SC explains when an arbitration can be set aside

SC explains when an arbitration can be set aside
Illustration: Yajur Negi

One-liner: An arbitration award can be set aside only if the award is against the public policy of India, the Supreme Court has said.

Crux of the matter: A bench said the award can be set aside under the Arbitration Act if it is found to be contrary to the fundamental policy of Indian law, the interest of country, justice or morality or if it is patently illegal.

  • The SC was hearing an appeal filed by Haryana Tourism Limited against an order of the Punjab and Haryana HC which set aside a 2005 award passed by the arbitrator as well as the order passed by the Additional District Judge, Chandigarh

Need to know: Haryana Tourism Limited (HTL) had invited tenders/quotations for the supply of Aerated Cold Drinks at its Tourist Complexes and the tender submitted by Kandhari Beverages was accepted.

  • HTL later terminated the contract after a dispute arose between the parties and the matter was referred to the sole arbitrator who directed Kandhari Beverages to pay ₹9.5 lakh

Behind the scenes: Kandhari Beverages thereafter filed an objection petition under Section 34 of the Arbitration Act against the award passed by the arbitrator.

  • The Additional District Judge dismissed the appeal/objection petition after which it filed further appeal before the HC under Section 37 of the Arbitration Act

On the other side: The HC allowed the said appeal by entering into the merits of the claim and quashed and set aside the award passed by the arbitrator as well as the order passed by Additional District Judge, Chandigarh.

Bottom line: The apex court said the HC has exercised the jurisdiction not vested in it under Section 37 of the Arbitration Act. An award can be set aside only if it is against the public policy of India, it said.

Source: PTI

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