Fraud and public policy in arbitration can justify challenge to an award, but proof and issue estoppel remain contested.

An arbitral award may be vulnerable under Section 34 where fraud, manipulation of accounts, or concealment of material facts is shown to have a causative link with the dispute and to offend public policy. On one view, such conduct affected the award and issue estoppel did not bar the civil challenge; on the other, the alleged fraud and public policy grounds were not proved sufficiently to justify setting aside the award. The Bench therefore recorded divergent conclusions, with no clear majority on the substantive challenge.

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Issues: Whether the arbitral award could be set aside under Section 34 on the ground of fraud, misrepresentation, suppression of material facts and conflict with public policy, and whether the High Court could reject the challenge on the basis of issue estoppel.

Analysis: One opinion held that the admitted manipulation of accounts and concealment of material facts by the concerned company officer had a causative link with the arbitral dispute, that such conduct amounted to fraud affecting the award, that the award was contrary to public policy, and that issue estoppel had no application to these civil proceedings. The other opinion held that the alleged fraud and FEMA/public policy grounds were not substantiated in a manner sufficient to sustain setting aside of the award, and that the High Court was right in restoring the award.

Conclusion: The Bench recorded differing conclusions on the merits of the challenge to the award and on the effect of issue estoppel.

Final Conclusion: The matter resulted in a split decision with no clear majority on the substantive challenge to the award.

Ratio Decidendi: Where an arbitral award is shown, on the facts and applicable law, to have been induced or affected by fraud with a causative link to the dispute, it may be vulnerable under the public policy ground under Section 34; issue estoppel does not ordinarily bar such a civil challenge.

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