Most arbitration disputes involving an Indian party are shaped years earlier, by a clause drafted in a few minutes. Indian courts have settled several questions about those clauses in recent years: how the seat is identified, whether one party may appoint the arbitrator, what an unstamped contract does to the clause, and when a company that never signed can be bound. This note answers those questions for businesses contracting with Indian parties and for Indian businesses contracting abroad. It sits alongside the firm’s longer analysis of drafting arbitration clauses against Indian counterparties.
Seat in India or abroad: what actually changes?
The seat decides which country’s courts supervise the arbitration and where the award can be challenged. With an Indian seat, Part I of the Arbitration and Conciliation Act, 1996 applies in full, and any challenge to the award is brought in an Indian court. With a foreign seat, the award is challenged only at the seat and is enforced in India as a foreign award under Part II.
A foreign seat does not always shut Indian courts out. Since the 2015 amendments, the proviso to Section 2(2) makes Sections 9 (interim relief), 27 (court assistance in taking evidence) and 37(1)(b) and 37(3) (appeals) available in an international commercial arbitration seated outside India, that is, one in which at least one party is foreign, unless the parties agree otherwise. Two Indian companies may also choose a foreign seat: in PASL Wind Solutions v GE Power Conversion India (2021), the Supreme Court found nothing in Sections 23 or 28 of the Contract Act that stops two Indian parties from arbitrating at a neutral forum outside India. How the institutions compare is covered in the firm’s note on ICC, SIAC and LCIA arbitration.
How do Indian courts identify the seat when the clause names only a venue?
Many clauses say only that the “venue” of arbitration will be a named city. In BGS SGS Soma JV v NHPC Ltd (2019), the Supreme Court held that where a clause expressly designates a venue, names no other place as the seat, and applies a body of rules to the arbitration, with no significant contrary indication, the venue is in fact the seat. Designating the seat also operates like an exclusive jurisdiction clause for the courts at that seat.
The practical lesson is simple. A clause should name the seat in terms, and say separately where hearings may be held, rather than leave a court to infer one from the other.
Can the Indian party appoint the sole arbitrator or insist on its own panel?
No, in most forms. In Perkins Eastman Architects v HSCC (India) (2019), the Supreme Court held that a person with an interest in the dispute or its outcome should not have the power to appoint a sole arbitrator unilaterally. A Constitution Bench went further in Central Organisation for Railway Electrification v ECI SPIC SMO MCML (JV) (8 November 2024). By majority, it held that:
- the principle of equal treatment of parties applies at every stage, including the appointment of arbitrators;
- a clause allowing one party to appoint a sole arbitrator unilaterally gives rise to justifiable doubts about the arbitrator’s independence and impartiality;
- a public sector undertaking may maintain a panel of arbitrators, but a clause cannot compel the other party to choose its arbitrator from that curated panel; and
- unilateral appointment clauses in public-private contracts violate Article 14 of the Constitution.
The Court made its ruling prospective, applying to arbitrator appointments made after the date of the judgment, and stated that this direction applies to three-member tribunals. After a dispute arises, the parties may still expressly waive the objection in writing under the proviso to Section 12(5).
Does an unstamped contract affect the arbitration clause?
Not in the way it once did. A seven-judge bench of the Supreme Court held in In re Interplay between Arbitration Agreements under the Arbitration and Conciliation Act, 1996 and the Indian Stamp Act, 1899 (13 December 2023) that agreements which are not stamped, or are inadequately stamped, are inadmissible in evidence but are not void or unenforceable, and that the defect is curable. An objection as to stamping is not decided by the court when referring parties to arbitration or appointing arbitrators; the court examines only whether the arbitration agreement prima facie exists, and stamping objections fall to the arbitral tribunal.
In the author’s view, this removes stamping as a tactic for delaying the start of an arbitration, but not as an issue: the document must still be properly stamped before it can be relied on as evidence.
Can a group company that did not sign the contract be bound by the arbitration clause?
It can. In Cox and Kings Ltd v SAP India Pvt Ltd (6 December 2023), a Constitution Bench held that the “parties” to an arbitration agreement under the Act include both signatories and non-signatories, that the conduct of a non-signatory may indicate its consent to be bound, and that the group of companies doctrine should be retained in Indian arbitration law. At the referral stage, the court should leave it to the arbitral tribunal to decide whether a non-signatory is bound.
For businesses dealing with an Indian group, the point cuts both ways. A parent or affiliate whose conduct in negotiating or performing the contract shows an intention to be bound may be drawn into the arbitration; equally, a party seeking to bind an affiliate must be ready to prove that intention on the facts. The firm’s domestic and international arbitration practice advises on both sides of these questions.
What should the clause itself say?
In the author’s view, a clause with an Indian party should, at a minimum: name the seat in terms and separately the venue; name the institution and its rules; provide a balanced method for appointing the tribunal; state the law governing the arbitration agreement; and, for a foreign seat, say expressly whether the Indian court powers under the proviso to Section 2(2) are preserved or excluded. The fuller framework, clause by clause, is in the firm’s analysis of cross-border arbitration clauses, and contract drafting is where these choices are made.
Related Services
Domestic and International Arbitration: India-seated and foreign-seated arbitrations, including under the ICC, SIAC and LCIA rules, interim relief over Indian assets, and challenges to and enforcement of awards.
Contract Drafting and Arbitration Clauses: cross-border commercial agreements and dispute resolution clauses.
Key Sources
BGS SGS Soma JV v NHPC Ltd, Supreme Court of India, 10 December 2019
Perkins Eastman Architects DPC v HSCC (India) Ltd, Supreme Court of India, 26 November 2019
Cox and Kings Ltd v SAP India Pvt Ltd, 2023 INSC 1051, Supreme Court of India, 6 December 2023
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
