Patent Illegality of Arbitration Award

The arbitral award, however, is the final determination made by the arbitral tribunal [as per Section 2(d)]. The term Patent illegality is one of the grounds invoked for setting aside an arbitral award. The word ‘Patent Illegality’ is nowhere defined under the Arbitration and Conciliation Act, 1996. In ONCG v. Saw Pipes, 2003 (2) Arb.LR 5 (SC), the Indian Supreme Court established the idea of "patent illegality," which falls under the purview of Indian public policy, the breach of which entitles Indian courts to annul an arbitration ruling. The customary grounds for annulling arbitration under Article 34 of the Model Law or Article V of the New York Convention are in addition to this. The phrase "patent illegality" exclusively refers to domestic and international arbitrations with India as their seat and are governed by Part I of the Indian Arbitration Act. It can be stated that patent illegality would be regarded as the contravention of the Arbitration Act. An award may be patently illegal if it is contrary to the substantive provisions of law of the arbitration act. In Patel Engineering Ltd. vs. North Eastern Electric Power Corporation Ltd., the Hon’ble Supreme Court stated that if an order of an arbitrator is found to be perverse or irrational or his view is not fair that any reasonable person would take, in that case, the ground of patent illegality can be invoked. In order to succeed in a challenge against an arbitral award, it must be shown that the award of the arbitrator suffered from perversity or an error of law or that the arbitrator has otherwise misconducted himself. Merely showing that there is another reasonable interpretation or possible view on the basis of the material on the record is insufficient to allow for the interference by the court.