Failure to adjudicate an issue that goes to the heart of the matter leading to an arbitral award contrary to public policy cannot be sustained: Delhi HC

The Delhi High Court observed that failure to adjudicate an issue that goes to the heart of the matter makes the arbitral award violative of the public policy of the country as it amounts to violation of the principles of natural justice.

In that context, the Bank of Judge Chandra Dhari Singh noted that, “Considering mandatory national laws is important to ensure that a ruling does not conflict with the country’s public policy and can therefore be made enforceable. The mandatory national laws include the basic concept of morality and justice, therefore the courts must determine whether a ruling is in accordance with the stated principles as contained in public policy.

In the same vein, it was also noted that “no opportunity was given to address an argument that goes to the heart of the matter or findings based on evidence that goes behind the party’s back and results in a denial of justice to the party’s detriment; the same would amount to violation of the principle of natural justice.”

Lawyer Ankur Mittal And Counsel Raushal Kumar appeared for the petitioner, while Advisor Navin Kumartogether with others, appeared before the respondent.

The petitioner, a government undertaking responsible for construction of national highways, has invited tenders for construction of a highway bypass in Madhya Pradesh. The respondent, a Korean construction company, won the bid and entered into a contract with the petitioner. Disputes arose over work completion and payments, leading to arbitration. The defendant has now submitted a draft final invoice for payment. The petitioner expressed concerns about the completion of the work and requested clarification. The defendant secured compliance but later initiated arbitration. The tribunal found in favor of the respondent, deemed a payment certificate final, and ordered the petitioner to make the remaining payments. The petitioner contested this decision, questioning its legality and compliance with public policy.

The High Court noted that while the Tribunal appreciated the arguments raised by the petitioner regarding the discrepancies and fallacies in the certificate, its failure to consider the same resulted in a violation of the rights of the petitioner. The said situation was therefore a clear violation of the principles of natural justice.

It was further noted that, “the petitioner has raised a case to prove that the impugned award is illegal as it is contrary to the public policy of this country. There are several reasons for this. Firstly, the Tribunal erred in ordering the payment of the amount due to the court ordered.” on the basis of the same despite the fact that the certificate dated August 31, 2014 was not a certificate of final payment, a conclusion contrary to his own findings. Secondly, non-adjudication of the contentions raised by the petitioner is a clear violation of the principles of nature and thirdly, the contrary opinions of the same Tribunal in a similar factual scenario creates a bizarre situation and the same cannot be allowed under law .

The Court ruled that the ruling was contrary to established legal position and therefore contrary to public order in the country. The request was granted and the dispute was referred back to the Arbitral Tribunal for re-adjudication.

appearances:

Submitter: Advisors Ankur Mittal and Raushal Kumar

Respondent: Advises Navin Kumar, Rashmeet Kaur, Aarti Mahto, Bhagya Ajith

Title of Cause: National Highway Authority of India vs. MS Ssangyong Engineering & Construction Co. Ltd.

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