Public Policy of India includes State Law ( Arbitration Law)

Public Policy of India is one of the ground to challenge the Arbitration Award under section 34 of the Arbitration Act.Award can be challenged in a court of law if it is in conflict with the Public Policy of India.Public Policy in India has not been defined in the Arbitration Act.

In Gherulal Parekh V. Mahadeodas Maiya ( AIR 1959 SC 781), the Apex Court gave a narrow interpretation of Public Policy. It was held that within public policy of India, lay certain determinate specified heads and that it would not be prudent to begin search for new heads. Subsequently in Central Inland Water Transport Corp. Ltd. Vs. Brojo Nath Ganguly, the term public policy was interpreted in wider stance which is on the pillars of public conscience, public good and public interest. From Renusagar Power Co.Ltd. Vs. General Electric Co. to ONGC Vs Saw Pipes and Balco Case Apex court has interpreted Public Policy.     

In a recent Judgment Supreme Court of India upheld that that Public Policy of India also includes the State Law. While hearing the matter of M/s. Lion Engineering Consultants Vs. State of M.P. & Ors. In civil appeal nos. 8984-8985 of 2017 a division bench comprising of HMJ Adarsh Kumar Goel, HMJ Rohington Fali Nariman and HMJ UU Lalit upheld that the public policy of India refers to law in force in India whether State Law or Central Law. Hon’ble Court further observed that the law laid down in MSP Infrastructure Ltd. Vs. Madhya Pradesh Road Development Corporation ( 2015) 13 SC 713 contrary to the same, do not lay down correct law.

Apex court observed that we do not agree with the observation that the Public policy of India does not refer to a State Law and refers only to an All India Law.

Earlier in MSP infrastructure Ltd. Case, it was held that intention of providing that the award should not be in conflict with the public policy in India is referable to the public policy of India as a whole and not merely the public policy of an individual state. Where the question arises out on the context between an action under a State Law and an action under a Central Law, the term public policy of India must necessarily be understood as being referable to the Policy of the Union. This observation is overruled in M/s. Lion Engineering Consultant case.    

It was further upheld that there is no bar to plea of jurisdiction being raised by way of an objection under Section 34 of the Act even if no such objection was raised under section 16 of Arbitration and conciliation Act 1996.  

Azeez Nazar Sabri
LLM(Business Law)

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