Contravention of Law in an Award, due to Public Policy or Interest

National Agricultural vs The Court ruled that:

Alimenta S.A. on 22 April, The contract between the two parties was a contingent contract under
2020 Section 32 of the Indian Contract Act, 1872, which would be
unenforceable on account of the lack of permission from the
government. Thus, it was against the fundamental public policy of
India to enforce such an award.
Venture Global Engg v. Section 34(2) of the Act declares that if making of an award is either
Satyam Computer Services "induced or affected by fraud, the same is liable to be tide.
Ltd., (2010) 8 SCC 660: Whether the facts relating to the fudging of the accounts of Satyam
(2010) 3 SCC (Civ) 523 and the non-disclosure of those facts by Satyam before the arbitrator
would amount either (to "Inducing the making of the award by fraud or
(in) the award made in ignorance of those facts by virtue of non-
disclosure of those facts by Satyam would be an "award affected by
fraud,-would be the questions relevant for deciding whether the award
is required to be set aside.

(Para 184)

The facts concealed must have a causative link. And if the

concealed facts, disclosed after the passing of the award, have a
causative link with the facts constituting or inducing the award, such
factors are relevant in a setting aside proceeding and award may be
set aside as affected or induced by fraud.

Venture Global The award is required to be set aside on the ground that the award is
Engineering Llc vs Tech opposed to the public policy of India. In the opinion of the trial court,
Mahindra Ltd & Anr Etc on the award contained directions which are in conflict with the FEMA
1 November, 2017 Act and Regulations made thereunder.
(a) The question under this point is this: Whether the award insofar
as the order of transfer of the petitioner's shares to the 1st
respondent at the book value is a violation of the Foreign
Exchange Management Act and violation of public policy?"

The trial court took note of the contention of Venture:

"(b) The contentions of the petitioner on this aspect are as under:'It is
admitted that the award directed 1st respondent to acquire the
petitioner's shares in Respondent 2 at book value being less than its
fair value. Such a direction was in express violation of the Foreign
Exchange Management (Transfer or issue of Security by a Person
Resident Outside India) Regulations, 2000, which require such
transfers to take place at fair value..."

173. The submission of Venture appears to be:

(1) The award insofar as it directed Venture to transfer its shares in

JVC to Satyam at book value is in violation of the Foreign Exchange

National Highway Authority
Of India Vs
Continental Engineering
Corporation (Cec)
Oil & Natural Gas
Corporation Ltd vs Saw
Pipes Ltd on 17 April, 2003
Management (Transfer or Issue of Security by a Person Resident
Outside India) Regulations, 2000; and
(in The book value of the shares of JVC is less than that of their fair
value.
174. It must be pointed out here that even according to the trial court
Satyam argued "that the book value of the shares is the price of
shares as recorded in the books of accounts of the Company. It may
be above or below the market value". On the above rival submissions,
the trial court concluded:
Thus, the award to the extent it directed the transfer of the
petitioner's shares to the 1st respondent at the rate of book
value is in violation of the Foreign Exchange Management Act
and consequently of the public policy.
“Justice or morality”
36. … An illustration of this can be given.
A claimant is content with restricting his claim, let us say to Rs 30 lakh
in a statement of claim before the arbitrator and at no point does he
seek to claim anything more. The arbitral award ultimately awards him
45 lakh without any acceptable reason or justification. Obviously, this
would shock the conscience of the Court and the arbitral award would
be liable to be set aside on the ground that it is contrary to “justice”.
S. 28(3), which applies to both domestic and international arbitrations,
provides that:“In all cases, the Arbitral Tribunal shall decide in
accordance with the terms of the contract and shall take into account
the usages of the trade applicable to the transaction.” On this
basis, the court held that an award contrary to the substantive law
to be applied to the dispute, the Act or the terms of the contract could
be patently illegal.
In the present case delay took place in deployment of rigs and on that
basis actual production of gas from platform B-121 had to be
changed, it is undoubtedly true that the witness has stated that
redeployment plan was made keeping in mind several constraints
including shortage of casing pipes The Arbitral Tribunal, therefore,
took into consideration the aforesaid statement volunteered by
the witness that shortage of casing pipes was only one of the several
reasons and not the only reason which led to change in deployment
of pLan or redeployment of rigs Trident platform B-121. In our view, in
such a contract would be difficult to prove exact loss or damage
which the parties suffer because of the breach therent in such a
situation, the parties have pre-estimated such loss after clear

Oil & Natural Gas
Corporation Ltd vs Saw
Pipes Ltd on 17 April, 2003
understanding, it would be totally unjustified to arrive at the
conclusion that the party who has committed breach of the contract is
not able to pay compensation. It would be against the specific
provisions of Sections 73 and 74 of the Indian Contract Act.
68. From the aforesaid discussions it can be held that-
(1) Terms of the contract are required to be taken into consideration
before arriving at the conclusion whether the party claiming damages
is entitled to the same
(2) If the terms are clear and unambiguous stipulating the
liquidated damages in case of the breach of the contract unless
it is held that such estimate of damages/compensation is
unreasonable or is by way of penalty, party who has committed
the breach is required to pay such compensation and that is
what is provided in Section 73 of the Contract Act.
For the reasons stated above, the impugned award directing the
appellant to refund the amount deducted for the breach as per
contractual terms requires to be set aside and is hereby set aside.
Take for illustration a case wherein there is a specific provision in the
contract that for delayed payment of the amount due and payable, no
interest would be payable, still however, if the arbitrator has passed
an award granting interest, it would be against the terms of the
contract and thereby against the provision of Section 28(3) of the
Act which specifically provides that "Arbitral Tribunal shall decide in
accordance with the terms of the contract". Further, where there is a
specific usage of the trade that if the payment is made beyond a
period of one month, then the party would be required to pay the said
amount with interest at the rate of 15 per cent. Despite the evidence
being produced on record for such usage, if the arbitrator
refuses to grant such interest on the ground of equity, such
award would also be in violation of sub-sections (2) and (3) of
Section 28. Section 28(2) specifically provides that the arbitrator shall
decide ex aequo et bono (according to what is just and good) only if
the parties have expressly authorised him to do so. Similarly, if the
award is patently against the statutory provisions of substantive
law which is in force in India or is passed without giving an
opportunity of hearing to the parties as provided under Section 24 or
without giving any reason in a case where parties have not agreed
that no reasons are to be recorded, it would be against the statutory
provisions. In all such cases, the award is required to be set aside on
the ground of "patent illegality.