2015 (9) TMI 1629 - SC - Indian Laws

Maintainability of petition - Section 14 of the Arbitration and Conciliation Act, 1996 - Foreign Awards - venue of conciliation or arbitration proceedings pursuant to this Article chosen is London, England and shall be conducted in the English Language - arbitration agreement was governed by the law of India - applicability of Part-I of the Arbitration Act, 1996 - Held that - This Court has held that since the substantive law of the contract was Indian law and since the arbitration clause was part of the contract, the arbitration clause would be governed by Indian law and not by the Rules of the International Chamber of Commerce. This being the case, it was held that the mere fact that the venue chosen by the ICC Court for the conduct of the arbitration proceeding was London does not exclude the operation of the Act which dealt with domestic awards i.e. the Act of 1940. The theory of concurrent jurisdiction was expressly given a go-by with the dropping of Section 9(b) of the Foreign Awards Act, while enacting Part-II of the Arbitration Act, 1996, which repealed all the three earlier laws and put the law of arbitration into one statute, albeit in four different parts. This Court has already determined both that the juridical seat of the arbitration is at London and that the arbitration agreement is governed by English law. This being the case, it is not open to the Union of India to argue that Part-I of the Arbitration Act, 1996 would be applicable. A Section 14 application made under Part-I would consequently not be maintainable - SLP dismissed.

Summary

Issues Involved:
1. Jurisdiction and applicability of Part I of the Arbitration and Conciliation Act, 1996.
2. Validity of the partial consent award dated 14.09.2011.
3. Applicability of the principle of res judicata.

Detailed Analysis:

1. Jurisdiction and Applicability of Part I of the Arbitration and Conciliation Act, 1996:
The core issue is whether Part I of the Arbitration Act, 1996 applies to the arbitration agreement, given that the seat of arbitration is outside India. The Supreme Court's earlier judgment on 28.05.2014 in Reliance Industries Limited v. Union of India concluded that Part I of the Arbitration Act, 1996 does not apply because the arbitration agreement is governed by English law, and the juridical seat is London. The Court emphasized that "the provisions of Part I of the Arbitration Act, 1996 (Indian) are necessarily excluded; being wholly inconsistent with the arbitration agreement which provides 'that arbitration agreement shall be governed by English law'." This judgment was reaffirmed by dismissing the review and curative petitions.

2. Validity of the Partial Consent Award Dated 14.09.2011:
The Solicitor General argued that the partial consent award was without jurisdiction, as it was contrary to clause 34.2 of the PSC, which requires written agreement by all parties for any amendments. Since ONGC did not agree, the award was deemed invalid. However, the Supreme Court noted that the Union of India had already availed itself of remedies under the UNCITRAL Arbitration Rules and had its objections rejected by the Permanent Court of Arbitration. Therefore, the argument against the partial consent award was dismissed.

3. Applicability of the Principle of Res Judicata:
The Solicitor General contended that the issue of jurisdiction could be raised despite the dismissal of review and curative petitions, citing that res judicata does not apply to jurisdictional questions. However, the Court held that the effect of clause 34.2 raises a mixed question of fact and law, not a pure question of jurisdiction. Consequently, the principle of res judicata applied, and the Union of India was precluded from re-litigating the issue. The Court stated, "both on grounds of res judicata as well as the law laid down in the judgment dated 28.5.2014, this application under Section 14 deserves to be dismissed."

Conclusion:
The Supreme Court upheld its previous decision that Part I of the Arbitration Act, 1996 does not apply to the arbitration agreement, as the juridical seat is London and the agreement is governed by English law. The partial consent award was deemed valid, and the principle of res judicata barred the Union of India from re-litigating the jurisdictional issue. Consequently, the Special Leave Petition was dismissed, affirming the Delhi High Court's judgment.