Case Note & Summary
The Bombay High Court considered an appeal under Section 37 of the Arbitration and Conciliation Act, 1996, filed by Oil and Natural Gas Corporation Ltd. (ONGC) against Dolphin Drilling Ltd. The dispute arose from a charter hire agreement dated 17th October 2003, under which ONGC took on hire a deep water drilling rig along with integrated services for offshore drilling operations. The agreement became operative from 1st August 2003 and was extended till 10th April 2007. Disputes emerged regarding claims for equipments lost in hole, day rate and integrated services invoices, wrongful deduction from demobilisation fee, interest on delayed payments, and extension of contract on quantum meruit. These were referred to an Arbitral Tribunal. The Tribunal, by award dated 23rd April 2013, granted monetary claims in USD and INR to Dolphin Drilling for lost equipment, day rates, demobilisation fee, and interest, but dismissed the quantum meruit claim. Costs were also awarded. ONGC challenged the award under Section 34 of the Act. The learned Single Judge of the High Court by order dated 26th March 2014 upheld the award except for the direction regarding interest on interest, which was set aside. ONGC then filed the present appeal under Section 37. The Division Bench, after hearings, reserved judgment and pronounced it on 20th December 2014. The judgment focused on the scope of judicial review under Section 34, emphasizing that it is not an appeal and that an arbitral award can be set aside only on limited grounds such as patent illegality, or if it is contrary to fundamental policy of Indian law, interests of India, or justice or morality. The court referred to precedents including McDermott International Inc. v. Burn Standard Co. Ltd. and ONGC v. Saw Pipes Ltd. The final order of the Division Bench is not included in the extracted text.
Headnote
A) Arbitration - Challenge To Award - Scope Under Section 34, Arbitration and Conciliation Act, 1996 - Limited Judicial Review - Award can be set aside only on limited grounds such as fundamental policy of Indian law, interests of India, or justice or morality - Court does not sit as appellate court - Held that the scope of interference is narrow (Paras 11-12).
Issue of Consideration
Whether the impugned Award passes the test of Section 34 of the Arbitration and Conciliation Act, 1996 as explained by the Supreme Court
Law Points
- Scope of challenge under Section 34 is limited
- Court does not sit in appeal
- Award can be set aside only if contrary to fundamental policy of Indian law
- interests of India
- justice or morality
Case Details
2014 LawText (BOM) (12) 50
Appeal (L) No.372 of 2014 in Arbitration Petition No.952 of 2013
Mohit S. Shah, C.J., B.P. Colabawalla, J.
Pradeep Sancheti, Darshit Jain, Pratik Gandhi, Rahul Narichania, Shardul Thacker, Sunilkumar V.N., Pratiksha Avhad
Oil and Natural Gas Corporation Ltd.
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Nature of Litigation
Arbitration Appeal under Section 37 of Arbitration and Conciliation Act, 1996 arising from an order under Section 34 dismissing petition to set aside arbitral award.
Remedy Sought
Appellant sought to set aside the order of Single Judge dated 26.03.2014 and consequently set aside the arbitral award dated 23.04.2013.
Filing Reason
Disputes arose from charter hire agreement for deep water drilling rig; arbitral award favored respondent on claims for Lost in Hole equipment, day rates, demobilisation fee, and interest; appellant challenged under Section 34 which was largely upheld, so appellant appealed.
Previous Decisions
Arbitral Tribunal passed award on 23.04.2013 granting monies to respondent; Single Judge of Bombay High Court on 26.03.2014 dismissed Section 34 petition except interest on interest direction in award.
Issues
Whether the award suffers from any patent illegality or is in conflict with the public policy of India, warranting interference under Section 34 of the Arbitration and Conciliation Act, 1996?
Ratio Decidendi
Under Section 34 of the Arbitration and Conciliation Act, 1996, judicial review of an arbitral award is limited; the court cannot re-appreciate evidence or substitute its own view; an award can be set aside only if it is patently illegal or against the fundamental policy of Indian law, in conflict with the interests of India, or contrary to justice or morality.
Judgment Excerpts
In this Arbitration Appeal under section 37 of the Arbitration and Conciliation Act, 1996 ... the Appellant (ONGC) seeks to challenge the order dated 26th March, 2014 passed by the learned Single Judge dismissing the Appellant’s Arbitration Petition filed under section 34 of the Act.
It is now too well settled that a challenge to an Arbitral Award is based on certain limited parameters and the Court hearing a challenge under section 34 of the Act is not sitting in Appeal over the Award.
In the case of Mcdermott International Inc. v/s Burn Standard Co. Ltd. and others, the Supreme Court ... held thus: ... the arbitral award can be set aside if it is contrary to (a) fundamental policy of Indian law; (b) the interests of India; or (c) justice or morality.
Procedural History
Agreement dated 17.10.2003; disputes arose; referred to arbitration; Arbitral Tribunal passed award on 23.04.2013 granting claims; ONGC filed Section 34 petition; High Court (Single Judge) partially modified award on 26.03.2014, setting aside interest on interest but upholding rest; ONGC appealed under Section 37; division bench heard and pronounced judgment on 20.12.2014.
Acts & Sections
- Arbitration and Conciliation Act, 1996: 34, 37
