SC: Contravention Of A Statute Not Linked To Public Policy, Public Interest Cannot Be A Ground To Set Aside An Arbitral Award

Background of the Case

• The case title is "Delhi Airport Metro Express Pvt. Ltd. vs Delhi Metro Rail Corporation Ltd (CA 5627 of 2021)". 
• The appeal was heard by the Supreme Court on 9th September 2021.
• The Supreme Court Bench that heard the appeal was constituted by Justice L. Nageswara Rao and Justice S. Ravindra Bhat
• An appeal had been filed with the Supreme Court against the judgement of the Delhi High Court. 
• The Delhi High Court had ordered the annulment of the award made by the Arbitral Tribunal in favour of the Delhi Airport Express Pvt. Ltd. 

Observations by the Court

• The Supreme Court noted that the limited grounds available to courts for annulling arbitral awards are well known to the legal minds. However, the difficulty arises in applying well-established interference principles to the facts of each case that comes before the courts. 
• The Court considered that there is a disturbing trend of courts annulling arbitral awards after reviewing the facts of the case and concluding that the award is vitiated by perversity or patent illegality, among other grounds for annulment. 
• The Court explained that Patent illegality should be root-cause illegality. In other words, the Arbitral Tribunal's legal errors do not constitute patent infringement.  Similarly, erroneous application of the law is not patent illegality. Also, patent illegality does not include law violations unrelated to public policy or public interest. 
• The Court also stated that it is forbidden for courts to reappraise evidence to conclude that the award is manifestly illegal because courts do not hear appeals from arbitral awards. 

Conclusion of the Appeal

• The Supreme Court's bench thoroughly considered the scope of the Court's authority to review arbitral awards.
• It was noted that a violation of a statute that is unrelated to public policy or the public interest could not be used to overturn an arbitration award. 
• Hence, the Supreme Court Bench granted the DAMEPL's appeal to overturn the High Court's decision.

Questions: 

• Which Indian Legislation governs the Concept of Arbitral Award?
• Under which section can the Courts annul an award by an arbitral tribunal?