Case Note & Summary
The dispute arose out of a contract between ABB India Limited (Petitioner) and Sunil Hariram Jaisingh and Others (Respondents) for the supply and installation of electrical equipment. The contract contained a liquidated damages clause for delay. The Respondents claimed that the Petitioner delayed the project and claimed damages. The matter was referred to arbitration. The Arbitral Tribunal passed an award in favor of the Respondents, granting them a sum of Rs. 2,50,00,000/- with interest. The Petitioner challenged the award under Section 34 of the Arbitration and Conciliation Act, 1996 before the Bombay High Court. The Petitioner argued that the award was patently illegal and against the public policy of India because the Tribunal ignored the express terms of the contract, which provided for a specific mechanism for calculating liquidated damages. The Respondents contended that the award was within the realm of the arbitrator's interpretation and should not be interfered with. The court analyzed the contract clauses and found that the Tribunal had misconstrued the contract and arrived at a perverse conclusion. The court held that the award suffered from patent illegality and was in conflict with the public policy of India. Consequently, the court set aside the arbitral award and allowed the petition.
Headnote
A) Arbitration Law - Setting Aside Arbitral Award - Section 34 of the Arbitration and Conciliation Act, 1996 - Patent Illegality - The court examined whether the arbitral award suffered from patent illegality appearing on the face of the award. The court found that the Tribunal's interpretation of the contract was contrary to the express terms and was perverse, thus amounting to patent illegality. (Paras 10-25) B) Arbitration Law - Public Policy - Section 34(2)(b)(ii) of the Arbitration and Conciliation Act, 1996 - Conflict with Public Policy - The court considered whether the award was in conflict with the public policy of India. It held that a perverse finding based on no evidence or ignoring material evidence would be contrary to fundamental policy of Indian law. (Paras 26-30) C) Contract Law - Interpretation of Contract - Express Terms - The court reiterated that when the terms of a contract are clear and unambiguous, the arbitrator must give effect to them and cannot rewrite the contract. The Tribunal's failure to do so resulted in a patently illegal award. (Paras 15-20)
Issue of Consideration
Whether the arbitral award is liable to be set aside under Section 34 of the Arbitration and Conciliation Act, 1996 on the ground of patent illegality and conflict with the public policy of India.
Final Decision
The court allowed the petition and set aside the arbitral award.
Law Points
- Arbitration
- Public Policy
- Patent Illegality
- Section 34 of Arbitration and Conciliation Act
- 1996
- Interpretation of Contract
- Perverse Finding
