Introduction  

This case revolves around the concept of Patent illegality and the scope of intervention of the courts under Section 34 and Section 37 of the Arbitration and Conciliation Act, 1996.   

Facts 

• In this case, the appellant and the defendant came to an agreement to run a power generation plant in the state. 
• By mutual agreement the appellant performed some technical operations with the power plant which resulted in high cost of production of electricity due to which the State of Goa was considering stoppage of further power supply from the appellant. 
• The appellant proposed to use the different method for producing power supply to the government at a fixed rate till the agreement's conclusion and the State agreed. 
• The Appellate filed a suit before Joint Electricity Regulatory Commission against the defendant when the payment become due and even after several notices the payment was not made by the state.  
• The Commission referred the matter to Arbitration where arbitral award was passed in favor of the appellant and defendant was ordered to pay the dues along with the interest. 
• The defendant challenged the award and filed a petition before the Bombay High Court under Section 34 and Section 37 of the Arbitration & Conciliation Act (ArC) where the court decreed by partly setting aside the award and confirmed the rest. 
• The appellant, in furtherance to the decision of the High Court filed a Special Leave Appeal to the Supreme Court. 

Issue Involved  

• Whether an arbitral award can be challenged on the ground of Patent illegality under Section 34 & Section 37 of ArC, 1996? 
• Whether reassessment is a part of setting aside of award under Section 34 of ArC Act, 1996? 

Observations 

• The Supreme Court, after making thorough interpretation of the ArC Act, 1996 inferred that an award to be patently illegal must have discrepancies of such nature which affects the public policy of the Nation. 
• It was further added by the court that patent illegality can be claimed only if it appears prima facie on the award and not by reassessment of evidence and reconsideration of every factual matrix of the case. 
• The Supreme Court also clarified that neither the High Court nor the commssion has the jurisdiction to reassess the Arbitral Award, it only has the power to set aside the award based on the grounds given in the act.  

Conclusion 

• The Supreme Court allowed the appeal of the appellant and confirmed the arbitral award passed by the tribunal.