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REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 5765 OF 2014
(Arii!" #$% #& S.L.P. (C' N#. 20041 #& 201('
R)*i+!,) I!-$%ri) Li.i%)- / A!r. 0A11)**+!%
VERSUS
U!i#! #& I!-i+ ...R)1#!-)!%
J U D 2 M E N T
SURINDER SIN2H NIJJAR3 J.
1. Leave granted.
2. This appeal is directed against the judgment of the High
Court of Delhi at New Delhi rendered in O! No."# of 2$1%
dated 22
nd
arch& 2$1%. '( the aforesaid judgment& the
Delhi High Court has allowed the petition filed )( the
respondent under *ection %" of the +r)itration and
Conciliation +ct& 1,,# -hereinafter referred to as .the
+r)itration +ct& 1,,#/0& challenging the 1inal !artial +ward
dated 12
th
*eptem)er& 2$12. '( the aforesaid +ward& the
o)jection raised )( the 2nion of 3ndia relating to the
2
ar)itra)ilit( of the claims made )( the petitioner in respect of
4o(alties& Cess& *ervice Ta5 and C+6 +udit have )een
rejected.
%. 'efore we discuss the legal issues& it would )e pertinent to
ma7e a ver( )rief note of the relevant facts.
". The parties had entered into Two !roduction *haring
Contracts dated 22
nd
Decem)er& 1,," -as amended )(
+mendment +greement No.1 and +mendment +greement
No.20 -hereinafter referred to as 8!*C9 or 8!*Cs90 as and
when appropriate. These two !*Cs provide for the
e5ploration and production of petroleum from the id and
*outh Tapti 1ields -hereinafter referred to as 8Tapti9 or 8Tapri
1ield90 and for the e5ploration and production of petroleum
from !anna and u7ta 1ields which shall )e hereinafter
referred to either as 8!anna u7ta9 or 8!anna u7ta fields9.
The two !*Cs shall )e referred to 8Tapti !*C9 and 8!anna
u7ta !*C&9 respectivel(.

:. One of the !*Cs was entered into with 4eliance 3ndustries
%
Limited -43L0& the appellant& a )od( corporate esta)lished
under the laws of 3ndia. 3t is a major 3ndian multinational and
the largest private sector compan( in 3ndia& with interests in
activities including e5ploration and production of oil and gas&
petroleum refining and mar7eting petrochemicals& te5tiles&
retail and special economic ;ones. The other !*C was
entered into with '6 <5ploration and !roduction 3ndia
Limited -8'690& a )od( corporate esta)lished under the laws
of the Ca(man 3slands. 3t is a compan( forming part of '6
6roup& an international energ( group head=uartered in the
2nited >ingdom with )usiness operations in numerous
countries. 3n 2$$2& '6 6roup ac=uired the share capital of
<nron Oil and 6as 3ndia Limited -<O63L& a compan(
formerl( part of the <nron group of companies0. 2pon its
ac=uisition on 1:
th
1e)ruar(& 2$$%& the name of <O63L was
changed to '6 <5ploration and !roduction 3ndia Limited.
#. ON6C is a state?owned oil and gas compan( in 3ndia in
which the 6overnment of 3ndia holds a @".1" A e=uit( sta7e.
3t produces various petroleum products including crude oil&
natural gas and L!6. These three companies are together
"
defined as the 8Contractor9 -in the !*Cs Clause 1.2%0.

@. The two !*Cs provide a detailed procedure for +lternative
Dispute 4edressal echanisms. +rticles %2 and %% of the
!*Cs are relevant for this purpose. These +rticles provide
as under B
8Ar%i,*) (2 4 A11*i,+5*) L+6 +!- L+!"$+") #&
%7) C#!%r+,% 4
%2.1 *u)ject to the provisions of +rticle %%.12& this
Contract shall )e governed and interpreted in
accordance with the laws of 3ndia.
%2.2 Nothing in this Contract shall entitle the
6overnment or the Contractor to e5ercise the rights&
privileges and powers conferred upon it )( this
Contract in a manner which will contravene the laws
of 3ndia.
%2.% The <nglish language shall )e the language of
this Contract and shall )e used in ar)itral
proceedings. +ll communication& hearings or visual
materials or documents relating to this Contract
shall )e in <nglish.

Ar%i,*) (( 4 S#*) E81)r%3 C#!,i*i+%i#! +!-
Ar5i%r+%i#! 9
%%.1 The !arties shall use their )est efforts to settle
amica)l( all disputes& differences or claims arising
out of or in connection with an( of the terms and
conditions of this Contract or concerning the
interpretation or performance thereof.
:
%%.2 <5cept for matters which& )( the terms of this
Contract& the !arties have agreed to refer to a sole
e5pert and an( other matters which the !arties ma(
agree to so refer& an( dispute& difference or claim
arising )etween the !arties hereunder which cannot
)e settled amica)l( ma( )e su)mitted )( an( !art(
to ar)itration pursuant to +rticle %%.%. *uch sole
e5pert shall )e an independent and impartial person
of international standing with relevant =ualifications
and e5perience appointed )( agreement )etween
the !arties. +n( sole e5pert appointed shall )e
acting as an e5pert and not as an ar)itrator and the
decision of the sole e5pert on matters referred to
him shall )e final and )inding on the !arties and not
su)ject to ar)itration. 3f the !arties are una)le to
agree on a sole e5pert& the disputed su)ject matter
ma( )e referred to ar)itration.
%%.% *u)ject to the provisions herein& an(
unresolved dispute& difference or claim which
cannot )e settled amica)l( within a reasona)le time
ma(& e5cept for those referred to in +rticle %%.2& )e
su)mitted to an ar)itral tri)unal for final decision as
hereinafter provided.
%%." The ar)itral tri)unal shall consist of three
ar)itrators. The !art( or !arties instituting the
ar)itration shall appoint one ar)itrator and the !art(
or !arties responding shall appoint another
ar)itrator and )oth !arties shall so advise the other
!arties. The two ar)itrators appointed )( the !arties
shall appoint the third ar)itrator.
%%.: +n( !art( ma(& after appointing an ar)itrator&
re=uest the other !art( -ies0 in writing to appoint the
second ar)itrator. 3f such other !art( fails to appoint
an ar)itrator within fort(?five -":0 da(s of receipt of
the written re=uest to do so& such ar)itrator ma(& at
the re=uest of the first !art(& )e appointed )( the
*ecretar( 6eneral of the !ermanent Court of
+r)itration at the Hague& within fort(?five -":0 da(s
#
of the date of receipt of such re=uest& from amongst
persons who are not nationals of the countr( of an(
of the !arties to the ar)itration proceedings.
%%.# 3f the two ar)itrators appointed )( the !arties
fail to agree on the appointment of the third
ar)itrator within thirt( -%$0 da(s of the appointment
of the second ar)itrator and if the !arties do not
otherwise agree& the *ecretar( 6eneral of the
!ermanent Court of +r)itration at the Hague ma(& at
the re=uest of either !art( and in consultation with
)oth& appoint the third ar)itrator who shall not )e a
national of the countr( of an( !art(.
%%.@ 3f an( of the ar)itrators fails or is una)le to act&
his successor shall )e appointed in the manner set
out in this +rticle as if he was the first appointment.
%%.C The decision of the ar)itration tri)unal and& in
the case of difference among the ar)itrators& the
decision of the majorit(& shall )e final and )inding
upon the !arties.
%%., +r)itration proceedings shall )e conducted in
accordance with the ar)itration rules of the 2nited
Nations Commission on 3nternational Trade Law
-2NC3T4+L0 of 1,C: e5cept that in the event of an(
conflict )etween these rules and the provisions of
this +rticle %%& the provisions of this +rticle %% shall
govern.
%%.1$ The right to ar)itrate disputes and claims
under this Contract shall survive the termination of
this Contract.
%%.11 !rior to su)mitting a dispute to ar)itration& a
!art( ma( su)mit the matter for conciliation under
the 2NC3T4+L conciliation rules )( mutual
agreement of the !arties. 3f the !arties fail to agree
on a conciliator -or conciliators0 in accordance with
the rules& the matter ma( )e su)mitted for
ar)itration. No ar)itration proceedings shall )e
@
instituted while conciliation proceedings are pending
and such proceedings shall )e concluded within
si5t( -#$0 da(s.
%%.12 The venue of conciliation or ar)itration
proceedings pursuant to this +rticle& unless the
!arties otherwise agree& shall )e London& <ngland
and shall )e conducted in the <nglish Language.
The ar)itration agreement contained in this +rticle
%% shall )e governed )( the laws of <ngland.
3nsofar as practica)le& the !arties shall continue to
implement the terms of this Contract
notwithstanding the initiation of ar)itral proceedings
and an( pending claim or dispute.
%%.1% The fees and e5penses of a sole e5pert or
conciliator appointed )( the !arties shall )e )orne
e=uall( )( the !arties. +ssessment of the costs of
ar)itration including incidental e5penses and lia)ilit(
for the pa(ment thereof shall )e at the discretion of
the ar)itrators.9
C. 3n accordance with +rticle %%.12& the ar)itral proceedings
were to )e held in London as the neutral venue. +t the time
of entering into the !*Cs& none of the parties were domiciled
in 2.>. 3n fact& su)se=uentl(& the venue of the ar)itral
proceedings was shifted to !aris and again re?shifted to
London. Conse=uentl( on 2"
th
1e)ruar(& 2$$"&
the parties to the !*Cs entered into an agreement amending
the !*Cs& where)( it was stated that B?
8". +pplica)le Law and +r)itration B
C
<5cept the change of venueDseat of +r)itration
from London to !aris& the +rticles %2 and %% of the
Contract shall )e deemed to )e set out in full in
this +greement mutatis mutandis and so that
references therein to the Contract shall )e
references to this +greement.9
,. 3t appears that certain disputes and differences have arisen
)etween the parties& under or in connection with the !*Cs.
Conse=uentl(& the appellant issued a notice of ar)itration
dated 1#
th
Decem)er& 2$1$. The disputes& differences and
claims are common to )oth the Tapti !*C and !anna E
u7ta !*C. The appellant claims that all attempts to resolve
the disputes with the respondent amica)l( through
correspondences and meetings have failed. The disputes&
differences and claims arising out of or in connection with
the !*Cs have )een summari;ed in paragraph # of the
notice of ar)itration.

1$.!ursuant to the aforesaid notice& the ar)itral tri)unal was
dul( constituted on 2,
th
Ful(& 2$11. 2nder +rticle %%.12& the
venue of ar)itration is in London. The parties confirmed the
term of appointment of the +r)itral Tri)unal on 2,
th
Ful(&
2$11& signed )( the Chairman on 1:
th
+ugust& 2$11. +
,
su)stantive hearing was held )etween 21
st
a(& 2$12 to 2,
th
a(& 2$12 in *ingapore. Thereafter& on the )asis of the
amendment made in the !*C as noticed a)ove& )(
agreement of the parties& the ar)itral tri)unal made the 81inal
!artial Consent +ward9 on 1"
th
*eptem)er& 2$11. 3n the
aforesaid award& it is recorded as under B
8%. 1inal !artial +ward as to *eat
%.1 2pon the agreement of the !arties& each
represented )( dul( authori;ed representatives and
through counsel& the Tri)unal here)( finds& orders
and awardsB
a0 That without prejudice to the right of the !arties
to su)se=uentl( agree otherwise in writing& the
juridical seat -or legal place0 of ar)itration for the
purposes of the ar)itration initiated under the
Claimants/ Notice of +r)itration dated 1#
th
Decem)er& 2$1$ shall )e London& <ngland.
)0 That an( hearings in this ar)itration ma( ta7e
place in !aris& 1rance& *ingapore or an( other
location the Tri)unal considers ma( )e convenient.
c0 That& save as set out a)ove& the terms and
conditions of the ar)itration agreements in +rticle %%
of the !*Cs shall remain in full force and effect and
)e applica)le in this ar)itration.9
11. This Consent +ward was dul( signed )( r.
Christopher Lau *C -Chairman0& r. !eter Leaver GC -Co?
ar)itrator0 and r. Fustice '.!. Feevan 4edd(
1$
-Co?ar)itrator0.
12.!ursuant to Clause 2C of the terms of appointment& the
Chairman of the Tri)unal is empowered to ma7e
interlocutor( orders and consult other mem)ers of the
tri)unal if he considers appropriate or one of the parties
re=uests that a decision )e given )( the whole tri)unal.
Harious directionsD ordersD clarifications were made )( the
Chairman& with the concurrence of the other mem)ers of the
tri)unal. !ursuant to the a)ove
directionsDordersDclarifications& the claimants D +ppellants
served upon the tri)unal its statement of claim and
amendment to the statement of claim dated :
th
+ugust& 2$11 and claimants/ revised amendment to the
statement of claim dated 1,
th
Fanuar(& 2$12.
*imilarl(& the 4espondent served upon the Tri)unal its
statement of defence dated %1
st
Fanuar(& 2$12 and
additional statement on )ehalf of 4espondent dated 1$
th
+pril& 2$12 pursuant to procedural order dated 1%
th
arch&
2$12. The aforesaid procedural order dated 1%
th
arch& 2$12
as amended )( directions dated 1:
th
a(& 2$12 set out the
11
list of issues -the a( 2$12 issues0 to )e heard and )e
determined )( the tri)unal at the hearing fi5ed to commence
on 21
st
a(& 2$12 and to conclude on 2,
th
a(& 2$12 -8the
a( 2$12 hearing90. The parties served upon each other
witness statement of their witnesses. The documents relied
upon )( )oth the parties were also placed on record.
1%. The !artial 1inal +ward dated 12
th
*eptem)er& 2$12
records the claimant/s claims for relief as set out in *ection <
of the *tatement of the *cheme. !aragraph %$.% of the
*tatement of Claim reads as followsB?
8-10 a declaration that& for the purposes of +rticle
1:.#.1& the value of 6as at the wellhead should )e
calculated )( deducting from the sales price at the
Deliver( !oint an amount reflecting all of the costs
which are incurred )etween the wellhead and the
Deliver( point regardless of whether such costs are
classified as capital e5penditure or operating
e5penditure and regardless of whether such costs
are recovera)le out of Cost !etroleum under +rticle
1% of the !*Cs.
-20 a declaration that& with effect from the date of
an( partial or final award to the termination of the
!*Cs& and pursuant to +rticle 1:.#.1 of the !*Cs&
12
the 6overnment is re=uired to reim)urse an(
e5cess ro(alties paid as a result of the e5clusion of
post?wellhead capital e5penditure from wellhead
value calculations made pursuant to the 6a;ette
Notification or pa( damages in the same amount for
failure to procure an e5emption in respect of such
e5cess ro(alties.
-%0 a declaration that the 6overnment is lia)le to
reim)urse the Claimants pursuant to +rticle 1:.#.1
of the !*Cs in respect of an( additional ro(alties
imposed and paid )( the Claimants since +ugust
2$$@ as a result of the e5clusion of post?wellhead
capital e5penditure from wellhead value calculations
made pursuant to the 6a;ette Notification.
-"0 on award in favour of the Claimants re=uiring the
6overnment to reim)urse the Claimants pursuant to
+rticle 1:.#.1 in the sum of 2* I 11&"1%&1@2 in
respect of the additional ro(alties imposed and paid
under protest )etween +ugust 2$$@ and arch
2$11 or pa( damages in the same amount for
failure to procure on e5emption in respect of such
additional ro(alties.9
1".3n the alternative& the appellants claimed the reim)ursement
pursuant to +rticle 1:.@ and 1:.C of the relevant !*Cs -as
1%
the case ma( )e0& the relief pra(ed for was as under B
8a0 directing the parties to consult in order to ma7e
the necessar( revisions and adjustments to the
!*Cs so as to maintain the e5pected )enefit to the
Claimants as from +ugust 2$$@ )( re=uiring the
respondent to reim)urse an( e5cess ro(alties
pa(a)le following the issuance of the 6a;ette
NotificationJ
)0 conse=uential declarator( reliefJ and
c0 an award in damages in the same amount as are
claimed in paragraph %$.%-"0 of the *tatement of
Claim.9
1:.The third set of relief claimed )( the appellant is set out in
paragraph %$.% of the *tatement of Claim and is as follows B
8-10 a declaration that pa(ment of ro(alties under
the !*Cs should )e made )( 1: 1e)ruar( in
respect of the period 1 Ful( to %1 Decem)er and )(
1: august in respect of the period 1 Fanuar( to %$
Fune.
-20 a declaration that& provided ro(alties are paid
within the timeframes specified in -10 no interest is
pa(a)le under the terms of the !*Cs and an(
1"
interest otherwise imposed is to )e reim)ursed )(
the 6overnment.
-%0 a declaration that& in the event ro(alties are paid
after the timeframes specified in -10& an( interest in
e5cess of L3'O4 plus one percentage point is to )e
reim)ursed )( the 6overnment.
-"0 a declaration that the 6overnment is lia)le to
reim)urse the claimants pursuant to +rticle 1:.#.1 of
the !*Cs in respect of an( additional ro(alties or
interest imposed which does not accord with the
principles outlined at -10 to -%0 a)ove.
-:0 an award in favour of the claimants re=uiring the
6overnment to reim)urse the Claimants pursuant to
+rticle 1:.#.1 in the sum of 4s.@&2#&$$&:%2 in
respect of the additional ro(alties imposed in
relation to ro(alt( pa(ments made )etween 1,,: to
2$$2.9
1#.+s noticed earlier& the aforesaid reliefs were claimed )( the
appellant under +rticle 1:.#.1& which is as underB?
81:.#.1 K The constituents of the -claimants0 shall
)e lia)le to pa( ro(alties and cess on their
participating interest share of Crude Oil and Natural
6as saved and said in accordance with the
1:
provisions of this +greement. The ro(alt( on oil
saved and sold will )e paid at 4*. "C1 per metric
ton and cessan oil saved and said will )e paid at
4s.,$$ per metric ton. 4o(alt( on 6as saved and
said will )e paid at ten per cent -1$A0 of the value
at wellhead. No cess shall )e pa(a)le in response
of 6as. 4o(alt( and cess shall not e5ceed the
herein a)ove amounts throughout the term of the
contract. 4o(alt( and cess shall )e pa(a)le in
3ndian 4upees. +n( such additional pa(ment shall
)e made )( the -respondent09
1@.1urther the relief is claimed under +rticle 1:.C of the Tapti
!*C which is in identical terms of +rticle 1:.@ in the !anna
u7ta !*C& which is as under B
81:.C K 3f an( change in or to an( 3ndian law& rule or
regulation )( an( authorit( results in a material
change to the economic )enefits accruing to an( of
the parties to this contract after the effective date&
the parties shall consult promptl( to ma7e
necessar( revisions and adjustments to the contract
in order to maintain such e5pected )enefits to each
of the parties.9
1C.The four preliminar( o)jections raised )( the 2nion of 3ndia
)efore the +r)itral Tri)unal are as follows B?
1#
-10 The Claimants/ claims in regard to ro(alties
-paragraph 1".1 of the *tatement of Defence0 are
not ar)itra)leJ
-20 The Claimants/ claims in respect of cess -paragraph
1".2 of the *tatement of Defence0 are not ar)itra)leJ
-%0 The Claimants/ claims in respect of service ta5
-paragraph 1".% of the *tate of Defence0 are not
ar)itra)leJ and
-"0 The Claimants/ claims in respect of the Comptroller
and +uditor 6eneral/s -8C+690 audit -paragraph
2$.1$ of the *tatement of Defence0 are not
ar)itra)le.
1,.The aforesaid preliminar( o)jections are raised for& for inter
alia& the following reasons B?
8-a0 the Claimants/ claim entail a challenge to the
validit( of the Oilfields -4egulation and
Development0 +ct& 1,"C -8the O4D +ct90 and of the
powers e5ercised under itJ
-)0 the claimants cannot contract out of such
legislation and an( agreement to that effect would
)e void and unenforcea)le )( virtue of *ection 2% of
the 3ndian Contract +ct& 1C@2J
1@
-c0 the Claimants cannot avoid the effect of the
legislation )( rel(ing on the doctrine of estoppelJ
-d0 an( dispute in respect of ro(alties should )e
referred to ar)itration under 4ule %% of !etroleum
and Natural 6as 4ules 1,:, -8the !N6 4ules90J
-e0 there will li7el( )e a defence to enforcement of
an( award in 3ndia under +rticle H-20-)0 of the New
Lor7 Convention as a matter of the pu)lic polic( of
3ndiaJ
-f0 since an( award has to )e enforced in 3ndia& this
Tri)unal ought not to enter into or adjudicate
=uestionsDissues relating to ro(alties in view of 4ule
%% of the !N6 4ules and the decisions of the 3ndian
*upreme Court in Nataraj *tudios vs. Navarang
*tudios -1,C10 1 *CC :2%&+mrit 'anaspati Co. Ltd.
vs. *tate of !unja) -1,,20 2 *CC "11 and afatlal
3ndustries Ltd. vs. 2nion of 3ndia -1,,@0 : *CC :%#J
and
-g0 were the Tri)unal to do so in reliance on Tamil
Nadu <lectricit( 'oard v. *T?C* <lectric Co !vt.
Ltd. -2$$@0 2 +ll <4 -Comm0 @$1& it would )e
contrar( to the law as laid down )( the <nglish
Court of +ppeal in 4alli 'ros v. C3+ Navleria -1,2$0
1C
2 >' 2C@.9
2$.The respondents also contended that the +r)itral Tri)unal
cannot& or ought not& to go into or adjudicate the =uestions
raised )( the appellants -claimants0 with respect to ro(altiesJ
and leave the parties& if the( choose& to see7 the necessar(
relief )efore the specific forums created under the Oilfields
-4egulation and Development0 +ct& 1,"C and the !etroleum
and Natural 6as 4ules& 1,:#.
21.The appellants -the claimants0 on the other hand su)mitted
that the issue of ar)itra)ilit( is governed )( the law of the
seat of ar)itration. The seat of the ar)itration )eing <ngland&
the issue of ar)itra)ilit( is governed )( the <nglish Law. 3t
was also su)mitted that although challenge to the validit( of
the terms of !*C is governed )( 3ndian Law -+rticle %2.1 of
the !*C0& nevertheless it falls within the jurisdiction of the
tri)unal just as an( other su)stantive dispute. The appellants
relied upon the judgment in T+.i* N+-$ E*),%ri,i%: B#+r-
Hs. ST;CMS E*),%ri, C#. P<%. L%-.
1
3t was also su)mitted
1
-2$$@0 2 +ll <4 -Comm0 @$1
1,
that the reliefs claimed are founded& onl(& on contractual
rights. 1urther& whether or not an( of those contractual rights
are vitiated )( *ection 2% of the 3ndian Contract +ct& 1C@2 is
a =uestion of su)stance and accordingl( a dispute as to the
underl(ing merits of the claim. The case of the appellants
-claimants0 assumes that respondent is entitled to rel( on the
relevant legislation )ut the claims of the appellants are
purel( contractual in nature.
22.2pon consideration of the entire matter& the ar)itral tri)unal
in the final award concluded as under B
S$..+r: #& C#!,*$i#! 4 F#r.+* Fi!+* P+r%i+*
A6+r- 4
8#.1 The Tri)unal& having carefull( considered the
documentar( evidence& the oral evidence and the
su)missions of the Claimants and the respondent&
and rejecting all su)missions to the contrar(&
here)( ma7es& issues and pu)lishes this 1ormal
1inal !artial +ward and for the reasons set out
a)ove 13ND*& +M+4D*& O4D<4* +ND
D<CL+4<* that the Claimants/ claims in respect
of ro(alties& cess& service ta5 and C+6 audit are
ar)itra)e.
#.2. 3n stating its conclusion on the four ar)itra)ilit(
2$
issues identified in *ection + of the List of issues
for the a( 2$12 Hearing& the Tri)unal wishes to
ma7e it clear that it is e5pressing no opinion on the
merits of the parties/ respective su)missions which
were made during the a( 2$12 Hearing. *u)ject
to further order in the meantime& the merits of
those issues will )e decided in the arch& 2$1%
Hearing.9
2%.2nion of 3ndia challenged the aforesaid award )efore the
High Court of Delhi in O! No."# of 2$1%. The respondents
invo7ed the jurisdiction of the High Court under *ection %" of
the +r)itration +ct for various reasons namel(& -i0 the terms
of the !*Cs entered would manifest an unmista7a)le
intention of the parties to )e governed )( the laws of 3ndia
and more particularl( the +r)itration +ct 1,,#J -ii0 the
contracts were signed and e5ecuted in 3ndiaJ -iii0 the su)ject
matter of the contracts& namel(& the !anna u7ta and the
Tapti 1ields are situated within 3ndiaJ -iv0 the o)ligations
under the contracts have )een for the past more than 1:
(ears performed within 3ndiaJ -v0 the contracts stipulate that
the( 8shall )e governed and interpreted in accordance with
the laws of 3ndia9J -vi0 the( also provided that 8nothing in this
21
contract9 shall entitle either of the parties to e5ercise the
rights& privileges and powers conferred upon them )( the
contract 8in a manner which will contravene the laws of
3ndia9 -+rticle %2.20J and -vii0 the contracts further stipulate
that 8the companies and the operations under this Contract
shall )e su)ject to all fiscal legislation of 3ndia9 -+rticle 1:.10.
2".The appellant raised preliminar( o)jection to the
maintaina)ilit( of the ar)itration petition primaril( on the
ground that )( choosing <nglish Law to govern their
agreement to ar)itration and e5pressl( agreeing to London
seated ar)itration& the parties have e5cluded the application
of !art 3 of the +r)itration +ct& 1,,#. 3t was su)mitted that
the High Court of Delhi had no jurisdiction to entertain the
o)jection filed )( the 2nion of 3ndia under *ection %" of the
+r)itration +ct& 1,,#. 3t was emphasi;ed that Courts of
<ngland and Males have e5clusive jurisdiction to entertain
an( challenge to the award. 3t was pointed out that the !*Cs
were amended on two occasions. On 2"
th
1e)ruar(& 2$$"&
!*C was sought to )e amended to change the seat of
ar)itration from London to !aris. However& on 1"
th
22
*eptem)er& 2$11& the parties to the ar)itration agreed that
the seat of the present ar)itration proceedings would )e
London& <ngland. This agreement is recorded in the 1inal
!artial Consent +ward rendered )( the ar)itral tri)unal
on 2,
th
Ful(& 2$11. +s noticed earlier& the final partial consent
award provided that the juridical seat or legal place of
ar)itration for the purpose of ar)itration initiated under the
claimants notice of ar)itration dated 1#
th
Decem)er& 2$11 shall )e London& <ngland. +rticle %%., of
the !*C provides that the ar)itration shall )e conducted in
accordance with the 2NC3T4+L 4ules& 1,C:. However&
su)se=uentl( it was recorded in the award that the
applica)le rules shall )e the 2NC3T4+L +r)itration 4ules&
1,@#. 3t was also su)mitted on )ehalf of the appellants that
the o)jections raised )( the 2O3 are (et to )e determined )(
the tri)unal on merits and shall )e considered after
considering the evidence at the time of rendering the final
award.
2:.2pon consideration of the entire matter& the High Court has
held that undou)tedl( the governing law of the contract i.e.
2%
proper law of the contract is the law of 3ndia. Therefore& the
parties never intended to all together e5clude the laws of
3ndia& so far as contractual rights are concerned. The Laws
of <ngland are limited in their applica)ilit( in relation to
ar)itration agreement contained in +rticle %%. This would
mean that the <nglish Law would )e applica)le onl( with
regard to the curial law matters i.e. conduct of the ar)itral
proceedings. 1or all other matters& proper law of the contract
would )e applica)le. 4el(ing on +rticle 1:-10& it has )een
held that the fiscal laws of 3ndia cannot )e derogated from.
Therefore& the e5clusion of 3ndian pu)lic polic( was not
envisaged )( the parties at the time when the( entered into
the contract. The High Court further held that to hold that the
agreement contained in +rticle %% would envisage the
matters other than procedure of ar)itration proceedings
would )e to re?write the contract. The High Court also held
that the =uestion of ar)itra)ilit( of the claim or dispute cannot
)e e5amined solel( on the touchstone of the applica)ilit( of
the law relating to ar)itration of an( countr( )ut appl(ing the
pu)lic polic( under the laws of the countr( to which the
parties have su)jected the contract to )e governed.
2"
Therefore& according to the High Court& the =uestion of
ar)itra)ilit( of the dispute is not a pure =uestion of applica)le
law of ar)itration or lex arbitri )ut a larger one governing the
pu)lic polic(. The High Court then concluded that pu)lic
polic( of 3ndia cannot )e adjudged under the laws of
<ngland. +rticle %2.1 specificall( provides that laws of 3ndia
will govern the o)ligations of the parties in the !*Cs. The
High Court also concluded that the effect of the interpla( of
+rticle %2.1 and +rticle %2.2 and %%.12 leads to the
conclusion that law of <ngland shall operate in relation to
matters contained in +rticle %% in so far as the( are not
inconsistent with the law of 3ndia. *ince the =uestion of
ar)itra)ilit( of the claim is a larger =uestion effecting pu)lic
polic( of *tate it should )e determined )( appl(ing laws of
3ndia. This would give a meaningful effect to +rticle %2.2&
otherwise it would )e rendered otiose. On the )asis of the
aforesaid plain reading& according to the High Court& the
conclusion is that the intention of the parties under the
agreement was alwa(s to remain su)ject to 3ndian laws and
not to contravene them. 3t is further held that +rticle %% was
confined to conducting the ar)itration in accordance with the
2:
laws of <ngland and not for all other purposes. 4el(ing on
the judgment of this Court in B7+%i+ I!%)r!+%i#!+* Hs. B$*=
Tr+-i!" S.A. / A!r.
2
& it has )een held that !art 3 of the
+r)itration +ct& 1,,# would )e applica)le as there is no clear
e5press or implied intention of the parties to e5clude the
applica)ilit( of the +r)itration +ct& 1,,#. The High Court also
relies on the judgment of this Court in V)!%$r) 2*#5+*
E!"i!))ri!" Hs. S+%:+. C#.1$%)r S)r<i,) L%-.
(
& in
support of the conclusion that the Delhi High Court has
jurisdiction to entertain and adjudicate the petition under
*ection %" of the +r)itration +ct& 1,,#. *ince& according to
High Court& the dispute raised )( the appellant relate to
pu)lic polic( of 3ndia& the petition under *ection %" of the
+r)itration +ct is maintaina)le. The High Court also gives
additional reasons for concluding that the petition to
challenge final partial award is maintaina)le. +ccording to
the High Court& the disputes involved rights in rem.
Therefore& due regard has to )e given to 3ndian laws. +n
award which is said to )e against pu)lic polic( can )e
permitted to )e challenged in 3ndia even though the seat of
2
-2$$20 " *CC 1$:
%
-2$$C0 " *CC 1,$
2#
ar)itration is outside 3ndia. The High Court also too7 support
from the doctrine of pu)lic trust with regard to natural
resources. *ince the appellants are see7ing refund of
amount of cess& ro(alties& service ta5& all matters of pu)lic
mone( in 3ndia& the jurisdiction of the 3ndian courts cannot )e
e5cluded. The High Court concludes that there is no reason
wh( the pu)lic mone( )e allowed to invested for see7ing
adjudication of the claims which ma( )e eventuall( found to
)e impermissi)le to )e enforced. 1inall(& the High Court
declined to consider the law laid down )( the Constitution
'ench of this Court in B7+r+% A*$.i!i$. on the )asis that
the operation of the judgment has )een made prospective )(
the court. The final conclusion has )een given in paragraph
:, which is as under B
>5?. No su)mission on the part of the respondents
remains unaddressed. 3 have alread( o)served that
upon testing the instant case on the principles of
law laid down in the case of 'hatia 3nternational
-supra0 as well as Henture 6lo)al -supra0& no infer?
ence as to e5press or implied e5clusion of the !art 3
of the +r)itration and Conciliation +ct& 1,,# can )e
drawn. 4esultantl(& the o)jection raised )( the re?
spondents relating to lac7 of jurisdiction of 3ndian
court on the count of e5press choice of laws provi?
sions cannot )e sustained as 3ndian laws including
provisions of !art 3 of the +ct are not e5pressl( nor
impliedl( e5cluded. The said o)jection is therefore
2@
rejected.9
2#.3t is this judgment of the High Court which is su)ject matter
of this appeal.
2@.Me have heard the learned counsel for the parties.
2C.Learned senior counsel for )oth the parties have made ver(
ela)orate oral su)missions. These su)missions have )een
summed up and supplemented )( the written su)missions.
Dr. *inghvi appearing for the appellants su)mitted that once
the <nglish Law is selected as the proper law of ar)itration&
the applica)ilit( of +r)itration +ct& 1,,# would )e ruled out.
He su)mits that the High Court has wrongl( intermingled the
issues relating to the challenge to the ar)itral proceedings or
the ar)itration award with the merits of the disputes relating
to the underl(ing contract. +ccording to him& even if the law
laid down in B7+%i+ I!%)r!+%i#!+* ($1r+' is applica)le& the
ar)itral tri)unal would appl( the provisions contained in the
3ndian Contract +ct. 'ut the <nglish Courts will have
jurisdiction over the control and supervision of the ar)itration
2C
including& challenge to the ar)itral award. 3n support of his
su)mission& Dr. *inghvi relies on Vi-)#,#! I!-$%ri)
Li.i%)- Hs. U!i#! #& I!-i+ / A!r.
4
He has also relied on
@#"r+A I!&r+%r$,%$r) Li.i%)- Hs. S+!" @#!"
E!"i!))ri!" +!- C#!%r$,%i#! C#.1+!: Li.i%)-
5
3 MB
D#C,# I!-i+ P. L%-. Hs. MB D##+! I!&r+,#r) C#. L%-.
6
&
B7+r+% A*$.i!i$. C#.1+!: Hs. D+i)r A*$.i!i$.
T),7!i,+* S)r<i,) I!,.
7

2,.Dr. *inghvi su)mitted that the reliance placed )( the High
Court on V)!%$r) 2*#5+* E!"i!))ri!" ($1r+' is
misplaced. 3n that case& the Court was not concerned with a
clause such as +rticle %2.1 of the !*C& which has to )e
interpreted su)ject to the provisions contained in +rticle
%%.12. +ccording to Dr. *inghvi& the ratio of V)!%$r) 2*#5+*
E!"i!))ri!" ($1r+' has lost its efficac( as it has )een
overruled )( the Constitution 'ench in B7+r+% A*$.i!i$.
C#.1+!: ($1r+'. Dr. *inghvi then su)mitted that the
concern shown )( the High Court for 3ndian pu)lic polic(
"
-2$110 # *CC 1#1
:
-2$110 , *CC @%:
#
-2$$,0 % +L4 1#2
@
-2$120 , *CC ::2
2,
was wholl( misplaced and erroneous. The High Court has
failed to appreciate that +rticle %2.1 and %2.2 deal onl( with
the proper law of the contract and not with the proper law of
the ar)itration agreement. The High Court has erroneousl(
distinguished the ratio of law laid down in Vi-)#,#!
I!-$%ri) Li.i%)- ($1r+' on the ground that although the
ar)itration clause therein was the same )ut the =uestion of
pu)lic polic( had not )een addressed )( the Court. 4el(ing
on S%+%) #& 2$A+r+% / A!r. Hs. J$%i,) R.A. M)7%+
(R)%ir)-' / Or.
E
& Dr. *inghvi su)mitted that even if the
issue of pu)lic polic( was not particularl( raised or
addressed& the judgment in Vi-)#,#! I!-$%ri) Li.i%)-
($1r+' still )e a )inding precedent. +ccording to him& whilst
concluding that the parties did not intend to e5clude the
applica)ilit( of the +r)itration +ct& 1,,# to the ar)itration
agreement& the High Court has erroneousl( held that it was
necessar( for the parties to e5clude not onl( the provisions
of the +r)itration +ct )ut also specificall( plead that pu)lic
polic( is also e5cluded. +ccording to the learned senior
counsel& +rticle 1:.#.1 has no relevance for the
C
-2$1%0 % *CC 1
%$
determination of the =uestion as to whether the +r)itration
+ct& 1,,# will appl( to the ar)itration& which is )eing held in
London.
%$.r. +.>. 6angul(& learned senior counsel appearing for
2nion of 3ndia su)mits that the decision in this case has
)een correctl( rendered )( the High Court )ased on the law
laid down )( this Court in B7+%i+ I!%)r!+%i#!+* and V)!%$r)
2*#5+* E!"i!))ri!" ($1r+' as the ar)itration agreement is
pre BALCO. He su)mits that in order to determine whether
+r)itration +ct& 1,,# is e5cluded& the contract had to )e
seen as a whole. Here& the contract is in 3ndia& for the wor7
to )e done in 3ndia over 2: (earsJ secondl(& it deals with
natural resources& 2nion of 3ndia is a trustee of these
resources for the citi;ens of 3ndia. London was designated
as the seat of ar)itration onl( to provide certain measure of
comfort level to the foreign parties. The contract can not )e
read in such a wa( as to e5clude the +r)itration +ct& 1,,#.
The High Court has correctl( concluded that ar)itra)ilit( had
to )e decided )( ta7ing into consideration 3ndian Laws&
which would include the 3ndian +r)itration +ct and not under
%1
the <nglish +r)itration +ct& 1,,#. He emphasi;ed that the
present proceedings relate to the interpretation of the
contract& which is of national importance to develop the oil
rich areas in the 3ndian Coasts. He points out that under the
!*C& the contractor has agreed to )e alwa(s mindful of the
rights and interests of 3ndia in the conduct of petroleum
operations N+rticle @.%-a0O. r. 6angul( also relied on +rticle
%2.1 and %2.2 and su)mitted that Contract is to )e governed
and interpreted in accordance with laws of 3ndia. He points
out that there is a negative covenant in +rticle %2.2& wherein
6overnment or the contractor are not entitled to e5ercise the
rights& privileges& and powers conferred under the !*C in a
manner which will contravene laws of 3ndia. r. 6angul(
further pointed out that the High Court has correctl( applied
the law laid down )( this court in B7+%i+ I!%)r!+%i#!+* and
V)!%$r) 2*#5+* E!"i!))ri!" ($1r+'. He also o)jected to
the additional documents& which are sought to )e relied upon
)( the petitioners in 3.+. No. @ of 2$1". He su)mitted that
none of these documents were on the record )efore the High
Court and can not )e permitted to )e relied on for the first
time in this Court. He& therefore& su)mitted that 3.+. No. 2
%2
ought to )e dismissed. He su)mitted that similar re=uest
was made )efore the High Court& which was rejected.
%1.r. 6angul( emphasi;ed that the issues raised )( the 2nion
of 3ndia are of pu)lic law and not purel( contractual as
sought to )e projected )( the appellants. He points out that
the appellants have sought a num)er of reliefs with respect
to C+6 +udit. 3t is a challenge to the conclusions recorded
)( the C+6 +udit and such a challenge would not )e
ar)itra)le. 3t is further su)mitted )( him that the issues
raised with regard to ro(alt( is also not ar)itra)le as it is not
a commercial issue. He has distinguished the judgment of
this Court in Vi-)#,#! I!-$%ri) Li.i%)- ($1r+' on the
)asis that the issue with regard to the pu)lic law was not
considered )( the Court in that judgment.
%2.+s noticed earlier& )oth the learned senior counsel have also
su)mitted written su)missions. !rimaril(& the su)missions
made in the Court have )een reiterated and& therefore&
reference will )e made to the same as and when necessar(.
%%
%%.Me have considered the su)missions made )( the learned
counsel for the parties.
%".'efore we anal(;e the su)missions made )( the learned
senior counsel for )oth the parties& it would )e appropriate to
notice the various factual and legal points on which the
parties are agreed. The controvers( herein would have to )e
decided on the )asis of the law declared )( this Court in
B7+%i+ I!%)r!+%i#!+* ($1r+'. The parties are agreed and it
is also evident from the 1inal !artial Consent +ward dated
1"
th
*eptem)er& 2$11 that the juridical seat -or legal place0 of
ar)itration for the purposes of the ar)itration initiated under
the Claimants/ Notice of +r)itration dated 1#
th
Decem)er&
2$1$ shall )e London& <ngland. The parties are also agreed
that hearings of the Notice of +r)itration ma( ta7e place at
!aris& 1rance& *ingapore or an( other location the Tri)unal
considers ma( )e convenient. 3t is also agreed )( the parties
that the terms and conditions of the ar)itration agreement in
+rticle %% of the !*Cs shall remain in full force and effect
and )e applica)le to the ar)itration proceedings.
%"
%:.The essential dispute )etween the parties is as to whether
!art 3 of the +r)itration +ct& 1,,# would )e applica)le to the
ar)itration agreement irrespective of the fact that the seat of
ar)itration is outside 3ndia. To find a conclusive answer to
the issue as to whether applica)ilit( of !art 3 of the
+r)itration +ct& 1,,# has )een e5cluded& it would )e
necessar( to discover the intention of the parties. 'e(ond
this parties are not agreed on an( issue.
%#.Me are also of the opinion that since the ratio of law laid
down in B+*,# ($1r+' has )een made prospective in
operation )( the Constitution 'ench itself& we are )ound )(
the decision rendered in B7+%i+ I!%)r!+%i#!+* ($1r+'.
Therefore& at the outset& it would )e appropriate to reproduce
the relevant ratio of B7+%i+ I!%)r!+%i#!+* in paragraph %2
which is as under B?
>(2. To conclude& we hold that the provisions of
!art 3 would appl( to all ar)itrations and to all pro?
ceedings relating thereto. Mhere such ar)itration is
held in 3ndia the provisions of !art 3 would com?
pulsoril( appl( and parties are free to deviate onl( to
the e5tent permitted )( the deroga)le provisions of
!art 3. 3n cases of international commercial ar)itra?
tions held out of 3ndia provisions of !art 3 would ap?
pl( unless the parties )( agreement& e5press or im?
%:
plied& e5clude all or an( of its provisions. 3n that
case the laws or rules chosen )( the parties would
prevail. +n( provision& in !art 3& which is contrar( to
or e5cluded )( that law or rules will not appl(.9
%@.3n view of the aforesaid& it would )e necessar( to anal(;e
the relevant +rticles of the !*C& to discover the real intention
of the parties as to whether the provisions of +r)itration +ct&
1,,# have )een e5cluded. 3t must& immediatel(& )e noticed
that +rticles %2.1 and %2.2 deal with applica)le law and
language of the contract as is evident from the heading of
the +rticle which is 8+pplica)le Law and Language of the
Contract9. +rticle %2.1 provides the proper law of the contract
i.e. laws of 3ndia. +rticle %2.2 ma7es a declaration that none
of the provisions contained in the contract would entitle
either the 6overnment or the Contractor to e5ercise the
rights& privileges and powers conferred upon it )( the
contract in a manner which would contravene the laws of
3ndia.
%C.+rticle %% ma7es ver( detailed provision with regard to the
resolution of disputes through ar)itration. The two +rticles do
not overlap ? one -+rt.%20 deals with the proper law of the
%#
contract& the other -+rt.%%0 deals with +D4& i.e. consultations
)etween the partiesJ conciliationJ reference to a sole e5pert
and ultimatel( ar)itration. 2nder +rticle %%& at first efforts
should )e made )( the parties to settle the disputes among
themselves -%%.10. 3f these efforts fail& the parties )(
agreement shall refer the dispute to a sole e5pert -%%.20. The
provision with regard to constitution of the ar)itral tri)unal
provides that the ar)itral tri)unal shall consist of three
ar)itrators -%%."0. This article also provides that each part(
shall appoint one ar)itrator. The ar)itrators appointed )( the
parties shall appoint the third ar)itrator. 3n case& the
procedure under +rticle %%." fails& the aggrieved part( can
approach the !ermanent Court of +r)itration at Hague for
appointment of an ar)itrator -%%.:0. 1urther& in case the two
ar)itrators fail to ma7e an appointment of the third ar)itrator
within %$ da(s of the appointment of the second ar)itrator&
again the *ecretar( 6eneral of the !ermanent Court of
+r)itration at Hague ma(& at the re=uest of either part(
appoint the third ar)itrator. 3n the face of this& it is difficult to
appreciate the su)mission of the respondent K 2nion of 3ndia
that the +r)itration +ct& 1,,# -!art 30 would )e applica)le to
%@
the ar)itration proceedings. 3n the event& 2nion of 3ndia
intended to ensure that the +r)itration +ct& 1,,# shall appl(
to the ar)itration proceedings& +rticle %%.: should have
provided that in default of a part( appointing its ar)itrator&
such ar)itrator ma(& at the re=uest of the first part( )e
appointed )( the Chief Fustice of 3ndia or an( person or
3nstitution designated )( him. Thus& the !ermanent Court of
+r)itration at Hague can )e approached for the appointment
of the ar)itrator& in case of default )( an( of the parties. This&
in our opinion& is a strong indication that applica)ilit( of
+r)itration +ct& 1,,# was e5cluded )( the parties )(
consensus. 1urther& the ar)itration proceedings are to )e
conducted in accordance with the 2NC3T4+L 4ules& 1,@#
-%%.,0. 3t is specificall( provided that the right to ar)itrate
disputes and claims under this contract shall survive the
termination of this contract -%%.1$0.
%,.The +rticle which provides the )asis of the controvers(
herein is +rticle %%.12 which provides that venue of the
ar)itration shall )e London and that the ar)itration
agreement shall )e governed )( the laws of <ngland. 3t
appears& as o)served earlier& that )( a 1inal !artial Consent
%C
+ward& the parties have agreed that the juridical seat -or
legal place of ar)itration0 for the purposes of ar)itration
initiated under the claimants/ notice of ar)itration dated 1#
th
Decem)er& 2$1$ shall )e London& <ngland.
"$.Me are of the opinion& upon a meaningful reading of the
aforesaid +rticles of the !*C& that the proper law of the
contract is 3ndian LawJ proper law of the arbitration
agreement is the law of <ngland. Therefore& can it )e said as
canvassed )( the respondents& that applica)ilit( of
+r)itration +ct& 1,,# has not )een e5cludedP
"1.3t was su)mitted )( r. 6angul( that the intention of the
parties was never to e5clude the applica)ilit( of +r)itration
+ct& 1,,#. 3t is su)mitted that the e5pression 8laws of 3ndia9
under +rticle %2.2 would also include the +r)itration +ct&
1,,#. This su)mission is without an( merit. 3n our opinion&
the e5pression 8laws of 3ndia9 as used in +rticle %2.1 and
%2.2 have a reference onl( to the contractual o)ligations to
)e performed )( the parties under the su)stantive contract
i.e. !*C. 3n other words& the provisions contained in %%.12
%,
are not governed )( the provisions contained in +rticle %2.1.
3t must )e emphasi;ed that +rticle %2.1 has )een made
su)ject to the provision of +rticle %%.12. +rticle %%.12
specificall( provides that the ar)itration agreement shall )e
governed )( the laws of <ngland. The two +rticles are
particular in la(ing down that the contractual o)ligations with
regard to the e5ploration of oil and gas under the !*C shall
)e governed and interpreted in accordance with the laws of
3ndia. 3n contra?distinction& +rticle %%.12 specificall( provides
that the ar)itration agreement contained in +rticle %%.12 shall
)e governed )( the laws of <ngland. Therefore& in our
opinion& the conclusion is inescapa)le that applica)ilit( of
+r)itration +ct& 1,,# has )een ruled out )( a conscious
decision and agreement of the parties. +ppl(ing the ratio of
law as laid down in B7+%i+ I!%)r!+%i#!+* ($1r+' it would
lead to the conclusion that the Delhi High Court had no
jurisdiction to entertain the petition under +rticle %" of the
+r)itration +ct& 1,,#.
"2.+rticle %% provides for +D4 K its limited application is to
dispute resolution through ar)itration as opposed to civil
"$
litigation. Therefore& there is no violation of %2.2& as
+r)itration +ct& 1,,#& in fact signifies !arliamentar( sanction
of +D4. 3n fact& +rticle %2.% indicates that o)ligations under
!*C and +r)itration +greement are separate. Hence& it is
provided that <nglish shall )e the language of the Contract.
1ollowed )( the stipulation that <nglish shall also )e the law
of ar)itral proceedings. Therefore& the conclusion of the
High Court that !*C is a composite contract is not in tune
with the approved provisions of the !*C. This separateness
is further emphasi;ed )( +rticle %2.1 )( ma7ing the provision
8su)ject to the provision of +rticle %%.129. Laws of 3ndia
have )een made applica)le to the su)stantive contract. Law
of <ngland govern the Dispute 4esolution echanism.
!rovision for +r)itration is a deli)erate election of remed(
other than usual remed( of a civil suit. The +D4 mechanism
under the +r)itral Laws of different nations is legall( and
jurisprudentiall( accepted& sanctified )( the Highest Law
a7ing 'odies of the mem)er *tates& signatories to the New
Lor7 Convention. 3ndia is not onl( a signator( to the New
Lor7 Convention& )ut it has ta7en into account the
2NC3T4+L odel Laws and the 2NC3T4+L 4ules& whilst
"1
enacting the +r)itration +ct& 1,,#. Therefore& it would not )e
possi)le to accept the su)mission of r. 6angul( that the
Law of the Contract is also the Law of the +r)itration
+greement.
"%.3n our opinion& it is too late in the da( to contend that the
seat of ar)itration is not analogous to an e5clusive
jurisdiction clause. This view of ours will find support from
numerous judgments of this Court. Once the parties had
consciousl( agreed that the juridical seat of the ar)itration
would )e London and that the ar)itration agreement will )e
governed )( the laws of <ngland& it was no longer open to
them to contend that the provisions of !art 3 of the +r)itration
+ct would also )e applica)le to the ar)itration agreement.
This Court in the case of Vi-)#,#! I!-$%ri) L%-. ($1r+'
has clearl( held as follows B?
8%%. 3n the present case also& the parties had
agreed that notwithstanding +rticle %%.1& the
ar)itration agreement contained in +rticle %" shall
)e governed )( laws of <ngland. This necessaril(
implies that the parties had agreed to e5clude the
provisions of !art 3 of the +ct. +s a corollar( to the
a)ove conclusion& we hold that the Delhi High Court
did not have the jurisdiction to entertain the petition
filed )( the respondents under *ection , of the +ct
"2
and the mere fact that the appellant had earlier filed
similar petitions was not sufficient to clothe that
High Court with the jurisdiction to entertain the
petition filed )( the respondents.9
"".3n coming to the aforesaid conclusion this Court interpreted
similar if not identical provisions contained in the ar)itration
agreement. The provision with regard to proper law of the
contract and the ar)itration agreement was as follows B
(. 1or the sa7e of convenience& the relevant clauses
of +rticles %%& %" and %: of the !*C are e5tracted
)elowB
8%%.1. Indian law to govern.Q*u)ject to the provi?
sions of +rticle %".12& this contract shall )e gov?
erned and interpreted in accordance with the laws
of 3ndia.
%%.2. Laws of India not to be contravened.Q*u)ject
to +rticle 1@.1 nothing in this contract shall entitle
the contractor to e5ercise the rights& privileges and
powers conferred upon it )( this contract in a man?
ner which will contravene the laws of 3ndia.
R R R
%".%. Unresolved disputes.Q*u)ject to the provi?
sions of this contract& the parties agree that an(
matter& unresolved dispute& difference or claim
which cannot )e agreed or settled amica)l( within
twent(?one -210 da(s ma( )e su)mitted to a sole
e5pert -where +rticle %".2 applies0 or otherwise to
an +r)itral Tri)unal for final decision as hereinafter
provided.
"%
R R R
%".12. Venue and law of arbitration agreement.Q
The venue of sole e5pert& conciliation or ar)itration
proceedings pursuant to this article& unless the
parties otherwise agree& shall )e >uala Lumpur&
ala(sia& and shall )e conducted in the <nglish lan?
guage. 3nsofar as practica)le& the parties shall con?
tinue to implement the terms of this contract not?
withstanding the initiation of ar)itral proceedings
and an( pending claim or dispute. Notwithstanding
the provisions of +rticle %%.1& the ar)itration agree?
ment contained in this +rticle %" shall )e governed
)( the laws of <ngland.
R R R
%:.2. Amendment.QThis contract shall not )e
amended& modified& varied or supplemented in an(
respect e5cept )( an instrument in writing signed )(
all the parties& which shall state the date upon which
the amendment or modification shall )ecome
effective.9
":.Me are of the opinion that in the impugned judgment the
High Court has erred in not appl(ing the ratio of law laid
down in Vi-)#,#! I!-$%ri) L%-. ($1r+' in the present
case. The first issue raised in Vi-)#,#! I!-$%ri) Li.i%)-
($1r+' was as to whether the seat of ar)itration was
London or >uala Lumpur. The second issue was with regard
to the Courts that would have supervisor( jurisdiction over
the ar)itration proceedings. 1irstl(& the plea of Vi-)#,#!
""
I!-$%ri) Li.i%)- was that the seat could not have )een
changed from >uala Lumpur to London onl( on agreement
of the parties without there )eing a corresponding
amendment in the !*C. This plea was accepted. 3t was
held that seat of ar)itration cannot )e changed )( mere
agreement of parties. 3n !aragraph 21 of the judgment& it
was o)served as followsB?
>21. Though& it ma( appear repetitive& we deem it
necessar( to mention that as per the terms of
agreement& the seat of ar)itration was >uala Lum?
pur. 3f the parties wanted to amend +rticle %".12&
the( could have done so onl( )( a written instru?
ment which was re=uired to )e signed )( all of
them. +dmittedl(& neither was there an( agreement
)etween the parties to the !*C to shift the juridical
seat of ar)itration from >uala Lumpur to London nor
was an( written instrument signed )( them for
amending +rticle %".12. Therefore& the mere fact
that the parties to the particular ar)itration had
agreed for shifting of the seat of ar)itration to Lon?
don cannot )e interpreted as an(thing e5cept ph(s?
ical change of the venue of ar)itration from >uala
Lumpur to London.9
"#.The other issue considered )( this Court in Vi-)#,#!
I!-$%ri) Li.i%)- ($1r+' was as to whether a petition
under *ection , of the +r)itration +ct& 1,,# would )e
maintaina)le in Delhi High Court& the parties having
specificall( agreed that the ar)itration agreement would )e
":
governed )( the <nglish Law. This issue was decided
against 2nion of 3ndia and it was held that Delhi High Court
did not have the jurisdiction to entertain the petition filed )(
2nion of 3ndia under *ection , of the +r)itration +ct.
"@.3n the present appeal& this Court is also considering the
issue as to whether the petition under *ection %" of the
+r)itration +ct& 1,,# filed )( 2nion of 3ndia in Delhi would )e
maintaina)le. The parties have made the necessar(
amendment in the !*Cs to provide that the juridical seat of
ar)itration shall )e London. 3t is also provided that the
ar)itration agreement will )e governed )( laws of <ngland.
Therefore& the ratio in Vi-)#,#! I!-$%ri) Li.i%)- ($1r+'
would )e relevant and )inding in the present appeal.
"C.The aforesaid judgment (Vi-)#,#!' has )een rendered )(
this Court upon consideration of V)!%$r) 2*#5+*
E!"i!))ri!" ($1r+'. V)!%$r) 2*#5+* E!"i!))ri!" and
Vi-)#,#! I!-$%ri) L%-. are )oth judgments delivered )(
two?Fudge 'ench. 3n our opinion& the factual and legal
issues involved in the Vi-)#,#! I!-$%ri) case are ver(
"#
similar to the controvers( involved in the present appeal.
The +r)itration +greement in this appeal is identical to the
ar)itration agreement in Vi-)#,#! I!-$%ri). 3n fact& the
factual situation in the present appeal is on a stronger
footing than in Vi-)#,#! I!-$%ri) Li.i%)- ($1r+'. +s
noticed earlier& in Vi-)#,#! I!-$%ri)& this Court
concluded that the parties could not have altered the seat of
ar)itration without ma7ing the necessar( amendment to the
!*C. 3n the present appeal& necessar( amendment has
)een made in the !*C. 'ased on the aforesaid
amendment& the +r)itral Tri)unal has rendered the 1inal
!artial Consent +ward of 1"
th
*eptem)er& 2$11 recording
that the juridical seat -or legal place0 of the ar)itration for the
purposes of ar)itration initiated under the Claimant/s Notice
of +r)itration dated 1#
th
Decem)er& 2$1$
shall )e London& <ngland. 1urthermore& the judgment in
Vi-)#,#! I!-$%ri) is su)se=uent to V)!%$r+ 2*#5+*. Me
are& therefore& )ound )( the ratio laid down in Vi-)#,#!
I!-$%ri) Li.i%)- ($1r+'.
",.Me ma( also point out that the judgment in Vi-)#,#!
"@
I!-$%ri) has )een followed on numerous occasions )( a
num)er of High Courts. This apart& the judgment of this
Court in Vi-)#,#! I!-$%ri) L%-. also reflects the view
ta7en )( the Courts in <ngland on the same issues. 3n the
case of A Hs. B
?
considering a similar situation& it has )een
held as follows B
8..an agreement as to the seat of an arbitration is
analogous to an exclusive jurisdiction clause. An
claim for a remedas to the validit of an
existing interim or final award is agreed to be made
onl in the courts of the place designated as the
seat of arbitration.! -emphasis supplied0.
:$.This Court in D#C,# I!-i+ L%-. ($1r+' again reiterated the
principle of law laid down in S$.i%#.# H)+<: I!-$%ri)
L%-. ($1r+'& wherein the law was ver( clearl( enunciated in
!ara 1#B
8The law which would appl( to the filing of the
award& to its enforcement and to its setting aside
would )e the law governing the agreement to
ar)itrate and the performance of that agreement.9
This judgment is rendered )( a three?Fudge 'ench.
:1.3t is noteworth( that the judgment in S$.i%#.# was not
,
2$$@ -10 +ll <.4. -Comm0 :,1
"C
dissented from in B7+%i+ I!%)r!+%i#!+* on which the
judgment in Henture 6lo)al is )ased. This again persuades
us to follow the law laid down in Vi-)#,#! ($1r+'.
:2.+gain this Court in @#"r+A I!&r+%r$,%$r) -two?Fudge
'ench0 considered a similar ar)itration agreement. 3t was
provided that the ar)itration proceedings shall )e conducted
in <nglish in *ingapore in accordance with the *ingapore
3nternational +r)itration Centre -*3+C0 4ules. -Clause 2@.10.
Clause 2@.2 provided that the ar)itration shall ta7e place in
*ingapore and )e conducted in <nglish language. This Court
held that having agreed that the seat of ar)itration would )e
*ingapore and that the curial law of the ar)itration
proceedings would )e *3+C 4ules& it was no longer open to
the appellant to contend that an application under *ection
11-#0 of the +r)itration +ct& 1,,# would )e maintaina)le.
:%.This judgment has specificall( ta7en into consideration the
law laid down in B7+%i+ I!%)r!+%i#!+* ($1r+' and V)!%$r)
2*#5+* ($1r+'. The same view has )een ta7en )( Delhi
High Court& 'om)a( High Court and the 6ujarat High Court&
",
in fact this Court in Vi-)#,#! has specificall( approved the
o)servations made )( the 6ujarat High Court in H+r-: Oi*
($1r+'.
:".The effect of choice of seat of ar)itration was considered )(
the Court of +ppeal in C Hs. D
10
. This judgment has )een
specificall( approved )( this Court in B+*,# ($1r+' and
reiterated in E!)r,#! ($1r+'. 3n C Hs. D ($1r+'&
the Court of +ppeal has o)servedB?
>Pri.+r: C#!,*$i#!
1#. 3 shall deal with r HirstSs arguments in due
course )ut& in m( judgment& the( fail to grapple with
the central point at issue which is whether or not& )(
choosing London as the seat of the ar)itration& the
parties must )e ta7en to have agreed that
proceedings on the award should )e onl( those
permitted )( <nglish law. 3n m( view the( must )e
ta7en to have so agreed for the reasons given )(
the judge. The whole purpose of the )alance
achieved )( the 'ermuda 1orm -<nglish ar)itration
)ut appl(ing New Lor7 law to issues arising under
the polic(0 is that judicial remedies in respect of the
award should )e those permitted )( <nglish law and
onl( those so permitted. r Hirst could not sa( -and
did not sa(0 that <nglish judicial remedies for lac7 of
jurisdiction on procedural irregularities under
sections #@ and #C of the 1,,# +ct were not
permittedJ he was reduced to sa(ing that New Lor7
judicial remedies were also permitted. That&
however& would )e a recipe for litigation and -what
is worse0 confusion which cannot have )een
1$
N2$$CO 1 Llo(d/s Law 4ep 2%,
:$
intended )( the parties. No dou)t New Lor7 law has
its own judicial remedies for want of jurisdiction and
serious irregularit( )ut it could scarcel( )e
supposed that a part( aggrieved )( one part of an
award could proceed in one jurisdiction and a part(
aggrieved )( another part of an award could
proceed in another jurisdiction. *imilarl(& in the case
of a single complaint a)out an award& it could not )e
supposed that the aggrieved part( could complain in
one jurisdiction and the satisfied part( )e entitled to
as7 the other jurisdiction to declare its satisfaction
with the award. There would )e a serious ris7 of
parties rushing to get the first judgment or of
conflicting decisions which the parties cannot have
contemplated.9
::.The aforesaid o)servations were su)se=uentl( followed )(
the High Court of Fustice Gueen/s 'ench Division&
Commercial Court -<ngland0 in S$*+.)Ri,+ CIA N+,i#!+*
D) S)"$r# SA Hs. E!)+ E!")!7+ri+ SA 4 E!)+
11
. 3n
la(ing down the same proposition& the High Court noticed
that the issue in this case depends upon the weight to )e
given to the provision in Condition 12 of the insurance polic(
that 8the seat of the ar)itration shall )e London& <ngland.9 3t
was o)served that this necessaril( carried with it the <nglish
Court/s supervisor( jurisdiction over the ar)itration process.
3t was o)served that 8this follows from the e5press terms of
the +r)itration +ct& 1,,# and& in particular& the provisions of
11
-2$120 ML 1"@#"
:1
*ection 2 which provide that !art 3 of the +r)itration +ct&
1,,# applies where the seat of the ar)itration is in <ngland
and Males or Northern 3reland. This immediatel( esta)lishes
a strong connection )etween the ar)itration agreement itself
and the law of <ngland. 3t is for this reason that recent
authorities have laid stress upon the locations of the seat of
the ar)itration as an important factor in determining the
proper law of the ar)itration agreement.9
:#.3n our opinion& these o)servations are full( applica)le to the
facts and circumstances of this case. The conclusion
reached )( the High Court would lead to the chaotic situation
where the parties would )e left rushing )etween 3ndia and
<ngland for redressal of their grievances. The provisions of
!art 3 of the +r)itration +ct 1,,# -3ndian0 are necessaril(
e5cludedJ )eing wholl( inconsistent with the ar)itration
agreement which provides 8that ar)itration agreement shall
)e governed )( <nglish law.9 Thus the remed( of the
respondent to challenge an( award rendered in the
ar)itration proceedings would lie under the relevant
provisions contained in +r)itration +ct& 1,,# of <ngland and
:2
Males. Mhether or not such an application would now )e
entertained )( the courts in <ngland is not for us to e5amine&
it would have to )e e5amined )( the Court of Competent
Furisdiction in <ngland.
P$5*i, P#*i,:9
:@.r. 6angul( has vehementl( argued that the issues involved
here relate to violation of pu)lic polic( of 3ndia. Therefore&
the applica)ilit( of !art 3 of the 3ndian +r)itration +ct cannot
)e e5cluded even if the seat of ar)itration is London. 3t would
also& according to r. 6angul(& ma7e no difference
that the ar)itration agreement specificall( provides for the
ar)itration agreement to )e governed )( the Laws of
<ngland. +ccording to r. 6angul(& proper law of the
contract would )e relevant to determine the =uestion as to
whether the interim final award would )e amena)le to
challenge under *ection %" of the +r)itration +ct& 1,,#. 3n
our opinion& the aforesaid su)mission of the learned counsel
runs counter to the well settled law in 3ndia as well as in
other jurisdictions. +s noticed earlier& r. 6angul( has
su)mitted that the disputes in relation to ro(alties& cess&
:%
service ta5 and the C+6 audit report are not ar)itra)le. 3n
support of this su)mission& he relies on the provisions
contained in +rticle 1:.1 read with +rticle %2.2. 4el(ing upon
these two +rticles& r. 6angul( su)mitted that the
o)ligation with regard to ta5es& ro(alties& rentals etc. are not
purel( contractual& the( are governed )( the relevant
statutor( provisions. He& therefore& placed strong reliance on
the judgment in V)!%$r) 2*#5+* ($1r+' in support of his
su)mission that since the disputes are not ar)itra)le& the
award cannot )e enforced under !art 33 of the +r)itration +ct&
1,,# )ut is amena)le to challenge under *ection %" of the
+ct. 3t would )e appropriate to point out that the judgment in
Henture 6lo)al is in two parts. The first part is )ased on
'hatia 3nternational Ltd.& wherein it is held as follows B?
8(2. TT.3n cases of international commercial ar)it?
rations held out of 3ndia provisions of !art 3 would
appl( unless the parties )( agreement& e5press or
implied& e5clude all or an( of its provisions. 3n that
case the laws or rules chosen )( the parties would
prevail. +n( provision& in !art 3& which is contrar( to
or e5cluded )( that law or rules will not appl(.9
:C.3n this case& the parties have )( agreement provided that the
juridical seat of ar)itration will )e in London. On the )asis of
the aforesaid agreement& necessar( amendment has )een
:"
made in the !*Cs. On the )asis of the agreement and the
consent of the parties& the +r)itral Tri)unal has made the
81inal !artial Consent +ward9 on 1"
th
*eptem)er& 2$11 fi5ing
the juridical seat -or legal place0 of ar)itration for the
purposes of ar)itration initiated under the claimants notice of
ar)itration dated 1#
th
Decem)er& 2$1$ in London& <ngland.
To ma7e it even further clear that the award also records
that an( hearing in the ar)itration ma( ta7e place in !aris&
1rance& *ingapore or an( other location the tri)unal
considers convenient. +rticle %%.12 stipulates that ar)itration
proceedings shall )e conducted in <nglish language. The
ar)itration agreement contained in +rticle %% shall )e
governed )( the laws of <ngland. + com)ined effect of all
these factors would clearl( show that the parties have )(
e5press agreement e5cluded the applica)ilit( of !art 3 of the
+r)itration +ct& 1,,# -3ndian0 to the ar)itration proceedings.
:,.Me are also una)le to agree with r. 6angul( that !art 3 of
the +r)itration +ct& 1,,# -3ndian0 would )e applica)le in this
case& in view of the law laid down )( this Court in V)!%$r)
2*#5+* E!"i!))ri!" -supra0. 3n our opinion& even the
::
second part of the ratio in V)!%$r) 2*#5+* E!"i!))ri!"
-supra0 from paragraph %2 of the judgment onwards would
not )e applica)le to the facts and circumstances of this case.
1irstl(& in our opinion& all the disputes raised )( the
petitioners herein are contractual in nature. *econdl(& the
performance of an( of these o)ligations would not lead to
an( infringement of an( of the laws of 3ndia per se. Thirdl(&
the non?o)stante clause which was under consideration in
V)!%$r) 2*#5+* is non?e5istent in the present case. 3n
V)!%$r) 2*#5+*& the court was concerned with direct
violation of 1oreign <5change anagement +ct. The actions
of the respondents therein would also have )een contrar( to
various provisions of the Companies +ct in the event the
shares were to )e transferred in accordance with the award.
Therefore& this Court was persuaded to ta7e the view that
inspite of the applica)ilit( of !art 3 having )een e5cluded as
the seat of ar)itration was outside nonetheless !art 3 would
appl( as the transfer of the shares would )e against the laws
of 3ndia and& therefore& violate pu)lic polic(. 3n our opinion&
such circumstances do not e5ist in the present case as there
is no danger of violation of an( statutor( provisions. !rima
:#
facie& it appears that there is no challenge to the 6a;ette
Notification. 3n fact& claim statement shows that the amounts
of ro(altiesDcess levied have )een paid. !ra(er is for
reim)ursement of the amounts paid& )ased on +rticles 1:.#
and 1:.@ of the !*C. There also seems to )e a claim for
ma7ing necessar( revisions and adjustment to the contract
to off?set the effect of an( changes in the law. Me fail to see
an( apparent or so patentl( o)vious violation of 3ndian Laws
in an( of these claims. The )asis for filing the petition under
*ection %" is that the +ppellants are )ound to o)e( the Laws
of the countr(. The appellants have nowhere claimed to )e
e5empted from the Laws of 3ndia. The( claim that the
6overnment of 3ndia& part( to the Contract& i.e.& !*C has
failed to see7 and o)tain e5emption as stipulated in the
contract. Mhether or not the claim has su)stance is surel(
an ar)itral matter. 3t is not the case of the appellants that
the( are not )ound )( the Laws of 3ndia& relating to the
performance of the contractual o)ligations under the !*Cs.
3n view of what we have said earlier& it is not possi)le to
sustain the conclusion reached )( the High Court. The
ar)itration agreement can not )e jettisoned on the plea that
:@
award& if made against the 6overnment of 3ndia& would
violate !u)lic !olic( of 3ndia. erel( )ecause the +r)itral
Tri)unal has held that claims are ar)itral does not mean that
the claims have )een accepted and an award adverse to
3ndia has )een given. Me& therefore& have no hesitation in
rejecting the su)mission made )( r. 6angul(. 1or the
same reasons& we are una)le to sustain the conclusions
reached )( the High Court of Delhi.

#$.+nother good reason for not accepting or approving the
conclusions reached )( the High Court is that it has failed to
distinguish )etween the law applica)le to the proper law of
the contract and proper law of the ar)itration agreement.
The High Court has also failed to notice that )( now it is
settled& in almost all international jurisdictions& that the
agreement to ar)itrate is a separate contract distinct from
the su)stantive contract which contains the ar)itration
agreement. This principle of severa)ilit( of the ar)itration
agreement from the su)stantive contract is indeed statutoril(
recogni;ed )( *ection 1# of the 3ndian +r)itration +ct& 1,,#.
*ection 1#-10 specificall( provides as underB?
:C
816.C#.1)%)!,) #& +r5i%r+* %ri5$!+* %# r$*) #! i%
A$ri-i,%i#!.; -10 The ar)itral tri)unal ma( rule on
its own jurisdiction& including ruling on an( o)jec?
tions with respect to the e5istence or validit( of the
ar)itration agreement& and for that purpose&??
-a0 an ar)itration clause which forms part of a con?
tract shall )e treated as an agreement independent
of the other terms of the contractJ and
-)0 a decision )( the ar)itral tri)unal that the con?
tract is null and void shall not entail ipso jure the in?
validit( of the ar)itration clause.9
#1.+ )are perusal of the aforesaid would show that the
ar)itration agreement is independent of the other terms of
the contract. 1urther& even if the contract is declared null
and void& it would not lead to the foregone conclusion that
the ar)itration clause in invalid. The aforesaid provision has
)een considered )( this Court in a num)er of cases& which
are as followsB?
R)<+ E*),%ri, C+r C#.1+!: P. L%-. Hs. 2r))! M#5i* .
12
&
T #-+: H#.) +!- I!&r+%r$,%$r) P<%. L%-. Hs. L$-7i+!+ I.;
1r#<).)!% Tr$% +!- A!r.&
1%
& E!)r,#! (I!-i+' L%-. / Or. Hs.
E!)r,#! 2MBH / A!r.&
1"
F #r*- S1#r% 2r#$1 (M+$ri%i$' L%-.
Hs. MSM S+%)**i%) (Si!"+1#r)' PTC L%-. NCivil +ppeal No. C,:
12
-2$120 2 *CC ,%
1%
2$1% -@0 *C+L< %2@
1"
2$1" -10 +r). L4 2:@ -*C0
:,
of 2$1"O
#2.This principle of separa)ilit( permits the parties to agreeB
that law of one countr( would govern to the su)stantive
contract and laws of another countr( would appl( to the
ar)itration agreement. The parties can also agree that even
the conduct of the reference would )e governed )( the law
of another countr(. This would )e rare& as it would lead to
e5tremel( comple5 pro)lems. 3t is e5pected that reasona)le
)usinessman do not intend a)surd results. 3n the present
case& the parties had )( agreement provided that the
su)stantive contract -!*C0 will )e governed )( the laws of
3ndia. 3n contradistinction& it was provided that the ar)itration
agreement will )e governed )( laws of <ngland. Therefore&
there was no scope for an( confusion of the law governing
the !*C with the law governing the ar)itration agreement.
This principle of severa)ilit( is also accepted specificall(
under +rticle %%.1$ of the !*C& which is as underB?
8The right to ar)itrate disputes and claims under this
Contract shall survive the termination of this con?
tract.9
#$
#%.Me are& therefore& una)le to uphold the conclusions
recorded )( the High Court that the applica)ilit( of the
<nglish Law would )e limited in its application onl( to the
conduct of the reference. 1or the same reasons& we are
una)le to accept the su)missions made )( r.
6angul( on this issue.
#".3n 1,C2& the 6overnment provided a model !roduction
*haring Contract to potential )idders& which provided a
governing law clause& which read as followsB?
8%2.1 This contract shall )e governed and inter?
preted in accordance with laws of 3ndia.9

This was specificall( amended and incorpor?
ated in the present !*Cs signed on 22
nd
Decem)er&
1,," and provided that the governing law clause
-%2.10 would )e 8su)ject to the provision of +rticle
%%.129.
#:.Considering the aforesaid two provisions& it leaves no
manner of dou)t that +rticle %2.2 would have no impact on
the designated juridical seat as well as governing law of the
#1
ar)itration agreement. This would )ecome evident from a
perusal of the 1inal !artial Consent +ward dated 1"
th
*eptem)er& 2$11& signed )( all the three mem)ers of the
ar)itral tri)unal recording that the juridical seat of the
ar)itration initiated under the Claimant/s Notice dated 1#
th
Decem)er& 2$1$ shall )e London& <ngland. Therefore& we
are una)le to accept the conclusion reached )( the Delhi
High Court and the su)mission made )( r. 6angul( that
+r)itration +ct& 1,,# -!art 30 would )e applica)le to the
ar)itration agreement.
##.r. 6angul( has ne5t sought to persuade us that the seat of
ar)itration shall )e in 3ndia as the !*C is governed )( the
law of 3ndia. +ccording to r. 6angul(& laws of 3ndia would
include the +r)itration +ct& 1,,#. Therefore& irrespective of
the provisions contained in +rticle %%.12& +r)itration +ct&
1,,# would )e applica)le to ar)itration proceedings. The
<nglish law would )e applica)le onl( in relation to the
conduct of the ar)itration upto the passing of the !artial 1inal
+ward. Me are una)le to accept the aforesaid su)missions
of r. 6angul(. +s noticed earlier& +rticle %2.1 itself
#2
provides that it shall )e su)ject to the provision of +rticle
%%.12. +rticle %%.12 provides that the ar)itration agreement
contained in this +rticle shall )e governed )( the laws of
<ngland. The term .laws of <ngland/ cannot )e given a
restricted meaning confined to onl( curial law. 3t is
permissi)le under law for the parties to provide for different
laws of the contract and the ar)itration agreement and the
curial law. 3n N+<i)r+ A.+C#!i,+ SA ($1r+'& the Court of
+ppeal in <ngland considered an agreement which
contained a clause providing for the jurisdiction of the courts
in Lima& !eru in the event of judicial dispute and at the same
time contained a clause providing that the ar)itration would
)e governed )( the <nglish Law and the procedural law of
ar)itration shall )e the <nglish Law. The Court of +ppeal
o)served as follows B?
8+ll contracts which provide for ar)itration and
contain a foreign element ma( involve three
potentiall( relevant s(stems of lawB -10 the law
governing the su)stantive contractJ -20 the law
governing the agreement to ar)itrate and the
performance of that agreementJ -%0 the law
governing the conduct of the ar)itration. 3n the
majorit( of cases all three will )e the same. 'ut -10
will often )e different from -20 and -%0. +nd
occasionall(& )ut rarel( -20 ma( also differ from -%0.9
#%
#@.1rom the a)ove& it is evident that it was open to the parties
to agree that the law governing the su)stantive contract
-!*C0 would )e different from the law governing the
ar)itration agreement. This is precisel( the situation in the
present case. +rticle %2.1 specificall( provides that the
performance of the contractual o)ligations under the !*C
would )e governed and interpreted under the laws of 3ndia.
*o far as the alternative dispute redressal agreement i.e. the
ar)itration agreement is concerned& it would )e governed )(
laws of <ngland. There is no )asis on which the respondents
can )e heard to sa( that the applica)ilit( of laws of <ngland
related onl( to the conduct of ar)itration reference. The law
governing the conduct of the ar)itration is interchangea)l(
referred to as the curial law or procedural law or the lex fori.
The delineation of the three operative laws as given in
N+<i)r+ A.+C#!i,+ ($1r+' has )een specificall( followed
)( this Court in the case of S$.i%#.# ($1r+0. The court
also& upon a surve(& of a num)er of decisions rendered )(
the <nglish Courts and after referring to the views e5pressed
)( learned commentators on 3nternational Commercial
#"
+r)itration concluded thatB?
>16. The law which would appl( to the filing of the
award& to its enforcement and to its setting aside
would )e the law governing the agreement to ar)it?
rate and the performance of that agreement.9
#C.3n coming to the aforesaid conclusion& this Court relied on a
passage from Law and !ractice of Commercial +r)itration in
<ngland& 2
nd
<dn. )( ustill and 'o(d which is as under B
8+n agreed reference to ar)itration involves two
groups of o)ligations. The first concerns the mutual
o)ligations of the parties to su)mit future disputes&
or an e5isting dispute to ar)itration& and to a)ide )(
the award of a tri)unal constituted in accordance
with the agreement. 3t is now firml( esta)lished that
the ar)itration agreement which creates these o)lig?
ations is a separate contract& distinct from the su)?
stantive agreement in which it is usuall( em)edded&
capa)le of surviving the termination of the su)stant?
ive agreement and suscepti)le of premature termin?
ation )( e5press or implied consent& or )( repudi?
ation or frustration& in much the same manner as in
more ordinar( forms of contract. *ince this agree?
ment has a distinct life of its own& it ma( in principle
)e governed )( a proper law of its own& which need
not )e the same as the law governing the su)stant?
ive contract.
"he second group of obligations# consisting of what
is generall referred to as the $curial law% of the ar&
bitration# concerns the manner in which the parties
and the arbitrator are re'uired to conduct the refer&
ence of a particular dispute. +ccording to the <ng?
lish theor( of ar)itration& these rules are to )e ascer?
tained )( reference to the e5press or implied terms
of the agreement to ar)itrate. This )eing so& it will
#:
)e found in the great majorit( of cases that the curi&
al law# i.e.# the law governing the conduct of the ref&
erence& is the same as the law governing the o)liga?
tion to ar)itrate. 3t is& however& open to the parties to
su)mit& e5pressl( or )( implication& the conduct of
the reference to a different law from the one govern?
ing the underl(ing ar)itration agreement. In
such a case# the court loo(s first at the arbitration
agreement to see whether the dispute is one which
should be arbitrated# and which has validl been
made the subject of the reference# it then loo(s 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.
R R R
3t ma( therefore )e seen that pro)lems arising out
of an ar)itration ma(& at least in theor(& call for the
application of an( one or more of the following laws
Q
). The proper law of the contract& i.e.& the law
governing the contract which creates the su)?
stantive rights of the parties& in respect of
which the dispute has arisen.
*. The proper law of the ar)itration agree?
ment& i.e.& the law governing the o)ligation of
the parties to su)mit the disputes to ar)itra?
tion& and to honour an award.
+. "he curial law# i.e.# the law governing the
conduct of the individual reference.
R R R
). "he proper law of the arbitration agreement gov&
erns the validit of the ar)itration agreement& the
=uestion whether a dispute lies within the scope of
##
the ar)itration agreementJ the validit( of the notice
of ar)itrationJ the constitution of the tri)unalJ the
=uestion whether an award lies within the jurisdic?
tion of the ar)itratorJ the formal validit( of the awardJ
the =uestion whether the parties have )een dis?
charged from an( o)ligation to ar)itrate future dis?
putes.
*. "he curial law governs the manner in which the
reference is to be conducted, the procedural
powers and duties of the arbitrator, 'uestions of
evidence, the determination of the proper law of the
contract.
+. The proper law of the reference governs the
=uestion whether the parties have )een discharged
from their o)ligation to continue with the reference
of the individual dispute.
R R R
3n the a)sence of e5press agreement& there is a
strong prima facie presumption that the parties in?
tend the curial law to )e the law of the .seat/ of the
ar)itration& i.e.& the place at which the ar)itration is
to )e conducted& on the ground that that is the
countr( most closel( connected with the proceed?
ings. *o in order to determine the curial law in the
a)sence of an e5press choice )( the parties it is
first necessar( to determine the seat of the ar)itra?
tion& )( construing the agreement to ar)itrate.9
#,.The same legal position is reiterated )( this Court in D#C,#
($1r+'. 3n paragraph 12 of the judgment& it is o)served as
follows B
>12. 3n the )ac7drop of these conflicting claims& the
#@
=uestion )oils down to as to what is the true inter?
pretation of +rticle 2%. This +rticle 2% will have to )e
read in the )ac7drop of +rticle 22 and more particu?
larl(& +rticle 22.1. 3t is clear from the language of
+rticle 22.1 that the whole agreement would )e gov?
erned )( and construed in accordance with the laws
of The 4epu)lic of >orea. 3t is for this reason that
the respondent heavil( relied on the law laid down
in -umitomo .eav Industries Ltd. v. /012 Ltd.
#
This judgment is a complete authorit( on the pro?
position that the ar)itra)ilit( of the dispute is to )e
determined in terms of the law governing ar)itration
agreement and the ar)itration proceedings have to
)e conducted in accordance with the curial law. This
Court& in that judgment& rel(ing on 3ustill and 4odB
"he Law and 5ractice of 2ommercial Arbitration in
6ngland& 2nd <dn.& o)served in para 1: that where
the law governing the conduct of the reference is
different from the law governing the underl(ing ar)it?
ration agreement& the court loo7s to the ar)itration
agreement to see if the dispute is ar)itra)le& then to
the curial law to see how the reference should )e
conducted& 8and then returns to the first law in order
to give effect to the resulting award9. 3n para 1#& this
Court& in no uncertain terms& declared that the law
which would appl( to the filing of the award& to its
enforcement and to its setting aside would )e the
law governing the agreement to ar)itrate and the
performance of that agreement.
@$.Me are in respectful agreement with the aforesaid judgment.
@1.3n view of the aforesaid )inding precedent& we are una)le to
accept the su)mission of r. 6angul( that the +r)itration
+ct& 1,,# has not )een e5cluded )( the parties )(
#C
agreement. 1or the same reasons& we are una)le to
approve the conclusions reached )( the Delhi High Court
that reference to laws of <ngland is onl( confined to the
procedural aspects of the conduct of the ar)itration
reference.
@2.Me are also una)le to agree with the su)mission of r.
6angul( that since the issues involved herein relate to the
pu)lic polic( of 3ndia& !art 3 of the +r)itration +ct& 1,,# would
)e applica)le. +pplica)ilit( of !art 3 of +r)itration +ct& 1,,# is
not dependent on the nature of challenge to the award.
Mhether or not the award is challenged on the ground of
pu)lic polic(& it would have to satisf( the pre?condition that
the +r)itration +ct& 1,,# is applica)le to the ar)itration
agreement. 3n our opinion& the High Court has committed a
jurisdictional error in holding that the provisions contained in
+rticle %%.12 is relevant onl( for the determination of the
curial law applica)le too the proceedings. Me have alread(
noticed earlier that the parties )( agreement have provided
that the juridical seat of the ar)itration shall )e in London.
Necessar( amendment has also )een made in the !*Cs& as
#,
recorded )( the 1inal !artial Consent +ward dated 1"
th
*eptem)er& 2$11. 3t is noteworth( that the +r)itration +ct&
1,,# does not define or mention juridical seat. The term
$juridical seat% on the other hand is specificall( defined in
*ection % of the <nglish +r)itration +ct. Therefore& this would
clearl( indicate that the parties understood that the
ar)itration law of <ngland would )e applica)le to the
ar)itration agreement.
@%.3n view of the aforesaid& we are una)le to uphold the
conclusion arrived at )( the Delhi High Court that the
applica)ilit( of +r)itration +ct& 1,,# to the ar)itration
agreement in the present case has not )een e5cluded.
@".3n view of the a)ove& we hold thatB
-i0 The petition filed )( respondents under *ection
%" of the +r)itration +ct& 1,,# in the Delhi High
Court is not maintaina)le.
-ii0 Me further over?rule and set aside the conclusion
@$
of the High Court that& even though the ar)itra?
tion agreement would )e governed )( the laws of
<ngland and that juridical seat of ar)itration
would )e in London& !art 3 of the +r)itration +ct
would still )e applica)le as the laws governing
the su)stantive contract are 3ndian Laws.
-iii0 3n the event& a final award is made against the
respondent& the enforcea)ilit( of the same in 3n?
dia& can )e resisted on the ground of !u)lic
!olic(.
-iv0 The conclusion of the High Court that in the
event& the award is sought to )e enforced outside
3ndia& it would leave the 3ndian part( remediless
is without an( )asis as the parties have consen?
suall( provided that the ar)itration agreement will
)e governed )( the <nglish law. Therefore& the
remed( against the award will have to )e sought
in <ngland& where the juridical seat is located.
However& we accept the su)mission of the appel?
@1
lant that since su)stantive law governing the con?
tract is 3ndian Law& even the Courts in <ngland&
in case the ar)itra)ilit( is challenged& will have to
decide the issue )( appl(ing 3ndian Law vi;. the
principle of pu)lic polic( etc. as it prevails in 3ndi?
an Law.
@:.3n view of the a)ove& the appeal is allowed and the
impugned judgment of the High Court is set aside.
000000000000.J.
GS$ri!-)r Si!"7 NiAA+rH
000000000000..J.
GA.D.Si=riH
N)6 D)*7iI
M+: 2E3 2014.
ITEM NO.1-A COURT No.2 SECTION XIV
(For judgment)
S U P R E M E C O U R T O F I N D I
RECORD OF PROCEEDINGS
CIVIL APPEAL NO....... OF 2014
(Arising out of S.L.P. (Civil) No. 20041 of 2013)
Reliance Industries Ltd. & Anr. Appellant(s)
Versus
U.O.I. Respondent(s)
DATE :28/05/2014 This matter was called
on for pronouncement of judgment today.
For Appellant(s) Mr.Sameer Parekh, Adv.
Mr.Utsav Trivedi, Adv. for
M/s P.H. Parekh & Co.
For Respondent(s) Mr. A.K. Ganguli, Sr.Adv.
Mr. Abhijeet Sinha, Adv.
Ms. Swati Sinha, Adv.
Mr. Vishal Gehrana, Adv.for
M/s Fox Mandal & Co.
Hon'ble Mr. Justice Surinder Singh Nijjar pronounced the
judgment of the Bench comprising His Lordship and Hon'ble Mr.
Justice A.K. Sikri.
Leave granted.
The appeal is allowed in terms of the signed judgment.
(Usha Bhardwaj) (M.S. Negi)
(A.R.-cum-P.S.) Assistant Registrar
[Signed reportable judgment is placed on the file ]

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