UNION OF INDIA versus HARDY EXPLORATION AND PRODUCTION (INDIA) INC on 1 May 2018

662

SUPREME COURT REPORTS

[2018] 5 S.C.R.

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UNION OF INDIA

v.

HARDY EXPLORATION AND PRODUCTION (INDIA) INC

(Civil Appeal No. 4628 of 2018)

BMAY 01, 2018

[R. K. AGRAWAL AND ABHAY MANOHAR SAPRE, JJ.]

Arbitration Law – International Commercial Arbitration –Award passed in respondent’s favour in an international commercialCarbitration proceeding between the appellant and respondent(foreign company) – Application filed by appellant u/s.34,Arbitration and Conciliation Act, 1996 against the respondentchallenging the legality of the award passed – Respondent raisedobjections inter alia that Indian Courts have no jurisdiction toentertain such application – Objection upheld by High Court –DIssue as to when the arbitration agreement specifies the “venue”for holding arbitration sittings by the arbitrators but does not specifythe “seat”, then on what basis and by which principle, the partieshave to decide the place of “seat” for determining the applicabilityof laws of a particular country for deciding the post awardEarbitration proceedings – Held: Though, the question regardingthe “seat” and “venue” for holding arbitration proceedings by thearbitrators arising under the Arbitration Agreement/InternationalCommercial Arbitration Agreement is primarily required to bedecided keeping in view the terms of the arbitration agreement itself,but having regard to the law laid down by Supreme Court in severalFdecisions, this is a fit case to exercise power under Or.VI, r.2, SupremeCourt Rules, 2013 and to refer to a larger Bench – Arbitration andConciliation Act, 1996 – s.34 – Supreme Court Rules, 2013 – Or.VI,r.2.

Directing the matter to be placed before the Hon’ble ChiefGJustice of India for constituting appropriate Bench, the Court H

HELD: 1.1 Though, the question regarding the “seat” and“venue” for holding arbitration proceedings by the arbitratorsarising under the Arbitration Agreement/International Commercial Arbitration Agreement is primarily required to bedecided keeping in view the terms of the arbitration agreementitself, but having regard to the law laid down by this Court inseveral decisions by the Benches of variable strength, and furthertaking into consideration the submissions urged by the counselsfor the parties and also keeping in view the issues involved inthe appeal, which frequently arise in International CommercialArbitration matters, this is a fit case to exercise power underOrder VI Rule 2 of the Supreme Court Rules, 2013 and referthis case (appeal) to be dealt with by the larger Bench of thisCourt for its hearing. [Para 23][670-A-C]

National Thermal Power Corporation v. Singer Co. andOrs. (1992) 3 SCC 551 : [1992] 3 SCR 106 ; SumitomoHeavy Industries Ltd. v. ONGC Ltd. and Ors. (1998) 1SCC 305 : [1997] 6 Suppl. SCR 186 ; SundaramFinance Ltd. v. NEPC India Ltd. (1999) 2 SCC 479 :[1999] 1 SCR 89 ; Bhatia International v. Bulk TradingS.A. and Anr. (2002) 4 SCC 105 : [2002] 2 SCR 411 ;Venture Global Engineering v. Satyam ComputerServices Ltd. & Anr. (2008) 4 SCC 190 : [2008] 1 SCR501 ; Indtel Technical Services Pvt. Ltd. v. W.S. AtkinsRail Ltd. (2008) 10 SCC 308 : [2008] 12 SCR 673 ;Bank of India & Anr. v. K. Mohan Das & Ors. (2009) 5SCC 313 : [2009] 5 SCR 118 ; Citation Infowares Ltd.v. Equinox Corporation (2009) 7 SCC 220 : [2009] 6SCR 737 ; State of Rajasthan & Anr. v. Ferro ConcreteConstruction (P) Ltd. (2009) 12 SCC 1 : [2009] 10 SCR31 ; Videocon Industries Limited v. Union of India andAnr. (2011) 6 SCC 161 : [2011] 8 SCR 569 ; DozcoIndia Private Ltd. v. Doosan Infracore Co. Limited(2011) 6 SCC 179 : [2010] 12 SCR 259 ; YograjInfrastructure Limited v. Ssang Yong Engineering andConstruction Co. Limited (2011) 9 SCC 735 : [2011]14 SCR 301 ; Bharat Aluminium Company v. KaiserAluminium Technical Services INC (2012) 9 SCC 552 :[2012] 12 SCR 327 ; Enercon (India) Ltd. & Ors. v.Enercon GMBH & Anr. (2014) 5 SCC 1 : [2014] 2 SCR855 ; Reliance Industries Limited and Anr. v. Union of A

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664SUPREME COURT REPORTSAIndia (2014) 7 SCC 603 : [2014] 6 SCR 456 ; HarmonyInnovation Shipping Ltd. v. Gupta Coal India Ltd. &Anr. (2015) 9 SCC 172 : [2015] 2 SCR 697 ; Union ofIndia v. Reliance Industries and Ors. (2015) 10 SCC213 : [2015] 10 SCR 85 ; Bharat Aluminum Companyv. Kaiser Aluminum Technical Services INC (2016) 4BSCC 126 : [2016] 1 SCR 364 ; Eitzen Bulk A/S & Ors.v. Ashapur Minechem Ltd. & Anr. (2016) 11 SCC 508 :[2016] 2 SCR 634 ; Imax Corporation v. E-CityEntertainment(India) Pvt. Ltd. (2017) 5 SCC 331 :[2017] 4 SCR 833 ; Roger Shashoua and Ors. v.CMukesh Sharma & Ors. (2017) 14 SCC 722 – referredto.

Naviera Amazonica Peruana S.A. v. CompaniaInternacional De Seguros Del Peru (1988) (1) Lloyd’sLaw Reports 116 ; Hiscox v. Outhwaite (1992) 1 ACD562 ; Union of India vs. McDonnell Douglas Corpn.(1993) 2 Lloyd’s Law Rep. 48 ; C v. D (2007) EWCACiv 1282 (CA); C v. D (2008) 1 Lloyd’s Law Rep 239 ;Braes of Doune Wind Farm (Scotland) Limited v. AlfredMcAlpine Business Services Limited (2008) EWHC 426E(TCC) ; Shashoua and Ors. v. Sharma (2009) EWHC957 (Comm.) ; Sulamerica Cia Nacional De SegurosS.A. & Ors. v. Enesa Engenharia SA & Ors.(2012) EWCA Civ 638 ; (1) Enercon GMBH (2) (India)Ltd. (2012) EWHC 3711 (Comm Wobben PropertiesGMBH v. Enercon); Govt. of India v. Petrocon IndiaFLtd. (2016) SCC Online MYFC 35 – referred to.

UNION OF INDIA v. HARDY EXPLORATION ANDPRODUCTION (INDIA) INC

CIVIL APPELLATE JURISDICTION : Civil Appeal No. 4628of 2018.

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From the Judgment and Order dated 27.07.2016 of the High Courtof Delhi at New Delhi in FAO No. 59 of 2016.

Tushar Mehta, ASG, K.R. Sasiprabhu, Rajat Nair, Somiran Sharma,Srijan Sinha, Ms. Kanu Agarwal, Advs. for the Appellant.

Ameet Naik, Rishi Agrawala, Abhishek Kale, Harshwardan Jha,Karan Luthra, Ms. Devika Mohan, E.C. Agrawala, Advs. for theRespondent.

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AThe Judgment of the Court was delivered byABHAY MANOHAR SAPRE, J. 1. Leave granted.

2. This appeal arises from the final judgment and order dated27.07.2016 passed by the High Court of Delhi at New Delhi in FAONo.59 of 2016 whereby the Division Bench of the High Court dismissedBthe appeal filed by the Union of India (appellant herein) challenging theorder dated 09.07.2015 passed by the Single Judge in OMP No.693 of2013 and order dated 20.01.2016 in Review Petition No.400 of 2015 inOMP No.693 of 2013.

3. In order to appreciate the controversy involved in the appeal,Cfew relevant facts, which lie in a narrow compass, need to be statedhereinbelow.

4. This appeal arises out of the proceedings (OMP 693/2013)filed by the appellant (Union of India) against the respondent-Companyunder Section 34 of the Arbitration and Conciliation Act, 1996 (hereinafterDreferred to as “the Act”) wherein the appellant had challenged the legality,validity and correctness of the award made by the arbitrators inrespondent’s favour in one international commercial arbitration proceedingbetween the appellant (Union of India) and the respondent (foreigncompany).E5. The respondent contested the appellant’s application by raisingseveral objections. One such preliminary objection, which went to theroot of the application, was in relation to the maintainability of appellant’sapplication filed under Section 34 of the Act in Courts in India.

6. According to the respondent, the Indian Courts have noFjurisdiction to entertain the appellant’s application filed under Section 34of the Act to challenge the legality and correctness of an award inquestion.

7. The Single Judge by order dated 09.07.2015 upheld therespondent’s preliminary objection and held that keeping in view theGterms of the agreement in question coupled with the law laid down bythis Court in several decisions governing the issues arising in the case,Indian Courts have no jurisdiction to entertain the application filed by theappellant under Section 34 of the Act to question the legality andcorrectness of the award in question and accordingly dismissed theappellant’s application as being not maintainable in Indian Courts.H

8. Since the appellant’s application was dismissed on the groundof lack of jurisdiction of the Indian Courts, the Single Judge did notconsider it necessary to decide the issues arising in the case on themerits.

9. The appellant (Union of India) felt aggrieved by the order ofthe Single Judge, filed appeal under Section 37(2) of the Act before theDivision Bench of the High Court at Delhi.

10. By impugned judgment, the Division Bench concurred withthe reasoning and the conclusion arrived at by the Single Judge and heldthat the Indian Courts have no jurisdiction to entertain the appellant’sapplication under Section 34 of the Act to question the legality of awardrendered in international commercial arbitration proceedings.

11. It is against this order, the Union of India felt aggrieved andhas filed the present appeal by special leave in this Court.

12. Heard Mr. Tushar Mehta, learned Additional Solicitor Generalfor the appellant and Dr. Abhishek Manu Singhvi, learned senior counselfor the respondent.

13. At the outset, we may state that Mr. Tushar Mehta, learnedASG appearing for the appellant (Union of India) and Dr. AbhishekManu Singhvi learned senior counsel appearing for the respondent veryably presented their respective arguments in support of their case. Thearguments indeed lasted for few months in intervals with lucidity.

14. In their submissions, both the learned senior counsel arguedon almost every issue, which has arisen in the appeal directly, indirectlyand even remotely.

15. Learned counsel, in support of their submissions, cited almostevery decision of this Court including English Courts decisions whichdealt with the subject and the issues arising in this case and made sincereattempt to either distinguish or/and place reliance on them to show howand why these decisions apply to the facts of the case at hand or howand why they do not apply.

16. Learned counsel for the parties mainly cited these cases:

Foreign Cases: Naviera Amazonica Peruana S.A. vs.Compania Internacional De Seguros Del Peru (1988) (1) Lloyd’sLaw Reports 116, Hiscox vs. Outhwaite (1992) 1 AC 562, Union of A

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AIndia vs. McDonnell Douglas Corpn. (1993) 2 Lloyd’s Law Rep.48, C vs. D (2007) EWCA Civ 1282 (CA), C vs. D (2008) 1 Lloyd’sLaw Rep 239, Braes of Doune Wind Farm (Scotland) Limited vs.Alfred McAlpine Business Services Limited (2008) EWHC 426(TCC), Shashoua and Ors. vs. Sharma (2009) EWHC 957 (Comm.),Sulamerica Cia Nacional De Seguros S.A. & Ors. vs. EnesaBEngenharia SA & Ors., (2012) EWCA Civ 638, (1) Enercon GMBH(2) Wobben Properties GMBH vs. Enercon (India) Ltd. (2012)EWHC 3711 (Comm), Govt. of India vs. Petrocon India Ltd. (2016)SCC Online MYFC 35.

Indian Cases: National Thermal Power Corporation vs.CSinger Co. And Ors. (1992) 3 SCC 551, Sumitomo Heavy IndustriesLtd. vs ONGC Ltd. and Ors. (1998) 1 SCC 305, Sundaram FinanceLtd. vs. NEPC India Ltd. (1999) 2 SCC 479, Bhatia Internationalvs. Bulk Trading S.A. and Anr.(2002) 4 SCC 105, Venture GlobalEngineering vs. Satyam Computer Services Ltd. & Anr. (2008) 4DSCC 190, Indtel Technical Services Pvt. Ltd. vs. W.S. Atkins RailLtd., (2008) 10 SCC 308, Bank of India & Anr. vs. K. Mohan Das& Ors., (2009) 5 SCC 313, Citation Infowares Ltd. vs. EquinoxCorporation (2009) 7 SCC 220, State of Rajasthan & Anr. vs. FerroConcrete Construction (P) Ltd. (2009) 12 SCC 1, VideoconIndustries Limited vs. Union of India and Anr. (2011) 6 SCC 161,EDozco India Private Ltd. vs. Doosan Infracore Co. Limited (2011)6 SCC 179, Yograj Infrastructure Limited vs. Ssang YongEngineering and Construction Co. Limited (2011) 9 SCC 735,Bharat Aluminium Company vs. Kaiser Aluminium TechnicalServices INC (2012) 9 SCC 552, Enercon (India) Ltd. & Ors. vs.FEnercon GMBH & Anr. (2014) 5 SCC 1, Reliance IndustriesLimited and Anr. Union of India (2014) 7 SCC 603, HarmonyInnovation Shipping Ltd. vs. Gupta Coal India Ltd. & Anr., (2015)9 SCC 172, Union of India vs. Reliance Industries and Ors.(2015)10 SCC 213, Bharat Aluminum Company vs. Kaiser AluminumTechnical Services INC (2016) 4 SCC 126, Eitzen Bulk A/S & Ors.Gvs. Ashapur Minechem Ltd. & Anr. (2016) 11 SCC 508, ImaxCorporation vs E-City Entertainment(India) Pvt. Ltd. (2017) 5SCC 331, Roger Shashoua and Ors. vs. Mukesh Sharma & Ors.,2017 (14) SCC 722.

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17. The argument of both the learned senior counsel mainlycentered around to one question which, in our opinion, does arise in theappeal, namely, when the arbitration agreement specify the “venue” forholding the arbitration sittings by the arbitrators but does not specify the“seat”, then on what basis and by which principle, the parties have todecide the place of “seat” which has a material bearing for determiningthe applicability of laws of a particular country for deciding the postaward arbitration proceedings.

18. Several other ancillary questions connected with the mainquestion were also urged by the learned senior counsel with the aid oflaw laid down in the aforementioned cases and the terms of the arbitrationagreement in question.

19. Learned counsel for the parties also addressed the Court bypointing out that some decisions which have bearing over the questionsarising in this appeal have been rendered by the Constitution Bench,some by Three Judge Bench and remaining by the Two Judge Bench.

20. One of the arguments of Dr. Singhvi, learned senior counselwas that the decision rendered by Three Judge Bench in the case ofSumitomo Heavy Industries Ltd. vs. ONGC Ltd. & Others (supra)on which great reliance was placed by Mr. Tushar Mehta, learned ASGhas lost its efficacy, though approved by another recent decision of ThreeJudge Bench in Bharat Aluminum Company vs. Kaiser AluminumTechnical Services INC (supra), for the reason that it was renderedunder the Arbitration Act, 1940 which now stands repealed by ArbitrationAct, 1996 and secondly, it was rendered in relation to Section 9 of theForeign Awards (Recognition and Enforcement) Act, 1961 which alsonow stands repealed by 1996 Act.

21. It was his submission that while approving the ratio ofSumitomo Heavy Industries Ltd. (supra) these two factors whichhave some relevance on its efficacy do not seem to have been examinedin the case of Bharat Aluminum Company (supra) .

22. Dr. Singhvi also urged that what is the effect of UNCITRALModel Law, when they are made part of the arbitration agreement fordeciding the question of “seat” has also not been so far decided in any ofthe earlier decisions.

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A23. In our opinion, though, the question regarding the “seat” and“venue” for holding arbitration proceedings by the arbitrators arisingunder the Arbitration Agreement/International Commercial ArbitrationAgreement is primarily required to be decided keeping in view the termsof the arbitration agreement itself, but having regard to the law laid downby this Court in several decisions by the Benches of variable strength asBdetailed above, and further taking into consideration the aforementionedsubmissions urged by the learned counsel for the parties and also keepingin view the issues involved in the appeal, which frequently arise inInternational Commercial Arbitration matters, we are of the consideredview that this is a fit case to exercise our power under Order VI Rule 2Cof the Supreme Court Rules, 2013 and refer this case (appeal ) to bedealt with by the larger Bench of this Court for its hearing.

24. It is for this reason, we refrain from recording our findings onany of the issues arising in the appeal and leave the questions/issues tobe dealt with by the appropriate larger Bench.

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25. We, accordingly direct the Registry to place the matter beforethe Hon’ble the Chief Justice of India for constituting the appropriateBench for hearing and disposal of this appeal.

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Divya Pandey Directions to place the matter before the Hon’ble CJI for constituing appropriate Bench.

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