SC:Patent illegality can’t be invoked in international commercial arbitrations seated in India

The Hon’ble Supreme Court, on 22nd May 2020, in the matter of Patel Engineering Ltd. v. North Eastern Electric Power Corporation Ltd. (NEEPCO) observed that the ground of “patent illegality” cannot be invoked in international commercial arbitrations seated in India.

The Hon’ble Supreme Court observed that:

The ground of “patent illegality” for setting aside a domestic award has been given statutory force in Section 34(2A) of the Arbitration and Conciliation Act, 1996. The ground of “patent illegality” cannot be invoked in international commercial arbitrations seated in India. Even in the case of a foreign award under the New York Convention, the ground of “patent illegality” cannot be raised as a ground to resist enforcement, since this ground is absent in Section 48 of the Arbitration Act. (Para 19)

The ground of patent illegality is a ground available under the statute for setting aside a domestic award, if the decision of the arbitrator is found to be perverse, or, so irrational that no reasonable person would have arrived at the same; or, the construction of the contract is such that no fair or reasonable person would take; or, that the view of the arbitrator is not even a possible view. (Para 22)

Copy of judgement: Judgement_22-May-2020

-Adv. Tushar Kaushik

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