At the time of a conflict with Public Policy, the award passed by the arbitral tribunal can be set aside and challenged on the ground that the award is against the public policy of the country in which it is entitled to be enforced. Every state reserve for itself, as a matter of public policy, what might perhaps be called state monopoly over certain types of dispute.[1] Public Policy is defined in Black’s Law Dictionary as ‘principles and standards regarded by the Legislature or by the courts as being of fundamental concern to the state and the whole of society’. It is categorised as a substantive ground for challenging the arbitral award.[2]

There are conflicting views with regard to the consideration of public policy are a ground for challenging an arbitral award. The international view of the term “public policy” is that it must be construed narrowly. This was reflected in the Delhi High Court decision in Glencore Grain Rotterdam B.V. v. Shivnath Rai Harnarain (India) Co[3]. The concept of international public policy (‘ordre public international’) has been developed by some jurists. It is also embodied in the New French Code of Civil Procedure. This Code allows an international arbitral award to be set aside ‘if the recognition or execution is contrary to international public policy’.[4]

Recently, challenge of arbitral award on the ground of public policy has undergone a drastic change. Earlier, it was laid down in ONGC case[5], that where the validity of award is challenged, the phrase ‘public policy of India’ used in Section 34 was required to be given a wider meaning because the concept of public policy connotes some matter which concerns public good and public interest.[6] In  Phulchand case,[7] the Supreme Court held that “patent illegality” under the term “public policy of India” needs to be looked into even while examining the enforcement of a foreign award under Section 48 (2) (b) of the Act. The Law commission of India in its 176^th report recommended that "public policy" be defined to echo the wording in ONGC but exclude the term "patent illegality". But recently Bharat Aluminum Co.[8] (BALCO) judgment has overturned all the prior cases.