The Bombay High Court in the recent case of M/s Addhar
Mercantile Private Limited (Applicant) v Shree Jagdamba Agrico
Exports Pvt Ltd1(Respondent) has
considered the important 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 and therefore opposed to public policy.
Applicant and the Respondent had
entered into an agreement whereby all disputes were to be referred
to arbitration and the arbitration clause included the following
"Arbitration in India or Singapore and English law to be
Pursuant to a dispute under the
agreement, the Applicant filed an application under Section 11(6)
of the Arbitration and Conciliation Act, 1996 (the Arbitration Act)
for appointment of an arbitrator as well as a petition under
Section 9 of the Arbitration Act seeking interim reliefs.
Respondent opposed the application
under Section 11(6) of the Arbitration Act on the ground that the
parties are governed by English Law and the venue of arbitration
should be Singapore.
The important issue of contention
between the parties was whether two Indian parties could enter into
an agreement to have the seat of arbitration at Singapore with the
governing law as English law?
Intention of parties was clear to have arbitration in India and
since both parties are Indian, they cannot be allowed to derogate
from Indian law in light of TDM Infrastructure Private Limited
v UE Development India Private Limited (TDM
Bombay High Court has no jurisdiction to resolve the issue. Though
both parties are Indian, parties by agreement can agree to the seat
of arbitration at Singapore and apply English law as the governing
law. If the Bombay High Court exercised its jurisdiction to appoint
an arbitrator under Section 11 of the Arbitration Act, it would be
contrary to Section 28 (1) (a) of the Arbitration Act.
Relevant paragraphs of the Bombay High Court judgement are set
"8. It is not in dispute that both parties are from
India. A perusal ofclause 23 clearly indicates
that intention of both parties is clear that the arbitration shall
be either in India or in Singapore. If the seat of the arbitration
would have be at Singapore, certainly English law have to be
applied. Supreme Court in case of TDM
Infrastructure Private Limited (supra) has held that the intention
of the legislature would beclear that Indian
nationals should not be permitted to derogate from Indian law. This
is part of the public policy of the country.
9. Insofar as submission of the learned counsel for the
respondent that if such provision is interpreted in the manner in
which it is canvassed by the learned counsel for the applicant, it
would be in violation of section 28(1) (a) is concerned, sinceI am of the view that the arbitration has to be
conducted in India, under section 28(1) (a), the arbitral tribunal
will have to decide the disputes in accordance with the substantive
law for the time being in force in India. In my view the said
agreement which provides for arbitration in India thus does not
violate section 28(1) (a)as canvassed by the
learned counsel for the respondent.
12. Insofar as next submission of the learned counsel for
the respondent in the alternative to the earlier submission that
thesaid clause is workable on the ground that the
clause referred to the seat of arbitration at Singapore and
applicability of the English law to such proceedingsare concerned,in my view since both the
parties are Indian and cannot derogate the Indian law, this
submission of the learned counsel has no substance and is
rejected." (Emphasis added)
Although this decision from the Bombay High Court follows the
obiter dicta from TDM Infrastructure and
BALCO3 there are also judgments such as
Reliance Industries Limited & Anr v Union of
India4 and Delhi Airport Metro Express Pvt Ltd
v CAF India & Anr5 that may be relied upon to
argue that a foreign seated arbitration between Indian parties is
valid. Given the prevailing uncertainty, a conclusive finding on
the subject from the Supreme Court would be welcome.
1. Arbitration Application No 197 of 2014 along with
Arbitration Petition No 910 of 2013
2. (2008) 14 SCC 271
3. (2012) 9 SCC 552
4. (2014) 7 SCC 603
5. In the High Court of Delhi, I.A. No 10776/2014 in
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Singhania & Partners LLP, Solicitors and Advocates
Under the Arbitration and Conciliation (Amendment) Act, 2015. There are two avenues available for the enforcement of foreign awards in India, viz., the New York Convention and the Geneva Convention, as the case may be.
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