Arbitral Tribunal Followed 'Unusual Process, Unknown to Law': Bombay High Court Sets Aside Award Against HPCL

The Bombay High Court has set aside a Rs 19.82 crore arbitral award against state-run Hindustan Petroleum Corporation Ltd., holding that the arbitral tribunal followed an “unusual process, unknown to law” and wrongly prevented the company from raising a defence that struck at the validity of the contract itself.

Justice Sandeep V Marne said the arbitrator shut out HPCL from raising objections based on suppression and fraud after those facts came to light.

This, the court said, was against the most basic notions of justice.

“It is clearly against the most basic notions of justice to disallow a party to raise the defence of validity of contract after it discovers the act of suppression,” the court observed, adding that the resulting award was “patently illegal.”

The dispute arose from a 2021 tender floated by HPCL for civil and structural works at its ethanol bio-refinery project in Bathinda. A joint venture between Om Construction and Nice Projects Ltd. emerged as the successful bidder.

At the time of bidding, however, Nice Projects Ltd., which was the lead consortium partner, was already undergoing corporate insolvency resolution proceedings. Despite this, it submitted a declaration stating that it was not facing any insolvency process. HPCL terminated the contract in August 2022, citing delays.

The joint venture then invoked arbitration. In June 2024, the arbitrator awarded Rs 19.82 crore in its favour, along with interest and directions to release security deposits.

Challenging the award, HPCL argued that the contract itself was secured by fraud since the insolvency proceedings were deliberately concealed, something expressly barred by the tender conditions.

It also contended that the arbitrator refused to allow amendments to its defence after the suppression came to light. The joint venture argued that the insolvency status was disclosed later during the arbitrator's appointment and that HPCL could not raise fresh grounds at a late stage.

Rejecting this, the court held that Nice Projects Ltd had made a “blatantly false declaration” and that the concealment went to the root of the contract.

"In my view, therefore, the issue of suppression of initiation of CIRP against Nice Projects Ltd. having effect on validity of contract goes to the root of the matter and was one of the most vital issues which ought to have been adjudicated by the Arbitral Tribunal. Since suppression and misrepresentation about pendency of CIRP against the lead consortium member was writ large, the Tribunal has egregiously and patently erred in refusing to decide the said issue by not permitting Petitioner to amend the pleadings", it said.

It also stressed that “it is not for a litigant to decide how much to disclose.” Holding that there was no part of the award that could be saved, the High Court set it aside in full, while leaving it open to the parties to initiate fresh arbitration.