ARBITRAL AWARD & PATENT ILLEGALITY

ARBITRAL AWARD & PATENT ILLEGALITY

This Short write-up on Arbitral Award is written by Harpreet Kaur pursuing BA.LL.B (Hons.) from Rayat College of Law.

  • The Model Law, relied upon limited grounds for setting aside arbitral awards .The Arbitration and Conciliation Act, 1996 was enacted in consonance with the Model Law.
  • An application to set aside the arbitral award can be made under section 34 of the Act of 1966. By Amendment 2015 section 34 underwent significant changes by introduction of section 34(2A) in the Act pursuant to which ground of patent illegality to set aside arbitral award given statutory effect.
  • The ground of patent illegality was first advanced in Oil & Natural Gas Corporation Ltd. v. Saw Pipes Ltd. Supreme Court widely interpreted the meaning of public policy of India, and held that an award would be “patently illegal”, if it is contrary to the substantive provisions of law, or provisions of the Act, or terms of the contract, and a patently illegal award may be set aside under section 34(2)(b)(ii).
  • The Supreme Court, in Patel Engineering Limited North Eastern Electric Power Corporation Limited reaffirmed the scope of patent illegality, post the 2015 Amendment of the Arbitration and Conciliation Act, 1996 as a ground to challenge a domestic award under Section 34 of the Act if:

(i) the arbitral award is found to be perverse, or, so irrational that no reasonable person would have arrived at the same; or,

(ii) the construction of the contract is such that no fair or reasonable person would take; or

(iii) the view of the arbitrator  is not even a possible view.