Ssangyong Engineering, (2019) 15 SCC 131 has in clear terms delineated the limited area for judicial interference, taking into account amendments brought about by 2015 Amendment Act.
As has been held in Ssangyong Engineering, mere contravention of substantive law as elucidated in Associate Builders v. Delhi Development Authority, (2015) 3 SCC 49 is no longer a ground available to set aside an Arbitral Award.
There is a disturbing tendency of Courts setting aside Arbitral Awards, after dissecting and reassessing factual aspects of cases. Every error of law committed by Arbitral Tribunal would not fall within ‘patent illegality’. An erroneous application of law cannot be categorized as ‘patent illegality’. In addition, contravention of law not linked to ‘public policy’ or public interest is beyond the scope of ‘patent illegality’.
The interference with a Domestic Award under Section 34(2A) on the ground of ‘patent illegality’ is when Arbitrator takes a view which is not even a possible one, or interprets a clause in the contract in such a manner which no fair-minded or reasonable person would, or if Arbitrator commits an error of jurisdiction by wandering outside the contract and dealing with matters not allotted. An Arbitral Award stating no reasons for its findings would make itself susceptible to challenge on this account. The conclusions of Arbitrator which are based on no evidence or have been arrived at by ignoring vital evidence are perverse and can be set aside on ground of ‘patent illegality’. Also, consideration of documents which are not supplied to other party is a facet of perversity falling within ‘patent illegality’.
– Hon’ble Justice L. Nageswara Rao, Delhi Airport Metro Express Pvt. Ltd. v. Delhi Metro Rail Coropation, [Civil Appeal No. 5627 of 2021].