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Supreme Court: An arbitral award can be set aside if it is "Patently illegal"

Deeksha Chugh ,
  25 May 2020       Share Bookmark

Court :
High Court of Meghalaya
Brief :
In the case of PATEL ENGINEERING LTD.VERSUS NORTH EASTERN ELECTRIC POWER CORPORATION LTD. (NEEPCO) (SLP 577 OF 2020), the High Court of Meghalaya passed an order declining to review petitions filed by the petitioner on the ground that there was a delay in filing the application for review
Citation :
PATEL ENGINEERING LTD.VERSUS NORTH EASTERN ELECTRIC POWER CORPORATION LTD. (NEEPCO) (SLP 577 OF 2020)

WHAT WAS THE CASE ABOUT?

In the case of PATEL ENGINEERING LTD.VERSUS NORTH EASTERN ELECTRIC POWER CORPORATION LTD. (NEEPCO) (SLP 577 OF 2020), the High Court of Meghalaya passed an order declining to review petitions filed by the petitioner on the ground that there was a delay in filing the application for review.

Mr. Harish Salve and Mr.Neeraj Kishan Kaul appeared on behalf of the petitioner and Mr.Tushar Mehta and Mr.HuzeffaAhmadi appeared on behalf of the respondent.

The Supreme Court bench of Justices R. Banumathu, Indu Malhotra and Aniruddha Bose observed that the ground of patent illegality is available under section 34 of the Arbitration and Conciliation Act for setting aside a domestic award made after the 2015 amendment to the Arbitration and Conciliation Act.

FACTS OF THE CASE:

  1. An award was made on March 29, 2016. The learned sole arbitrator passed an arbitral award stating that the claimant was entitled to extra payment Hfor the extra lead that was provided in the contract between the parties.
  2. The applications filed by NEEPCO challenging three arbitral awards against it were dismissed.  An appeal was filed before the High Court which set aside the award.
  3. Aggrieved by the High Court’s judgment petitioner filed Special Leave Petitions before the Supreme Court which were earlier dismissed. Then he filed a review petition before the High Court stating that the judgment of the High Court suffered from error apparent on the face of record as the court did not consider the amendments made to Arbitration and Conciliation Act, 1996 by Amendment Act of 2015.

CONTENTIONS OF THE PARTIES:

PETITIONERS: The petitioners contended that dismissal of earlier SLP is a non-speaking order and not on merits so no objection could be taken for filing of the review petition.

RESPONDENTS: It was contended that the appeal is not maintainable against the order rejecting the application for review of judgement and such appeal is not against the main judgement.

COURT HELD 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, so irrational, or the construction of the contract is such that no fair or reasonable person would take such a view.
  • The apex court relied on the judgment in Ssangyong Engineering, where a new ground of “patent illegality” was introduced which would apply to applications under Section 34 made on or after 23/10/2015.
  • So, the SLP’s were dismissed.
 
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