In an Arbitration proceeding, there are generally three branches of law that apply. First, the substantive law, that governs the contract between the parties. Second is the procedural law, that guides the procedure of arbitration. Third is the law which governs with the arbitration agreement. Even though the procedural law and the law governing the arbitration agreement stem from the same legislation i.e. The Arbitration and Conciliation Act, 1996, it is important to divide them into categories for a better analysis of this unsettled issue. Almost every country has their own set of rules for arbitration. It is well settled law under Article 20 of the UNCITRAL model law that the curial law or the procedural law shall apply of that nation where the place (seat) of arbitration lies. It is also settled that if it is a case of international commercial arbitration then it is for the parties to choose the seat of their choice. But it is not settled due to certain conflicting decisions of the court that, whether two Indian parties could choose a foreign seat of arbitration or not. A recent controversy came into light when Supreme Court in a case called Sasan Power Limited v. North American Coal Corporation India Pvt. Ltd1 when asked the question that whether two Indian parties could be allowed to choose a foreign seat of arbitration, refused to comment upon the question stating that it was not the issue in the present case and the same had found its way into the written submissions by oversight.2 The decision has been criticized by various scholars who say that it was a good opportunity for the Supreme Court to settle the issue and put it to bed but the court failed to do so.
I shall now discuss what the position of Indian courts is regarding this issue and base my discussion on two judgements one of the Bombay High Court3 and the other of Madhya Pradesh High Court.4 I shall analyze the two judgements and then present my comments on the issue.