Bombay High Court Clarifies Narrow Scope for Challenging International Arbitral Awards: Why "Patent Illegality" and "Perversity" Grounds are Unavailable Even if Vital Evidence is Ignored by the Tribunal.

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Case: Oil and Natural Gas Corporation Ltd v. Sapura Fabrication SDN BHD
Court: Bombay High Court
Date: 09-06-2026
Law: Arbitration and Conciliation Act, Indian Contract Act.

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In the high-stakes world of offshore oil and gas redevelopment, contracts are often as deep and complex as the wells they describe. When disputes arise over multi-million dollar "Change Orders" and "Marine Spreads", the legal battleground usually shifts to arbitration. However, a recent judgment by the Bombay High Court in Oil and Natural Gas Corporation Limited v. Sapura Fabrication SDN BHD offers a masterclass in the limits of judicial interference. For legal practitioners and corporate entities, the ruling serves as a stark reminder: in international commercial arbitration, the "finality" of an award is nearly absolute, even when a tribunal might have overlooked key evidence.

The "Patent Illegality" Shield is Not Universal

The most significant takeaway from this judgment is the reinforcement of the boundary between domestic and international commercial arbitration. Under Section 34(2A) of the Arbitration and Conciliation Act, 1996, a domestic award can be set aside if it is vitiated by "patent illegality" appearing on the face of the award. However, the Court clarified that this ground is strictly unavailable for challenging international commercial arbitrations. Since the respondent was a Malaysian entity, the arbitration was classified as international, effectively shielding the award from any challenge based on a mere erroneous application of law or a patent error.

Perversity is No Longer a "Public Policy" Backdoor

Historically, lawyers often used the "Public Policy of India" ground as a broad umbrella to challenge awards on the basis of perversity or irrationality. The Court, drawing on the landmark Ssangyong Engineering precedent, noted that the 2015 Amendment has significantly narrowed this path. Perversity—such as a finding based on no evidence—is now categorized under "patent illegality". Because patent illegality is excluded for international awards, a "perverse" finding in an international arbitration cannot be challenged under the guise of being "against public policy".

The "Lump Sum" Contract is Not an Absolute Bar

ONGC argued that because the contract was on a "turnkey" or "lump sum" basis, the contractor was disentitled from claiming additional costs for work like the Intruder Detection cum Deterrence System (IDDS). The Court rejected this, upholding the Tribunal's view that even in lump sum contracts, specific instructions that exceed the original "scope of work" constitute a "Change Order".

"The moment it is found that a particular work is over and above the scope of contract, the same would amount to a Change Order."

This underscores that "lump sum" does not mean "infinite work" for a fixed price.

"As Per Actuals" Does Not Mean Discretionary Rates

A fascinating contractual dispute arose over the interpretation of the phrase "as per actuals" in a letter authorizing additional work. ONGC contended this allowed them to apply rates from a different, cheaper contract (the B-127 contract). The Court upheld the Tribunal’s interpretation that "as per actuals" simply means the work will be measured volumetrically and paid at the contractually agreed rates for that specific project, rather than giving the employer a license to import lower rates from unrelated agreements.

Judicial Hands are Tied, Even When Evidence is Ignored

Perhaps the most counter-intuitive aspect of the judgment relates to Claim No. 5, involving standby charges. ONGC demonstrated that the Tribunal had seemingly ignored a crucial letter dated 13 January 2017, which could have proven that the contractor was aware of the site constraints. In a domestic setting, this "ignorance of vital evidence" would constitute perversity and lead to the award being set aside. However, because this was an international arbitration, the Court held it was powerless to intervene.

"This Court will have to respect the legislative objective of minimal interference... the award cannot be set aside merely because the arbitral tribunal has ignored some evidence while making the Award."

This judgment reinforces India’s pro-arbitration stance, signaling to the global community that Indian courts will respect the autonomy of international arbitral tribunals. While this provides certainty for the prevailing party, it serves as a warning to litigants: in the international arena, your best (and often only) chance at justice is within the arbitral room itself, as the doors of the High Court are largely locked against appeals on merits.