Question

The Supreme Court in ................................... held that irrespective of where the 'central management and control is exercised' by a company, companies incorporated in India, cannot choose foreign law as the governing law of their arbitration.

• A. TDM Infrastructure (P) Ltd. v. UE Development India (P) Ltd.
• B. Comed Chemicals Ltd. v. C.N. Ramchand
• C. Shreejee Traco (I) Pvt. Ltd. v. Paperline International Inc
• D. Bhatia International v. Bulk Trading

Hint:

A key principle in Indian arbitration law is that two Indian parties cannot have a foreign-seated arbitration. This is based on the idea that they cannot contract out of the substantive law of India. Remember the \textit{TDM Infrastructure} case for this principle.

Answer 1

The Correct Option is A

Step 1: Understanding the Concept:
The question is about the arbitrability of disputes between two Indian parties and their ability to choose a foreign seat of arbitration or foreign governing law. The Supreme Court has clarified that two Indian parties are bound by Indian law and cannot derogate from it by choosing a foreign legal system for their dispute.
Step 2: Detailed Explanation:
In the case of TDM Infrastructure (P) Ltd. v. UE Development India (P) Ltd., (2008) 14 SCC 271, the Supreme Court addressed this issue squarely. The court held that if both parties to an arbitration agreement are Indian, they cannot opt out of the Indian legal framework. The intention of the legislature is to make the provisions of Part I of the Arbitration and Conciliation Act, 1996, applicable to all arbitrations held within India between Indian parties. The court clarified that the nationality of the company is determined by its place of incorporation. Therefore, two companies incorporated in India are Indian nationals and cannot choose a foreign seat or foreign governing law for their arbitration. The 'central management and control' test is relevant for determining tax residency, not for the purpose of the Arbitration Act.
Step 3: Final Answer:
The correct case is TDM Infrastructure (P) Ltd. v. UE Development India (P) Ltd.

Answer 2

The question asks in which case the Supreme Court held that Indian-incorporated companies cannot choose a foreign law to govern their arbitration, regardless of where their central management and control is exercised. Let us test each option.

1. TDM Infrastructure (P) Ltd. v. UE Development India (P) Ltd.: Here the Court held that the nationality of a company for the purpose of the Arbitration and Conciliation Act is determined by its place of incorporation, not by where its central management and control sits. Since both parties were companies incorporated in India, they were treated as Indian parties who cannot contract out of the mandatory application of Part I of the Act by choosing a foreign governing law. This matches the question exactly.
2. Comed Chemicals Ltd. v. C.N. Ramchand: This case deals with a different arbitration issue, the appointment of an arbitrator and related procedural questions, not the nationality test for choosing governing law.
3. Shreejee Traco (I) Pvt. Ltd. v. Paperline International Inc: This case concerns the applicability of the Act's provisions where the arbitration agreement specifies a foreign venue, but it does not lay down the specific rule about incorporation-based nationality overriding central management and control.
4. Bhatia International v. Bulk Trading: This case is significant for holding that Part I of the Act can apply to international commercial arbitrations held outside India unless expressly or impliedly excluded, a related but distinct proposition from the specific nationality-by-incorporation rule described in the question.

Since the specific holding on incorporation determining nationality, irrespective of central management and control, was made in the first case, the correct answer is TDM Infrastructure (P) Ltd. v. UE Development India (P) Ltd.