PASL Wind Solutions Private Ltd. Vs. GE Power Conversion India Private Ltd. [April 20, 2021] 

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INTRODUCTION 

This landmark judgment PASL Wind Solutions Pvt Ltd vs. GE Power Conversion India Pvt Ltd, the apex Court decided that Indian parties can select a seat for foreign arbitration. The apex court further stated that award will be referred as foreign award as per part II pf Arbitration and Conciliation Act of 1996. 

FACTS 

1. The disagreement originated under the Settlement Agreement between the firms PASL Wind Solutions Pvt Ltd and GE Power Conversion India Pvt Ltd, both of which were formed in India. The settlement agreement stated that Zurich would serve as the arbitration seat and that disagreements between the parties would be settled by arbitration in accordance with the International Chamber of Commerce’s Rules of Conciliation and Arbitration. In accordance with the Settlement Agreement, PASL Wind Solutions made a request to settle the disagreement. However, GE Power Conversion India opposed the overseas arbitration venue.
2. That was the basis cited by the appellant, PASL Wind Solutions. There is no explicit provision in Indian arbitration law stating that two Indian parties cannot select a foreign arbitration venue in their dispute. Although the tribunal granted PASL Wind Solutions’ petition, the appellant was not found to be in the right, and as a result, PASL Wind Solutions was required to pay GE Power Conversion India.
3. Due to PASL Wind Solutions’ refusal to abide by the award, GE Power Conversion India filed an application with the Gujarat High Court to have the award’s outstanding payment and enforcement enforced. Due to the Arbitration Act of 1996’s lack of clear mention allowing parties to pick a foreign venue for arbitration, PASL argued that the decided judgment violated public policy. Additionally, PASL Wind Solutions contended that since all of the proceedings took place in Mumbai, Mumbai ought to be the arbitration’s seat. Furthermore, the arbitration process will be carried out in accordance with the foreign substantive law if the parties were allowed to select the foreign venue for the arbitration.
4. The Gujarat High Court reserved its decision in favour of GE Power Conversion India on November 3, 2020, and upheld the award. However, the court declined to grant GE Power Conversion India an interim asset relief under Section 9 of the Arbitration and Conciliation Act because that remedy is inapplicable to the foreign arbitration seat where two Indian parties are involved. 

ISSUES 

1. Whether Indian entities established under Indian law can select a seat outside India?
2. Whether an award made between Indian parties at a forum outside of India be considered a “foreign award” under Part II of the Act and be enforced as such?
3. Whether it possible to sustain an application for interim relief filed by Indian parties with a foreign arbitral seat under Section 9 of the Act?

CONTENTIONS 

APPELLANT 

1. Relying on section 23 of Contract Act, 1872 read with sections 28 (1) (a) and 34(2-A) of the Arbitration Act. The appellant contended that the award was not enforceable under section 47 and 49 of the Act as it was not a foreign award. 
2. It was further contended by the appellant that it would be contrary to public policy if parties are able to choose to opt out of the country’s substantive laws by selecting a foreign seat.
3. As per part 2 of the Act foreign awards can arise only from international commercial arbitrations according to Section 2(1)(f) of the Arbitration Act (Part I), at least one of the parties to arbitration must be a foreign national a company incorporated in a nation other than India, or an association.
4. Applying closest connection test, the seat of arbitration would be Mumbai and not Zurich as there is no foreign element involved. 

RESPONDENTS 

1. The respondent contended that part the definition of international commercial arbitration cannot be imported from Part I of the Act into Section 44 of the Act through the phrase “unless the context otherwise requires” found in Section 44 of the Act.
2. The nationality, domicile or place of residence of parties is not relevant for applying section 44 of the Act. As Part II is based on the New York Convention and according which both persons in dispute must be Indians and dispute must arise out of legal relationship and must be resolved in state signatory to New York convention and must be outside India.  
3. Choice of foreign seat in arbitration is not prescribed in section 23 or 28 of Contract Act. 
4. Zurich was named as the seat of the arbitration and Mumbai was only mentioned as a convenient venue. Both parties have accepted this designation, and the arbitration clause in the Settlement Agreement, along with the procedural decisions made by the arbitrator, shall control the arbitral proceedings in this instance.

JUDGMENT 

The Supreme Court ruled that both Part I and II of the Arbitration Act, which are related to Indian seat of arbitration and New York Convention are enforceable because India is a signatory to the New York Convention. Therefore. foreign award can be implemented in India respective of nationality of parties. Any arbitral award rendered outside India will be considered as foreign award. Parties are not prohibited by Arbitration Act or Indian Contract Act from resolving their disputes outside India. further it was observed that the settlement agreement specifies their arbitral seat outside of India does not constitute a violation of Indian public policy.  The Supreme Court ruled that interim relief can be taken even if arbitration seat is located outside India, relief can be taken from Indian courts if contested asset is located in India however this remedy can be granted only if settlement agreement does not provide otherwise. as per ruling of Gujrat High Court the application under section 9 of the Arbitration Act is therefore maintainable. 

ANALYSIS 

This historic decision of supreme court cleared uncertainty regarding foreign arbitration seat in India. regarding arbitration seat it was held that parties can select arbitration seat along with selection of seat parties can also select the governing law for arbitration proceedings. Nonetheless, the arbitrator’s foreign award must be examined and complied with the New York Convention’s rules. This judgment also cleared away the concerns regarding interim relief as in this can the court state that interim relief can be taken from Indian courts if the contested asset is located in India and there is no clause in settlement agreement in this regard however such relief is avail only in Indian High Courts and not in District Courts. 

CONCLUSION 

We can say that this judgment is a step in making India an arbitration friendly country by endorsing principles like party autonomy and freedom of contract.  Various issues regarding arbitration ore touched by this case.  This judgment also highlights the role of courts in resolving disputes related to breach of contract, adhering to contractual obligations and potential consequences in case of failing to meet those contractual obligations. 

 REFERENCES 

1. https://indiankanoon.org/doc/79928496/
2. https://www.scconline.com/blog/post/2021/08/07/foreign-arbitral-seat/
3. https://legalbots.in/blog/pasl-wind-solutions-pvt-ltd-v-ge-power-conversion-india-pvt-ltd-analysis-of-indian-parties-choosing-foreign-seat-of-arbitration
4. https://www.pslchambers.com/case-brief/pasl-wind-solutions-pvt-ltd-v-ge-power-conversion-india-pvt-ltd/

This article is written by Palak Mehta from G.H.G. Institute of Law.  Ludhiana, Punjab, intern at legal Vidhya.

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