Patently illegal domestic arbitral awards can be set aside: SC

Patently illegal domestic arbitral awards can be set aside: SC

May 23, 202091 0Want create site? Find Free WordPress Themes and plugins.

New Delhi,  May 23: The Supreme Court of India has said that patently illegal domestic arbitral awards can be set aside under Section 34 of the Arbitration and Concilliation Act, 1996.

The Supreme Court Bench comprising Justices R. Banumathi,  Indu Malhotra, and Aniruddha Bose made this observation on Friday in Patel Engineering Ltd versus North Eastern Electric Power Corporation Ltd.(NEEPCO) and dismissed all the Special Leave Petitions related to the case. Pursuant to the recommendations of the Law Commission, the 1996 Act was amended by Act 3 of 2016, which came into force w.e.f. 23.10.2015.

The ground of “patent illegality” for setting aside a domestic award has been given statutory force in Section 34(2A) of the 1996 Act. The ground of “patent illegality” cannot be invoked in international commercial arbitrations seated in India.

Senior counsels Harish Salve and Neeraj Kishan Kaul appeared on behalf of the petitioner- Patel Engineering Ltd. Solicitor General Tushar Mehta and senior counsel Huzeffa Ahmadi represented the respondent- NEEPCO.

The North Eastern Electric Power Corporation Ltd.(NEEPCO) filed three applications under Section 34 of the Arbitration and Conciliation Act, 1996 before the Additional Deputy Commissioner (Judicial), Shillong challenging the three arbitral awards dated 29.03.2016.

The Additional Deputy Commissioner (Judicial) vide common judgment dated 27.04.2018 rejected the applications under Section 34 of the Act and upheld all the three arbitral awards. The respondent- NEEPCO filed three appeals under Section 37 of the Act before the High Court.

By the common judgment dated 26.02.2019, the High Court allowed the respondent’s appeals and set aside the common judgment dated 27.04.2018 passed by the Additional Deputy Commissioner (Judicial).

Aggrieved by the common judgment, the petitioner preferred special leave petitions before the Supreme Court. After hearing both the parties, the Supreme Court on 19.07.2019 dismissed all the three SLPs filed by the petitioner holding that the Court is not inclined to interfere in the matters.

After dismissal of the SLPs, the petitioner filed review petitions before the High Court on the ground that the judgment of the High Court dated 26.02.2019 suffers from error apparent on the face of the record as it had not taken into consideration the amendments made to Arbitration and Conciliation Act, 1996 by Amendment Act of 2015. The said review petitions came to be dismissed by the High Court vide the impugned orders.

The appellant in the instant case challenged the order passed by the High Court of Meghalaya at Shillong in and by which the High Court declined to entertain the review petitions filed by the petitioner seeking review of the judgment and order on the ground that no ground for review is made out and that there is a delay in filing the application for review.

Justices R. Banumathi,  Indu Malhotra, and Aniruddha Bose observed that while dealing with the appeal under Section 37 of the Act, the High Court has considered the matter at length, and held that while interpreting the terms of the contract, no reasonable person could have arrived at a different conclusion and that the awards passed by the arbitrator suffer from the vice of irrationality and perversity.

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