Reliance Industries Limited & Anr vs Union Of India

3. Before we discuss the legal issues, it would be pertinent 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 and when 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 Mukta” or “Panna Mukta fields”. The two PSCs shall be referred to “Tapti PSC” and “Panna Mukta PSC,” respectively.

9. It appears that certain disputes and differences have arisen between the parties, under or in connection with the 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 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 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 9 substantive hearing was held between 21st May, 2012 to 29th May, 2012 in Singapore. Thereafter, on the basis of the amendment 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 :

12.Pursuant to Clause 28 of the terms of appointment, the Chairman of the Tribunal is empowered to make interlocutory 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 / Appellants 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 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 11 list of issues (the May 2012 issues) to be heard and be determined by the tribunal at the hearing fixed to commence 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 the parties were also placed on record.

(3) 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 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. (4) on award in favour of the Claimants requiring the Government to 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 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.”

(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 made between 1995 to 2002.”

* * * 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 lan- guage. Insofar as practicable, the parties shall con- tinue to implement the terms of this contract not- withstanding the initiation of arbitral proceedings and any pending claim or dispute. Notwithstanding the provisions of Article 33.1, the arbitration agree- ment contained in this Article 34 shall be governed by the laws of England.

* * * 35.2. Amendment.—This contract shall not be amended, modified, varied or supplemented in any respect except by an instrument in writing signed by all the parties, which shall state the date upon which the amendment or modification shall become effective.”

47.In the 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 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.

Public Policy:

tract shall be treated as an agreement independent of the other terms of the contract; and

(b) a decision by the arbitral tribunal that the con- tract is null and void shall not entail ipso jure the in- validity of the arbitration clause.”

62.This principle of separability permits the parties to agree:

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 conduct of the reference. For the same reasons, we are unable to accept the submissions made by Mr. Ganguly on this issue.

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 61 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 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.

2. The proper law of the arbitration agree- ment, i.e., the law governing the obligation of the parties to submit the disputes to arbitra- tion, and to honour an award.

* * *

3. The proper law of the reference governs the question whether the parties have been discharged from their obligation to continue with the reference of the individual dispute.

70.We are in respectful agreement with the aforesaid judgment.

71.In view of the aforesaid binding precedent, we are unable to accept the submission of Mr. Ganguly that the Arbitration Act, 1996 has not been excluded by the parties by 68 agreement. For the same reasons, we are unable to approve the conclusions reached by the Delhi High Court that reference 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 Arbitration Act, 1996 would 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, 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 applicable too the proceedings. We have already noticed earlier that 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, as 69 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 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.

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:

(ii) We further over-rule and set aside the conclusion 70 of the High Court that, even though the arbitra- tion 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.

(iii) In the event, a final award is made against the respondent, the enforceability of the same in In- dia, can be resisted on the ground of Public Policy.

75.In view of the above, the appeal is allowed and the impugned judgment of the High Court is set aside.

May 28, 2014.

(Arising out of S.L.P. (Civil) No. 20041 of 2013) Reliance Industries Ltd. & Anr. Appellant(s) Versus U.O.I. Respondent(s) DATE :28/05/2014 This matter was called on for pronouncement of judgment today.

For Appellant(s) Mr.Sameer Parekh, Adv.

Mr.Utsav Trivedi, Adv. for M/s P.H. Parekh & Co.

For Respondent(s) Mr. A.K. Ganguli, Sr.Adv.

Mr. Abhijeet Sinha, Adv.

Ms. Swati Sinha, Adv.

Mr. Vishal Gehrana, Adv.for M/s Fox Mandal & Co.

Hon'ble Mr. Justice Surinder Singh Nijjar pronounced the judgment of the Bench comprising His Lordship and Hon'ble Mr. Justice A.K. Sikri.

Leave granted.

The appeal is allowed in terms of the signed judgment.

[Signed reportable judgment is placed on the file ]