Table Of Contents

INTRODUCTION..........................................................................................................................
5

OBJECT OF STUDY....................................................................................................................
HYPOTHESIS..............................................................................................................................
RESEARCH METHODOLOGY.....................................................................................................
KINDS OF LIABILITY.................................................................................................................
Civil Liability.........................................................................................................................

10

Remedial Liability..................................................................................................................
Penal Liability........................................................................................................................
Vicarious Liability..................................................................................................................
Absolute Or Strict Liability..................................................................................................
VICARIOUS LIABILITY............................................................................................................

15

Mixed And Vicarious Liability- A Suggested Distinction....................................................

VICARIOUS LIABILITY ARISING BETWEEN DIFFERENT RELATIONSHIPS
..................................................................................................................................................
Principal And Agent.............................................................................................................
Master And Servant..............................................................................................................

20

Who Is A Servant.............................................................................................................
Servant And Independent Contractor...............................................................................
Liability Of The Employer For The Acts Of An Independent
Contractor.........................................................................................................................
Servants Not Under The Control Of The Master.............................................................

25

Vicarious Liability By State.....................................................................................................

Position In England..............................................................................................................

Position In India...................................................................................................................
Conclusion...............................................................................................................................
Bibliography...........................................................................................................................
Books Referred.....................................................................................................................
5

INTRODUCTION

The decision rendered by the arbitral tribunal which finally determines

the issues submitted to it is termed as the arbitral award. A party who is
10

discontent with an arbitral award shall proceed to challenge the award by

preferring an application for its setting aside arbitral award. Section
34 of the Act 1996 carves out the permissible grounds only upon
which the award can be subject to challenge. This is one another unique
provision to sharpen the limited jurisdiction of the role of judicial

15

intervention in arbitration proceedings. The Court does not sit in appeal

over any award. The jurisdiction of Tribunal is fettered within the
territory of terms of contract. The Tribunal under the pretext of
exercising its power cannot travel beyond terms of reference. In case
where the party put forth his objection by way of proper pleadings that

20

demand of another party is beyond the terms of contract and statutory

provision, then in those exceptional cases, the tribunal may examine the
terms of contract as well as statutory provisions. Even in that process, if
there is absolutely lack of proper pleadings and objections, such a course

may not be permissible.299 If the award is one which does not contain any
reason is one of the grounds where the award can be set aside. But
however this has to be cautiously looked into in circumstances where if a
party has absolutely failed to produce the relevant records before the
5

arbitrator and also failed to cross examine deponents of affidavit filed by

the claimants and therefore led to the situation where the arbitrator was
not in position to give detailed reasons, then the award cannot be set
aside on ground that the award was unreasoned.300 In case of setting aside
ex parte Award, the court would examine the bonafideness of the

10

applicant. If the party with a oblique motive failed to appear before the
arbitrator and deliberately delay the proceedings and that in process
frustrate the entire arbitration proceedings coupled with the act of not
accepting the copy of the award then he is deemed to have been served
the award. In such a scanerio the application for setting aside the exparte

15

award is deserved to be rejected.

Sections 34 of the 1996 Act encompass four sub sections. Subsection (1)
lay down that recourse against an award may be made only by an
application. Grounds on which an award can be set aside by the court is
provided in Sub Section (2). Sub Section (3) deals with the time limit for

20

filing an application and condonation of delay by the Court while Sub

Section (4) permits the Court to adjourn the proceedings for setting aside
an award to permit the arbitral tribunal to resume arbitral proceedings or

to take such action as in the opinion of the arbitral tribunal will eliminate
the grounds for setting aside the award. Apart from Sub Section (4) there
is no provision for remission of the award for reconsideration
To put it comprisingly, there are very limited grounds for setting aside the
5

arbitral award, which are as follows: -

i.

A party to the arbitration agreement was under some

incapacity

ii. The arbitration agreement is not valid under the law.

10

iii. The applicant that is the party making the application

was not given proper notice of appointment of the
arbitrator or of the arbitral proceedings or was
otherwise unable to present his case.

iv. The arbitral award deals with matters outside the

scope of submission or reference to arbitration.

15

v.

The constitution of the arbitral tribunal or the

procedure of arbitration was not as per agreement of
the parties.

vi. The subject matter of dispute is not capable of

settlement by arbitration. The arbitral award is in

conflict with the public policy of India.

OBJECT OF STUDY
5

The researchers object through this project is to critical analyze

reservation as a right. The researchers object was a deep study and
analysis of the topic.
HYPOTHESIS
10

The reservation provision under the Indian Constitution confer a claim

upon the subjects of it.
RESEARCH METHODOLOGY

15

For doing the project, the researcher relied upon various books, articles,
websites, law journals, Acts etc. the sources of material is collected both
from the primary and as well as the secondary sources. The researcher
relied upon the doctrinal method and the citation used is be Universal
Citation Style..

20

DOMESTIC AND FOREIGN AWARD

25

Part I of the New Act provides for any domestic arbitration and

enforcement of awards there under. Part II provides for enforcement of

foreign awards where the seat of arbitration is not in India. Any
arbitration conducted in India or enforcement of award there under
(whether domestic or international) is governed by Part I while
5

enforcement of any foreign award to which the New York Convention or

the Geneva Convention applies, is governed by Part II of the Act. The
provisions of Part II of the Act give effect to the New York Convention
under Chapter I and the Geneva Convention under Chapter II. The
definition of Foreign award under Chapter I mandates that the award only

10

needs to be made in a state, other than India, which is a party to the New
York Convention 1958302. There is no requirement that the parties to the
award should be subject to the jurisdiction of different contracting
states. Nor does it require that the arbitration Agreement should be
governed by Indian law. The definition of Foreign Award in Chapter I

15

which pertain to New York Convention is much simpler to the definition

of Foreign Award as adverted in Chapter II pertaining to Geneva
Convention Award303

LIMITED GROUNDS

20

Limited grounds for refusing enforcement of foreign award are:

(a) Incapacity that a party to the arbitration agreement was under the law
applicable to him under some incapacity304,

(i) invalid arbitration agreement that the arbitration agreement

was invalid under the law to which the parties subjected it, or
failing any indication thereon, under the law of the country
where the award was made305

(ii) Due process that a party was not given proper notice of the
appointment of the arbitrator or of the arbitration proceedings
or was otherwise unable to present his case306
0
1

(iii)

Jurisdictional defect that the award deals with a difference

not contemplated by or not failing within the terms of the
submission to arbitration or contains decisions on maters
beyond the scope of the submission to arbitration. Provided

15

that, if the decisions on matters submitted to arbitration can be

separated from those not so submitted, that part of the award
which

contains

decisions

on

matters

submitted

to

arbitration may be enforced307.

20

(v) Composition of the tribunal and procedure that the

composition of the arbitral authority or the arbitral procedure
was not in accordance with the agreement of the parties, or,
failing such agreement, with the law of the country where the
arbitration took place308.

5
2

(vi)Ineffective award that the award has not yet become binding

on the parties or has been set aside or suspended by a

competent authority of the country in which or under the law
of which, it was made309.

(vii)

Ex officio court jurisdiction may refuse to enforce a

foreign award if it finds that that award is in respect of a

matter which is not capable of settlement by arbitration under
the laws of India310 and that the enforcement of foreign award
would be contrary to public policy of India 311. The court may
10

decide these two issues suo motto.

Under Chapter I if the defendant establishes any of these defenses, refusal

to enforce the award is within the discretion of the court, and not
mandatory as it generally is under Chapter II.
15

Section 35 of this Act provides that a domestic award shall be final and
binding on the parties and persons claiming under them respectively.
While section 36 provides that after the expiry of the prescribed time, the
award shall be enforceable under the Code of Civil Procedure 1908 in the
same manner as if it were a decree of the court. Section 36 cautions that

20

enforcement is available only after the expiry of the time for making an
application to set aside the arbitration award under section 34 has expired
or when such application having been made stands refused. In case
amendment of award is called for in a given case three months is
provided from the date on which the application prescribed under section

33 has been made and further discretion has been given to the court to
extend the time under section 33 for correction.312 An award becomes
binding when possibility of recourse or appeal against it ceases to exist.
However, section 46 does not prescribe any time limit for the
5

enforcement of a foreign award. Therefore, where the court is satisfied

that such award is enforceable under this Chapter, the award shall be
deemed to be a decree of that court313.

GROUNDS FOR SETTING ASIDE AWARD

10

Part I is moulded on the UNCITRAL Model Law 11and the UNCITRAL

Arbitration Rules12 with few deviation. The relevant provisions are briefly
outlined below:
Challenge to an arbitrator can be made on the grounds of lack of
independence or impartiality or lack of qualification as provided under

15

Section 13 of the Act which is corresponding to Article 13 of the Model

Law. Initially the challenge to an arbitrator ought to be raised before the
arbitral tribunal itself. If the challenge is rejected by the tribunal then it is
open for the tribunal to continue with the arbitral proceedings and make
an award. Then the only recourse for the party challenging the arbitrator

20

is to make an application for setting award the arbitral award under

Section 34 of the Act raising the same ground. This is corresponding to
Article 34 of the Model Law. Therefore the occasion for the party to
resort to court is only at the post award stage. The departure from the
Model Law which provides for an approach to the court within 30 days of

25

the arbitral tribunal rejecting the challenge.

As far as enforcement is concerned, the second departure from the Model

Law is contained in Section 16 of the Act which is corresponding to

Article 16 of the Model Law. Section 16 of the Act provides that the
arbitral tribunal can decide as to the preliminary objection to rule on its
jurisdiction and conferred with jurisdiction to decide the dispute as to the
5

existence or validity of the arbitration agreement. If the arbitral tribunal

negatives any objection as to the existence or validity of the arbitration
agreement and in the case where it rejects any objection as to its
jurisdiction, the arbitral tribunal as usually can proceed to conduct the
arbitral proceedings and pass the award. Then even here the only

10

recourse for the party is to make an application for setting award the
arbitral award under Section 34 of the Act raising the same ground. This
is corresponding to Article 16 of the Model Law. Therefore the occasion
for the party to resort to court is only at the post award stage. The
departure from the Model Law which provides for an approach to the

15

court within 30 days of the arbitral tribunal overrules any objection to its
jurisdiction,.

To put in other words in addition to the grounds contained in Section 34

of the Act, there are yet another two grounds for challenge of the award
20

as contained in Section 13 (5) and 16(6) of the Act. The grounds for
setting aside arbitration award are contained in Section 34 of the Act.
This is corresponding to Article 34 of the Model Law which states that
they are the only grounds on which an award may be set aside.

However as adverted supra if though Section 34 of the Act uses the word
only prefixing the grounds, is watered down as yet another two grounds
for challenge of the award is contained in Section 13 (5) and 16(6) of the
Act itself. Adding further one more ground can be visualised in an
5

Explanation to the public policy ground in Section 34. The same reads as
follows:

"Explanation.... it is hereby declared, for the avoidance of any

doubt, that an award is in conflict with the public policy of India if the
10

making of the award is induced or affected by fraud or corruption or was

in violation of Section 75 or Section 81."
Section 75 referred to above is part of the conciliation scheme under the
Act. It provides that the conciliator and parties shall maintain
confidentiality in all matters pertaining to the conciliation proceedings.

15

Section 81 bars any reference in arbitral or judicial proceedings to views,

suggestions, admissions or proposals etc. made by parties during
conciliation proceedings.
Save for the Exception adverted supra Section 34 of the Act is a faithful
replica of Article 34 of the Model Law.Under Section 16(1) of the

20

Arbitration Act, 1940, the Court had the power to remit the Award for
reconsideration, under three contingencies listed therein 314. But there is
no corresponding provision in the 1996 Act. The parties, under the 1996
Act, can take recourse either to Section 33(4) or the Court 315 should act in

terms of Section 34 (4). But there is no specific provision for an order of

remand. The Supreme Court did not specifically recognise such a power
in Mc Dermott International Inc. V. Burn Standard Co. Ltd316 . The Delhi
High Court in Hindustan Fertilizer V. J.M.Boxi and Co317
5

Madras

High

Court

in

Central

Warehousing

and the

Corporation

V.A.S.A.Transport318 have taken the view that the Court has no power to
remit the matter back to the Arbitrator. Therefore, in such circumstances
even if the application for setting aside arbitration award is allowed, the
Court cannot remit the matter back to Arbitrator and the only option to
10

the court is to leave it open to the parties to workout their remedies in a

manner known to law.

TIME LIMIT
An aggrieved party can make an application to the court for
15

setting aside an arbitral award within three months from the date of
receipt of the award only on the grounds mentioned in Section 34 of the
Act. However, the aforesaid time limit three months can be extended
maximum by another 30 days by the court where the applicant was
prevented by sufficient cause from filing it timely "but not

20

thereafter."Supreme Court of India in the State of Maharashtra & Ors. V.

M/s. Ark Builders Pvt. Ltd321 has held that the application for setting aside
the award to be made within the period of limitation which would start

commencing only from the date when the signed copy of the award is
delivered to/received by the party making the application for setting aside
the award under Section 34(1) of the Act. The legal position on the issue
has been settled holding that if the law stipulates a modus that a copy of
5

the order/award is to be communicated, delivered, dispatched, forwarded,

rendered or sent to the parties concerned in a particular way and in case
the law also sets a period of limitation for challenging the order/award in
question by the aggrieved party, then it that case, the period of limitation
can only start to commence from the date on which the order/award was

10

received by the party concerned in the manner prescribed by the law. In

Popular Construction Co. (supra), Honble Apex Court has held that if
after the expiry of the period of limitation as stipulated under Section
34(3) of the Act, an application for setting aside an award is filed it would
not be an application in accordance with sub-section (3) as required

15

under Section 34(1) of the 1996 Act and Section 5 of the Limitation
1963 Act has no application to such application. In para 12 of the
judgement it was held with clarity that the crucial words but not
thereafter incorporated in the proviso to Section 34 of the 1996 Act had
expressly excluded the application of Section 5 of the Limitation. This is

20

the clear intention of the Legislature. Therefore if the court entertains any
application to set aside the award beyond the extended period under the
Proviso it would absolutely render the phrase but not thereafter wholly

otiose. No code of explanation would justify such an effect.

In the State of Maharashtra V. Hindustan Construction Company
Limited322, a two Judge Bench of the Honble Apex Court emphasized
that the application for setting aside arbitral award under Section 34 of
5

the 1996 Act has to be made within the time prescribed under sub-section
(3) of Section 34, i.e., within three months and a further period of 30 days
on sufficient cause being shown and not thereafter. The Apex Court
stressed upon the mandatory nature of the limit of to the extension of the
period provided in the proviso to Section 34 (3) of the Act. Limitation Act

10

1963 shall apply to arbitrations as it applies to proceedings in court as

provided in Section 43 (1) of the 1996 Act. The Limitation Act 1963 Act
is therefore applicable to the matters of arbitration covered by the 1996
Act save and except to the extent its applicability has been excluded by
virtue of the express provision contained in Section 34(3) of the 1996

15

Act.
The applicability of Section 4 of the Limitation Act to the matters of
arbitration covered by the 1996 Act has been decided by the Honble
Supreme Court Of India in Assam Urban Water Supply & Sewerage
Board V. M/S. Subash Projects & Marketing Ltd.323 The strange facts of

20

the case therein were that the appellants have received the arbitral awards
on August 26, 2003. Before elapse of three months from the receipt

thereof the appellant has not filed any application for setting aside the
arbitral awards. Three months from the date of the receipt of the arbitral
award by the appellants expired on November 26, 2003 as a matter of
record. Christmas vacations fell for the period from December 25, 2003
5

to January 1, 2004 during which the District Court was closed.

Immediately during January 2, 2004 when the Court reopened an
application was made by the appellant for setting aside the awards under
Section 34 of the 1996 Act. The question, whether the appellants were
entitled to extension of time under Section 4 of the Limitation Act 1963

10

was therefore fell for consideration in the given facts. Extracting Section
4 of the 1963 Act which reads as Expiry of prescribed period when court
is closed - Where the prescribed period for any suit, appeal or application
expires on a day when the court is closed, the suit, appeal or application
may be instituted, preferred or made on the day when the court reopens.

15

Explanation.-A court shall be deemed to be closed on any day within the

meaning of this section if during any part of its normal working hours it
remains closed on that day. Elucidated that the above Section permits a
party to institute a suit, prefer an appeal or make an application on the
day when the court reopens in case where the prescribed period for any

20

suit, appeal or application expires on the day when the court remains
closed. Honble Apex Court in this scenario observed that the words
'prescribed period' are the most crucial words in Section 4 of the 1963

Act. Section 2(j) of the 1963 Act defines 'period of limitation' which
means the period of limitation prescribed for any suit, appeal or
application by the Schedule, and 'prescribed period' means the period of
limitation computed in accordance with the provisions of this Act. A co
5

joint reading of both Section 2(j) of the Limitation Act 1963 Act and
Section 34(3) of the Arbitration 1996 Act, it becomes thoroughly clear
that the prescribed period for making an application for setting aside
arbitral award is three months. While that be so, the period of 30 days
mentioned in proviso that follows sub-section (3) of Section 34 of the

10

1996 Act is not the 'period of limitation' and, therefore, not 'prescribed
period' for the purposes of making the application for setting aside the
arbitral award. Therefore Section 4 of the Limitation Act 1963 is not at all
attracted to the facts and circumstances of the case. It has been made
clear that that proviso appended to sub section (3) of Section 34 of the

15

1996 Act which provides that the period of 30 days beyond three months
which the court may extend on sufficient case being shown is not the
period of limitation or prescribed period. Seen thus, the applications
made by the appellants on January 2, 2004, for setting aside the arbitral
award dated August 26, 2003 were dismissed as time barred and

20

confirmed the decision of the District Judge, Kamrup, Guwahati and the
consequent dismissal of the Arbitration appeals by the High Court
holding that the same cannot be legally flawed for the reasons adverted

supra. Therefore the appeal stood dismissed by the Honble Apex Court.
Sub-section (3) of section 34 of the Act provides that an application for
setting aside an award may not be made after three months have elapsed
from the date on which the party making that application has received the
5

arbitral award. Sub-section

(5) of section 31 of the Act provides that after an arbitral award is
made, a signed copy shall be delivered to each party. If one of the
parties to arbitration is a government or a statutory body or a

10

corporation, which has notified holidays or non-working days,

and if the award was delivered to it on a holiday, the question is
whether the date of physical delivery to the office of a party,
should be considered as the date of receipt of the award by the
party, or the next working day should be considered as the date of

15

receipt. In Union of India V. Tecco Trichy Engineers &

Contractors324 Honble Apex Court measured the meaning of the
word received in Section 31(5) of the Act and held:
The delivery of an arbitral award under sub-Section (5) of Section 31 is
not a matter of mere formality. It is a matter of substance. The

20

delivery of arbitral award to the party, to be effective, has to be

"received" by the party. This delivery by the arbitral tribunal and upon
receipt by the party of the award immediately the period of limitation
starts commences. Period of Limitation refers to prescribed period for an
application to be made for correction and interpretation of an award

25

within 30 days as provided under Section 33(1). Then again the

prescribed period for an application to be made for making an additional

award under Section 33(4) and an application for setting aside an award
under Section 34(3) and so on. Therefore since this delivery of the copy
of award has the utmost effect of conferring certain rights on the party as
5

also bringing to an end the right to exercise those rights on expiry of the
prescribed closed - Where the prescribed period for any suit, appeal or
application expires on a day when the court is closed, the suit, appeal or
application may be instituted, preferred or made on the day when the
court reopens. Explanation.-A court shall be deemed to be closed on any

10

day within the meaning of this section if during any part of its normal
working hours it remains closed on that day.
Elucidated that the above Section permits a party to institute a suit, prefer
an appeal or make an application on the day when the court reopens in
case where the prescribed period for any suit, appeal or application

15

expires on the day when the court remains closed. Honble Apex Court in
this scenario observed that the words 'prescribed period' are the most
crucial words in Section 4 of the 1963 Act. Section 2(j) of the 1963 Act
defines 'period of limitation' which means the period of limitation
prescribed for any suit, appeal or application by the Schedule, and

20

'prescribed period' means the period of limitation computed in accordance

with the provisions of this Act. A co joint reading of both Section 2(j) of
the Limitation Act 1963 Act and Section 34(3) of the Arbitration 1996
Act, it becomes thoroughly clear that the prescribed period for making an
application for setting aside arbitral award is three months. While that be

so, the period of 30 days mentioned in proviso that follows sub-section

(3) of Section 34 of the 1996 Act is not the 'period of limitation' and,
therefore, not 'prescribed period' for the purposes of making the
application for setting aside the arbitral award. Therefore Section 4 of the
5

Limitation Act 1963 is not at all attracted to the facts and circumstances
of the case. It has been made clear that that proviso appended to sub
section (3) of Section 34 of the 1996 Act which provides that the period
of 30 days beyond three months which the court may extend on sufficient
case being shown is not the period of limitation or prescribed period.

10

Seen thus, the applications made by the appellants on January 2, 2004,

for setting aside the arbitral award dated August 26, 2003 were dismissed
as time barred and confirmed the decision of the District Judge, Kamrup,
Guwahati and the consequent dismissal of the Arbitration appeals by the
High Court holding that the same cannot be legally flawed for the reasons

15

adverted supra. Therefore the appeal stood dismissed by the Honble

Apex Court.
If though Section 34 of the Act uses the word only prefixing the
grounds, is watered down as yet another two grounds for challenge of the
award is contained in Section 13 (5) and 16(6) of the Act itself. Adding

20

further one more ground can be visualised in an Explanation to the public

policy ground in Section 34. The same reads as follows:

"Explanation.... it is hereby declared, for the avoidance of any

doubt, that an award is in conflict with the public policy of India if the

making of the award is induced or affected by fraud or corruption or was

in violation of Section 75 or Section 81."
Section 75 referred to above is part of the conciliation scheme under the
Act. It provides that the conciliator and parties shall maintain
5

confidentiality in all matters pertaining to the conciliation proceedings.

Section 81 bars any reference in arbitral or
judicial proceedings to views, suggestions, admissions or proposals etc.
made by parties during conciliation proceedings.

10

Save for the Exception adverted supra Section 34 of the Act is a faithful
replica of Article 34 of the Model Law. Under Section 16(1) of the
Arbitration Act, 1940, the Court had the power to remit the Award for
reconsideration, under three contingencies listed therein314. But there is
no corresponding provision in the 1996 Act. The parties, under the 1996

15

Act, can take recourse either to Section 33(4) or the Court315 should act in
terms of Section provides for exclusion of time in legal proceedings.
Sub-section (1) thereof provides that in computing the period of
limitation for any application, the day from which such period is to be
reckoned, shall be excluded. The applicability of Section 12 of

20

Limitation Act, 1963 to petitions under Section 34 of the Act is not

excluded by the provisions of the Act. Section (9) of General Clauses
Act, 1897 provides that in any Central Act, when the word from is used
to refer to commencement of time, the first of the days in the period of
time shall be excluded. Therefore the period of three months from the

date on which the party making that application had received the arbitral
award shall be computed from 13.11.2007. Sub-section (3) of Section
34 of the Act and the proviso thereto significantly, do not express the
periods of time mentioned therein in the same units. Sub-section (3) uses
5

the words three months while prescribing the period of limitation and
the proviso uses the words thirty days while referring to the outside
limit of condonable delay. The legislature had the choice of describing
the periods of time in the same units, that is to describe the periods as
three months and one month respectively or by describing the periods

10

as ninety days and thirty days respectively. It did not do so. Therefore,
the legislature did not intend that the period of three months used in subsection (3) to be equated to 90 days, nor intended that the period of thirty
days to be taken as one month. Section 3(35) of the General Clauses Act,
1897 defines a month as meaning a month reckoned according to the

15

British calendar. In Dodds V.Walker326 , the House of Lords held that in

calculating the period of a month or a specified number of months that
had elapsed after the occurrence of a specified event, such as the giving
of a notice, the general rule is that the period ends on the corresponding
date in the appropriate subsequent month irrespective of whether some

20

months are longer than others. To the same effect is the decision of this
Court in Bibi Salma Khatoon V. State of Bihar327 Therefore when the
period prescribed is three months (as contrasted from 90 days) from a
specified date, the said period would expire in the third month on the date

corresponding to the date upon which the period starts. As a result,

depending upon the months, it may mean 90 days or 91 days or 92 days
or 89 days.

PUBLIC POLICY

Public policy has become a new dimensional ground for challenge to

award. In furtherance to the interpretation given to the words used in
Section 34 of the 1996 Act, a new "judge made" ground came about in
the Supreme Court decision, wherein in this context the three decisions of
10

this Court Renusagar, Saw Pipes and Phulchand exports cases need a
careful and close examination. The facts suffice to deal with

Renusagar332 case is that an award was passed by the Arbitral Tribunal,

GAFTA in favour of General Electric Company (GEC) against
15

Renusagar. The award was sought to be enforced by GEC passed in its

favour by filing an arbitration petition under Section 5 of the Foreign
Awards Act in the Bombay High Court. On very many diverse grounds
the application for enforcement was contested by Renusagar. Inter alia,
one of the main objections on the ground of public policy was raised by

20

Renusagar and contended that the enforcement of the award was contrary
to the public policy of India. The objection was overruled by the Single
Judge of the Bombay High. Thereby it was held that the award was
enforceable and on that basis a decree in terms of the award was drawn.

Renusagar filed an intra-court appeal but that was dismissed on the

ground of maintainability. Thereafter the matter reached Honble Apex
Court. On behalf of the parties, multiple arguments were made. A threeJudge Bench of the Honble Supreme Court noticed diverse provisions,
5

one among which is Section 7(1)(b)(ii) of the Foreign Awards Act which
provided that a foreign award may not be enforced if the court dealing
with the case was satisfied that the enforcement of the award would be
contrary to public policy. The Court held that the words public policy
used in Section 7(1) (b) (ii) of the Foreign Awards Act meant public

10

policy of India. An apparently clear and understandable fine distinction

was drawn by the Court while applying the rule of public policy between
a matter governed by domestic laws and a matter involving conflict of
laws. It has been held in explicit terms that the application of the doctrine
of public policy in the field of conflict of laws is more limited than that

15

in the domestic law. In cases concerning a foreign element than when

purely municipal legal issues are involved in such situations the courts
are slower to invoke public policy. Explaining the concept of public
policy vis--vis the enforcement of foreign awards in Renusagar 3,
Honble

0
2

Apex Court stated333 This would mean that Section 7(1)(b)(ii) of the
Foreign Awards Act which permits to raise the defence of public policy
should be read in a narrow scope. Identically and correspondingly it is

pertinent to mention at this juncture that under Article I(e) of the Geneva
Convention Act of 1927 provides to raise an objection to the enforcement
of arbitral award on the ground that the recognition or enforcement of the
award is contrary to the public policy or to the principles of the law of the
5

country in which it is sought to be relied upon. Respectively Section 7(1)

of the Protocol & Convention Act of 1937 which necessitates that the
enforcement of the foreign award must not be contrary to the public
policy or the law of India. Therefore so as to attract the expression
public policy contravention of law alone is not sufficient. Section 7(1)

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(b)(ii) of the Foreign Awards Act which deals with public policy has
been used in narrow sense. In order to attract the bar of public policy the
enforcement of the award must invoke something more than the violation
of the law of India. The expression public policy in Section 7(1)(b)(ii)
of the Foreign Awards Act must necessarily be construed in the sense the

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doctrine of public policy is applied in the field of private international

law. This is for the reason that since the Foreign Awards Act is concerned
with recognition and enforcement of foreign awards which are governed
by the principles of private international law. Applying the said criteria it
must be held foreign award may not be enforced if the court dealing with

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the case was satisfied that the enforcement of the award would be
contrary to (i) fundamental policy of Indian law; or (ii) the interests of
India; or (iii) justice or morality.

Further, in Renusagar Power Co. Ltd. V. General Electric Co. this Court
considered Section 7(1) of the Arbitration (Protocol and Convention) Act,
1937 which inter alia provided that a foreign award may not be enforced
under the said Act, if the court dealing with the case is satisfied that the
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enforcement of the award will be contrary to the public policy. After

elaborate discussion, the Court arrived at the conclusion that public
policy comprehended in Section 7(1)(b)(ii) of the Foreign Awards
(Recognition and Enforcement) Act, 1961 is the public policy of India
and does not cover the public policy of any other country. While

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adverting to Oil & Natural Gas Corporation Ltd. V. Saw Pipes Ltd334., the
scope and extent of the courts jurisdiction under Section 34 of the 1996
Act was under consideration. The law of liquidated damages has been
incorrectly applied by the arbitral tribunal whether can be raised as one of
the ground for setting aside the award was an issue which fell for

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consideration in this case. This is not an apparent ground to challenge on

merits on the plain reading of Section 34 of the Act. The Supreme Court
in Saw Pipes came to the conclusion that the impugned award was legally
flawed in so far as it allowed liquidated damages on an incorrect view of
the law. In the process it held, that an award can also be challenged on the

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ground that it contravenes "the provisions of the Act (i.e. Arbitration Act)
or any other substantive law governing the parties or is against the terms
of the contract." Further, the judgment expanded the concept of public
policy to add that the award would be contrary to public policy if it is

"patently illegal." Apex Court held in Saw Pipes said that the expression
public policy of India was required to be given a wider meaning.
Accordingly, for the purposes of Section 34, Apex Court added a new
category patent illegality for setting aside the award. Adding together
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to the narrower meaning given to the term public policy in Renusagar

case it was held that the award could be set aside if it is patently illegal.
The result would be award could be set aside if it is contrary to: (a)
fundamental policy of Indian law; or (b) the interests of India; or (c)
justice or morality, or (d) in addition, if it is patently illegal. For that

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purpose iIllegality must go to the root of the matter and if the illegality is
of small in nature it cannot be held that award is against the public policy.
If the award is unfair and unreasonable then it would be set aside and also
if the award shocks to the conscience of the court. Such award is opposed
to public policy and is required to be adjudged void.

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Following Renusagar and Saw pipes, Supreme Court of India in Shri Lal
Mahal Ltd. V. Progetto Grano Spa335 applied that for purposes of Section
48(2)(b), the expression public policy of India must be given narrow
meaning and the enforcement of foreign award would be refused on the
ground that it is contrary to (a)fundamental policy of Indian law; or (b)

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the interests of India; or (c) justice or morality as enumerated in

Renusagar. Although both the Section 34(2(b)(ii) and Section 48(2)(b)
uses the same expression public policy of India wherein the concept is
also same in nature in both the Sections, Honble Apex Court in its view

observed that the application differs in degree of level insofar as these

two Sections are concerned. The application of the expression public
policy of India for the purposes of Section 48(2)(b) is more limited than
the application of the same expression in respect of the domestic arbitral
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award. Therefore dictum laid down by the Apex Court Renusagar applied
only for the purposes of Section 48(2)(b) of the 1996 Act336. On the other
hand the principles laid down in Saw Pipes would govern the scope of
such proceedings for setting aside an award under Section 34 is
concerned. Accordingly Apex Court held that enforcement of foreign

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award would be refused under Section 48(2)(b) only if such enforcement

would be contrary to (i) fundamental policy of Indian law; or (2) the
interests of India or (3) justice or morality. The wider meaning given to
the expression public policy of India occurring in Section 34(2)(b)(ii)
in Saw Pipes is not applicable where objection is raised to the

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enforcement of the foreign award under Section 48(2)(b).

It is true that in Phulchand Exports , a two-Judge Bench of the Apex
Court accepted that the meaning given to the expression public policy of
India in Section 34 in Saw Pipes must be applied to the same expression
occurring in Section 48(2)(b) of the 1996 Act. Moreover, Section 48 of

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the 1996 Act does not give an opportunity to have a second look at the
foreign award in the award - enforcement stage. The scope of inquiry
under Section 48 does not permit review of the foreign award on merits.
Procedural defects (like taking into consideration inadmissible evidence

or ignoring/rejecting the evidence which may be of binding nature) in the

course of foreign arbitration do not lead necessarily to excuse an award
from enforcement on the ground of public policy. In this aspect Apex
Court observed that such errors would not bar the enforceability of the
5

appeal awards. While considering the enforceability of foreign awards,

the court does not exercise appellate jurisdiction over the foreign award
nor does it enquire as to whether, while rendering foreign award, some
error has been committed. Under Section 48(2)(b) the enforcement of a
foreign award can be refused only if such enforcement is found to be

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contrary to (1) fundamental policy of Indian law; or (2) the interests of

India; or (3)justice or morality. Since the objections raised by the
appellant in that case did not fell in any of these categories, therefore, the
foreign awards were not held to be contrary to public policy of India as
contemplated under Section 48(2)(b) and therefore dismissed the appeal.

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The Saw Pipes Judgment was made subject to thorny condemnation from
several quarters. Study of the judgement accurately sets the clock back to
the old position where an award could be challenged on merits and
without a doubt renders the court (testing enforceability of an award) as a
court of appeal. Some judicial decisions have tried to reign in the effect

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of Saw Pipes. One instance of this is the Supreme Court decision in the
case of McDermott International Inc. v. Burn Standard Co. Ltd. where the
Court somewhat read down Saw Pipes and held that the supervisory role

of the court by reviewing the arbitral award is only to ensure fairness as

per the provision of 1996 Act. Only under few circumstances envisaged
there under judicial intervention is permitted. Situations like fraud or bias
by the arbitrators, violation of natural justice are such instances. The
5

court can only quash the award leaving the parties free to begin the
arbitration again if it is desired. The Court cannot correct the errors of
arbitrators. So, the scheme of the provision aims at keeping the
supervisory role of the court at minimum level and this can be justified as
parties to the agreement make a conscious decision to exclude the court's

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jurisdiction by opting for arbitration as they prefer the expediency and

finality offered by it.
ONGC V. SAW PIPES
Commenting on ONGC v. Saw pipes the court held: Since it is only for a
large Bench to decide as to the correctness or otherwise of the said

15

decision, till then the said decision has the binding effect and the same
has been followed in large number of cases despite the decision of ONGC
had invited unfavourable remarks from different quarters practically. A
few decisions of the High Court have also endeavoured to narrowly read
Saw Pipes upon the reasonable apprehension that literary interpreting the

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dictum laid down in the judgment would only have an impact of the
possibility of expanding judicial review beyond all limitations contained
not only under the Arbitration Act but even under the old regime. These

High Court decisions have concurrently observed that a single Judgment

of the Apex Court cannot naught the entire law on the subject and set the
clock anti. The High Court of Bombay in the case of Indian Oil
Corporation Ltd. V. Langkawi Shipping Ltd. observed that to accept a
5

literal construction on Saw Pipes would have the consequence to the

effect as hereunder. The object of the 1996 Act itself is to radically curtail
the judicial intervention in arbitration awards except in the circumstances
as contemplated in the provisions of the Act. While that being the
legislative intent, the effect of the Judgement would only widen the scope

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of courts jurisdiction to intervene under Section 34 of the 1996 Act. This

is absolutely not the intention of the legislature. It is noteworthy to
recollect that the need to minimize the supervisory role of Courts in the
Arbitral process is the main objective of the Arbitration and Conciliation
Bill 1996 which preceded the 1996 Act. The Saw Pipes Judgment has

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rather correctly been criticized. Out the outset, the dictum of the
judgement is very much contrary to the apparent language of the
arbitration act and the spirit of the law. While there exists already a
backlog of cases, this has in addition payed way to expand the doors of
judicial review more particularly when the same is unsuitable in the

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Indian context. That apart the enforcement proceedings would equally be

delayed which the award is made subject matter of challenge on merits. A

majority of parties opting for arbitrations do so to avoid court delays and

legal niceties. To embroil them back into the same system at the
enforcement stage would be ironic. An adverse side effect of this decision
is that it has become a reason for the parties to shift the venue of
5

arbitration outside India (in case arbitration in India renders the award
more helpless or judicial review hinder the enforcement).

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