Bombay HC sets aside arbitral award for 'patent illegality' in stockbroker dispute

A stockbroker registered with NSE and BSE challenged, under Section 34 of the Arbitration and Conciliation Act, 1996, an appellate arbitral award that had upheld an earlier award directing it to pay about Rs. 15.92 lakh to a client over a dispute arising from their Member-Client Agreement. The Bombay High Court recalled the settled position, drawn from the Supreme Court's rulings in Associate Builders v. Delhi Development Authority and Ssangyong Engineering & Construction Co. Ltd. v. NHAI, that an award may be set aside for 'patent illegality' under Section 34(2A) only where the illegality appears on the face of the award itself, and that a mere contravention of a statute unconnected to public policy cannot be smuggled in through this ground; a court cannot reappraise evidence or act as a court of appeal. Patent illegality is nonetheless made out where an arbitral tribunal returns no finding at all on contentious issues that go to the root of the dispute.

Examining the appellate award, the Court found several such material issues left unaddressed, held that this amounted to patent illegality warranting interference, and set the appellate award aside. It directed release of any amount deposited in court and left the parties free to arbitrate the dispute afresh.