2013 Supreme(Del) 329

High Court of Delhi
MANMOHAN SINGH, J.
Union of India
Versus
Reliance Industries Ltd & Another
OMP No. 46 of 2013
Decided on : 22-03-2013

Headnote:

Whether the Indian courts have jurisdiction to entertain the objections raised by the petitioner under Section 34 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as the "Act") challenging the Final Partial Award dated 12th September, 2012 passed by the Arbitral Tribunal comprising the Chairman and two Members, ordering that the respondents' claim in respect of Royalties, Cess, Service Tax and CAG Audit are arbitrable, by rejecting the preliminary objections of the petitioner relating to the arbitrability of the said claims as mentioned in the Statement of Claim.

Fact of the Case:

On 22nd December, 1994, two Production Sharing Contracts (PSCs) came to be executed between the Ministry of Petroleum and Natural Gas, Government of India, Oil and Natural Gas Commission, Reliance Industries Ltd. (respondent No.1) and Enron Oil and Gas India Limited (EOGIL) for the exploration and production of petroleum from the Tapti and Panna Mukta fields respectively. In 2002, BG Exploration and Production India Limited (respondent No.2) acquired the share capital of EOGIL and was substituted in place of EOGIL by amendments to the PSCs. The respondents are admittedly parties to the two PSCs relating to the Tapti Gas and Panna Mukta Oil Fields, dated 22nd December, 1994. The petitioner and Oil & Natural Gas Corporation Limited are also parties to the PSCs. The relevant provision of Article 15.1 the PSCs reads as under:- “Article 15: Taxes, Royalties, Rentals, etc. 15.1 The Companies and the operations under this Contract shall be subject to all fiscal legislations of India, except where pursuant to any authority granted to under any applicable law, they are exempt wholly and partly from the application of the provisions of a particular law or as otherwise provided herein…”

Finding of the Court:

The court held that the intention of the parties under the agreement was always to remain subject to Indian laws and not to contravene them, further it was only for conducting the arbitration and for the matters contained in the arbitration agreement under clause/Article 33, the parties had intended to govern themselves by the laws of England and not for all other purposes. Consequently, it is difficult to infer any implied exclusion of Indian law by mere reading of clauses of the agreement.

Issues: Whether the Indian courts have jurisdiction to entertain the objections raised by the petitioner under Section 34 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as the "Act") challenging the Final Partial Award dated 12th September, 2012 passed by the Arbitral Tribunal comprising the Chairman and two Members, ordering that the respondents' claim in respect of Royalties, Cess, Service Tax and CAG Audit are arbitrable, by rejecting the preliminary objections of the petitioner relating to the arbitrability of the said claims as mentioned in the Statement of Claim.

Ratio Decidendi: The court observed that the choice of law in relation to arbitration agreement is confined to the agreement contained in clause 33. If one has to read the said clause in isolation without reading clause 32.2 together, then the exclusion which can be inferred by the operation of the said clause is in relation to matters contained in clause 33 which are all matters of curial law. All these matters are the ones which have role to play in the conduct of arbitration proceedings and end at the passing of the award and not the ones which are concerned with challenge or the violation. The issue of the arbitrability of the dispute under the challenge is something which is not forming part of clause 33 and thus no exclusion of Indian law can be inferred when there exists clause 32.2 which specifically provides for not to contravene Indian laws.

Final Decision: The court held that the objection raised by the respondents relating to lack of jurisdiction of Indian court on the count of express choice of laws provisions cannot be sustained as Indian laws including provisions of Part 1 of the Act are not expressly nor impliedly excluded. The said objection is therefore rejected.