Foreign seated arbitration between Indian parties held to be not valid

Bombay High Court: In a judgment of June 2015, a bench comprising of R. D Dhanuka, J. considered the issue as to whether two Indian parties, choosing a foreign seat of arbitration and a foreign law governing the arbitration agreement may be construed to be contracting out of Indian law. In this case, the two parties had entered into an agreement whereby disputes between them were to be referred to arbitration and the arbitration clause included the following language: “Arbitration in India or Singapore and English law to be apply.”

When dispute arose, one party filed an application under Section 11(6) of the Arbitration and Conciliation Act,1996 for appointment of an arbitrator as well as a petition under Section 9 of the Arbitration Act seeking interim relief which was opposed by the other party.   The respondent party contended that the parties are governed by English Law and the seat of arbitration shall be at Singapore.

After hearing the arguments on both sides, the Court relying on the case of   TDM Infrastructure Pvt. Ltd. v. UE Development India Pvt. Ltd.,(2008) 14 SCC 271   where it was held that the intention of the legislature is clear that Indian parties should not be permitted to wriggle out of Indian law and this is a matter of Indian public policy, held that the arbitration has to be conducted in India and the arbitral tribunal will have to decide the disputes in accordance with the substantive law for the time being in force in India and since both the parties are Indian, they cannot derogate the Indian law. [Addhar Mercantile Private Limited v Shree Jagdamba Agrico Exports Private Ltd, Arbitration Application No 197 of 2014 along with Arbitration Petition No 910 of 2013, decided on 12-06-15]

Join the discussion

Your email address will not be published.

This site uses Akismet to reduce spam. Learn how your comment data is processed.