SC: Patent-illegality test post-2015—perverse construction allows setting aside domestic award; SLPs against review dismissal rejected
Case Name: Patel Engineering Ltd. v. North Eastern Electric Power Corporation Ltd. (NEEPCO)
Citation: SLP (C) Nos. 3584–3585 of 2020 (arising out of D No. 577 of 2020), with SLP (C) Nos. 3438–3439 of 2020 and 3434–3435 of 2020
Date of Judgment: 22 May 2020
Bench: Justice R. Banumathi, Justice Indu Malhotra, and Justice Aniruddha Bose
Held: The Supreme Court dismissed SLPs challenging the High Court’s refusal to review its Section 37 judgment. It affirmed that the 2015 amendments apply to Section 34 petitions filed after 23.10.2015 and that, for domestic awards, “patent illegality” under Section 34(2A) permits interference where the arbitrator’s view is not even a possible view or ignores vital contractual clauses. The High Court’s setting aside of declaratory awards—on the ground that the tribunal’s construction of BoQ Items 2.7/3.4 and Clauses 32(ii)(a)/33(iii) was irrational and perverse—was consistent with Associate Builders/Ssangyong. The Court noted the earlier SLPs against the Section 37 judgment had already been dismissed and saw no error apparent warranting review.
Summary: Three declaratory awards (29.03.2016) fixed rates for extra-lead transport under a hydro project. Section 34 challenges were rejected by the Additional Deputy Commissioner (Judicial), but the High Court (26.02.2019) allowed Section 37 appeals, holding the awards perverse for ignoring key tender/specification clauses and for an interpretation no reasonable person could adopt; it also flagged potential unjust enrichment against a PSU. SLPs against that judgment were dismissed on 19.07.2019. The contractor then sought review in the High Court on the footing that the 2015 amendments were overlooked; review was dismissed for delay and on merits (10.10.2019). In the present round, the Supreme Court held that the High Court had, in substance, applied the correct post-2015 standard: no re-appreciation of evidence, but intervention where the award’s construction is impossible or jurisdictionally errant. No ground was made out to reopen the concluded challenge through review.
Decision: SLPs dismissed; High Court’s rejection of review petitions upheld; no order as to costs.