Reliance Industries Ltd. v. Union of India, (2014) 7 SCC 603
Arbitration and Conciliation Act, 1996
Pt. I or Pt. II - Three sets of laws that may apply to an arbitration: (i) proper law of the contract; (ii) proper law of the
arbitration agreement/lex arbitri; and (iii) proper law of the conduct of arbitration/lex fori/curial law - Distinguished and
explained - Held, all three sets of laws can be different in a given arbitration,
Arbitration and Conciliation Act, 1996
Pt. I or Pt. II - Doctrine of severability - Laws of different countries as proper law of the arbitration agreement/lex arbitri,
and, as law of substantive contract - Law of substantive contract, held, does not determine law of arbitration
agreement/lex arbitri
- Held, parties are entitled to agree that law of one country would govern substantive contract and
laws of another country would apply to arbitration agreement - Parties can also agree that conduct of reference to
arbitration would be governed by laws of yet a third country - In present case, parties had by agreement provided that
substantive contract (PSC) will be governed by laws of India, arbitration agreement by laws of England and appointment
of arbitrators by Permanent Court of Arbitration at The Hague in case of failure of parties to appoint arbitrator(s), and the
arbitration proceedings will be conducted in accordance with the UNCITRAL Rules, 1976 - Further, agreement
specifically provided that right to arbitrate disputes and claims under said contract shall survive termination of contract -
Applying doctrine of severability, held, there is no scope for confusion as to law governing the substantive contract (PSC)
and law governing arbitration agreement,
Arbitration and Conciliation Act, 1996
Pt. I or Pt. II - Juridical seat of arbitration and proper law of arbitration agreement - Inter-relationship between - Held,
once parties consciously agreed that juridical seat of arbitration would be London and that arbitration agreement will be
governed by laws of England, proper law of arbitration agreement would be laws of England and provisions of Pt. I of
1996 Act are not applicable to arbitration agreement,
Arbitration and Conciliation Act, 1996
Pt. I or Pt. II - Foreign-seated arbitration - Proper law of the arbitration agreement/lex arbitri - Determination of -
Application of Pt. I of the 1996 Act to foreign-seated award - Pre-Balco agreement - Arbitration clause expressly
stipulating juridical seat of arbitration as London and governing law of arbitration agreement as laws of England, while
making laws of India as governing law of contract - Effect - Proper law of arbitration agreement, whether laws of India or
laws of England - Applying Bhatia International, (2002) 4 SCC 105 [which was only prospectively overruled in Balco,
(2012) 9 SCC 552, and remains good law for all arbitration agreements entered into on or prior to 6-9-2012], held, once
parties consciously agreed that juridical seat of arbitration would be London and that arbitration agreement will be
governed by laws of England, provisions of Pt. I of 1996 Act are not applicable to arbitration agreement and laws of
England govern arbitration agreement - However, since substantive law governing contract is Indian law, enforcement of
final award can be challenged before courts of India (as a foreign award), or, courts of England by applying Indian law -
Arts. 32.1 and 32.2 of Production Sharing Contract (PSC) providing that contract is governed and is to be interpreted as
per laws of India, but Art. 33 provides for resolution of disputes through arbitration to be held at London in terms of
UNCITRAL, and laws of England to govern arbitration agreement - Art. 33 further providing that in case of failure to
appoint arbitrator(s) or if both arbitrators failed to appoint third arbitrator, Permanent Court of Arbitration at The Hague
will appoint an arbitrator or third arbitrator - Final partial award dt. 12-9-2012 made by Arbitral Tribunal at London,
framing claims for relief, inter alia, in respect of royalties, cess, service tax and CAG audit challenged under S. 34 of
1996 Act by respondent before Delhi High Court as not arbitrable being contrary to public policy of India - Maintainability -
Held, seat of arbitration shall determine proper law of arbitration agreement, when parties excluded applicability of 1996
Act by intent - Having made express provision in Art. 33.12 of PSC that arbitration agreement shall be governed by laws
of England, making Art. 32.1 subject to Art. 33.12, and having agreed before Arbitral Tribunal that seat of arbitration is
London, held, expression laws of India in Arts. 32.1 and 32.2 referred only to contractual obligations under substantive
contract (i.e. PSC) but not to arbitration agreement - Both articles are separate and distinct as Art. 32 deals with law
governing substantive contract and Art. 33 deals with dispute resolution mechanism - Also, having empowered
Permanent Court of Arbitration at The Hague to appoint arbitrator/Arbitral Tribunal in case of failure of parties to appoint
arbitrators, parties excluded application of 1996 Act by intent - Applicability of 1996 Act, thus, excluded by conscious
decision and agreement of parties - Hence, contention that English law is applicable up to passing of partial final award
and proper law of arbitration agreement is Indian law since Indian law includes 1996 Act, is rejected - However, held,
enforcement of final award in India can be challenged before courts in India (as a foreign award), or, in England on
ground of public policy since substantive laws governing contract (PSC) are Indian laws - Hence, held, application under
S. 34 of 1996 Act before Delhi High Court was not maintainable,
Arbitration and Conciliation Act, 1996
Pt. I, S. 34 or Pt. II, S. 48 - Challenge to foreign-seated award on ground of public policy - Application of Pt. I to foreign
awards - Pre-Balco agreement - Held, applicability of Pt. I is not dependent on nature of challenge to award but on
establishing that 1996 Act is applicable to arbitration agreement - Final partial award made by Arbitral Tribunal at
London, framing claims (issues) for relief in respect of royalties, cess, service tax and CAG audit, challenged as not
arbitrable being contrary to public policy of India in S. 34, 1996 Act application before Delhi High Court - Maintainability -
Held, merely because Arbitral Tribunal has held that claims are arbitrable does not mean that claims have been accepted
and award adverse to public policy of India has been given - Further held, arbitration agreement cannot be set aside on
plea that award, if made against Government of India, would violate public policy of India - In instant case, parties
excluded application of 1996 Act by conscious decision and agreement - Further, there is no apparent or so patently
obvious violation of Indian laws in any of the claims - Hence, held, petition under S. 34 of 1996 Act before Delhi High
Court not maintainable,
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