Recently, the Delhi High Court has been in the news internationally for holding that two Indian parties can choose a foreign seat thereby making the arbitration a non-Domestic Arbitration and thereby sounding a death-knell for TDM Infrastructure v. UE Development as a binding precedent. The Madhya Pradesh (Sasan's case) and the Delhi High Courts have gone ahead and addressed the issue as to whether two Indian parties could choose a foreign seat, which the Supreme Court failed to do in the (Sasan Appeal). A perusal of the judgements concerning this issue would show only a textual analysis of the legislation and probably a policy argument that allowing Indian parties (especially where one of the party is an Indian subsidiary/ affiliate of a foreign parent) would give fillip to investments in India. There is a general lack of discussion of competing policy perspectives in these judgements, given the lack of a clear legislative guideline on the subject. The Delhi High Court's decision is a typical example.
While the international arbitration community is appreciative of this development (see here), there are certain unanswered questions. Take, for instance, this scenario: a micro enterprise (as defined in the MSMED Act, 2006) enters into an agreement with an Indian subsidiary of a foreign company for supply of certain goods. The arbitration clause provides for Singapore arbitration. Disputes crop up and the micro enterprise sends a letter demanding payment of dues. In order to pre-empt the micro enterprise from availing favourable remedies under the MSMED Act, 2006, the buyer (Indian subsidiary of a foreign parent) invokes arbitration in Singapore. The micro enterprise files a claim before the MSE Facilitation Council. Would the Facilitiation Council compel the micro enterprise to go for arbitration?
It is time the Supreme Court of India considers the issue in depth.
3 comments:
May I suggest that logically the microenterprise has agreed in advance to arbitrate disputes privately. The MSE Facilitation Council would have to have a very good reason before allowing any party to avoid its own bargain. That would not be facilitation, it would be intervention
Geoffrey, India has a fairly sophisticated contractual (and arbitration) regime for protection of certain types parties whose bargaining power in a transaction are likely to be non-existent. As is well-established party autonomy has its limitations. A typical example is consumer contracts. Therefore, Indian law does not do away with arbitration in such cases. It allows such a party to approach other (more convenient) remedies. For instance, consumer arbitration is virtually non-existent in India because a consumer could approach the Consumer courts notwithstanding the existence of an arbitration clause. Micro, small and medium enterprises and start ups also have a similar choice- they could either go for arbitration or approach the facilitation council, which is a more convenient remedy for such entities. Considering this context, the question I posed is a hard case, and an answer in favour of arbitration would definitely make the other remedy less efficacious.
It seems to me, Badrinath, that consumer arbitration schemes can be very simple - in the 'look-sniff' tradition - and need not be of any cost to the consumer.
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