Foreign element and arbitration autonomy: Section 45 limits review to the arbitration agreement, enforcing English law and ICC arbitration.

A later agreement executed by all three entities did not extinguish the original contract or discharge the foreign party, so the arrangement was not a mere assignment or novation between two Indian companies alone. The dispute therefore retained a foreign element. In that setting, Section 45 of the Arbitration and Conciliation Act, 1996 requires the court to examine only whether the arbitration agreement is null, void, inoperative, or incapable of performance, not the substantive validity of the contract. The choice of English law and ICC arbitration was treated as enforceable under party autonomy, with the suit barred and the parties relegated to arbitration.

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Issues: (i) Whether the second agreement amounted to a true assignment or novation so as to make the dispute one only between two Indian companies; (ii) whether, in the presence of a foreign element, the governing-law and arbitration clauses could be enforced and the suit rejected under Section 45 of the Arbitration and Conciliation Act, 1996.

Issue (i): Whether the second agreement amounted to a true assignment or novation so as to make the dispute one only between two Indian companies.

Analysis: The later agreement was executed by all three entities, preserved the original foreign company's obligations, and did not discharge it from liability. A burden of contract cannot be shifted by assignment without the consent of all concerned, and the document did not extinguish the earlier contract or replace it with a wholly new one. The arrangement therefore retained the original foreign element and could not be treated as a simple bilateral assignment or novation between the two Indian companies alone.

Conclusion: The agreement was not a mere assignment or novation; the dispute remained a tri-partite dispute with a foreign element.

Issue (ii): Whether, in the presence of a foreign element, the governing-law and arbitration clauses could be enforced and the suit rejected under Section 45 of the Arbitration and Conciliation Act, 1996.

Analysis: The arbitration clause was independent of the substantive contract, and the enquiry under Section 45 was confined to whether the arbitration agreement itself was null, void, inoperative, or incapable of performance. Questions about the validity of the substantive contractual terms under the Contract Act did not negate the arbitration agreement. Given the foreign element and the parties' contractual autonomy, the stipulation choosing English law and ICC arbitration was enforceable, and the statutory bar under Section 45 operated.

Conclusion: The suit was barred and the parties were liable to be referred to arbitration; the challenge to the governing-law and arbitration clauses failed.

Final Conclusion: The appeal failed, the concurrent findings below were upheld, and the civil suit was not maintainable in view of the binding arbitration arrangement.

Ratio Decidendi: In proceedings under Section 45 of the Arbitration and Conciliation Act, 1996, the court examines only the validity and operability of the arbitration agreement, not the substantive contract; where the transaction retains a foreign element, party autonomy permits selection of foreign governing law and foreign-seated institutional arbitration.

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