Western Geco: One step forward or two steps back?

Parliament, through the incorporation of article 34 of the draft UNCITRAL Model Law on International Commercial Arbitration into section 34 of the Arbitration and Conciliation Act, 1996, laudably endeavoured to minimize court intervention in arbitration proceedings in India, in line with international trends. The purpose of the enactment was to ensure that courts restrict themselves to the grounds enumerated in section 34, and do not go into the merits of a case, or reappraise or re-examine evidence, facts, or the sufficiency of evidence when the arbitrators appear to have applied their minds to these matters.

Case law

This issue came up afresh in Oil and Natural Gas Corporation Ltd v Saw Pipes Ltd (2003), when the Supreme Court considered the scope of judicial intervention in connection with the expression “conflict with the public policy of India”, in section 34(2)(b)(ii) of the act. The Supreme Court cracked open the door to judicial intervention when it defined “public policy” to include, in the alternative, fundamental policy of Indian law; the interest of India; justice or morality; or patent illegality.

While distinguishing the Saw Pipes case, the Supreme Court in Shri Lal Mahal Ltd v Progetto Grano Spa (2013) upheld the earlier trend of minimal court intervention, particularly with regard to enforcement of foreign awards. However, in the recent case of Oil and Natural Gas Corporation Ltd v Western Geco International Ltd, the Supreme Court has, through an elaborate consideration of the scope of the term “fundamental policy of Indian law”, reverted to, and enhanced, the Saw Pipes ruling, granting courts greater latitude to interfere in arbitral awards.

Vivek Vashi is the mainstay of the litigation team at Bharucha & Partners, where Shreya Ramesh is an associate.