Renusagar Power Co. Ltd. vs. General Electric Co.

1994 Supp (1) SCC

644

FACTS:
Renusagar Power Plant Ltd. had entered into a contract with General Electric Co., a company
of New York in the USA under which it had to supply equipment and power services for
setting up a thermal power plant. The contract was approved by the Government of India. All
the items were to be delivered in 15 months from the effective date and the completion of the
plant was to be done within 30 months. The contract provided for payment in instalments and
also required execution of unconditional negotiable promissory notes for all the instalments.
The contract contained an arbitration clause which provides that any disagreement arising out
of the contract where the parties are unable to resolve by sincere negotiation shall be settled
in accordance with the Arbitration Rules of the International Chamber of Commerce (ICC).
There was some delay on the part of General Electric in adhering to the time schedule for the
supply of equipment and consequently, Renusagar rescheduled the payment instalments and
certain instalments were unpaid under due dates.

PROCEDURAL HISTORY:
A dispute arose and General Electric referred the matter to arbitration. An award was
rendered in favour of General Electric which it sought to enforce before the High Court of
Bombay. The High Court enforced the award and Renusagar appealed to the Supreme Court.

ISSUES ADDRESSED:
 Scope of enquiry in proceedings for recognition and enforcement of a foreign award
under the Foreign Awards Act
 Bar to the enforcement of the award under Section 7(1)(a)(ii) of the act
 Objection to the enforceability of the award on the ground that it is contrary to the public
policy of the state of New York
 Meaning of 'public policy in section 7(1)(b)(ii) of the act
 Is the award contrary to public policy of India?
 Interest pendente lite and future interest

HELD:
 The term “public policy” in Section 7(1)(b)(ii) of the 1961 Act referred to the public
policy of India and not the public policy of New York.
 There is nothing to indicate that the expression "public policy" in Article V(2)(b) of the
New York Convention and S. 7(1)(b)(ii) of the Foreign Awards Act is not used in the
same sense and that "this would imply that the defence of public policy which is
permissible u/s. 7(1)(b)(ii) should be construed narrowly."
Para 29
 In proceedings for enforcement of a foreign award under the Foreign Awards Act, 1961,
the scope of enquiry before the court in which award is sought to be enforced is limited to
grounds mentioned in Section 7 of the Act and does not enable a party to the said
proceedings to impeach the award on merit. Para 31,
37
 Since the Foreign Awards Act is concerned with recognition and enforcement of foreign
awards which are governed by the principles of private international law, the expression
"public policy" in Section 7(1)(b)(ii) of the Foreign Awards Act must necessarily be
construed in the sense the doctrine of public policy is applied in the field of private
international law. Applying the said criteria it must be held that the enforcement of a
foreign award would be refused on the ground that it is contrary to public policy if such
enforcement would be contrary to (i) fundamental policy of Indian law; or (ii) the
interests of India; or (iii) justice or morality. .
Para 66, 67
 The Court found that no aspect of the award or interest was excessive or unjust, and
therefore enforcing the award would not be contrary to India's public policy.

ONGC Ltd v. Saw Pipes Ltd (2003) 5 SCC

705

FACTS:
Respondent Company Saw Pipes which dealt in the business of supply of equipment for
offshore exploration of oil entered an agreement with the appellant ONGC to supply them
with casing pipes. Due to the reason for worker’s strike all over Europe at that time, the raw
material which was agreed by them, could not be acquired by the respondent in time to
complete the order. This had been conveyed by the respondent to the appellant and the
appellant in response to it extended the delivery date stipulating that the amount equivalent to
liquidated damages for delay in supply of pipes would be recovered from the respondent.
There was a clause in the contract that stated – for delay of every week the contractor will be
charged 1% of the whole unit price of the order or the part which the contractor has failed to
deliver and these liquidated damages can be recovered up to the ceiling limit of 10% of the
whole price of the unit. It has also been agreed by the parties that the stipulated liquidated
damages are genuine, pre-estimated, not in the form of penalty, and can be deducted from the
bill of the payment. Respondent had caused the delay and when the appellant withheld the US
$ 3, 04,970.20 and Rs. 15, 75,559/- on account of customs duty, freight charges, sale tax by
way of liquidated damages.

PROCEDURAL HISTORY:
The respondent disputed the deduction and the dispute was referred to the Arbitral tribunal.
The Arbitral tribunal passed the award in favour of Respondent. Aggrieved by this Appellant
filed an appeal challenging the arbitral award before the Bombay High Court which was
dismissed and hence appeal was filed in Supreme Court.

ISSUES:
 Whether the Supreme Court has jurisdiction under Section 34 of the Arbitration and
Conciliation Act, 1996 to entertain the present appeal?
 Whether the award can be set aside if the tribunal has failed to follow the procedure
prescribed under the Arbitration and Conciliation Act, 1996?
 Whether the award can be set aside on the grounds of ‘public policy’ if it violates
provisions of substantial law under Section 34 of the Arbitration and Conciliation Act,
1996?

HELD:
 Argued that “if the arbitral tribunal does not dispense justice, it cannot truly be reflective
of an alternate dispute resolution mechanism. Hence, if the award has resulted in an
injustice, a court would be well within its rights in upholding the challenge to the award
on the ground that it is in conflict with public policy in India.”
Para 27
 ‘Public Policy’ cannot be restrained and has to be interpreted liberally thereby including
one more aspect to the public policy i.e. ‘patent illegality’. Para
22
 On this, the court held that if legislative intent is sought by reading other provisions with
Sec 34 of the Act, it appears that violation of the provisions of the Act as well as the
substance has occurred leading to miscarriage of justice. Not following the procedure by
not giving due consideration to the terms of the contract would mean that the Tribunal has
acted beyond its jurisdiction and therefore the award would be patently illegal and could
be set aside under Section 34 on the grounds of ‘Public Policy’ as it considerably affects
the rights of the party. Para 13, 15,
16
 if the Arbitral tribunal does not follow the mandatory procedure means that it has acted
beyond its jurisdiction, the award would be illegal and can be set aside under Section 34
of the Act.
Para 13
 Illegality must go to the root of the matter and if the illegality is of trivial nature it cannot
be held that award is against the public policy. Award could also be set aside if it is so
unfair and unreasonable that it shocks the conscience of the court. Such award is opposed
to public policy and is required to be adjudged void. Para
30,31

McDermott International Inc. v . Burn Standards Co. (2006) 11 SCC

181

FACTS AND PROCEDURAL HISTORY:

BSCL and McDermott International Inc. entered into contract to transfer technology to the
former with regard to design, construction and operation of a fabrication yard. BSCL decided
to give a sub-contract of the work to MII on a project by project basis. Disputes and
differences having arisen between the parties, MII invoked the arbitration clause. Proceedings
regarding invocation of arbitration clause were initiated by the parties before the Calcutta
High Court. Proceedings ultimately ended in favour of MII leading to appointment of two
arbitrators for determination of the disputes and differences between the parties. The learned
arbitrator having heard the parties inter alia on jurisdictional question initially passed a partial
award in favour of MII. BSCL filed an application under Section 34 of the Act questioning
the said partial award. The learned Arbitrator thereafter took up the left over matters for his
consideration. BSCL filed Section 34 application for setting aside the final award.

ISSUES:
 Validity of a Partial award
 Duty is assign reason while setting aside an award
 Whether time was the essence of contract
 Method for computation of damages

HELD:
 the Arbitrator is required to assign reasons in support of the award. A question may
invariably arise as to what would be meant by a reasoned award. The mandatories of
giving reasons unless the arbitration agreement provides otherwise.
Para 55
 An award has been defined under Section 2(c) to include an interim award. Sub-section
(6) of Section [ of Section 31(6) and 2(c) of the Act and, thus, the validity of the partial
award is not open to question.
 “we are of the opinion that it is final in all respects with regard to disputes referred to the
arbitrator which are subject matter of such award. We may add that some arbitrators
instead and in place of using the expression “interim award” use the expression “partial
award”. By reason thereof the nature and character of an award is not changed. In any
view of the matter, BSCL is not in any way prejudiced. We may state that both the partial
award and the final award are subject matter of challenge under Section 34 of the Act.”
 the court cannot modify but only quash the award under Section 34 leaving it to the
parties to re-arbitrate if they desire so.
 Section 33 of the Act empowers the arbitral tribunal to make correction of errors in
arbitral award, to give interpretation of a specific point or a part of the arbitral award, and
to make an additional award as to claims, though presented in the arbitral proceedings,
but omitted from the arbitral award. Subsection (4) empowers the arbitral tribunal to
make additional arbitral award in respect of claims already presented to the tribunal in the
arbitral proceedings but omitted by the arbitral tribunal provided
1. There is no contrary agreement between the parties to the reference;
 2. A party to the reference ,with notice to the other party to the reference ,requests the
arbitral tribunal to make the additional award;
3. Such request is made within thirty days from the receipt of the arbitral award;
4. The arbitral tribunal considers the request so made justified;
5. Additional arbitral award is made within sixty days from the receipt of such request by
the arbitral tribunal The additional award, in our opinion, is not vitiated in law.

Cybernetics Network Pvt. Ltd. v. Bisquare Technologies Pvt. Ltd

2012 SCC OnLine Del 1155
FACTS:
CNPL and Bisquare entered into a Memorandum of Understanding ('MOU') whereby CNPL
was to subscribe 30% of the issued and subscribed equity capital of Bisquare and Bisquare
was to subscribe to 30% of the issued and subscribed equity capital of CNPL. Bisquare and
Mr. Baoni required CNPL to pay Bisquare Rs. 17.37 lakhs for acquiring 19,300 equity shares
of a face value of Rs. 10 each in Bisquare. The amount consisted of a sum of Rs. 15.44 lakhs
as share premium demanded by Bisquare and Mr. Baoni. CNPL states that it paid the entire
sum of Rs. 17.37 lakhs during January and March 2000. Further, CNPL, Bisquare and Mr.
Baoni executed a separate Technology Sale and Support Agreement ('TSSA'). Multiple
disputes arose between the three. CNPL sent them a notice invoking the arbitration clause.

PROCEDURAL HISTORY:
Sole Arbitrator was appointed by the Delhi HC. Court held it will be open to the CNPL to
approach the learned Arbitrator to decide those claims in accordance with law and pass a
fresh Award.

ISSUES:
 whether the above claims have been erroneously rejected by the learned Arbitrator can be
allowed by this Court in exercise of its powers under Section 34(4) of the Act?

HELD:
 However, none of the above decisions categorically hold that where certain claims have
been erroneously rejected by the Arbitrator, the Court can in exercise of its powers under
Section 34(4) of the Act itself decide those claims. The Allahabad High Court has in
 Managing Director v. Asha Talwar 2009 (5) ALJ 397, held that while exercising the
powers to set aside an Award under Section 34 of the Act, the Court does not have the
jurisdiction to grant the original relief which was prayed for before the Arbitrator.
 Under Section 34(4) of the Act, the Court while deciding a challenge to an arbitral award,
can either "adjourn the proceedings for a period of time determined by it in order to give
the arbitral tribunal an opportunity to resume the arbitral proceedings or to take such other
action as in the opinion of the arbitral tribunal will eliminate the grounds for setting aside
the arbitral award". This necessarily envisages the Court having to remit the matter to the
Arbitral Tribunal. This is subject to the Court finding it appropriate to do so and a party
requesting it to do so.
 The remand to the Arbitrator under Section 34(4) is to a limited extent of requiring the
Arbitral Tribunal "to eliminate the grounds for setting aside the arbitral award". There is
no specific power granted to the Court to itself allow the claims originally made before
the Arbitral Tribunal where it finds the Arbitral Tribunal erred in rejecting such claims. If
such a power is recognized as falling within the ambit of Section 34(4) of the Act, then
the Court will be acting no different from an appellate court which would be contrary to
the legislative intent behind Section 34 of the Act.

ONGC Ltd. v. Western Geco International Ltd. (2014) 9 SCC

263

FACTS:
Oil and Natural Gas Corporation (‘ONGC’) contracted with the Respondent, Western Geco
international limited (‘GECO’) for procuring U.S. origin “Geophone” Hydrophones. GECO
intimated ONGC that it would not be possible to provide for the desired U.S. Hydrophones.
The procedure could not be completed as the Respondent was not able to obtain license from
the regulatory bodies from the US Government for the sale of these hydrophones. It sought to
exempt itself from liability under the force majeure clause. ONGC refuted GECOs claim of
force majeure and required the immediate delivery of the U.S. Hydrophones. ONGC
conditionally accepted GECO’s offer subject to it deducting the liquidated damages. The
deductions gave rise to the arbitration.

PROCEDURAL HISTORY:
The arbitral tribunal held that the delay in the delivery of the vessel could not be attributed to
Western Geco. ONGC, aggrieved by the tribunal’s award, challenged the decision under
section 34 of the act before Bombay High Court. The high court held that the award was
passed by the tribunal after due consideration of the facts, and rejected interference. ONGC
then moved the Supreme Court. Appeal Partly Allowed. It ‘overturned’ the arbitral award and
allowed for ONGC to deduct liquidated damages.

ISSUES:
 Was the claimant's declaration of force majeure justified under the terms of the contract?
 the jurisdiction of the Court to set aside an arbitral award being limited to grounds set out
in Section 34 of the Arbitration and Conciliation Act, 1996, this Court ought not to
interfere with the same.
HELD:
 The court permitted an inquiry into the merits of an arbitral award as is evident from a
bare reading of the relevant portion of the judgment:
(a) A Judicial Approach: “Judicial approach ensures that the authority acts bona fide and
deals with the subject in a fair, reasonable and objective manner and that its decision is
not actuated by any extraneous consideration. Judicial approach in that sense acts as a
check against flaws and faults that can render the decision of a court, tribunal or authority
vulnerable to challenge.”
(b) Principles of Natural Justice: “Besides the celebrated audi alteram partem rule one of
the facets of the principles of natural justice is that the court/authority deciding the matter
must apply its mind to the attendant facts and circumstances while taking a view one way
or the other. Non-application of mind is a defect that is fatal to any adjudication.”
(c) The Wednesbury Principle of Reasonableness: “a decision which is perverse or so
irrational that no reasonable person would have arrived at the same will not be sustained
in a court of law. Perversity or irrationality of decisions is tested on the touchstone of
Wednesbury principle of reasonableness”.
 the Court found it appropriate to divide the delay into four components as against the
method adopted by the Tribunal and thereby found that they are unable to agree with the
decision of the Tribunal. The Court characterised this as an error resulting in the
miscarriage of justice apart from the fact that it failed to appreciate and draw inferences
that logically flow such proved facts.
