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Issues: (i) Whether the petition under Section 34 of the Arbitration and Conciliation Act, 1996 was maintainable before the Delhi High Court when the juridical seat of arbitration was London and the arbitration agreement was governed by English law; (ii) whether the choice of Indian law as the proper law of the substantive contract kept Part I of the Arbitration and Conciliation Act, 1996 applicable to the arbitration agreement; (iii) whether the public policy objection preserved Indian court supervision over the challenge to the award.
Issue (i): Whether the petition under Section 34 of the Arbitration and Conciliation Act, 1996 was maintainable before the Delhi High Court when the juridical seat of arbitration was London and the arbitration agreement was governed by English law.
Analysis: The contract separately dealt with the substantive obligations and the dispute resolution mechanism. The substantive contract was governed by Indian law, but the arbitration agreement was expressly governed by English law, and the juridical seat was London. On the application of the then governing principle that Part I applies to foreign-seated arbitrations only if not excluded by agreement, the designation of London as the seat and the express choice of English law for the arbitration agreement showed exclusion of Part I and of Indian court supervisory jurisdiction over the challenge to the award.
Conclusion: The Section 34 petition in the Delhi High Court was not maintainable.
Issue (ii): Whether the choice of Indian law as the proper law of the substantive contract kept Part I of the Arbitration and Conciliation Act, 1996 applicable to the arbitration agreement.
Analysis: The governing law of the substantive contract and the governing law of the arbitration agreement were distinct. Section 16 of the Arbitration and Conciliation Act, 1996 recognizes the separability of the arbitration clause from the main contract. The Court held that the reference in the contract to Indian law governed the substantive rights and obligations under the production sharing contract, while the arbitration agreement and the remedy for setting aside or challenging the award were governed by English law at the seat of arbitration. The High Court had erred in conflating the proper law of the contract with the proper law of the arbitration agreement.
Conclusion: Part I of the Arbitration and Conciliation Act, 1996 did not remain applicable to the arbitration agreement.
Issue (iii): Whether the public policy objection preserved Indian court supervision over the challenge to the award.
Analysis: The Court held that a public policy objection could arise at the stage of enforcement, but it did not by itself create jurisdiction under Section 34 where Part I had been excluded by agreement. The claims were treated as contractual disputes, and there was no basis to hold that the award challenge could be entertained in India merely because public policy issues were pleaded.
Conclusion: The public policy argument did not sustain Indian court jurisdiction to entertain the Section 34 challenge.
Final Conclusion: The contractual choice of a foreign juridical seat and English law for the arbitration agreement excluded Indian supervisory jurisdiction under Part I, so the award challenge had to be pursued in the court of the seat, with public policy remaining relevant only at the enforcement stage.
Ratio Decidendi: Where parties expressly choose a foreign juridical seat and make the arbitration agreement subject to foreign law, Part I of the Arbitration and Conciliation Act, 1996 is excluded notwithstanding that the substantive contract is governed by Indian law, and a challenge to the award cannot be maintained in Indian courts under Section 34.
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