UNION OF INDIA vs. RELIANCE INDUSTRIES LIMITED .

REPORTABLE IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION SPECIAL LEAVE PETITION (CIVIL) NO.11396 OF 2015 UNION OF INDIA …PETITIONER VERSUS RELIANCE INDUSTRIES LIMITED & ORS. …RESPONDENTS J U D G M E N T R.F. Nariman, J. 1. The present case arises as a sequel to this Court’s decision th delivered on 28 May, 2014 in Reliance Industries Limited and another v. Union of India , (2014) 7 SCC 603. JUDGMENT 2. A brief résumé of the facts that led to the judgment of this th Court on 28 May, 2014 are as follows:- Two Production Sharing Contracts (hereinafter referred to as “PSC”) for the Tapti and Panna Mukta Fields were executed between 1 Page 1 Reliance Industries Limited, the Union of India, Enron Oil and Gas India Limited and the ONGC. The relevant clauses of the PSCs insofar as they are applicable to the present controversy are as follows:- “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. 32.2 Nothing in this Contract shall entitle the Government 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. ARTICLE 33: SOLE EXPERT, CONCILIATION AND ARBITRATION JUDGMENT 33.9 Arbitration proceedings shall be conducted in 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. … 33.12 The venue of conciliation or arbitration 2 Page 2

amendment agreements dated 24.2.2004 and 10.1.2005. Since JUDGMENT certain disputes and differences arose between the Union of India, Reliance Industries Limited and BG Exploration and Production India Limited sometime in 2010, Reliance Industries Limited and BG Exploration and Production India Limited invoked the arbitration clause and appointed Mr. Peter Leaver, QC as Arbitrator. The Union of India appointed Justice B.P. Jeevan Reddy as Arbitrator and Mr. 3 Page 3 Christopher Lau SC was appointed as Chairman of the Tribunal. On 14.9.2011, the Union of India, Reliance Industries Limited and BG Exploration and Production India Limited, agreed to change the seat

stating the facts and the contentions of both parties, this Court held:

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4. The Court went on to state in paragraph 45 that it is too late in 7 Page 7 the day to contend that the seat of arbitration is not analogous to an exclusive jurisdiction clause and then went on to hold as follows:-

It ultimately concluded: JUDGMENT “We are also unable to agree with the submission of Mr Ganguli 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 the 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 precondition that the Arbitration Act, 1996 is 8 Page 8

In view of the aforesaid, we are unable to uphold the conclusion arrived at by the Delhi High Court that the applicability of the Arbitration Act, 1996 to the arbitration agreement in the present case has not been excluded. In view of the above, we hold that: JUDGMENT The petition filed by respondents under Section 34 of the Arbitration Act, 1996 in the Delhi High Court is not maintainable. We further overrule and set aside the conclusion of the High Court that, even though the arbitration agreement would be governed by the laws of England and that the 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. 9 Page 9 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.

In view of the above, the appeal is allowed and the impugned judgment [(2013) 199 DLT 469] of the High Court is set aside.” [at paras 74 - 77]” JUDGMENT 5. Continuing the narration of facts, the present SLP arises out of a judgment dated 3.7.2014 whereby the Delhi High Court has dismissed an application filed under Section 14 of the Arbitration and Conciliation Act, 1996, dated 12.6.2013, on the ground that this Court’s judgment dated 28.5.2014 having held that Part-I of the Arbitration Act, 1996 is not applicable, such petition filed under 10 Page 10 Section 14 would not be maintainable. 6. It needs further to be pointed out that a review petition against

a curative petition filed thereafter was also dismissed. 7. Shri Ranjit Kumar, learned Solicitor General of India argued before us that the partial consent award dated 14.9.2011 was without jurisdiction in that it was contrary to clause 34.2 of the PSC which stated that the PSC can only be amended if all the parties thereto by an agreement in writing amend it. Since ONGC which was a party to the PSC had not done so, the said final partial consent award was without jurisdiction. This being so, the seat of JUDGMENT the arbitration cannot be said to be London and clause 33.12 of the PSC which made the “venue” London would continue to govern. Since the arbitration clause contained in the PSC is prior to 12.9.2012, the judgment in Bhatia International v. Bulk Trading S.A. & Anr., (2002) 4 SCC 105 would govern and consequently Part I of the Arbitration Act, 1996 would be applicable. He also stated 11 Page 11 that the judgment delivered on 28.5.2014 would not stand in his way notwithstanding that a review petition and a curative petition had already been dismissed. This was because, according to him, the

the UK Arbitration Act, 1996 to further buttress his submission. 8. Dr. A.M. Singhvi, learned senior counsel, on the other hand vehemently opposed the arguments of Shri Ranjit Kumar, learned Solicitor General of India. According to him, the judgment dated 28.5.2014 being final inter partes binds the parties both by way of res judicata and as a precedent. According to him, the judgment unequivocally holds that on the very facts of this case Part-I of the JUDGMENT Arbitration Act, 1996 would have no application. He further went on to demonstrate that the Union of India had already availed of the very remedy sought under Section 14 and had invited a decision of the Permanent Court of Arbitration dated 10.6.2013 by which its objections to the appointment of Mr. Peter Leaver as Arbitrator were already rejected. 12 Page 12 9. We have heard learned counsel for the parties. In order to fully appreciate the contention raised by the learned Solicitor General of

Arbitration in India – the Arbitration (Protocol and Convention) Act, 1937, which gave effect to the Geneva Convention, the Arbitration Act, 1940, which dealt with domestic awards, and the Foreign Awards (Recognition And Enforcement) Act, 1961 which gave effect to the New York Convention of 1958 and which dealt with challenges to awards made which were foreign awards. 10. In National Thermal Power Corporation v. Singer JUDGMENT Company , (1992) 3 SCC 551, this Court while construing Section 9(b) of the Foreign Awards Act held that where an arbitration agreement was governed by the law of India, the Arbitration Act, 1940 alone would apply and not the Foreign Awards Act. The arbitration clause in Singer’s case read as follows:- 13 Page 13 “Sub-clause 6 of Clause 27 of the General Terms deals with arbitration in relation to an Indian contractor and sub-clause 7 of the said clause deals with arbitration in respect of a foreign contractor. The latter provision says:

In respect of an Indian contractor, sub-clause 6.2 of Clause 27 says that the arbitration shall be conducted at New Delhi in accordance with the provisions of the Arbitration Act, 1940. It reads: “27.6.2 The arbitration shall be conducted in accordance with the provisions of the Indian Arbitration Act, 1940 or any statutory modification thereof. The venue of arbitration shall be New Delhi, India.” JUDGMENT The General Terms further provide: “[T]he contract shall in all respects be construed and governed according to Indian laws.” (32.3). The formal agreements which the parties executed on August 17, 1982 contain a specific provision for 14 Page 14 settlement of disputes. Article 4.1 provides:

11. Notwithstanding that the award in that case was a foreign award, this Court held that since the substantive law of the contract was Indian law and since the arbitration clause was part of the contract, the arbitration clause would be governed by Indian law and not by the Rules of the International Chamber of Commerce. This being the case, it was held that the mere fact that the venue chosen JUDGMENT by the ICC Court for the conduct of the arbitration proceeding was London does not exclude the operation of the Act which dealt with domestic awards i.e. the Act of 1940. In a significant sentence, the Court went on to hold:- “…Nevertheless, the jurisdiction exercisable by the English courts and the applicability of the laws of that country in procedural matters must be viewed as 15 Page 15 concurrent and consistent with the jurisdiction of the competent Indian courts and the operation of Indian laws in all matters concerning arbitration insofar as the main contract as well as that which is contained in the arbitration clause are governed by the laws of India.” [at para 53] 12. It can be seen that this Court in Singer’s case did not give effect to the difference between the substantive law of the contract and the law that governed the arbitration. Therefore, since a construction of Section 9(b) of the Foreign Awards Act led to the aforesaid situation and led to the doctrine of concurrent jurisdiction, the 1996 Act, while enacting Section 9(a) of the repealed Foreign Awards Act, 1961, in Section 51 thereof, was careful enough to omit Section 9(b) of the 1961 Act which, as stated hereinabove, excluded JUDGMENT the Foreign Awards Act from applying to any award made on arbitration agreements governed by the law of India. 13. This being the case, the theory of concurrent jurisdiction was expressly given a go-by with the dropping of Section 9(b) of the Foreign Awards Act, while enacting Part-II of the Arbitration Act, 16 Page 16 1996, which repealed all the three earlier laws and put the law of arbitration into one statute, albeit in four different parts.

S.A. & Anr., (2002) 4 SCC 105, resurrected this doctrine of concurrent jurisdiction by holding, in paragraph 32, that even where arbitrations are held outside India, unless the parties agree to exclude the application of Part-I of the Arbitration Act, 1996, either expressly or by necessary implication, the courts in India will exercise concurrent jurisdiction with the court in the country in which the foreign award was made. Bhatia International was in the context of a Section 9 application made under Part-I of the 1996 Act by the respondent in that case for interim orders to safeguard the JUDGMENT assets of the Indian company in case a foreign award was to be executed in India against it. The reductio ad absurdum of this doctrine of concurrent jurisdiction came to be felt in a most poignant form in the judgment of Venture Global Engineering v. Satyam Computer Services Ltd. & Anr. , (2008) 4 SCC 190, by which this Court held that a foreign award would also be considered as a domestic award and the challenge procedure provided in Section 34 17 Page 17 of the Part-I of the Act of 1996 would therefore apply. This led to a situation where the foreign award could be challenged in the country in which it is made; it could also be challenged under Part-I of the

18 Page 18 16. It will thus be seen that facts like the present case attract the Bhatia International principle of concurrent jurisdiction inasmuch as all arbitration agreements entered into before 12.9.2012, that is the

17. It is important to note that in paragraph 32 of Bhatia International itself this Court has held that Part-I of the Arbitration Act, 1996 will not apply if it has been excluded either expressly or by necessary implication. Several judgments of this Court have held that Part-I is excluded by necessary implication if it is found that on the facts of a case either the juridical seat of the arbitration is outside India or the law governing the arbitration agreement is a law other than Indian law. This is now well settled by a series of decisions of this Court [see: Videocon Industries Ltd. v. Union of India & Anr. , JUDGMENT (2011) 6 SCC 161, Dozco India Private Limited v. Doosan Infracore Company Limited , (2011) 6 SCC 179, Yograj Infrastructure Limited v. Ssang Yong Engineering and Construction Company Limited, (2011) 9 SCC 735), the very judgment in this case reported in Reliance Industries Limited v. Union of India , (2014) 7 SCC 603, and a recent judgment in 19 Page 19 Harmony Innovation Shipping Ltd. v. Gupta Coal India Ltd. & th Anr., (decided on 10 March, 2015 in Civil Appeal No. 610 of 2015)]. 18. In fact, in Harmony’s case, this Court, after setting out all the

paragraph 32 as follows: “In view of the aforesaid propositions laid down by this Court, we are required to scan the tenor of the clauses in the agreement specifically, the arbitration clause in appropriate perspective. The said clause read as follows: “5. If any dispute or difference should arise under this charter, general average/arbitration in London to apply, one to be appointed by each of the parties hereto, the third by the two so chosen, and their decision or that of any two of them, shall be final and binding, and this agreement may, for enforcing the same, be made a rule of Court. Said three parties to be commercial men who are the members of the London Arbitrators Association. This contract is to be governed and construed according to English Law. For disputes where total amount claim by either party does not exceed USD 50,000 the arbitration should be conducted in accordance with small claims procedure of the Page 33 33 London Maritime Arbitration Association.” [at para 32] JUDGMENT It then held: “Coming to the stipulations in the present arbitration clause, it is clear as day that if any dispute or difference would arise under the charter, arbitration in London to apply; that the arbitrators are to be commercial men who 20 Page 20 are members of London Arbitration Association; the contract is to be construed and governed by English Law; and that the arbitration should be conducted, if the claim is for a lesser sum, in accordance with small claims procedure of the London Maritime Arbitration Association. There is no other provision in the agreement that any other law would govern the arbitration clause.” [at para 41] “Thus, interpreting the clause in question on the bedrock of the aforesaid principles it is vivid that the intended effect is to have the seat of arbitration at London. The commercial background, the context of the contract and the circumstances of the parties and in the background in which the contract was entered into, irresistibly lead in that direction. We are not impressed by the submission that by such interpretation it will put the respondent in an advantageous position. Therefore, we think it would be appropriate to interpret the clause that it is a proper clause or substantial clause and not a curial or a procedural one by which the arbitration proceedings are to be conducted and hence, we are disposed to think that the seat of arbitration will be at London. Having said that the implied exclusion principle stated in Bhatia International (supra) would be applicable, regard being had to the clause in the agreement, there is no need to dwell upon the contention raised pertaining to the addendum, for any interpretation placed on the said document would not make any difference to the ultimate conclusion that we have already arrived at.” [at paras 46 and 47] JUDGMENT 19. It is interesting to note that even though the law governing the arbitration agreement was not specified, yet this Court held, having regard to various circumstances, that the seat of arbitration would be London and therefore, by necessary implication, the ratio of Bhatia International would not apply. 21 Page 21 20. The last paragraph of Bharat Aluminium’s judgment has now to be read with two caveats, both emanating from paragraph 32 of Bhatia International itself – that where the Court comes to a

Arbitration Act, 1996 would be excluded by necessary implication. Therefore, even in the cases governed by the Bhatia principle, it is only those cases in which agreements stipulate that the seat of the arbitration is in India or on whose facts a judgment cannot be reached on the seat of the arbitration as being outside India that would continue to be governed by the Bhatia principle. Also, it is only those agreements which stipulate or can be read to stipulate that the law governing the arbitration agreement is Indian law which would continue to be governed by the Bhatia rule. JUDGMENT 21. On the facts in the present case, it is clear that this Court has already determined both that the juridical seat of the arbitration is at London and that the arbitration agreement is governed by English law. This being the case, it is not open to the Union of India to argue that Part-I of the Arbitration Act, 1996 would be applicable. A Section 14 application made under Part-I would consequently not be 22 Page 22 maintainable. It needs to be mentioned that Shri Ranjit Kumar’s valiant attempt to reopen a question settled twice over, that is by dismissal of both a review petition and a curative petition on the very

Dossibai N.B. Jeejeebhoy , (1970) 1 SCC 613, that res judicata would not attach to questions relating to jurisdiction, would not apply in the present case as the effect of clause 34.2 of the PSC raises at best a mixed question of fact and law and not a pure question of jurisdiction unrelated to facts. Therefore, both on grounds of res judicata as well as the law laid down in the judgment dated 28.5.2014, this application under Section 14 deserves to be dismissed. It is also an abuse of the process of the Court as has rightly been argued by Dr. Singhvi. It is only after moving under the JUDGMENT UNCITRAL Arbitration Rules and getting an adverse judgment from the Permanent Court of Arbitration dated 10.06.2013 that the present application was filed under Section 14 of the Arbitration Act two days later i.e. on 12.6.2013. Viewed from any angle therefore, the Delhi High Court judgment is correct and consequently this Special Leave Petition is dismissed. 23 Page 23 ……………………J. (A.K. Sikri ) ……………………J. (R.F. Nariman) New Delhi; September 22, 2015. JUDGMENT 24 Page 24