- (1.) 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.
(2.) A brief r sum 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 ] 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];