Arbitral Award Passed In Disregard To Judicial Decisions Conflicts With The Public Policy : Delhi High Court

[24 MAay 2022] The Delhi High Court has held that an arbitral award that is not in consonance with the judicial decisions and principles laid down by the courts of India would be in violation of the fundamental policy of Indian law and thus in conflict with the public policy of India under Section 34 of the Arbitration and Conciliation Act, 1996 (A&C Act). The Bench, consisting of Justices Mukta Gupta and Neena Bansal Krishna, upheld the order of the Single Judge setting aside the arbitral award under Section 34 on the ground that the Arbitrator had failed to apply the basic fundamental law as contained in the Limitation Act, 1963 and the Transfer of Property Act, 1882. The Court observed that under Section 34 of the A&C Act, a domestic arbitral award can be set aside if it is in conflict with the “public policy of India”. Also, the Court observed that as per Section 34, an award in contravention with the fundamental policy of Indian law would be in conflict with the public policy of India. The Court noted that as per the decision of the Supreme Court in the case of Renusagar Power Co. Ltd. versus General Electric Co. (1994), disregarding the orders passed by superior courts would adversely affect the administration of justice and consequently an award passed in such disregard to the orders of superior courts would also be a violation of the fundamental policy of Indian law. The Court held that in view of the decision of the Supreme Court in the case of Vijay Karia versus Prysmian Cavi E Sistemi SRL (2020), mere violation of any enactment shall not be a breach of fundamental policy of Indian law unless the same comprises the most basic values and principles that form the basic policy of laws in the country. The Court ruled that the Will or the Conveyance Deed cannot be challenged by the appellant 22 years after it was brought to effect. The Court added that the limitation period for challenging the Conveyance Deed is three years as per Article 59 of the Limitation Act, 1963 and that as per Section 27 of the Limitation Act any person’s right to sue for recovery of possession of immovable property is extinguished upon expiration of the specified limitation period.
Thus, the Court observed that the Arbitrator had failed to apply the basic fundamental law as contained in the Limitation Act, 1963 and the Transfer of Property Act, 1882. The Court added that the award was also not in consonance with the judicial decisions and principles laid down by the courts of India. Therefore, the Court held that the findings of the Arbitrator were in breach of the fundamental policy of Indian law.