Recently, by order dated 05.08.2019, the Supreme Court upheld the judgment of the Delhi High Court dated 18.12.2018 in the matter of Union of India v. Reliance Industries Ltd. & Ors.,1 wherein the Delhi High Court had held that an appeal against the procedural order of an Arbitral Tribunal for the disclosure of documents, was not maintainable under Section 37 of the Arbitration and Conciliation Act, 1996 ("Act"). The case is significant in that it displays the cautious approach of Indian courts in assessing appeals against orders of international arbitral tribunals dealing with discovery of documents.
The Delhi High Court was dealing with an appeal preferred by the Union of India ("UOI") against the procedural order dated 31.08.2018 ("Impugned Order") passed by the majority members of the Arbitral Tribunal in an international commercial arbitration between Reliance Industries Limited ("RIL"), NIKO Resources Limited ("NIKO") and B.P. Exploration (Alpha) Limited (collectively referred to as the "Claimants") on the one hand, and the UOI on the other.
The dispute arose out of a Production Sharing Contract ("PSC") entered in April 2000 between the UOI, RIL and NIKO. The PSC placed obligations on RIL and NIKO with regard to exploration, extraction, evacuation and sale of natural gas from D1-D3 gas fields situated in the KG Basin. Under the terms of the PSC, RIL and NIKO submitted their Work Programmes and budgets which were approved by the Managing Committee established under the PSC. Around February 2011, RIL sold part of its interest to B.P. Exploration (Alpha) Limited, and consequently B.P. Exploration (Alpha) Limited became a party to the PSC.
The UOI claimed that though the Work Programmes and budget provided for the production of 80 mmscmd of gas to be extracted from 50 development wells, RIL and NIKO had drilled only 18 development wells, and sought to recover and appropriate costs for all 50 development wells from the revenues obtained on sale of gas. The UOI therefore disallowed recovery of costs, pursuant to which the Claimants served a notice of arbitration dated 23.11.2011 upon the UOI.
The Arbitration Proceedings
During the course of the arbitration proceedings, the parties to the arbitration made requests for various documents according to the rules on the taking of evidence in international arbitration based on the Redfern Schedule. The UOI made disclosures of some of the documents requested by the Claimants but did not disclose all of the requested documents. The UOI raised several objections against the Claimants' requests for disclosure, which led to further procedural hearings and orders by the Arbitral Tribunal. The UOI's objections were based on the following:2
i) The requests lack relevance and/or materiality;
ii) The requests are a mere "fishing and roving" exercise;
iii) The requests lack specificity;
iv) The requests are directed towards internal documents;
v) The documents of which disclosure is sought are privileged as they refer to the affairs of the State;
vi) That the documents of which disclosure is sought are privileged inasmuch as they refer to intra-Governmental discussions; and
vii) The requests are irrelevant as the documents sought are notings of lower functionaries, who are lesser in rank than those who have taken the ultimate decisions on behalf of the UOI.
In considering the above objections, the Arbitral Tribunal relied on decisions of Indian courts as applicable to requests for discovery, in particular, the judgments of M L Sethi v. R P Kapur,3 The Municipal Board of Agra v. Asharfi Lal,4 and Basanagouda v. S B Amarkhed5 and set forth the following guiding principles:6
i) The request for discovery of documents could not be refused only because it did not specify the documents which are sought to be discovered, as unless the party seeking discovery is aware of what documents are in possession of the opposite party, it cannot possibly seek discovery of specific documents;
ii) A party has a right to approach the Court or concerned Adjudicatory Authority and to insist on production of all documents which throw light on the matter in issue and being those documents which are in power and possession of the opposite party;
iii) The Court or Adjudicating Authority concerned shall examine whether the documents are necessary to decide the matter in issue, i.e. the Court or the Authority concerned will delve into aspects pertaining to expediency, justness and relevance of the documents keeping in mind the matter in issue.
Based on these principles, the Arbitral Tribunal granted the request for disclosure of documents made by the Claimants by a majority order dated 31.08.2018. There was partial dissent on two aspects by one of the members.
The Delhi High Court's consideration of the matter
The Delhi High Court considered the reasoning of the Arbitral Tribunal in passing its order and took note of the judgments which had been relied upon by the Arbitral Tribunal. However, the threshold question before the Court was whether an appeal under Section 37(2)(b) was maintainable against an order directing the disclosure of documents by the Arbitral Tribunal. In this regard, the Court considered that Section 37 of the Act stipulates the specific orders that are appealable. Section 37 states that:
"(1) An appeal shall lie from the following orders (and from no others) to the Court authorised by law to hear appeals from original decrees of the Court passing the order, namely:--
(a) refusing to refer the parties to arbitration under section 8;
(b) granting or refusing to grant any measure under section 9;
(c) setting aside or refusing to set aside an arbitral award under section 34.
(2) An appeal shall also lie to a Court from an order of the arbitral tribunal.--
(a) accepting the plea referred in sub-section (2) or sub-section (3) of section 16; or
(b) granting or refusing to grant an interim measure under section 17.
(3) No second appeal shall lie from an order passed in appeal under this section, but nothing in this section shall affect or take away any right to appeal to the Supreme Court."
During the proceeding at the High Court, the Claimants had challenged the maintainability of the appeal, claiming that an appeal under Section 37(2)(b) of the Act lies only against an order passed by the Arbitral Tribunal under Section 17, and the present Impugned Order is not such an order. The UOI however, claimed that the power of an Arbitral Tribunal to order discovery is rooted in Section 17(1)(ii)(c) of the Act. This provision reads as follows:
"A party may, during the arbitral proceedings or at any time after the making of the arbitral award but before it is enforced in accordance with section 36, apply to the arbitral tribunal—
(i) for the appointment of a guardian for a minor or person of unsound mind for the purposes of arbitral proceedings; or
(ii) for an interim measure of protection in respect of any of the following matters, namely:—
(a) the preservation, interim custody or sale of any goods which are the subject-matter of the arbitration agreement;
(b) securing the amount in dispute in the arbitration;
(c) the detention, preservation or inspection of any property or thing which is the subject-matter of the dispute in arbitration, or as to which any question may arise therein and authorising for any of the aforesaid purposes any person to enter upon any land or building in the possession of any party, or authorising any samples to be taken, or any observation to be made, or experiment to be tried, which may be necessary or expedient for the purpose of obtaining full information or evidence;
(d) interim injunction or the appointment of a receiver;
(e) such other interim measure of protection as may appear to the arbitral tribunal to be just and convenient,
and the arbitral tribunal shall have the same power for making orders, as the Court has for the purpose of, and in relation to, any proceedings before it."
The Court disagreed with the contention of the UOI and held that the latter part of Section 17(1)(ii)(c) is only indicative of the fact that while putting in place interim measures in order to protect any property or thing which is the subject matter of the arbitral proceedings, the Arbitral Tribunal would have the power to authorize any person to enter upon any land or building in possession of any party where the property or thing may lie, for the purpose of obtaining full information or evidence.7 The Court held that the power under Section 17(1)(ii)(c) is not to order discovery of documents, which may be connected or related to a property or thing, which is the subject matter of dispute in the arbitration proceedings. Inspection of any property or thing, which is the subject matter of the dispute in arbitration, would be different from ordering discovery or inspection of documents, which are related to a property or thing which is the subject matter of the dispute.8
The Court held that the power of the Arbitral Tribunal to order discovery is instead derived from Section 19 of the Act which reads as follows:
"Determination of rules of procedure.—
(1) The arbitral tribunal shall not be bound by the Code of Civil Procedure, 1908 (5 of 1908) or the Indian Evidence Act, 1872 (1 of 1872).
(2) Subject to this Part, the parties are free to agree on the procedure to be followed by the arbitral tribunal in conducting its proceedings.
(3) Failing any agreement referred to in sub-section (2), the arbitral tribunal may, subject to this Part, conduct the proceedings in the manner it considers appropriate. (4) The power of the arbitral tribunal under sub-section (3) includes the power to determine the admissibility, relevance, materiality and weight of any evidence."
The Court noted that under Section 19 of the Act, the Arbitral Tribunal can devise an appropriate procedure in consonance with known principles of law in the absence of any agreed procedure among the parties. Further, the fact that Section 19(4) grants the power to the Arbitral Tribunal to ascertain the admissibility, relevance, materiality and weight of any evidence provides a clue that the Arbitral Tribunal would also have the power to order disclosure of documents which may have evidentiary value. Section 27 of the Act also allows the Arbitral Tribunal, or a party with the approval of the Arbitral Tribunal, to apply to a Court for assistance to take evidence from the opposite party. It was held that both sections inhere in the Arbitral Tribunal the power to gather evidence.9
The Court found that the Arbitral Tribunal had considered the provisions of Section 18 and 19 of the Act while bearing in mind that no procedure had been agreed to by the parties with regard to inspection and discovery, and decided to go about in a manner that it thought appropriate, by applying the principles enunciated by the Courts in India.
The Court also observed that legislative policy appears to be that a remedy of appeal should not be provided against an order passed by the Arbitral Tribunal directing discovery of documents, so as to not impede the smooth conduct of the arbitration proceedings by interdicting procedural orders passed by the Arbitral Tribunal in furtherance of the adjudication process.10 The Court drew parallels from the Code of Civil Procedure, wherein Order XI vests the power in the civil courts to order discovery and inspection. It was noted that under the provisions of Order XI, an appeal can be preferred only in the limited instance of an order passed under Rule 21 of Order XI, wherein a court is vested with powers to dismiss the suit for want of prosecution and in case of the defendant, have his defence struck out.11
Based on this reasoning, the Delhi High Court dismissed UOI's appeal against the Tribunal's order. The Supreme Court upheld the Delhi High Court's order.
1 Arb. A. (COMM.) 57/2018, 2019 (1) Arb LR 72 (Delhi), ("Delhi HC Judgment")
2 As explained in para 22 of the Delhi HC Judgment
3 (1972) 2 SCC 427
4 ILR (1922) 44 All 202
5 (1992) 2 SCC 612
6 As explained in para 23 of the Delhi HC Judgment
7 As explained in para 34 of the Delhi HC Judgment
8 It is pertinent to note that both sections 17 and 37 as referred to by the Delhi High Court, have been amended with effect from 30.08.2019. The amendments to the provisions however do not have any impact on the basis on which the Delhi HC reasoned on their applicability to the facts of the case.
9 As explained in para 37 of the Delhi HC Judgment
10 As explained in para 37.4 of the Delhi HC Judgment
11 Paras 37.5 and 37.6 of the Delhi HC Judgment
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