International Commercial Arbitral Awards cannot be set aside on the ground of patent illegality.

The Petitioner (SAIL) and a Consortium involving the Respondent (NCC Ltd.) entered into a Contract dated 16.10.2007 for a Blast Furnace Complex project

The Contract stipulated a Minimum Guaranteed Tax Credit (MGC) of ₹103.85 crores, later apportioned specifically to NCC and POSCO

During execution, the indirect tax regime changed, leading to a reduction in actual tax credits generated

Believing the MGC was an absolute obligation, SAIL withheld ₹16,91,03,984/- from payments due to NCC to cover the alleged shortfall

NCC invoked ICC arbitration in 2021

The Sole Arbitrator, Mr. Andrew G. Moran KC, rendered an Award on 08.01.2024, holding that the MGC was not an absolute obligation independent of tax variations and directed SAIL to refund the withheld amount with interest

SAIL challenged the Award under Section 34 of the Arbitration and Conciliation Act, 1996

The Court applied Section 34 of the Arbitration and Conciliation Act, 1996, specifically the restricted grounds for challenging an International Commercial Arbitration award

It relied on Ssangyong Engineering & Construction Co. Ltd. v. NHAI, which established that "patent illegality" is not a ground for setting aside an ICA award

The court further cited OPG Power Generation (P) Ltd. v. Enexio Power Cooling Solutions, clarifying that "public policy of India" is narrowly construed post-2015 to include only fundamental policy of Indian law, justice, or morality, and strictly prohibits a review on the merits of the dispute

The Court observed that since the seat was in India and the arbitration involved a foreign entity (making it an ICA), Section 34(2A) expressly excluded "patent illegality" as a ground for challenge

The Tribunal had conducted a detailed factual and linguistic analysis of Article 2.1 of the Contract and Clause 14.5.6 of the GCC, concluding that NCC's obligation to provide documentation was predicated on SAIL's primary obligation to pay the full Contract Price, which included the tax components

The Tribunal found that because tax rates reduced, the total tax actually paid by SAIL decreased; thus, the "minimum guaranteed" figure had to be adjusted proportionately under Clause 14.6.2 of the GCC

The High Court reasoned that it cannot substitute the Tribunal’s interpretation with its own so long as the Tribunal’s view is "plausible" and "commercially reasonable"

The Court held that SAIL’s petition was essentially an attempt to seek an appellate review on merits, which is forbidden under the Ssangyong and Associate Builders standards

The Court held that no grounds under Section 34(2)(b)(ii) were made out as there was no breach of natural justice or fundamental policy. Consequently, the challenge to Claim No. 1 failed, and the Arbitral Award dated 08.01.2024 was upheld