Arbitration award review: undisclosed material breached fair hearing rights, and amended Section 34 governed post-2015 challenges.

The amended Section 34 regime applied to applications filed on or after 23.10.2015, even if the arbitral proceedings had begun earlier, and public policy review remained confined to the narrower Renusagar standard with patent illegality limited to domestic awards. An award could be set aside where the tribunal relied on undisclosed government guidelines, because reliance on material not put to the parties denied a fair opportunity to meet the case and breached the right to present the case. On scope of submission and public policy, a mere alternative contractual interpretation was insufficient for interference, but the majority award was found to have imposed a unilateral alteration inconsistent with the agreed formula, justifying interference on the public policy ground.

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Issues: (i) Whether the amended Section 34 of the Arbitration and Conciliation Act, 1996 applied to a petition filed after 23.10.2015 although the arbitral proceedings had commenced earlier; (ii) Whether the arbitral award could be interfered with because the tribunal relied on government guidelines that were not produced in evidence, thereby violating the party's right to present its case; (iii) Whether the majority award was liable to be set aside on the grounds of public policy of India and decision on matters beyond the scope of submission to arbitration.

Issue (i): Whether the amended Section 34 of the Arbitration and Conciliation Act, 1996 applied to a petition filed after 23.10.2015 although the arbitral proceedings had commenced earlier.

Analysis: The amended regime was held to govern Section 34 applications filed on or after 23.10.2015. The Court held that the 2015 Amendment substantially narrowed the public policy ground, confined it to the Renusagar understanding, excluded the wider Western Geco expansion, and introduced patent illegality only for domestic awards. The date of commencement of arbitration proceedings did not prevent application of the amended Section 34 to the court application.

Conclusion: The amended Section 34 applied to the challenge petition.

Issue (ii): Whether the arbitral award could be interfered with because the tribunal relied on government guidelines that were not produced in evidence, thereby violating the party's right to present its case.

Analysis: Reliance on undisclosed material deprived the appellant of a fair opportunity to meet the basis of the award. The tribunal referred to guidelines that were not on record and were not communicated to the parties, so the appellant could not address their applicability or interpretation. This amounted to breach of the right to present the case and of the principle that all material relied upon must be disclosed to both sides.

Conclusion: The award was liable to be set aside under Section 34(2)(a)(iii).

Issue (iii): Whether the majority award was liable to be set aside on the grounds of public policy of India and decision on matters beyond the scope of submission to arbitration.

Analysis: The Court held that a mere interpretative error or a possible view on contract construction would not justify interference under Section 34(2)(a)(iv). However, on the facts, the majority award had effectively imposed a unilateral circular and substituted the agreed formula, which offended basic notions of justice. The Court treated the public policy challenge narrowly, but found that the facts disclosed an exceptional case where enforcement of the majority award would shock the conscience because a unilateral contractual alteration had been foisted on the appellant.

Conclusion: The award was liable to be interfered with on the public policy ground, while Section 34(2)(a)(iv) was not attracted.

Final Conclusion: The impugned judgments and the majority arbitral award were set aside, and the minority award was directed to be given effect to with interest.

Ratio Decidendi: Under the amended Arbitration and Conciliation Act, 1996, a court may set aside an arbitral award where the tribunal relies on material not disclosed to the parties and thereby denies a fair opportunity to meet the case, but it will not interfere merely because another contractual interpretation is possible; public policy review remains confined to exceptional cases that shock the conscience of the court.

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