Justice Katju, Arbitration and BALCO

Historical research is a very interesting exercise. It brings forth unusual facts. This post discusses one such event. Most of us know that a five judge Bench of the Supreme Court in Bharat Aluminium Co. v. Kaiser Aluminium Co. (pdf)(BALCO) has held that Part I of the Arbitration & Conciliation Act, 1996 applies only to arbitrations held in India and not to arbitrations seated outside India. The history of how the case came before a five judge Bench is interesting. Most of the history is recorded in para 1 of the said judgement.

image from here

Civil Appeal No. 7019 of 2005 came up before a two judge Bench of the Supreme Court on 16.01.2008. One of the judges was Justice Markandey Katju. When the counsel for Bharat Aluminium relied on Bhatia International v. Bulk Trading SA and Venture Global Engineering v. Satyam Computer Services, Katju J. doubted the correctness of these judgements. Katju, J. doubted if Section 2(2) of the 1996 Act which read: "(2) This Part shall apply where the place of arbitration is in India." should be read the way the three judge Bench Bhatia International did- it did not say that Part I will NOT apply to arbitrations held outside India and hence would apply to such arbitrations.  Hence, the case was placed before the Chief Justice who placed it before a three Judge Bench. A three judge Bench was constituted and placed it before a five judge Bench vide order dated 1 November 2011. And thus, BALCO happened on 6 September 2012. Thus, Justice Katju played an important role in getting Bhatia International reversed.

We take our readers back in history to a judgement rendered by a two judge Bench of a High Court in LML India v. Union of India (01.12.1998). In the said case, a writ petition was filed praying  for declaration that Section 45 of the 1996 Act was unconstitutional and bad in law. The additional prayer was for the issue of a writ of mandamus commanding the second respondent not to act in violation of the agreement. The agreement in question was a technology collaboration agreement between foreign party and an Indian party providing for ICC arbitration. The two judges hearing the matter wrote two judgements but concurred on the ultimate conclusion that "Section 9 of the Arbitration and Conciliation Act, 1996 applies also to the proceedings under Part II of the Act and hence interim relief can be granted by the civil court pending the arbitration proceedings". Specifically, this judge held:

"In our opinion, if Section 9 is treated as inapplicable to Part II, it will make Section 45 too harsh. The purpose of Section 9 is to give interim protection during the arbitration proceedings. In our view, interim protection under Section 9 can be given by the Court in all kinds of arbitration proceedings, even those under Part II, otherwise irreparable loss may be caused." (emphasis supplied).

The High Court which decided so was the Allahabad High Court and the judge who stated the above was none other than Mr. Markandey Katju.