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Legality and Validity of substantive contract cannot be enquired under Arbitration Act

The Supreme Court has upheld a Madhya Pradesh High Court decision holding that two Indian firms, Sasan Power Ltd and North American Coal Corporation India Pvt Ltd, may conduct arbitration outside India and under a foreign law if there was an agreement to that effect.
“We see no reason to interfere with the conclusions recorded by the courts (HC) below. The appeal is, therefore, dismissed with costs,” a bench of Justices J Chelameswar and A M Sapre said while dismissing the plea of Reliance Power-owned Sasan Power Ltd which operates Ultra Mega Power Project (UMPP) at Singrauli district in Madhya Pradesh.

The court held that as the assignment in its truest sense did not take place between the American and the Indian company, the liability of the American company still exists.

Note: Also refer to the judgment of Hon'ble High Court where both parties are Indian. http://gmbalegal.blogspot.in/2015/08/arbitration-foreign-seat-indian-party.html

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