Securing Indian assets in foreign arbitrations

Foreign investors often choose arbitration as their preferred method of dispute resolution in relation to transactions with Indian entities. Whether the arbitral proceedings will be held in India (domestic arbitration) or outside India (foreign arbitration) is often a commercial and strategic decision.

One factor that, in our experience, concerns foreign investors is the availability of protective interim orders to secure assets in India for the potential enforcement of arbitral awards. In view of recent decisions of the Supreme Court of India expanding the scope of intervention by Indian courts in foreign arbitrations, it is important to draft arbitration agreements carefully to identify the specific areas in which parties may have recourse to Indian courts, and no others.

Applying Part I

The provisions relating to orders for interim protection of assets pending arbitration are included in Part I of the Arbitration and Conciliation Act, 1996. Section 2(2) of the act states that Part I of the act shall apply where the place of arbitration is in India. However, in 2002 a three-judge bench of the Supreme Court in Bhatia International v Bulk Trading SA and Another stated that provisions of Part I would also apply to foreign arbitrations unless the parties by agreement, express or implied, exclude all or any of its provisions.

Palash Ranjan Gupta (pgupta@snrlaw.in) and Samiksha Godiyal (sgodiyal@snrlaw.in) are associates at S&R Associates, a law firm based in New Delhi and Mumbai.