Arbitration proceeding between two Indian parties can be validly conducted in a foreign seat – says Supreme Court of India

May 1, 2021by Admin0
arbitration

The Supreme Court of India, while disposing of an appeal filed in the matter of PASL Wind Solutions Private Limited Vs GE Power Conversion India Private Limited (2021) SCC Online SC 331  reconfirmed that arbitration proceeding between two Indian parties can be validly conducted in a foreign seat. This decision further augments the concept of “Party Autonomy” which is the backbone of arbitration proceedings. The Court also said that the choice of a foreign seat by Indian Nationals would not violate the “Public Policy” of India. It was further clarified that an Arbitration proceeding, though between two Indian nationals, if seated in a foreign country would still result in a “Foreign Award” enforceable under Part II of the Arbitration Act. 

Arbitration Between Two Indian Parties

The Appellant is a company incorporated in Ahmedabad, Gujarat. The Respondent is a subsidiary of GE, France, which is again a subsidiary of GE, United States. The dispute was regarding the warranty expiry of some converters bought by the Appellant. For the dispute resolution, the party sought a settlement agreement that had a clause for dispute resolution. The dispute resolution clause provided for Arbitration in Zurich in the English language, in accordance with the Rules of Conciliation and Arbitration of the International Chamber of Commerce (ICC).

The Appellant initiated arbitration under ICC rules and the Respondent challenged the jurisdiction of the arbitrator on the basis that two Indian parties could not have chosen a foreign seat of arbitration. The said objection was dismissed by the Arbitral Tribunal, based on various earlier judgments issued by the Indian Courts. The arbitration proceeding was concluded and a final award was issued on 18th April 2019 in Zurich. The Arbitration award rejected the Appellant’s claim and directed the Appellant to pay the legal costs and expenses of the Respondent. When the Respondent filed an execution case against the Appellant for the legal costs and expenses, the Appellant took a total U-turn and argued that the seat of arbitration was really Mumbai, where all the hearings of the arbitral proceedings took place and also filed an application to challenge the arbitration award in the Commercial Court of Ahmedabad.  Interestingly, arbitration proceedings were conducted for the convenience of all parties in Mumbai though the seat was Zurich. The subject appeal was filed against a decision of the Commercial Court of Ahmedabad upholding the arbitral award.

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