Definitions, and How Far Part I Reaches

Three things to take from that. The district judge is the court for a domestic arbitration, not the junior civil judge. A High Court is the court for an international commercial arbitration, whatever the amount. And the phrase "had it been the subject matter of a suit" imports the ordinary rules of pecuniary and territorial jurisdiction.

(f) "International commercial arbitration" means an arbitration relating to disputes arising out of legal relationships, whether contractual or not, considered as commercial under the law in force in India, and where at least one of the parties is:

• (i) an individual who is a national of, or habitually resident in, any country other than India; or
• (ii) a body corporate incorporated in any country other than India; or
• (iii) an association or body of individuals whose central management and control is exercised in any country other than India; or
• (iv) the Government of a foreign country.

Two points that carry marks. The test is about the parties, not the place: an arbitration seated in Delhi between an Indian company and a French company is an international commercial arbitration. And clause (ii) turns on incorporation, not on control, so a company incorporated in India and wholly owned from abroad is not a foreign party under it. Words that had extended clause (iii) to a company have been omitted.

(g) "Legal representative" means a person who in law represents the estate of a deceased person, including an intermeddler, and where a party acts in a representative character, the person on whom the estate devolves.

(h) "Party" means a party to an arbitration agreement.

Section 2(2): the sub-section that produced a decade of litigation

"This Part shall apply where the place of arbitration is in India."

Ten words, and the whole question is what they leave out. The Model Law's equivalent said the law applies "if the place of arbitration is in the territory of this State"; India dropped the word "only".

In Bhatia International v. Bulk Trading S.A. the Supreme Court read that omission as deliberate and held that Part I applied even to arbitrations seated outside India, unless the parties expressly or impliedly excluded it. The practical effect was that a party to a foreign-seated arbitration could come to an Indian court under section 34 to set aside the award.

In Bharat Aluminium Co. v. Kaiser Aluminium Technical Services Inc., always called BALCO, a five-judge bench overruled that reading and held that Part I applies only to arbitrations seated in India. The ruling was prospective: it applied to arbitration agreements executed after the date of that judgment, so older agreements continued under Bhatia.

Parliament then legislated a middle position. The 2015 amendment added a proviso to section 2(2): subject to an agreement to the contrary, sections 9, 27, 37(1)(a) and 37(3) shall also apply to international commercial arbitration even if the place of arbitration is outside India, and an award made in such a place is enforceable under Part II.

That proviso is the practical answer to a real problem. A party to a foreign-seated arbitration may still need to attach assets in India, or to compel an Indian witness. Section 9 and section 27 are exactly those powers, so they were let back in while the setting-aside power was kept out.

The verified case bank does not yet carry the facts and holdings of Bhatia International and BALCO; both are in the queue. State the propositions as this chapter does and do not attribute reasoning to either judgment that you have not read.

The rest of section 2

Section 2(3): this Part shall not affect any other law by virtue of which certain disputes may not be submitted to arbitration. This is the statutory hook for the whole of non-arbitrability, and chapter 250 works it through.

Section 2(4): Part I, except section 40(1) and sections 41 and 43, applies to every arbitration under any other enactment as if it were pursuant to an arbitration agreement, except so far as Part I is inconsistent with that other enactment or its rules. So a statutory arbitration is run under this Act unless its own statute says otherwise.

Section 2(5): subject to sub-section (4), and save as otherwise provided by any law or by an agreement between India and another country, Part I applies to all arbitrations and all proceedings relating thereto.

Section 2(6): where Part I, except section 28, leaves the parties free to determine an issue, that freedom includes the right to authorise any person, including an institution, to determine it. This is what makes institutional rules workable: agreeing to a set of rules is agreeing that the institution decides those questions. The exception of section 28 matters, because the law governing the substance is not something the parties can delegate.

Section 2(7): an arbitral award made under Part I shall be considered as a domestic award. Short, and it does real work: an award made in India between an Indian and a foreign party is a domestic award even though the arbitration is an international commercial arbitration, so it is challenged under section 34 rather than resisted under section 48.

Section 2(8): where the Part refers to the parties having agreed, or to an agreement of the parties, that includes any arbitration rules referred to in the agreement.

Section 2(9): where the Part refers to a claim it also applies to a counterclaim, and where it refers to a defence it applies to a defence to a counterclaim, except in section 25(a) and section 32(2)(a).

Distinctions worth keeping straight

A worked example

A Singapore company and an Indian company agree that disputes will be arbitrated in Singapore. The Indian company's assets are in Chennai. A dispute arises and the Singapore company fears the assets will be sold.

Does Part I apply? Not generally. Section 2(2) applies Part I where the place of arbitration is in India, and BALCO holds that to be exhaustive for agreements after that judgment.

Can it still get an attachment in India? Yes, unless the parties agreed otherwise. This is an international commercial arbitration under section 2(1)(f)(ii), because one party is a body corporate incorporated outside India, and the proviso to section 2(2) applies section 9 to such an arbitration even where the place is outside India.

Which court? A High Court, because section 2(1)(e)(ii) makes the High Court the court for international commercial arbitration.

And the award? Made in Singapore, so it is a foreign award enforced under Part II, not a domestic award. It cannot be set aside under section 34.

Change one fact. Make the place of arbitration Chennai. Now Part I applies in full under section 2(2); the award is a domestic award under section 2(7) even though the arbitration remains an international commercial arbitration; it is challenged under section 34; but patent illegality is not available against it, because the proviso to section 34(2A) excludes that ground in an international commercial arbitration.

What beginners get wrong

"International commercial arbitration" is not about where the arbitration sits. It is about the parties, under section 2(1)(f).

An international commercial arbitration seated in India produces a domestic award. Section 2(7) says so, and it decides how the award is attacked.

"Court" is not the same for both. District court for domestic, High Court for international commercial.

Bhatia International is not good law for agreements after BALCO, and BALCO's overruling was prospective. Say both.

Section 2(2)'s proviso does not bring back section 34. It brings back sections 9, 27 and parts of 37 only.

Quick revision

• 2(1)(a) arbitration includes ad hoc and institutional; (c) award includes an interim award; (d) tribunal means a sole arbitrator or a panel.
• 2(1)(e) "Court": principal Civil Court of original jurisdiction in a district for domestic; High Court for international commercial. Not a court inferior to the principal civil court, and not a Court of Small Causes.
• 2(1)(f): international commercial arbitration turns on a party being a foreign national or habitual resident, a body corporate incorporated abroad, an association whose central management and control is abroad, or a foreign Government.
• 2(2): Part I applies where the place of arbitration is in India. Bhatia International read it as non-exclusive; BALCO overruled that prospectively; the 2015 proviso applies ss.9, 27, 37(1)(a) and 37(3) to a foreign-seated international commercial arbitration unless otherwise agreed.
• 2(3) preserves other laws making disputes non-arbitrable; 2(4) applies Part I to statutory arbitrations; 2(6) lets the parties delegate any issue except under section 28; 2(7) an award under Part I is a domestic award; 2(9) claim includes counterclaim.

Test yourself

1. Two Indian companies arbitrate in Mumbai. Which court hears a section 34 application? The principal Civil Court of original jurisdiction in the district, or the High Court in exercise of its ordinary original civil jurisdiction where it has one, under section 2(1)(e)(i). Not a court inferior to the principal civil court and not a Court of Small Causes.

2. An Indian company and a German company arbitrate in Delhi. Is the award domestic or foreign? Domestic. Section 2(7) provides that an award made under Part I is a domestic award, and Part I applies because the place of arbitration is in India. It is nonetheless an international commercial arbitration under section 2(1)(f), so the court is a High Court and patent illegality is not available against the award.

3. What did the 2015 proviso to section 2(2) do? It applied sections 9, 27, 37(1)(a) and 37(3) to international commercial arbitration even where the place of arbitration is outside India, subject to an agreement to the contrary, so that interim measures and court assistance in taking evidence remain available in India while the setting-aside power does not.

4. A company incorporated in India whose entire shareholding is held from Dubai is a party. Is the arbitration an international commercial arbitration on that ground? Not under section 2(1)(f)(ii), which turns on the place of incorporation, and the company is incorporated in India. Foreign ownership alone does not answer the definition.

5. What does section 2(6) permit, and what does it except? Where Part I leaves the parties free to determine an issue, they may authorise any person, including an institution, to determine it. Section 28 is excepted, so the rules applicable to the substance of the dispute cannot be delegated in that way.