The Hindu reports that the Supreme Court has constituted a five judge bench to reconsider the decision in Bhatia International v. Bulk Trading S.A. (Bhatia International). As we have discussed in several posts in the past, the Supreme Court's interpretation of Section 2(2) of the Arbitration and Conciliation Act, 1996 has been at the root of a chain of cases that have had severe adverse impact on the institution of arbitration in India. This decision, by making Part I of the Act (and the powers under it, like the power to set aside an award under Section 34) applicable to arbitrations held outside India, rendered the Indian approach to arbitration extremely parochial. Some problems arising out of the decision, especially in the context of investment treaty arbitration was discussed here. Also, we had reported here how a Calcutta High Court decision following Bhatia had resulted in India being dragged into its first ever investment arbitration by an Australian investor.
The decision to reconsider Bhatia is a welcome one. Recently, the Government proposed overcoming the effects of Bhatia through legislative action. However, now the judiciary appears to be willing to clean up the mess that is its own creation.
The decision of the constitutional bench in Bharat Aluminium Co. v. Kaiser Aluminium Technical Services Inc., which will finally decide the fate of Bhatia (and with it, the fate of arbitration in India) is eagerly awaited.