The Bombay High Court has affirmed that courts cannot interfere with international commercial arbitration awards, even if they appear to be perverse, under Section 34 of the Arbitration and Conciliation Act. This ruling was made in the case Oil and Natural Gas Corp Ltd v. Sapura Fabrication SDN BHD, where Justice Sandeep Marne dismissed Oil and Natural Gas Corporation’s (ONGC) challenge to a multi-million dollar arbitral award in favor of Malaysian contractor Sapura, now known as VTEB Fabrication.
Justice Marne acknowledged ONGC’s contention that the arbitral tribunal might have overlooked crucial correspondence and meeting minutes in allowing one of Sapura’s claims. However, he clarified that the court’s jurisdiction does not extend to reviewing allegations of patent illegality in international arbitration awards. The judge emphasized that the Arbitration Act does not permit challenges to such awards on the grounds of patent illegality, including claims of perversity.
The court referenced Section 34(2A) of the Arbitration Act, which allows for domestic awards to be set aside if marred by patent illegality. However, this provision does not apply to international commercial arbitrations. Justice Marne cited the Supreme Court’s interpretation in Ssangyong Engg & Construction Ltd. v. NHAI, which confirmed that patent illegality cannot be invoked to challenge international arbitration awards.
Since Sapura is a Malaysian entity, the arbitration with ONGC was classified as an international commercial arbitration, despite the arbitration seat being in Mumbai. Justice Marne noted that other grounds exist for challenging international awards under Section 34, but none were applicable in this case, leading to the dismissal of ONGC’s petition.
The case involved a contract for the redevelopment of ONGC’s Mumbai High South Field. ONGC had contracted Sapura in 2015 for extensive offshore works, which were completed on schedule. Payments exceeding $214 million, €7.81 million, and ₹344.42 crore were made by ONGC under the contract. Post-completion, Sapura submitted six claims for additional work, of which ONGC partially admitted two and rejected four.
More Read
The matter was referred to arbitration, and in May 2024, a three-member tribunal led by former Chief Justice AP Shah issued a unanimous award. The tribunal rejected one claim, partially allowed two, and fully allowed three claims, directing ONGC to pay over $24 million, along with post-award interest and nearly ₹1.88 crore in costs.
ONGC’s subsequent appeal under Section 34 was rejected by Justice Marne, who found no basis to interfere with the tribunal’s conclusions on five of the six claims or the monetary awards. With ONGC having already deposited the full awarded sum and interest during the proceedings, the dismissal permits Sapura to request the release of these funds.
ONGC was represented by senior advocate Zubin Behramkamdin, with advocates Sana Khan, Sakshi Kashyap, Arundhati Korale, and Paras Gupta from Jurisperitus Mumbai. Advocates Naresh Thacker, Alok Jain, Samarth Saxena, Ria Garg, and Vanshika Kainya appeared for Sapura.
