Summary
Two Indian companies may choose a foreign arbitral seat, and the resulting award can qualify as a foreign award enforceable under Part II. Section 44 is seat-based and does not require foreign nationality. Zurich remained the seat despite hearings in Mumbai. The Court upheld enforcement jurisdiction of the High Court and reversed the finding that Section 9 interim relief was unavailable, while preserving statutory public-policy safeguards against enforcement.
Issues
- Whether two Indian companies could validly select a foreign arbitral seat and obtain an enforceable foreign award.
- Whether Mumbai hearings displaced the agreed Zurich seat.
- Whether the High Court had enforcement jurisdiction and Section 9 interim relief was available.
Provisions considered
- Sections 2(1)(f), 2(2), 9, 28, 44, 47 and 48, Arbitration and Conciliation Act, 1996Distinguished Part I’s party-based definition from Part II’s territorial test, sustained foreign-seat autonomy and High Court enforcement, and held interim relief available subject to the statutory proviso. (¶¶ 6-26, 51-59, 63-71)
- Sections 23 and 28, Exception 1, Indian Contract Act, 1872Rejected the contention that choosing a foreign seat between Indian parties was intrinsically unlawful or opposed to public policy. (¶¶ 27-30, 38-59)
- Sections 10 and 21, Commercial Courts Act, 2015Harmonised commercial-court jurisdiction with the High Court enforcement forum in the explanation to Section 47. (¶ 62-69)
Held
- The agreement and accepted procedural orders fixed Zurich as the juridical seat. Holding hearings in Mumbai for convenience did not change it. The closest-connection test could not override a clearly designated and accepted seat. (¶¶ 3.2-3.6, 7-10)
- Section 44 concerns commercial differences between persons under a written arbitration agreement and an award made in the requisite notified Convention territory. Nationality, domicile or residence does not supply an additional foreign-element requirement. Part I’s Section 2(1)(f) definition cannot be imported to undo that seat-based test. (¶ 11-26)
- Neither Section 23 nor Section 28 of the Contract Act prohibits the foreign-seat choice. Party autonomy prevailed absent clear and undeniable public harm; Section 28(1)(a) of the Arbitration Act governs an Indian seat and does not prohibit arbitration abroad. Enforcement may still be refused under Section 48 where an award violates India’s fundamental public policy. (¶ 38-59)
- Atlas Export supplied a merits ratio as well as a separate procedural reason. TDM Infrastructure’s Section 11 appointment decision was not binding authority for the contrary position. Seven Islands Shipping and Addhar Mercantile were overruled; the relevant reasoning in Sasan I and the Delhi decisions was approved. (¶ 27-37)
- The explanation to Section 47 places foreign-award enforcement before the High Court. Section 10(1) of the Commercial Courts Act accommodates Part II foreign-seat arbitrations; its provisions do not shift this enforcement proceeding to a district court. The Arbitration Act also remains the special enactment governing arbitration applications and appeals. (¶ 62-69)
- The expression international commercial arbitration in the proviso to Section 2(2), in this foreign-seat context, is not confined by Section 2(1)(f). The respondent’s Section 9 application was maintainable, reversing the High Court on that point. This did not itself grant the requested interim measures. (¶¶ 13-14, 70-71)
Result
Appeal disposed of: Gujarat High Court judgment upheld except its finding that the respondent’s Section 9 application was not maintainable; that application held maintainable.