Domestic parties arbitrating to be governed by Indian law: BHC

The Bombay High Court recently held that if domestic parties had entered into an agreement whereby disputes between them were to be referred to arbitration and the arbitration clause provided for arbitration to be held outside India with English law, the same would be unenforceable.

The Court relied on the decision of the Supreme Court, wherein it was held that the intention of the legislature is clear that Indian parties should not be permitted to wriggle out of Indian law and this is a matter of Indian public policy. Hence, the Court held that the arbitration has to be conducted in India and the arbitral tribunal will have to decide the disputes in accordance with the substantive law for the time being in force in India and since both the parties are Indian, they cannot derogate the Indian law.

In this case when the  dispute arose between the parties, a party filed an application under Section 11(6) of the Arbitration and Conciliation Act, 1996 (“Act”) for appointment of an arbitrator as well as a petition under Section 9 of the Arbitration Act seeking interim reliefs which were  opposed by the other party. Application under Section 11(6) of the Arbitration Act was opposed on the ground that the parties are governed by English Law and the seat of arbitration shall be at Singapore.

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