Judicial Decisions on Public Policy

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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 c...

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...ment. It connotes some matter which concerns the public good or public interest. Doctrine of 'Public Policy' is somewhat open textured and flexible and this flexibility has been the cause of judicial censure of the doctrine. The concept of ‘Public Policy’ denotes what is good for the public or in public interest or what would be injurious or harmful from time to time. New concept of Public Policy takes the place of the old. Public Policy of India does not cover public policy of the country, mere contravention of law would not attract bar of public policy, but the award must be contrary to ‘Fundamental policy of Indian Law’ or ‘The interest of India’ or ‘ Justice or Morality’ or ‘Patently illegal’. Principles governing what would be 'Public Policy' will have to be construed on each occasion on facts of each case and with the law as applicable at the relevant time.

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