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Public Policy in Arbitration Judgments

The document discusses how Indian courts have interpreted the term "public policy" with respect to challenging arbitral awards. It notes that in Renusagar Power Co. v. General Electrical Corporation, the Supreme Court interpreted public policy narrowly, stating that an award could only be against public policy if it violated fundamental Indian policy, India's interests, or justice and morality. However, in Oil & Natural Gas Corporation v. Saw Pipes, the Court took a broader view, equating violations of any law with "patent illegality." This made it easier for losing parties to challenge awards. Later cases like S.B.P Co. Ltd. v. Patel Engineering Ltd. and Venture Global Engineering v. Satyam Computer

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Ritu Pipraiya
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67 views2 pages

Public Policy in Arbitration Judgments

The document discusses how Indian courts have interpreted the term "public policy" with respect to challenging arbitral awards. It notes that in Renusagar Power Co. v. General Electrical Corporation, the Supreme Court interpreted public policy narrowly, stating that an award could only be against public policy if it violated fundamental Indian policy, India's interests, or justice and morality. However, in Oil & Natural Gas Corporation v. Saw Pipes, the Court took a broader view, equating violations of any law with "patent illegality." This made it easier for losing parties to challenge awards. Later cases like S.B.P Co. Ltd. v. Patel Engineering Ltd. and Venture Global Engineering v. Satyam Computer

Uploaded by

Ritu Pipraiya
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© © All Rights Reserved
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Public policy as defined by judgments

Interpretation of public policy is within the domain of the judiciary. Supreme court has been
mentioning in a number of judgements that a suit is always possible in cases where the
arbitral award is against the public policy. This is applicable on foreign awards passed for
international commercial transactions as well.

Renusagar Power co v. General Electrical Corporation 1 is a leading supreme court decision


that interpreted public policy with respect to the foreign awards:

"This would mean that "public policy" in Section 7 (1) (b) (ii) has been used in narrower
sense and in order to attract to bar of public policy the enforcement of the award must invoke
something more than the violation of the law of India. Applying the said criteria, it must be
held that the enforcement of a foreign award would be refused on the ground that it is
contrary to public policy if such enforcement would be contrary to (i) fundamental policy of
Indian law; or (ii) the interests of India; or (iii) justice or morality."

Oil & Natural Gas Corporation v. Saw Pipes 2 was another decision by supreme court where
the award given by Indian arbitral tribunal was challenged in the ground of public policy. The
court's interpretation in this case was very open ended and broad despite the prevent set by
Renusagar case3 which said that the term should be interpreted in a restricted manner so as to
not include the mere violation of any law. Non adherence to any law was interpreted as patent
illegality, thus provoking a challenge to award. Patent illegality was equated with the error of
law which ultimately opened the gates for losing parties to approach the judicial court and
file for judicial review. This case resultantly nullified the transformation brought by 1996
amendment and judicial intervention was rampant for years after this case. Given the fact that
there’s no law which clearly mentions the meaning of this term, the precedents set by the
courts are the only source of interpretation here.

In S.B.P Co. Ltd. v. Patel Engineering Ltd.4, the court further elaborated on the interpretation
given by previous case and this time, the interpretation was much wider as Chief justice was
empowered to decide upon the validity of arbitration agreement, which is a preliminary and
contentious issue. Also, this finding was held to be binding on the tribunal.
1
1994 AIR 860.
2
(2003) 5 SCC 709.
3
1994 AIR 860.
4
2009 (13) SCALE 335.
In the case of Venture Global Engineering v. Satyam Computer Services Ltd. 5 (hereinafter
Venture Global case), the grounds of challenging a foreign arbitral award were extended to
include the provisions of section 34 along with that of section 48 of arbitration act i.e. for the
purposes of enforcement, the application needs to be filed under both the sections. Hence,
this new ground was added in the case for challenging the award wherein the award needs to
be qualified under the grounds mentioned in both the sections. Extensive review was
provided for by the case and court was allowed to look into the question of whether the
arbitral award of international arbitration was in accordance of the law of this country.

5
AIR 2008 SC 1061.

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