While hearing the case of an appeal filed by PSA Sical Terminals Pvt. Ltd. against the order of Madras High Court, the Supreme Court dismissed the said appeal while observing that an arbitral award granted while ignoring or overlooking vital evidence or rewriting the contract would be considered perverse and is thus liable to be set aside under Section 34 of the Arbitration and Conciliation Act, 1996 on the grounds of “patent illegality”.
The bench headed by Justices RF Nariman and BR Gavai held that a finding of a court in regard to an arbitral award which is based on no evidence at all or one that overlooks some evidences in reaching a conclusion is perverse. In case of rewriting of a contract for the parties the court would cause a breach of fundamental principles of justice and thus can be set aside for the perverse nature of the award.
While referring to its own judgment in the case Associate Builders v. Delhi Development Authority and others, the court held that the scope of interference would be limited to the grounds mentioned under section 34 of the Arbitration and Conciliation Act, 1996. It observed that a judicial interference upon the merits of a case is not permissible.
The Court finally held that such an award would come under the scope of patent illegality and is thus rightly set aside by the High Court.