International arbitration clauses in company agreements are not invalid merely because they provide for ICC Rules under the Convention regime.

Section 389 of the Companies Act, 1956 does not form an exclusive code governing a company's reference of disputes to arbitration. The Arbitration Act, 1940 applies subject to other laws in force, and the Arbitration (Protocol and Convention) Act, 1937 is such a law. Accordingly, an agreement by an Indian company to submit future disputes to arbitration under the ICC Rules is not invalid merely because it does not follow the domestic arbitration framework, where the Convention regime applies. The earlier view treating such a clause as unenforceable could not stand, and the matter had to be reconsidered under the applicable stay provisions.

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Issues: Whether an agreement by a company registered under the Indian Companies Act to refer future disputes to arbitration under the Rules of the International Chamber of Commerce is binding and enforceable notwithstanding section 389 of the Companies Act, 1956.

Analysis: Section 389 of the Companies Act, 1956 regulates a company's power to refer disputes to arbitration and does not create a new or exclusive code excluding other legally applicable arbitration regimes. Section 47 of the Arbitration Act, 1940 makes that Act applicable to all arbitrations, subject to any other law for the time being in force. The Arbitration (Protocol and Convention) Act, 1937 is such a law, and where its conditions are satisfied, arbitration under the International Chamber of Commerce rules is not inconsistent with section 389. The earlier view that such an agreement was invalid because it did not conform to the Arbitration Act, 1940 could not be sustained.

Conclusion: The arbitration clause was not invalid merely because it provided for arbitration under the International Chamber of Commerce rules, and the matter had to be reconsidered in light of the applicable stay provisions.

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