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Indian parties can obtain interim relief and choose foreign arbitral seat: PASL wind solutions case
Introduction: Parties incorporated in the same jurisdiction may opt to have their arbitration held outside of their home country for various reasons. Before the Supreme Court's ruling in PASL Wind Solutions v GE Power1, it was uncertain whether a foreign-seated arbitration award involving two or more Indian companies would be effective in India or if the parties could even seek interim relief in Indian courts.
PASL Wind Solutions Pvt Ltd (“PASL”) and GE Power Conversion India Pvt Ltd (“GE India”) had reached an agreement to resolve certain disputes related to a converter supply deal. Both businesses are based in India. General Electric Conversion International SAS (France), a wholly-owned subsidiary of the General Electric Company, owns 99 percent of GE India (United States). The arbitration clause in the settlement agreement said that the arbitration would occur in Zurich and would be conducted in line with the ICC Rules. Indian law controlled the settlement accord.
Following disputes, in 2017, PASL began arbitration proceedings against GE India. In the proceedings, the tribunal decided that the arbitration would be seated in Zurich but that the proceedings would be held in Mumbai. PASL's allegations were dismissed by the tribunal in 2019, and GE India was granted damages and costs.
GE India then filed an enforcement action in the Gujarat High Court under Sections 47 and 49 of the Indian Arbitration and Conciliation Act 1996 (the "Act"), which apply to the enforcement of foreign awards and are found in Part II of the Act. The Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the "New York Convention") is implemented in Part II of the Act. GE India further asked the Court for interim relief under Section 9 of the Act to stop PASL from dissipating its assets to avoid complying with the judgment.
Contentions: PASL claimed that the award was not a foreign award enforced under sec.47 and 49 of the Act. It argued that, under the closest connection test, which the Supreme Court had used to identify the arbitral seat in previous cases, the arbitral seat was Mumbai because it was the place of the hearings. As a result, PASL filed a motion to vacate the award under Section 34 of the Act, which governs arbitrations and awards held in India.
Issue: The two Indian companies have chosen the seat of arbitration outside India, which had been a long debate in India. Now the issues that arose from this is;
- Whether the foreign award was enforceable in India under the Arbitration and Conciliation Act, 1996
- Whether the Indian courts could grant interim relief concerning such award.
Supreme Court’s Judgement: The Gujarat HC had denied GE India's motion for interim relief, claiming that Section 9 of the Act, which is found in Part I, only pertained to "foreign commercial arbitrations," as defined in Section 2(1) (f) read with Section 2(2) of the Act. As a result, it was determined that Section 9 could not be used in this case because both parties were Indian. The HC also granted that the final award was enforceable in India.
To thappealed to the SC by Special Leave Petition to set aside the judgmjudgment to this HC ent. GE India cross-appealed the HC of Gujarat’s decision on the availability of interim measures.
The Supreme Court of India held in favor of GE India that: the arbitral award was enforceable as a ‘foreign award’ in India, and interim relief should be granted to GE India as the court has jurisdiction to do so.
The court rejected PASL’s claim that allowing two Indian parties to choose a foreign seat is against public policy. The court reached this decision using prior pronouncements like Atlas Exports Industries v. Kotak & Company[1]. Regarding interim relief, the court depended on Sec.2 (2) under the Arbitration Act, which extends applying the relevant laws (which normally apply exclusively to domestic arbitrations) to foreign-seated arbitrations leading to this result.
In Conclusion, this judgment has far-reaching ramifications for both Indian and international firms having Indian subsidiaries or affiliates. Non-Indian parent businesses may choose to have their Indian subsidiaries arbitrate in jurisdictions with which they are more familiar, as shown in this instance.
[1] (1999) 7 SCC 61.
This Article Does Not Intend To Hurt The Sentiments Of Any Individual Community, Sect, or Religion, Etcetera. This Article Is Based Purely On The Authors Personal Views And Opinions In The Exercise Of The Fundamental Right Guaranteed Under Article 19(1)(A) And Other Related Laws Being Force In India, For The Time Being. Further, despite all efforts made to ensure the accuracy and correctness of the information published, White Code VIA Mediation and Arbitration Centre Foundation shall not be responsible for any errors caused due to human error or otherwise.
- Introduction
- Contentions
- Decision
