PASL Wind Solutions Private Limited Vs. GE Power Conversion India Private Limited [LL 2021 SC 226] - Synopsis
Team SoOLEGAL 27 Apr 2021

SUPREME COURT: TWO INDIAN PARTIES CAN CHOOSE FOREIGN SEAT FOR ARBITRATION AND CAN ALSO SEEK INTERIM RELIEF

Recently, a bench comprising justice Nariman, Justice BR Gavai, and Justice Hrishikesh Roy, in the case of PASL Wind Solutions Private Limited Vs. GE Power Conversion India Private Limited [LL 2021 SC 226], observed that “Nothing stands in the way of party autonomy in designating a seat of arbitration outside India even when both parties happen to be Indian nationals.”

A dispute arose between the two Indian companies out of the settlement agreement. The contract entered by both parties was incorporated under the Companies Act, 1956. Clause 6 of the Contract states that if any dispute arises in the future, the matter will be resolved in Zurich through Arbitration as per the Rules of Conciliation and Arbitration of the International Chamber of Commerce. The Arbitration procedure was done and GE received an award.

GEcommenced the enforcement proceeding of the foreign award in Gujarat High Court and also made an application under Section 9 of the Arbitration Act seeking security from PASL, pending the enforcement of the award. The Gujarat High Court relied on the single Bench Supreme Court Judgment of TDM Infrastructure Pvt Ltd v. UE Development India Ltd [(2008) 14 SCC 271] and held that two Indian parties can choose a foreign seat for arbitration but no interim relief could be sought from the Indian Courts in such arbitrations. The Supreme Court in the present appeal overruled that contention and stated that interim relief under Sec 9 of the Arbitration Act will be available to the parties.

The Apex Court relied mostly on the case of Atlas Export Industries v. Kotak Company [(1997) 7 SCC. 61], where the Supreme Court held that two Indian Parties can choose a foreign seat for arbitration depending on the party’s choice. The Bench also overruled the judgment of TDM stating that it was a single bench judgment and it is not a binding precedent. The court held that an Award between two Indian parties rendered in a foreign seated arbitration would be a “Foreign Award” for Part II of the Act and would be enforced accordingly.

An argument was made against Sec 28(1)(a) of the Arbitration Act, where the contention was made that the section does not allow two Indian parties to choose a foreign law. However, the court made it clear stating that, “52. It can be seen that section 28(1)(a) of the Arbitration Act makes no reference to an arbitration being conducted between two Indian parties in a country other than India, and cannot be held, by some tortuous process of reasoning, to interdict two Indian parties from resolving their disputes at a neutral forum in a country other than India.”

The judgment is a clear win for party autonomy where two Indian companies can settle a dispute by choosing arbitrations at neutral fora outside India.

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