Petitions filed on or after 23rd October 2015 will gain benefit of Arbitration and Conciliation (Amendment) Act 2015

Shaunak Choudhury | SVKM’s NMIMS Kirit P. Mehta School of Law | 26^th May 2020

Patel Engineering v. North Eastern Electric Power Corporation SLP (C) D No. 577 of 2020 

Facts

The Petitioner filed a Special Leave Petition after the order in the High Court of Meghalaya that declined to entertain a review petition seeking review of order dated 26^th February 2019. On 29^th March 2016, a sole arbitrator passed 3 Declaratory Arbitral Awards. The Respondent, aggrieved by the awards approached the Additional Deputy Commissioner under section 34 of the Arbitration and Conciliation Act, 1996. The Additional Deputy Commissioner rejected the applications made by the Respondent and thus it approached the Meghalaya High Court, which then set aside the judgement of the Additional Deputy Commissioner on 26^th February 2019. Thereafter the Petitioner filed 3 SLPs in the Supreme Court, which, the hon’ble court rejected. Review petitions were filed in the Meghalaya High Court on the judgement dated 26^th February 2019. The review petitions were also dismissed. The SLP heard in this case was applied because the petitioner claimed that the judgement of the High Court suffered from error apparent on the face of the record as it utilized judgements that are not good in law anymore and it ignored the Arbitration and Conciliation (Amendment) Act 2015. The Respondents on the other had argued that since the SLPs did not assail the basic judgement and only the order passed in the review, they are liable to be rejected, and the matter of the Amendment Act had already been discussed in the previous SLPs before the Supreme Court. But the Court did not go into the matter of maintainability and directly addressed the questions in law.

Issues

1. Whether the petitions filed come within the ambit of the Arbitration and Conciliation (Amendment) Act 2015 and the added section 34 (2A) of the AC Act.
2. Whether the decision of the High Court of Meghalaya was correct in its judgement in declaring the 3 Arbitral Awards, “patently illegal” under section 34 (2A) of the AC Act.

Judgement

1. The Supreme Court in Board of Control for Cricket in India v. Kochi Cricket Private Limited ((2018) 6 SCC 287) had decided that the Amendment Act of 2015 would apply to those petitions under section 34 which are made on or after 23^rd October 2015, which is the date the Amendment Act came into force. The Court in this case observed that since the applications opposing the Arbitral Awards were submitted after 23^rd October 2015, the provisions of the Amendment Act would apply in this case.
2. The concept of “patent illegality” for setting aside arbitral awards is applicable only for domestic awards and not international ones. International arbitral awards cannot be challenged on this ground as it is not a ground that has been listed in Section 48 of the AC Act. Section 34 (2A), which was added through the Amendment, only covers domestic awards. 

The Supreme Court has in cases like Ssangyong Engineering and Construction Company v. National Highways Authority of India ((2019) 15 SCC 131) and Associate Builders v. Delhi Development Authority ((2015) 3 SCC 49), asserted that the construction of the terms of contract are primarily for the arbitrator to decide, unless he construes the contract in such a manner which no fair minded or reasonable person would take. The arbitrator wandering outside the contract and dealing with matters outside his jurisdiction is also a ground under Section 34 (2A) of the Act. 

The Court found that the judgement of the High Court that determined the fate of the arbitral awards to be good in law. The Supreme Court concurred with the High Court in the matter of the awards suffering from the vice of irrationality and perversity. 

The Supreme Court thus dismissed the SLPs and declared that the High Court’s order of dismissing the review petitions was appropriate.