UNIVERSITY MOOT COURT SELECTIONS 2017

WINTER UNIVERSITY MOOT COURT SELECTIONS

MOOT PROBLEM

IN THE SUPREME COURT OF INDIA

(I) TEL SHODHAN LIMITED

V.

GOVERNMENT OF RAJASTHAN & ORS.

[CIVIL APPEAL NO. 08/2017]

ALONG WITH

(II) MPSL

V.

OGX & ORS.

[APPEAL NO. 19/2017]

ALONG WITH

(III) OIL

V.

TSL

[CIVIL APPEAL NO. 309/2017]

I. In Rajasthan, Petroleum Exploration & Development activities have gained momentum after
the largest oil discovery Mangla in 2004 in Barmer-Sanchore Basin in last three decades of
the country. Presently, exploration for Oil, Gas & CBM (Coalbed Methane) is underway in
12 Blocks of Rajasthan by National/Multinational Companies against 21 blocks carved out
covering about 65ooo sq. km area. Rajasthan has about 1,50,000 sq. km on-land area under 4
petroliferrous basins. Thus, Rajasthan has the maximum on-land area of the country available
for exploration.
 II. For Petroleum Exploration & Development (PED) the state government signed a multi-
party Petroleum Exploration & Development Agreement (PEDA) with Desert Land
Petroleum Resource Corporation (DLPRC), OGX Petrleo e Gs Participaes S.A.
(OGX), Tel Shodhan Limited (TSL), and Oil India Limited (OIL). All the parties are
jointly known as Barmer-Bikaner Basin Consortium (Consortium). DLPRC is a residence
company of United Kindom, OGX is Brazilian publicly listed oil and gas company, TSL is a
company registered under the Companies Act, 1956 and Oil India Limited (OIL) is a
Government of India enterprise.
III. PEDA, inter alia, provided for resolution of disputes between the parties by way of
arbitration to be administered by International Chambers of Commerce (ICC) in London,
England, under laws of the United Kingdom. The Clause 19(1) provides that Law of the
United Kingdom and international customary commercial laws will be applicable on disputes
arising out of agreement between the parties.
IV. In terms of the agreement, man power supply agreement was executed between DLPRC and
Man Power Supply Limited (MPSL), a company registered under the Companies Act,
2013 and engaged in supplying semi-skilled and skilled workers. This agreement also
contained an arbitration clause having seat of arbitration in ICC, London. The man power
supplied by MPSL is used for the Consortium works but payment was made by DLPRC only.
V. In 2016, TSL initiated an arbitration proceeding in ICC, London against OIL and the
Government of Rajasthan. The issue was related to encashment of Bank Guarantees and
deduction of Service Tax on the services provided under the PEDA by TSL to OIL and State
of Rajasthan. On receipt of arbitration proceeding notice, the Govt. of Rajasthan filed an anti-
arbitration injunction suit before the District Court, Jaipur. However, OIL agreed to get
involved in arbitration proceeding in London. The Govt. of Rajasthan contended that the
agreement between the Govt., OIL and TSL pertaining to applicability of law of foreign
country on dispute arising out of the agreement and on arbitration proceedings is void under
Section 23 of Indian Contract Act as it is against the public policy of the nation. The court
granted the injunction in favour of the Government and also declared the arbitration clause
and Clause 19(1) void as it is applicable on disputes between Govt. of Rajasthan, OIL and
TSL only. The court observed that under the public policy of the country Indian nationals are
not permitted to derogate from Indian law.
 VI. Aggrieved by the decision of the District Court, TSL filed a Special Leave Petition (SLP)
before the Supreme Court on the following grounds:
i. Decision of the District Court is per-in curium of laws enacted by the Parliament and
laws declared by the Supreme Court.
ii. Decision of the court and action of the Government violates its fundamental right of
trade and occupation guaranteed under Art. 19 of the Constitution etc.

The Supreme Court admitted the SLP as Civil Appeal no. 08/2017 as the case involves
substantial question of law and may require revisit of earlier decision passed by it on similar
issues.

VII. Meanwhile, OGX initiated arbitration proceedings against DLPRC and MPSL for
compensation for damage occurred due to negligence of workers. The damage was allegedly
caused by the workers engaged by DLPRC through MPSL. In response to it, MPSL filed an
injunction suit before District Court with contention that MPSL does not have any direct
relation with OGX, and there isnt any arbitration agreement between them. It argued that
merely because workers of MPSL are engaged for consortium as whole does not bring MPSL
into the ambit of disputes under PEDA.
VIII. The District Court rejected the suit filed by MPSL on the ground that seat of arbitration is
outside India thus such suit cannot be entertained by Indian courts. Further, the court ruled
that there is no prohibition under law in making sub-contractors like MPSL a party in
arbitration proceeding between leading parties of a contract. Aggrieved, MPSL also filed an
SLP before the Supreme Court. The Supreme Court admitted the SLP as Civil Appeal no.
19/2017 as the case involves substantial question of law and requires revisit of earlier
decision passed by it on similar issues.
IX. Before the Supreme Court decided the above SLPs, arbitrators of ICC, London issued an
award in the proceeding between TSL and OIL. The award was in the favour of TSL. Taking
note of the legal proceeding between TSL and the Govt. of Rajasthan, OIL filed an
application under Sec. 34 of the Arbitration and Conciliation Act, 1996 for setting aside the
award. High Court of Rajasthan rejected the application of OIL and ruled that there is no bar
under the Indian law in deciding the seat of arbitration outside India and applicability of
foreign law on Indian nationals in international commercial arbitration wherein at least one
 party is foreign national or company. OIL filed a regular appeal before the Supreme Court
against the decision of High Court, which has been admitted by the Supreme Court. (Listed
as Civil Appeal no. 309/2017).

X. The Supreme Court decided to hear all the three appeals on merit of 4th /5th February, 2017.

ISSUES INVOLVED: -

Civil Appeal no. 08/2017

I. Whether the decision of the district court is per-in curium of laws enacted by the
Parliament and laws declared by the Supreme Court in relation to choosing the seat of
arbitration outside India, choice of law governing the proceedings, and substantive laws of
governing the contract?
II. Whether the decision of the district court and action of the Government violates TSLs
fundamental right of trade and occupation guaranteed under Art. 19 of the Constitution?

Civil Appeal No. 19/2017

III. Whether MPSL can be made a party to arbitration proceedings?

Civil Appeal no. 309/2017

IV. Whether the High Court was correct in not setting aside the application under S. 34 of
the Arbitration and Conciliation Act of 1996?

NOTE:
1. PEDA and Man Power Supply Agreement were executed in September, 2014.
2. The Constitution of India and all the laws enacted by the parliament of India and State
Legislature of Rajasthan are binding in toto.

This Moot Problem has been drafted by Mr. Ramesh Kumar Maali, Alumnus from the 2015
Batch. Any attempt to contact him in relation to the same shall lead to disqualification of the
concerned team.