Patent Illegality Ground Not Available In International Commercial Arbitration: Bombay High Court Upholds Arbitral Award Against ONGC

The Bench while hearing ONGC’s petition under Section 34 of the Arbitration Act, noted that the arbitration qualified as an international commercial arbitration under Section 2(1)(f) of the Act since the respondent was a Malaysian company and the dispute arose from a commercial legal relationship.

Justice Sandeep V. Marne observed, “The Legislature has consciously excluded the ground of patent illegality in relation of commercial international arbitrations. The Legislative objective is to give maximum possible latitude to the decision of the arbitral tribunal in an international commercial arbitration. This Court will have to respect the legislative objective of minimal interference with awards made in international commercial arbitrations…”.

“…Therefore, though Claim No. 5 appears to have been awarded by ignoring evidence on record and the Petitioner may be in a position to demonstrate patent illegality in award of Claim No. 5, hands of this Court are bound by the language of Section 34(2A) of the Arbitration Act. Had this been a domestic arbitration, the ground of patent illegality would have been available for the Petitioner by demonstrating perversity in the findings recorded in the Award qua Claim No. 5”, the Bench further noted.

Senior Advocate Zubin Behramkamdin appeared for the petitioner and Advocate Naresh Thacker appeared for the respondent.

The dispute arose after Sapura completed ONGC’s redevelopment project involving installation of offshore platforms, laying of submarine pipelines, submarine cables and other offshore works. Although ONGC had paid substantial amounts after completion of the contract, Sapura raised six claims alleging additional work/change orders. The arbitral tribunal allowed three claims in full, partly allowed two claims and rejected one claim. ONGC challenged the award, alleging errors in interpretation of contract terms and perversity in findings.

Rejecting ONGC’s challenge, the High Court held that Section 34(2A), which permits setting aside an award on the ground of patent illegality appearing on the face of the award, specifically excludes international commercial arbitrations. The Court observed that while patent illegality remains available for domestic arbitrations, it cannot be used to seek reappreciation of evidence or challenge contractual interpretations in international commercial arbitrations.

The Court further noted that perversity in an arbitral award is a facet of patent illegality and therefore cannot independently become a ground for interference in an international commercial arbitration. It relied upon the Supreme Court’s decisions, including Ssangyong Engineering & Construction Co. Ltd. v. National Highways Authority of India (2019) 15 SCC 131, to hold that courts must maintain a narrow scope of review while examining such awards.

Applying this principle, the Court upheld the tribunal’s findings on multiple claims, including disputes concerning additional offshore works, contractual rates and variation claims. It held that the arbitral tribunal’s interpretation of the contract was a possible and plausible view and did not warrant interference under Section 34.

Accordingly, the Bombay High Court dismissed ONGC’s arbitration petition and upheld the award passed in favour of Sapura Fabrication.

Cause Title: Oil and Natural Gas Corporation Limited v. Sapura Fabrication SDN BHD (Neutral Citation: 2026:BHC-OS:12621)

Appearances:

Petitioner: Zubin Behramkamdin, Senior Advocate with Sana Khan, Sakshi Kashyap, Arundhati Korale and Paras Gupta i/b Jurisperitus Mumbai

Respondent: Naresh Thacker with Alok Jain, Samarth Saxena, Ria Garg and Vanshika Kainya, Advocates.

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