Judgement Briefs

Alternative Dispute Resolution

PASL Wind Solutions Pvt. Ltd. v. GE Power Conversion India Pvt. Ltd.

(2021) 7 SCC 1

Citation
(2021) 7 SCC 1
Court
Supreme Court of India
Date
20 April 2021
Bench
R.F. Nariman, B.R. Gavai and Hrishikesh Roy, JJ.

Facts

  • PASL Wind Solutions and GE Power Conversion India were both companies incorporated in India.
  • They entered into a settlement agreement resolving disputes concerning supply of converters.
  • The agreement provided for arbitration under ICC Rules with Zurich, Switzerland, as the seat.
  • A dispute later arose.
  • Arbitration was conducted in Zurich, and the tribunal issued an award in favour of GE Power.
  • GE Power sought enforcement of the award in India under Section 47.
  • It also sought interim protection under Section 9.
  • PASL opposed enforcement and argued that:
  • two Indian parties could not lawfully choose a foreign seat;
  • the arrangement violated Section 28 and Indian public policy;
  • the award could not be a “foreign award” between Indian parties; and
  • Section 9 was unavailable.
  • The Gujarat High Court rejected these objections.
  • PASL appealed to the Supreme Court.

Issue

  • Whether two Indian parties may choose a foreign seat.
  • Whether an award between Indian parties made at a Convention seat is a foreign award.
  • Whether Section 9 relief is available in support of such arbitration.

Rule

  • Party autonomy permits two Indian parties to select a foreign seat unless expressly prohibited by statute.
  • Section 44 classifies a foreign award primarily by:
  • the territory where it is made;
  • existence of a commercial relationship; and
  • reciprocity under the New York Convention.
  • Nationality of the parties is not the controlling test.
  • Section 28(1)(a), requiring application of Indian substantive law to domestic arbitration, applies only where the place of arbitration is in India.
  • The proviso to Section 2(2) permits Section 9 relief for foreign-seated arbitrations unless excluded by agreement.
  • Any violation of mandatory Indian law may be examined at enforcement under Section 48.

Application

  • The Supreme Court found no provision prohibiting Indian parties from choosing a foreign seat.
  • The Arbitration Act itself distinguishes:
  • seat;
  • nationality;
  • substantive law; and
  • international commercial arbitration.
  • The definition of “international commercial arbitration” in Part I was not relevant to whether an award was foreign under Part II.
  • Part II uses a territorial test.
  • The award was made in Zurich, a notified Convention territory.
  • It therefore qualified as a foreign award even though both parties were Indian.
  • The Court rejected the argument that Section 28 compelled Indian law.
  • Section 28 operates within Part I and applies to India-seated arbitration.
  • Once parties choose a foreign seat:
  • the foreign curial law governs;
  • conflict-of-law rules may identify the substantive law; and
  • the award is enforced through Part II.
  • Choosing a foreign seat did not automatically evade Indian mandatory law.
  • If an award required something prohibited in India, the enforcement court could apply:
  • public policy;
  • non-arbitrability; or
  • other Section 48 grounds.
  • The Court also confirmed Section 9 jurisdiction.
  • The 2015 proviso to Section 2(2) expressly extends specified provisions, including Section 9, to foreign-seated international commercial arbitration unless the parties agree otherwise.
  • For that limited proviso, the arbitration satisfied the international element through the foreign seat and legal framework.
  • Denying interim relief would make enforcement ineffective and defeat the statutory amendment.
  • The decision confirmed the territorial and party-autonomy principles that had earlier been considered in GMR Energy.

Conclusion

  • The Supreme Court held that two Indian parties may validly choose a foreign seat.
  • The Zurich award was a foreign award enforceable under Part II.
  • Section 9 interim relief was available in India.
  • The arrangement did not violate Indian public policy merely because both parties were Indian.
  • Use this case for: nationality does not prevent Indian parties from choosing a foreign seat or the resulting award from being enforced as a foreign award.