RE- APPRECIATING EVIDENCE OR RE- INTERPRETING THE CONTRACTS WHILE EXAMINING THE PATENT ILLEGALITY CANNOT BE RE- EVALUATED: CALCUTTA HIGH COURT OBSERVED
Category: Commercial Law
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It remarked that the Court cannot be sitting in appeal over the Tribunal's decision and cannot re-interpret the contract differently from the point of view of differentiating it from the orders of subordinate court. Also, the Court highlighted the fact that Patent illegality is fundamental error committed in an arbitral award which is irrational, illogical and perverse which goes to the root of the matter which no fair-minded or reasonable person could commit and which is visibly apparent on the face of it even by an ordinary sane person.
FACTUAL NOTION-
While stating the disapproval of the court towards the appeal filed by the appellate, the court stated its reasoning for dismissing the appeal. The Court rightly stated Patent Illegality has not been explicitly defined in the Arbitration & Conciliation Act, 1996 after the 2015 Amendment Act, however, it has been introduced as one of the grounds to set aside the Arbitral Award. The term "patent" implies that the illegality must be evident or manifest on the face of the award itself. It should not require extensive examination or investigation to ascertain the illegality. Mere errors of law or misinterpretation of contractual terms by the arbitrator may not amount to patent illegality unless they are so egregious that they violate fundamental principles of law.
The concept of patent illegality as a ground for setting aside arbitral awards was introduced by Indian courts to address situations where the award was so fundamentally flawed that it exhibited irrationality, perversity and contrary to logical principles. Thus, the Calcutta High Court bench in re-Appreciate Evidence or re-interpret Contracts While Examining Patent Illegality dismissed the appeal of appellate. Also, the court stated the reasoning that it is not an appeal process- Reviewing for "patent illegality" is not intended to be a full appeal where a court can re-examine all aspects of the case, including the weight given to evidence. The Jurisdiction of Section 34 of Arbitration & Conciliation Act, particularly in India is limited. Also, it outlines the grounds for setting aside an arbitral award and “Patent illegality” is one such ground for it. The court also focused on fundamental flaws of the act and stated that The court only looks for blatant errors in law or logic that make the award demonstrably wrong on its face, not just disagreements with the arbitrator's interpretation.
CONCLUSION-
The Court dismissed the appeal and stated the reason it is trite that the terms of the contract can be express or implied. The conduct of the parties would also be a relevant factor in the matter of construction of a contract. The construction of the contract agreement, is within the jurisdiction of the arbitrators having regard to the wide nature, scope and ambit of the arbitration agreement and they cannot, be said to have misdirected themselves in passing the award by taking into consideration the conduct of the parties. It is also trite that correspondences exchanged by the parties are required to be taken into consideration for the purpose of construction of a contract. Interpretation of a contract is a matter for the arbitrator to determine, even if it gives rise to determination of a question of law.
The 1996 Act makes the provision for the supervisory role of courts, for the review of the arbitral award only to ensure fairness. Intervention of the Court is envisaged in few circumstances only, like, in case of fraud or bias by the arbitrator, violation of natural justice, etc. The court cannot correct the errors of the arbitrators. It can only quash the award leaving the parties free to begin the arbitration again if it is desired. So, the scheme of the provision aims at keeping the supervisory role of the court at minimum level and this can be justified as parties to the agreement make a conscious decision to exclude the court's jurisdiction by opting for arbitration as they prefer the expediency and finality offered by it.
The Court will not judge the reasonableness of a particular interpretation accorded by the arbitrator to the terms of the contract. Even an error in interpretation, unless patently illegal, will only amount to an error within the jurisdiction of the arbitrator. Patent illegality may render an award to be in conflict with the public policy of India. Under the explanation to Section 34(2)(b) an award may be said to be in conflict with the public policy of India if the making of the award was induced or affected by fraud or corruption.
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WRITTEN BY: ALOK CHHAPARWAL
GUIDED BY: ADVOCATE ANIK
