Patel Engineering Ltd. v. North Eastern Electric Power Corp Ltd.

Special Leave Petition (C) Nos. 3584-85 of 2020 

Facts of the case

A dispute arose between the petitioner (North Eastern Electric Power Corporation Ltd.) and the respondent (Patel Engineering Ltd.) regarding a works contract in three packages and each package contained a separate arbitration clause and three arbitration awards were awarded in the disputed case. The respondent, in this case, filed three applications challenging the three arbitral awards awarded under Section 34 of the Arbitration and Conciliation Act before the Additional Deputy Commissioner (Judicial). However, the applications were rejected and the three arbitral awards were upheld. The respondent then filed three appeals under Section 37 of the Act before the High Court in an arbitration appeal and the court allowed the respondent’s appeal. Aggrieved by the common judgment, the petitioner challenged the judgment by filing three SLPs and the hon’ble court dismissed the SLPs stating that the court is not inclined to interfere in the matters. After the dismissal, a review petition was filed because the high court’s decision “suffered from error apparent on the face of the record as it had not taken into consideration the amendments made by the act.”

Issues:

  1. Whether setting aside three arbitral awards by the hon’ble high court was justified or not?
  2. Whether the 2015 amendment which came into force on 23/10/2015 would be applicable or not?

Judgment

The Supreme court held that the award accorded suffered from vices and while granting it the sole arbitrator had taken irrelevant factors into account ignoring the crucial facts. The awards granted were dated 23/09/2016 which was after the amendment came into force so it would be applicable. The supreme court upheld the judgment of the high court and stated that the “test of patent illegality” was rightly applied.

 Conclusion

The arbitral award should consider all the terms of the contract and the views of parties into consideration. If an arbitral award is granted that no reasonable minded person could have given then it will be considered against the “public policy” of India and can be set aside by the Hon’ble court. There should not be unjust enrichment on the cost of the other party, if so the court has the right to interfere.

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