Can two companies incorporated in India subject themselves to the law and jurisdiction of another country if disputes arise between them?
According to the petitioner before the Supreme Court of India, when the central management and control of a company is exercised in Malaysia, despite the fact that the company is incorporated and registered in India, it will become resident of Malaysia. NO - said the Supreme Court of India...... Very well said.
The nationality of a company, which is a legal person, is determined by the law of the country in which it is incorporated and from which it derives its personality.
Thus, when both companies are incorporated in India, neither can claim ‘international commercial arbitration’ on the averment that the management and control of either or both is situated outside India.
According to the Arbitration and Conciliation Act, 1996, in arbitration other than an international commercial arbitration, the arbitral tribunal shall decide the dispute submitted to arbitration in accordance with the substantive law for the time being in force in India. As part of public policy of the country, the intention of the legislature appears to be that Indian nationals should not be permitted to avoid Indian law.
The Court, however clarified that , for the purpose of taxation, test of residence may not be the registration but where the company does its real business and where the central management and control exists.
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