Patent illegality and fraud findings rendered the arbitral award unsustainable and liable to be set aside.

Exclusion of material pre-contractual negotiations and internally inconsistent findings on termination, force majeure, and contractual termination clauses were treated as patent illegality because they went to the root of the arbitral award. The award was also found contrary to the fundamental policy of Indian law and basic notions of justice and morality in light of concurrent findings of fraud in winding-up proceedings, affirmed by the Supreme Court, showing that the underlying commercial relationship was tainted by fraud. On that basis, the arbitral award was held unsustainable and was set aside.

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Issues: Whether the arbitral award was liable to be set aside under Section 34 of the Arbitration and Conciliation Act, 1996 for patent illegality, conflict with the public policy of India, and the effect of the findings of fraud recorded in the winding-up proceedings.

Analysis: The award was examined on the basis that the arbitral tribunal had excluded material pre-contractual negotiations and had reached conclusions that were internally inconsistent, including on the nature of the termination, force majeure, and the applicability of the contractual termination clauses. The Court held that the exclusion of relevant evidence and the contradictory findings amounted to patent illegality going to the root of the award. The Court also relied on the concurrent findings of fraud returned in the winding-up proceedings, which had been affirmed by the Supreme Court, to hold that the underlying commercial relationship itself was tainted by fraud. In that view, the award could not be sustained as it was contrary to the fundamental policy of Indian law and the basic notions of justice and morality.

Conclusion: The arbitral award was held unsustainable and was set aside in favour of the petitioner.

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