The Hon'ble Supreme Court of India ("SC") while deciding the appeal of State of Chhattisgarh & Anr. Vs. M/s Sal Udyog Private Limited [Civil Appeal No. 4353 of 2010] on 8th November 2021 held that a party is not barred from raising additional grounds for setting aside an arbitration award under section 37 of the Arbitration and Conciliation Act, 1996 ("A&C Act"), merely because the said ground was not raised before the district court to set aside an arbitration award under S. 34 of the A&C Act.

It was observed that the plea of waiver taken against the Appellant-State on the ground that since it did not raise such an objection in the S. 34 petition it is now estopped from raising the said ground in the appeal preferred under S. 37 of the A&C Act, would not be available to the respondent-Company. The SC buttressed its decision by referring to the language used in S. 34(2A) of the A&C Act which empowers the Court to set aside an award if it finds that the same is vitiated by patent illegality appearing on the face of the same. 

The SC while partly allowing the Appeal observed that "failure on the part of the learned  Sole Arbitrator to decide in accordance with the  terms of the contract governing the parties, would certainly attract the "patent illegality ground", as the said oversight amounts to gross contravention of Section 28(3) of the 1996 Act, that enjoins the Arbitral Tribunal to take into account the terms of the contract while making an Award. The  said 'patent illegality' is not only apparent on the face of the Award, it goes to the very root of the matter and deserves interference."

Once the appellant-State had taken such a ground in the S. 37 petition and it was duly noted in the impugned judgment, the High Court ought to have interfered by resorting to S. 34(2A) of the A&C Act, a provision  which would be equally available for application to an appealable order under S. 37 as it is to a petition filed under S. 34 of the A&C Act.

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