THE GREEN CORE OF SECTION 34

Navya Dhawan is a IV Year B.A., LL.B. (Hons.) student at National Law School of India University, Bengaluru.

Roadmap

Should Violation of Environmental Law Render Arbitral Awards Contrary to Public Policy? This post seeks to answer this question in the affirmative. I begin by mapping how Indian courts have narrowed the “public policy” ground under Section 34 of the Arbitration Act, 1996, from broad merits review to a focus on violations of the fundamental policy of Indian law. It then shows that core environmental norms, grounded in constitutional rights and the public trust doctrine, operate at this fundamental level. Building on this framework, the blog re-examines the Reliance gas-theft arbitration as a missed environmental public-policy case and concludes by proposing when environmental violations should justify setting aside arbitral awards without reopening routine contractual disputes.

A.    Mere Infraction v. Fundamental Policy

Section 34(2)(b)(ii) permits a court to set aside an arbitral award if it is in conflict with the “public policy of India.” Earlier jurisprudence interpreted expansively, allowing courts to revisit the merits under the guise of public policy. In ONGC v Saw Pipes (2003), the Supreme Court held that even a “patent illegality” apparent on the face of a domestic award could justify setting it aside. Later, Associate Builders v DDA (2014) divded public policy into sub‑heads such as “fundamental policy of Indian law,” “interest of India,” and “justice or morality,” but the net result remained wide judicial discretion. The 2015 amendment to Section 34, and the subsequent Supreme Court decisions, tried to reverse the trend. Courts have sought to interpret the amendment such that the use of the word “fundamental” before “policy of Indian law” makes the expression narrower, meaning mere contravention of law is not enough to make an award vulnerable. In Ssangyong Engineering & Construction Co Ltd v NHAI (2019), the Court explicitly favoured minimal intervention and that patent illegality cannot be equated with a mere erroneous application of law or reappreciation of evidence.  More recently, the Supreme Court noted that for an arbitral award to be considered in conflict with the public policy of India, a mere infraction of the municipal laws of India is not enough. Based on previous judicial pronouncements, it reiterated that to render an award contrary to public policy, the contravention must: (1) Relate to the fundamental policy of Indian law, (2) Involve an infraction of law that goes beyond triviality and includes a law meant to serve public interest or public good and (3) Be contrary to the most basic notions of morality or justice.

B.    Core Environmental Norms as Fundamental Policy

Constiutional entrechment alone is, of course, too broad a criteria. Afterall, statutory rights may have constitutional dimensions without warranting interference with arbitral awards. However, the argument that I propose is more specific. I endeavor to demonstrate that enviornmental norms meet the “fundamental policy” threshold not because they merely appear in the Constitution but for two more converging factors: (1) the public trust doctrine and (2) irreversability of enviornmental damage. These taken together provide a basis for my proposed classification of core environmental norms as part of the “fundamental policy of Indian law.” The starting point is the Supreme Court’s reading of Article 21 to include a right to a clean and healthy environment, coupled with Articles 48A and 51A(g), which impose duties on the State and citizens to protect and improve the environment. In Subhash Kumar v. State of Bihar (1991) and later in Virender Gaur v. State of Haryana (1995), the Courts held that the “Right to Life” encompasses the right to a clean and hygienic environment. Most recently, in M.K. Ranjitsinh v. Union of India (2024), the Supreme Court expanded this horizon by recognizing the “Right to be free from the adverse effects of climate change” as a distinct fundamental right under Articles 14 and 21.

Alongside this rights‑based strand, the Court has entrenched the public trust doctrine in Indian law. In M.C. Mehta v. Kamal Nath (1997), the Court held that natural resources like air, water, and forests are held by the State as a “trustee” for the public and cannot be transferred to private ownership for commercial use. This doctrine creates a distinct hierarchy: public trust obligations are superior to private commercial contracts. Further, unlike other constitutional rights (which constrain how the State acts), the public trust doctrine limits what agreements the State can make. Furthermore, the Precautionary Principle and the Polluter Pays Principle were declared to be the “law of the land” in Vellore Citizens Welfare Forum v. Union of India (1996). Thus, an arbitral award which would validate a degradation of a public resource for private gain is, would validate something that the State lacked capacity to promise in the first place.

One of the primary objectives of arbitration is that of speed and finality in exchange for a limited juidical review. This may work for commercial disputes where wrongs can be remedied with damages. But environmental harm is irreversible, once a forest is cleared or a natural resource is exploited, more often than not, no subsequent correction can restore the status quo ante. In such cases, arbitrable finality seems untenable. Environment law is prophylactic, not remedial. This has also why the Supreme Court and various High Courts have, in challenges to retrospective approvals, have emphasised that granting ex post facto clearances is “antithetical” to environmental rule of law and undermines the preventive logic of the Environment (Protection) Act and the environmental impact assessment (EIA), even when a 2025 order has partially relaxed an earlier blanket prohibition under a tightly controlled framework. Bypassing ex ante scrutiny, public participation and impact assessment is treated as a serious systemic wrong and not a curable procedural lapse.​ An instance of this is the recent CREDAI v. Vanshakti (2025), where the SC noted that a government notification permitting ex-post facto environment clearance is in contravention with the EIA regime, Article 21 and environmental sustainability principles.

I argue that these strands allow a tripartite categorisation of “core environmental norms” that operate at the level of fundamental policy: (i) the existence and validity of environmental, forest and coastal regulation clearances for major projects; (ii) compliance with mandatory EIA and public‑consultation requirements; and (iii) adherence to public‑trust obligations in the allocation and exploitation of key natural resources. Each of these has been judicially framed as necessary for protecting constitutional rights and the public interest, rather than as standard municipal regulation. Using the language now found in Section 34, these laws are exactly the type that relates to “linked to public good/public interest”. This distinction sets apart a specific category of illegal actions that can involve the “fundamental policy of Indian law”.

C.    Re-Characterising the Reliance Gas-Theft Arbitration as an Environmental Public-Policy Case

The brief facts of Union of India v. Reliance (2023) before the High Court of Delhi are stated here. This arbitration arose out of the production‑sharing regime for the Krishna Godavari Basin offshore gas fields on India’s east coast, where Reliance operated a block adjacent to one held by ONGC. The Union of India alleged that gas had “migrated” or effectively been siphoned from ONGC’s neighbouring reservoir into the Reliance‑operated block, leading to wrongful extraction and unjust enrichment under the production‑sharing contract. In deciding the Section 34 petition, the Court framed the controversy primarily as one about contractual interpretation, expert evidence on reservoir behaviour, and the limits of judicial review over arbitral fact‑finding and construction of the PSC. The focus was on whether the tribunal’s view was perverse or patently illegal in commercial and evidentiary terms.

At the same time, the judgment contains important, but under‑developed, environmental and public‑trust signals. The Court expressly recognised that petroleum and natural gas vest in the Union under Article 297 and drew on the public trust doctrine and earlier natural‑resource decisions to describe the State’s fiduciary responsibilities in administering such resources. However, these principles were deployed mainly to justify closer scrutiny of the award’s reasoning on migration and unjust enrichment, not to articulate a distinct environmental or resource‑trust standard within the “public policy of India” ground under Section 34(2)(b)(ii). The judgment did not examine whether enforcement of the award would, in effect, legitimise extraction practices inconsistent with statutory clearances, reservoir‑management duties, or constitutional commitments to resource stewardship.

The Court ultimately set aside the award on patent‑illegality and perversity grounds without explicitly locating the controversy in the “fundamental policy of Indian law” as shaped by environmental and public‑trust jurisprudence. The award here risked binding the State to extraction outcomes that violated its constitutional duty as trustee over Article 297 resources. This is precisely the situation, as I discussed in Section B, where public trust obligations should override private contractual arrangements because the State cannot through arbitration abdicate fiduciary duties it holds for the public. Thus, a more explicit characterisation of the case as one where an award risked endorsing constitutionally sensitive resource‑use practices would have helped crystallise an environmental public‑policy standard for future Section 34 scrutiny.

D.    When Should Environmental Violations Render an Award Contrary to Public Policy?

If an award violates constitutional mandates, including the right to a healthy environment found in Article 21, or if a governmental body violates one’s protection from climate-related damages, then the award becomes vulnerable. Furthermore, violations of the public’s trust doctrine by the Government, such as those that allow the Government to alienate natural resources such as oil and gas under Article 297 without a fiduciary relationship, will raise the level of the violation above triviality. Routine non-compliance with procedural rules, like post-facto clearances does not suffice absent systemic harm to public good.

In Reliance Gas migration case, the Court ruled in February 2025 that the award issued in December 2018 should be set aside because the award was issued in violation of fundamental legislative policy (by including the absence of Union permissions) and was, thus, issued in patent illegality. The Delhi High Court, in this ruling, acknowledges the invalidation of an award that allows for the Environmental Impact Assessment/public participation process to continue with respect to future awards that permit ecological degradation over ecological stewardship. In this paper, I have demonstrated that the courts, must develop a three-pronged test under Section 34 of the Arbitration Act: (1) whether an award’s core clearances are valid; (2) whether the Environmental Impact Assessment/public participation process was validly followed; and (3) whether there was an obligation to care for the resources as a trustee. Developing this tripartite system will ensure that the efficiency of arbitration will remain intact and maintain the protection of the ecology and environment of the Constitution.

E.    Conclusion

This piece has demonstrated that essential environmental norms grounded in constitutional rights, the public trust theory, and the irreversibility of environmental harm operate at the level of “fundamental policy of Indian law” under Section 34(2)(b)(ii). The proposed three-pronged test addresses the concern that constitutional entrenchment alone would excessively broaden judicial review by limiting interference to three specific categories: validity of mandatory clearances, compliance with EIA and public consultation, and adherence to public trust obligations over natural resources. The Reliance arbitration serves as an example of the consequences of ignoring this distinction. Arbitration runs the risk of turning into a means of evading constitutional duties that the State is otherwise unable to renounce through private agreement. Therefore, an explicit environmental public-policy standard under Section 3 is important to prevent the alienation of public trust resources, the bypass of mandatory environmental safeguards, and the legitimisation of irreversible ecological harm.