Reliance – Panna Mukta arbitration: Supreme Court says Centre abused process of court

The Supreme Court has criticized the Central government for abusing “the process of court” in the matter pertaining to arbitration between the Government and Reliance Industries Limited over Panna Mukta gas fields..In the judgment authored by Justice Rohinton Nariman with whom Justice AK Sikri has concurred, the Court has turned down the Central government’s challenge to the mandate of one of the arbitrators, Peter Leaver..The case pertains to an arbitration agreement between the Reliance Industries Limited and the Central government pertaining to Tapti and Panna Mukta gas fields. When disputes arose between the parties, the arbitration was held in London as agreed to by the parties by virtue of a consent award. The Arbitral Tribunal passed a final partial award which became the subject matter of a Section 34 petition filed in the Delhi High Court by the Union of India. The issue was whether Part I of the Arbitration and Conciliation Act, 1996 will be applicable to the arbitration agreement. The issued had to be decided in the light of the principles laid down in Bhatia International’s judgment and not the new BALCO judgment because the arbitration agreement pre-dated the BALCO judgment which had only prospective application..The Delhi High Court held that the said petition was maintainable but the Supreme Court overturned the said judgment placing reliance on excluding clauses laid down in the 2002 judgment of Bhatia International (overruled in 2012). According to Bhatia International case, Part-I of the Arbitration, 1996 will not apply if it has been excluded either expressly or by necessary implication. The Centre’s review petition and curative petition were also dismissed by the Supreme Court..Subsequently, the Centre filed an application in the Delhi High Court under Section 14 of the Arbitration and Conciliation Act, 1996 challenging the mandate of one of the arbitrators, Peter Leaver. The said case was dismissed by the High Court prompting the present appeal..The Court held that though the Bhatia International case resurrected the concurrent jurisdiction principle, even the said judgment will not apply to those arbitration agreements which exclude application of Part I. It held that,.“The last paragraph of Bharat Aluminium’s judgment has now to be read with two caveats, both emanating from paragraph 32 of Bhatia International itself – that where the Court comes to a determination that the juridical seat is outside India or where law other than Indian law governs the arbitration agreement, Part-I of the Arbitration Act, 1996 would be excluded by necessary implication. Therefore, even in the cases governed by the Bhatia principle, it is only those cases in which agreements stipulate that the seat of arbitration is in India or on whose facts a judgment cannot be reached on the seat of the arbitration as being outside India that would continue to be governed by the Bhatia principle. Also, it is only those agreements which stipulate or can be read to stipulate that the law governing the arbitration agreement is Indian law which would continue to be governed by the Bhatia rule.”.The Court held that in the present case, the Supreme Court had already determined both that the juridical seat of the arbitration is at London and that the arbitration agreement is governed by English law. It therefore held that,. “This being the case, it is not open to the Union of India to argue that Part-I of the Arbitration Act, 1996 would be applicable. A Section 14 application made under Part-I would consequently not be maintainable. It needs to be mentioned that Shri Ranjit Kumar’s valiant attempt to reopen a question settled twice over, that is by dismissal of both a review petition and a curative petition on the very ground urged before us, must meet with the same fate.” .The Court then criticized the Centre for abusing the process of court..…., both on grounds of res judicata as well as the law laid down in the judgment dated 28.5.2014, this application under Section 14 deserves to be dismissed. It is also an abuse of the process of the Court as has rightly been argued by Dr. Singhvi.”