When the arbitration agreement between parties says that disputes if any would have to be decided in accordance with the Indian law, it does not automatically mean that the arbitration proceedings themselves would be governed by the law of arbitration in India.

In Coal India Ltd vs Canadian Commercial Corporation, this is what the Calcutta High Court said.

The petitioner Indian company and the Canadian company had initiated arbitration proceedings in terms of the arbitration clause in the commercial contract.

The issue was whether the Indian company was eligible to penalty from the respondent or the respondent was eligible to bonus from the petitioner. The arbitration was conducted in the UK though as per the arbitration clause the seat of arbitration was Geneva, Switzerland. The arbitration clause also clearly said that the arbitrators would settle the disputes keeping in mind the Indian law on the subject.

The Calcutta High Court was moved by the petitioner to annual the arbitration award.

Expressing its inability to do so, the Court pointed out that all that was required of the arbitrators was to follow the Indian laws like the Indian Contract Act, 1872 etc but when it came to mounting a challenge to the arbitral award itself, the Indian courts were out of bounds inasmuch as the arbitration clause clearly contemplated Geneva to be the seat of arbitration and as such the Swiss courts alone are empowered to examine whether the award suffered from any infirmities.

(The author is a New Delhi-based chartered accountant)

(This article was published on April 19, 2012)
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