Indian parties may opt for foreign-seated arbitrations

The Supreme Court in TDM Infrastructure Private Limited v UE Development India Private Limited (2008) laid down that the legislature’s intention was to not permit Indian nationals to derogate from Indian law, as doing so would be a violation of the public policy of India. Essentially, it would not be open to two Indian nationals to circumvent Indian law by opting for a foreign seat in arbitration.

Yet in the recent ruling of Madhya Pradesh High Court in Sasan Power Ltd v North America Coal Corporation India Pvt Ltd, a division bench has held that there is no bar against Indian parties opting for foreign-seated arbitrations.

To summarize the events leading up to this ruling, Sasan Power and US-based North American Coal Corporation (NACC-US) executed an association agreement on 1 January 2009, which NACC-US subsequently assigned to its Indian subsidiary (NACC-India). The agreement envisaged a reference to arbitration, with the seat in London. Disputes later arose, as a result of which NACC-India terminated the agreement and invoked arbitration.

Vivek Vashi is the mainstay of the litigation team at Bharucha & Partners, where Shreya Ramesh is an associate.