Patent illegality in arbitral awards: ignoring uncontroverted expert evidence and internal contradiction justified interference with the rejected claim.

An arbitral award may be set aside under Section 34 of the Arbitration and Conciliation Act, 1996 where it ignores uncontroverted relevant evidence or contains a facial contradiction in its findings. The Madras HC found that the award did not consider the claimant's expert evidence, although it had not been cross-examined, and still rejected the claim. It also noted an internal inconsistency because the award recorded that neither party had breached the contract, yet sustained termination on breach. The award was therefore treated as vitiated by perversity, irrationality and patent illegality, and was interfered with to the extent it rejected the contractor's claim.

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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 on the grounds of conflict with public policy of India and patent illegality, particularly for ignoring the uncontroverted expert evidence and for sustaining termination despite a finding that neither party had violated the contract.

Analysis: The award was challenged under Section 34(2)(b)(ii) and Section 34(2-A) of the Arbitration and Conciliation Act, 1996. The Court held that while Section 34 does not permit a review on merits, interference is justified where relevant material is ignored or where the award suffers from patent illegality apparent on its face. The expert evidence adduced by the claimant was not cross-examined, yet the award recorded no consideration of that evidence and nonetheless rejected the claim. The Court also found an internal contradiction in the award, because it recorded that neither party had violated the contract, but still sustained termination on the alleged ground of breach.

Conclusion: The award was held to be vitiated by perversity, irrationality, and patent illegality, and therefore liable to be set aside insofar as it rejected the contractor's claim.

Final Conclusion: The original petition succeeded in part, and the arbitral award was interfered with to the extent of the rejected claim, with no order as to costs.

Ratio Decidendi: An arbitral award under Section 34 may be set aside where it ignores relevant uncontroverted material and contains a facial contradiction between its findings and conclusion, because such an award is contrary to the fundamental policy of Indian law and amounts to patent illegality.

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