the agreement was to be governed by Michigan Law. A clause in the agreement contained a non obstante provision to the effect that the parties “shall at all times act in accordance with the Companies Act and other applicable Acts/Rules being in force, in India at any time”. In this case the Supreme Court held that even in the case of international commercial arbitration held ‘outside’ India, Part I (including Section 34) would apply unless the parties, expressly or impliedly, exclude all or any of its provisions. In reaching this conclusion, the court had relied heavily on its own ruling in the landmark case of Bhatia International8 and the non-obstante clause in the contract between the parties. It becomes imperative, therefore, to understand what had happened in Bhatia International. In that case, the broad question answered bythe court was whether the provisions of Part I can govern an arbitration conducted outside India. As per the contract between the parties, the arbitration was to be held in Paris following the rules of the International Chambers of Commerce; however, neither the proper law of the contract nor the proper law of arbitration was clearly specified. In this case, the Supreme Court’s conclusions are noteworthy:

• Part I applies compulsorily when arbitration is held in India and
• Part I applies to arbitrations conducted outside India unless parties, expressly or impliedly, exclude the application thereof The court held that Part I would not stand excluded when the seat of arbitration was Paris, but the proper law of contract and the proper law of arbitration agreement were not specified.

Now, in Venture Global, it appears that the non-obstante clause was interpreted to mean that Part I ‘is not excluded’ and, consequently, an award passed in such arbitration could be challenged under Section 34. Further, no inconsistency was found between Section 34 and Section 48. Therefore, for Section 34 to not apply, the contract must mention clearly – the place of arbitration, the law governing both the arbitration agreement and the contract, and exclude (clearly) the provisions of Part I.