A) ABSTRACT / HEADNOTE

The Supreme Court dealt with the enforceability of an arbitral award addressing whether the award conflicted with the public policy of India or involved patent illegality under the Arbitration and Conciliation Act, 1996 (s. 34). Key issues involved the binding liability of the holding company under the Group of Companies doctrine, limitation periods for principal claims and counterclaims, and adherence to contractual terms. The Court examined whether an award could be deemed perverse due to alleged inconsistencies in its reasoning or application of the law. The decision emphasized a restricted judicial approach in reviewing arbitral awards, aligning with the principles of arbitral autonomy.

Keywords: Arbitration, Public Policy, Patent Illegality, Limitation, Joint Liability.

B) CASE DETAILS

• i) Judgement Cause Title: OPG Power Generation Private Limited v. Enexio Power Cooling Solutions India Private Limited & Anr.

• ii) Case Number: Civil Appeal Nos. 3981-3982 of 2024.

• iii) Judgement Date: September 20, 2024.

• iv) Court: Supreme Court of India.

• v) Quorum: Dr. Dhananjaya Y. Chandrachud (CJI), J.B. Pardiwala, Manoj Misra, JJ.

• vi) Author: Manoj Misra, J.

• vii) Citation: [2024] 9 S.C.R. 490 : 2024 INSC 711.

• viii) Legal Provisions Involved:

  • Arbitration and Conciliation Act, 1996 – Sections 34, 37, and 23(2A).
  • Limitation Act, 1963 – Articles 14, 18, 55, and Section 18.

• ix) Judgments Overruled by the Case: Not specified.

• x) Case Related to Law Subjects: Arbitration Law, Contract Law, Limitation.

C) INTRODUCTION AND BACKGROUND OF JUDGEMENT

The dispute arose between OPG Power Generation Private Limited (OPG) and Enexio Power Cooling Solutions India Private Limited (Enexio) over outstanding payments related to a contract for the supply, erection, and commissioning of an Air-Cooled Condenser (ACC) unit. OPG challenged the arbitral award on grounds of public policy and patent illegality, questioning the tribunal’s findings on liability, limitation, and counterclaims. Enexio contended the award was justified and in accordance with the law.

D) FACTS OF THE CASE

1. OPG initiated a composite tender for the 160 MW Coal-Based Thermal Power Project at Gummidipoondi, Tamil Nadu, which Enexio secured.
2. Separate purchase orders were issued by Gita Power (holding company of OPG) and later confirmed by OPG.
3. The contract included detailed arbitration and payment clauses. Enexio claimed Rs. 6.75 crore as unpaid dues.
4. OPG issued debit notes for liquidated damages and customs duties, reducing its liability.
5. Enexio invoked arbitration, seeking outstanding payments, interest, and damages. OPG filed counterclaims for repair costs.

E) LEGAL ISSUES RAISED

1. Conflict with Public Policy of India: Whether the award contravenes the public policy of India under Section 34(2)(b)(ii).
2. Patent Illegality: Whether the award suffered from apparent illegality under Section 34(2-A).
3. Group of Companies Doctrine: Applicability to bind Gita Power jointly and severally.
4. Limitation: Whether claims and counterclaims were within the permissible period under the Limitation Act.
5. Consistency in Reasoning: If the tribunal applied different standards to claims and counterclaims.
6. Perverse Reasoning: Alleged contradictions in findings and disregard of material evidence.

F) PETITIONER/APPELLANT’S ARGUMENTS

1. Limitation: Claims were barred under Articles 14, 18, and 55 of the Limitation Act. Counterclaims were wrongly rejected on this ground.
2. Yardstick for Claims: Tribunal applied inconsistent reasoning for claims and counterclaims, violating fairness principles.
3. Public Policy: Award’s reasoning was perverse, violating the fundamental policy of Indian law.
4. Customs Duty: Ignored liability of Enexio for customs duty under the contract.

G) RESPONDENT’S ARGUMENTS

1. Group of Companies Doctrine: Joint liability of Gita Power was justified, as it actively participated in contract negotiations.
2. Extended Limitation: Acknowledgement in a 2018 meeting extended limitation under Section 18 of the Limitation Act.
3. Tribunal’s Reasoning: Findings were reasonable and based on the evidence.
4. No Perversity: Alleged contradictions were not material and did not render the award irrational.

H) JUDGEMENT

• a. Ratio Decidendi:

  1. The Group of Companies doctrine applied, holding Gita Power and OPG jointly liable.
  2. Claims for outstanding amounts were within limitation due to valid acknowledgment under Section 18.
  3. Counterclaims were time-barred as no acknowledgment supported them.
  4. The award was consistent with fundamental principles and did not violate public policy.

• b. Obiter Dicta:

  • Limitations under Section 34: Interference should only occur if the award shocks judicial conscience or violates natural justice.

• c. Guidelines:

  1. Acknowledgment of liability can extend limitation under Section 18.
  2. Perversity in reasoning requires evidence of illogical or arbitrary conclusions.

I) CONCLUSION & COMMENTS

The judgment reinforces arbitration’s autonomy while limiting judicial interference. It clarifies doctrines like joint liability and limitation in arbitration, promoting efficiency and fairness in commercial disputes.

J) REFERENCES

1. Cases:

   • Ssangyong Engg. & Construction Co. Ltd. v. NHAI, (2019) 15 SCC 131.
   • Associate Builders v. DDA, (2015) 3 SCC 49.
   • Bharat Sanchar Nigam Ltd. v. Nortel Networks Pvt. Ltd., (2021) 5 SCC 738.

2. Statutes:

   • Arbitration and Conciliation Act, 1996.
   • Limitation Act, 1963.