OTHER ASPECTS OF THE CASE EXPLORED IN BRIEF

The Supreme Court in Saw Pipes confined the expansion of public policy to domestic awards as
an earlier larger bench decision of the court in case of Renusagar Power Co. vs General
Electricals1 had construed narrowly this ground as limited to fundamental policy of Indian Law.

The Saw pipes judgment has come in for sharp criticisms from several quarters. Read literally,
the judgment sets the clock back to the old position where an award could be challenged on merit
and indeed renders the court as a court of appeal. The judgment was followed by two judge
bench of the Supreme Court in Centro trade Minerals & Metals Inc. vs. Hindustan Copper ltd2
and it was held that “the doctrine of Public Policy must be held to be ground for setting aside as
arbitration agreement and consequently an award.”

The judgment of ONGC v. Saw Pipes has now been affirmed by a three judge bench in the case
of Shri Lal Mahal Ltd. vs. Progetto Grano Spa.3 In para 26 of this judgment, the court held that
in so far as proceedings for setting aside an award under section 34 is concerned, the principles
laid down in Saw pipes would govern the scope of proceedings foe setting aside an award under
section 34 is concerned, the principles laid down in the Saw Pipes would govern the scope of
proceedings.

It also finds support in comments of two eminent commentators Michael Hwang and Amy Lai in
the following language4:

“Public policy is a ground for challenge has been historically viewed with much skepticism,
often for good reason. While we do not advocate that it be used as catch-all provision to be
applied whenever convenient, it should be available for attacking awards that are fundamentally
flawed. To allow such awards to stand, uncorrected would undermine confidence in the integrity
of the arbitral process. A supervisory or enforcing court should not second- guess a tribunal, and
the risk of arbitral error is inherent in the acceptance of the process. However, parties do not

1
(1994) Supp 1 SCC 644 at p. 671, para 33 :AIR 1994 SC 860: 1994 (2) Arb LR 405 (SC)
2
2006 (3) Arb LR 201 SC: (2006) 11 SCC 245: [2006] Supp. (2) SCR 146.
3
2013 (3) Arb LR 1: 2013 (8) SCALE 489
4
Michael Hwang and Amy Lai, Do Egrigious Errors Amount to a breach of Public Policy! The Journal of the
Chartered Institute of Arbitrators, Vol. 71, (February 2005), pp. 1-24

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bargain for a perverse and manifest error that calls out for correction. To ignore such errors
would be to accept that the arbitral process can condone miscarriage of justice.”

Some judicial decisions have tried to reign in this effect of Saw Pipes. One instance of this is the
Supreme Court decision in case of McDermott International vs. Burn Standard Co Ltd.5 Where
the court somewhat read down Saw Pipes.

It held that- “1996 Act makes provision for supervisory roles of courts, for the review of the
arbitral award only to ensure fairness. Intervention of the court is envisaged. In few
circumstances only, like in case of fraud or bias by the arbitrators, violation of natural justices
etc. The court cannot correct the errors of the arbitrators. It can only quash the award leaving the
parties to begin the arbitration again if it is desired. So, the scheme of this provision aims at
keeping the supervisory role of the court at minimum level and this can be justified as parties to
the agreement make a consciousness decision to exclude the court’s jurisdiction by opting for
arbitration as they prefer the expediency and finality offered by it.”

Commenting on Saw Pipes it held – “We are not unmindful that the decision of this court in
ONGC had invited considerable adverse comments but the correctness or otherwise of the said
decision is not in question before us. It is only for a larger bench to consider the correctness or
otherwise of the said decision the said decision is binding on us and has been followed in many
cases.”

5
(2006) 11 SCC 181

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