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Arbitration – Scope of enquiry under Section 45 to not include enquiry of legality and validity of substantive contract


7 October, 2016

The Hon’ble Supreme Court of India in its case of Sasan Power Limited v. North American Coal Corporation India Private Limited on 24 -8-2016 has held that the scope of enquiry under  Section 45 of the Arbitration and Conciliation Act, 1996, is confined only to the question – whether the arbitration agreement is “null and void, inoperative or incapable of being performed” and not on the legality and validity of the substantive contract.

Submissions that some portion of the agreement were inconsistent with some provisions of the Indian Contract Act, 1872, and Section 23 of the Indian Contract Act (as being contrary to public policy), thus invalidating the  arbitration agreement , were rejected by the Court observing that arbitration agreement is independent from the substantive contract.
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