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Wednesday, September 30, 2015

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. 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 determination that the juridical seat is outside India or where law other than Indian law governs the arbitration agreement, Part-I of the 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.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 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 ground urged before us, must meet with the same fate. His argument citing the case of Mathura Prasad Bajoo Jaiswal v. 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 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.

                                                                  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.

The present case arises as a sequel to this Court’s  decision  delivered  on
28th May, 2014 in Reliance  Industries  Limited  and  another  v.  Union  of
India, (2014) 7 SCC 603.



A brief résumé of the facts that led to the judgment of this Court  on  28th
May, 2014 are as follows:-

Two Production Sharing Contracts (hereinafter referred  to  as   “PSC”)  for
the Tapti and Panna Mukta Fields were executed between  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



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  proceedings  pursuant  to
this Article, unless the Parties otherwise agree, shall be  London,  England
and shall be conducted in the 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 dispute.

34.2  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.”





3.    It needs to be mentioned that the  PSCs  were  amended  to  substitute
Enron Oil & Gas India Limited  with  BG  Exploration  and  Production  India
Limited on 10.1.2005.  Since certain disputes and differences arose  between
the Union of India and Reliance Industries Limited  sometime  in  2010,  the
Union of India invoked  the  arbitration  clause  and  appointed  Mr.  Peter
Leaver, QC as Arbitrator.  Reliance  Industries  Limited  appointed  Justice
B.P. Jeevan Reddy as Arbitrator and Mr. 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 of arbitration to London, England  and  a  final  partial
consent award was made and duly signed by the parties to  this  effect.   On
12.9.2012, the Arbitral Tribunal passed a final partial award  which  became
the subject matter of a Section 34 petition filed in the  Delhi  High  Court
by the Union of  India,  dated  13.12.2012.   The  Delhi  High  Court  by  a
judgment and order dated 22.3.2013 decided  that  the  said  petition  filed
under Section 34 was maintainable.  This Court in a detailed judgment  dated
28.5.2014 reversed the Delhi High Court.   Since  this  judgment  in  effect
determines the controversy raised in the present SLP,  it  is  important  to
set it out in some detail.  After stating the facts and the  contentions  of
both parties, this Court held:

“Before we analyse the submissions made by the learned  Senior  Counsel  for
both the parties, it would be 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 [(2002) 4 SCC 105] . The parties are agreed  and  it  is  also
evident  from  the  final  partial  consent  award  dated   14-9-2011   that
the juridical seat (or legal place) of arbitration for the purposes  of  the
arbitration initiated under the claimants' notice of arbitration  dated  16-
12-2010 shall be London, England. The parties are also agreed that  hearings
of the notice of arbitration may take 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.
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 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. Beyond this parties  are  not  agreed
on any issue.
We are  also  of  the  opinion  that  since  the  ratio  of  law  laid  down
in Balco [Balco v. Kaiser Aluminium Technical Services Inc.,  (2012)  9  SCC
552 : (2012) 4 SCC (Civ) 810] has been made prospective in operation by  the
Constitution Bench itself, we are bound by the decision  rendered  in Bhatia
International [(2002) 4 SCC 105] . Therefore, at the  outset,  it  would  be
appropriate to reproduce the relevant ratio of Bhatia  International [(2002)
4 SCC 105] in para 32 which is as under: (SCC p. 123)

“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 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 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.”

In view of the aforesaid, it would be  necessary  to  analyse  the  relevant
articles of the PSC, to discover the real intention of  the  parties  as  to
whether the provisions of the 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 the article which is “Applicable  law  and  language  of  the  contract”.
Article 32.1 provides for 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 and powers conferred  upon  it
by the contract in a manner which would contravene the laws of India.
Article 33 makes a very detailed provision with regard to the resolution  of
disputes through arbitration. The two articles do not  overlap—one  (Article
32) deals with the proper law of the contract, the other (Article 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  the  disputes  among
themselves (Article 33.1). If these efforts fail, the parties  by  agreement
shall refer the dispute to a sole expert (Article 33.2). The provision  with
regard to constitution of the Arbitral Tribunal provides that  the  Arbitral
Tribunal shall consist of three arbitrators  (Article  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  Arbitration  at  The  Hague  for  appointment  of   an
arbitrator (Article 33.5). Further, in case  the  two  arbitrators  fail  to
make the  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 The Hague may, at the  request  of  either
party 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, the Union of India intended to  ensure  that  the
Arbitration Act, 1996 shall apply to the  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  The  Hague
can be 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 the Arbitration Act, 1996 was excluded by  the  parties  by
consensus. Further, the arbitration  proceedings  are  to  be  conducted  in
accordance with the Uncitral Rules, 1976 (Article 33.9). It is  specifically
provided that  the  right  to  arbitrate  disputes  and  claims  under  this
contract shall survive the termination of this contract (Article 33.10).
The article which provides the basis of the controversy  herein  is  Article
33.12 which provides that venue of the 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  arbitration)
for the purposes of arbitration initiated under  the  claimants'  notice  of
arbitration dated 16-12-2010 shall be London, England.
We are of the opinion, upon a meaningful reading of the  aforesaid  articles
of the PSC, that the proper law of the 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 the  Arbitration
Act, 1996 has not been excluded?” [at paras 36 - 42]





4.    The Court went on to state in paragraph 45 that it is too late in  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:-

“In our opinion, these observations in Sulamerica case [(2013) 1 WLR  102  :
2012 EWCA Civ 638 : 2012 WL 14764] are fully applicable  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  excluded;
being wholly inconsistent with  the  arbitration  agreement  which  provides
“that arbitration agreement shall be governed  by  English  law”.  Thus  the
remedy  for  the  respondent  to  challenge  any  award  rendered   in   the
arbitration proceedings would lie under the  relevant  provisions  contained
in the Arbitration 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.” [at para 57]



It ultimately concluded:



“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 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 are relevant only for the  determination  of  the
curial law applicable to 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 recorded by the final partial consent  award  dated  14-9-2011.
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.



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:



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.



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.



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 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 the 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 Indian law viz. the  principle  of
public policy, etc. as it prevails in Indian law.



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]”



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 Section 14 would not be  maintainable.




6.    It needs further to be pointed out that a review petition against  the
said judgment dated 28.5.2014 was dismissed  on  31.7.2014  and  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  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  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 issue  raised  being  jurisdictional
in nature, the doctrine of res judicata would have no application.  He  went
on to read various provisions of 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 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.



9.    We have heard learned counsel for the  parties.   In  order  to  fully
appreciate the contention raised by the learned Solicitor General of  India,
it is necessary to delve into the history  of  the  law  of  arbitration  in
India. Prior to the 1996 Act, three Acts governed the law 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 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:-



“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:



“27.7  In  the  event  of  foreign  contractor,  the  arbitration  shall  be
conducted by three arbitrators, one each to be nominated by  the  owner  and
the  contractor  and  the  third  to  be  named  by  the  President  of  the
International Chamber of  Commerce,  Paris.  Save  as  above  all  rules  of
conciliation and arbitration of the International Chamber of Commerce  shall
apply to such arbitrations. The  arbitration  shall  be  conducted  at  such
places as the arbitrators may determine.”



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.”



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 settlement of disputes. Article 4.1 provides:



“4.1. Settlement of Disputes.—It is specifically agreed by and  between  the
parties that all the differences or disputes arising out of the contract  or
touching the subject-matter of the contract, shall be decided by process  of
settlement and arbitration as specified in Clauses 26.0 and  27.0  excluding
27.6.1 and 27.6.2., of the General Conditions of the Contract.” [at para 4]





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 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 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 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,  1996,  which
repealed all the three earlier laws and put the law of arbitration into  one
statute, albeit in four different parts.



14.   However, this Court in Bhatia International v.  Bulk  Trading  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 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 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 1996 Act in India; and could be refused to be  recognised  and  enforced
under Section 48  contained in Part II of the 1996 Act.



15.   Given this state of the law, a 5-Judge Bench of this Court  in  Bharat
Aluminium Company Ltd. v. Kaiser Aluminium Technical Services, Inc.,  (2012)
9 SCC, overruled both Bhatia International and Venture  Global  Engineering.
But in so overruling these judgments, this Court went on to hold:

“The judgment in Bhatia International [(2002) 4 SCC  105]  was  rendered  by
this Court on  13-3-2002.  Since  then,  the  aforesaid  judgment  has  been
followed by all the High Courts  as  well  as  by  this  Court  on  numerous
occasions. In fact, the judgment  in Venture  Global  Engineering [(2008)  4
SCC 190] has been rendered on  10-1-2008  in  terms  of  the  ratio  of  the
decision in Bhatia International [(2002) 4 SCC 105] . Thus, in order  to  do
complete justice, we hereby order, that the law now declared by  this  Court
shall apply  prospectively,  to  all  the  arbitration  agreements  executed
hereafter.” [at para 197]




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  date  of
pronouncement of Bharat Aluminium Company’s judgment, will  be  governed  by
Bhatia International.

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., (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 Harmony Innovation Shipping Ltd. v.  Gupta
Coal India Ltd. & Anr., (decided on 10th March, 2015  in  Civil  Appeal  No.
610 of 2015)].

18.   In fact, in Harmony’s case, this Court,  after  setting  out  all  the
aforesaid judgments,  set  out  the  arbitration  clause  in  that  case  in
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]



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 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]

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.
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 determination  that  the  juridical
seat is outside India or  where  law  other  than  Indian  law  governs  the
arbitration  agreement,  Part-I  of  the  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.
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 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 ground urged before us,  must  meet  with  the
same fate. His argument citing the case of Mathura Prasad Bajoo  Jaiswal  v.
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 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.
                                       ……………………J.

                                       (A.K. Sikri )





                                       ……………………J.

                                       (R.F. Nariman)

New Delhi;

September 22, 2015.

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