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.