by Rishi Kumar.A question that arbitration practitioners are grappling with after the decision of the Supreme Court in Oil and Natural Gas Corporation Ltd. vs. Western Geco International Ltd (Western Geco case) is, whether the principle of Wednesbury reasonableness would apply to judicial orders or should it only be applied in the context of executive or administrative action?.In the Western Geco case, the Supreme Court has held that adjudication by arbitrators must confirm to the principles of Wednesbury reasonableness. Admonishing a three member arbitral tribunal comprising of former Chief Justice’s of India for miscarriage of justice, it held that, a decision which is perverse or so irrational that no reasonable person would have arrived at the same will not be sustained in a court of law..The Wednesbury Principle was formulated in 1947 by Lord Greene M.R. in Associated Provincial Picture House Ltd. vs. Wednesbury Corporation in the following words: “.It is true the discretion must be exercised reasonably. Now what does that mean? Lawyers familiar with the phraseology commonly used in relation to exercise of statutory discretions often use the word ‘unreasonable’ in a rather comprehensive sense. It has frequently been used and is frequently used as a general description of the things that must not be done. For instance, a person entrusted with the discretion must, so to speak, direct himself properly in law. .He must call his own attention to the matters which he is bound to consider. He must exclude from his consideration matters which are irrelevant to what he has to consider. .If he does not obey those rules, he may truly be said, and often said, to be acting ‘unreasonably’. Similarly, there may be something so absurd that no sensible person could ever dream that it lay within the powers of the authority.”.In Datar’s Commentary on the Constitution of India, the, jurist and practitioner of constitution law states that this principle is often cited by the Supreme Court of India, in cases where there is no need to rely on it at all. He further observes that, this principle should always be applied only in the context of executive or administrative action and this principle can be usefully applied in writ petitions under Article 226 (Power of High Courts to issue certain writs) to challenge unreasonable executive action. .Additionally, the Wednesbury principle is one facet of arbitrariness which is now treated as part of Article 14 (Equality before law). Therefore, the Wednesbury principle can be applied on a stand-alone basis in deciding the reasonableness of executive action and would not apply to judicial orders as has been attempted by the Supreme Court in the aforesaid matter..What is more glaring is that, the Supreme Court while admitting the contention of Western Geco, that none of the grounds enumerated under Section 34(2)(a) (application for setting aside arbitral award) of the 1996, Act were set up either before the High Court to assail the award or even before them, rejected the same. It further disregarded the contention that a Court cannot, in the absence of any compelling reason, interfere with the view taken by the arbitrators as if it was sitting in appeal over the award made by the arbitral tribunal..In coming to its aforesaid conclusions, the Supreme Court relied upon its own decision in ONGC Ltd. vs. Saw Pipes Ltd. and held that an award could be set aside on the ground of violating the “public policy of India” if it is contrary to (a) fundamental policy of Indian law; or (b) the interest of India; or (c) justice or morality; or (d) in addition, if it is patently illegal..The Supreme Court laid stress upon “fundamental policy of Indian law” and without meaning to exhaustively enumerate the purport of the said expression held that there are three distinct and fundamental juristic principles that are to be followed, one of which, it held was that the decision is not perverse or so irrational that no reasonable person would have arrived at the same, will not be sustained in a court of law..Perversity or irrationality of decisions is tested on the touchstone of the Wednesbury principle of reasonableness. Thus it held that the arbitral tribunal violated the above principles and thereby violated the “fundamental policy of Indian law”..Another important aspect which the Supreme Court failed to take into consideration in the aforesaid decision is the recommendations of the Law Commission of India in its Report No. 246 (Amendments to the Arbitration and Conciliation Act, 1996), wherein certain restriction in the scope of “public policy” in both Sections 34 and 48 were recommended after much deliberations and taking into consideration the judgments of the Supreme Court in ONGC vs. Saw Pipes Ltd, Renusagar Power Plant Co Ltd v General Electric Co, and Shri Lal Mahal v Progetto Grano Spa..George Washington had wisely quoted that, “Precedents are dangerous things”. One precedent creates another. They soon accumulate and constitute law. What yesterday was fact; today is a doctrine..One of the major considerations of enacting the 1996 Act was to curtail delays in the arbitral process with minimal interference/supervisory role of courts and that every final award is enforced in the same manner as if it was a decree of the court..Hence, it would serve well for the arbitral regime in India if the Supreme Court would keep the above objective in mind while dealing with petitions challenging any arbitral award..Rishi Kumar is an advocate practicing at the Madras High Court.
by Rishi Kumar.A question that arbitration practitioners are grappling with after the decision of the Supreme Court in Oil and Natural Gas Corporation Ltd. vs. Western Geco International Ltd (Western Geco case) is, whether the principle of Wednesbury reasonableness would apply to judicial orders or should it only be applied in the context of executive or administrative action?.In the Western Geco case, the Supreme Court has held that adjudication by arbitrators must confirm to the principles of Wednesbury reasonableness. Admonishing a three member arbitral tribunal comprising of former Chief Justice’s of India for miscarriage of justice, it held that, a decision which is perverse or so irrational that no reasonable person would have arrived at the same will not be sustained in a court of law..The Wednesbury Principle was formulated in 1947 by Lord Greene M.R. in Associated Provincial Picture House Ltd. vs. Wednesbury Corporation in the following words: “.It is true the discretion must be exercised reasonably. Now what does that mean? Lawyers familiar with the phraseology commonly used in relation to exercise of statutory discretions often use the word ‘unreasonable’ in a rather comprehensive sense. It has frequently been used and is frequently used as a general description of the things that must not be done. For instance, a person entrusted with the discretion must, so to speak, direct himself properly in law. .He must call his own attention to the matters which he is bound to consider. He must exclude from his consideration matters which are irrelevant to what he has to consider. .If he does not obey those rules, he may truly be said, and often said, to be acting ‘unreasonably’. Similarly, there may be something so absurd that no sensible person could ever dream that it lay within the powers of the authority.”.In Datar’s Commentary on the Constitution of India, the, jurist and practitioner of constitution law states that this principle is often cited by the Supreme Court of India, in cases where there is no need to rely on it at all. He further observes that, this principle should always be applied only in the context of executive or administrative action and this principle can be usefully applied in writ petitions under Article 226 (Power of High Courts to issue certain writs) to challenge unreasonable executive action. .Additionally, the Wednesbury principle is one facet of arbitrariness which is now treated as part of Article 14 (Equality before law). Therefore, the Wednesbury principle can be applied on a stand-alone basis in deciding the reasonableness of executive action and would not apply to judicial orders as has been attempted by the Supreme Court in the aforesaid matter..What is more glaring is that, the Supreme Court while admitting the contention of Western Geco, that none of the grounds enumerated under Section 34(2)(a) (application for setting aside arbitral award) of the 1996, Act were set up either before the High Court to assail the award or even before them, rejected the same. It further disregarded the contention that a Court cannot, in the absence of any compelling reason, interfere with the view taken by the arbitrators as if it was sitting in appeal over the award made by the arbitral tribunal..In coming to its aforesaid conclusions, the Supreme Court relied upon its own decision in ONGC Ltd. vs. Saw Pipes Ltd. and held that an award could be set aside on the ground of violating the “public policy of India” if it is contrary to (a) fundamental policy of Indian law; or (b) the interest of India; or (c) justice or morality; or (d) in addition, if it is patently illegal..The Supreme Court laid stress upon “fundamental policy of Indian law” and without meaning to exhaustively enumerate the purport of the said expression held that there are three distinct and fundamental juristic principles that are to be followed, one of which, it held was that the decision is not perverse or so irrational that no reasonable person would have arrived at the same, will not be sustained in a court of law..Perversity or irrationality of decisions is tested on the touchstone of the Wednesbury principle of reasonableness. Thus it held that the arbitral tribunal violated the above principles and thereby violated the “fundamental policy of Indian law”..Another important aspect which the Supreme Court failed to take into consideration in the aforesaid decision is the recommendations of the Law Commission of India in its Report No. 246 (Amendments to the Arbitration and Conciliation Act, 1996), wherein certain restriction in the scope of “public policy” in both Sections 34 and 48 were recommended after much deliberations and taking into consideration the judgments of the Supreme Court in ONGC vs. Saw Pipes Ltd, Renusagar Power Plant Co Ltd v General Electric Co, and Shri Lal Mahal v Progetto Grano Spa..George Washington had wisely quoted that, “Precedents are dangerous things”. One precedent creates another. They soon accumulate and constitute law. What yesterday was fact; today is a doctrine..One of the major considerations of enacting the 1996 Act was to curtail delays in the arbitral process with minimal interference/supervisory role of courts and that every final award is enforced in the same manner as if it was a decree of the court..Hence, it would serve well for the arbitral regime in India if the Supreme Court would keep the above objective in mind while dealing with petitions challenging any arbitral award..Rishi Kumar is an advocate practicing at the Madras High Court.
