Case Number: Civil Appeal No(s). 5628 of 2021 (Arising out of SLP (C) No. 8311 of 2019)

Judges Name: Hon’ble Judges L. Nageswara Rao J, S. Ravindra Bhat

Order dated: 09.09.2021

Facts of the Case:  

The Respondent invoked arbitration proceedings against the Appellant. The primary question for determination before the Arbitration Tribunal was regarding the validity of termination notice and the quantum of damages to be paid. The Tribunal ruled in favor of the Appellant and directed the Respondent to pay the damages. Aggrieved by the same, the Respondent filed an application under Section 34 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as the “Act”) before the Hon’ble High Court of Delhi. The learned Single Judge dismissed the appeal stating that, no grounds for interference was made by the Respondent. Thereafter another appeal was preferred by the Respondent before the Division Bench of the Hon’ble High Court of Delhi under Section 37 of the Act read with Section 13 of the Commercial Courts, Commercial Division and Commercial Appellate Division of High Courts Act, 2015. The Division Bench allowed the appeal filed by the Respondent and set aside the award passed by the Tribunal. Aggrieved by the decision of the Division Bench the Appellant preferred an appeal before the Hon’ble Supreme Court of India. 

Order

The Hon’ble Supreme Court observed/held as follows:

• To determine the role of Courts in reviewing arbitral wards several judgments such as Ssangyong Engineering and Construction Company Limited v National Highways Authority of India (NHAI) and Renusagar Power Co. Ltd .v. General Electric Co. were taken into consideration from which it was concluded that when there exists “patent illegality” the Judiciary can interfere.
• Referred the decisions of the Supreme Court in Associate Builders v. DDA and held that “mere contravention of substantive law does not constitute a ground to set aside an arbitral award but, if the arbitrator does not specify the reasons for his award, then he would contravene the mandate under Section 3(31) of the 1996 Act which would amount to “patent illegality”.
• Therefore, the Hon’ble Supreme Court allowed the appeal and set aside the judgment of the Division Bench.