Reliance Industries Limited and Another versus Union of India, Civil Appeal No. 5765 of 2014 (Arising out of SLP (C) No. 20041 of 2013)

The Hon’ble Supreme Court on May 28, 2014 allowed the appeal filed against the order dated March  22, 2013 passed by the Hon’ble Delhi High Court.

The Hon’ble Delhi High Court held that, even though the arbitration agreement is governed by the  laws of England and the juridical seat of arbitration is in London, Part I of the Arbitration &  Conciliation Act, 1996 is still applicable as the laws governing the substantive contract are  Indian Laws and the issues involved in the matter relates to public policy of India.

The Hon’ble Supreme Court while setting aside the High Court’s order held that applicability of  Part I of the Act is not dependent on the nature of challenge to the award. Whether or not the  award is challenged on the ground of public policy, it would have to satisfy the pre-condition that  the Act is applicable to the arbitration agreement. The parties, by providing the juridical seat in  London, understood that the arbitration law of England would be applicable to the arbitration  agreement and not Indian law.

M/s. Kone Elevator India Private Limited versus State of Tamil Nadu and Others, Writ Petition  (Civil) No. 232 of 2005

The Constitution Bench of the Hon’ble Supreme Court on May 6, 2014 overruled the decision of  three-Judge Bench in State of Andhra Pradesh versus Kone Elevators (India) Limited on the ground  that the three-Judges Bench had not taken into consideration the decisions rendered by the Supreme  Court in various precedents in relation to “works contract”.

The Hon’ble Supreme Court has set out four concepts related to works contract: (i) the works  contract is an indivisible contract but, by legal fiction, is divided into two parts, one for sale  of goods, and the other for supply of labour and services; (ii) the concept of “dominant nature test” or the “degree of intention test” or “overwhelming  component test” for treating a contract as a works contract is not applicable; (iii) the term  “works contract” as used in the Constitution takes in its sweep all genre of works contract and is  not to be narrowly construed to cover one species of contract to provide for labour and service  alone; and (iv) once the characteristics of works contract are met with in a contract entered into  between the parties, any additional obligation incorporated in the contract would not change the nature of the contract.