India - SC Clarifies That Two Indian Parties Can Choose Foreign Seat Of Arbitration.
Legal News & Analysis - Asia Pacific - India - Dispute Resolution
26 July 2021
Matter: PASL Wind Solutions Private Limited v. GE Power Conversion India Private Limited
Order dated: 20 April 2021.
A contractual dispute arose between PASL Wind Solutions Private Limited (“PASL”) and GE Power Conversion India Private Limited (“GE Power”), both incorporated in India. As per the terms of the agreement the disputes were referred to arbitration in Zurich, Switzerland, in accordance with the rules of the International Chamber of Commerce (“ICC”). The sole arbitrator passed its award (“Arbitrator’s Award”) rejecting the claim of PASL and directing PASL to reimburse GE Power their legal costs and expenses with accumulated interest. GE Power initiated enforcement proceedings under the Arbitration and Conciliation Act, 1996 (“Indian Arbitration Act”) before the Gujarat HC, within whose jurisdiction the assets of PASL were located. The Gujarat HC’s order, which was decided in favor of GE Power, was appealed before the SC by PASL.
SC noted that the Indian Arbitration Act has been divided into several parts with part I, dealing with domestic arbitration and international commercial arbitration, while part II specifically dealt with the enforcement of foreign awards. Therefore, to answer the question of whether an award is deemed to be regarded as a foreign award, the courts must solely be guided by the definition of foreign awards provided under section 44 in part II of the Indian Arbitration Act. For an award to fall under the scope and the ambit of section 44, the requirements are:
(a) the dispute must be considered to be a commercial dispute under the laws of India;
(b) the dispute must arise between ‘persons’;
(c) the award must be passed in pursuance of a written agreement for arbitration; and
(d) the award must be passed in one of such territories notified by the Indian government to be a territory to which the New York convention applies.
As Switzerland is a signatory to the New York convention and all the other ingredients set out in section 44 of the Indian Arbitration Act were fulfilled in the present case, the SC held that the Arbitrator’s Award is a ‘foreign award’ as defined under the Indian Arbitration Act and the nationality or domicile or place of incorporation / residence of the parties cannot have any bearing on the definition of foreign award laid down under section 44 of the Indian Arbitration Act.
SC further held that section 9 of the Indian Arbitration Act, which deals with interim measures before constitution of the arbitral tribunal remains available even if two Indian parties adopt a foreign seated arbitration and Indian courts may grant interim reliefs in such cases if the assets of one of the parties is situated in India and interim orders are required for preservation of such assets.
For further information, please contact:
Souvik Ganguly, Partner, Acuity Law