In a major setback to Reliance Power-owned Sasan Power Ltd, the Supreme Court on Wednesday upheld the arbitration agreement mandating it and another Indian company to take recourse to a foreign-seated arbitration with foreign governing law.
A bench headed by Justice J Chelameswar upheld the Madhya Pradesh High Court’s judgment of September 11 last year which held that the two Indian parties may conduct arbitration in London and under English law, a stand opposed by Reliance Power-led Ultra Mega Power Project. The HC had stated that when parties have agreed to resolve all their disputes through arbitration, they can’t be permitted to avoid arbitration.
The district court had dismissed Sasan Power’s plea for an injunction against international arbitration with the Indian subsidiary of US-based North America Coal Corporation (NACC).
The UMPP’s stand was that the arbitration proceedings between two Indian entities cannot be seated in a foreign country and the arbitration Act is quite clear on domestic arbitration between two Indian parties.
Sasan Power argued that the dispute between the two Indian companies should be decided by the Indian judicial system and not the arbitral tribunal in London under the auspices of the International Chamber of Commerce (ICC).
North America Coal Corporation, on the other hand, argued that it has to be heard at the ICC. It was permissible for two Indian parties to have a foreign seat and this is was contemplated within the scheme of the Arbitration and Conciliation Act, 1996, the Indian subsidiary had argued.