Patent Illegality Ground Unavailable to Challenge Central Awards in International Commercial Arbitrations Under Section 34.

The Petitioner (ONGC) awarded a lump-sum contract to the Respondent (Sapura) for the redevelopment of the Mumbai High South Field

Upon timely completion of the work, Sapura raised six claims for additional works/change orders. ONGC partially admitted two claims (Claims 1 & 2) but disputed the applicable rates and rejected the remaining four claims (Claims 3–6)

A three-membered Arbitral Tribunal delivered a unanimous Award on May 4, 2024, rejecting one claim, partially allowing two, and fully allowing three

ONGC challenged the Award under Section 34 of the Arbitration & Conciliation Act, 1996, primarily arguing that the contract was on a turnkey basis and the works fell within the original scope or were performed at the contractor's risk

1. Whether the ground of "patent illegality" under Section 34(2A) is available to challenge an award arising out of an International Commercial Arbitration

2. Whether the Arbitral Tribunal’s interpretation of contractual rates (Annexure-C) over "actuals" for Claims 1 and 2 was plausible

3. Whether the instructions regarding IDDS (Claim 4) and change in installation philosophy (Claim 3) constituted "Change Orders" beyond the scope of a lump-sum contract

4. Whether the grant of standby charges for the SK900 vessel (Claim 5) was perverse due to alleged ignorance of vital evidence

The court applied Section 34 of the Arbitration and Conciliation Act, 1996, specifically Section 34(2A) which excludes "patent illegality" as a ground for setting aside awards in International Commercial Arbitrations

It relied on Ssangyong Engineering & Construction Co. Ltd. v. NHAI, which clarified that "public policy of India" is restricted to the "fundamental policy of Indian law" and excludes "perversity" or "patent illegality" for international awards

The court further referenced Associate Builders v. DDA and PSA Sical Terminals (P) Ltd. v. V.O. Chidambranar Port Trust regarding the limited scope of judicial interference in contractual interpretation by arbitrators

The Court first determined that as an International Commercial Arbitration, the Award could not be challenged on grounds of "patent illegality" or "perversity"

Regarding Claims 1 and 2, the Court analyzed Clause 8.1.1.4 and Annexure-C, finding the Tribunal's decision to apply contractually agreed unit rates—rather than rates from a different (B-127) contract—to be a plausible interpretation

For Claim 3 (SCA Platform) and Claim 4 (IDDS), the Court noted ONGC’s own admissions in meeting minutes that certain works (like deck extensions) were "not envisaged in contract scope," thereby validating the Tribunal's finding of a "Change Order"

On Claim 5 (Standby Charges), although the Court observed that the Tribunal appeared to have ignored specific correspondence (letter dated Jan 13, 2017) regarding SIMOPs, it held that such "perversity" constitutes "patent illegality" under Section 34(2A), which is expressly unavailable for international awards. Thus, the Court was statutorily barred from interfering even if the finding appeared erroneous

(ii) the Tribunal's interpretation of contractual rates and additional works was plausible and based on evidence/admissions; and (iii) even if a finding is allegedly perverse or ignores evidence, it cannot be set aside in an international award under the current restrictive legal framework of Section 34. No costs were awarded for the petition