# Sri Navin Tyagi & Anr v. Union of India & Ors

- **Citation:** (2013) 3 ILRA 1666
- **Court:** High Court of Judicature at Allahabad
- **Decided:** 2013-11-08
- **Case number:** Civil Misc. Writ Petition No. 45023 of 2010
- **Bench:** Ashok Bhushan, Vipin Sinha
- **Source:** https://unisonlegal.in/judgment/allahabad-high-court/sri-navin-tyagi-anr-v-union-of-india-ors-42872
- **Pages:** 11

## Headnote

Constitution of India, Art.-226- Alternative
remedy-petitioner seeking enhancement
of compensation-by quashing arbitration
award-can be challenged under section 34
of arbitration & Cancellation Act 1966held-petition not maintainable.

Held: Para-24 & 25

## Text

1666 INDIAN LAW REPORTS ALLAHABAD SERIES
representations, was retired on 30th June,
1996.

20. After careful consideration of
the facts and circumstances of the case,
for the aforestated reasons, I am of the
view that end of justice would be
subserved in case a direction is issued
upon the respondent no. 1 to pay the
salary of the petitioner from 01st July,
1996 to 25th July, 1997 within a period of
three
months
from
the
date
of
communication of this order. In view of
the
above,
the
order/communication
issued by the District Inspector of Schools
dated 02/05th June, 1998, impugned in
this writ petition, needs to be quashed and
accordingly it is quashed.

21. Accordingly, the writ petition is
allowed.

22. No order as to costs.
--------
ORIGINAL JURISDICTION
CIVIL SIDE
DATED: ALLAHABAD 08.11.2013

BEFORE
THE HON'BLE ASHOK BHUSHAN, J.
THE HON'BLE VIPIN SINHA, J.

Civil Misc. Writ Petition No. 45023 of 2010

Sri Navin Tyagi & Anr... .Petitioners
Versus
Union of India & Ors.... Respondents

Counsel for the Petitioner:
Sri Yogendra Nath Rai

Counsel for the Respondents:
C.S.C., Sri R.K. Singh

Constitution of India, Art.-226- Alternative
remedy-petitioner seeking enhancement
of compensation-by quashing arbitration
award-can be challenged under section 34
of arbitration & Cancellation Act 1966held-petition not maintainable.

Held: Para-24 & 25
24. Thus in view of what has been
discussed above and the consistent legal
position, the contention of the learned
counsel for the petitioners that they
cannot seek remedy under the provisions
of the Arbitration and Conciliation Act,
1996 is misconceived and fallacious and
accordingly rejected.

25. Petitioners may approach the
appropriate forum under the provisions
of Section 34 of the Arbitration and
Conciliation Act, 1996. The present writ
petition is thus not maintainable and
accordingly the same is dismissed.

Case Law discussed:
(2011)10 SCC 300; (2006) 4 SCC 445; (2008)
13 SCC 80; (2006) 11 SCC 181; (2011) 5 SCC
758.

(Delivered by Hon'ble Ashok Bhushan, J.)

1. By means of this writ petition
petitioners are challenging the award
dated 29.07.2009 given by the Arbitrator
under Section 3-G(5) of the National
Highways Act, 1956. The reliefs as
sought in the writ petition are as follows:

I) Issue a writ, order or direction in
the nature of certiorari quashing the order
dated 29.07.2009 passed by respondent
no. 3, District Magistrate, Ghaziabad.

II)Issue a writ order or direction in
the nature of mandamus commanding and
directing the respondents to enhance the
rate of the land compensation of the
petitioner Rs. 5000/- per sq. meter or paid
as per the rate given by Gail India Limited
and Indian Oil Corporation fixed by
compromise by both the party Rs. 4400/-
per sq. meter and direct the respondents to
pay
10%
interest
along
with.
3 All] Sri Navin Tyagi & Anr. Vs. Union of India & Ors.
1667

III)Issue any other writ order or
direction which this Hon'ble Cort may
deem fit and proper under the facts and
circumstances of this case.

2. Heard Sri Yogendra Nath Rai,
learned counsel for the petitioners, Sri
R.K. Singh, learned counsel appearing for
opposite party-respondent no. 2 and
learned standing counsel for respondent
nos. 1 & 3.

3. The contentions as raised in the
writ petition are to the effect that the
petitioners are aggrieved, and thus are
challenging the legality and the validity of
the order dated 29.07.2009 passed by the
Arbitrator/District Magistrate, Ghaziabad
by which the rate of the acquired land of
the petitioners has been fixed as Rs.
820.00 by the Arbitrator. It has been
contended that the said compensation is
totally arbitrary and against the norms.

4. The facts as stated in the writ
petition are that the petitioners were the
owners of gata No. 155, khasra No. 422,
area 5080 sq. meter situate in Village
Basantpur Saintali, Pargana Jalalabad,
Tehsil Modi Nagar, District Ghaziabad; that
petitioners land was acquired for the
construction of National High Way (Eastern
Periphered Way) and notification under
Section 3A was published on 02.08.2006
under the National Highways Act, 1956 in
the local newspaper on 23.08.2006 and
24.08.2006 and declaration under Section
3D of National Highway Act was published
on
30.11.2006;
that
petitioners
have
received compensation as per rate of Rs.
820/- fixed by the competent authority; that
without giving any opportunity of hearing
to the petitioners, rate was fixed by the
competent authority @ Rs. 820/- per sq.
meter; that the assessed market rate of the
land of the petitioners fixed by the
competent authority, court of A.D.M. is
very less on 25.01.2008, which is not
acceptable
by
the
petitioners;
that
petitioners land was situated on Delhi
Meerut Road which comes under the
National Capital Region, the market value
of the petitioners' land is not less than Rs.
5,000/- per sq. meter, the assessment of
the market rate decided by the Collector
Ghaziabad was must less; that the circle
rate is not the market value, the judgment
given by the competent authority is
absolutely illegal and arbitrary and the
assessment of the land was not fixed as
per norms prescribed for such fixation.

5. Accordingly, it has been prayed
by the petitioners that the respondents be
directed to pay the compensation at the
rate of the market value, same being not
less than Rs. 5000/- per sq. meter.

6. Thus, the petitioners are basically
aggrieved
against
the
quantum
of
compensation that has been fixed by the
Arbitrator.

7. A counter affidavit has been filed
on behalf of respondent no. 2, in which a
stand has been taken that as the
petitioners have an efficacious alternative
remedy
available
of
moving
an
application under Section 34 of the
Arbitration and Conciliation Act, 1996
and thereafter again by filing an appeal
under Section 37 of the Act against the
order, if any, passed in proceedings under
Section 34 of the Act, the writ petition is
not maintainable and the same is liable to
be dismissed on the ground of alternative
remedy, being available to the petitioners.

8. To the said counter affidavit, a
rejoinder affidavit has been filed.
1668 INDIAN LAW REPORTS ALLAHABAD SERIES

9. It has been contended by Sri
Yogendra Nath Rai, learned counsel for
the petitioners that no remedy lies under
the provisions of Arbitration Act as the
scope of interference under Section 34 of
the Arbitration Act is much limited and an
award can be set aside only on certain
grounds mentioned therein.

10. The contention as raised at the
bar necessitates reference to the following
provisions. Section 34 of Arbitration and
Conciliation Acţ 1996 is quoted herein
below:

34.Application
for
setting
aside
arbitral award. "(1) Recourse to a Court
against an arbitral award may be made
only by an application for setting aside
such award in accordance with subsection (2) and subsection (3).

2. An arbitral award may be set aside
by the Court only if-

a. the party making the application
furnishes proof that-

i.a party was under some incapacity,
or

ii.the arbitration agreement is not
valid under the law to which the parties
have subjected it or, failing any indication
thereon, under the law for the time being
in force; or

iii.the party making the application
was not given proper notice of the
appointment of an arbitrator or of the
arbitral proceedings or was otherwise
unable to present his case; or

iv.the arbitral award deals with a
dispute not contemplated by or not falling
within the terms of the submission to
arbitration, or it contains decisions on
matters
beyond
the
scope
of
the
submission to arbitration:

Provided that, if the decisions on
matters submitted to arbitration can be
separated from those not so submitted,
only that part of the arbitral award which
contains
decisions
on
matters
not
submitted to arbitration may be set aside;
or

v. the composition of the arbitral
tribunal or the arbitral procedure was not
in accordance with the agreement of the
parties, unless such agreement was in
conflict with a provision of this Part from
which the parties cannot derogate, or,
failing such agreement, was not in
accordance with this Part; or

b. the Court finds that-

i. the subject-matter of the dispute is
not capable of settlement by arbitration
under the law for the time being in force,
or

ii.the arbitral award is in conflict
with the public policy of India.

Explanation.-Without prejudice to
the generality of sub-clause (ii), it is
hereby declared, for the avoidance of any
doubt, that an award is in conflict with the
public policy of India if the making of the
award was induced or affected by fraud or
corruption or was in violation of section
75 or section 81."

11. Reference may also be made to
certain provisions of National Highways
Act, 1956. Section 3G reads herein as
under:

3G.
Determination
of
amount
payable as compensation.

"(l) Where any land is acquired
under this Act, there shall be paid an
amount which shall be determined by an
order of the competent authority.

(2) Where the right of user or any
right in the nature of an easement on, any
land is acquired under this Act, there shall
be paid an amount to the owner and any
3 All] Sri Navin Tyagi & Anr. Vs. Union of India & Ors.
1669
other person whose right of enjoyment in
that land has been affected in any manner
whatsoever by reason of such acquisition
an amount calculated at ten per cent of the
amount determined under sub-section (1),
for that land.

(3) Before proceeding to determine
the amount under sub-section (1) or subsection (2), the competent authority shall
give a public notice published in two local
newspapers, one of which will be in a
vernacular language inviting claims from
all persons interested in the land to be
acquired.

(4) Such notice shall state the
particulars of the land and shall require all
persons interested in such land to appear
in person or by an agent or by a legal
practitioner referred to in sub-section (2)
of section 3C, before the competent
authority, at a time and place and to state
the nature of their respective interest in
such land.

(5) If the amount determined by the
competent authority under sub-section (1)
or sub-section (2) is not acceptable to
either of the parties, the amount shall, on
an application by either of the parties, be
determined by the arbitrator to be
appointed by the Central Government.

(6) Subject to the provisions of this
Act, the provisions of the Arbitration and
Conciliation Act, 1996 (26 of 1996) shall
apply to every arbitration under this Act.

(7) The competent authority or the
arbitrator while determining the amount
under sub-section (1) or sub-section (5),
as the case may be, shall take into
consideration -

(a) the market value of the land on
the date of publication of the notification
under section 3A;

(b) the damage, if any, sustained by
the person interested at the time of taking
possession of the land, by reason of the
severing of such land from other land;

(c) the damage, if any, sustained by
the person interested at the time of taking
possession of the land, by reason of the
acquisition injuriously affecting his other
immovable property in any manner, or his
earnings;

(d)if,
in
consequences
of
the
acquisition of the land, the person
interested is compelled to change his
residence or place of business, the
reasonable expenses, if any, incidental to
such change.

12.

While
raising
objection
regarding maintainability of the writ
petition,
learned
counsel
for
the
respondent has cited two Division Bench
judgements in Writ-C No. 58782 of 2010;
Rajesh Prasad And Others Vs. Union of
India And Others decided on 06.10.2010,
Writ C No. 38273 of 2013; Sudheer
Rawal Vs. Union of India And 3 Others
decided on 17.07.2013 and a Single
Bench judgement in Writ-C No. 27718 of
2013; Waseem Ahmad Khan Vs. State of
U.P. Thru D.M. And 3 Others decided on
16.05.2013,
wherein the
Court
has
dismissed the writ petitions on the ground
that the petitioners have alternative
remedy available to them under the
provisions of Section 34 of the Arbitration
and Conciliation Act, 1996 and, therefore,
held that the writ petitioner is not
maintainable.

13. Prima facie the objection as
taken by the learned counsel for the
respondent has much water. A perusal of
Section 3G sub clause (7) shows that for
determining the amount as payable under
Section 3G(7), certain parameters are to
be considered which have been classified
in Clause a,b,c,d. Meaning thereby the
1670 INDIAN LAW REPORTS ALLAHABAD SERIES
fixation of quantum of compensation is
not an exercise in abstract and the same is
governed by the parameters given in sub
Section (7) and Clause a,b,c,d, which
have to be kept in mind by the authority
concerned while determining the quantum
of
compensation.
The
quantum
of
compensation as such is a logical
conclusion of the procedure to be adopted
by the Arbitrator keeping in mind the
parameters as given under the Act of
1956, while determining the quantum and
thus, the grievance of the petitioners, if
any, is to the effect that the quantum of
compensation as determined is not in
accordance
with
the
parameters
as
prescribed under the Act, 1956 for the
said purpose.

14. At this stage, it is relevant to
consider the definition of public policy.
Section 34 sub clause (2)(b) of the Act,
1996 provides that an arbitral award may
be set aside by the Court only if it is in
conflict with the public policy of India.
Section 34(2)(b)(i) & (ii) of the Act 1996
are quoted herein as under:

i.the subject-matter of the dispute is
not capable of settlement by arbitration
under the law for the time being in force,
or

ii. the arbitral award is in conflict
with the public policy of India.

Explanation.-Without prejudice to
the generality of sub-clause (ii), it is
hereby declared, for the avoidance of any
doubt, that an award is in conflict with the
public policy of India if the making of the
award was induced or affected by fraud or
corruption or was in violation of section
75 or section 81.

15. Thus, it is apparent that if while
determining the quantum of compensation
under the provisions of National Highways
Authority Act, 1956, the Arbitrator has not
followed the procedure or has not considered
the parameters as given under Clause 3G sub
clause (7) and the parameters mentioned
therein, then that would be an award against
public policy.

16. It would be relevant here to
consider the definition of public policy as
has
been
expanded
in
the
recent
judgements of Hon'ble Supreme Court.
Needless to say that the definition of term
public policy has been expanded to a very
great extent and in this regard reference
may be made to the judgement rendered
in the case of Oil & Natural Gas
Corporation Ltd. Vs. Saw Pipes Ltd.;
(2003) 5 SCC 705. Relevant extact of the
said judgement is being quoted herein
below:

"16. The next clause which requires
interpretation is clause (ii) of sub-section
2(b) of Section 34 which inter alia
provides that the Court may set aside the
arbitral award if it is in conflict with the
'Public Policy of India'. The phrase 'Public
Policy of India' is not defined under the
Act. Hence, the said term is required to be
given meaning in context and also
considering the purpose of the section and
scheme of the Act. It has been repeatedly
stated by various authorities that the
expression 'public policy' does not admit
of precise definition and may vary from
generation to generation and from time to
time. Hence, the concept 'public policy' is
considered to be vague, susceptible to
narrow or wider meaning depending upon
the context in which it is used. Lacking
precedent the Court has to give its
meaning in the light and principles
underlying the Arbitration Act, Contract
Act and Constitutional provisions."
3 All] Sri Navin Tyagi & Anr. Vs. Union of India & Ors.
1671

"17. For this purpose, we would refer
to few decisions referred to by the learned
counsel for the parties. While dealing
with the concept of 'public policy, this
Court in Central Inland Water Transport
Corporation Limited and another v. Brojo
Nath Ganguly and another [(1986) 3 SCC
156] has observed thus: -

"92. The Indian Contract Act does
not define the expression "public policy"
or "opposed to public policy". From the
very nature of things, the expressions
"public policy", "opposed to public
policy", or "contrary to public policy" are
incapable of precise definition. Public
policy, however, is not the policy of a
particular government. It connotes some
matter which concerns the public good
and the public interest. The concept of
what is for the public good or in the
public interest or what would be injurious
or harmful to the public good or the
public interest has varied from time to
time. As new concepts take the place of
old,
transactions
which
were
once
considered against public policy are now
being upheld by the courts and similarly
where there has been a well recognized
head of public policy, the courts have not
shirked from extending it to the new
transactions and changed circumstances
and have at times not even flinched from
inventing a new head of public policy.
There are two schools of thought- "the
narrow view" school and "the broad view"
school. According to the former, courts
cannot create new heads of public policy
whereas the latter countenances judicial
law-making in this area. The adherents of
"the narrow view" school would not
invalidate a contract on the ground of
public policy unless that particular ground
had been well- established by authorities.
Hardly ever has the voice of the timorous
spoken more clearly and loudly than in
these words of Lord Davey in Janson v.
Driefontein Consolidated Gold Mines
Ltd. [(1902) AC 484, 500] : "Public
Policy
is
always
an
unsafe
and
treacherous ground for legal decision".
That was in the year 1902. Seventy-eight
years earlier, Burrough, J., in Richardson
v. Mellish [(1824) 2 Bing 229, 252]
described public policy as "a very unruly
horse, and when once you get astride it
you never know where it will carry you."
The Master of the Rolls, Lord Denning,
however, was not a man to shy away from
unmanageable horses and in words which
conjure up before our eyes the picture of
the young Alexander the Great taming
Bucephalus, he said in Enderby Town
Football Club Ltd. v. Football Assn. Ltd.
[(1971) Ch. 591, 606]; "With a good man
in the saddle, the unruly horse can be kept
in control. It can jump over obstacles".
Had the timorous always held the field,
not only the doctrine of public policy but
even the Common Law or the principles
of Equity would never have evolved. Sir
William Holdsworth in his "History of
English Law",

In fact, a body of law like the
common law, which has grown up
gradually with the growth of the nation,
necessarily
acquires
some
fixed
principles, and if it is to maintain these
principles it must be able, on the ground
of public policy or some other like
ground, to suppress practices which,
under ever new disguises, seek to weaken
or negative them.

It is thus clear that the principles
governing public policy must be and are
capable, on proper occasion, of expansion
or modification. Practices which were
considered perfectly normal at one time
have today become obnoxious and
oppressive to public conscience. If there
1672 INDIAN LAW REPORTS ALLAHABAD SERIES
is no head of public policy which covers a
case, then the court must in consonance
with public conscience and in keeping
with public good and public interest
declare such practice to be opposed to
public policy. Above all, in deciding any
case which may not be covered by
authority our courts have before them the
beacon light of the Preamble to the
Constitution. Lacking precedent, the court
can always be guided by that light and the
principles underlying the Fundamental
Rights and the Directive Principles
enshrined in our Constitution.

93. The normal rule of Common Law
has been that a party who seeks to enforce
an agreement which is opposed to public
policy will be non-suited. The case of A.
Schroeder Music Public Co. Ltd. v.
Macaulay
[(1974)
1
WLR
1308],
however, establishes that where a contract
is vitiated as being contrary to public
policy, the party adversely affected by it
can sue to have it declared void. The case
may be different where the purpose of the
contract is illegal or immoral. In Kedar
Nath Motani v. Prahlad Rai [(1960) 1
SCR 861], reversing the High Court and
restoring the decree passed by the trial
court declaring the appellants' title to the
lands in suit and directing the respondents
who were the appellants' benamidars to
restore possession, this Court, after
discussing the English and Indian law on
the subject, said.

The correct position in law, in our
opinion, is that what one has to see is
whether the illegality goes so much to the
root of the matter that the plaintiff cannot
bring his action without relying upon the
illegal transaction into which he had
entered. If the illegality be trivial or
venial, as stated by Williston and the
plaintiff is not required to rest his case
upon that illegality, then public policy
demands that the defendant should not be
allowed to take advantage of the position.
A strict view, of course, must be taken of
the plaintiff's conduct, and he should not
be allowed to circumvent the illegality by
resorting to some subterfuge or by
misstating the facts. If, however, the
matter is clear and the illegality is not
required to be pleaded or proved as part of
the cause of action and the plaintiff
recanted before the illegal purpose was
achieved, then, unless it be of such a gross
nature as to outrage the conscience of the
court, the plea of the defendant should not
prevail.

The types of contracts to which the
principle formulated by us above applies
are not contracts which are tainted with
illegality but are contracts which contain
terms
which
are
so
unfair
and
unreasonable
that
they
shock
the
conscience of the court. They are opposed
to public policy and require to be
adjudged void."

17. Therefore, in a case where the
validity of award is challenged there is no
necessity of giving a narrow meaning to
the term 'Public Policy of India' on the
contrary, a wider meaning is required to
be given so that the "patently illegal
award" passed by the Arbitrator Tribunal
would be set aside.

18. In the same judgement of
O.N.G.C. (Supra), the Apex Court has
further held in Paragraph Nos. 26, 27, 28,
31 which are quoted herein as under:

"26. It is true that Legislature has not
incorporated
exhaustive
grounds
for
challenging the award passed by the
arbitral tribunal or the ground on which
3 All] Sri Navin Tyagi & Anr. Vs. Union of India & Ors.
1673
appeal against the order of the Court
would be maintainable."

"27. On this aspect, eminent Jurist &
Senior
Advocate
Late
Mr.
Nani
Palkhivala while giving his opinion to
'Law of Arbitration and Conciliation' by
Justice Dr. B.P. Saraf and Justice S.M.
Jhunjhunuwala, noted thus:-

"I am extremely impressed by your
analytical approach in dealing with the
complex subject of arbitration which is
emerging
rapidly
as
an
alternate
mechanism for resolution of commercial
disputes. The new arbitration law has
been brought in parity with statutes in
other countries, though I wish that the
Indian law had a provision similar to
section 68 of the English Arbitration Act,
1996 which gives power to the Court to
correct errors of law in the award.

I welcome your view on the need for
giving the doctrine of "public policy" its
full amplitude. I particularly endorse your
comment that Courts of law may
intervene to permit challenge to an
arbitral award which is based on an
irregularity of a kind which has caused
substantial injustice.

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 right in
upholding the challenge to the award on
the ground that it is in conflict with the
public policy of India."

28.From this discussion it would be
clear that the phrase 'public policy of India' is
not required to be given a narrower meaning.
As stated earlier, the said term is susceptible
of narrower or wider meaning depending
upon the object and purpose of the
legislation. Hence, the award which is passed
in contravention of Sections 24, 28 or 31
could be set aside. In addition to Section 34,
Section 13(5) of the Act also provides that
constitution of the arbitral tribunal could also
be challenged by a party. Similarly, Section
16 provides that a party aggrieved by the
decision of the arbitral tribunal with regard to
its jurisdiction could challenge such arbitral
award under Section 34. In any case, it is for
the Parliament to provide for limited or wider
jurisdiction to the Court in case where award
is challenged. But in such cases, there is no
reason to give narrower meaning to the term
'public policy of India' as contended by
learned senior counsel Mr. Dave. In our
view, wider meaning is required to be given
so as to prevent frustration of legislation and
justice. This Court in Rattan Chand Hira
Chand v. Askar Nawaz Jung (Dead) By LRs
and others [(1991) 3 SCC 67], this Court
observed thus:-

"17. .. It cannot be disputed that a
contract which has a tendency to injure
public interests or public welfare is one
against public policy. What constitutes an
injury to public interests or welfare would
depend upon the times and climes. ... The
legislature often fails to keep pace with
the changing needs and values nor as it
realistic to expect that it will have
provided
for
all
contingencies
and
eventualities. It is, therefore, not only
necessary but obligatory on the courts to
step in to fill the lacuna. When courts
perform this function undoubtedly they
legislate judicially. But that is a kind of
legislation
which
stands
implicitly
delegated to them to further the object of
the legislation and to promote the goals of
the society. Or to put it negatively, to
prevent the frustration of the legislation or
perversion of the goals and values of the
society."

"31. Therefore, in our view, the
phrase 'Public Policy of India' used in
Section 34 in context is required to be
1674 INDIAN LAW REPORTS ALLAHABAD SERIES
given a wider meaning. It can be stated
that the concept of public policy connotes
some matter which concerns public good
and the public interest. What is for public
good or in public interest or what would
be injurious or harmful to the public good
or public interest has varied from time to
time. However, the award which is, on the
face of it, patently in violation of statutory
provisions cannot be said to be in public
interest. Such award/judgment/decision is
likely
to
adversely
affect
the
administration of justice. Hence, in our
view in addition to narrower meaning
given to the term 'public policy' in
Renusagar's case (supra), it is required to
be held that the award could be set aside
if it is patently illegal. Result would be -
award could be set aside if it is contrary
to: -

(a) fundamental policy of Indian law;
or

(b) the interest of India; or

(c) justice or morality, or

(d) in addition, if it is patently illegal.

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."

19. The aforesaid judgement has
been
followed
in
the
subsequent
judgement of Phulchand Exports Limited
Vs. O.O.O. Patriot; (2011) 10 SCC 300.

20. Then again in the case of
Hindustan Zinc Ltd. Vs. Friends Coal
Carbonisation;
(2006)
4
SCC
445,
observation of the Apex Court with regard
to public policy has been followed.

21. Reference may also be made to
the case of Delhi Development Authority
Vs. R.S. Sharma And Company, New
Delhi; (2008) 13 SCC 80, in which while
placing reliance on the case of O.N.G.C.
(Supra), the Court has observed as under.

"20 In Hindustan Zinc Ltd. vs.
Friends Coal Carbonisation, (2006) 4
SCC 445, the following principles laid
down in paragraphs 13 and 14 are
relevant for the disposal of the present
case:

13. This Court in ONGC Ltd. v. Saw
Pipes Ltd. (2003) 5 SCC 705 held that an
award contrary to substantive provisions
of law or the provisions of the Arbitration
and Conciliation Act, 1996 or against the
terms of the contract, would be patently
illegal, and if it affects the rights of the
parties, open to interference by the court
under Section 34(2) of the Act. This Court
observed: (SCC pp. 718 & 727-28, paras
13 & 31)

13. The question, therefore, which
requires consideration is--whether the award
could be set aside, if the Arbitral Tribunal
has not followed the mandatory procedure
prescribed under Sections 24, 28 or 31(3),
which affects the rights of the parties. Under
sub-section (1)(a) of Section 28 there is a
mandate to the Arbitral Tribunal to decide
the
dispute
in
accordance
with
the
substantive law for the time being in force in
India. Admittedly, substantive law would
include the Indian Contract Act, the Transfer
of Property Act and other such laws in force.
Suppose, if the award is passed in violation
of the provisions of the Transfer of Property
Act or in violation of the Indian Contract
Act, the question would be--whether such
award could be set aside. Similarly, under
sub-section (3), the Arbitral Tribunal is
directed to decide the dispute in accordance
3 All] Sri Navin Tyagi & Anr. Vs. Union of India & Ors.
1675
with the terms of the contract and also after
taking into account the usage of the trade
applicable to the transaction. If the Arbitral
Tribunal ignores the terms of the contract or
usage of the trade applicable to the
transaction, whether the said award could be
interfered. Similarly, if the award is a nonspeaking one and is in violation of Section
31(3), can such award be set aside? In our
view, reading Section 34 conjointly with
other provisions of the Act, it appears that the
legislative intent could not be that if the
award is in contravention of the provisions of
the Act, still however, it couldn't be set aside
by the court. If it is held that such award
could not be interfered, it would be contrary
to the basic concept of justice. If the Arbitral
Tribunal has not followed the mandatory
procedure prescribed under the Act, it would
mean that it has acted beyond its jurisdiction
and thereby the award would be patently
illegal which could be set aside under
Section 34.

31. ... in our view, the phrase `public
policy of India' used in Section 34 in context
is required to be given a wider meaning. It
can be stated that the concept of public
policy connotes some matter which concerns
public good and the public interest. What is
for public good or in public interest or what
would be injurious or harmful to the public
good or public interest has varied from time
to time. However, the award which is, on the
face of it, patently in violation of statutory
provisions cannot be said to be in public
interest. Such award/judgment/decision is
likely to adversely affect the administration
of justice. Hence, in our view in addition to
narrower meaning given to the term public
policy in Renusagar case, it is required to be
held that the award could be set aside if it is
patently illegal. The result would be --award
could be set aside if it is contrary to:

(a) fundamental policy of Indian law;
or

(b) the interest of India; or

(c) justice or morality; or

(d)in addition, if it is patently illegal.

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.

14.The High Court did not have the
benefit of the principles laid down in Saw
Pipes,
and
had
proceeded
on
the
assumption
that
award
cannot
be
interfered with even if it was contrary to
the terms of the contract. It went to the
extent of holding that contract terms
cannot even be looked into for examining
the correctness of the award. This Court
in Saw Pipes has made it clear that it is
open to the court to consider whether the
award is against the specific terms of
contract and if so, interfere with it on the
ground that it is patently illegal and
opposed to the public policy of India.

21. From the above decisions, the
following principles emerge:

(a) An Award, which is

(i) contrary to substantive provisions
of law ; or (ii)the provisions of the
Arbitration and Conciliation Act, 1996 ;
or

(iii)against
the
terms
of
the
respective contract ; or

(iv) patently illegal, or
1676 INDIAN LAW REPORTS ALLAHABAD SERIES

(v) prejudicial to the rights of the
parties, is open to interference by the
Court under Section 34(2) of the Act.

(b) Award could be set aside if it is
contrary to :

(a) fundamental policy of Indian
Law; or

(b) the interest of India; or

(c) justice or morality;

(c) The Award could also be set
aside if it is so unfair and unreasonable
that it shocks the conscience of the Court.

(d) It is open to the Court to consider
whether the Award is against the specific
terms of contract and if so, interfere with
it on the ground that it is patently illegal
and opposed to the public policy of India.

22. In Mcdermott International Inc.
Vs. Burn Standard Co. Ltd. And Others;
(2006) 11 SCC 181, definition of pubic
policy as defined in the case of O.N.G.C.
(Supra) was followed and the case was
affirmed.

23. As even in recent past in the case
of J.G. Engineers Private Ltd. Vs. Union
of India And Another; (2011) 5 SCC 758,
the Supreme Court has again adhered to
the definition of public policy as defined
in the case of O.N.G.C. (Supra).

24. Thus in view of what has been
discussed above and the consistent legal
position, the contention of the learned
counsel for the petitioners that they
cannot seek remedy under the provisions
of the Arbitration and Conciliation Act,
1996 is misconceived and fallacious and
accordingly rejected.

25. Petitioners may approach the
appropriate forum under the provisions of
Section 34 of the Arbitration and
Conciliation Act, 1996. The present writ
petition is thus not maintainable and
accordingly the same is dismissed.

26. No order as to costs.
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