Supreme Court of India
RELIANCE INDUSTRIES .LIMITED & ANR.versusUNION OF INDIA
- Citation
- 2014 INSC 410
- Decided
- 28 May 2014
- Disposal
- Appeal(s) allowed
- Bench
- S S NIJJAR
Holding
When parties expressly agree that the arbitration agreement is governed by foreign law and the seat is abroad, Part I of the Arbitration and Conciliation Act, 1996 is excluded and a Section 34 petition in India is not maintainable.
Summary
Reliance Industries and BG Exploration entered into two Production Sharing Contracts (PSCs) with the Government of India for oil fields. Disputes arose over royalties, cess, service tax and a CAG audit, leading Reliance to issue a notice of arbitration under Article 33 of the PSCs. The parties agreed that the arbitration would be seated in London and that the arbitration agreement would be governed by English law, resulting in a Final Partial Consent Award finding the claims arbitrable. The Union of India challenged the award in the Delhi High Court under Section 34 of the Arbitration and Conciliation Act, 1996, and the High Court held that Part I of the Act applied despite the foreign seat. On appeal, the Supreme Court held that the parties had expressly excluded the applicability of Part I of the Act, invoking the principle of separability, and therefore the Section 34 petition was not maintainable in India. The Court allowed the appeal, set aside the High Court judgment, and held that any challenge to the award must be pursued in England, though enforcement in India could be resisted on public‑policy grounds.
Issues considered
- The applicability of Part I of the Arbitration and Conciliation Act, 1996 to an arbitration agreement expressly governed by English law and seated in London.
- Whether a petition under Section 34 of the Arbitration Act, 1996 challenging a foreign arbitral award is maintainable in Indian courts when the parties have excluded Indian arbitration law.
- Whether Indian public policy can be invoked to set aside or refuse enforcement of an award rendered under a foreign seat.
- The interpretation of Articles 32 and 33 of the Production Sharing Contracts concerning the proper law of the substantive contract versus the arbitration agreement.
Legislation cited
- Arbitration and Conciliation Act, 1996s. 16, s. 3, s. 34
Subjects
ArbitrationArbitration agreementSeparability principlePublic policySection 34 petitionSeat of arbitrationForeign lawProduction Sharing ContractIndian arbitration lawEnglish law
Judgment
[2014] 6 S.C.R. 456
A RELIANCE INDUSTRIES .LIMITED & ANR.
V.
UNION OF INDIA
(Civil Appeal No.5765 of 2014)
MAY 28, 2014
B
[SURINDER SINGH NIJJAR AND A.K. SIKRI, JJ.)
Arbitration and Conciliation Act, 1996 - ss. 16 and 34 -
Applicability of the Act - Arbitration petition u/s. 34 -
C Maintainability of - Parties-appellants entering into two
Product Sharing Contracts (PSCs) with the Government of
India, providing for exploration and production of petroleum
- Disputes between parties regarding payments of royalties,
cess, service tax and GAG audit report- Notice of arbitration
D - Constitution of arbitral tribunal - Under Article 33. 12 of
PSCs, the venue of arbitration would be London -
Amendment in the PSC, by agreement of the parties, Final
Partial Consent Award by arbitral tribunal that juridical seat
for arbitration would be London, England - 'Final Partial Award
E that appellants' claims are arbitrable - Petition uls. 34 by
respondent challenging Final Partial Award -Allowed by High
Court holding that the arbitration petition was maintainable -
On appeal, held: Petition uls. 34 is riot maintainable -
Applicability of Arbitration Act, 1996 to the arbitration
F agreement has been excluded - It cannot be said that even
though the arbitration agreement would be governed by the
laws of England and that juridical seat of arbitration would be
in London, Part I of the Arbitration Act would stiff be applicable
as the laws governing the substantive contract are Indian
Laws - Upon a meaningful reading of the said Articles of the
G PSC, that the proper law of the contract is Indian Law; proper
law of the arbitration agreement is the law of England -
Applicability of Arbitration Act, 1996 has been ruled out by a
H 456
RELIANCE INDUSTRIES LIMITED v. U.0.1. 457
conscious decision and agreement of the parties - In the A
event, final award is made against the respondent, the
. enforceability of the same in India, can be resisted on the
ground of Public Policy- Remedy against the award will have
to be sought in England, where the juridical seat is located -
International Commercial Arbitration. s
Doctrines/Principles - Principle of separability - Held:
Permits the parties to agree that law of one coµntry would
govern to the substantive contract and laws of another country
would apply to the arbitration agreement.
c
The appellant and one 'BG' Exploration and
Production India Ltd. entered into two Production
Sharing Contracts (PSCs) with the Government of India
for the exploration and prod:uction of petroleum from
certain oil fields. Disputes arose between the parties with D
. regard to payment of royalties, cess, service tax and CAG
audit report. The appellant issued a notice of arbitration.
The arbitral tribunal was duly constituted. Under Article
33.12, the venue of arbitration is in London. Thereafter,
on the basis of the amendment in the PSC, by agreement E
of the parties, the arbitral tribunal made the 'Final Partial
Consent Award' that the juridical seat (or legal place) for
the purposes of the arbitration shall be London, England.
The respondent raised objections relating to the
arbitrability of the claims made by the petitioner. By the
F
Final Partial Award, it was held that the petitioners' claims
are arbitrable. The respondent filed a petition under
Section 34 of the Arbitration and Conciliation Act, 1996
challenging the Final Partial Award. The High Court
allowed the petition .holding that the governing law of the G
contract, is the law of India; and that the English law
would be applicable only with regard to curial law matters,
conduct of the arbitral proceedings; that the question of
arbitrability of the claim is a larger question effecting
public policy of State and it should be determined by
H
458 SUPREME COURT REPORTS [2014] 6 ·s.C.R.
A applying laws of India; that the intention of the parties
~mder the agreement was always to remain subject to
Indian laws and not to contravene them; that an award
which is said to be against public policy can be permitted
to be challenged in India even though the seat of
8 arbitration is outside India; and that since the appellants
are seeking refund of amount of cess, royalties, service
tax, all matters of public money in India, the jurisdiction
of the Indian courts cannot be excluded. Hence, the
instant appeal.
C Allowing the appeal, the Court
HELD: 1. The conclusion arrived at by the High Court
that the applicability of Arbitration Act, 1996 to the
arbitration agreement has not been excluded, cannot be
o upheld. The petition filed by respondents under Section
34 of the Arbitration Act, 1996. in the High Court is not
maintainable. The conclusion of the High Court that even
though the arbitration agreement would be governed by
the laws of England and that juridical seat of arbitration
E would· be in London, Part I of the Arbitration Act would
still be applicable as the laws governing the substantive
contract are Indian Laws, is overruled and set aside. In
the event, a final award is made against the respondent,
the enforceability of the same in India, can be resisted on
F the ground of Public Policy. The conclusion of the High
Court that in the event, the award is sought to be
enforced outside India, it would leave the Indian party
remediless is without any basis as the parties have
consensually provided that the arbitration agreement will
be governed by the English law. Therefore, the remedy
G against the award will have to be sought in England,
where the juridical seat is located. However, since
substantive law governing the contract is Indian Law,
even the Courts in England, in case the arbitrability is
challenged, will have to decide the issue by applying
H
RELIANCE INDUSTRIES LIMITED v. U.0.1. 459
Indian Law viz. the principle of public policy etc. as it A
prevails in Indian Law. [Paras 73, 74] [512-G; 513-A-F]
2.1. The essential dispute between the parties was as
to whether Part I of the Arbitration Act, 1996 would be
applicable to the arbitration agreement irrespective of the B
fact that the seat of arbitration is outside India. To find a
conclusive answer to the issue as to whether applicability
of Part I of the Arbitration Act, 1996 has been excluded,
it would be necessary to discover the intention of the
parties for which the relevant Articles of the PSC are C
analyzed. [Para 35] [489-G-H; 490-A]
Bhatia International vs. Bulk Trading S.A. & Anr.:2002
(2) SCR 411: (2002) 4 sec 105- relied on.
2.2. Articles 32.1 and 32.2 deal with applicable law D
and language of the contract as is evident from the
heading of the Article which is 'Applicable Law and
Language of the Contract'. Article 32.1 provides the
proper law of the contract i.e. laws of India. Article 32.2
makes a declaration that none of the provisions E
contained in the contract would entitle either the
Government or the Contractor to exercise the rights,
privileges and powers conferred upon it by the contract
in a manner which would contravene the laws of India.
Article 33 makes very detailed provision with regard to
F
the resolution of disputes through arbitration. The two
Articles do not overlap - one (Art.32) deals with the proper
law of the contract, the other (Art.33) deals with ADR, i.e.
consultations between the parties; conciliation; reference
to a sole expert and ultimately arbitration. Under Article
33, at first efforts should be made by the parties to settle G
the disputes among themselves (33.1). If these efforts fail,
the parties by agreement shall refer the dispute to a sole
expert (33.2). The provision with regard to constitution of
the arbitral tribunal provides that the arbitral tribunal shall
consist of three arbitrators (33.4). This article also H
460 SUPREME COURT REPORTS [2014] 6 S.C.R.
A provides that each party shall appoint one arbitrator. The
arbitrators appointed by the parties shall appoint the third
arbitrator. In case, the procedure under Article 33.4 fails,
the aggrieved party can approach the Permanent Court
of Arbitration at Hague for appointment of an arbitrator
B (33.5). Further, in case the two arbitrators fail to make an
appointment of the third arbitrator within 30 days of the
appointment of the second arbitrator, again the Secretary
General of the Permanent Court of Arbitration at Hague
may, at the request of either party appoint the third
c arbitrator. Thus, the Permanent Court of Arbitration at
Hague can be approached for the appointment of the
arbitrator, in case of default by any of the parties. This,
is a strong indication that applicability of Arbitration Act,
1996 was excluded by the parties by consensus. Further,
the arbitration proceedings are to be conducted in
0
accordance with the UNCITRAL Rules, 1976 (33.9). It is
specifically provided that the right to arbitrate disputes
and claims under this contract shall survive the
termination of this contract (33.10). Article 33.12 provides
that venue of the arbitration shall be London and that the
E arbitration agreement shall be governed by the laws of
England. It appears, that by a Final Partial Consent Award,
the parties have agreed that the juridical seat (or legal
place of arbitration) for the purposes of arbitration initiated
under the claimants' notice of arbitration shall be
F London, England. [Paras 37, 38, 39] [490-G-H; 491-A-H;
492-A-C]
2.3. Upon a meaningful reading of the said Articles
of the PSC, that the proper law of the contract is Indian
G Law; proper law of the arbitration agreement is the law
of England. [Para 40] [492-D]
2.4. The submission that the intention of the parties
was never to exclude the applicability of Arbitration Act,
1996; and that the expression "laws of India" under
H
RELIANCE INDUSTRIES LIMITED v. U.0.1. 461
Article 32.2 would also include the Arbitration Act, 1996, A
is without any merit. The expression "laws of India" as
used in Article 32.1 and 32.2 have a reference only to the
contractual obligations to be performed by the parties
under the substantive contract i.e. PSC. In other words,
the provisions contained in 33.12 are not governed by the B
provisions contained in Article 32.1. Article 32.1 has been
made subject to the provision of Article 33.12. Article
33.12 specifically provides that the arbitration agreement
shall be governed by the laws of England. The two
Articles are particular in laying down that the contractual c
obligations with regard to the exploration of oil and gas
under the PSC shall be governed and interpreted in
accordance with the laws of India. In contra-distinction,
Article 33.12 specifically provides that the arbitration
agreement contained in Article 33.12 shall be governed 0
by the ',laws of England. Therefore, the conclusion is
inescapable that applicability of Arbitration Act, 1996 has
beel) ruled out by a conscious decision and agreement
of the parties. The High Court had no jurisdiction to
entertain the petition under Article 34 of the Arbitration
E
Act, 1996.[Para 41] [492-E-H; 493-A-B]
Bhatia International vs. Bulk Trading S.A. & Anr. 2002
(2) SCR 411: (2002) 4 sec 105 - relied on.
2.5. Article 33 provides for ADR-its limited application F
is to dispute resolution through arbitration as opposed
to civil litigation. Therefore, there is no violation of 32.2,
as Arbitration Act, 1996, in fact signifies Parliamentary
sanction of ADR. In fact, Article 32.3 indicates that
obligations under PSC and Arbitration Agreement are G
separate. Hence, it is provided that English shall be the
language of the Contract. Followed by the stipulation that
English shall also be the law of arbitral proceedings.
Therefore, the conclusion of the High Court that PSC is
a composite contract is not in tune with the approved H
provisions of the PSC. This separateness is further
462 SUPREME COURT REPORTS [2014] 6 S.C.R.
A emphasized by Article 32.1 by making the provision
"subject to the provision of Article 33.12". Laws of India
have been made applicable to the substantive contract.
Law of England govern the Dispute Resolution
Mechanism. Provision for Arbitration is a deliberate
s election of remedy other than usual remedy of a civil suit.
The ADR mechanism under the Arbitral Laws of different
nations is legally and jurisprudentially accepted,
sanctified by the Highest Law Making Bodies of the
member States, signatories to the New York Convention.
c India is not only a signatory to the New York Convention,
but it has taken into account the UNCITRAL Model Laws
and the UNCITRAL Rules, whilst enacting the Arbitration
Act, 1996. Therefore, it cannot be said that the Law of the
Contract is also the Law of the Arbitration
Agreement.[Para 42] [493-C-H]
0
2.6. Once the parties had consciously agreed that the
juridical seat of the arbitration would be London and that
the arbitration agreement will be governed by the laws of
England, it was no longer open to them to contend that
E the provisions of Part I of the Arbitration Act would also
be applicable to the arbitration agreement. [Para 43] [494-
B, CJ
Videocon Industries Limited vs. Union of India & Anr.
F 2011 (8) SCR 569: (2011) 6 sec 161- relied on.
Yograj Infrastructure Limited Vs. Ssang Yong
Engineering and Construction Company Limited (2011) 9
SCC 735; Enercon (India) Ltd. & Ors. vs. Enercon GMBH &
Anr. 2014(1) Arb.LR 257 (SC) - referred to.
G
A vs. B 2007(1) All ER (Comm) 591; Mis Dozco India
P. Ltd. Vs. Mis Doosan lnfracore Co. Ltd. (2009) 3 ALR 162;
C Vs. D [2008] 1 Lloyd's Law Rep 239; SulameRica CIA
Nacional De Seguros SA vs. Enesa Engenharia SA - Enesa
H (2012) WL 14764 - referred to.
RELIANCE INDUSTRIES LIMITED v. U.0.1. 463
2.7. The submission that the issues involved relate A
to violation of public policy of India, thus, the applicability
of Part I of the Arbitration Act cannot be excluded even if
the seat of arbitration is London; that it would make no
difference that the arbitration agreement specifically
provides for the arbitration agreement to be governed by B
the Laws of England; that proper law of the contract
would be relevant to determine the question as to
whether the interim final award would be amenable to
challenge under Section 34 of the Arbitration Act, 1996
runs counter to the well settled law in India as well as in c
other jurisdictions.[Para 57] [501-D-H]
2.8. In the instant case, the parties have by
agreement provided that the juridical seat of arbitration
will be in London. On the basis of the said agreement,
necessary amendment has been made in the PSCs. On D
the basis of the agreement and the consent of the parties,
the Arbitral Tribunal has made the "Final Partial Consent
Award" fixing the juridical seat (or legal place) of
arbitration for the purposes of arbitration initiated under
the claimants notice of arbitration in London, England. E
The award also records that any hearing in the arbitration
may take place in Paris, France, Singapore or any other
location the tribunal considers convenient. Article 33.12
stipulates that arbitration proceedings shall be conducted
in English language. It is also agreed by the parties that F
tt-;e terms and conditions of the arbitration agreement in
Article 33 of the PSCs shall remain in full force and effect
and be applicable to the arbitration proceedings. The
arbitration agreement contained in Article 33 shall be
governed by the laws of England. A combined effect of G
all these factors would clearly show that the parties have
by express agreement excluded the applicability of Part
I of the Arbitration Act, 1996 (Indian) to the arbitration
proceedings. [Para 58, 34] [489-F-G; 502-D-G]
H .
464 SUPREME COURT REPORTS [2014] 6 S.C.R.
A Venture Global Engineering vs. Satyam Comp.JJ/er.
Services Ltd. 2008 (1 ) SCR 501: (2008) 4 SCC 190 - held
inapplicable.
2.9. In the instant case, there is no danger of violation
of any statutory provisions. Prima facie, it appears that
8
there is no challenge to the Gazette Notification. In fact,
claim statement shows that the amounts of royalties/cess
levied have been paid. Prayer is for reimbursement of the
amounts paid, based on Articles 15.6 and 15.7 of the PSC.
There also seems to be a claim for making necessary
C revisions and adjustment to the contract to off-set the
effect of any changes in the law. There is no apparent or
so patently obvious violation of Indian Laws in any of
these claims. The basis for filing the petition under
Section 34 is that the appellants are bound to obey the
D Laws of the country. The appellants have nowhere
claimed to be exempted from the Laws of India. they
claim that the Government of India: party to the Contract,
i.e., PSC failed to seek and obtain exemption as stipulated
in the contract. Whether or not the claim has substance
E is surely an arbitral matter. It is not the case of the
appellants that they are not bound by the Laws of India,
relating to the performance of the contractual obligations
under the PSCs. The arbitration agreement· cannot be
jettisoned on the plea that award, if made against the
F Government of India, would violate Public Policy of India.
Merely because the Arbitral Tribunal has held that claims
are arbitral does not mean that the claims have been
accepted and an award adverse to India has been given.
[Para 59] [503-E-H; 504-A-C]
G
2.10. The High Court failed to distinguish between
the law applicable to the proper law of the contract and
proper law of the arbitration agreement. The High Court
also failed to notice that by now it is settled, in almost all
international jurisdictions, that the agreement to arbitrate
H
RELIANCE INDUSTRIES LIMITED v. U.0.1. 465
is a separate contract distinct from the substantive A
contract which contains the arbitration agreement. This
principle of severability of the arbitration agreement from
the substantive contract is indeed statutorily recognized
by Section 16 of the Arbitration Act, 1996. A bare perusal
of the s.16(1) would show that the arbitration agreement B
is independent of the other terms of the contract. Further,
even if the contract is declared null and void, it would not
lead to the foregone conclusion that the arbitration
clause in invalid. [Paras 61] [504-D-F; 505-B]
Reva Electric Car Company P. Ltd. vs. Green Mobil 2011 c
(13 ) SCR 359: (2012) 2 SCC 93; Today Homes and
Infrastructure Pvt. Ltd. vs. Ludhiana Improvement Trust and
Anr. (2013) 7 SCALE 327; Enercon (India) Ltd. & Ors. vs.
Enercon GMBH & Anr. 2014(1) Arb.LR 257 (SC); World
Sport Group (Mauritius) Ltd. Vs. MSM Satellite (Singapore) D
PTC Ltd. Civil Appeal No. 895 of 2014 - referred to.
2.11. The principle of separability permits the parties
to agree that law of one country would govern to the
substantive contract and laws of another country would E
apply to the arbitration agreement. The parties can also
agree that even the conduct of the reference would be
governed by the law of another country. This would be
rare, as it would lead to extremely complex problems. It
is expected that reasonable businessman do not intend F
absurd results. In the instant case, the parties had by
agreement provided that the substantive contract (PSC)
will be governed by the laws of India. In contradistinction,
it was provided that the arbitration agreement will be
governed by laws of England. There was no scope for G
any confusion of the law governing the PSC with the law
governing the arbitration agreement. Therefore, the
conclusions recorded by the High Court that the
applicability of the English Law would be limited in its
application only to the conduct of the reference, cannot
be accepted. [Para 62, 63] [505-D-G; 506-A] H
466 SUPREME COURT REPORTS [2014] 6 S.C.R.
A 2.12. Article 32.2 would have no impact on the
designated juridical seat as well as governing law of the
arbitration agreemerit. This would become evident from
a perusal of the Final Partial Consent Award, signed by
all the three members of the arbitral tribunal recording
B that the juridical seat of the arbitration initiated under the
Claimant's Notice shall be" London, England. [Para 65]
[506-F-G]
2.13. The submissions that the seat of arbitration
shall be in India as the PSC is governed by the law of
C lndia; that laws of India would include the Arbitration Act,
1996, thus, irrespective of the provisions contained in
Article 33.12, Arbitration Act, 1996 would be applicable to
arbitration proceedings; and that the English law would
be applicable only in relation to the conduct o'f the
D arbitration upon the passing of the Partial Final Award,
cannot be accepted. Article 32.1 itself provides that it shall
be subject to the provision of Article 33.12. Article 33.12
provides thS!t the arbitration agreement contained in this
Article shall be governed by the laws of England. The
E term 'laws of England' cannot be given a restricted
meaning confined to only curial law. It is permissible
under law for the parties to provide for different laws of
the contract and the arbitration agreement and the curial
law. [Para 66] [506-H; 507-A-D]
F
2.14. The situation in the instant case was that it was
open to the parties to agree that the law governing the
substantive contract (PSC) would be different from the
law governing the arbitration agreement. Article 32.1
G specifically provides that the performance of the
contractual obligations under the PSC would be
governed and interpreted under the laws of India. So far
as the alternative dispute redressal agreement i.e. the
arbitration agreement is concerned, it would be governed
by laws of England. There is no basis on which the
H
RELIANCE INDUSTRIES LIMITED v. U.0.1. 467
respondents can be heard to say that the applicability of A
laws of England related only to the conduct of arbitration
reference. The law governing the conduct of the
·arbitration is interchangeably referred to as the curial law
or procedural law or the lex tori. It cannot be said that the·
Arbitration Act, 1996 has not been excluded by the parties B
by agreement. Thus, the conclusions by the High Court
that reference to laws of England is only confined to the
procedural aspects of the conduct of the arbitration
reference, cannot be approved. [Para 67,71) [507-G-H;
508-A-B; 512-A-B] C
. ~
Mis Dozco India P. Ltd. Vs. Mis Doosan lnfracore Co. Ltd.
(2009) 3 ALR 162 - referred to.
Law and Practice of Commercial Arbitration in
England, by Mustill and Boyd, 2nd Edn. - referred to. D
2.15. It cannot be said that since the issues involved
relate to the public policy of India, Part I of the Arbitration
Act, 1996 would be applicable. Applicability of Part I of
Arbitration Act, 1996 is not dependent on the nature of E
challenge to the award. Whether or not the award is
challenged on the ground of public policy, it would have
to satisfy the pre-condition that the Arbitration Act, 1996
is applicable to the arbitration agreement. The High Court
committed a jurisdictional error in holding that the
F
provisions contained in Article 33.12 is relevant only for
the determination of the curial law applicable to the
proceedings. The parties by agreement have provided
that the juridical seat of the arbitration shall be in London.
Necessary amendment has also been made in the PSCs,
a~ recorded by the Final Partial Consent Award. Further, G
the Arbitration Act, 1996 does not define or mention
juridical seat. The term 'iuridica/ seat' on the other hand
is specifically defined in Section 3 of the English
Arbitration Act. Therefore, this would clearly indicate that
the parties understood that the arbitration law of England H
468 SUPREME COURT REPORTS [2014) 6 S.C.R.
A would be applicable to the arbitration agreement. [Para
72) [512-C-F]
Bharat Aluminium Company Vs. Kaiser Aluminium
Technical Services lnc.2012 (12 ) SCR 327:(2012)9 SCC
552; State of Gujarat & Anr. Vs. Justice R.A. Mehta (Retired)
8
& Ors. 2013 (1 ) SCR 1 :(2013) 3 SCC 1- referred to.
Tamil Nadu Electricity Board vs. ST-CMS Electric Co.
Pvt. Ltd. (2007) 2 All ER (Comm) 701 - referred to.
c Case Law Reference:
(2007) 2. All ER (Comm) 701 Referred to Para 21
(2011 > 9 sec 135 Referred to Para 28
(2009) 3 ALR 162 Referred to Para 28 50
D 2012 (12 ) SCR 327 Referred to Para 28, 29
2013 (1 ) SCR 1 Referred to Para 29
2011 (8) SCR 569 Relied on Para 34, 36,
41
E
2011 (8) SCR 569 Relied on Para 47,48,
51
(2008) 1 Lloyd's Law Rep 239 Referred to Para 54
(2012) WL 14764 Referred to Para 55
F
2008 (1 ) SCR 501 Held Para 59
inapplicable
2011 (13) SCR 359 Referred to Para 61
2013 (7) SCALE 327 Referred to Para 61
G
2014 (1) Arb. LR 257 (SC) Referred to Para 61
CIVIL APPELLATE JURISDICTION : Civil Appeal No.
5765 of 2014.
H
RELIANCE INDUSTRIES LIMITED v. U.0.1. .469
From the Judgment and Order dated 22.03.2013 in OMP A
No. 46/2013 of the High Court of Delhi at New Delhi.
Dr. Abhishek Manu Singhvi, Sameer Parekh, Madhur
Baya, Faisal SherwaniM, Utsav Trivedi (For Parekh & Co.,), for
the Appellant.
B
A.K. Ganguli, Abhijeet Sinha, Sangeeta Mandal, Mamta
Tewari, Swati Sinha, Mr. Vishal Gehrana (For Mandal & Co.,),
for the Respondent.
The Judgment of the Court was delivered by c
SURINDER SINGH NIJJAR, J. 1. Leave granted.
2. This appeal is directed against the judgment of the High
Court of Delhi at New Delhi rendered in OMP No.46 of 2013
dated 22nd March, 2013. By the aforesaid judgment, the Delhi D
Higfi Court has allowed the petition filed by the respondent
under Section 34 of the Arbitration and Conciliation Act, 1996
(hereinafter referred to as 'the Arbitration Act, 1996'),
challenging the Final Partial Award dated 12th September,
2012. By the aforesaid Award, the objection raised by the Union E
of India relating to the arbitrability of the claims made by the
petitioner in respect of Royalties, Cess, Service Tax and CAG
Audit have been rejected.
3. Before we discuss the legal issues, it would be pertinent
F
to make a very brief note of the relevant facts.
4. The parties had entered into Two Production Sharing
Contracts dated 22nd December, 1994 (as amended by
Amendment Agreement No.1 and Amendment Agreement
No.2) (hereinafter referred to as "PSC" or "PSCs") as aJ1d when G
appropriate. These two PSCs provide for the exploration and
production of petroleum from the Mid and South Tapti Fields
(hereinafter referred to as ''Tapti" or "Tapri Field") and for the
exploration and production of petroleum from Panna and Mukta
Fields which shall be hereinafter referred to either as "Panna H
470 SUPREME COURT REPORTS [2014] o S.C.R.
A Mukta" or "Panna Mukta fields". The two PSCs shaWbe referred
to. ''Tapti PSC" and "Panna Mukta PSC," respectively.
5. One of the PSCs was entered into with Reliance
Industries Limited (RIL), the appellant, a body corporate
established under the laws of India. It is a major Indian
8
multinational and the largest private sector company in 1ndia,
with interests in activities including exploration and production
of oil and gas, petroleum refining and marketing
petrochemicals, textiles, retail and special economic zones. The
other PSC was entered into with BG Exploration and
C Production India Limited ("BG"), a body corporate established
under the laws of the Cayman Islands. It is a company forming
part of BG Group, an international energy group headquartered
in the United Kingdom with business operations in numerous
countries. In 2002, BG Group acquired the share capital of
D · Enron Oil and Gas India Limited (EOGIL, a company formerly
part of the Enron group of companies). Upon its acquisition on
15th February, 2003, the name of EOGIL was changed to BG
Exploration and Production India Limited.
E 6. ONGC is a state-owned oil and gas company in India
in which the Government of India holds a 74.14 % equity stake.
It produces various petroleum products including crude oil,
natural gas and LPG. These three companies are together
defined as the "Contractor" (in the PSCs Clause 1.23).
F 7. The two PSCs provide a detailed procedure for
Alternative Dispute Redressal Mechanisms. Articles 32 and 33
of the PSCs are relevant for this purpose. These Articles
provide as under :
G "Article 32 - Applicable Law and Language of the
Contract.-
32.1 Subject to the provisions of Article 33.12, this Contract
shall be governed and interpreted in accordance with the
laws of India.
H
RELIANCE INDUSTRIES LIMITED v. U.0.1. 471
[SURINDER SINGH NIJJAR, J.]
32.2 Nothing in this Contract shall entitle the Government A
or the Contractor to exercise the rights, privileges and
powers conferred upon it by this Contract in a manner
which will contravene the laws of India.
32.3 The English language shall be the language of this 8
Contract and shall be used in arbitral proceedings. All
communication, hearings or visual materials or documents
relating to this Contract sh~ll be in English.
Article 33 - Sole Expert, Conciliation and Arbitration
c
33.1 The Parties shall use their best efforts to settle
amicably all disputes, differences or claims arising out of
or in connection with any of the terms and conditions of
this Contract or concerning the interpretation or D
performance thereof.
......
33.2 Except for matters which, by the terms of this Contract,
the Parties have agreed to refer to a sole expert and any
other matters which the Parties may agree to so refer, any
dispute, difference or claim arising between the Parties E
hereunder which cannot be settled amicably may be
submitted by any Party to arbitration pursuant to Article
33.3. Such sole expert shall be an independent and
impartial person of international standing with relevant
qualifications and experience appointed by agreement F
between the Parties. Any sole expert appointed shall be
acting as an expert and not as an arbitrator and the
decision of the sole expert on matters referred to him shall
be final and binding on the Parties and not subject to
arbitration. If the Parties are unable to agree on a sole G
expert, the disputed subject matter may be referred to
arbitration.
33.3 Subject to the provisions herein, any unresolved
dispute, difference or claim which cannot be settled
H
472 SUPREME COURT REPORTS [2014] 6 S.C.R.
A amicably within a reasonable time may, except for those
referred to in Article 33.2, be submitted to an arbitral
tribunal for final decision as hereinafter provided.
33.4 The arbitrar tribunal shall consist of three arbitrators.
The Party or Parties instituting the arbitration shall appoint
8
one arbitrator and the Party or Parties responding shall
appoint another arbitrator and both Parties shall so advise
the other Parties. The two arbitrators appointed by the
Parties shall appoint the third arbitrator.
c 33.5 Any Party may, after appointing an arbitrator, request
the other Party (ies) in writing to appoint the second
arbitrator. If such other Party fails to appoint an arbitrator ·
within forty-five (45) days of receipt of the written request
to do so, such arbitrator may, at the request of the first
D Party, be appointed by the Secretary General of the
Permanent Court of Arbitration at the Hague, within forty-
five (45) days of the date of receipt of such request, from·
amongst persons who are not nationals of the country of
any of the Parties to the arbitration proceedings.
E
33.6 If the two arbitrators appointed by the Parties fail to
agree on the appointment of the third arbitrator within thirty
(30) days of the appointment of the second arbitrator and
if the Parties do not otherwise agree, the Secretary
General of the Permanent Court of Arbitration at the Hague
F may, at the request of either Party and in consultation with
both, appoint the third arbitrator who shall not be a national
of the country of any Party.
33. 7 If any of the arbitrators fails or is unable to act, his
G successor shall be appointed in the manner set out in this
Article as if he was the first appointment.
33.8 The decision of the arbitration tribunal and, in the
case of difference among the arbitrators, the decision of
the majority, shall be final and binding upon the Parties.
H
RELIANCE INDUSTRIES LIMITED v. U.0.1. 473
[SURINDER SINGH NIJJAR, J.]
33.9 Arbitration proceedings shall be conducted in A
accordance with the arbitration rules of the United Nations
Commission on International Trade Law (UNCITRAL) of
1985 except that in the event of any conflict between these
rules and the provisions of this Article 33, the provisions
of this Article 33 shall govern. B
33.10 The right to arbitrate disputes and claims under this
Contract shall survive the termination of this Contract.
33.11 Prior to submitting a dispute to arbitration, a Party
may submit the matter for conciliation under the UNCITRAL C
conciliation rules by mutual agreement of the Parties. If the
Parties fail to agree on a conciliator (or conciliators) in
accordance with the rules, the matter may be submitted for
arbitration. No arbitration proceedings shall be instituted
while conciliation proceedings are pending and such D
proceedings shall be concluded within sixty (60) days.
33.12 The venue of conciliation or arbitration proceedings
pursuant to this Article, unless the Parties otherwise agree,
shall be London, England and shall be conducted in the
E
English Language. The arbitration agreement contained in
this Article 33 shall be governed by the laws of England.
Insofar as practicable, the Parties shall continue to
implement the terms of this Contract notwithstanding the
initiation of arbitral proceedings and any pending claim or
F
dispute.
33.13 The fees and expenses of a sole expert or
conciliator appointed by the Parties shall be borne equally
by the Parties. Assessment of the costs of arbitration
including incidental expenses and liability for the payment G
thereof shall be at the discretion of the arbitrators."
8. In accordance with Article 33.12, the arbitral
proceedings were to be held in London as the neutral venue.
At the time of entering into the PSCs, none of the parties were
H
47~ SUPREME COURT REPORTS [2014] 6 S.C.R.
A domiciled in U.K. In fact, subsequently, the venue of the arbitral
proceedings was shifted to Paris and again re-shifted to
:..ondon. Consequently on 24th February, 2004, the parties to
the PSCs entered into an agreement amending tl1-e PSCs,
whereby it was stated that :~
8
"4. Applicable Law and Arbitration :
Except the change of venue/seat of Arbitration from
London to Paris, the Articles 32 and 33 of the Contract
shall be deemed to be set out in full in this Agreement
c mutatis mutandis and so that references therein to the
Contract shall be references to this Agreement."
9. It appears that certain disputes and differences have
arisen between the parties, under or in connection with the
0 PSCs. Consequently, the appellant issued a notice of
arbitration dated 16th December, 2010. The disputes,
differences and claims are common to both the Tapti PSC and
Panna & Mukta PSC. The appellant claims that all attempts to!
resolve the disputes with the respondent amicably through .
E correspondences and meetings have failed. The disputes,
differences and claims arising out. of or in connection with the
PSCs have been summarized in paragraph 6 of the notice of
arbitration.
10. Pursuant to the aforesaid notice, the arbitral tribunal
F was duly constituted on 29th July, 2011. Under Article 33.12,
the venue of arbitration is in London. The parties confirmed the
term of appointment of the Arbitral Tribunal on 29th July, 2011,
signed by the Chairman on 15th August, 2011. A substantive
nearing was held between 21st May, 2012 to 29th May, 2012
G in Singapore. Thereafter, on the basis of the amenqment made
in the PSC as noticed above, by agreement of the parties, the
arbitral tribunal made the "Final Partial Consent Award" on 14th
September, 2011. In the aforesaid award, it is recorded as
under:
H
RELIANCE INDUSTRIES LIMITED v. U.0.1. 475
[SURINDER SINGH NIJJAR, J.]
"3. Final Partial Award as to Seat A
3.1 Upon the agreement of the Partieis, each represented
by duly authorized representatives and through counsel, the
Tribunal hereby finds, orders and awards:
(a) That without prejudice to the right of the Parties to B
subsequently agree otherwise in writing, the juridical seat
(or legal place) of arbitration for the purp·oses of the
arbitration initiated under the Claimants' Notice of
Arbitration dated 16th December, 2010 shall be London,
England. c
(b) That any hearings in this arbitration may take place in
Paris, France, Singapore or any other location the Tribunal
considers may be convenient.
(c) That, save as set out above, the terms and conditions D
of the arbitration agreements in Article 33 of the PSCs
shall remain in full force and effect and be applicable in
this arbitration."
11. This Consent Award was duly signed by Mr. E
Christopher Lau SC (Chairman), Mr. Peter Leaver QC (Co-
arbitrator) and Mr. Justice B.P. Jeevan Reddy (Co-arbitrator).
12. Pursuant to Clause 28 of the terms of appointment, the
Chairman of the Tribunal is empowered to m.ake interlocutory
F
orders and consult other members of the tribunal if he considers
appropriate or one of the parties requests that a decision be
given by the whole tribunal. Various directions/ orders/
clarifications were made by the Chairman, with the concurrence
of the other members of the tribunal. Pursuant to the above
directions/orders/clarifications, the claimants I Appellants G
served upon the tribunal its statement of claim and amendment
to the statement of claim dated-5th August, 2011 and claimants'
revised amendment to the statement of claim dated 19th
January, 2012. Similarly, the Respondent served upon the
H
476 SUPREME COURT REPORTS [2014] 6 S.C.R.
A Tribunal its statement of defence dated 31st January, 2012 and
additional statement on behalf of Respondent dated 10th April,
2012 pursuant to procedural order dated 13th March, 2012. The
aforesaid procedural order dated 13th March, 2012 as
amended by directions dated 15th May, 2012 set out the list
B of issues (the May 2012 issues) to be heard and be determined
by the tribunal at the hearing fixed to c9mmence on 21st May,
2012 and to conclude on 29th May, 2012 ("the May 2012
hearing"). The parties served upon each other witness
statement of their witnesses. The documents relied upon by both
c the parties were also placed on record.
13. The Partial Final Award dated 12th September, 2012
records the claimant's claims for relief as set out in Section E
of the Statement of the Scheme. Paragraph 30.3 of the
Statement of Claim reads as follows:-
D
"(1) a declaration that, for the purposes of Article 15.6.1,
the value of Gas at the wellhead should be calculated by
deducting from the sales price at the Delivery Point an
amount reflecting all of the costs which are incurred
E between the wellhead and the Delivery point regardless of
whether such costs are classified as capital expenditure
or operating expenditure and regardless of whether such
costs are recoverable out of Cost Petroleum under Article
13 of the·PSCs.
F (2) a declaration that, with effect from the date of any partial
or final award to the termination of the PSCs, and pursuant
to Article 15.6.1 of the PSCs, the Government is required
to reimburse any excess royalties paid as a result of the
exclusion of post-wellhead capital expenditure from
G wellhead value calculations made pursuant to the Gazette
Notification or pay damages in the same amount for failure
to procure an exemption in resf)ect of such excess
royalties.
H (3) a declaration that the Government is liable to reimburse
RELIANCE INDUSTRIES LIMITED v. U.0.1. 477
[SURINDER SINGH NIJJAR, J.]
the Claimants pursuant to Article 15.6.1 of the PSCs in A
respect of any additional royalties imposed and paid by
the Claimants since August 2007 as a result of the
exclusion of post-wellhead capital expenditure from
wellhead value calculations made pursuant to the Gazette
Notification. B
(4) on award in favour of the Claimants requiring the
Government t6 reimburse the Claimants pursuant to Article
15.6.1 in the sum of US $ 11,413, 172 in respect of the
additional royalties imposed and paid under protest C
between August 2007 and March 2011 or pay damages
in the same amount for failure to procure on exemption in
respect of such additional royalties."
14. In the alternative, the appellants claimed the
reimbursement pursuant to Article 15. 7 and 15.8 of the relevant D
PSCs (as the case may be), the relief prayed for was as under
"(a) directing the parties to consult in order to make the
necessary revisions and adjustments to the PSCs so as
E
to maintain the expected benefit to the Claimants as from
August 2007 by requiring the respondent to reimburse any
excess royalties payable following the issuance of the
Gazette Notification;
(b) consequential declaratory relief; and F
(c) an award in damages in the same amount as are
claimed in paragraph 30.3(4) of the Statement of Claim."
15. The third set of reiief claimed by the appellant is set G
out in paragraph 30.3 of the Statement of Claim and is as
follows:
"(1) a declaration that payment of royalties underthe PSCs
should be made by 15 February in respect of the period
1 July to 31 December and by 15 august in respect of the H
478 SUPREME COURT REPORTS [2014] 6 S.C.R.
A period 1 January to 30 June.
(2) a declaration that, provided royalties are paid within the
timeframes specified in (1) no interest is payable under
the terms of the PSCs and any interest otherwise imposed
is to be reimbursed by the Government.
B
(3) a declaration that, in the event royalties are paid after
the timeframes specified in (1 ), any interest in excess of
LIBOR plus one percentage point is to be reimbursed by
the Government.
c
(4) a declaration that the Government is liable to reimburse
the claimants pursuant to Article 15.6.1 of the PSCs in
respect of any additional royalties or interest imposed
which does not- ,accord with the principles outlined at (1)
D to (3) above.
(5) an award in favour of the claimants requiring the
Government to reimburse the Claimants pursuant to Article
15.6.1 in the sum of Rs.7,26,00,532 in respect of the
additional royalties imposed in relation to royalty payments
E made between 1995 to 2002."
16. As noticed earlier, the aforesaid reliefs were claimed
by the appellant under Article 15.6.1, which is as under:-
"15.6.1 - The constituents of the (claimants) shall be liable
F
to pay royalties and cess on their participating interest
share of Crude Oil and Natural Gas saved and said in
accordance with the provisioM of this Agreement. Th~
royalty on oil saved and sold will be paid at RS. 481 per
metric ton and cessan oil saved and said will be paid at
G Rs.900 per metric ton. Royalty on Gas saved and said will
be paid at ten per cent (10%) of the value at wellhead. No
cess shall be payable in response of Gas. Royalty and cess
shall not exceed the herein above amounts throughout the
term of the contract. Royalty. and cess shal! be payable in
H
RELIANCE INDUSTRIES LIMITED v. U.0.1. 479
[SURINDER SINGH NIJJAR, J.]
Indian Rupees. Any such additional payment shall be made A
by the (respondent)"
17. Further the relief is claimed under Article 15.8 of the
Tapti PSC which is in identical terms of Article 15.7 in the Panna
Mukta PSC, which is as under : B
"15.8 - If any change in or to any Indian law, rule or
regulation by any authority results in a material change to
the economic benefits accruing to any of the parties to this
contract after the effective date, the parties shall consult
promptly to make necessary revisions and adjustments to C
the contract in order to maintain such expected benefits
to each of the parties."
18. The fOur preliminary objections raised by the Unio.n of
India before the Arbitral Tribunal are as follows :- D
(1) . The Claimants' claims in regard to royalties
(paragraph 14.1 of the Statement of Defence) are
not arbitrab1e;
(2) The Claimants' claims in respect of cess E
(paragraph 14.2 of the Statement of Defence) are
not arbitrable:
(3) The Claimants' claims in respectof service tax
(paragraph 14.3 of the State of. Defetfce) are not
F
arbitrable; and
(4) The Claimants' claims in respect of the Comptroller
and Auditor General's ("CAG") audit (paragraph
20.10 of the Statement of Defence) are not
arbitrable. G
19. The aforesaid preliminary objections are raised for, for
inter ali'8, the followin9 reasons :-
"(a) the Claimants' claim entail a challenge to the validity H
480 SUPREME COURT REPORTS [2014] 6 S.C.R.
A of the Oilfields (Regulation and Development) Act, .1948
("the ORD Act") and of the powers exercised under it;
(b) the claimants cannot contract out of such legislation
and any agreement to that effect would be void and
unenforceable by virtue of Section 23 of the Indian Contract
B
Act, 1872;
I •
(c) the Claimants cannot avoid the effect of the legislation
by relying on the doctrine of estoppel;
c (d) any dispute in respect of royalties should be referred
to arbitration under Rule 33 of Petroleum and Natural Gas
Rules 1959 ("the PNG Rules");
(e) there will likely be a defence to enforcemerit of any
award in India under Article V(2)(b) of the New York
D Convention as a matter of the publir. policy of India;
(f) since any award has to be enforced in India, this T:·:bunal
ought not to enter into or adjudicate questions/issues
relating to royalties in view of Rule 33 of the PNG Rules
E and the decisions of the Indian Supreme Court in Nataraj
Studios vs. Navarang Studios (1981) 1 SCC 523,Amrit
Banaspati Co. Ltd. vs. State of Punjab (1992) 2 SCC 411
and Mafatlal Industries Ltd. vs. Union of India (1997) 5
sec 536; and
F
(g) were the Tribunal to do so in reliance on Tamil Nadu
Electricity Board v. ST-CMS Electric Co Pvt. Ltd. (2007)
2 All ER (Comm) 701, it would be contrary to the law as
laid down by the English Court of Appeal in Ralli Bros v.
CIA Navleria (1920) 2 KB 287."
G
20. The respondents also contended that the Arbitral
Tribunal cannot, or ought not, to go into or adjudicate the
questions raised by the appellants (claimants) with respect to
royalties; and leave the parties, if they choose, to seek the
H necessary relief before the specific forums created under the
RELIANCE INDUSTRIES LIMITED v. U.0.1. 481
[SURINDER SINGH NIJJAR, J.]
Oilfields (Regulation and Development) Act, 1948 and the A
Petrolel,!m and Natural Gas Rules, 1956.
21. The appellants (the claimants) on the other hand
submitted that the issue 6f arbitrability is governed by the law
of the seat of arbitration. The seat of the arbitration being B
England, the issue of arbitrability is governed by the English
Law. It was also submitted that although challenge to the validity
of the terms of PSC is governed by Indian Law (Article 32.1 of
the PSC), nevertheless it falls within the jurisdiction of the
tribunal just as any other substantive dispute. The appellants C
relied upon the judgment in Tamil Nadu Electricity Board v. ST-
CMS Electric Co. Pvt. 1 Ltd. It was also submitted that the reliefs
claimed are founded, only, on contractual rights. Further,
whether or not any of those contractual rights are vitiated by
Section 23 of the Indian Contract Act, 1872 is a question of
substance and accordingly a dispute as to the underlying merits D
. of the claim. The case of the appellants (claimants) assumes
that respondent is entitled to rely on the relevant legislation but.
· the claims of the appellants are purely contractual in nature.
22. Upon consideration of the entire matter, the arbitral E
tribunal in the.final award concluded as under:
Summary of Conclusions - Formal Final Partial Award -
"6.1 The Tribunal, having carefully considered the
documentary evidence, the oral evidence and the F
submissions of the Claimants and the respondent, and
rejecting all submissions to the contrary, hereby makes,
issues and publishes this Formal Final Partial Award and
for the reasons set out above "FINDS, AWARDS,
ORDERS AND DECLARES that the Claimants' claims in G
respect of royalties, cess, service tax and CAG audit are
arbitrabe.
6.2. In stating its conclusion on the four arbitrability issues
1. (2007) 2 All ER (Comm) 701. H
482 SUPREME COURT REPORTS [2014] 6 S.C.R.
A identified in Section A of the List of issues for the May 2012
Hearing, the Tribunal wishes to make it clear that it is
expressing no opinion on the merits of the parties'
respective submissions which were made during'the May
.2012 Hearing. Subject to further order in the meantime, the
B merits of those issues will be decided in the March, 2013
Hearing."
23. Union of India challenged the aforesaid award before
the High Court of Delhi in OMP No.46 of 2013. The respondents
invoked the jurisdiction of the High Court under Section 34: of
C the Arbitration Act for various reasons namely, (i) the terms of
the PSCs entered would manifest an unmistakable intention of ·
the parties to be governed by the laws of India and more
particularly the Arbitration Act 1996; (ii) the contracts were
signed and executed in India; (iii) the subject matter of the
D contracts, namely, the Panna Mukta and the Tapti Fields are
situated within India; (iv) the obligations under the contract~ have
been for the past more than 15 years performed within India;
(v) the contracts stipulate that they "shall be governed and
interpreted in accordance with the laws of India"; (vi) they also
E provided that "nothing in this contract" shall entitle either of the
parties to exercise the rights, privileges and powers conferred
upon them by the contract "in a manner which will contravene
the laws of India" (Article 32.2); and (vii) the contracts further
stipulate that "the companies and the operations under this
F Contract shall be subject to all fiscal legislation of India" (Article
15.1 ). .
24. The appellant raised preliminary objection to the
maintainability of the arbitration petition primarily on the ground
G that by choosing English Law to govern their agreement to
arbitration and expressly agreeing to London seated
arbitration, the parties have excluded the application of Part I
of the Arbitration Act, 1996. It was submitted that the High Court
of Delhi had no jurisdiction to entertain the objection filed by
the Union of India under Section 34 of the Arbitration Act, 1996.
H
RELIANCE INDUSTRIES LIMITED v. U.0.1. 483
[S.URINDER SINGH NIJJAR, J.]
It was emphasized that Courts of England and Wales have A
exclusive jurisdiction to entertain any challenge to the award. It
·was pointed out that the PSCs were amended on two
occasions. On 24th February, 2004, PSC was sought to be
amended to change the seat of arbitration from London to
Paris. However, on 14th September, 2011, the parties to the B
arbitration agreed that the seat of the present arbitration
proceedings would be London, England. This agreement is
recorded in the Final Partial Consent Award rendered by the
arbitral tribunalon 29th July, 2011. As noticed earlier, the final
partial consent'.award provided that the juridical seat or legal c
place of arbitration for the purpose of arbitration,initiated under
the claimants notice of arbitration dated 16th December, 2011
shall be London, England. Article 33.9 of the PSC provides that
the arbitration shall be conducted in accordance with the
UNCITRAL Rules, 1985. However, subsequently it was D
recorded in the award that the applicable rules shall be the
UNCITRAL Arbitration Rules, 1976. It was also submitted on
behalf of the appellants that the objections raised by the UOI
are yet to be determined by the tribunal on merits and shall be
considered after considering the evidence at the time of E
rendering the final award.
25. Upon consideration of the entire matter, the High Court
has held that undoubtedly the governing law of the contract i.e.
proper law of the contract is the law of India. Therefore, the
parties never intended to all together exclude the laws of India, F
so far as contractual rights are concerned. The Laws of
England are limited in their applicability in relation to arbitration
agreement contained in Article 33. This would mean that the
English Law would be applicable only with regard to the curial
law matters i.e. conduct of the arbitral proceedings. For all other G
matters, proper law of the contract would be applicable. Relying
on Article 15(1), it has been held that the fiscal laws of India
cannot be derogated from. Therefore, the exclusion of Indian
public policy was not envisaged by the parties at the time when
they entered into the contract. The High Court further held that H
484 SUPREME COURT REPORTS [2014) 6 S.C.R.
A to hold that the agreement contained in Article 33 would
envisage the matters other than procedure of arbitration
proceedings would be to re-write the contract. The High Court
also held that the question of arbitrability of the claim or dispute
cannot be examined solely on the touchstone of the applicability
B of the law relating to arbitration of any country but applying the
public policy under the laws of the country to which the parties
have subjected the contract to be governed. Therefore,
according to the High Court, the question of arbitrability of the
dispute is not a pure question of applicable law of arbitration
c or lex arbitri but a larger one governing the public policy. The
• High Court then concluded that public policy of India cannot be
adjudged under the laws of England. Article 32.1 specifically
provides that laws of India will govern the obligations of the
parties in the PSCs. The High Court also concluded that the
effect of the interplay of Article 32.1 and Article 32.2 and 33.12
0
leads to the conclusion that law of England shall operate in
relation to matters contained in Article 33 in so far as they are
not inconsistent with the law of India. Since the question of
arbitrability of the claim is a larger question effecting public
E policy of State it should be determined by applying laws of India.
This would give a meaningful effect to Article 32.2, otherwise:
it would be rendered otiose. On the basis of the aforesaid plain
reading, according to the High Court, the conclusion is that the ·
intention of the parties under the agreement was always to .
remain subject to l.13.dian laws and not to contravene them. It is ·
F further held that Article 33 was confined to conducting the
arbitration in accordance with the laws of England and not for I
all other purposes. ReJying on the judgment of this Court in ,
Bhatia International Vs. Bulk Trading S.A. & Anr. 2, it has been ·
held that Part I of the Arbitration Act, 1996 would be applicable
G as there is no clear express or implied intention of the parties
to exclude the applicability of the Arbitration Act, 1996. The
High Court also relies on the judgment of this Court in Venture
Global Engineering Vs. Satyam Computer Services Ltd. 3 , in
2. (2002) 4 sec 1os
H 3. (2008) 4 sec 190.
RELIANCE INDUSTRIES LIMITED v. U.0.1. 485
[SURINDER SINGH NIJJAR, J.]
support of the conclusion that the Delhi High Court has A
jurisdiction to entertain and adjudicate the petition under
Section 34 of the Arbitration Act, 1996. Since, according to
High Court, the dispute raised by the appellant relate to public
policy of India, the petition under Section 34 of the Arbitration
Act is maintainable. The High Court also gives additional B
reasons for concluding that the petition to challenge final partial
award is maintainable. According to the High Court, the
disputes involved rights in rem. Therefore, due regard has to
be given to Indian laws. An award which is said to be against
public policy can be permitted to be challenged in India even c
though the seat of arbitration is outside India. The High Court
also took support from the doctrine of public trust with regard
to natural resources. Since the appellants are seeking refund
of amount of cess, royalties, service tax, all matters of public
money in India, the jurisdiction of the Indian courts cannot be 0
excluded. The High Court concludes that there is no reason why
the public money be allowed to invested for seeking
adjudication of the claims which may be eventually found to be
impermissible to be enforced. Finally, the High Court declined
to consider the law laid down by the Constitution Bench of this
E
Court in Bharat Aluminium on the basis that the operation of
the judgment has been made prospective by the court. The final
conclusion has been given in paragraph 59 which is as under:
"59. No submission on the part of the respondents remains
unaddressed. I have already observed that upon testing F
the instant case on the principles of law laid down in the
case of Bhatia International (supra) as well as Venture
Global (supra), no inference as to express or implied
exclusion of the Part I of the Arbitration and Conciliation
Act, 1996 can be drawn. Resultantly, the objection raised G
by the respondents relating to lack of jurisdiction of Indian
court on the count of express choice of laws provisions
cannot be sustained as Indian laws including provisions of
Part I of the Act are not expressly nor impliedly excluded.
The said objection is therefore rejected." H
486 SUPREME COURT REPORTS [2014] 6 S.C.R.
A '2~. It is this judgment of the High Court which is subject
matter ..:if this appeal.
27. We have heard the learned counsel for th~ parties.
28. Learned senior counsel for both the parties have made
B very elaborate oral submissions. These submissions have been
summed up and supplemented by the written submissions. Dr.
Singhvi appearing for the appellants submitted that once the
English Law is selected as the proper law of arbitration, the
applicability of Arbitration Act, 1996 would be ruled out. He
C submits that the High Court has wrongly intermingled the issues
relating to the challenge to the arbitral proceedings or the
arbitration award with the merits of the disputes relating to the ·
underlying contract. According to him, even if the law laid down
in Bhatia International (supra) is applicable, the arbitral tribunal
D would apply the provisions contained in the Indian Contract Act.
But the English Courts will have jurisdiction over the control and
supervision of the arbitration including, challenge to the arbitral
award. In support of his submission, Dr. Singhvi relies on
Vldeocon Industries Limited Vs. Union of India & Anr4. He has
E also relied on Yograj Infrastructure Limited Vs. Ssang Yong
Engineering and Construction Company Limited5, Mis Dozco
India P. Ltd. Vs. Mis Doosan lnfracore Co. Ltd. 6 , Bharat
Aluminium Company Vs. Kaiser Aluminium Technical
Services lnc 7 .
F 29. Dr. Singhvi submitted that the reliance placed by the
High Court on Venture Global Engineering (supra) is
misplaced. In that case, the Court was not concerned with a
clause such as Article 32.1 of the PSC, which has to be
interpreted subject to the provisions contained in Article 33.12.
G According to Dr. Singhvi, the ratio of Venture Global
4. (2011 J 6 sec 161.
5. (2011) 9 sec 735.
6. (2009) 3 ALR 162.
H 7. (2012) 9 sec 552.
RELIANCE INDUSTRIES LIMITED v. U.0.1. 487
[SURINDER SINGH NIJJAR, J.]
Engineering (supra) has lost its efficacy as it has been A
overruled by the Constitution Bench in Bharat Aluminium
Company (supra). Dr. Singhvi then submitted that the concern
shown by the High Court for Indian public policy was wholly
misplaced and erroneous. The High Court has failed to
appreciate that Article 32.1 and 32.2 deal only with the proper B
law of the contract and not with the proper law of the arbitration
agreement. The High Court has erroneously distinguished the
ratio of law laid down in Videocon Industries Limited (supra)
on the ground that although the arbitration clause therein was
the same but the question of public policy had not been c
addressed by the Court. Relying on State of Gujarat & Anr. Vs.
Justice R.A. Mehta (Retired) & Ors. 8, Dr. Singhvi submitted that~
even if the issue of public policy was not particularly raised or
addressed, the judgment in Videocon Industries Limited
(supra) <still be a binding precedent. According to him;· whilst D
concluding that the parties did not intend to exclude the
applicability of the Arbitration Act, 1996 to the arbitration
agreement, the High Court has erroneously held that it was
·necessary for the parties to exclude not only the provisions of
the Arbitration Act but also specifically plead that public policy E
is also excluded. According to the learned senior counsel,
Article 15."6. 1 has no relevance for the determination of the
question 'as to whether the Arbitration Act, 1996 will apply to
the arbitration, which is being held in London.
30. Mr. A.K. Ganguly, learned senior counsel appearing F
for Union of India submits that the decision in this case has
been correctly rendered by the High Court based on the law
laid down by this Court in Bhatia International and Venture
Global Engineering (supra) as the arbitration agreement is pre
BALCO. He submits that in order to determine whether G
Arbitration Act, 1996 is excluded, the contract had to be seen
as a whole. Here, the contract is in India, for the work to be
done in India over 25 years; secondly, it deals with natural
a. [(2013) 3 sec 1. H
488 SUPREME COURT REPORTS [2014) 6 S.C.R.
A resources, Union of India is a trustee of these resources for the
citizens of India. London was designated as the seat of
arbitration only to provide certain measure of comfort level to
the foreign parties. The contract can not be read in such a way
as to exclude the Arbitration Act, 1996. The High Court has
B correctly concluded that arbitrability had to be decided by taking
into consideration Indian Laws, which, would include the Indian
Arbitration Act and not under the English Arbitration Act, 1996.
He emphasized that the present proceedings relate to the
interpretation of the contract, which is of national importance
c to develop the oil rich areas in the Indian Coasts. He points out
that under the PSC, the contractor has agreed to be always
mindful of the rights and interests of India in the conduct of
petroleum operations [Article 7.3(a)]. Mr. Ganguly also relied
on Article 32.1 and 32.2 and submitted that Contract is to be
governed and interpreted in accordance with laws of India. He
0
points out that there is a negative covenant in Article 32.2,
wherein Government or the contractor are not entitled to
exercise the rights, privileges, and powers conferred under the
PSC in a manner which will contravene laws of India. Mr.
E Ganguly further pointed out that the High Court has correctly
. applied the law laid down by this court in Bhatia International
and Venture Global Engineering (supra). He also objected to
the additional documents, which are sought to be relied upon
by the petitioriers in I.A. No. 7 of 2014. He submitted that none
of these documents were on the record before the High Court
F and can not be permitted to be relied on for the first time in
this Court. He, therefore, submitted that I.A. No. 2 ought to be
dismissed. He submitted that similar request was made before
the High Court, which was rejected.
G 31. Mr. Ganguly emphasized that the issues raised by the
Union of India are of public law and not purely contractual as
sought to be projected by the appellants. He points out that the
appellants have sought a number of reliefs with respect to CAG
Audit. It is a challenge to the conclusions recorded by the CAG
H Audit and such a challenge would not be arbitrable. It is further
RELIANCE INDUSTRIES LIMITED v. U.0.1. 489
[SURINDER SINGH NIJJAR, J.]
A
submitted by him that the issues raised with regard to royalty
is also not arbitrable as it is not a commercial issue. He has
distinguished the judgment of this Court in Videocon Industries
Limited (supra) on the ~sis that the issue with regard to the
public law was not considered by the Court in that judgment.
B
32. As noticed earlier, both the learned senior counsel
have also submitted written submissions. Primarily, the
submissions made in the Court.have been reiterated and,
therefore, reference will be made to the same as and when
necessary. c
33. We have considered the submissions made by the
learned counsel for the parties.
34. Before we analyze the submissions made by the
learned senior counsel for both the parties, it would be D
appropriate to notice the various factual and legal points on
which the parties are agreed. The controversy herein would
have to be decided on the basis of the law declared by this
Court in Bhatia International (supra). The parties are agreed
and it is also evident from the Final Partial Consent Award E
dated 14th September, 2011 that the juridical seat (or legal
place) of arbitration for the purposes of the arbitration initiated
under the Claimants' Notice of Arbitration dated 16th
December, 2010 shall be London, England. The parties are
also agreed that hearings of the Notice of Arbitration may take F
place at Paris, France, Singapore or any other location the
Tribunal considers may be convenient. It is also agreed by the
parties that the terms and conditions of the arbitration
agreement in Article 33 of the PSCs shall remain in full force
and effect and be applicable to the arbitration proceedings. G
35. The essential dispute between the parties is as to
whether Part I of the 'Arbitration Act, 1996 would be applicable
to the arbitration agreement irrespective of the fact that the seat
of arbitration js outside India. To find a conclusive answer to
H
490 SUPREME COURT REPORTS [2014] 6 S.C.R.
A the issue as to whether applicability of Part I of the Arbitration
Act, 1996 has been excluded, it would be necessary to discover
the intention of the parties. Beyond this parties are not agreed
on any issue.
B 36. We are also of the opinion that since the ratio of law
laid down in Ba/co (supra) has been made prospective in
operation by the Constitution Bench itself, we are bound by the
decision rendered in Bhatia International (supra). Therefore,
at the outset, it would be appropriate to reproduce the relevant
ratio of Bhatia International in paragraph 32 which is as under
c
"32. To conclude, we hold that the provisions of Part I would
apply to all arbitrations and to all proceedings relating
thereto. Where such arbitration is held in India the
D provisions of Part I would compulsorily apply and parties
are free to deviate only to the extent permitted by the
derogable provisions of Part I. In cases of international
commercial arbitrations held out of India provisions of Part
I would apply unless the parties by agreement, express or
implied, exclude all or any -of its provisions. In that case
t; J 'aws or rules chosen by the parties would prevail. Any
provision, in Part I, which is contrary to or excluded by that
law or rules will not apply."
37. In view of the aforesaid, it would be necessary to
F analyze the relevant Articles of the PSC, to discover the real
intention of the parties as to whether the provisions of
Arbitration Act, 1996 have been excluded. It must, immediately,
be noticed that Articles 32.1 and 32.2 deal with applicable law
and language of the contract as is evident from the heading of
G the Article which is "Applicable Law and Language of the
Contract". Article 32.1 provides the proper law of the contract
i.e. laws of India. Article 32.2 makes a declaration that none of
the provisions contained in the contract would entitle either the
Government or the Contractor to exercise the rights, privileges
H and powers conferred upon it by the contract in a manner which
RELIANCE INDUSTRIES LIMITED v. U.0.1. 491
[SURINDER SINGH NIJJAR, J.]
would contravene the laws of India. A
38. Article 33 makes very detailed provision with regard
to the resolution of disputes through arbitration. The two Articles
do not overlap - one (Art.32) deals with the proper law of the
contract, the other (Art.33) deals with ADR, i.e. consultations 8
between the parties; conciliation; reference to a sole expert and
ultimately arbitration. Under Article 33, at first efforts should be
made by the parties to settle the disputes among themselves
(33.1 ). If these efforts fail, the parties by agreement shall refer
the dispute to a sole expert (33.2). The provision with regard C
to constitution of the arbitral tribunal provides that the arbitral
tribunal shall consist of \hree arbitrators (33.4). This article also
provides that each party shall appoint one arbitrator. The
arbitrators appointed by the parties shall appoint the third
arbitrator. In case, the procedure under Article 33.4 fails, the
aggrieved party can approach the Permanent Court of D
Arbitration at Hague for appointment of an arbitrator (33.5).
Further, in case the two arbitrators fail to make an appoint~ent
of the third arbitrator withirT 30 days of the appointment of the
second arbitrator, again the Secretary General of the Permanent
Court of Arbitration at Hague may, at the request of either party E
appoint the third arbitrator. In the face of this, it is difficult to
appreciate the submission of the respondent - Union of India
that the Arbitration Act, 1996 (Part I) would be applicable to the
arbitration proceedings. In the event, Union of India intended
to ensure that the Arbitration Act, 1996 shall apply to the F
arbitration proceedings, Article 33.5 should have provided that
in default of a party appointing its arbitrator, such arbitrator may,
at the request of the first party be appointed by the Chief Justice
of India or any person or Institution designated by him. Thus,
the Permanent Court of Arbitration at Hague can be G
approached for the appointment of the arbitrator, in case of
default by any of the parties. This; in our opinion, is a strong
indication that applicability of Arbitration Act, 1996 was
excluded by the parties by consensus. Further, the arbitration
proceedings are to be conducted in accordance with the H
492 SUPREME COURT REPORTS [2014] 6 S.C.R.
A UNCITRAL Rules, 1976 (33.9). It is specifically provided that
th~ right to arbitrate disputes and claims under this contract shall
survive the termination of this contract (33.10).
39. 1The Article which provides the basis of the controversy
herein is Article 33.12 which provides that venue of the
8
arbitration shall be London and that the arbitration agreement
shall be governed by the laws of England. It appears, as
observed earlier, that by a Final Partial Consent Award, the
parties have agreed that the juridical seat (or legal place of
C arbitration) for the purposes of arbitration initiated under the
claimants' notice of arbitration dated 16th December, 201 Oshall
be London, England.
40: We are of the opinion, upon a meaningful reading of
the aforesaid Articles of the PSC, that the proper law of the
D contract is Indian Law; proper law of the arbitration agreement
is the law of England. Therefore, can it be said as canvassed
by the respondents, that applicability of Arbitration Act, 1996
has not been excluded?
E 41. It was submitted by Mr. Ganguly that the intention of the
parties was never to exclude the applicability of Arbitration Act,
1996. It is submitted that the expression "laws of India" under
Article 32.2 would also include the Arbitration Act, 1996. This
submission is without any merit. In our opinion, the expression
"laws of India" as used in Article 32.1 and 32.2 have a reference
F only to the contractual obligations to be performed by the parties
under the substantive contract i.e. PSC. In other words, the
provisions contained in 33.12 are not governed by the
provisions contained in Article 32.1. It must be emphasized that
Article 32.1 has been made subject to the provision of Article
G 33.12. Article 33.12 specifically provides that the arbitration
agreement shall be governed by the laws of England. The two
Articles are particular in laying down that the contractual
obligations with regard to the exploration of oil and gas under
the PSC shall be governed and interpreted in accordance with
H the laws of India. In contra-distinction, Article 33.12 specifically
RELIANCE INDUSTRIES LIMITED v. U.0.1. 493
[SURINDER SINGH NIJJAR, J.]
provides that the arbitration agreement contained in Article A
33.12 shall be governed by the laws of England. Therefore, in
our opinion, the conclusion is inescapable that applicability of
Arbitration Act, 1996 has been ruled out by a conscious
decision and agreement of the parties. Applying the ratio of law
as laid down in Bhatia International (supra) it would lead to B
the conclusion that the Delhi High Court had no jurisdiction to
entertain the petition under Article 34 of the Arbitration Act,
1996.
42. Article 33 provides for ADR - its limited application
is to dispute resolution through arbitration as opposed to civil
c
litigation. Therefore, there is no violation of 32.2, as Arbitration
Act, 1996, in fact signifies Parliamentary sanction of ADR. In
fact, Article 32.3 indicates that obligations under PSC and
Arbitration Agreement are separate. Hence, it is provided that
English shall be the language of the Contract. Followed by the D
stipulation that English shall also be the law of arbitral
proceedings. Therefore, the conclusion of the High Court that
PSC is a composite contract is not in tune with the approved
provisions of the PSC. This separateness is further
emphasized by Article 32.1 by making the provision "subject E
to the provision of Article 33.12". Laws of India have been made
applicable to the substantive contract. Law of England govern
the Dispute Resolution Mechanism. Provision for Arbitration is
a deliberate election of remedy other than usual remedy of a
civil suit. The ADR mechanism under the Arbitral Laws of F
different nations is legally and jurisprudentially accepted,
sanctified by the Highest Law Making Bodies of the member
States, signatories to the Nelfll, York Convention. India is not only
a signatory to the New Yo(k Convention, but it has taken into
account the UNCITRAL Model Laws and the UNCITRAL Rules, G
whilst enacting the Arbitration Act, 1996. Therefore, it would not
"be possible to accept the submission of Mr. Ganguly that the
Law of the Contract is also the Law of the Arbitration
Agreement.
H
494 SUPREME COURT REPORTS [2014] 6 S.C.R.
A 43. In our opinion, it is too late in the day to contend that
the s~at of arbitration is not analogous to an exclusive
jurisdiction clause. This view of ours will find support from
numerous judgments of this Court. Once the parties had
consciously agreed that the juridical seat of the arbitration
s would be London and that the arbitration agreement will be
governed by the laws of England, it was no longer open to them
to contend that the provisions of Part I of the Arbitration Act
would also be applicable to the arbitration agreement. This
Court in the case of Videocon Industries Ltd. (supra) has
c clearly held as follows :-
"33. In the present case also, the parties had agreed that
notwithstanding Article 33.1, the arbitration agreement
contained in Article 34 shall be governed by law~ -of
England. This necessarily implies that the parties had
D agreed to exclude the provisions of Part I of the Act. As a
corollary to the above conclusion, we hold that the Delhi
High Court did not have the jurisdiction to entertain the
petition filed by the respondents under Section 9 of the Act
and the mere fact that the appellant had earlier filed similar
E petitions was not sufficient to clothe that High Court with
the jurisdiction to entertain thetQetition filed by the
respondents."
44. In coming to the aforesaid conclusion this Court
F interpreted similar if not identical provisions contained in the
arbitration agreement. The provision with regard to proper law
of the contract and the arbitration agreement was as follows :
3. Fo.r the sake of convenience, the relevant clauses of
Articles 33, 34 and 35 of the PSC are extracted below:
G
"33.1. Indian law to govern.-Subject to the provisions of
Article 34.12, this contract shall be governed and
interpreted in accordance with the laws of India.
33.2. Laws of India not to be contravened.-Subject to
H
RELIANCE INDUSTRIES LIMITED v. U.0.1. 495
[SURINDER SINGH NIJJAR, J.]
A
Article 17 .1 nothing in this contract shall entitle the
contractor to exercise the rights, privileges and powers
conferred upon it by this contract in a manner which will
contravene the laws of India.
* * * B
34.3. Unresolved disputes.-Subject to the provisions of
this contract, the partie.s agree that any matter, unresolved
dispute, difference or claim which cannot be agreed or
settled amicably within twenty-one (21) days may be C
submitted to a sole expert (where Article 34.2 applies) or
otherwise to an Arbitral Tribunal for final decision as
hereinafter provided.
* * *
D
34.12. Venue and law of arbitration agreement.-The
venue of sole expert, conciliation or arbitration proceedings
pursuant to this article, unless the parties otherwise agree,
shall be Kuala Lumpur, Malaysia, and shall be conducted
in the English language. Insofar as practicable, the parties E
shall continue to implement the terms of this contract
notwithstanding the initiation of arbitral proceedings and
any pending claim or dispute. Notwithstanding the
provisions of Article 33.1, the arbitration agreement
contained in this Article 34 shall be governed by the laws F
of England.
* * *
35.2. Amendment.-This contract shall not be amended,
modified, varied or supplemented in any respect except G
by an instrument in writing signed by all the parties, which
shall state the date upon which the amendment or
modification shall become effective."
45. We are of the opinion that in the impugned judgment
H
496 SUPREME COURT REPORTS [2014] 6 S.C.R.
A the High Court has erred in not applying the ratio of law laid ,
down in Videocon Industries Ltd. (supra) in the present case.'
The first issue raised in Videocon Industries Limited (supra) 1
was as to whether the seat of arbitration was London or Kuala
Lumpur. The second issue was with regard to the Courts thaf
B would have supervisory jurisdiction over the arbitration
proceedings. Firstly, the plea of Videocon lndustri.es Limited
was that the seat could not have been changed from Kuala
Lumpur to London only on agreement of the parties without
there being a corresponding amendment in the PSC. This plea
c was accepted. It was held that seat of arbitration cannot be
changed by mere agreement of parties. In Paragraph 21 of the
judgment, it was observed as follows:-
"21. Though, it may appear repetitive, we deem it
necessary to mention that as per the terms of agreement,
D the seat of arbitration was Kuala Lumpur. If the parties
wanted to amend Article 34.12, they could have done so
only by a written instrument which was required to be
signed by all of them. Admittedly, neither was there any
agreement between the parties to the PSC to shift the
E juridical seat of arbitration from Kuala Lumpur to London
nor was any written instrument signed by them for
amending Article 34.12. Therefore, the mere fact that the
parties to the particular arbitration had agreed for shifting
of the seat of arbitration to London cannot be interpreted
F as anything except physical change of the venue of
arbitration from Kuala Lumpur to London."
46. The other issue considered by this Court in Videocon
Industries Limited (supra) was as to whether a petition under
Section 9 of the Arbitration Act, 1996 would be maintainable
G in Delhi High Court, the parties having specifically agreed that
the arbitration agreement would be governed by the English
Law. This issue was decided against Union of India and it was
held that Delhi High Court did not have the jurisdiction to
entertain the petition filed by Union of India under Section 9 of
H the Arbitration Act.
RELIANCE INDUSTRIES LIMITED v. U.0.1 497
[SURINDER SINGH NIJJAR, J,]
A
47. lnJhe present appeal, this Court is also considering
the issue as to whether the petition under Section 34 of the
Arbitration Act, 1996 filed by Union of India in Delhi would be
maintainable. The parties have made the necessary
amendment in the PSCs to provide that the juridical seat of
B
arbitration shall be London. It is also provided that the arbitration
agreement will be governed by laws of England. Therefore, the
ratio in Videocon Industries Limited (supra) would be relevant
and binding in the present appeal.
48. The aforesaid judgment .(Videoconl has been . C
rendered by this Court upon consideration of Venture Global
Engineering (supra). Venture Global Engineering and Videocon
Industries Ltd. are both judgments delivered by two-Judge
Bench. In our opinion, the factual and legal issues involved in
the Videocon Industries case are very similar to the controversy D
involved in the present appeal. The Arbitration Agreement in
this appeal is identical to the arbitration agreement in Videocon
Industries. In fact, the factual situation in the present appeal is
on a stronger footing than in Videocon Industries Limited
(supra). As noticed earlier, in Videocon Industries, this Court E
concluded that the parties could not have altered the seat of
arbitration without making the necessary amendment to the
PSC. In the present appeal, necessary amendment has been
made in the PSC. Based on the aforesaid amendment, the
Arbitral Tribunal has rendered the Final Partial Consent Award F
of 14th September, 2011 recording that the juridical seat (or
legal place) of the arbitration for the purposes of arbitration
initiated under the Claimant's Notice of Arbitration dated 16th
December, 2010 shall be London, England. Furthermore, the
judgment in Videocon Industries is subsequent to Ventura G
Global. We are, therefore, bound by the ratio laid down in
Videocon Industries Limited (supra).
49. We may also point out that the judgment in Videocon
Industries has been followed on numerous occasions by a
number of High Courts. This apart, the judgment of this Court H
498 SUPREME COURT REPORTS [2014] 6 S.C.R.
A in Videocon Industries Ltd. also reflects the view taken by the
Courts in England on the same issues. In the case of A Vs. 8 9
considering a similar situation, it has been held as follows :
"" ..... an agreement as to the seat of an arbitration is
B analogous to an exclusive jurisdiction clause. :Any claim
for a remedy ...... as to the validity of an existing interim
or final award is agreed to be made only in the courts of
the place designated as the seat of arbitration."
(emphasis supplied).
50. This Court in Dozco India Ltd. (supra) again reiterated
the principle of law laid down in Sumitomo Heavy Industries
Ltd. (supra), wherein the law was very clearly enunciated in Para
16:
'The law which would apply to the filing of the award, to its
enforcement and to its setting aside would be the law
governing the agreement to arbitrate and the performance
of that agreement.".
This judgment is rendered by a three-Judge Bench.
51. It i~ noteworthy that the judgment in Sumitomo was not
dissented from in Bhatia lntern~tional on which the judgment
in Venture Global is based. This again persuades us to follow
the law laid down in Videocon (supra).
52. Again this Court in Yograj Infrastructure (two-Judge
Bench) considered a similar arbitration agreement. It was
provided that the arbitration proceedings shall be conducted
in English in Singapore in accordance with the Singapore
International Arbitration Centre (SIAC) Rules. (Clause 27.1).
·clause 27.2 provided that the arbitration shall take place in
Singapore and be conducted in English languag_e. This Court
held that having ·agreed that the seat of arbitration would be
Singapore and that the curial law of the arbitration proceedings
9. 2007 (1) All E.R (Comm) 591.
RELIANCE INDUSTRIES LIMITED v. U.0.1. 499
[SURINDER SINGH NIJJAR, J.]
would be SIAC Rules, it was no longer open to the appellant A
to contend that an application under Section 11 (6) of the
Arbitration Act, 1996 would be maintainable.
53. This judgment has specifically taken into consideration
the law laid down in ahatia International (supra) and Venture B
Global (supra). The same view has been taken by Delhi High
Court, Bombay High Court and the Gujarat High Court, in fact
this Court in Videocon has specifically approved the
observations made by the Gujarat High Court in Hardy Oil
(supra).
c
54. The effect of choice of seat of arbitration was
considered by the Court of Appeal in C Vs. 0 10• This judgment
has been specifically approved by this Court in Balco (supra)
and reiterated in Enercon (supra). In C Vs. D (supra), the Court
of Appeal has ob·served:- D
"Primary Conclusion·
16. I shall deal with Mr Hirst's arguments in due course but,
. in my judgment, they fail to grapple with the central point
at issue which is whether or not, by choosing London as E
the seat of the arbitration, the parties must be taken to have
agreed that proceedings on the award should be only those
permitted by English law. In my view they must be taken
to have so agreed for the reasons given by the judge. The
whole purpose of the balance achieved by the Bermuda F
Form (English arbitration but applying New York law to
issues arising under the policy) is that judicial remedies
in respect of the award should be those permitted by
English law and only those so permitted. Mr Hirst could not
say (and did not say) that English judicial remedies for lack G
of jurisdiction on procedural irregularities under sections
67 and 68 of the 1996 Act were not permitted; he was
reduced to saying that New York judicial remedies
10. [2008) 1 Lloyed's Rep 239. H
500 SUPREME COURT REPORTS [2014] 6 S.C.R.
A were also permitted. That, however, would be a recipe for
litigation and (what is worse) confusion which cannot have
been intended by the parties. No doubt New York law has
its own judicial remedies for want of jurisdiction and
serious irregularity but it could scarcely be supposed that
B a party aggrieved by one part of an award could proceed
in one jurisdiction and a party aggrieved by another part
of an award could proceed in another jurisdiction. Similarly,
in the case of a single complaint-about an award, it could
not be supposed that the aggrieved party could complain
c in one jurisdiction and the satisfied party be entitled to ask
the other jurisdiction to declare its satisfaction with the
award. There would be a serious risk of parties rushing to
get the first judgment or of conflicting decisions which the
parties cannot have contemplated."
D 55. The aforesaid observations were subsequently
tallowed by the High Court of Justice Queen's Bench Divi'i3ion,
Commercial Court (England) in SulameRica CIA Nacional De
Seguros SA v. Enesa Engenharia SA - Enesa 11 . In laying
down the same proposition, the High Court noticed that the
E issue in this case depends upon the weight to be given to the
provision in Condition 12 of the insurance policy that "the seat
.of the arbitration shall be London, England." It was observed
that this necessarily carried with it the English Court's
supervisory jurisdiction over the arbitration process. It was
F observed that "this follows from the express terms of the
Arbitration Act, 1996 and, in particular, the provisions of Section
2 which provide that Part I of the Arbitration Act, 1996 applies
where the seat of the arbitration is in England and Wales or
Northern Ireland. This immediately establishes a strong
G connection between the arbitration agreement itself and the law
of England. It is for this reason that recent authorities have laid
stress upon the locations of the seat of the arbitration as an
important factor in determining the proper law of the arbitration
agreement."
H 11. (2012)WL14764.
RELIANCE INDUSTRIES LIMITED v. U.0.1. 501
[SURINDER SINGH NIJJAR, J.]
56. In our opinion, these observations are fully applicable A
to the facts and circumstances of this case. The conclusion
reached by the High Court would lead to the chaotic situation
where the parties would be left rushing between India and
England for redressal of their grievances. The provisions of
, Part I of the Arbitration Act 1996 (Indian) are necessarily s
excluded; being wholly inconsistent with the arbitration
agreement which provides "that arbitration agreement shall be
governed by English law." Thus the remedy of the respondent
to challenge any award rendered in the arbitration proceedings
would lie under the relevant provisions contained in Arbitration c
Act, 1996 of England and Wales. Whether or not such an
application would now be entertained by the courts in England
is not for us to examine, it would have to be examined by the
Court of Competent Jurisdiction in England.
Public Policy: D
57. Mr. Ganguly has vehemently argued that the issues
; involved here relate to violation of public policy of India.
; Therefore, the applicability of Part I of the Indian Arbitration Act
: cannot be excluded even if the seat of arbitration is London. It E
· would also, according to Mr. Ganguly, make no difference that
the arbitration agreement specifically provides for the arbitration
agreement to be governed by the Laws of England. According
to Mr. Ganguly, proper law of the contract would be relevant to
determine the question as to whether the interim final award F
would be amenable to challenge under Section 34 of the
Arbitration Act, 1996. In our opinion, the aforesaid submission
of the learned counsel runs counter to the well settled law in
India as well as in other jurisdictions. As noticed earlier, Mr.
Ganguly has submitted that the disputes in relation to royalties, G
cess, service tax and the CAG audit report are not arbitrable.
In support of this submission, he relies on the provisions
contained in Article 15.1 read with Article 32.2. Relying upon
these two ·Articles, Mr. Ganguly submitted that the obligation
with regard to taxes, royalties, rentals etc. are not purely
H
502 SUPREME COURT REPORTS [2014) 6 S.C.R.
A contractual, thef are governed by the relevant statutory
provisions. He, therefore, placed strong reliance on the
judgment in Venture Global (supra) in support of his
submission that since the disputes are not arbitrable, the award
cannot be enforcea under Part II of the Arbitration Act, 1996
B but is amenable to challenge under Section 34 of the Act. It
would be appropriate to point out that the judgment in Venture
Global is in two parts. The first part is based on Bhatia
International Ltd., wherein it is held as follows :-
"32 ........ In cases of international commercial arbitrations
c held out of India provisions of Part I would apply unless the
parties by agreement, express or implied, exclude all or
any of its provisions. In that case the laws or rules chosen
by the parties would prevail. Any provision, in Part I, which
is contrary to or excluded by that law or rules will not apply."
D
58. In this case, the parties have by agreement provided
that the juridical seat of arbitration will be in London. On the
basis of the aforesaid agreement, necessary amendment has
been made in the PSCs. On the basis of the agreement and
E the consent of the parties, the Arbitral Tribunal has made the
"Final Partial Consent Award" on 14th September, 2011 fixing
the juridical seat (or legal place) ofarbitration for the purposes
of arbitration initiated under the claimants notice of arbitration
dated 16th December, 2010 in London, England. To make it
F even further clear that the award also records that any hearing
in the arbitration may take place in Paris, France, Singapore
or any other location the tribunal considers convenient. Article
33.12 stipulates that arbitration proceedings shall be conducted
in English language. The arbitration agreement contained in
G Article 33 shall be governed by the laws of England. A
combined effect of all these factors would clearly show that the
parties have by express agreement excluded the applicability
of Part I of the Arbitration Act, 1996 (Indian) to the arbitration.
proceedings.
H
RELIANCE INDUSTRIES LIMITED v. U.0.1. 503
[SURINDER SINGH NIJJAR, J.]
59. We are also unable to agree with Mr. Ganguly that Part A
I of the Arbitration Act, 1996 (Indian) would be applicable in this
case, in view of the law laid down by this Court in Venture
Global Engineering (supra). In our opinion, even the second
part of the ratio in Venture Global Engineering (supra) from
paragraph 32 of the judgment onwards would not be applicable B
to the facts and circumstances of this case. Firstly, in our
opinion, all the disputes raised by the petitioners herein are
contractual in nature. Secondly, the performance of any of these
obligations would not lead to any infringement of any of the laws
of India per se. Thirdly, the non-obstante clause which was c
under consideration in Venture Global is non-existent in the
present case. In Venture Global, the court was concerned with
direct violation of Foreign Exchange Management Act. The
actions of the responderfts therein would also h?ve been
contrary to various provisions of the Companies Act in the event D
the shares were to be transferred in accordance with the award.
Therefore, this Court was persuaded to take the view that
. inspite of the applicability of Part I having been excluded as the
· seat of arbitration was outside nonetheless Part I would apply
' .
· as the transfer of the shares would be against the laws of India
·and, therefore, violate public policy. In our opinion, such
E
circumstances do not exist in the present case as there is no
danger of violation of any statutory provisions. Prima facie, it
appears that there is no challenge to the Gazette Notification.
In fact, claim statement shows that the amounts of royalties/cess
levied have been paid. Prayer is for reimbursement of the F
amounts paid, based on Articles 15.6 and 15.7 of the PSC.
There also seems to be a claim for making necessary revisions
and adjustment to the contract to off-set the effect of any
changes in the law. We fail to see any apparent or so patently
obvious violation of Indian Laws in any of these claims. The G
basis for filing the petition under Section 34 is that the
Appellants are bound to obey the Laws of the country. The
appellants have nowhere claimed to be exempted from the
Laws of India. They claim that the Government of India, party
H
504 SUPREME COURT REPORTS [2014] 6 S.C.R.
A to the Contract, i.e .. PSC has failed to seek and obtain
exemption as stipulated in the contract. Whether or not the .claim
has substance is surely an arbitral matter. It is not the case of
the appellants that they are not bound by the Laws of India,
relating to the performance of the contractual obligations under
B the PSCs. In view of what we have said earlier, it is not possible
to sustain the conclusion reached by the High Court. The
arbitration agreement can not be jettisoned on the plea that
award, if made against the Government of India, would violate
Public Policy of India. Merely because the Arbitral Tribunal has
c held that claims are arbitral does not mean that the claims have
been accepted and an award adverse to India has been given.
We, therefore, have no hesitation in rejecting the submission
made by Mr. Ganguly. For the same reasons, we are unable
to sustain the conclusions reached by the High Court of Delhi.
D 60. Another good reason for not accepting or approving
the conclusions reached by the High Court is that it has failed
to distinguish between the law applicable to the proper law of
the contract and proper law of the arbitration agreement. The
High Court has also failed to notice that by now it is settled, in
E almost all international jurisdictions, that the agreement to
arbitrate is a separate contract distinct from the substantive
contract which contains the arbitration agreement. This principle
of severability of the arbitration agreement from the substantive
contract is indeed statutorily recognized by Section 16 of the
F Indian Arbitration Act, 1996. Section 16(1) specifically provides
as under:-
"16.Competence of arbitral tribunal to rule on its
jurisdiction.- (1) The arbitral tribunal may rule on its own
jurisdiction, including ruling on any objections with respect
G
to the existence or validity of the arbitration agreement, and
for that purpose,-
(a) an arbitration clause which forms part of a contract shall
be treated as an agreement independent of the other terms
H of the contract; and
RELIANCE INDUSTRIES LIMITED v. U.0.1. 505
[SURINDER SINGH NIJJAR, J.]
(b) a decision by the arbitral tribunal that the contract is null A
and void shall not entail ipso jure the invalidity of the
arbitration clause."
61. A bare perusal of the aforesaid would show that the
arbitration agreement is independent of the other terms of the
8
contract. Further, even if the contract is declared null and void,
it would not lead to the foregone conclusion that the arbitration
clause in invalid. The aforesaid provision has been considered
by this Court in a number of cases, which are as follows:-
Reva. Electric Car Company P. Ltd. Vs. Green C
Mobil. 12, Today Homes and Infrastructure Pvt. Ltd.
Vs. Ludhiana Improvement Trust and Anr. 13,
Enercon (India) Ltd. & Ors. Vs. Enercon GMBH &
Anr. 14, World Sporl Group (Mauritius) Ltd. Vs. MSM
Satellite (Singapore) PTC Ltd. [Civil Appeal No. D
895 of 2014]
62. This principle of separability permits the parties to
agree: that law of one country would govern to the substantive
contract and laws of another country would apply to the E
arbitration agreement. The parties can also agree that even the
conduct of the reference would be governed by the law of
another country. This would be rare, as it would lead to
extremely complex problems. It is expected that reasonable
businessman do not intend absurd results. In the present case,
the parties had by agreement provided that the substantive F
contract (PSC) will be governed by the laws of India. In
contradistinction, it was provided that the arbitration agreement
will be governed by laws of England. Therefore, there was no
scope for any confusion of the law governing the PSC with the
law governing the arbitration agreement. This principle of G
12. (2012) 2 sec 93.
13. 2013 (7) SCALE 327.
14. 20.14 (1) Arb. LR 257 (SC) H
506 SUPREME COURT REPORTS [2014] 6 S.C.R.
A severability is also accepted specifically under Article 33.10 of
the PSC, which is as under:-
"The right to arbitrate disputes and claims under this
.
Contract shall survive the termination of this contract."
B 63. We are, therefore, unable to uphold the conclusions
recorded by the High Court that the applicability of the English
Law would be limited in its application only to the cpnduct of
the reference. For the same reasons, we are unable to accept
the submissions made by Mr. Ganguly on this issue.
c
64. In 1982, the Government provided a model Production
Sharing Contract to potential bidders, which provided a
governing law clause, which read as follows:-
"32.1 This contract shall be governed and interpreted in
D
accordance with laws of India."
This was specifically amended and incorporated in the
present PSCs signed on 22nd December, 1994 and
provided that the governing law clause (32.1) would be
E "subject to the provision of Article 33.12".
65. Considering the aforesaid two provisions, it leaves no
manner of doubt that Article 32.2 would have no impact on the
designated juridical seat as well as governing law of the
F arbitration agreement. This would become evident from a
perusal of the Final Partial Consent Award dated 14th
September, 2011, signed by all the three members of the
arbitral tribunal recording that the juridical seat of the arbitration
initiated under the Claimant's Notice dated 16th December,
2010 shall be London, England. Therefore, we are unable to
G accept the·conclusion reached by the Delhi High Court and the
submission made by Mr. Ganguly that Arbitration Act, 1996
(Part I) would be applicable to the arbitration agreement.
66. Mr. Ganguly has next sought to persuade us that the
H seat of arbitration shall be in India as the PSC is governed by
RELIANCE INDUSTRIES LIMITED v. U.0.1. 507
[SURINDER SINGH NIJJAR, J.]
the law of India. According to Mr. Ganguly, laws of India would A
include the Arbitration Act, 1996. Therefore, irrespective of the
provisions contained in Article 33.12, Arbitration Act, 1996
would be applicable to arbitration proceedings. The English law
would be applicable only in relation to the conduct of the
arbitration upto the passing of the Partial Final Award. We are B
unable to accept the aforesaid $Ubmissions of Mr. Ganguly. As
noticed earlier, Article 32.1 itself provides that it shall be subject
to the provision of Article 33.12. Article 33.12 provides that the
arbitration agreement contained in this Article shall be governed
by the laws of England. Th~ term 'laws of England' cannot be c
given a restricted meaning confined to only curial law. It is
permissible under law for the parties to provide for different
laws of the contract and the arbitration agreement and the curial
law. In Naviera Amazonica SA (supra), the Court of Appeal in
England considered an agreement which contained a clause D
providing for the jurisdiction of the courts in Lima, Peru in the
event of judicial dispute and at the same time contained a
clause providing that the arbitration would be governed by the
English Law and the procedural law of arbitration shall be the
English Law. The Court of Appeal observed as follows :-
E
"All contracts which provide for arbitration and contain a
foreign element may involve three potentially relevant
systems of law: (1) the law governing the substantive
contract; (2) the law governing the agreement to arbitrate
and the performance of that agreement; (3) the law F
governing the conduct of the arbitration. In the majority of
cases all three will be the same. But (1) will often be
different from (2) and (3). And occasionally, but rarely (2)
may also differ from (3)."
G
67. From the above, it is evident that it was open to the
parties to agree that the law governing the substantive col)tract ~
(PSC) would be different from the law governing the arbitr"1tion
agreement. This is precisely the situation in the present-~!:ise. J
Article 32.1 specifically provides that the performance o~ the
H
508 SUPREME COURT REPORTS [2014) 6 S.C.R.
A contractual obligations under the PSC would be governed and
interpreted under the laws of India. So far as the alternative
dispute redressal agreement i.e. the arbitration agreement is
concerned, it would be governed by laws of England. There is·
no basis on which the respondents can be heard to say that
s the applicability of laws of England related only to the conduct .
of arbitration reference. The law governing the conduct of the
arbitration is interchangeably referred to as the curial law or
procedural law or the lex fori. The delineation of the three
operative laws as given in Naviera Amazonica (supra) has
c been specifically followed by this Court in the case of
Sumitomo (supra). The court also, upon a survey, of a number
of decisions rendered by the English Courts and after referring
to the views expressed by learned commentators on
International Commercial Arbitration concluded that:-
D "16. The law which would apply to the filing of the award,
to its enforcement and to its setting aside would be the law
governing the agreement to arbitrate and the performance
of that agreement."
E 68. In coming to the aforesaid conclusion, this Court relied
on a passage from Law and Practice of Commercial
Arbitration in England, 2nd Edn. by Mustill and Boyd which is
as under:
"An agreed reference to arbitration involves two groups of
F obligations. The first concerns the mutual obligations of the
parties to submit future disputes, or an existing dispute to
arbitration, and to abide by the award of a tribunal
constituted in accordance with the agreement. It is now
firmly established that the arbitration agreement which
G creates these obligations is a separate contract, distinct
from the substantive agreement in which it is usually
embedded, capable of surviving the termination of the
substantive agreement and susceptible of premature
termination by express or implied consent, or by
H repudiation or frustration, in much the same manner as in
RELIANCE INDUSTRIES LIMITED v. U.0.1. 509
[SURINDER SINGH NIJJAR, J.]
more ordinary forms of contract. Since this agreement has A
a distinct life of its own, it may in principle be governed by
a proper law of its own, which need not be the same as
the law governing the substantive contract.
The second group of obligations, consisting of what is
generally referred to as the 'curial law' of the arbitration,
8
concerns the manner in which the parties and the
arbitrator are required to conduct the reference of a
particular dispute. According to the English theory of
arbitration, these rules are to be ascertained by reference
to the express or implied terms of the agreement to C
arbitrate. This being so, it will be found in the great majority
of cases that the curial law, i.e., the law governing the
conduct of the reference, is the same as the law governing
the obligation to arbitrate. It is, however, open to the parties
to submit, expressly or by implication, the conduct of the D
reference to a different law from the one governing the
underlying arbitration agreement. In such a case, the courl·
looks first at the arbitration agreement to see whether the
dispute is one which should be arbitrated, and which has
validly been made the subject of the, reference, it then E
looks to the curial law to see how that reference should
be conducted and then returns to the first law in order to
give effect to the resulting award.
* * *
F
It may therefore be seen that problems arising out of an
arbitration may, at least in theory, call for the application
of any one or more of the following laws-
1. The proper law of the contract, i.e., the law G
governing the contract which creates the
substantive rights of the patties, in respect of which
the dispute has arisen.
2. The proper law of the arbitration agreement, i.e.,
H
510 SUPREME COURT REPORTS [2014] 6 S.C.R.
A the law governing the obligation of the parties to
submit the disputes to arbitration, and to honour
an award.
3. The curial law, i.e., the law governing the conduct
of the individual reference.
B
* * *
1. The proper law ot the arbitration agreement governs
the validity of the arbitration agreement, the question
c whether a dispute lies within the scope of the arbitration
agreement; the validity of the notice of arbitration; the
constitution of the tribunal; the question whether an award
lies within the jurisdiction of the arbitrator; the formal
validity of the award; the question whether the parties
have been discharged from any obligation to arbitrate
D
future disputes.
2. The curial law governs the manner in which the
reference is to be conducted; the procedural powers and
duties of the arbitrator; questions of evidence; the
determination of tffe proper law of the contract.
3. The proper law of the reference governs the question
whet~er the parties have been discharged from their
obligation to continue with the reference of the individual
F dispute.
* * *
In the absence of express agreement, there is a strong
prima facie presumption that the parties intend the curial
G law to be the law of th~ 'seat' of the arbitration, i.e., the
place at which the arbitration is to be conducted, on the
ground that that is the country most closely connected with
the proceedings. So in order to determine the curial law
in the absence of an express choice by th"e parties it is
H
RELIANCE INDUSTRIES LIMITED v. U.0.1. 511
[SURINDER SINGH NIJJAR, J.]
first necessary to determine the seat of the arbitration, by A
construing the agreement to arbitrate."
69, The same legal position is reiterated by this Court in
Dozco (supra). In paragraph 12 of the judgment, it is observed
·as follows : B
"12. In the backdrop of these conflicting claims, the
question boils down to as to what is the true interpretation
of Article 23. This Article 23 will have to be read in the
backdrop of Article 22 and more particularly, Article 22.1.
It is clear from the language of Article 22.1 that the whole C
agreement would be governed by and construed in
accordance with the laws of The Republic of Korea. It is
for this reason that the respondent heavily relied on the law
laid down in Sumitomo Heavy Industries Ltd. v. ONGC
Ltd.!i This judgment is a complete authority on the D
proposition that the arbitrability of the dispute is to be
determined in terms of the law governing arbitration
agreement and the arbitration proceedings hav~ to be
conducted in accordance with the curial law. This Court,
in .that judgment, relying on Mustill and Boyd: The Law E
and Practice of Commercial Arbitration in England, 2nd
Edn., observed in para 15 that where the law governing
the conduct of the reference is different from the law
governing the underlying arbitration agreement, the court
looks to the arbitration agreement t~ see. if the dispute is F
arbitrable, then to the curial law to see how the reference
should be conducted, "and then returns to the first law in
order to give effect to the resulting award". In para 16, this
Court, in no uncertain terms, declared that the law which
would apply to the filing of the award, to its enforcement G
and to its setting aside would be the law governing the
agreement to arbitrate and the performance of that
agreement.
70. We are in respectful agreement with the aforesaid
judgment. H
512 SUPREME COURT REPORTS (2014] 6 S.C.R.
A 71. In view of the aforesaid binding precedent, we are
unable to accept the submission of Mr. Ganguly that the
Art;:tration Act, 1996 has not been excluded by the parties by
agreement. For the same reasons, we are unable to approve
the conclusions reached by the Delhi High Court that reference
B to laws of England is only confined to the procedural aspects
of the conduct of the arbitration reference.
72. We are also unable to agree. with the submission of
Mr. Ganguly that since the issues involved herein relate to the
public policy of India, Part I of the Alibitration Act, 1996 would
C be applicable. Applicability of Part I of Arbitration Act, 1996 is
not dependent on the nature of challenge to the award. Whether
or not the award is challenged on the ground of public policy, it
would have to satisfy the pre-condition that the Arbitration Act,
1996 is applicable to the arbitration agreement. In our opinion,
D the High Court has committed a jurisdictional error in holding
that the provisions contained in Article 33.12 is relevant only
for the determination of the curial law app'licable too the
proceedings. We have already noticed earlier that the parties
by agreement have provided that the juridical seat of the
E arbitration shall be in London. Necessary amendment has also
been made in the PSCs, as recorded by the Final Partial
Consent Award dated 14th September, 2011. It is noteworthy
that the Arbitration Act, 1996 does not define or mention
juridical seat. The term juridical seat' on the other hand is
F specifically defined in Section 3 of the English Arbitration Act.
Therefore, this would clearly indicate that the parties understood
that the arbitration law of England would be applicable to the
arbitration agreement.
G 73. In view of the aforesaid, we are unable to uphold the
conclusion arrived at by the Delhi High Court that the
applicability of Arbitration Act, 1996 to the arbitration agreement
in the present case has not been excluded.
74. In view of the above, we hold that:
H
RELIANCE INDUSTRIES LIMITED v. U.0.1. 513
[SURINDER SINGH NIJJAR, J.]
(i) The petition filed by respondents under Sectjon 34 A
of #le Arbitration Act, 1996 in the Delhi High Court
is ~ot maintainable.
(ii) W~ further over-rule and set aside the conclusion
of the High Court that, even though the arbitration
8
agreement would be governed by the laws of
England and that juridical seat of arbitration would
be in London, Part I of the Arbitration Act would still
be applicable as the laws governing the substantive
contract are Indian Laws.
c
(iii) In the event, a final award is made against the
respondent, the enforceability of the same in India,
can be resisted on the ground of Public Policy.
(iv) · The conclusion of the High Court that in the event, D
!he award is sought to be enforced outside India, it
iNould leave the Indian party remediless is without
any basis as the parties have consensually
provided that the arbitration agreement will be
governed by the English law. Therefore, the remedy
E
against the award will have to be sought in
England, where the juridical seat is located.
However, we accept the submission of the appellant
that since substantive law governing the contract is
Indian Law, even the Courts in England, in case the
arbitrability is challenged, will have to decide the F
issue by applying Indian Law viz. the principle of
public policy etc. as it prevails in Indian Law.
· 75. l'l view of the above, the appeal is allowed and the
impugned iudgment of the High Court is set aside. G
Nidhi Jain Appeal allowed.
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