The approaches of a judge, while interpreting a statute, have always been under the scanner of different interest groups and claims. The recent decision of the Supreme Court of India in DDA v. R.S. Sharma (2008) (Sharma), gives another opportunity of flood back. The law relating to arbitration and conciliation in India has a specific locale. The legislative history ostensibly portrays a trend of facilitation of trade and commerce by opening up another front for party autonomy. It allows the parties to settle their disputes in accordance with the rules of game they stipulate, as long as it is within the prescribed limits of the specific law, the Arbitration and Conciliation Act, 1996 (Act), being the latest. The aeonian baddie of delay and complexities, the courts, are given only limited scope to meddle with party’s dominion. Nevertheless, it is argued by many, that the courts have found methods to extend its province into arbitration within the fertile grounds of public policy, using the techniques of interpretation. This piece is an attempt to understand the impact of interpretation of public policy from Oil and Natural Gas Corporation v. Saw Pipes (2003) (Saw Pipes) to Sharma.
Adieu to the default rule of interpretation- as search for intention of the legislature- has been bid long back by the textualists and dynamists. The pragmatist lot of the judges sail back and forth between intention and purpose of the legislature/legislation to buttress their interpretatative endeavours. They acquire legitimacy by being an extension of legislative enterprise in interpreting the law to fend off the Blackstonian prudence, when they overstep the text of the law.
In Saw Pipes and Sharma, court crosses its ways with an arbitrator, who disregards the terms of the contract, and in Saw Pipes allegedly disregarding the provisions of substantive law , the Indian Contract Act. Court, in Saw Pipes, poses the problem to themselves as to their jurisdiction under Section 34 of the Act to set aside an award that violate the provisions of the Act, the terms of the contract, substantive law governing the parties and which is patently illegal. The text of Section 34 does not offer any support to the conclusion which is so obvious for the court that it became essential for them to construct the text. The court is bemused as to whether it is a case of scrivener's error by drafters in assigning the legislature's intentions to print or a case where the absurd result give the court license to traverse afar the text to search for the intent, purpose and beyond.
Justified by the absurdity of the result in reading Section 34 as it is, the court set sail to explore the land of intent and purpose. The charted course in Bhatia International v. Bu lk Trading S.A (2002), that when the text offers an absurd result which could not have been the legislature’s intent, it is the courts duty to correct it, might have emboldened the court to embark. For the Saw Pipes court, intention of the legislature augmented by the concept of justice, empowers them to take a position that if the award is in contravention of the provisions of the Act which created the tribunal, the same could be set aside by the court. May be it would be unwise to allow the creation to grow beyond the creator.
The court’s reasoning is simple here, “the jurisdiction or the power of the arbitral tribunal [which for the court in this case is same as the procedure] is prescribed under the Act and if the award is de hors the said provisions, it would be, on the face of it, illegal” and “if the award is contrary to the substantive provisions of law or the provisions of the Act or against the terms of the contract, it would be patently illegal, which could be interfered under Section 34," and this in no doubt will be the legislative intent. The court hastens to add that “such failure of procedure should be patent affecting the rights of the parties.” Having said this, the trained mind reminds the judge to locate this position within the four corners of the statute to claim legitimacy.
The abundant land of ‘public policy’, without doubt, is the appropriate place to anchor. The court traces the two schools of thought in the understanding of public policy and prefers the moorings of the “broad view”. The heads of public policy has already been attempted to be detailed by an earlier court (Renusagar v. General Electric Ltd, 1994), (Renusagar). The broad view understanding advices the Saw Pipes court that “if there is no head of public policy which covers a case, then the court must in consonance with public conscience and in keeping with public good and public interest declare such practice to be opposed to public policy.” When the narrow approach would make certain provisions of the Act nugatory, a wider meaning that will allow the court to set aside a “patently illegal award” should be the preferred one. Court has no doubt that a wider approach would be the one which suits the object and purpose of the Act. The court therefore justifies its position on the interpretative approaches of intention and purpose.
The court also adorns the mantle of dynamic approach of interpretation when it recognises its role to legislate judicially. Support from an earlier decision which held that it is obligatory for the courts to step in and legislate as this role ‘is implicitly delegated to them to further the object of the legislation and to promote the goals of the society’ comes handy (Rattan Chand Hira Chand v. Askar Nawaz Jung, 1991). The Saw Pipes court gives a brand new Section 34 through interpretation.
The issue then is how the court has reached the intention, object and purpose of the Act as ascribing a wider meaning for public policy specific to this Act. The counsel for respondent tried to attract the attention of the court as to what informed the legislature in the framing of the 1996 Act, the UNCITRAL Model Law. This would suggest minimum intervention by courts and non extension of public policy ground. Giving no reason as to non appreciation of this position, the favour of the court falls for the wish of Mr. Nani Palkhivala, who desired a similar clause as that of ‘Section 68 of the English Arbitration Act, 1996, which gives power to the court to correct errors of law in the award.’ Palkiwala had also extended a nod of approval to the work of Justice B.P. Saraf and Justice S.M. Jhunjhunuwala about their take on public policy that ‘gives its effect the full amplitude’. One cannot but recall the textualists’ criticism of dynamic approach that, while pressing in service the external aids, what the dynamists do is to ‘look over the crowd and call for their friends’.
The holding of the court rests on the principle that the concept of ‘public policy connotes matters of public good and public interests’. An “award which is, on the face of it, patently in violation of statutory provisions cannot be said to be in public interest. Such award/judgment/decision is likely to adversely affect the administration of justice.” The court thereby adds another ground to the Renusagar, patent illegality, leaving it for the later courts to interpret the expression 'patent illegality' and to determine its ambit.
The Sharma decision relies on the illegality of the award to set it aside, illegality arising out of traversing beyond the terms of the contract. Sharma gives the benefit of summary of principles that permits setting aside an arbitral award. It generously adds few more grounds to the Saw Pipes and misinterprets a ground in Saw Pipes. The patent illegality in Saw Pipes is qualified in the following terms:
If the award is contrary to the substantive provisions of law or the provisions of the Act or against the terms of the contract, it would be patently illegal, which could be interfered under Section 34. However, such failure of procedure should be patent affecting the rights of the parties.
In Sharma, the facets of patent illegality becomes independent grounds with a potential of having its own extensive domain, free from the limitation on patent illegality that Saw Pipes attempted to make in the following words:
"Illegality must go to the root of the matter and if the illegality is of trivial nature it cannot be held that award is against the public policy … Such [illegal] award is opposed to public policy and is required to be adjudged void."
As a fourth ground, which allows interference under Section 34 (2), Sharma adds; “(iv) prejudicial to the rights of the parties.” Here, a qualification to patent illegality transforms into a ground. The rationale offered for broader understanding of public policy in Saw Pipes and interpretation of Saw Pipes in Sharma are befitting illustrations of the existing gaps between text, intention, purpose and dynamism in interpretation.
The gap between the text and what the interpreter construct as intention and purpose of the text is a trap for future judges. They need to be cautious in understanding the authorial meaning and the constructed meaning of the interpreter and the gaps between. The future judges should understand the context and reason of the earlier interpretation in constructing a meaning for the text when they accept, reject or extend that meaning.
The challenge is to balance two approaches. To find out (i) whether it is possible to accomplish what the legislature has intended by following what they said, to place it at the minimum (for textualists to a certain extent and intentionalists), and (ii) to interpret every law to be the best law it can be (for the purposivists and dynamists), as suggested by Dworkin.
It is a grace that Indian judiciary never stops to amuse the practitioner, academic and the practical academic.
 The court gives two illustrations. One, a case wherein there is a specific provision in the contract that for delayed payment of the amount due and payable, no interest would be payable, still however, if the Arbitrator has passed an award granting interest, it would be against the terms of the contract and thereby against the provision of Section 28(3) of the Act which specifically provides that "arbitral tribunal shall decide in accordance with the terms of the contract”. Second, if the award is patently against the statutory provisions of substantive law which is in force in India , or is passed without giving an opportunity of hearing to the parties as provided under Section 24 , or without giving any reason in a case where parties have not agreed that no reasons are to be recorded, it would be against the statutory provisions. In all such cases, the award is required to be set aside on the ground of 'patent illegality'.