‘Patent Illegality’: A Ground Available To Set Aside Domestic Arbitral Awards Made After 2015 Amendment

The Supreme Court observed that an arbitral award can be set aside if it is patently illegal or perverse; under Section 34 of the arbitration and Conciliation Act. The 2015 Amendment which gave statutory force to Section 34(2A), inserted the ground of “patent illegality” for setting aside a domestic award to the Arbitration and Conciliation Act. The bench comprised of Justices R. Banumathi, Indu Malhotra and Aniruddha Bose.

North Eastern Electric Power Corporation Ltd. (NEEPCO), filed the application; under Section 34 of the Arbitration and Conciliation Act, 1996 before the Additional Deputy Commissioner (Judicial), Shillong. The Application challenged the three arbitral awards dismissed against it. The bench observed that ground of patent illegality is a ground available under the statute; for setting aside a domestic award made after the 2015 amendment to the Arbitration and Conciliation Act. Likewise, the award stood granted on March 29, 2016, in the present case. Following which, the High Court allowed the appeal against these orders while setting it aside.

While confirming the High Court‘s view, the Apex Court dealt with the history of ‘Patent illegality’ ground. Moreover, it observed that such a ground for setting aside a domestic award was first expounded in the judgment of Saw Pipes Ltd. Later the ground of “patent illegality” for setting aside a domestic award was given statutory force in Section 34(2A) of the 1996 Act, it noted.

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