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PASL Wind Solutions Private Limited v. GE Power Conversion India Private Limited

Civil Appeal · 2021 INSC 264Decided 20 Apr 2021
Civil Appeal No. 1647 of 2021
Justice Rohinton Fali Nariman · Justice B.R. Gavai · Justice Hrishikesh Roy

Background

Two companies incorporated in India, PASL Wind Solutions and GE Power Conversion India, had a dispute over converter warranties and settled it through an agreement that required any future disputes to be arbitrated in Zurich, Switzerland under ICC Rules, even though both parties were Indian and the substantive law applicable was Indian law. When fresh disputes arose, GE sought interim relief from Indian courts under Section 9 of the Arbitration and Conciliation Act, and PASL challenged whether two Indian parties could even validly choose a foreign seat of arbitration, and whether the resulting award could be enforced in India as a "foreign award."

Decision Breakdown

The Supreme Court held that Indian law does not prohibit two Indian companies from choosing a forum for arbitration outside India, and an award rendered at such a foreign seat, governed by the New York Convention, qualifies as an enforceable "foreign award" under Part II of the Arbitration and Conciliation Act: party autonomy to select a juridical seat abroad is not defeated merely because both contracting parties happen to be Indian nationals. The Court clarified that the restrictive definition of "international commercial arbitration" in Section 2(1)(f) (which requires a foreign element) applies only to domestic arbitrations under Part I of the Act, and is irrelevant to Part II's separate "foreign award" framework, which turns on the seat of arbitration rather than the nationality of the parties. It also upheld that an application for interim relief under Section 9 remains maintainable before Indian courts even where the arbitration itself is seated abroad.

Lesson Learnt

Two Indian businesses can lawfully agree to resolve their disputes through arbitration seated in another country, and the resulting award will still be enforceable in India as a foreign award: contractual freedom to choose where arbitration happens is not restricted just because both sides are Indian.

Official source (sci.gov.in)View Judgment (PDF)

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