Some more research...
Ok, i made some more research.
(Disclaimer: I am not a lawyer. The reasoning in this text is purely based on common sense.)
The citizenship act , which can be found here
http://www.unhcr.org/cgi-bin/texis/vtx/home/opendoc.pdf?tbl=RSDLEGAL&id=410520784
( The homepage of the ministry of home affairs links to this pdf
http://mha.nic.in/acts-rules/ic_act55.PDF
however, the first one seems to be more complete with regards to the amendments, i believe the first pdf is in fact the law currently in effect)
leaves the decision whether a acquisition of a citizenship was voluntarily or not up to the center government.
This is what this quote from the citizenship act means:
9. Termination of citizenship
…
(2) If any question arises as to whether, when or how any citizen of India has acquired the citizenship of another country, it shall be determined by such authority, in such manner, and having regard to such rules of evidence, as may be prescribed in this behalf.
Now the government of India basically set up a catalog of rules, according to which such questions should be decided. There is a judgment from 1962, which can be found here:
http://judis.nic.in/supremecourt/qrydisp.asp?tfnm=3963
Besides other things. this Judgment also refers to a rule from this catalog saying:
"The fact that a citizen of India has obtained on any date a passport from the Government of any other country shall be conclusive proof of his having voluntarily acquired the citizenship of the country before that date."
However, it seems that this catalog of rules was recently updated, and in the new catalog, which can be found at
http://mha.nic.in/acts-rules/ic_rule56.pdf
this rule was removed. Therefore obtaining a passport is NOT anymore conclusive proof that the citizenship was voluntarily acquired. However, when a person has two citizenships that person has to proof that he did not acquire the foreign one voluntarily, i.e. the burden of proof is on the person.
However, the website from the Indian home ministry says at
http://mha.nic.in/citi-susp.htm
that a baby will only be a citizen of India if either parent is Indian and the birth is registered within one year at an Indian embassy. This section also includes the clause:
“Provided also that no such birth shall be registered unless the parents of such person declare, in such form and in such manner as may be prescribed, that the minor does not hold the passport of another country”.
(These conditions can also be found in the law as per the first pdf which i mentioned).So this begs the question what will happen if the parents first register the birth at the Indian embassy, truthfully signing the affidavit that the baby currently is not holding a passport of another country, and after getting the Indian passport proceed to apply for the passport of the foreign country (of course, provided that according to the foreign law the baby acquired the foreign nationality automatically, i.e. “involuntarily”, and the law of the foreign country has no further objections against this procedure).
In fact, it seems this kind was procedure was already anticipated, if not wanted by the recent amendments to the Citizenship Act, because the latest version of the law also has the following clause:
“A minor who is a citizen of India by virtue of his section and is also a citizen of any other country shall cease to be a citizen of India if he does not renounce the citizenship or nationality of another country within six months of attaining full age.”
First of all, this sentence acknowledges that there might be in fact minors who are citizens of India and of other countries. Accordingly, there must be (or have been) some process or possibility for a minor to actually hold both citizenships at the same time, until that minor reaches full age. As far as I understand the law the above suggested procedure would result in the minor having and keeping both citizenships, without breaking Indian law.
Some people think that it is written down in the Indian law that it is not possible that a Indian citizen is having another passport. This is not the case (i challenge anybody who thinks otherwise to tell me the name of the act and the number of the section where it is written), rather this is a assumption which one could draw from the existing law, similar to how a theorem is concluded from a set of axioms in mathematics. However, i think such a conclusion would not apply to children of binational parents.
As before, i would be very happy for comments about this interpretation of the law.
@sv2707: Yes, according to German law our daughter will be automatically a German citizen because i am German, very similar to the Indian law according to which she will be Indian because my wife is Indian. The German law does in fact allow dual citizenship for minors, and in theory it also allows that the parents renounce the German citizenship of the child (the procedure might be complicated, but). However, i believe that the best solution for our child would be to have both citizenships, at least until she is 18. Maybe until then the law has changed so that she can keep both citizenships, or, if not, then at least she can choose for herself.