JUDICIAL DECISIONS ON PUBLIC POLICY
In the case of Renusagar Power Plant Co. Ltd v. General Electric Co., (Renusagar’s Case), the Supreme Court while construing the term “Public Policy” in Section 7(1)(b)(ii) of Foreign Awards (Recognition and Enforcement) Act, 1961 (Foreign Awards Act), applied the principles of private international law and held that an award would be contrary to public policy if such enforcement would be contrary to (i) fundamental policy of Indian law; or (ii) the interests of India; or (iii) justice or morality and cannot be set aside on merits.
In Oil and Natural Gas Corporation Ltd. v. SAW Pipes Ltd., the aggrieved party challenged an adverse arbitral award because the arbitral tribunal had incorrectly applied the law of liquidated damages to the case. In holding that the challenged award was legally flawed, the Court held that, in addition to the interpretation of public policy in Renusagar’s Case, a domestic arbitral award may be set aside if it contravenes the “provisions of the [1996 Arbitration and Conciliation] Act or any other substantive law governing the parties or is against the terms of the contract.” The holding of the Supreme Court in SAW Pipes added “Patent Illegality” as a fourth public policy consideration to the three considerations previously enumerated in Renusagar’s case.
In Gherulal Parakh v. Mahadeodas Maiyev, the Supreme Court observed that the ‘Public Policy’ or the policy of the law is an illusive concept. It has been described as ‘untrustworthy guide’, variable quantity’, ‘uncertain one’, ‘unruly horse’ etc. The primary duty of a court of law is to enforce a promise which the parties have made and to uphold the sanctity of contracts which form the basis of society, but in certain cases, the court may relieve them of their duty on a rule founded on public policy. The doctrine of public policy is extended not only to harmful cases but also to harmful tendencies; it is only a branch of common law, and just like any other branch of common law. It is governed by precedents. The principle has been crystallized under different heads although it is permissible for courts to expound and apply them to different situations, it should only be invoked in clear and incontestable cases of harm to the public policy, through the heads are not closed and though theoretically it may be permissible to evolve a new head under exceptional circumstance of a changing world, it is advisable in the interest of stability of society not to make any attempt to discover new heads.
In Central Inland Water Corp. Ltd. v. Brojo Nath Ganguly, the Supreme Court promoted a wider stance by interpreting the term public policy on the pillars of public conscience, public good and public interest.
In Shri Hans Enterprises v. Air Port Authority of India, it was held that Award not based on true construction of the terms and conditions of the contract between the parties and correct appreciation of the material in as much as he has...