13R

TEAM CODE: W13 IN THE HONOURABLE SUPREME COURT OF INDIA -IN THE MATTERS OF-

UNDER ARTICLE UNDER ARTICLE 136 OF CONSTITUTION OF INDIA, 1950 [CIVIL APPEAL NO. APPEAL NO. 08 OF 2017] TEL SHODHAN LIMITED (APPELLANT) V.

GOVERNMENT OF RAJASTHAN & ORS. (RESPONDENT)

UNDER ART.136 UNDER ART.136 OF THE CONSTITUTION OF INDIA, 1950 [APPEAL NO. [APPEAL NO. 19 OF 2017] MPSL (PETITIONER) V.

OGX & ORS. (DEFENDANT)

UNDER ART. UNDER ART. 132 OF THE CONSTITUTION OF INDIA, 1950 [CIVIL APPEAL NO. APPEAL NO. 309 OF 2017] OIL (APPELLANT) V.

TSL (RESPONDENT)

-WRITTEN SUBMISSIONS ON THE BEHALF OF THE RESPONDENTS/DEFENDANT-

TABLE OF CONTENTS

INDEX OF AUTHORITIES............. AUTHORITIES................................... ............................................ ............................................ ........................................... ..................... III LIST OF ABBREVIATIONS ... ......................... ............................................. ............................................. ............................................ ......................... ... VIII STATEMENT OF JURISDICTION................... JURISDICTION......................................... ............................................ ............................................. ......................... .. IX STATEMENT OF FACTS ........................................................... ................................................................................. ............................................ ...................... X ARGUMENT PRESENTED ......................................... ............................................................... ............................................ .................................. ............ XII SUMMARY OF ARGUMENTS ............................... ...................................................... ............................................. .................................... .............. XIII ARGUMENTS ADVANCED ........................................... ................................................................. ............................................ .................................. ............ 1 I. THAT THE DECISION OF THE DISTRICT COURT IS NOT IS NOT PER-IN CURIUM OF LAWS ENACTED BY THE PARLIAMENT AND LAWS DECLARED BY THE SUPREME COURT............................................ .................................................................. ............................................ ............................................. ....................... 1 A. THE AGREEMENT IS AGAINST PUBLIC POLICY ........................................... .................................................................. ....................... 2 B. THE PROPER LAW OF CONTRACT IS NO T INDIAN LAW ............................................ ....................................................... ...........4 II.

THAT THE DECISION OF THE COURT AND ACTION OF THE GOVERNMENT

DOES NOT

VIOLATE

TSL’S

FUNDAMENTAL

RIGHT

OF

TRADE

AND

OCCUPATION UNDER ART. UNDER ART. 19 OF THE CONSTITUTION ............................................ ............................................6 A. THE DISTRICT COURT IS NOT ‘THE STATE’ UNDER ARTICLE 12 OF THE CONSTITUTION ..... 6 B. TSL CANNOT CLAIM FUNDAMENTAL RIGHT UNDER ARTICLE 19 SINCE IT IS NOT A CITIZEN

........................................... ................................................................. ............................................ ............................................. .............................................. .............................. ....... 7 C. THAT FUNDAMENTAL RIGHT UNDER ARTICLE

19(1)(G)

IS NOT ABSOLUTE AND IS

................................................................. .............................. ....... 8 SUBJECTED TO REASONABLE RESTRICTIONS .......................................... III. THAT MPSL CAN BE MADE A PARTY TO ARBITRATION PROCEEDING .......... 9 A. DOCTRINE OF ESTOPPEL APPLIES ............................................ ................................................................... ......................................... ..................9 B. DOCTRINE OF REFERENCE APPLIES .......................................... ................................................................. ....................................... ................ 10 C. LESS TIME AND MONEY ............................................ .................................................................. ............................................ ................................ .......... 11 D. INCLUSIVE INTERPRETATION OF TERM ‘PARTY’ ............................................ ............................................................. .................12

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TABLE OF CONTENTS

INDEX OF AUTHORITIES............. AUTHORITIES................................... ............................................ ............................................ ........................................... ..................... III LIST OF ABBREVIATIONS ... ......................... ............................................. ............................................. ............................................ ......................... ... VIII STATEMENT OF JURISDICTION................... JURISDICTION......................................... ............................................ ............................................. ......................... .. IX STATEMENT OF FACTS ........................................................... ................................................................................. ............................................ ...................... X ARGUMENT PRESENTED ......................................... ............................................................... ............................................ .................................. ............ XII SUMMARY OF ARGUMENTS ............................... ...................................................... ............................................. .................................... .............. XIII ARGUMENTS ADVANCED ........................................... ................................................................. ............................................ .................................. ............ 1 I. THAT THE DECISION OF THE DISTRICT COURT IS NOT IS NOT PER-IN CURIUM OF LAWS ENACTED BY THE PARLIAMENT AND LAWS DECLARED BY THE SUPREME COURT............................................ .................................................................. ............................................ ............................................. ....................... 1 A. THE AGREEMENT IS AGAINST PUBLIC POLICY ........................................... .................................................................. ....................... 2 B. THE PROPER LAW OF CONTRACT IS NO T INDIAN LAW ............................................ ....................................................... ...........4 II.

THAT THE DECISION OF THE COURT AND ACTION OF THE GOVERNMENT

DOES NOT

VIOLATE

TSL’S

FUNDAMENTAL

RIGHT

OF

TRADE

AND

OCCUPATION UNDER ART. UNDER ART. 19 OF THE CONSTITUTION ............................................ ............................................6 A. THE DISTRICT COURT IS NOT ‘THE STATE’ UNDER ARTICLE 12 OF THE CONSTITUTION ..... 6 B. TSL CANNOT CLAIM FUNDAMENTAL RIGHT UNDER ARTICLE 19 SINCE IT IS NOT A CITIZEN

........................................... ................................................................. ............................................ ............................................. .............................................. .............................. ....... 7 C. THAT FUNDAMENTAL RIGHT UNDER ARTICLE

19(1)(G)


................................................................. .............................. ....... 8 SUBJECTED TO REASONABLE RESTRICTIONS .......................................... III. THAT MPSL CAN BE MADE A PARTY TO ARBITRATION PROCEEDING .......... 9 A. DOCTRINE OF ESTOPPEL APPLIES ............................................ ................................................................... ......................................... ..................9 B. DOCTRINE OF REFERENCE APPLIES .......................................... ................................................................. ....................................... ................ 10 C. LESS TIME AND MONEY ............................................ .................................................................. ............................................ ................................ .......... 11 D. INCLUSIVE INTERPRETATION OF TERM ‘PARTY’ ............................................ ............................................................. .................12

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E. PRIVITY OF CONTRACT DOES NOT APPLY ........................................... .................................................................. ............................ ..... 13

IV. THE HIGH COURT WAS RIGHT IN NOT IN NOT SETTING ASIDE THE AWARD UNDER SEC. 34 OF ARBITRATION AND CONCILIATION ACT, 1996 ..................................... ..................................... 14 A. PART I OF THE ACT IS NOT APPLICABLE .......................................... ................................................................. ................................ ......... 14 B. ADOPTION OF SEAT CENTRIC APPROACH BY THE LEGISLATURE ..................................... ..................................... 15 C. APPLICATION UNDER SECTION 34 IS NOT MAINTAINABLE ............................................ .............................................. .. 17 D. NO VIOLATION OF PUBLIC POLICY........................................... .................................................................. ....................................... ................ 17

PRAYER .......................................... ................................................................. ............................................. ............................................ .................................... ..............XVI

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INDEX OF AUTHORITIES CASES

A.B.C. Laminart Pvt. Ltd. v. A.P. Agencies, A.I.R. 1989 S.C. 1239.......................................... 3 Addhar Mercantile Private Limited v. Shree Jagdamba Agrico Exports Pvt. Ltd., 2015 S.C.C. Bom. 7752..............................................................................................................................5 Anwar v. State of J&K , A.I.R. 1971 S.C. 337............................................................................ 7 Balaji v. I.T.O., (1962) 2 S.C.R. 983 ......................................................................................... 7 Bennett Coleman and Co. v. Union of India, A.I.R. 1973 S.C. 106 .......................................... 8 Bharat Aluminium Co. Ltd. v. Kaiser Aluminium Technical Service Ltd ., (2012) 9 S.C.C. 552 .............................................................................................................................................. 15 Bhatia International v. Bulk Trading S.A., (2002) 4 S.C.C. 105 ............................................. 15 Central Inland Water Transport Corpn. Ltd. v. Brojo Nath Ganguly , A.I.R. 1986 S.C. 1571 . 2 Chatterjee Petroleum v. Haldia Petro Chemicals, 2013 Arb. L.R. 456 .................................. 19 Chloro Controls India Pvt. Ltd. v. Seven Trent Water Purification Inc. & Ods ., (2013) 1 S.C.C. 641 ............................................................................................................................12 Dozco India (P) Ltd. v. Doosan Infracore Co. Ltd ., (2011) 6 S.C.C. 179 ............................ 1,14 Enercon (India) Private Limited v. Enercon G.M.B.H ., 2014 (5) S.C.C. 1 ............................. 19 G.A.I.L. v. Kalyana Mukund Ltd ., 2011 (1) R.A.J. 150 ........................................................... 18 G.A.I.L. v. S.P.I.E. C.A.P.A.G. , A.I.R. 1994 Del. 75. .............................................................. 14 Ghodra Electricity Co. Ltd. v. State of Gujarat , A.I.R. 1975 S.C. 32 ....................................... 7 Gopal Singh v. Ashok Leyland Finance , 2010 (4) R.A.J. 175 .................................................18 Haji Abdulla Haji Cassum v. George Reginald Stamp, A.I.R. 1924 Bom. 381 ........................ 3 Hardy Oil & Gas Ltd. v. Hindustan Oil Exploration Co. Ltd ., 2006 (1) Arb. L.R. 61 .............. 4 Harman Singh v. Purbi Devi, A.I.R. 2000 H.P. 108 ................................................................ 13 Himmatlal Harilal Mehta v. State of M.P., A.I.R. 1954 S.C. 403 ............................................. 7 Indian Express Newspapers v. Union of India, A.I.R. 1986 S.C. 515 ....................................... 8 Indian General Investment Trust v. Raja of Kholikote, A.I.R. 1952 Cal. 508 ........................... 2 Indtel Technical Services Pvt. Ltd. v. W.S. Atkins Rail Ltd ., (2008) 10 S.C.C. 308 .................. 4 Kumud Agarwalla v. Fertilizer Corpn. of India, A.I.R. 1985 Cal. 89 ..................................... 19 Linde A.G., Linde Engg. Division v. Dy. D.I.T. [2014] 365 I.T.R ............................................. 3 M.M.T.C. Ltd. v. Shyam Singh Chaudhary , (2001) 89 D.L.T. 683 ..........................................12 N.B. Khare v. State of Delhi, A.I.R. 1950 S.C. 211 ...................................................................8

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National Thermal Power Corp. v. Singer Co., A.I.R. 1993 S.C. 998...................................... 15 National Thermal Power v. Singer Company and Ors., 1992(3) S.C.C. 551 ............................ 1 Navalmar U.K. Ltd. v. Ashapura Minechem Ltd ., 2016 (11) R.A.J. 307.................................15 O.N.G.C . Ltd. v. Western Geco Int’l Ltd ., A.I.R. 2015 S.C. 363 ............................................. 18 Penn Racquet Sports v. Mayor Int’l Ltd ., 2011 (1) Arb. L.R. 244 ..........................................18 R.C. Cooper v. Union of India, A.I.R. 1970 S.C. 564. .............................................................. 8 Rail India Technical and Economic Services Ltd. v. Ravi Construction, A.I.R. 2002 S.C. 3017 Rajendra Sethia v. Punjab National Bank , A.I.R. 1991 Del. 285 ............................................. 3 Reliance Industries Ltd. v. Union of India, A.I.R. 2014 S.C. 3218 ......................................... 14 Reliance Industries v Union of India, A.I.R. 2014 S.C. 3218 ................................................. 19 Rupa Ashok Hurra v. Ashok Hurra, A.I.R. 2002 S.C. 1771 ...................................................... 6 Sakuna Exports Ltd. v. Louis Drefus Commodities Suisse S.A., 2012 (1) Arb. L.R. 496 .......... 1 Se Se Oil v. Gorakhram, (1962) 64 Bom. L.R. 113 ...................................................................3 Sinha Govindji v. Chief Controller, (1962) 1 S.C.R. 540 .......................................................... 7 State of Bihar v. Bal Mukund Sah (2000) 4 S.C.C. 640............................................................. 6 State of Orissa v. Radheyshyam Meher, (1995) 1 S.C.C. 652 ................................................... 8 State of West Bengal v. Subodh Gopal Bose, A.I.R. 1954 S.C. 92 ............................................8 State Trading Corporation of India Ltd. v. C.T.O. , A.I.R. 1963 S.C. 1811 .............................. 7 Sukhwinder Singh v. Kusum Sharma, A.I.R. 2016 H.P. 1 ....................................................... 13 T.D.M. Infrastructure Pvt. Ltd. v. U.E. Development India Pvt. Ltd. , (2008) 4 S.C.C. 271. .... 5 Union of India v. East Coast Boat Builders & Engineers Ltd., A.I.R. 1999 Del. 44. ............. 16 Union of India v. Reliance Industries Ltd ., 2015 S.C. 385 ...................................................... 15 Vikrant Tyres Ltd. v. Techno Exports Foreign Trade Co. Ltd ., 2005 (3) R.A.J. 612 .............. 17 William Jacks & Co. v. Harrowing Steamship Co., A.I.R. 1932 Sind. 111 ............................ 19 World Sport Group (Mauritius) Ltd. v M.S.M. Satellite (Singapore) Ltd ., 2014 (1) Arb. L.R. 197.......................................................................................................................................... 9 STATUTES

Arbitration and Conciliation (Amendment) Act, 2015 § 8. ..................................................... 13 Arbitration and Conciliation Act, 1996 § 19(2). ...................................................................... 18 Arbitration and Conciliation Act, 1996 § 2(1)(f). .................................................................... 14 Arbitration and Conciliation Act, 1996 § 2(1)(h). ................................................................... 12 Arbitration and Conciliation Act, 1996 § 20(1). ...................................................................... 18 Arbitration and Conciliation Act, 1996 § 34(2)(b)(ii). ............................................................ 18

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Code of Civil Procedure, 1908 § 89......................................................................................... 13 Specific Relief Act, 1963 § 15 ................................................................................................. 13 The Constitution of India, 1950 art. 19(6). ................................................................................ 8 The Constution of India, 1950 art. 19, § 1 ................................................................................. 6 U.N.C.I.T.R.A.L. Arbitration Rules, 1976 § 33 ........................................................................ 4

CONVENTIONS

Geneva Protocol on Arbitration Clauses, 1923 Protocol 2 ...................................................... 15 The New York Convention on the recognition and enforcement of foreign arbitral awards, 1958 art. V(1)(a) and (e). ..................................................................................................... 16 The New York Convention on the recognition and enforcement of foreign arbitral awards, 1958 art. V(1)(a). ................................................................................................................. 15 UNCITRAL Model Law on International Commercial Arbitration, 2006 art. 1(2 ................. 16

BOOKS

1 Durga Das Basu, Commentary on the Constitution of India 657 (8 th ed. Wadhwa & Company Law Publisher Nagpur 2007 .................................................................................. 6 1 Pollock & Mulla, Indian Contract and Specific Relief Act 134,135 (Nilima Bhadbhade ed., 13th ed. LexisNexis 2008). ................................................................................................... 13 Alan Redfern & Martin Hunter, Redfern and Hunter on International Arbitration (5th ed. Oxford 2009)........................................................................................................................15 Dicey & Morris, Conflict of Laws 145 (15th ed. Sweet & Maxwell 2016). ............................. 19 Mustill & Boyd, The law and practice of Commercial Arbitration in England 64 (2nd ed. Lexis Law Pub 1989). ............................................................................................................1 P.C. Markanda, Law relating to Arbitration & Conciliation (9th ed. Lexis Nexis 2016). ....... 15 P.C. Markanda, Law relating to Arbitration & Conciliation , 1214 (9 th ed. Lexis Nexis 2016). .............................................................................................................................................. 18 V.N. Shukla, Constitution of India 34 (10th ed. EBC Publishing Pvt. Ltd Lucknow 2001 ....... 6

FOREIGN CASES

Abu Dhabi Gas Liquefaction Co. Ltd. v. Eastern Bechtel Corporation, 2 L.R. 425 (1982). .. 12 Atlantic Shipping & Trading Co. Ltd. v. Louis Dreyfus & Co., [1992] 2 A.C. 250 ................ 18

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C v. D, [2007] E.W.C.A. Civ. 1282 ......................................................................................... 16 Comer v. Micor , 436 F.3d 1098 (2006). .................................................................................... 9 Dallah Real Estate & Tourism Holding Co. v. The Ministry of Religious Affairs, Govt. of Pakistan, [2008] E.W.H.C. 1901 (Comm.) (U.K.) .............................................................. 11 Dutton v. Pulle, (1677) 2 Lev. 211 .......................................................................................... 13 Fiona Trust & Holding Corporation and others v. Privalov and others, [2007] 2 All E.R. (Comm.) 1053 ......................................................................................................................20 Habas Sinai v. V.S.C ., (2013) E.W.H.C. 4071........................................................................... 4 Herron v. Mid-Stream Transfer , 1984 W.L. 2920 (1984). ........................................................ 9 Hill v. G.E. Power System, 282 F.3d 343 (2002). .................................................................... 10 Holaman v. Johnson, (1775) Cowp. 341 ................................................................................... 2 Import Export Steel Corp. v. Mississippi Valley Barge Line Co., 351 F.2d 503 (1965). ........ 10 Intergen N.V. v. Grina, 344 F.3d 134 (2003)............................................................................. 9 J.S.& H. Constructions Co. v. Richmond Country Hospital Authority , 473 F.2d 212 (1973). 10 Javitch v. First Union Securities, 315 F.3d 619 (2003) ............................................................. 9 Jones v. Jacobson, 195 Cal. Rpt. F.3d 522 (2011). .................................................................10 Lee v. Showmen’s Guild of Great Britain, [1952] 1 All E.R. 1175 ...........................................3 Leigh v. National Union of Railwaymen, (1970) Ch. 326 ......................................................... 2 National Broadcasting Co. v. Bear Stearns & Co., 165 F.3d 184 (1999). ............................... 9 P.T. First Media T.B.K v. Astro Nusantara International B.V. & Ors, (2013) S.G.C.A. 57 ... 11 Progressive Cas. Ins. Co. v. C.A. Reaseguradora Nacional de Venezuela, 991 F.2d 42 (1993). .............................................................................................................................................. 11 Sherer v. Green Tree Servicing L.L.C., 548 F.3d 379 (2008).................................................... 9 Sulamerica Cia Nacional De Seguros S.A. & Odr. v. Enesa Engenharia S.A. & Odr ., [2012] E.W.C.A. Civ. 638. .............................................................................................................. 16 Sulamerica v. Enesa, (2012) E.W.C.A. Civ. 638....................................................................... 4 Sunkist Soft Drinks v. Sunkist Growers, 10 F.3d 753 (1993)..................................................... 9 Thomson-C.S.F. S.A. v. American Arbitration Association , 64 F.3d 773 (1995). ..................... 9 Union of India v. McDonnell Douglas Corp., [1993] 2 Lloyd's Rep. 48 ................................ 16 Upstate Shredding, L.L.C. v. Carloss Well Supply Co ., 84 F.2d 357 (2000)........................... 11 X.L. Insurance v. Owens, [2001] 1 All E.R. (Comm.) 530 ...................................................... 16 REPORTS & JOURNALS

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Pierre Mayer , Extension of the Arbitration Clause to Non-signatories under French Law and English Courts, 27 American University International L.J. 831-836 (2012). ....................... 9 Report of Law Commission of India No. 246 on Amendment to Arbitration and Conciliation Act,

1996

(Aug.

5,

2014),

available

at

http://lawcommissionofindia.nic.in/reports/Report246.pdf. ................................................ 13 William W. Park, Non-signatory and International Contracts, Oxford L.J. 1-32 (2009). ........ 9

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LIST OF ABBREVIATIONS

1. & - And 2. AIR - All India Reporter 3. All ER - All England Reporter 4. Anr – Another 5. AP – Andhra Pradesh 6. Arb. LR – Arbitration Law Reporter 7. Art. – Article 8. Bom – Bombay 9. Cal – Calcutta 10. Ch – Chancery 11. Civ – Civil 12. Comm – Commercial 13. Del - Delhi 14. ed – Edition 15. HP – Himachal Pradesh 16. J&K – Jammu and Kashmir 17. Ker – Kerala 18. Ltd – Limited 19. Mad – Madras 20. MPSL- Man Power Supply Limited 21. OIL- Oil India Limited 22. Ors – Others 23. PEDA – Petrol Exploration and Development Limited 24. Pub - Publication 25. Pvt.- Private 26. SCC - Supreme Court Cases 27. SCR – Supreme Court Reporter 28. Supp – Supplementary 29. TSL- Tel Sodhan Limited 30. UK – United Kingdom 31. UNCITRAL- United Nations Convention on International Trade Law

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STATEMENT OF JURISDICTION

The Hon’ble Supreme Court of India has both ordinary and extraordinary jurisdiction under Article 132 and Article 136 respectively. The first two petitions are filed before Hon’ble Supreme Court under Article 136 of Indian Constitution which reads as: Special leave to appeal by the Supreme Court: (1) Notwithstanding anything in this Chapter, the Supreme Court may, in its discretion, grant special leave to appeal from any judgment, decree, determination, sentence or order in any cause or matter passed or made by any court or tribunal in the territory of India. (2) Nothing in clause (1) shall apply to any judgment, determination, sentence or order passed or made by any court or tribunal constituted by or under any law relating to the Armed Forces. Third petition before the Hon’ble Supreme Court of India is filed under Article 132 of Indian Constitution which reads as: Appellate jurisdiction of Supreme Court in appeals from High Courts in certain cases: (1) An appeal shall lie to the Supreme Court from any judgment, decree or final order of a High Court in the territory of India, whether in a civil, criminal or other proceeding, if the High Court certifies under Article 134A that the case involves a substantial question of law as t the interpretation of this Constitution. (2) Omitted. (3) Where such a certificate is given, any party in the case may appeal to the Supreme Court on the ground that any such question as aforesaid has been wrongly decided Explanation For the purposes of this article, the expression final order includes an order declaring an issue which, if decided in favour of the appellant, would be sufficient for the final disposal of the case.

This memorandum sets forth the facts, contentions and arguments for the respondents/ defendant in the given case.

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STATEMENT OF FACTS

1. In Rajasthan, Petroleum & Development Activities have gained momentum after 2004. At present, Rajasthan has maximum on-land area of the country available for exploration. For Petroleum & Development, the state government signed a multi-party Petroleum Exploration & Development Agreement (PEDA) with DLPRC a residence company of UK, OGX a Brazilian publicly listed oil and gas company, TSL a company registered under Companies Act, 1956 and OIL a government of Indian enterprise. All parties are jointly known as Barmer-Bikaner Basin Consortium. 2. PEDA, provides for resolution of disputes between parties b way of arbitration to be administered by International Chamber of Commerce in London, England, under laws of UK. Clause 19(1) provides that ‘Law of UK and international customary commercial laws will be applicable in disputes arising out of agreement between the parties. 3. In terms of agreement, man power supply agreement was executed between DLPRC and MPSL, a company registered under Companies Act, 2013. This agreement also contained an arbitration clause having seat of arbitration in ICC, London. Although the man power was supplied for the Consortium, but payment was done by DLPRC only. 4. In 2016, TSL initiated an arbitration proceeding in ICC, London against OIL and Government of Rajasthan. The issue was related with encashment of Bank Guarantee and deduction of Service Tax on the services provided under PEDA by TSL to OIL and State of Rajasthan. In response, Government of Rajasthan filed an anti-arbitration injunction suit before District Court, Jaipur. OIL agreed to get involved in arbitration proceeding in London. Government of Rajasthan contended that applicability of law of foreign country as well as on arbitration proceeding is void under section 23 of Indian Contract Act as it violates ‘public policy of India’. The court granted anti -arbitration injunction and declared arbitration clause and Clause 19(1) void as it is applicable on disputes between Govt. of Rajasthan, OIL and TSL only. The Court also observed that Indian nationals are not permitted to derogate from Indian Laws. 5. Against the decision of District Court, Jaipur, TSL filed a SLP which is later accepted by SC, contending that the decision of District Court is per-in curium of laws enacted by Parliament and laws declared by the SC. TSL also contented that decision of court and

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action of Government violated TSL’s fundamental right of trade and commerce enshrined under Article 19 of Constitution. 6. Meanwhile, OGX also initiated arbitration proceeding against DLPRC and MPSL for compensation for the damages occurred due to negligence of workers. The damage was because of the workers engaged by DLPRC through MPSL. In return, MPSL filed an injunction against before District Court with contention that MPSL does not have any ‘direct relationship’ with OGX and there is no arbitration agreement between them. MPSL also contented that since they are providing man power supply for work of consortium does not MPSL into the ambit of disputes under PEDA. 7. The District Court rejected suit filed by MPSL on ground that seat of arbitration is outside India and domestic courts cannot entertain this issue. Also, District Court ruled that there is no prohibition under Law in making sub-contractor a party in arbitration proceeding between leading parties of a contract. MPSL filed an SLP before SC which was later accepted. 8. Before SC decided the above SLPs, arbitrators of ICC issued an award in favour of TSL. OIL in taking regards to legal proceeding between TSL and Govt. of Rajasthan, filed an application before HC of Rajasthan under sec 34 of Arbitration and Conciliation Act, 1996 to set aside the award. High Court rejected the application of OIL and ruled that there is no bar under Indian law in deciding the seat of arbitration outside India as well as applicability of foreign law on Indian nationals in International commercial arbitration wherein at least one part if foreign national or company. In return, OIL filed a regular appeal before SC against the decision of HC, which was later admitted by SC. 9. The SC decided to hear all three appeals on merits of 4 th and 5th of February, 2017.

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ARGUMENT PRESENTED

CASE-I CIVIL APPEAL NO. 08/2017 TEL SHODHAN LIMITED V. GOVERNMENT OF RAJASTHAN & ORS.

1. WHETHER THE DECISION OF DISTRICT COURT IS PER IN-CURIUM OF LAWS ENACTED BY THE PARLIAMENT AND LAWS DECLARED BY THE SUPREME COURT. 2. WHETHER THE DECISION OF DISTRICT COURT AND ACTION OF THE GOVERNEMENT VIOLATES TSL’S FUNDAMENTAL RIGHTS OF TRADE AND OCCUPATION GUARANTEED UNDER ARTICLE 19 OF THE CONSTITUTION.

CASE-II CIVIL APPEAL NO. 19/2017 MPSL V. OGX & ORS.

3. WHETHER

MPSL

CAN

BE

MADE

A

PARTY

TO

ARBITRATION

PROCEEDING. CASE-III CIVIL APPEAL NO. 309/2017 OIL V. TSL

4. WHETHER THE HIGH COURT WAS COORECT IN NOT SETTING ASIDE THE APPLICATION

UNDER

SECTION

34

OF

THE

ARBITRATION

CONCILIATION ACT, 1996.

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AND

SUMMARY OF ARGUMENTS

I. THAT THE DECISION OF THE DISTRICT COURT IS NOT PER-IN CURIUM OF LAWS ENACTED BY THE PARLIAMENT AND LAWS DECLARED BY THE SUPREME COURT.

Section 23 of the Indian Contract Act, 1872 specifically prohibits agreements/contracts entered into by any Indian party of which the object is unlawful. Since the Clause would circumvent the laws of India and defeat the provisions of law, and also denude the Courts of this country of their jurisdiction the said claim of the appellants therefore should be held invalid. It is submitted that parties cannot by private agreement confer upon a court jurisdiction which it does not possess, nor can they divest a court of its jurisdiction which it possesses under the ordinary law. Thus the objective of the arbitration clause and clause 19(1) is unlawful and against public policy and therefore the district court was right to declare it null and void. Further it is stated that the proper law governing the contract is not Indian law as the parties chose UK laws to govern the agreement and the same is contrary to the public policy of India. II. THAT THE DECISION OF THE COURT AND ACTION OF THE GOVERNMENT DOES

NOT VIOLATE

TSL’S

FUNDAMENTAL RIGHT OF TRADE AND

OCCUPATION UNDER ART. 19 OF THE CONSTITUTION.

It is stated that fundamental rights can only be enforced against the state and in the present instant the parties have claimed violation of fundamental right by district court which is not possible as a district court cannot be called a state. It is asserted that fundamental rights are only available to citizens and TSL being a company incorporated under Companies Act, 1956 cannot be treated as citizens and hence cannot claim Fundamental Rights. Further by not allowing parties to derogate from Indian laws does not lead to violation of freedom to carry on trade and occupation but even it is supposed that the same has been violated, it can be covered under reasonable restriction. III. THAT MPSL CAN BE MADE A PARTY TO ARBITRATION PROCEEDING.

The counsel submits that MPSL can be made a party to arbitration proceeding despite the fact they are non-signatory/third party to arbitration proceeding. Even though the definition of ‘party’ under Arbitration and Conciliation Act, 1996 is limited to arbitration proceeding, with

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recent judgements and pro-arbitration approach adopted by judiciary to develop arbitration friendly environment, the courts had tried to emanate certain doctrines by which the definition of ‘party’ has been made inclusive and third parties can be bought under the ambit of arbitration agreement. In present case, doctrines of estoppel and reference can be implemented as their exist a ‘direct relation’ between MPSL and OGX and the subject matter of the both proceedings are inter-related and such intertwined that implementation of one agreement is dependent on performance of other. Similarly, doctrine of reference plays an important role in present situation as it can be clearly inferred from the incorporation of arbitration clause in both the agreements as well as from the wider interpretation of term ‘in terms of agreement’ that the parties under PEDA want to bind the third party or nonsignatory within the ambit of PEDA arbitration. Similarly, doctrine of privity do not apply as MPSL can be bought within the exemption of ‘collateral agreement’ and also the payment of man power supply by DLPRC is for operational efficiency only. Also, bringing MPSL for arbitration under PEDA agreement will result in expedient resolution of disputes and will save parties from timely and costly litigation. IV. THAT THE HIGH COURT OF RAJASTHAN WAS RIGHT IN NOT SETTING ASIDE THE APPLICATION UNDER SECTION 34 OF THE ARBITRATION AND CONCILIATION ACT, 1996.

The counsel submits that the High Court was right in not setting aside the application under sec 34 of Arbitration and Conciliation Act, 1996 as the present agreement between all parties is an International Arbitration as it has been held in plethora of judicial pronouncements that keeping a foreign seat of arbitration will make it an international arbitration. Secondly, the definition of International Commercial Arbitration as given under sec 2(1)(f) of Arbitration and Conciliation Act, 1996 is based on UNCITRAL model which places emphasis on seat of arbitration to judge the nature of arbitration proceeding. It has been backed by plethora of judicial pronouncements in which it was held that keeping a seat of arbitration outside India is sufficient enough to consider it as international commercial arbitration. With the amendment of 2015 as well as Supreme Court judgement in BALCO, Part-I of the Arbitration Act is not applicable to Part II which deals with international arbitration. Thus, the domestic courts do not have jurisdiction to entertain an international commercial arbitration as the application was filed under sec 34 of said Act. Also, the term ‘public policy’ has been given narrow interpretation.

-XIV-WRITTEN SUBMISSION FOR RESPONDENTS/DEFENDANTS-

It is also contended that the decision of tribunal is not violating the ‘public policy of India’ as it is in conformity with fundamental policy of Indian laws as two Indian parties can choose foreign seat of arbitration and choose foreign law to if at least one party is foreign national or company.

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ARGUMENTS ADVANCED

I. THAT THE DECISION OF THE DISTRICT COURT IS NOT PER-IN CURIUM OF LAWS ENACTED BY THE PARLIAMENT AND LAWS DECLARED BY THE SUPREME COURT.

It is humbly submitted by the respondents before the Hon’ble Supreme Court of India that the decision of the District Court is not per-in curium of laws enacted by the Parliament and the laws declared by the SC in relation to choosing the seat of arbitration outside India, choice of law governing the proceedings and substantive laws of governing the contract. In an arbitration agreement following types of laws are applicable at a given point of time: i) law governing the arbitration agreement ii) law governing the existence and proceedings of the arbitral tribunal i.e. the curial law or Lex Arbitri, iii) the law of the seat of arbitration and iv) the proper law of contract 1. The law of the arbitration agreement is the law that determines the interpretation of the arbitration agreement itself. It governs the validity of the arbitration agreement, the question whether a dispute lies within the scope of the arbitration agreement; the validity of the notice of arbitration; the question whether an award lies within the jurisdiction of the arbitrator; the formal validity of the award; the question whether the parties have been discharged from any obligation to arbitrate future disputes2. Thus the law governing the arbitration is not the same law which governs the contract, but it is the law which is in force in the country in which the arbitration is being conducted 3. The curial law governs the manner in which the reference is to be conducted; the procedural powers and duties of the arbitrator; questions of evidence; the determination of the proper law of the contract4. The 1996 Act makes the seat of arbitration as the centre of gravity of the arbitration. Determining the seat is very important from the point that in some cases it may determine each of the procedural law applicable to the arbitration, the law of the arbitration agreement and the proper law of the substantive contract 5. The expression proper law of contract refers to the legal system by which the parties to the contract intended their contract 1

Sakuna Exports Ltd. v. Louis Drefus Commodities Suisse S.A ., 2012 (1) Arb. L.R. 496. Dozco India (P) Ltd. v. Doosan Infracore Co. Ltd ., (2011) 6 S.C.C. 179. 3 National Thermal Power v. Singer Company and Ors., 1992(3) S.C.C. 551. 4 Id. 5 Mustill & Boyd, The law and practice of Commercial Arbitration in England 64 (2nd ed. Lexis Law Pub. 1989). 2

-1-WRITTEN SUBMISSION FOR RESPONDENTS/DEFENDANTS-

to be governed 6. In other words, the proper law governs the matters flowing from the contract executed by and between the parties. In the present case as well the PED Agreement provides for resolution of disputes by way of arbitration administered by the ICC in London according to the UK laws. This forms the seat and the curial law of arbitration respectively. Clause 19(1) of the agreement states the laws by which the arbitration agreement is to be governed. However the agreement is silent as to what is the proper law governing the contract. Therefore it is submitted that the District Court was right in granting the anti-arbitration injunction as the arbitration clause and clause 19(1) is void it is against public policy of the country. A. THE AGREEMENT IS AGAINST PUBLIC POLICY .

Section 23 of the Indian Contract Act lays down as to what consideration and objects are lawful. Under this the consideration or object of an agreement is unlawful if it is opposed to public policy. Public policy is the principle which declares that no man can lawfully do that which has a tendency to be injurious to the public welfare 7. The SC has held that public policy is not the policy of a particular government. It connotes some matter which concerns public good and public interest 8. A contract which has a tendency to injure public interest or public welfare is one against public policy. It is humbly submitted by the respondent that the Indian parties to the dispute-TSL, Government of Rajasthan and OIL cannot, by any stretch of imagination, exclude the applicability or the operation of Indian law, by contract or otherwise. It is necessary to take into consideration the parties to the dispute since they are part of a consortium. A consortium is an association of two or more individuals, companies, organizations or governments (or any combination of these entities) with the objective of participating in a common activity or pooling their resources for achieving a common goal. Each member is independently responsible for executing its part of the work, through its own resources, and also bears the risk of its scope of work, i.e., there is a clear demarcation in the work and costs between the consortium members, and each member incurs expenditure only in its specified area of work convenience. The Delhi HC has held 9 that in a consortium each party has a separate legal identity. 6

Indian General Investment Trust v. Raja of Kholikote, A.I.R. 1952 Cal. 508. Holaman v. Johnson, (1775) Cowp. 341. 8 Central Inland Water Transport Corpn. Ltd. v. Brojo Nath Ganguly , A.I.R. 1986 S.C. 1571. 9 Linde A.G., Linde Engg. Division v. Dy. D.I.T. [2014] 365 I.T.R. 7


It is submitted that the Supreme Court has, in a number of cases, held that two domestic parties cannot by agreement or otherwise contract out of the municipal laws of India. Any clause providing for the same is illegal and unenforceable 10. It is further stated that under the laws of India, Indian residents or companies incorporated in India entering into a contract must be governed by the laws in force in India and the intention of the legislature while enacting the Act was also that two Indian companies cannot be permitted to derogate from Indian laws. This principle is a part of the public policy of India. It is also submitted that Section 23 of the Indian Contract Act, 1872 specifically prohibits the agreements/contracts entered into by any Indian party of which the object is unlawful. Since the Clause would circumvent the laws of India and defeat the provisions of law, and also denude the Courts of this country of their jurisdiction 11 the said claim of the appellants therefore should be held invalid. It is submitted that parties cannot by private agreement confer upon a court jurisdiction which it does not possess, nor can they divest a court of its jurisdiction which it possesses under the ordinary law. 12 Thus the objective of the arbitration clause and clause 19(1) is unlawful and against public policy and therefore the district court was right to declare it null and void. Therefore Indian nationals making a contract while in India should not and cannot be permitted to avoid the applicability of the Indian law to the contract made in India or to be performed in part or whole of India. 13 This point has been highlighted in Lee v. Showmen’s Guild for Great Britain14 where the court held that if the parties by an agreement take the law out of the hands of the courts and put it into the hands of a private tribunal, without any recourse to all the courts in cases of error of law, then the agreement is contrary to public policy. Courts in India have also followed the same. The Bombay HC 15 stayed the action in a case where the contract provided for arbitration in England with Italian Law as the governing law of contract. The court held that the parties could not oust the jurisdiction of the Indian court by an agreement whether executed in India or outside. Moreover such type of agreement where the Indian parties can circumvent Indian laws renders the Government of Rajasthan remedy less. The government in such case would have to apply foreign laws in case of dispute despite the fact that the performance of the contract, the subject matter of the contract and the type of work is in 10

Leigh v. National Union of Railwaymen, (1970) Ch. 326. Rajendra Sethia v. Punjab National Bank , A.I.R. 1991 Del. 285. 12 A.B.C. Laminart Pvt. Ltd. v. A.P. Agencies, A.I.R. 1989 S.C. 1239. 13 Se Se Oil v. Gorakhram, (1962) 64 Bom. L.R. 113. 14 Lee v. Showmen’s Guild of Great Britain, [1952] 1 All E.R. 1175. 15 Haji Abdulla Haji Cassum v. George Reginald Stamp, A.I.R. 1924 Bom. 381. 11


India. Thus it is submitted that the arbitration clause contained in the agreement is against the provisions of Section 23 of the Act as it has unlawful object of taking away the power of the Courts to adjudicate upon the disputes, making the Government of Rajasthan remedy less. B. THE PROPER LAW OF CONTRACT IS NOT INDIAN LAW .

As stated earlier an arbitration agreement involves application of different sets of laws. Parties are free to choose substantive law applicable to the contract, curial law applicable to arbitration proceedings and the judicial seat of arbitration. However a major problem arises when the parties fail to select an applicable law by agreement. Under such circumstances, the Model law provides, “Failing any designation by the parties, the arbitral tribunal shall apply the law determined by the conflict of law rules which it considers applicable”16. Generally, the proper law of contract is the same as that of the arbitration agreement as it forms the part of the main contract unless the parties express an intention to the contrary. The courts in such case consider whether they can ascertain that there was an implied or inferred choice of law by the parties. Thus it is submitted that in this case the proper law of contract is not Indian Contract Act and thereby it goes against the public policy of the nation. According to the decision of the SC in NTPC v Singer 17 the substantive law of the arbitration agreement is normally the proper law as well. However, in exceptional circumstances if there is no substantive law defined, then the law of the seat will be deemed to be the proper law 18. In another case the Gujarat HC 19 relying on the NTPC case held that in case where the proper law of contract is not given then, that system of law shall be applied which governs matters concerning arbitration. In foreign countries such as UK, a three-stage test laid was down in Sulamerica v. Enesa20 where the proper law was considered to be either (i) expressly chosen; (ii) impliedly chosen; and (iii) in the event it is neither expressly nor impliedly chosen, it is the law of the seat of the arbitration. Although the court took note of the fact that an express choice of substantive law of arbitration is a persuasive indicator of the proper law, it went on to hold that the identification of the seat as London is a more impressive factor in arriving at the conclusion that the governing law would be English law. This position was confirmed by the English

16

U.N.C.I.T.R.A.L. Arbitration Rules, 1976 § 33. N.T.P.C. v. Singer , A.I.R. 1993 S.C. 998. 18 Indtel Technical Services Pvt. Ltd. v. W.S. Atkins Rail Ltd ., (2008) 10 S.C.C. 308. 19 Hardy Oil & Gas Ltd. v. Hindustan Oil Exploration Co. Ltd ., 2006 (1) Arb. L.R. 61. 20 Sulamerica v. Enesa, (2012) E.W.C.A. Civ. 638. 17


Commercial Court in Habas Sinai v. VSC 21, where the court applied the closest connection test to conclude that the law of the seat would be the law applicable to the arbitration agreement. Thus in this case as well due to the absence of any expressed or implied mention of proper law the laws of UK and the international customary commercial laws shall be the proper law of the contract. The contract in this situation would be governed by the UK laws which not only enables the parties to the dispute to circumvent from the indian laws but also makes the government remedy less even though the entire contract is being performed in India. Thus it is submitted that the decision contrary to public policy of india as the Indian residents or companies incorporated in India are being governed by the laws of some other country. This goes against the intention of the legislature who enacted the Act. Reliance is placed on the decision of the SC in the case of TDM Infrastructure Private Limited v UE Development India Private Limited 22 where the court held that Indian parties would derogate from Indian law and contrary to the Indian public policy by choosing: i) a foreign seat ii) a foreign law as the proper law of the contract and iii) a foreign law as the governing law of the arbitration agreement. Since in this case all three conditions are being satisfied the agreement is therefore void against public policy. This decision was followed by the Bombay HC in the case of Addhar Mercantile Private Limited v. Shree Jagdamba Agrico Exports Pvt Ltd 23. In this case the court had considered this important issue – Whether two Indian parties choosing a foreign seat of arbitration and a foreign law governing the arbitration agreement may be understood to be contracting out of Indian law and be therefore considered to be opposed to public policy. The Hon’ble Bombay High Court clearly stated that the legislative intent makes it very clear that if two parties are Indian they cannot preclude Indian law and if they do it will be contrary to public policy. Therefore in this case as well the fact that the arbitration agreement is governed by a foreign law, the seat is outside india and the proper law not being Indian law the agreement would result in the Indian parties evading the Indian laws and courts which is contrary to the public policy of the nation. Thus it is submitted that the decision of the District Court was not per-in curium of laws laid down and declared by the Parliament and the SC.

21

Habas Sinai v. V.S.C ., (2013) E.W.H.C. 4071. T.D.M. Infrastructure Pvt. Ltd. v. U.E. Development India Pvt. Ltd., (2008) 4 S.C.C. 271. 23 Addhar Mercantile Private Limited v. Shree Jagdamba Agrico Exports Pvt. Ltd., 2015 S.C.C. Bom. 7752. 22


II. THAT THE DECISION OF THE COURT AND ACTION OF THE GOVERNMENT DOES

NOT

VIOLATE

TSL’S

FUNDAMENTAL RIGHT

OF TRADE

AND

OCCUPATION UNDER ART. 19 OF THE CONSTITUTION.

It is submitted that the decision of the District Court did not violate TSL’s Fundamental Right of trade and occupation under Art. 19(1)(g). That 'District Court' is not 'the State' within the meaning of the term as specified in Art. 12 and therefore cannot violate fundamental rights of the Appellants. Moreover the Freedom to trade and occupation has not been violated by the action of the government and court’s decision since Fundamental Right under Art. 19(1)(g) is not absolute and is subjected to reasonable restrictions. In addition to this the company being not a citizen cannot bring a claim for enforcement of the rights given under this article. A. THE DISTRICT COURT IS NOT ‘THE STATE ’ UNDER ARTICLE

12 OF THE CONSTITUTION .

It is submitted that the District Court being a judicial body in so far as it discharges its judicial function it shall not be 'the State' under Art. 12. The entire objective of incorporating fundamental rights in a written constitution was to protect the individual from governmental aggression and not from aggression by another individual. Similarly, in India the rights guaranteed by Art. 19, 21 and 31 are guaranteed against State as distinguished from violation of such rights by private individuals 24. In case of violation of such rights by individuals, the ordinary legal remedies may be available but not the constitutional remedies. 25 The exercise of such judicial functions does not occasion the infringement of the fundamental rights and therefore, the question of bringing the courts within the definition of 'the State' would not arise.26 It is singularly inappropriate to assume that a judicial decision pronounced by a Judge of competent jurisdiction in or in relation to a matter brought before him for adjudication can affect the fundamental rights of the citizens under Art. 19(1) 27. What the judicial decision purports to do is to decide the controversy between the parties brought before the court and nothing more. 28 Unless their power to perform that function is excluded or restricted by the Constitution or any other law, courts are compete nt to make a right or wrong determination in

24

1 Durga Das Basu, Commentary on the Constitution of India 657 (8th ed. Wadhwa & Company Law Publisher Nagpur 2007). 25 Id . 26 V.N. Shukla, Constitution of India 34 (10th ed. E.B.C. Publishing Pvt. Ltd. Lucknow 2001); Rupa Ashok Hurra v. Ashok Hurra, A.I.R. 2002 S.C. 1771. 27 The Constution of India, 1950 art. 19, § 1. 28 Naresh Mirajkar v. State of Maharashtra, (1966) 3 S.C.R. 744; State of Bihar v. Bal Mukund Sah (2000) 4 S.C.C. 640.


the exercise of that function. A wrong determination in such a case does not constitute a breach of a fundamental right by the court. It is a genuine mistake which the court is competent to, though it must not, make 29. A constitutional bench 30 of this Court had further clarified, that in certain exceptional conditions, if an order of a judicial body violates or threatens to violate a fundamental right, the same could be quashed vide certiorari. Firstly, where the decision is made which is ultra vires the Constitution31, rendering the decision to be without jurisdiction. Secondly, where thought the statute is constitutional and intra vires, the judicial decision is itself without jurisdiction32. Thirdly, when the order is in violation of the principles of natural justice33. However, in light of the facts and circumstances of the instant case, it is submitted that none of the abovementioned exceptions apply to this case and therefore no question of enforcement of Fundamental rights shall ensue. B. TSL CANNOT CLAIM FUNDAMENTAL RIGHT UNDER ARTICLE

19 SINCE IT IS NOT A CITIZEN .

It is humbly submitted that TSL cannot claim violation of Fundamental Right under Art. 19 because the rights in this article are available only to citizens. Determination of citizenship is therefore a condition precedent for the availability of rights in this article. Even an alien or a foreigner has no rights under this article because he is not a citizen of India 34. Citizens under this article mean only natural persons who have the status of citizenship under the law. Therefore juristic persons such as Registered Companies cannot be treated as citizens for the purposes of this article.35 The SC in State Trading Corporation 36 case had to decide whether State Trading Corporation which is incorporated under Companies Act, 1956 is a citizen within the meaning of Art. 19 of the constitution and can ask for the enforcement of fundamental rights granted to the citizen under the said article. The SC explained clearly that corporate bodies are juristic persons and so they cannot be termed as citizens though they may be of Indian nationality due to incorporation in India. However, the fundamental rights of the shareholders of a company are not lost when they associate to form a company. The SC in the Bank

29

V.N. Shukla, Constitution of India 21 (10 th ed. E.B.C. Publishing Pvt. Ltd. Lucknow 2001). 30 Id . 31 Balaji v. I.T.O., (1962) 2 S.C.R. 983. 32 Ujjam Bai v. State of U.P., A.I.R. 1962 S.C. 1621; Tata Iron and Steel Co. Ltd. v. S.R. Sarkar, A.I.R. 1961 S.C. 65; Madan Lal Arora v. Excise and Taxation Officer, Amritsar, A.I.R. 1961 S.C. 1565; Himmatlal Harilal Mehta v. State of M.P., A.I.R. 1954 S.C. 403. 33 Sinha Govindji v. Chief Controller, (1962) 1 S.C.R. 540. 34 Anwar v. State of J&K , A.I.R. 1971 S.C. 337. 35 Ghodra Electricity Co. Ltd. v. State of Gujarat , A.I.R. 1975 S.C. 32. 36 State Trading Corporation of India Ltd. v. C.T.O. , A.I.R. 1963 S.C. 1811.


Nationalisation37 case as well as in Bennett Coleman38 case has held that the fundamental rights of citizens are not lost when they associate to form a company. Thus these cases establish that it only citizens as such associations of citizens, corporations can claim for violation of their rights but a company cannot. Therefore in light of the present circumstances it is submitted that TSL being a company registered under Companies Act, 1956 is not a citizen for the purposes of Art. 19 and therefore cannot claim for violation of its rights under the said article. C. THAT FUNDAMENTAL RIGHT UNDER ARTICLE

19(1)(G)


SUBJECTED TO REASONABLE RESTRICTIONS .

It is humbly submitted that the action of the Government of Rajasthan and decision of the District Court does not violate the Fundamental Right under Art. 19(1)(g) of TSL. This is because by not allowing parties to derogate from Indian laws and courts will not lead to violation of freedom to carry on trade and occupation but even it is assumed that the same has been violated, it can be covered under reasonable restriction39 which can be imposed in the interests of general public. The Fundamental Right of a citizen to carry on any occupation, trade or business under Art. 19 (1) (g) of the Constitution is not absolute. 40 In deciding whether the restrictions, on the exercise of the right are reasonable, the Court has to decide not only on the extent and nature of the restrictions on the exercise of the right but also as to whether the conditions under which the right is restricted are reasonable. 41 It must be in accordance with the spirit of the Constitution.42 A Government Policy in the public interest would override the business interests of an individual person. 43 In the current situation the ‘underlying purpose’ is protection of public policy. Hence the decision of the District Court should be upheld as the same has been given upholding that Indian parties should not derogate from Indian laws. Moreover the government’s action of issui ng the antiarbitration injunction is justified due to the fact that the arbitration clause was null and void, inoperative, or incapable of being performed, therefore in such cases disputes cannot be referred to arbitration44.

37

R.C. Cooper v. Union of India, A.I.R. 1970 S.C. 564. Bennett Coleman and Co. v. Union of India , A.I.R. 1973 S.C. 106. 39 The Constitution of India, 1950 art.19, cl.6. 40 State of West Bengal v. Subodh Gopal Bose, A.I.R. 1954 S.C. 92. 41 N.B. Khare v. State of Delhi, A.I.R. 1950 S.C. 211. 42 Indian Express Newspapers v. Union of India, A.I.R. 1986 S.C. 515. 43 State of Orissa v. Radheyshyam Meher, (1995) 1 S.C.C. 652. 44 World Sport Group (Mauritius) Ltd. v M.S.M. Satellite (Singapore) Ltd ., 2014 (1) Arb. L.R. 197. 38


There isn’t any disproportionate imposition as the decision and the injunction is simply preventing Indian nationals from circumventing Indian laws. Reasonable restrictions have to be considered from the standpoint of the interest of the public and not from the point of view of persons upon whom restrictions are imposed. Therefore, since the right under article 19 (1) (g) is not absolute, TSL cannot claim abridgement of the same. III. THAT MPSL CAN BE MADE A PARTY TO ARBITRATION PROCEEDING.

The counsel humbly submits before the Hon’ble Supreme Court of India that MPSL can be made a party to arbitration proceeding although being a non-signatory/third party to arbitration agreement. This is because of the advent of multiple doctrine enunciated by judicial intervention, that non-signatory or third parties can be considered as a party to arbitration proceeding45. In India, the law relating to non-signatory has changed drastically over years which continental scholars sometimes refer to ‘extending’ the arbitration clause. 46 “Extension” of arbitration clause can suggest imposing a duty beyond the circle of those agreed to arbitrate.47. Following theories have been recognised by courts seeking to bind a non-signatory to an arbitration agreement: (i) principle of contract and agency 48; (ii) incorporation be reference; (iii) veil-piercing or alter ego49; (iv) assumption or implied consent50; (v) equitable estoppel51; (vi) successor in interest; and (vii) third party beneficiary52. Along with these doctrines, the principles of agency and contract do govern the third parties. A. DOCTRINE OF ESTOPPEL APPLIES

It is humbly submitted that MPSL can be considered as party to arbitration agreement under doctrine of estoppel. Estoppel typically entails equitable estoppel, which "precludes a party from enjoying rights and benefits under a contract while at the same time avoiding its burdens and obligations.”53It allows a party to be estopped from repudiating a contract on which the other party has relied and a result which the other party has changed its position so

45

National Broadcasting Co. v. Bear Stearns & Co., 165 F.3d 184 (1999). Pierre Mayer , Extension of the Arbitration Clause to Non-signatories under French Law and English Courts , 27 American University International L.J. 831-836 (2012). 47 William W. Park, Non-signatory and International Contracts, Oxford L.J. 1-32 (2009). 48 Javitch v. First Union Securities, 315 F.3d 619 (2003). 49 Thomson-C.S.F. S.A. v. American Arbitration Association , 64 F.3d 773 (1995). 50 Id. 51 Comer v. Micor , 436 F.3d 1098 (2006). 52 Sherer v. Green Tree Servicing L.L.C. , 548 F.3d 379 (2008). 53 Intergen N.V. v. Grina, 344 F.3d 134 (2003). 46


that it will suffer an injury if the contract is repudiated. 54 Thus, a party can be estopped from denying arbitration because of lack of written agreement if there is a close relationship between the entities involved and between the alleged wrongs and the non-signatory’s obligation and duties in the contract if the claims are intimately founded in and intertwined with the underlying contractual obligations. 55Equitable estoppel applies when the signatory to the contract containing an arbitration clause raises allegation of substantially interdependent and concerted misconduct by both non-signatory and one or more of the signatory to the contract.56 In present situation, under PEDA agreement DLPRC was appointed to arrange for man power for which they appointed a sub-contractor MPSL which provided the same for the consortium. In a contract, the person given a duty to perform an act should perform it in most reasonable manner like a prudent person would do in given circumstances with enough “duty of care”. But in present situation, DLPRC hadn’t performed it duty with enough duty of care and appointed MPSL whose workers were incompetent to perform their work and due to whose misconduct OGX along with other members had to suffer loss. This is evident to establish ‘direct and close relationship’ existing between MPSL and OGX. Also, equitable estoppel “precludes a party from enjoying rights and benefits under a contract while at the same time avoiding its burdens and obligations.” Similarly, MPSL was claiming a direct and substantive benefit from the contract. In the present situation the act of MPSL is directly intertwined with the performance of consortium and also to the agreement containing arbitration clause as the role of MPSL is intrinsically related with achievement of object of the contract. In the judicial pronouncement of Federal Court, 57 the court held that “holding claims that rely upon, make reference to, or are intertwined with claims under the subject contract containing an arbitration agreement are arbitrable”. B. DOCTRINE OF REFERENCE APPLIES .

It is humbly submitted that MPSL can be considered as a party to arbitration under doctrine of reference. This doctrine bounds a non-signatory to arbitrate where there is a separate contractual relationship between the signatory and the non-signatory that incorporates another

54

Herron v. Mid-Stream Transfer , 1984 W.L. 2920 (1984). Sunkist Soft Drinks v. Sunkist Growers , 10 F.3d 753 (1993). 56 Hill v. G.E. Power System, 282 F.3d 343 (2002). 57 Jones v. Jacobson, 195 Cal. Rpt. F.3d 522 (2011). 55


contract’s arbitration clause by reference.58 The language of such incorporation should not specifically refer to it.59 In present situation, arbitration clause under PEDA provides for resolution of dispute through arbitration administered at ICC, London under the laws of UK. Similarly, a separate arbitration clause was incorporated in separate contract between DLPRC and MPSL which also provides for arbitration at ICC, London. The applicability of doctrine of reference can be judged on two folds- First the court must determine whether the agreement allegedly incorporating the arbitration clause contains the requisite words of incorporation; and second, the court must determine whether the arbitration clause is broad enough to encompass the non-signatory. 60In present situation, the second arbitration clause does not ‘specifically’ provide for a reference to arbitration clause but a ‘similar’ arbitration clause is provided under second arbitration clause. Also, broad interpretation of ‘in terms of the agreement’ 61 is evident as the second contract was through PEDA only, which clearly implies that DLPRC under second arbitration clause has taken reference from first arbitration agreement as first clause was base over which the MPSL is duly appointed. Also, it clearly shows the intention of the parties of consortium that every contracting party apart from parties to consortium should be governed under same line with same arbitration seat which is enough to derive the reference from parties. Also, the first arbitration clause is inclusive enough as it provides for resolution to disputes between the parties. The arbitration agreement by no means try to narrow down the scope of arbitration in any specific dispute. Similarly, Federal Court in one of his leading judgement stated that “language limiting an arbitration clause to disputes between "the parties" generically, may not exclude non-signatories.”62 The ICC has held that whenever there is implied or express acceptance of arbitration agreement by the non-signatory, whether in the particular arbitration itself 63 or in another forum. 64 C. LESS TIME AND MONEY .

It is submitted that initiation of two different but interconnected arbitration proceeding will eventually burden the parties with lot of money expenditure and wastage of time. Since the 58

Import Export Steel Corp. v. Mississippi Valley Barge Line Co., 351 F.2d 503 (1965). J.S.& H. Constructions Co. v. Richmond Country Hospital Authority , 473 F.2d 212 (1973). 60 Upstate Shredding, L.L.C. v. Carloss Well Supply Co ., 84 F.2d 357 (2000). 61 Moot Proposition, ¶ IV. 62 Progressive Cas. Ins. Co. v. C.A. Reaseguradora Nacional de Venezuela, 991 F.2d 42 (1993). 63 Dallah Real Estate & Tourism Holding Co. v. The Ministry of Religious Affairs, Govt. of Pakistan , [2008] E.W.H.C. 1901 (Comm.) (U.K.). 64 P.T. First Media T.B.K v. Astro Nusantara International B.V. & Ors., (2013) S.G.C.A. 57. 59


subject matter of both the arbitration relates to common ground i.e. negligence of workers provided by MPSL and their negligence causing losses to OGX and both transaction are composite in nature i.e. DLPRC being liable for acts done by workers provided by MPSL and functionality of workers for whole consortium in which origin and end of all the transaction is with the Mother or Principal Agreement. The fact that a party was non-signatory to one or other agreement may not be of much significance, 65 more so, where performance of ancillary agreements is substantially dependent upon effective execution of the principal agreement, thus it will be beneficial to all parties concerned to initiate combined arbitration proceeding. The SC also relied on Alan Redfern and Martin Hunter book “ Law and Practise of International Commercial Arbitration”, where that said that when several parties are involved in a dispute, it is desirable that the dispute should be dealt with in the same proceeding rather than in a series of separate proceeding.66 Similarly, there is imminent possibility of the two tribunals arriving at incompatible conclusion. Lord Denning in this regard held in a case that “it is most undesirable that there should be inconsistent findings by two separate arbitration on virtually the self-same question, such as causation. It is very desirable that everything should be done to avoid such circumstances.”67 Similar views were rendered by Delhi HC which held that “ It is a wellestablished principle of law, admitting of no exceptions, that the simultaneous continuance of two independent legal proceedings on the same subject matter which are intertwined may be assiduously avoided. Not only does this expose the parties to multiplicity of proceedings but, even more importantly, it creates the possibility of a piquant situation where there may be diametrically conflicting decisions on the same matter by two jural entities of competent jurisdiction.”68 Even ICC Rules, under Rule 9, go further to permit a composite reference to arbitration disputes under multiple contracts irrespective of whether they are covered by more than one arbitration agreement, where claims arise out of or are in connection with multiple agreement. D. INCLUSIVE INTERPRETATION OF TERM ‘PARTY’.

The counsel humbly submits that the term party has inclusive interpretation. Although, definition of ‘party’ under Arbitration and Conciliation Act, 1996 states that “ party means

65

Chloro Controls India Pvt. Ltd. v. Seven Trent Water Purifi cation Inc. & Ods ., (2013) 1 S.C.C. 641. Id. 67 Abu Dhabi Gas Liquefaction Co. Ltd. v. Eastern Bechtel Corporation , 2 L.R. 425 (1982). 68 M.M.T.C. Ltd. v. Shyam Singh Chaudhary, (2001) 89 D.L.T. 683. 66


party to an arbitration agreement ”69 but with advent of complexities and pro-arbitration approach70 adopted by Hon’ble Courts in India, definition of parties can’t be narrowed down. This can be evident from decision71 of SC took help of ‘Doctrines of Non -Signatory’ to bind third party to arbitration. Interestingly, the Law Commission in its 246 th Report on the Amendments to the Act had proposed an amendment to the definition of “party” under section 2(1)(h) of the Act so as to include ‘ any person claiming through or under’ such party.72 Similarly, in 2015 Amendment the scope under Section 8 was broadened by inserting “any party claiming through or under such party to arbitration agreement” 73 which clearly shows the intention of legislature to expand the scope of arbitration to include non-signatory as well. Similarly, Section 45 of said Act keeps the scope of parties to expansive interpretation. The inclination of Indian law towards permitting arbitration between nonsignatories can be gathered from provision of Code of Civil Procedure, 1908 74 and Specific Relief Act, 196375 as well. E. PRIVITY OF CONTRACT DOES NOT APPLY .

It is humbly submitted before the Hon’ble SC that concept of “privity of contract” does not apply in present situation. The Doctrine of Privity states that ‘any third person who is not a party to contract cannot enforce or claim any rights under or through existing contract.’ 76 But there are certain exceptions to this “doctrine” which includes trust, insurance, family arrangement, collateral contracts, and contracts requiring tortious duty of care to third parties. A collateral contracts between a third party and one of the parties to a main contract may be associated with the main contract. Such a contract may enable a third party to enforce the main contract.77 In present situation, both OGX and DLPRC are parties to main PEDA contract and DLPRC which is one of parties to main contract contracted with MPSL for supply of man power and MPSL should be considered as parties to main agreement. Similarly, for sake of “ope rational

69

Arbitration and Conciliation Act, 1996 § 2(1)(h). Sukhwinder Singh v. Kusum Sharma , A.I.R. 2016 H.P. 1. 71 Chloro Controls India Pvt. Ltd. v. Seven Trent Water Purification Inc. & Ods ., (2013) 1 S.C.C. 641. 72 Report of Law Commission of India No. 246 on Amendment to Arbitration and Conciliation Act, 1996 (Aug. 5, 2014), available at http://lawcommissionofindia.nic.in/reports/Report246.pdf. 73 Arbitration and Conciliation (Amendment) Act, 2015 § 8. 74 Code of Civil Procedure, 1908 § 89. 75 Specific Relief Act, 1963 § 15. 76 Harman Singh v. Purbi Devi, A.I.R. 2000 H.P. 108. 77 1 Pollock & Mulla, Indian Contract and Specific Relief Act 134,135 (Nilima Bhadbhade ed., 13 th ed. LexisNexis 2008). 70


efficiency”78 DLPRC was given work to provide man power supply for consortium and for which DLPRC contracted with MPSL. Mere contention that consideration is flowing from DLPRC don’t make MPSL immune, because under Section 2 of Indian Contract Act, 1872 consideration can flow from “promisee or any other person” 79 which in present case is flowing from DLPRC even though work is being performed for whole consortium. Thus, in lights of above arguments, the counsel would like to submit before the Hon’ble Supreme Court of India that MPSL should be made a party to arbitration proceeding.

IV. THE HIGH COURT WAS RIGHT IN NOT SETTING ASIDE THE AWARD UNDER SEC. 34 OF ARBITRATION AND CONCILIATION ACT, 1996.

It is humbly submitted before the Hon’ble SC of India that the High Court was right in not setting aside the award under Sec. 34 of the Arbitrat ion and Conciliation Act, 1996. A. PART I OF THE ACT IS NOT APPLICABLE .

Sec.2(1)(f) of the Act defines International Commercial Arbitration as an arbitration relating to disputes arising out of legal relationships, whether contractual or not, considered as commercial under the law in force in India and where at least one of the parties is (i) An individual who is a national of, or habitually resident in, any country other than India; or (ii) A body corporate which is in corporate in any on try other than India; or (iii) A company or an association or a body of individuals whose central management and control is exercised in any country other than India; or (iv) The Government of a foreign country.

80

The Act lays

emphasis on the presence of a foreign element for it to be called an International Commercial Arbitration. It is submitted that the arbitration agreement will be considered as international arbitration agreement where one of the parties is a foreigner notwithstanding the fact that the arbitration is to take place in a particular country. 81 Moreover, if the judicial seat of arbitration and the law governing the arbitration is of foreign law then, this amounts to an express exclusion of Part-I.82 In this case, the PEDA comprises of five parties out of which two are of foreign nationals (DLPRC and OGX) therefore, this satisfies the definition of International Commercial Arbitration and hence, Part-I is excluded.

78

Reliance Industries Ltd. v. Union of India, A.I.R. 2014 S.C. 3218. Dutton v. Pulle, (1677) 2 Lev. 211. 80 Arbitration and Conciliation Act, 1996 § 2(1)(f). 81 G.A.I.L. v. S.P.I.E. C.A.P.A.G., A.I.R. 1994 Del. 75. 82 Dozco India Pvt. Ltd. v. Doosan Infracore Co. Ltd ., A.I.R. 2011 S.C. 2365. 79


Sec. 34 of the Act comes under the ambit of Part I of the Act and after the recent rulings 83 and amendments it has been made quite clear that Part I will not be applicable to Part II which deals with International Commercial Arbitration. The Arbitration and Conciliation (Amendment) Act, 2015 has added Clause 2(A) under Sec. 34 which states that an arbitral award arising out of arbitrations other than International Commercial Arbitrations can be set aside under this section on basis of patent illegality. The SC in Balco84 overruled Bhatia International 85 which had held that Indian Court had exclusive jurisdiction to test the validity of an arbitral award made in India even when the proper law of the contract is the law of another country. The court categorical stated that Part I of the Act shall not apply to arbitrations seated outside India86. The choice of a foreign seat was enough-there being no need to expressly or impliedly exclude the application of Part I 87. It was held by the Hon’ble Court that Part-I of Indian Arbitration Act, 1996 will have no applicability over international commercial arbitrations held outside India with respect to arbitration agreements entered into thereafter. In Union of India v. Reliance Industries Ltd .88 held that Part I of the Act will be excluded by necessary implication ‘if juridical seat is outside India or where law other than Indian law governs the arbitration agreement’. Due to the presence of a foreign seat and as well as a foreign law to govern the arbitration agreement, the SC held Part I to be ex cluded. B. ADOPTION OF SEAT CENTRIC APPROACH BY THE LEGISLATURE .

It must be pointed out that the law of the seat or place where the arbitration is held, is normally the law to govern that arbitration 89. The territorial link between the place of arbitration and the law governing that arbitration is well established in the international instruments, namely, the New York Convention of 1958 and the UNCITRAL Model Law of 198590. It is true that the terms seat and place are often used interchangeably. In Redfern and Hunter on International Arbitration 91, the seat theory is defined thus: “The concept that arbitration is governed by the law of the place in which it is held, which is the seat (or forum or locus arbitri) of the arbitration, is well established in both the theory and practice of international arbitration”. In fact, the 1923 Geneva Protocol states: The arbitral procedure,

83

Navalmar U.K. Ltd. v. Ashapura Minechem Ltd ., 2016 (11) R.A.J. 307. Bharat Aluminium Co. Ltd. v. Kaiser Aluminium Technical Service Ltd ., (2012) 9 S.C.C. 552. 85 Bhatia International v. Bulk Trading S.A., (2002) 4 S.C.C. 105. 86 Id. 87 Reliance Industries Ltd. v. Union of India, A.I.R. 2014 S.C. 3218. 88 Union of India v. Reliance Industries Ltd ., 2015 S.C. 385. 89 National Thermal Power Corp. v. Singer Co., A.I.R. 1993 S.C. 998. 90 P.C. Markanda, Law relating to Arbitration & Conciliation (9th ed. Lexis Nexis 2016). 91 Alan Redfern & Martin Hunter, Redfern and Hunter on International Arbitration (5th ed. Oxford 2009). 84


including the Constitution of the arbitral tribunal, shall be governed by the will of the parties and by the law of the country in whose territory the arbitration takes place 92. The New York Convention maintains the reference to the law of the country where the arbitration took place93 and, synonymously to the law of the country where the award is made under Art. V(1)(a) and (e)94. The aforesaid observations clearly show that New York Convention continues the clear territorial link between the place of arbitration and the law governing that arbitration. It is further pointed out that this territorial link is again maintained in the Model Law 95 which provides that the provision of this law, except Articles 8, 9, 35 and 36 apply only if the place of arbitration is in the territory of the State. Just as the Arbitration Act, 1996 maintains the territorial link between the place of arbitration and its law of arbitration, the law in Switzerland and England also maintain a clear link between the seat of arbitration and the lex arbitri. The Indian Act was drafted and enacted taking the UNCITRAL Model Law on International Commercial Arbitration and Conciliation rules, as the basis. The Indian law was designed and drafted in a manner that in case any lacunae was found or any provision was capable of two or more interpretation reference could be made to Model laws and rules as the same were taken into account while drafting96. In Union of India v McDonnell Douglas Corp 97 court reasoned that, by choosing the seat of the arbitration, the parties incorporate the laws of that country to govern their arbitral proceedings. In other cases such as C v D 98 and XL Insurance v Owens99 , the English Courts held that respective arbitration agreements were governed by English law as the arbitrations were seated in London, notwithstanding the fact that different governing laws applied to the contracts. The same conclusion was also reached in Sulamérica v Enesa100 in that case, the Court of Appeal set out guidelines providing that the law of an arbitration agreement is to be determined by undertaking a sequential three-stage enquiry into express choice, implied choice and the closest and most real connection.

92

Geneva Protocol on Arbitration Clauses, 1923 Protocol 2. The New York Convention on the recognition and enforcement of foreign arbitral awards, 1958 art. V(1)(a). 94 The New York Convention on the recognition and enforcement of foreign arbitral awards, 1958 art. V(1)(a) and (e). 95 UNCITRAL Model Law on International Commercial Arbitration, 2006 art. 1 cl. 2 . 96 Union of India v. East Coast Boat Bu ilders & Engineers Ltd., A.I.R. 1999 Del. 44. 97 Union of India v. McDonnell Douglas Corp., [1993] 2 Lloyd's Rep. 48. 98 C v. D, [2007] E.W.C.A. Civ. 1282. 99 X.L. Insurance v. Owens, [2001] 1 All E.R. (Comm.) 530. 100 Sulamerica Cia Nacional De Seguros S.A. & Odr. v. Enesa Engenharia S.A. & Odr ., [2012] E.W.C.A. Civ. 638. 93


Therefore it is clear that the regulation of conduct of arbitration and challenge to an award would have to be done by the courts of the country in which the arbitration is being conducted. In this case as well, the fact that parties have chosen ICC, London as place of arbitration implies that the parties have expressly excluded applicability of Part-I. C. APPLICATION UNDER SECTION

34 IS NOT MAINTAINABLE

The counsel humbly submits that the appellant had filed the application under wrong Section. Sec. 34 deals with setting aside of domestic awards given by tribunal having seat in India. Remedy under this Sec. is available only in cases of domestic arbitration and has no application whatsoever to international commercial arbitration.101 Even after the amendment of 2015, the jurisdiction of Indian courts has been curtailed under Sec. 34(2)(A). Sec. 34(2)(A) reads as “An arbitral award arising out of arbitration other than international commercial arbitration, may also be set aside by the court, if the court finds that the award is vitiated by patent illegality.” This clearly shows the intention of legislature to take the International commercial arbitration outside the ambit of Indian Courts. Even, Part-I is not applicable to International commercial arbitration102, restricting the applicability of Sec. 34 in present situation. The correct way which the party should have adopted is to file the application under Sec. 48 of said Act. D. NO VIOLATION OF PUBLIC POLICY .

The counsel humbly submits that the decision of arbitration tribunal does not violate public policy. Public policy has been considered as a leeway by the parties to negate the award of tribunal as it hasn’t been defined under said provision of Act. For purpose of said section, it can be considered under judicial pronouncements as ‘ principles and standards constituting the general or fundamental policy of state established by the constitution and existing law of the country, and principles of moral and justice.’103 The central government has defined the expression ‘public policy’ as ‘ principles in accordance with which actions of men and commodities need to be regulated to achieve the good of the entire community or public.’ The term public policy needs to be given narrow interpretation. The Supreme Court in a case held that ‘court do not have unfettered powers to set aside an arbitral award and though this section permits courts to interfere on the ground of public policy but very restricted

101

Vikrant Tyres Ltd. v. Techno Exports Foreign Trade Co. Ltd ., 2005 (3) R.A.J. 612. Bharat Aluminium Co. Ltd. v. Kaiser Aluminium Technical Service Ltd ., (2012) 9 S.C.C. 552. 103 Rail India Technical and Economic Services Ltd. v. Ravi Construction , A.I.R. 2002 S.C. 30. 102


interpretation is given to term public policy’. 104 In supplementary report to 246 th report of Law Commission of India, it criticizes the judgement of SC in ONGC Ltd. v. Western Geco Int’l Ltd.105, and stated the scope of the words ‘public policy’ should be limited so that interference by the courts in arbitration awards is reduced. 106 Under Sec. 34 of said Act, the court can set aside the award on basis of public policy. The ground under which public policy is violated are enumerated as (i) if making of award was induced or affected by fraud or corruption or was in violat ion of Sec. 75 or Sec. 81, or (ii) if it is in contravention with the fundamental policy of India, or (iii) if it is conflict with most basic notion of justice and morality.107 Public policy of India under Sec. 48(2) carries a narrow meaning when compared to meaning assigned to same expression in the context of Sec. 34(2)(b).108 I) PARTY CAN CHOOSE FOREIGN LAW AND FOREIGN SEAT

The counsel submits before the Hon’ble Supreme Court that Indian parties can derogate from Indian law, as there is no bar on Indian nationals on issues of applicable law as well as choosing a foreign seat. It is submitted that the Act enables the parties to enter into binding arbitration agreements which enable them to determine “how their disputes are to be resolved” by choosing the seat 109, procedural law110 and substantive law of the agreement therefore, it is not against public policy to agree that all disputes are to be taken to arbitration111 as has been done in the present case in hand. Further, Sec. 20(1) allows the parties to an arbitration agreement to choose the seat of arbitration. This incorporates the principle of party autonomy as would be apparent from the expression “ parties are to free to agree on”112. In the present case as well the parties to the PED Agreement have chosen ICC to be their seat of arbitration and thus it would no longer be open to the parties to contend that provisions of Part I of the 1996 Act would be still applicable. Further in the case of Sasan Power Ltd v. North America Coal Corporation India Pvt Ltd , the Madhya Pradesh High Court has stated that two Indian parties may conduct arbitration in a foreign seat under English law. The Court also relied upon Enercon (India) Private Limited v. 104

G.A.I.L. v. Kalyana Mukund Ltd ., 2011 (1) R.A.J. 150. O.N.G.C. Ltd. v. Western Geco Int’l. Ltd ., A.I.R. 2015 S.C. 363. 106 P.C. Markanda, Law relating to Arbitration & Conciliation, 1214 (9th ed. Lexis Nexis 2016). 107 Arbitration and Conciliation Act, 1996 § 34(2)(b)(ii). 108 Penn Racquet Sports v. Mayor Int’l Ltd ., 2011 (1) Arb. L.R. 244. 109 Arbitration and Conciliation Act, 1996 § 20(1). 110 Arbitration and Conciliation Act, 1996 § 19(2). 111 Atlantic Shipping & Trading Co. Ltd. v. Louis Dreyfus & Co., [1992] 2 A.C. 250. 112 Gopal Singh v. Ashok Leyland Finance , 2010 (4) R.A.J. 175. 105


Enercon GMBH 113 and Chatterjee Petroleum v. Haldia Petro Chemicals 114 to come to this conclusion. Moreover in cases where the parties have agreed to resolve their disputes by way of arbitration outside India, the courts have generally held such agreements not contrary to public policy115 and upheld its validity. Similarly, no objection have been raised to an arbitration agreement that it contains a stipulation that any arbitration proceedings under the agreement shall take place in a specified country or city 116. Such clauses have not held to be opposed to public policy of India 117. II) THE PROPER LAW OF CONTRACT IS INDIAN LAW

The counsel humbly submits before the Hon’ble SC that Indian parties are allowed to choose a foreign law to govern their proceeding and it is not against the public policy of India. There are four laws which govern the arbitration. They are i) law governing the arbitration agreement ii) law governing the existence and proceedings of the arbitral tribunal i.e. the curial law or Lex Arbitri, iii) the law of the seat of arbitration and iv) the proper law of contract118. In present situation, the parties to arbitration agreement had expressly chosen the laws of UK as the law of seat as well as law of arbitration proceeding. Similarly, the law of arbitration is of UK and International customary commercial laws. But, the agreement is silent on proper law of contract which is Indian law, as contented by respondent. If the agreement is silent on the law of contract then the court in ascertaining the proper law must give regard to the features of the contract which serve as links between the contract and the country with which it is most closely and vitally connected119. These factors include the place where the contract was made, the form and object of contract, the place of performance, the place of residence or business of parties and such other links.120It is submitted that in this case the place of performance is india, the agreement was entered into by the parties in Rajasthan, the business involved the utilisation of natural resources of India therefore the proper law of contract is Indian law and the parties to the dispute (TSL, OIL and Government of Rajasthan) have not completely derogated from Indian laws. This position has been affirmed by various

113

Enercon (India) Private Limited v. Enercon G.M.B.H ., 2014 (5) S.C.C. 1. Chatterjee Petroleum v. Haldia Petro Chemicals, 2013 Arb. L.R. 456. 115 Reliance Industries v. Union of India, A.I.R. 2014 S.C. 3218. 116 William Jacks & Co. v. Harrowing Steamship Co., A.I.R. 1932 Sind. 111. 117 Kumud Agarwalla v. Fertilizer Corpn. of India, A.I.R. 1985 Cal. 89. 118 Sakuna Exports Ltd. v. Louis Drefus Commodities Suisse S.A ., 2012 (1) Arb. L.R. 496. 119 Dicey & Morris, Conflict of Laws 145 (15th ed. Sweet & Maxwell 2016). 120 National Thermal Power v. Singer Company & Ors. , A.I.R. 1992(3) S.C.C. 551. 114


judgments of this court. In the case of Reliance Industries v. Union of India121 a division bench of the Supreme Court allowed two Indian parties to choose a seat outside India and a foreign law to govern the arbitration agreement, provided they choose Indian substantive law to govern the contract. III) SUBJECT MATTER OF DISPUTE IS ARBITRABLE

Under PEDA it was provided that all disputes arising out of the said agreement will be resolved by way of Arbitration administered by International Chambers of Commerce (“ICC”) in London, England, under laws of the United Kingdom. The Clause 19(1) further provided that “Law of the United Kingdom and international customary commercial laws will be applicable on disputes arising out of agreement between the parties.” From the above clause it can be clearly inferred that it was the intention of the parties to resolve all disputes via arbitration under UK laws. The disputes aris ing out of encashment of Bank Guarantee and deductions of Service tax also comes under the disputes arising out of the PEDA agreement and are hence under arbitrable under UK law. In Fiona Trust & Holding Corporation and others v Privalov

122

the court held that when parties use the term “arising out of” it is their

intention that the agreement be construed in wide manner. The court further went on to say that such agreements should be interpreted liberally to include disputes arising out of underlying agreements. The counsel humbly submits before the Hon’ble SC that there was no violation of Public policy of India as award of tribunal was not against the ground enumerated under sec 34. There is no case of fraud arising under present situation. The fundamental policy of Indian law are not violated as ‘dispute regarding bank guarantee and service tax’ are arbitrable and the award is not against the principle of natural justice as all the principles of natural justice are duly followed and there exists a presumption in favour of award. Reference can be made to judgement in which court rendered that ‘the Courts should be very circumspect about setting aside an award reached by an arbitrator. It is duty of court to honour the award and not to find out reasons to set aside the same’. 123 Similarly, the decision of High Court of Rajasthan is not irrational as the award was in due consonance of the laws and statutes made by

legislatures

as

well

as

the

Supreme

121

Court.

Reliance Industries v. Union of India A.I.R. 2014 S.C. 3218. Fiona Trust & Holding Corporation and others v. Privalov and others, [2007] 2 All E.R. (Comm.) 1053. 123 I.O.C. Ltd. v. Devi Construction Engineering Contractors, 2009 (4) R.A.J. 584. 122


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