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4. PATENT ILLEGALITY – A Ground Available To Set Aside Domestic Arbitral Awards Made After 2015 Amendment – SC
The 3 bench of judges comprising Justice R. Bhanumati, Indu Malhotra and Aniruddha Bose observed that the patent illegality is a ground available under the Arbitration and Conciliation Act,1996 to set aside a domestic arbitral award made after the 2015 Amendment to the said statute. That an arbitral award can be set aside under section 34 of the Arbitration and Conciliation Act if that award is patently illegal or perverse in nature.
In the concerned case, the arbitral awards were made on the 29 March 2016 i.e. after 2015 amendment. The North Eastern Electric Power Corporation Ltd. challenges the three arbitral awards and filed applications for the same under article 34 of the statute before the Additional Deputy Commissioner (Judicial), Shillong. However, the ADC (Judicial) rejected the applications and upheld all the three arbitral awards. Further the appeals against these orders were allowed by the High court which set aside the judgement passed by Additional Deputy Commissioner (Judicial).
The bench observed that in so far as the domestic awards are concerned, the additional ground is available under section 34 (2A) of the statute and the ground of patent illegality has been given statutory force in section 34 (2A) of the statute. However, re appreciation of evidence was not permitted under the ground of “patent illegality” appearing on the face of the award. Further it was observed that the ground of patent illegality is a ground available under the statute for setting aside a domestic award, if the decision of the arbitrator is found to be perverse or irrational or the construction of the contract is such that no fair or reasonable person would take or the view of the arbitrator is not even a possible view. Hence, the bench arrives at the conclusion that an arbitral award can be set aside under Section 34 if it is patently illegal or perverse.
