Meaning of Public policy

It is practically difficult to define the limits and tell what do we exactly mean by public
policy but Indian courts have interpreted the term too liberally and widely. Public policy
could be anything that hinders the right of a person, whether natural, legal or commercial, or
causes injustice, or abrogates the statutory provisions, or against the morals and values of
current society at large. It tends to make any contract void and hence, not enforceable.

Public policy could be violated also in cases where arbitrator is not free and unbiased.
Arbitrator is bound by the contract existing amongst the parties, give opportunity to the
parties to decide the procedure, language, etc. of arbitration and decide the case as per the
terms of the contract. Also, tribunals have to take special care of law while passing an award
so that their acts do not amount to misconduct. Misconduct can arise due to slightest of
mistakes too like non application of mind on important questions by them.

In case of Renusagar Power Co. v. General Electric Co.1, court tried to interpret the meaning
of the term public policy as follows: “the expression ‘public policy’ refers to the public
policy India and the recognition and enforcement of the award of the arbitral tribunal in India
cannot be questioned on the ground that it is contrary to the public policy of any other
country".

Supreme court has also interpreted this term in another case of Oil and Natural Gas
Corporation Ltd. v. Saw Pipes Ltd.2 by saying that patent illegality or violation of any
provision of Arbitration and Conciliation Act 1996 is a ground for challenging arbitral award
on ground of public policy:

Patent illegality has emerged as a new dimension of the term and was discussed in Associated
Builders v. Delhi Development Authority3, which is mentioned in detail while dealing with
the case laws.

1
1994 AIR 860.
2
(2003) 5 SCC 709.
3
2014 (4) ARBLR 307(SC).