Can two companies incorporated in India, choose a forum for arbitration outside India?

Last updated: 05 May 2021

Save Share

Quick Summary

This Supreme Court case examines whether two companies incorporated in India can agree to hold their arbitration proceedings outside of India. It also considers whether an award from such an arbitration, falling under the New York Convention, qualifies as a 'foreign award' enforceable in India under Part II of the Arbitration and Conciliation Act, 1996.

Court :
Supreme Court of India

Brief :
The present appeal raises an interesting question – as to whether two companies incorporated in India can choose a forum for arbitration outside India – and whether an award made at such forum outside India, to which the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, 1958 [“New York Convention”] applies, can be said to be a “foreign award” under Part II of the Arbitration and Conciliation Act, 1996 [“Arbitration Act”] and be enforceable as such.

Citation :
CIVIL APPEAL NO. 1647 OF 2021

IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 1647 OF 2021

[ARISING OUT OF SLP (CIVIL) NO.3936 OF 2021]
PASL WIND SOLUTIONS PRIVATE LIMITED ...APPELLANT

VERSUS

GE POWER CONVERSION INDIA

PRIVATE LIMITED ...RESPONDENT

J U D G M E N T

R.F. Nariman, J.

1. Leave granted.

2. The present appeal raises an interesting question – as to whether two companies incorporated in India can choose a forum for arbitration outside India – and whether an award made at such forum outside India, to which the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, 1958 [“New York Convention”] applies, can be said to be a “foreign award” under Part II of the Arbitration and Conciliation Act, 1996 [“Arbitration Act”] and be enforceable as such.
Factual Background

3.1. The appellant is a company incorporated under the Companies Act, 1956 with its registered office at Ahmedabad, Gujarat. The respondent is a company incorporated under the Companies Act, 1956 with its registered
office at Chennai, Tamil Nadu, and is a 99% subsidiary of General Electric Conversion International SAS, France, which in turn is a subsidiary of the General Electric Company, United States.

3.2. In 2010, the appellant issued three purchase orders to the respondent for supply of certain converters. Pursuant to these purchase orders, the respondent supplied six converters to the appellant. Disputes arose between the parties in relation to the expiry of the warranty of the said converters. In order to resolve these disputes, the parties entered into a settlement agreement dated 23.12.2014. Under clauses 5.1 and 5.2 of the settlement agreement, the respondent agreed to provide certain delta modules along with warranties on these modules for the working of the converter panel. Clause 6 of the settlement agreement contained the dispute resolution clause which reads as follows:

To know more in details find the attachment file

FAQ :

Yes, the Supreme Court's judgment addresses the question of whether two companies incorporated in India can indeed choose a forum for arbitration located outside of India.

A 'foreign award' under Part II of the Arbitration and Conciliation Act, 1996, refers to an award made in a country to which the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, 1958 (the New York Convention) applies.

The judgment considers whether an award made at an arbitration forum outside India, to which the New York Convention applies, can be considered a 'foreign award' and enforced as such in India.

The dispute arose from issues concerning the warranty of converters supplied by GE Power Conversion India Private Limited to PASL Wind Solutions Private Limited, which led to a settlement agreement containing a dispute resolution clause.