Delhi High Court answers the question in the case of Rajendra Sethia vs Punjab National Bank [AIR 1991 Delhi 285] holding that any agreement providing that parties will not have recourse to Indian Courts would be void.
Subsequently, Andhra Court in the case of National Aluminium Company vs Gerald Metals 2004 (2) ALD 196, has held that there is no implied consent for excluding the jurisdiction of the Courts in India under Part-I of the Act. Where such arbitration is held in India the provisions of Part I would compulsorily apply and parties are free to deviate only to the extent permitted by the derogable provisions of Part I.
Delhi High Court again in the case of Max India Limited vs General Binding Corporation on 16 July, 2009 upheld its previous stand by pronouncing that in cases of domestic arbitration the competency of a court which is to be approached can be determined applying the provisions contained in the CPC, particularly Section 20 thereof.
Supreme Court too in the case of TDM Infrastructure Private vs UE Development India Private 14 May, 2008 has made it clear that the intention of the legislature appears to be clear that Indian nationals should not be permitted to derogate from Indian law. This is part of the public policy of the country.
Yes, two Indian parties can by agreement opt to exclude the applicability of Indian arbitrational law, provided the seat of arbitration is outside Indian territory. This would apply irrespective to the law govening the base contract, for which an arbitration agreement is adopted.
e.g. A and B have a purchase agreement which is governed by Indian law. In the same agreement, they have an arbitration clause, which they have agreed to be governed by English law. Seat of arbitration is decided to be London. In such a scenario, Indian Law would not govern the arbitration proceedings.
Supreme Court, last year, in the case of Bharat Aluminium Co. v. Kaiser Aluminium Technical Service, Inc. opined the same.
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