RELIANCE INDUSTRIES .LIMITED & ANR. v. UNION OF INDIA

RELIANCE INDUSTRIES LIMITED v. U.0.1. 507 [SURINDER SINGH NIJJAR, J.] the law of India. According to Mr. Ganguly, laws of India would 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 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

67Copy pinpoint67. 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

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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."

68Copy pinpoint68. 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 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 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 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 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 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 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

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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 dispute.

In the absence of express agreement, there is a strong prima facie presumption that the parties intend the curial 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 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 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 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 and to its setting aside would be the law governing the agreement to arbitrate and the performance of that agreement.

70Copy pinpoint70. We are in respectful agreement with the aforesaid judgment. H

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71Copy pinpoint71. 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 to laws of England is only confined to the procedural aspects of the conduct of the arbitration reference.

72Copy pinpoint72. 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 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 app'licable 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 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.

73Copy pinpoint73. 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.

74Copy pinpoint74. 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 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 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.