Arbitration Can Be Set Aside Only if Award is Against Public Policy of India: SC

An arbitration award can be set aside only if the award is against the public policy of India, the Supreme Court has said. A bench of Justices M R Shah and B V Nagarathna 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, interest of country, justice or morality or if it is patently illegal.

The top court was hearing an appeal filed by Haryana Tourism Ltd against an order of the Punjab and Haryana High Court which set aside a 2005 award passed by the arbitrator as well as the order passed by the Additional District Judge, Chandigarh. 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 dispute arose between the parties and the matter was referred to the sole arbitrator. The arbitrator directed Kandhari Beverages to pay Rs 9.5 lakh while the counter claim lodged by it claiming Rs 13.92 lakh was dismissed by the arbitrator.

Kandhari Beverages thereafter filed objection petition Additional District Judge, Chandigarh 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 high court under Section 37 of the Arbitration Act.

The high court allowed the said appeal by entering into the merits of the claim and has quashed and set aside the award passed by the arbitrator as well as the order passed by Additional District Judge, Chandigarh. The apex court said the high court has exercised the jurisdiction not vested in it under Section 37 of the Arbitration Act.

In view of the above and for the reasons stated above, the present appeal succeeds. The impugned judgment and order passed by the High Court is hereby quashed and set aside. The award passed by the arbitrator and the order passed by the Additional District Judge under Section 34 of the Arbitration Act overruling the objections are hereby restored, the bench said in January 11 order. An award can be set aside only if the award is against the public policy of India, it said.

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