This article is written by Aradhya Gupta and further updated by Shweta Singh. This is an exhaustive article that delves into the system of arbitration, and certain provisions of arbitral awards under the Arbitration and Conciliation Act, of 1996 to discuss the concept of application for setting aside the arbitral awards.

Introduction

The settlement of a dispute out of the court, by bringing it to a third person, is very commonly known since the period of Ancient and Medieval India. Therefore, the concept of arbitration is an old phenomenon. The modern law of arbitration was drafted by the East India Company which was developed in the regulatory framework through which the courts refer the suits for the arbitration process. 

The Indian legal system’s persistent problem of delayed justice has been debated much in the past. The large number of cases in Indian courts has made it very challenging to provide prompt justice for those seeking redressal. The gravity of the situation is acknowledged and a number of proposals are made to overcome this challenge. These proposals include strategies that include more judges, restructuring the allocation of cases, revisiting procedural rules, and addressing tactics that cause unnecessary delays. Along with other proposed solutions, the Alternative Dispute Resolution (ADR) mechanism emerges as a noteworthy alternative. Adopted widely across the world, ADR is a better option in terms of effectiveness, speed, and cost. Adopting ADR could relieve the load on the ordinary legal system and make it more convenient for individuals seeking a quick redress of their disputes. In India, the laws governing the ADR are provided under the Arbitration and Conciliation Act, 1996 (hereinafter referred to as “the 1996 Act”). The main aim of the Act is the quick and effective redressal of commercial disputes by way of arbitration. 

Though arbitration is the most appropriate mechanism for resolving the dispute outside the court, the courts of India are not completely barred from interfering when the arbitration process begins. The 1996 Act provides the instance under which the court can exercise its jurisdiction, one such jurisdiction arises when an application for setting aside an arbitral award is made by the party. The 1996 Act contains provisions relating to the conditions under which an application for setting aside an arbitral award can be made and the procedure to apply for the same. 

Arbitral awards

Meaning of an Arbitral award

According to Section 2(1)(c) of the 1996 Act an arbitral award includes an interim award. As a preventive measure and at the request of the party an arbitrator can issue an interim order or award regarding the dispute. Interim orders are orders that are valid only during the arbitration process, mandating the party to refrain from doing some actions that may fall counter to or harm the other party’s interest. Such an order is passed in the form of an interim injunction. Unlike a usual interim measure, an interim award under the 1996 Act forms a part of the final award, that is binding on the parties involved. An interim award is granted after a thorough hearing, encompassing the accepted interim measures.

However, once the arbitration proceedings have been completed, the arbitral tribunal grants an arbitral/arbitration award, as the final award. An arbitral award can be monetary or non-monetary. It can be monetary which is made for payment of a sum of money from one party to the other and it can be non-monetary when no money needs to be paid, but it includes decisions like stopping a certain business practice or increasing unemployment perks and incentives.

For an award to be held valid, it must fulfil two conditions. Firstly it should be certain, meaning that it should be clear, definite, and unambiguous in terms of the decision made with regard to the rights of the parties. Secondly, it must contain a decision. An award without a valid decision or unclear decision on every issue raised before the arbitral tribunal shall be considered invalid. In addition to fulfilling these conditions, an award must bear the signature of an arbitrator. It must also contain specific reasons for the decision made in an award regarding the particular case. The award should not leave any room for confusion and must clearly outline the duties and liabilities imposed on the parties. An award must deal with every aspect of the issue that is a matter of concern between the parties, giving a clear and final decision on every such aspect of the issue.

In the case of Union of India v. Punjab Communications (2002), the amount which was payable by one party to the other was not specified in the award and also the decision was unclear and incapable of being enforced. Therefore the arbitral award was set aside.

The requirements have been further elaborated in Section 31 of the 1996 Act. Firstly, an award needs to be in written form, emphasising the legal requirement against recognizing oral awards. Secondly, if the tribunal is composed of more than one member, the award should be signed by all the members of the arbitration tribunal. However, it is worth mentioning that if a majority of the tribunal members sign the award, their signatures together identify the award as valid. Thirdly, the award must specify the date and place of its issuance, providing crucial contextual details. Lastly, to ensure fairness and transparency, a signed copy of the document is required to be issued to every party after its completion.

According to Section 31(1) of the 1996 Act, the nature of an arbitral award rendered by an arbitrator is both final and binding on the parties involved. It signifies that the award once passed conclusively determines all the issues brought forth in the arbitration process. The use of the word ‘final’ under Section 31 denotes that, among the involved parties, the award stands as conclusive on the issues it addresses, maintaining its binding nature unless a court intervenes to set it aside. The arbitrators are obligated to pass an award within the specified time frame or any extension granted. It’s crucial to interpret the award broadly, emphasising a liberal construction that aligns with the genuine intentions of the arbitral tribunal. The award passed by an arbitrator can be challenged by an unsatisfied party by filing an application for setting aside an award in an appropriate court.

Can an arbitral award be set aside

The 1996 Act is underpinned by two core provisions aimed at ensuring the efficiency and effectiveness of arbitration proceedings: firstly, the principle of Minimum Judicial Interference, which emphasises limited court intervention; and secondly, the principles of Finality and Enforcement of Awards, which emphasise the conclusive nature of arbitral decisions and the mechanisms for their enforcement. Therefore, when two parties enter into an arbitration agreement as outlined in Section 7 of the 1996 Act, they mutually commit to abiding by the terms of the agreement and if in the event of a future dispute where arbitration is chosen as the resolution method, the decision rendered by the arbitrator becomes conclusive and obligatory for both parties. 

However, instances may arise where either one party or both parties express dissatisfaction with the decision reached through arbitration. In such circumstances, the 1996 Act provides a recourse. The 1996 Act delineates specific grounds upon which parties can file an application in the court for setting aside such an award.

It is important to note that an application for setting aside an arbitral award has to be made in an appropriate court having jurisdiction on such matters. According to Section 2(1)(e)(i) of the 1996 Act, an application for setting aside an arbitral award rendered in an arbitration other than an international commercial arbitration must be submitted to either a District Court, specifically the principal Civil Court of original jurisdiction, or to the High Court with ordinary original civil jurisdiction. This High Court should have the authority to adjudicate on the issues central to the arbitration proceedings.

In the case of an arbitral award in an international commercial arbitration, the application to set aside the award must be submitted to the High Court with ordinary civil jurisdiction. According to Section 2(1)(e)(ii) of the 1996 Act, the High Court should have authority to decide on the issues central to the arbitration or, in alternative situations, possess jurisdiction to hear appeals from lower court decrees. The Section further states that If a commercial division exists within the high court under the Commercial Courts Act, the application will be addressed and resolved by this specialised division.

Procedure for filing an application for setting aside of an arbitral awards

The jurisdiction of the court is generally barred from an arbitration proceeding. However, there are circumstances wherein the court can interfere to ascertain the proper conduct of the arbitration proceeding. For this purpose, certain remedies are provided under the 1996 Act against the arbitral award issued by an arbitrator. Under the provisions contained in the 1996 Act, an aggrieved party may approach a court to set aside an arbitral award on the presence of certain grounds provided under Section 34 of the 1996 Act.

Any party to an agreement who wants to challenge an arbitral award passed by an arbitrator needs to file an application for setting aside an award. The procedure for filing such an application is provided under the provisions contained in Section 34 of the 1996 Act. In accordance with Section 34(3) of the 1996 Act, a party desiring to challenge a domestic arbitral award has to file an application within the period of 3 months from the date of the receipt of an award or the disposition of the request seeking rectification as per Section 33, whatever occurs later. Prior to filling out an application, the party is required to issue the notice to the other party and file an affidavit, which confirms that they have complied with Section 34(5) of the 1996 Act.

After an application has been presented to the court, the applicant needs to convince the court that the grounds on the basis of which an award is challenged are just in order to set aside the arbitral award. Once the judge is satisfied, a notice is released requiring the other party to respond. Upon the completion of the pleadings, the court takes oral arguments to ensure that the grounds outlined in Subsection (2) and (2A) of Section 34 are fulfilled. Based on this, the court can either set aside the award or simply refuse the application. Usually, the court doesn’t reevaluate the evidence examined by the arbitral tribunal, which is why witness cross-examination is often a rarity.

The application to set aside a domestic arbitral award must be determined expeditiously and at the earliest opportunity, nominally within a year by virtue of Section 34(6) of the 1996 Act. However, the Supreme Court clarified that this requirement is a directive, not mandatory.

With respect to a foreign award, the award debtor must wait for execution of the award under Section 47 read with Section 49 of the 1996 Act. Then, the debtor can object to the award under Section 48. The proceedings involve completing pleadings and oral arguments, similar to domestic awards. However, the enforcement court in India can only refuse to enforce the foreign award. It has no jurisdiction or authority to set it aside.

Whenever an application for setting aside an arbitral award is filed before an appropriate court, such court can have the authority to set aside an arbitral award only when the grounds mentioned under Section 34 are present and not otherwise.

Grounds for setting aside of an arbitral award

Two parties that sign up to an arbitration agreement are mutually bound by the agreement in line with Section 7 of the 1996 Act. It means that the parties have a contractual obligation to resolve any future controversies by means of arbitration. This initial agreement sets the stage for the arbitration process and establishes a legal obligation for the parties to abide by the terms specified in the agreement.

When the dispute between the parties arises and they resolve such dispute through arbitration, an award is rendered which becomes legally binding on both parties. This means that the award passed by the adjudicating authority obligates the parties to adhere to the decision and terms outlined in the arbitration award. The finality of the award provides for the complete resolution of the dispute by the arbitrator.

However, there may arise some instances where one or both parties are not satisfied with the arbitral award, in such circumstances, the 1996 Act provides a recourse mechanism. Section 34 of the 1996 Act provides for specific grounds available to the parties on the basis of which they can apply for setting aside an award, while Section 37 establishes the provisions of appeal regarding certain orders.

Section 34 of the 1996 Act provides the provisions of certain specific grounds on the basis of which an arbitral award rendered in India can be set aside. They are-

1. Incapacity of a party while making an application to enter the agreement.
2. Arbitration agreement not being valid under the law.
3. Parties were not given proper notice of the appointed Arbitrators or the Arbitral Tribunal.
4. Nature of dispute not capable of settlement by arbitration.
5. The composition of the arbitral award was not in accordance with the agreement of the parties.
6. The arbitral award is in violation of the public policy of a state.
7. The arbitral award deals with a dispute not falling within the terms of submissions to an arbitration.

Incapacity of parties

An application for setting aside an arbitral award can be passed if a party to the arbitration is incapable of taking care of their interest and they are not represented by a person who can safeguard their rights. The award can be set aside by the court if it finds that a party to a contract is a minor or an unsound person who is not being represented by a Guardian to protect his interest. Section 9 of the 1996 Act provides for the appointment of a guardian for a minor or a person of unsound mind for arbitral proceedings.  Consider a situation where there is a commercial contract between a software development company (Party A) and an individual freelance developer (Party B), which includes an arbitration clause. Thereafter a dispute arises between them regarding the quality of the software delivered by Party B.

During the arbitration proceedings, it comes to the knowledge that Party B, who is the freelance developer, is of unsound mind thereby, lacking the capacity to effectively represent their interests. It was also noticed that Party B does not have any legal representative to protect their rights in the arbitration proceeding.

In the aforementioned circumstances, a party can file an application for setting aside an arbitral award on the grounds of incapacity of the party, by arguing that the incapacity of Party B to manage its affairs and the absence of legal representation warrant the court’s intervention. The court, while considering an application, looks into the matter to ensure a fair and just resolution, taking into account the need for proper representation in cases involving individuals with limited mental capacity.

The invalidity of an arbitration agreement under laws 

An arbitration award can be challenged on the grounds of invalidity of an arbitration agreement. This implies that if an arbitration agreement or the main agreement in which the arbitration clause is mentioned, is held invalid then an arbitration award passed by the tribunal on the matter arising out of such agreement shall also be held invalid.

If the arbitration agreement is found to be legally invalid, both the reference to it and subsequently the award based on such a reference may be invalidated and set aside. The validity of an arbitration agreement can be challenged on the same grounds that the validity of a contract can be challenged. In situations where an arbitration clause is added under a broad contract, the whole arbitration clause is invalid if the main contract is found void. Also, if one of the parties claims that there is no agreement on partnership and that the agreement is null and void, it does not preclude them from disputing the arbitral tribunal’s jurisdiction later on, even if they already participated in the arbitration proceeding. In such circumstances, the concerned party has the right to initiate the application on the basis of their argument that the arbitration agreement either doesn’t exist or is void from its inception.

To illustrate, consider a scenario wherein Company X and Company Y enter into a Collaboration Agreement that also includes an arbitration clause for the resolution of their dispute that arises in the future. However, later on, it is found out that the Collaboration agreement that has covered various aspects of their collaboration is legally not valid due to a serious breach of contract law. In such a circumstance, the validity of the arbitration clause, being an essential part of the main contract, is also considered invalid. If the main contract is found to be void, the arbitration clause incorporated in the main contract is also considered to have lost its legal foundation. Consequently, both the reference to arbitration and any subsequent award arising from it may be invalidated and set aside.

To elaborate further on the given illustration, if a situation arises wherein Company A takes part in an arbitration proceeding and then later on claims that there was no valid agreement between the parties, rendering the entire contract null and void. In such a situation, even though Company A participated in the arbitration process, it can not be stopped from disputing the arbitral tribunal’s jurisdiction at a later stage. The party can initiate an application asserting that the arbitration agreement either never existed or was void from its inception, despite their initial participation.

What constitutes an invalid agreement

In the case of K.K.Modi v. K.N.Modi and Ors. (1998) the Supreme Court has the occasion of providing the basic attributes and essential elements of an arbitration agreement. While deciding on the issue of whether the arbitration clause was a valid arbitration clause or not, the Court provided some of the essential elements for an arbitration agreement to be valid. That are as follows: “Among the attributes which must be present for an agreement to be considered as an arbitration agreement are: (1) The   arbitration   agreement   must contemplate  that the decision of the tribunal will be binding on the parties to the agreement, (2) that the jurisdiction of the tribunal to decide the rights of parties must derive either from the consent of the parties or from an order of the court or from a statute, the terms of which make it clear that the process is to be an arbitration, (3) the   agreement   must  contemplate  that substantive rights of parties will be determined by the agreed tribunal, (4) that the tribunal will determine the rights of the parties in an impartial and judicial manner with the tribunal owing an equal obligation of fairness towards both sides, (5)  that  the  agreement  of  the  parties  to  refer their   disputes   to   the   decision   of   the   tribunal must be intended to be enforceable in law and lastly, (6) the agreement must  contemplate  that the tribunal will make a decision upon a dispute which is already formulated at the time when a reference is made to the tribunal.” It has been held that if in the agreement, the parties have referred to the process of arbitration as merely a possibility rather than an express mandate to refer disputes to arbitration, then it can not be said that there is a valid and binding arbitration agreement.

Whether an unstamped agreement is invalid or void

On 25 April 2023, in the case of N.N. Global Mercantile Pvt. Ltd. v. Indo Unique Flame Ltd. (2023), (“N.N. Global”) a five-judge Constitution Bench of the Supreme Court comprising Justices K.M. Joseph, Aniruddha Bose, C.T. Ravikumar, Ajay Rastogi and Hrishikesh Roy in a 3:2 majority opinion held that an unstamped arbitration agreement was void and too bad to be enforced. The majority also held that the arbitration clause was inseparable from the main contract. Consequently, if no stamp duty was paid on the main agreement, the arbitration clause would also then be void.

While considering the larger effects of N.N. Global, and another matter, the Supreme Court held that the issues should be referred to a 7-judge bench to reconsider the correctness of the view by a 5-judge bench.

The 7-judge bench of the Supreme Court clarified that the agreements that are not stamped, in conformity with Section 35 of the Stamp Act 1899, are inadmissible as evidence but are not automatically considered null and void or null and void by operation of law. Improper stamping or non-stamping will be regarded as a curable defect and objections related to stamping should be addressed by the arbitral tribunal. Matters regarding stamping will not be heard under Sections 8 or 11 of the 1996 Act. The court emphasised the need that the concerned court must conduct a prima facie assessment to determine the existence of the arbitration clause. Furthermore, the Supreme Court overruled the two earlier decisions in the NN Global and SMS Tea Estates (2011) cases, and some parts of the reasoning in the Garware Wall Ropes case were also overruled. Mr. Justice Sanjiv Khanna, in his concurring opinion, elucidated that unstamped agreements are not inherently void or void ab initio.

Whether an incorrect reference of applicable law rendered arbitration agreements as invalid

The Karnataka High Court in the case of M/S. ICDS Ltd v. Sri Bhaskaran Pillai (2024) ruled that the errors made or inaccurate mention and statements regarding the application of the Arbitration Act 1940 shall not lead to the invalidation of the arbitration agreement in its entirety. In an Appeal against the district court’s decision to set aside the Arbitral Award, the court ruled that the District Judge erred in law by asserting that the Arbitration Agreement as contained in the Hire Purchase Agreement, referring to the now repealed Arbitration Act of 1940, could not be enforced.

A recent judgment given by Justice H.P. Sandesh ruled that the arbitration agreement which inappropriately refers to the 1940 Act, shall not become invalid despite the introduction of the 1996 Act. To support this, the court indicated that irrespective of whether the default arbitration clause, after 1996, has a reference either to the provisions under the Indian Arbitration Act, 1940, or the old Act, such reference holds no significance, and proceedings must be conducted according to the 1996 Act. The bench clarified that such inaccuracies do not invalidate the entire arbitration agreement. Instead, they should be construed in accordance with Section 85 of the 1996 Act, and the principles guiding this relationship must align with the provisions of the 1996 Act.

Notice not given to the parties of arbitration proceedings

As provided under Section 34(2)(a)(iii), if the party to a dispute in arbitral proceedings was not given proper notice regarding the appointment of an arbitrator or any other notice of arbitral proceedings, then this would be considered as a ground for setting aside the arbitral award of such proceedings.

Section 23(1) of the 1996 Act, provides that the arbitral Tribunal has to determine the time within which the statement must be filed. This must be timely communicated to the parties by a proper notice and Section 24(2) provides that an advance notice shall be given to the parties regarding any hearing or meeting of the Tribunal for any purpose of inspection of documents, goods, other property, etc. 

In Dulal Podda v. Executive Engineer, Dona Canal Division (2003), the Court held that the appointment of an arbitrator at the request of the appellant of the dispute without sending a notice to the respondent and an ex-parte decree given by the arbitration Tribunal will be held illegal and liable for setting aside.

In this case, the contractor and cooperators had a dispute about canal construction. The contract stipulated arbitration with the Superintending Engineer who was designated as the arbitrator. The Superintending Engineer, however, failed to address the appellant’s claims after the invocation of arbitration. Disappointed, the applicant applied for a Section 8 ruling, thereupon the judge named a retired Chief Engineer to act as an arbitrator without giving the respondents a notice.

Upon receiving the information regarding the e-appointment of the said Arbitrator, they approached the High Court by filing a revision petition challenging the appointment of the said Arbitrator as illegal. Since the ex-parte award was already passed by an arbitrator the High Court held that the respondents could challenge the Arbitrator’s appointment through an objection under Section 30 of the 1996 Act in the Civil Court. The High Court reflected these objections. Consequently, the respondent filed an appeal to the High Court against such reflection. The high Court ruled in the favour of the respondent leading to the setting aside of both the arbitrator’s appointment and the award.

On appeal by the applicant, the Supreme Court ruled in favour of this decision with an emphasis on the illegality of the ex-parte award that was effected without notification of the respondents. The Supreme Court declined the appeal and recommended that the arbitrator should be appointed at the earliest by the Civil Court, underlining the importance of a fair and just arbitration process.

Whether an arbitrator is appointed without providing due notice to the other party or is unilaterally chosen without their consent or agreement, such actions can potentially give rise to challenges regarding the fairness and impartiality of the arbitration process and the resulting arbitral award.

Unilateral appointment of an arbitrator

Section 11(2) of the 1996 Act gives parties who are in the process of arbitration proceedings the right to choose the procedure of choosing arbitrators by themselves. Absolute adherence to only one side in this procedure of arbitrator appointing, and the other party left without any means of input, conflicts with legal principles, as well as the fundamental philosophy behind the Alternate Dispute Resolution (ADR). The judgment of the Hon’ble Supreme Court in the Perkins Eastman Architects DPC and Others v. HSCC (India) Ltd. (2019) case explores the notion of equal power for both parties in the appointment of arbitrators. The Court explained that using discretion to appoint an arbitrator exclusively could result in favouritism and even prejudice, leading to a situation where the arbitrator issues a final award taking into consideration the political/moral/other bias of that person. This emphasises the importance of adopting neutral and equal treatment in arbitration so as to retain the credibility of Alternate Dispute Resolution methods.

In the matter of Cholamandalam Investment and Finance Co. Ltd. v. Amrapali Enterprises (2023) (Perkins Case), the High Court of Calcutta considered an application submitted under Section 36 of the Arbitration Act seeking the execution of an arbitral award rendered by a sole arbitrator appointed unilaterally. The High Court, interpreting a line of judgments, clarified that a unilateral appointment of an arbitrator particularly without the waiver in writing specified under Subsection 5 of Section 12 is fundamentally void ab initio (i.e. from the beginning). This ultimately means that any outcomes arising from such an appointment are legally treated as not existing (non est in law). Subsequently, the High Court cited decisions from various other High Courts in India to emphasise that an arbitral award issued by a sole arbitrator unilaterally appointed would also be void and legally non-existent. It indicates that the appointment of the arbitrators should always be in accordance with due process so as to make the arbitral award binding and legally enforceable. The quasi-unilateral appointment of an arbitrator is a bit different from the unilateral appointment of the arbitrator. In the quasi-unilateral appointment of an arbitrator, one party is provided by the panel of arbitrators selected by another party. Each party is then required to select their arbitrator candidate from the provided panel of names. Subsequently, the two nominated arbitrators will collaboratively designate the presiding arbitrator, also chosen from the same panel. While the Supreme Court has not cleared the issue regarding the validity of the quasi-unilateral appointment of an arbitrator, many are advocating that such a practice of appointing the arbitrator should be held invalid as it goes against the very objective outlined in the Perkins case.

Quasi-unilateral appointment of arbitrator

It has been established by various judgments of the Supreme Court that the unilateral appointment of an arbitrator is against the law and thus invalid. The judgment of the Supreme Court in the case of  Perkins Eastman Architects DPC & Anr. v. HSCC Ltd. (2019) (Perkins case) clarified the issue of the unilateral appointment of an arbitrator. The court held the practice of appointing an arbitrator by the sole party is invalid and thus put an end to such a practice undertaken by the party in the process of appointing an arbitrator. Although the legal framework is now clear regarding the validity of a party unilaterally appointing a sole arbitrator, uncertainties persist concerning the validity of quasi-unilateral appointments. 

The present scenario with regard to the validity of the appointment of an arbitrator quasi-unilaterally by the parties can be traced from the judgment of the Supreme Court passed in the Central Organisation for Railway Electrification v. M/s ECI-SPIC-SMO-SMO-MCML (2019) (CORE v. ECI case). This judgment after the decision of the Supreme Court passed in the Perkins case holds importance when an arbitrator is appointed quasi-unilaterally. In this case, CORE had compiled a list of four railway officers (retired). Out of these four officers, ECI had to select two arbitrators and the manager of Core would then select one out of the two arbitrators previously selected by Core. In addition to this, he was also required to select the remaining arbitrators either from the list or from outside the list in order to constitute the tribunal. The Supreme Court while hearing the matter decided in favor of the validity of the appointment of the arbitrators. The court held that in the present case, the arbitrators were appointed by giving equal opportunity to both parties, wherein the CORE prepared the list and ECI selected the arbitrators, thereby creating a balance in the arbitrator appointment process.

The judgment passed before the Perkins case by the Supreme Court in  Voestalpine Schienen Gmbh v. Delhi Metro Rail Corporation (2017) (Voestalpine case) also holds importance for considering the present scenario regarding the quasi-unilateral appointment of arbitrators. In the aforementioned case, the Supreme Court opinionated that a list unilaterally prepared by one party of 31 arbitrators who are retired government officials or public sector undertaking employees is not valid on the grounds that such a list is not “Broad-based”. The Supreme Court defined “Broad-based” as a list that should include individuals from diverse backgrounds, such as accountants and private sector employees, in order to be considered as appropriately ‘broad-based.’ Thus, the Supreme Court while rendering its judgment concluded that if the arbitrators are appointed from the list unilaterally prepared by the party and such a list is broad-based, an arbitrator appointed shall be valid.

Recently, the same conclusion was followed by the Delhi High Court in the case of BVSR-KVR v. Rail Vikas Nigam Ltd. (BVSR) and SMS Ltd. v. Rail Vikas Nigam Ltd. (SMS) (2020). The High Court held that the list of arbitrators consisting of only employees of the Indian Government is not Broad-based as held by the Supreme Court in Voestalpine case. Therefore, the appointment of arbitrators through this list is invalid.

Section 18 of the Act mandates equal treatment of parties throughout the arbitral proceedings. Commencing under Section 21, the appointment of the tribunal follows this start. As per Section 18, parties must equally participate in forming the arbitral tribunal, a crucial role in guiding the arbitration process. In CORE v. ECI, the Supreme Court noted the appellant’s unilateral power to prepare the list is balanced by the respondent’s ability to choose an arbitrator from it. However, this might be more of an artificial choice, placing one party at a strategic disadvantage. Allowing quasi-unilateral appointments gives disproportionate influence over the tribunal’s composition, violating Section 18’s fundamental requirements, and rendering such arbitration agreements potentially invalid.

An award not falling within the terms of submission to arbitration 

The dispute arising from an arbitration agreement serves as the basis for determining the jurisdiction of an arbitral tribunal. If any matter arising from such an agreement does not fall within the jurisdiction of an arbitral tribunal, an award passed on such matter shall be deemed invalid. Auch an award can be set aside on the grounds of it not falling within the terms submitted to arbitration. An arbitrator is required to act under the authority as provided in the terms of an agreement and not beyond that. 

In the case of Rajendra Krishan Kumar v. Union of India (2019), a matter that was a part of the writ petition was referred to arbitration. Though the petition did not contain any matter related to the compensation for releasing effluents and slurry by the party thereby affecting the land use, the tribunal passed an award on such matter. Consequently, when an award was challenged to set it aside, the court held that the award was invalid to the extent it dealt with a matter not specifically authorised to decide upon.

On the matter of Board of Control for Cricket in India v. Deccan Chronicle Holdings Ltd. (2012), a decision passed by the Bombay High Court on the 16th of June 2021 conveyed an influential verdict. The court struck down the arbitral award passed by an arbitrator as it was beyond the scope of the agreement between the involved parties. The Court of Bombay highlighted the fact that the power of an arbitrator is only as much as has been given to him in the agreement. The court stipulated that the arbitrator has the authority to make orders on the subject matter that is explicitly mentioned in the agreement unless the parties, by mutual agreement, attribute to the arbitrator the competence to resolve controversy on the grounds of what they consider to be fair and reasonable. This decision emphasises the need to adhere to the agreed terms in the arbitration agreement and the limitation on the arbitrator’s scope of authority unless expressly expanded by the parties’ mutual consent.

The relevant observation is found in the judgment of the Hon’ble Supreme Court in Ssangyong Engineering & Construction Co. Ltd. v. the National Highways Authority of India (NHAI) (2019). The court observed that it is now constantly recognised that, where an Arbitrator goes beyond the terms of the contract between the parties, and judgment is formed on matters outside the contract, this becomes a jurisdictional error, over which award on its merits can be challenged under Section 34. It is, however, clarified by the court that this principle applies only to domestic arbitration, and cannot be applied to arbitrations governed by Part II of the 1996 Act. In the case of domestic arbitrations, straying beyond the contract’s scope can be the basis for the challenge of the award. But this does not automatically transfer to International Commercial Arbitration, which would be governed by Part II of the Act.

Composition of tribunal not following agreement

Section 34(2)(a)(v) lays out that an award can be discarded or challenged if the composition of the arbitral tribunal is not in obedience to the agreement of the parties or if the procedure of conduct of proceedings was not followed properly. If the arbitrator passes a decision of an award which is in deviation from the terms of reference and the arbitration agreement, then this would lead to the award being set aside and will amount to the misconduct of the arbitrator.

In the case of State Trading Corporation v. Molasses Co. the Bengal Chamber of Commerce (1981), the Arbitral Tribunal did not allow a company that was a party to be represented by its law officer who was a full-time employee of the company. Here, the court held that it was the misconduct of the arbitrator as well as the violation of arbitration proceedings. 

In the case of ONGC Ltd v. Saw Pipe Ltd. (2003), the Supreme Court held that the arbitral Tribunal, while exercising its jurisdiction, cannot act in breach of some provisions of substantive law or provisions of the Arbitration and Conciliation Act, 1966. In the aforementioned case, the court asserted that Section 34(2)(a)(v) of the 1996 Act is crucial in deciding the composition of the arbitral tribunal. As per the provisions of this section, the composition of the arbitral tribunal should be done following the agreement made by the parties involved. In addition to this, the arbitrator appointed should follow the same procedure of conducting arbitration proceedings as outlined under the agreement between the parties in dispute. In cases where no such procedure has been specified under the agreement, the arbitrator is expected to act in conformity with the procedural requirement mentioned in Part 1 of the 1996 Act. The objective behind the formation of this provision is to highlight the importance of the composition of the arbitral tribunal and the procedure to be followed while conducting arbitration proceedings. They are required to conform with the terms agreed upon by the parties, and in the absence of such agreement, the statutory provisions of Part 1 of the 1996 Act shall be followed.

The Hon’ble Supreme Court in the case of Narayan Prasad Lohia v. Nikunj Kumar Lohia & Ors. (2002) reiterated the legal principle governing the composition and the procedural framework to be followed by the arbitral tribunal. The court talks about the two scenarios and the legal consequences of the same. The first scenario deals with the situation wherein the agreement outlines the composition and the procedure to be followed by an arbitral tribunal, and the actual composition does not align with the terms of the agreement but adheres to the statutory provisions of the 1996 Act. Taking note of such a situation the court held that the resulting award cannot be contested before the court. In the case of the second scenario wherein there are no details regarding the composition or the procedure of the arbitral tribunal and the actual composition is also not in accordance with the statutory provisions of the 1996 Act, the court held that in such case the resulting award shall become subject to challenge.

Disputes not arbitrable 

Generally, disputes that are in personam (against an individual) can be settled through arbitration, whereas disputes that relate to rights in rem (against the public at large) can be resolved through courts or tribunals. If there is an arbitration agreement between the parties then in such cases as well all the disputes that are of civil and commercial nature that a regular court could handle can be referred to arbitration. However, certain disputes are specifically defined by law and may not be suitable for resolution through arbitration. Though the 1996 Act does not expressly prohibit a particular dispute from being resolved through arbitration, Section 2(3) recognises that some disputes may not be submitted to arbitration as per the law. It is generally considered appropriate for many disputes to be resolved in public forums. Some cases, however, are decided based on a special regime, which works under specific laws and grants adjudication to these specific forums exclusively. Such disputes are seen as implicitly excluded from arbitration and are deemed non-arbitrable. Consequently, if a dispute is non-arbitrable and the parties agree to resolve it through arbitration, the court where the case is pending will decline to refer the parties to arbitration on the grounds of it being non-arbitrable. The same goes for an arbitration award. If the award has been passed by an arbitrator on the non-arbitrable subject matter, the court has the authority to set aside such an award under Section 34 of the 1996 Act.

The Supreme Court, in the case of Booz Allen and Hamilton Inc. v. SBI Home Finance Ltd. (2011), has laid down an elaborate list of suits that are not arbitrable. This includes not only cases on criminal offences but also ones regarding matrimonial disputes consisting of divorce, judicial separation, restitution of conjugal rights, and child custody. Besides, custodial issues, bankruptcy and winding up, testamentary matters including the issue of probate, letters of administration, as well as the eviction or tenancy issues entailing special laws, also fall in this non-arbitrable category. In all these aforementioned specified areas, where certain rights and protections are provided by law, only designated courts are conferred with the jurisdiction to grant remedies or decide the disputes. In accordance with the Supreme Court’s guidelines, these disputes are regarded as beyond the realm of arbitration even though the parties have previously agreed to resolve these issues by way of arbitration.

In one of its recent decisions, the Supreme Court of India, in the case of Vidya Drolia & Others v. Durga Trading Corporation (2021) (referred to as “Vidya Drolia”), has attempted to clarify the longstanding ambiguity regarding what disputes are considered arbitral and as non-arbitral. In this case, a reference was made to the three-judge bench of the Supreme Court. The question referred to was whether tenancy disputes are arbitrable or not. While deciding on this issue, the Supreme Court examined the concept of arbitrability in other jurisdictions as well. As a result, the Supreme Court established a “four-part test” to determine when a subject matter would not be arbitrable.

According to the Supreme Court, “a dispute is non-arbitrable when the cause of action or subject matter of the dispute 

1. pertains to actions in rem, which do not concern subordinate rights in personam that arise from rights in rem;
2. affects third-party rights, has erga omnes effect (obligations or rights towards all), requires centralised adjudication and mutual adjudication would not be appropriate;
3. concerns the inalienable sovereign and public interest functions of the State; or
4. is expressly or impliedly non-arbitrable under a specific statute.”

The Supreme Court in the Vidya Drolia case emphasised that, excluding the subordinate rights in personam (rights available against an individual) arising from rights in rem (rights available against the public at large), legal actions in rem by themselves cannot be resolved through arbitration. Similarly, disputes or matters that impact the rights of third parties can not be resolved through arbitration and hence such matters are non-arbitral in nature. The Court’s perspective was grounded in the notion that arbitration serves as a private method for resolving disputes, binding exclusively on the parties involved in the arbitration agreement. In contrast, legal courts, inherently established by law, possess jurisdiction by default and do not necessitate mutual agreement to confer jurisdiction.

Award against public policy 

If an award passed by an arbitral tribunal is against public policy, that is, if an award is influenced by fraud or corruption, it shall be liable to be set aside by the court. Section 34 of the 1996 Act in addition to the aforementioned grounds, provides a party can file an application to set aside an award if an award is found to be against the public policy. The context related to public policy implies public welfare and interest. As a result, as held in the case of Venture Global Engineering v. Satyam Computer Services Ltd. (2010), in cases where an award has been obtained by means of suppressing important facts and by misleading or bribing the arbitrators, etc., an arbitral award passed shall be invalid on the grounds of it being against public policy. 

The 2015 Amendment Act which has added Explanation 1 and 2 to Section 34(2)(b)(ii) of the 1996 Act has clearly described the grounds for the award to be considered against the Public Policy of India. The award shall be considered as against public policy if the award-making process was influenced by fraud or corruption, Section 75 or Section 81 of the 1996 Act has been violated, fundamental policy Indian Law has been contravened, or it went against the most basic notions of morality and justice. With the addition of Explanation 2 to the Section, the amendment adds that the decision on whether a breach of the fundamental policy of Indian law took place does not imply a review of the merits of the dispute. In the case of Renusagar Power Co. Ltd. v. General Electric Co. (1993), the Supreme Court asserted the fact that the principle of unjust enrichment, as present in the public policy of India, is not a conclusive argument. The principle of unjust enrichment runs on the theory that no one should take advantage of the position of someone which causes a loss to one party and a gain to another party. The main point is that unjust enrichment must be relevant to the enforcement of the award, not its merits.

The Hon’ble Supreme Court on its recent judgment of Haryana Tourism Limited v. M/S Kandhari Beverages Limited (2022) reiterated a well-established legal principle deduced from several Apex Court’s judgments. The court underlined that an arbitral award could only be annulled in cases wherein the award is demonstrated to violate the public policy of India. Sections 34 and 37 of the 1996 Act provide the grounds for setting aside an arbitral award, and this can happen if the award is deemed to be contrary to (a) the basic principle of Indian law, (b) the interest of the state of India, (c) question of justice or morality, or (d) if the judgment is associated with something patently illegal. Such reiteration by the Supreme Court in many of its judgments stresses the limited and specific instances under which an arbitral award can be challenged and set aside, highlighting the necessity of making such an award consistent with the basic principles and values of a country’s law. 

The Supreme Court of India in the case of Associate Builders v. Delhi Development Authority (2014) held that the Delhi High Court had acted beyond its authority by setting aside the domestic award made by arbitration. The Supreme Court also went ahead to explain the “public policy ground” contained under Section 34(2)(b)(ii) of the 1996 Act. The Supreme Court condemned the Delhi High Court for the review of the award on its merits considering evidence not initially presented, and emphasised the importance of respecting the arbitrator’s determination, especially on factual issues.

In the aforementioned case, the Associate Builders had a construction contract with the Delhi Development Authority for residential houses and there were significant delays. The arbitrator held the authority responsible for the delay and passed an award against them. The division bench of the High Court set aside an award by re-assessing the factual findings and looking into the facts that were not presented in the arbitration proceedings. Associate builders opposed the Division Bench’s decision by filing an appeal in the Supreme Court asserting that the bench misapplied Section 34 of the 1996 Act by reviewing the arbitrator’s factual conclusions.

The Supreme Court overruled the Division bench’s judgment by giving effect to the award and reaffirming that the division bench went beyond its jurisdiction. The court pointed out that the award would only be set aside on the grounds of public policy if the award shocks the conscience of the court, excluding a re-evaluation based on the court’s view of justice.

The Supreme Court in its judgment analysed the grounds of “public policy” covered under Section 34 of the 1996 Act by citing previous judgments like ONGC v. Saw Pipes (2003). It laid down that the award can be said as violating “public policy” if it runs counter to the basic policy of Indian law, the interests of India, the concept of justice and morality, or is patently unlawful. The Court acknowledged the scrutiny of an arbitral award’s merits in a public policy challenge but emphasised limitations on when and to what extent such re-evaluation can occur.

Patent illegality

For the last couple of years, India has been working to ensure that it is easier to do business and that investors have more opportunities. The intention behind introducing several amendments to the 1996 Act was to decrease court intervention. An arbitral award can only be set aside if it is attended by material flaws or legal incorrectness. Section 34 of the 1996 Act specifies limited grounds for setting aside an award. 

All the grounds listed to set aside an arbitral award are straightforward, except for the ground of being “against public policy,” which has been interpreted in different ways by various court decisions. Subsection 34(2A) introduced by the 2015 Amendment Act, enables an award made by a domestic court to be rejected if it appears, on the face of it, that it is tainted by illegality. In the case of Bhaven Construction v. Sardar Sarovar Narmada Nigam Ltd (2021), the Supreme Court emphasised the word “only” at the start of Section 34 emphasising that any application to set aside an arbitral award has to be in accordance with the subsections (2) and (3) of Section 34 of the 1996 Act.

The interpretation of “patent illegality” was decided in the case of ONGC v. Saw Pipes by the Supreme Court of India for the very first time. In this case, the Supreme Court explained that an arbitral award is declared ‘patently illegal’ if it goes against substantive provisions of the law, arbitration rules and regulations, or terms of the contract. Initially, this interpretation was extended to both domestic and international arbitral awards. However, following the recommendations of the 246th Law Commission report, this interpretation is now specifically applicable to domestic awards, as specified in Section 34(2A) of the 1996 Act. The amendment broadened the concept of the “public policy of India,” which had been construed narrowly in prior court judgments. Since then, there have been numerous cases where the ground of patent illegality has been invoked.

In the case of Mohan Steels Ltd v. Steel Authority of India (2020), the validity of the award was denied on the grounds of patent illegality. The Arbitrator’s interpretation of the contract was deemed flawed because it went beyond the conditions of the contract. The Arbitrator based his decision on notifications that were obtained from the Regulator and entered as evidence in the record only after the conclusion of the arguments that were delivered by the parties involved. Significantly, this addition occurred without providing the petitioner an opportunity to challenge or counter its applicability to the case, even though the petitioner had expressly denied its relevance in the statement of claims. Consequently, the award was set aside also because some provisions of the agreement conflicted with fair trade customs and business common sense. This demonstrates the importance of following the general rule of procedural fairness in arbitration and taking into account only relevant facts.  

Limitation for filing an application to set aside an arbitral award

Section 34(3) provides the limitation period for filing an application to set aside an arbitration order. It states that an appeal to set aside an arbitration order by an aggrieved party has to be strictly made within the period of 3 months from the date of receipt of the same. The importance of this is set out by Section 36 which asserts that the award becomes enforceable as soon as the limitation period under Section 34 expires. Under Section 33, the Court may, however, allow a delay of 30 days on a request made by the aggrieved party if the court is satisfied with the evidence of sufficient cause. In the case of National Aluminum Co Ltd v. Presteel Fabrication (P) Ltd (2003), proceedings were instituted before the Supreme Court under the disbelief that it had jurisdiction in the matter of setting aside the arbitral award passed by the Arbitral Tribunal. Time consumed on a bona fide prosecution of an application in a wrong forum was held by the Supreme Court to be a sufficient cause for condonation of delay.

As in the Code of Civil Procedure, 1908, there is a general rule that an executing Court can execute the decree if there is no stay by the appellate court. In the same way, in the Arbitration Act, once an application of setting aside the arbitral award is done under Section 34, the executing Court has no power or authority to effectuate the award until and unless the application gets dismissed/refused under Section 34.

As per Section 34, a party to the arbitration agreement has to make an application for setting aside the award. But a legal representative in the case of any such party can also apply for it because he is a person claiming under that. An award that is set aside no longer remains applicable by law. Setting aside means that it is rejected as invalid. The parties get back to their former position in regard to their claims in the dispute and the matter becomes open again for decision. The parties have the option after setting aside an order to either again go for arbitration or to have the matter decided by a court of law.

Applicability of the Limitation Act, 1963 on applications under Section 34 of the 1996 Act

Although Section 5 of the Limitation Act of 1963 deals with the extension of a prescribed period in certain cases, it is silent about the maximum limit for granting the delay condonation. Section 34 of the 1996 Act forms an altogether different scheme. It provides that an application will be heard within an additional thirty days but not later than that. 

Noting this difference, the Supreme Court in the case of State of Himachal Pradesh & Anr. v. M/s Himachal Techno Engineers & Anr. (2010), (hereinafter referred to as Techno Engineers case) has held that recourse to Section 5 of the Limitation Act to challenge an award under Section 34 after the expiry of the statutory limitation period prescribed is impermissible.

The limit within which a court must consider any delay in filing a petition is up to three months. If a petition exceeds the three-month limit, the court can only consider a delay of up to thirty days, provided there’s a valid reason. Furthermore, the applications made under Section 34 are to be made in accordance with Section 34(2) read with Section 34(3) of the 1996 Act. Therefore, filing beyond the Section 34(3) time frame does not adhere to the ‘in accordance with’ requirement mentioned under clause 1 of Section 34. 

The Supreme Court, in the case of Simplex Infrastructure Limited v. Union of India (2018), clarified that the intention of the legislature is evident in the proviso to Section 34(3), where a thirty-day extension post the three-month deadline is explicitly limited. Consequently, Section 5 of the Limitation Act, 1963 does not apply to challenges under Section 34, and the benefit of Section 14 of the Limitation Act can be extended only to the extent of the time period prescribed under Section 34 3) of the 1996 Act. 

Is limitation period of 3 months under Section 34 interpreted as 90 days

The Supreme Court in State Of H.P.& Anr vs M/S Himachal Techno Engineers & Anr (2010) has sought to clarify on the matter regarding the interpretation of the limitation specified under Section 34(3) of the 1996 Act. The issue before the court was whether the time limit of 3 months could be considered as 90 days. The court while deciding upon the issue decisively asserted that the limitation period of 3 months as provided under clause 3 of Section 34 should not be interpreted as equivalent to 90 days. The reason for the same as provided by the court emanates from the important observation made by the court that the language used in Section 34(3) differs from that in the proviso. The court points out that while Section 34(3) uses the word ‘month’, the proviso uses the term ‘days’. Following this observation the court asserted that such a distinction in the use of terminology within the same subsection highlights the Legislature’s conscious intention of not using uniform units. Therefore, the Supreme Court in this case held that the limitation period of 3 months as given under Section 34(3) can not be construed as 90 days and similarly, the 90 days period as provided in the proviso to Section 34(3) can not be equated as one month.

When does the receipt or service of the award become effective

As per the limitation period provided under Clause 3 of Section 34 of the 1996 Act, the period of 3 months is calculated from the date on which the applicant making the application receives an award. The Supreme Court in the case of Techno Engineers case clarified that the physical delivery in the office of the party on the day which is a non-working day does not render such delivery as effective and thus does not qualify as the date of receipt. The court further clarified that the delivery shall be considered effective only when it has been practically received and acknowledged by the party concerned. Hence, if the day on which the award was delivered was a holiday, such delivery shall not be construed as a receipt on that day. Instead, the next working day shall be recognized as the date of receipt of the award. Moreover, on the question concerning the calculation of the time period for filing the application under Section 34, the court held that the limitation period will start from the day following the actual receipt of the award by the party as mentioned above.

In the case of Union of India v. Tecco Trichy Engineers and Contractors (2002), the Supreme Court by observing that delivery of an arbitral award and its receipt by the other party initiates the limitation period and the rights of the party in connection thereto, underscored that this requirement is not just a procedural formality but holds utmost importance. The court emphasised that to consider the delivery of an award as effective, it must be actually received by the party. With the help of an illustration, the court asserted that in the case of a large organisation (like the railway), the delivery of an award will be effective only when a copy of the award has been received by the person who has the knowledge of the proceedings and who completely understands and appreciates the award and also who would be the best person to take initiative in the matter of moving an application under Section 34 of the 1996 Act.

The Supreme Court through its various judgments has emphasised that in the presence of a legislature that mandates the delivery, dispatch, rendering, communicating, forwarding, or sending the copy of an award to the party concerned in a prescribed manner and also provides for a limitation period for challenging the said order, for them the computation of the limitation period starts only from the date on which the party receives an award in accordance with the prescribed method provided in the legislature. In line with the aforementioned principle, the Supreme Court in the case of Benarsi Krishna Committee and Ors. v. Karmyogi Shelters Pvt. Ltd (2012) held that the receipt of an award by an advocate of the party does not qualify as effective delivery for the computation of the limitation period. The court highlighted that as per the provisions of Section 31(5) of the 1996 Act, delivering the signed copy of the award directly to the party and not to its advocate shall be considered as the proper compliance with the provisions of that section. Again, in the recent case of Dakshin Haryana Bijli Vitran Nigam Ltd. v. M/s Navigant Technologies Pvt. Ltd (2019), a division bench of the Supreme Court clarified that the date on which the concerned party receives a signed copy of an arbitral award is the date on which the limitation period for filing objection would commence.

Remission of an award to Arbitral Tribunal

In general, Section 34 of the 1996 Act outlines the ground and process for setting aside an arbitral award. However, there is a particular provision under Section 34 that provides for the remission of an award to the arbitral tribunal. Remission means adjourning the proceedings for a determined period of time to enable the tribunal to ascertain the grounds on which challenges to an award have been raised and to eliminate them. Section 34(4) of the 1996 Act specifically authorises the court, on the request of the party and if the court finds it necessary, to allow the arbitral tribunal to continue the arbitration proceeding or take actions to address the issues leading to the challenge of the arbitral award. This provision is incorporated with the objective of empowering the court to provide the arbitral tribunal with an opportunity to resolve matters before the award is set aside.

Scope of Section 34(4) of the 1996 Act

A Division Bench of the Hon’ble Supreme Court, in one of its remarkable recent rulings dated January 3, 2022, consisting of Hon’ble Mr. Justice R. Subhash Reddy and Hon’ble Mr. Justice Hrishikesh Roy, rendered a significant judgment in the case of I-Pay Clearing Services Private Limited v. ICICI Bank Limited (2022). The judgment provides an analysis of the applicability and interpretation of Section 34(4) of the 1996 Act, clarifying the scope and implications of this particular provision.

I-Pay Clearing Services Private Limited vs. ICICI Bank Limited (2022)

Section 34(4) of the 1996 Act allows for the recording of reasons either to substantiate the findings already made in the arbitral award or to address any gaps in its reasoning. The court clarified the distinction between ‘finding,’ which refers to a decision on an issue, and ‘reasons,’ which are the connections between the supporting evidence and the ultimate conclusions. In the absence of a specific finding on critical matters, such as the termination of the contract, it was emphasised that this provision should not be invoked merely to provide additional reasons or fill gaps in the reasoning of the arbitral award.

Facts of the case

In this case, the facts are that the I-Pay Clearing Services Limited (I-PayServices) and ICICI Bank Limited (ICICI Bank) entered into an agreement on November 4, 2002. As per the terms of the Agreement, I-Pay Services was responsible for providing technology and operations services for Smart Card-based loyalty programs for Hindustan Petroleum Corporation Ltd. Later on, the parties entered into another agreement on February 4, 2003. Under the terms of this agreement, I-Pay Services had to develop the ‘Drive Smart Software’. Subsequently, it was requested by ICICI Bank, requiring I-Pay Services to create an additional software called ‘Drive Track Fleet Card’, and treating it as an extension of the Service Provider Agreement dated 04.11.2002.

I-pay being dissatisfied with the abrupt termination of the agreement dated November 4, 2002, by ICICI Bank, proceeded to initiate arbitration proceedings as per the terms of the agreement. I-Pay Services claimed compensation for the loss incurred amounting to ₹95 Crores. Upon hearing the parties and analysing the evidence presented, the arbitrator issued an award in favour of I-Pay Services ordering ICICI Bank to pay ₹50 Croes together with interest and costs (referred to as the Impugned Award).

Thereafter, ICICI Bank filed an application under Section 34(1) of the 1996 Act to the Bombay High Court, seeking to set aside an Impugned Award on the grounds of patent illegality. The argument provided by the ICICI Bank was that the arbitrator did not decide upon the matter of invalid termination of an agreement by the Respondent (Issue No. 1). ICICI Bank further contended that the arbitrator, without evaluating the evidence on record and considering whether there was a mutual agreement and satisfaction between the parties regarding the contractual obligations, ordered to pay the compensation to I-Pay Services.

In the same proceeding, I-Pay Services filed an application for an adjournment of the proceeding and directing the arbitrator to address the issue and take action to eradicate the grounds leading to set aside the Imugned Award as provided under Section 34(4)

Taking the matter into consideration the Bombay High Court through its order dated July 16, 2019 (Impugned Order) rejected the application filed by I-Pay Services under Section 34(4). The court stated that the arbitrator should not have rendered findings on the claims in the Impugned Award without resolving Issue No. 1 emphasising that this defect in the award was not one that could be rectified. I-Pay Services Challenged the Impugned Order by way of appeal before the Supreme Court. They argued that although the arbitrator correctly awarded damages based on the illegal termination of the contract by ICICI Bank, the omission of detailed reasons in the Impugned Award constituted a curable defect under Section 34(4) of the 1996 Act.

Issues involved in the case

The issues raised before the Supreme Court to resolve were as follows:

1. Whether an arbitral award can be remitted to an arbitrator when no findings on the issues involved for the arbitrator to determine have been provided under the award.
2. Whether the court has the authority to set aside an award when an application under Section 34(4) has been filed for the remission of an award to the arbitral tribunal.

Judgment

The Supreme Court in this case affirmed the dismissal of the application filed under Section 34(4) of the 1996 Act by the Hon’ble High Court and made several observations for the purpose of determining the issues raised in the case. The court further observed that cases referred to by the I-Pay Service were distinguishable on facts and would be of no use in this matter regarding Section 34(4) of the 1996 Act. 

The court briefly referred to Section 31 of the 1996 Act and emphasised that every arbitral award should describe the reasons on which the award is based, unless parties agree otherwise under Section 30 or if the award is on agreed terms. Following this reference to Section 31, the court clarified that under Section 34(4) remission of an award to an arbitral tribunal can be granted to allow for recording reasons on findings already given in the arbitral award to fill gaps. The court asserted that since in the present case there are no findings on an issue, remission is not permissible. 

The ‘findings’ and ‘reasons’ of the case connote different aspects and hence in order to substantiate the difference between the two the Supreme Court relied on several of its cases. The court referred to the judgment in the case of Income Tax Officer, A Ward, Sitapur v. Murlidhar Bhagwan Das (1965). In this case, the court has attempted to define a ‘finding’ as a decision on an issue and also to the judgment. The court also relied on the judgment in the case of J. Ashoka v. University of Agricultural Sciences (2017) in which reasons is defined as the “links between materials on which conclusions are based and the actual conclusions.” Therefore, in line with the principles held in the aforementioned case, the Supreme Court asserted that a harmonious interpretation of Sections 31, 34(1), 34(2A), and 34(4) of the 1996 Act authorises the court to provide an arbitrator with an opportunity to continue with an arbitration proceeding to facilitates the presentation of ‘reasons’ supporting a ‘finding’ already provided in the arbitral award. 

On the issue of whether the court has the authority to set aside an award when an application for remission has been filed under Section 34(4), the court held that the phrase “where it is appropriate” in Section 34(4) of the 1996 Act indicates that the court has the discretion to remit the matter to the arbitrator. Consequently, it is not mandatory or obligatory for the court to remit the matter to an arbitrator because an application has been filed. If it is found by the court that no finding is recorded on an issue, the court may reject the Section 34(4) application.

Doctrine of severability and setting aside of an arbitral award

Section 34 of the 1996 Act allows a court to partially set aside an arbitral award on the basis of a ground provided under the proviso to Section 34(2)(a)(iv) of the 1996 Act.

When an award consists of different claims and both the claims are independent of each other, each claim may be considered as a distinct award. Thus a claim subject to a challenge can be partially set aside. This principle emphasises the applicability of the doctrine of severability and the option for partially setting aside an award engraved under Section 34 of the 1996 Act.

NHAI vs. Trichy Thanjavur Expressway Ltd.(2023)

The Delhi High Court in the recent case of NHAI v. Trichy Thanjavur Expressway Ltd. (2023) (“NHAI case”) provides the difference between modification and partial setting aside of an award. Such an analysis by the court clarifies that the decision given in the case of NHAI v. Hakeem & Anr.(2021) does not serve as an authority on the matters related to the partial setting aside of an award.

The court also put some light on the purpose and scope of Section 34(4) clarifying that this section aims to ensure defects in the awards without reassessing past findings. Thereby ensuring a limited opportunity for rectification while preserving the overall integrity of the award.

Background of the case 

The Delhi High Court in the NHAI case was approached to decide upon the court’s authority to partially set aside an arbitral award under Section 34 of the 1996 Act.

The case is based on the legal principle established in NHAI v. In Hakeem & Ors.(2021) (“Hakeem case”). The Supreme Court in this case, clarified that the authority of the court to set aside an arbitral award under Sectio 34 of the 1996 Act does not mean that the court also has the authority to change and amend the award that was granted by the arbitral tribunal. In the Hakeem case, the principal point of interest was the judgment of the District and Sessions Judge to increase compensation awarded by the arbitrator in an award. In its decision, the Supreme Court underlined the fact that if defects or gaps were found in the award or ground provided under Section 34 were identified, setting aside an award is the only option available, as opposed to modification which is not expressly provided in the 1996 Act. This leads to a crucial question as to whether decisions made in the Hakeem case also prohibit the court from partially setting aside the award. 

As per the provisions contained in the proviso to Section 34(2)(a)(iv), the court has the authority to partially set aside an award, provided that the matter that is submitted to the arbitrator for the resolution is severed from the matters that is not submitted. Only those matters forming part of an award that are not submitted to arbitration may be set aside

The Delhi High Court, aligning its judgment with the said provision, has cleared the confusion posed by the Hakeem case on the issue of the court’s authority to partially setting aside an award. 

Facts of the case

As per the facts of the case the appellant purchased certain lands from the Respondents under the National Highways Act, 1956 (“NHA”). When the Land Acquisition Collector offered compensation to the Respondents, they initiated an arbitration proceeding under Section 3G(5) of the NHA on being dissatisfied with the compensation offered. The arbitration proceeding was led by Respondent 1, who decided the matter in favour of the remaining Respondents. Consequently, the Appellants challenged the arbitral award before the District Court by filing an application under Section 34 of the 1996 Act. 

The District Court after hearing the matter, partially set aside an award with regard to an additional 10 percent amount on the total compensation, which was ordered to be paid to the Respondents for their loss of easementary rights according to Section 3G(2) of the NHA Act. Such an order was passed due to a lack of evidence presented by the Respondents during arbitration proceedings. Following the District Court order, the Respondents appealed to the Bombay High Court under Section 37 of the 1995 Act against the partial setting aside of an award.

Judgment and analysis

No Prohibition on partial setting aside of an arbitral award

Even though Section 34 of the 1996 Act, does not have an explicit clause permitting the partial setting aside of awards, the Delhi High Court through the interpretation of the provisions contained in Section 34 has allowed for the authority to partially set aside an award under certain conditions. Section 34(2)(a)(iv) provides for the setting aside of an award on matters that are beyond the scope of the arbitration agreement. The proviso to Section 34(2)(a)(iv) holds an important place for the full enforcement of this section. The proviso provides the court with the authority to set aside the part of the award that is related to the matters not submitted to arbitration. This suggests that the valid portions can be protected, acknowledging that partial setting aside is a valid concept. The proviso can be considered a safeguard, as it ensures that the parties are not required to restart the entire arbitration process, emphasising the separability of different parts of an award. The 1996 Act relies on the principle that each dispute is treated as an independent award subject to the arbitral panel’s power to issue interim final awards on separate claims, which, in turn, amplifies the doctrine of the separability of agreements.

Doctrine of severability

The court in this case clarified that each decision on a particular claim is treated as a separate award where an arbitration tribunal makes decisions on various claims, provided that each claim is independent of other claims. The court was of the view that a final award might address several claims, but the court shall treat each decision on an individual claim as a separate award. This approach relies on the fact that the authority of the arbitration tribunal extends not only to issuing a final award but also interim awards for different claims arising during the arbitration process. Thus, if an award that is challenged contains distinct parts, each having its own significance and interdependent on the other, the court may partially cancel or set aside an award. Such power of setting aside an award is in accordance with Section 34 of the 1996 Act.

Modification v. partially setting aside an award

The court in this case also attempted to answer the question of whether partially setting aside an award would go against the precedent set in the Hakeem case, wherein it was held that the power to set aside does not include the power to modify. The Delhi High Court while making a distinction between modifying an award and partially setting aside an award explained that the word “modify” means altering the final relief given by the arbitral tribunal. Referring to the case of JG Engineers v. Union of India (2011) and Saptarishi Hotels Pvt. Ltd. and Anr. v. National Institute of Tourism & Hospitality Management (2019), the court asserted that when the court attempts to partially set aside an award, it means cancelling a particularly problematic part of an award, which is separable and distinct from the other parts of an award. The main factor to consider while partially setting aside an award is whether the challenged claim can be removed without affecting other concussions made in an award.

Intent and scope of Section 34

The court examined the underlying purpose of Section 34 and emphasised that the role of this section is to address the defects without compromising the intrinsic aspect of the award or altering its main findings and conclusions. The primary intent of this provision is to rectify the issues that are considered to be curable without derogating the very basis of an award. The court further observed that Section 34(4) can not be invoked in the case of an award plagued by legal defects as provided under Section 34(2)(a) or (b). The court clarified that Section 34(4) serves as a tool for rectifying certain defects, but where an award is challenged on the grounds of it being illegal, the only recourse would be to set aside an award under Section 34 (2).

Recourse against setting aside of an arbitral award

When an Indian court revokes an arbitral award, the award will no longer be enforceable. The first recourse available to a party who is not satisfied with a domestic arbitral award is to apply for the setting aside of the award, resorting to Section 34 of the Arbitration Act. This may then give rise to an opportunity of appeal under Section 37 of the Act against the court order which either sets aside an arbitration award or refuses to do so under Section 34. According to Section 37 of the 1996 Act, an appeal can be made to the authorised court against specific orders only, including those that (a) decline to refer parties to arbitration under Section 8, (b) approve or disapprove measures under Section 9, and (c) annul or reject an arbitral award under Section 34. There is no provision regarding a second appeal from an order issued on appeal under Section 37. It is, however, important to note that despite the absence of a second appeal, the party has the right to approach the Apex Court by filing a petition under Article 136 of the Constitution.

Scope of Section 37

The scope of the section has been aptly dealt with by the Supreme Court in the case of Haryana Tourism Limited v. M/s Kandhari Beverages Limited (2022).

The facts of the case were that the Haryana Tourism Corporation chose the Respondent’s tender for supplying cold drinks to its tourist complexes. In accordance with their deal, the Complainant was expected to pay Rs. 20 Lakhs on brand promotion using a mutual agreement plan. The corporation had announced a Mango Fair and allotted a total of Rs.1 Lakh. The respondent asserted to have spent Rs.13.92 Lakhs. A dispute cropped up and the Corporation asked the Respondent those Rs. 19 lakh for sponsorship money.

The dispute was attempted to be settled through arbitration, where the arbitrator ordered the Respondent to pay Rs.19 Lakhs. The respondent’s counter-claim of Rs.13.92 Lakhs claim was rejected by the arbitrator. An application for setting aside an award was filed by the Respondent under Section 34 of the 1996 Act, but the same was rejected on 25.09.2014.

The Respondent then filed an appeal under Section 37 of the 1996 Act and the Hon’ble High Court of Punjab and Haryana allowed the appeal by delving into the claim’s merits.

The Corporation appealed the decision to the Supreme Court, contending that the High Court had exceeded its jurisdiction under Section 37 by setting aside the arbitrator’s award.

The Honourable Court, in their opinion, observed that the High Court had gone too far by delving into the details of the claim and hence had overrun the boundaries of Section 37.

The court held that as per the legal principles regarding setting aside an award, as developed by the courts in many cases, an award can only be set aside if it is against public policy in India. To set aside the award, Section 34/37 of the 1996 Act outlines certain grounds on the basis of which an award can be set aside. They are: (a) fundamental policy of Indian Law; (b) the interest of India; (c) justice or morality; or (d) if it is patently illegal. In the present case, none of these grounds were applicable. 

Based on these observations, the Supreme Court quashed the disputed judgment. The apex court also opined that the High Court encroached into the merits of the case and treated the appeal under Section 37 as if it were an appeal against the judgment and decree of the Trial Court. Therefore, the High Court made an arbitrary decision that laid it beyond the Section 37 jurisdiction of the 1996 Act.

Limitation period under Section 37

The Supreme Court in its recent judgment in the case of Government of Maharashtra v. Borse Brothers Engineers & Contractors Pvt. Ltd. (2021) attempted to clarify the legal framework regarding the limitation period of filing an appeal under Section 37 of the 1996 Act. While clarifying the doubt surrounding the limitation period under Section 37 of the 1996 Act, the court overturned the early precedent set by the court in the case of  N.V. International v. The State of Assam (2019).

The court in this case acknowledged that the appeal provided under Section 37 is of a dual nature, in the sense that it can be classified according to the value of the claims involved. For claims, the value of which is less than INR 3 lakhs, the Limitation Act sets either 90 or 30 days, depending on the court that issued the decree. Conversely, for claims exceeding INR 3 lakhs, the limitation period under Section 13(1A) of the Commercial Courts Act, 2015 is 60 days.

The court also asserted that Section 5 of the Limitation Act is applicable to both the categories of an appeal, enabling the condonation of delay if there exists sufficient cause. This means that the court has the discretion to consider an appeal filed after the expiry of the limitation period if the court is satisfied with the reasons provided by the appellant for the delay. Nonetheless, the court emphasised that the court should use caution while exercising its power to condone the delay under Section 37. The court stressed that it should be exercised with prudence and should be reserved for exceptional circumstances.

This ruling of the Supreme Court provides an important clarification on the confusion surrounding the timelines associated with filing appeals under Section 37. It highlights the importance of ensuring a nuanced and context-specific approach while applying law in a particular situation. The judgment strikes a balance between the necessity of expeditiously resolving the dispute as provided under the 1996 Act and the Commercial Courts Act, 2015 and recognising the need for taking a flexible approach to timelines that exceptional situations may require.

Constitutional validity of Section 34

As already mentioned, when the matters are agreed to be resolved by way of arbitration the court is barred from exercising its jurisdiction in such matters. Therefore any attempt to interfere in the arbitration process except as provided under Section 34 of the 1994 shall be unconstitutional. In line with the aforementioned principle the court in the case of TPI Ltd. v. Union of India (2000) held that the arbitration is an alternate forum for the resolution of a dispute and it is on the wish of the parties to opt in on their free will for their matters and if they agree to the decision of the arbitral tribunal by mutual agreement. There is no compulsion by any statute forcing the parties to resort to the arbitration procedure.

Setting aside the foreign award

Section 44 of the 1996 Act, offers a definition of a “foreign award” as an arbitral award addressing disputes arising from legal relationships, whether contractual or not, recognized as commercial under Indian law. The section emphasises that these provisions must align with a written arbitration agreement subject to the Convention outlined in the First Schedule. Additionally, these provisions should apply in territories declared by the Central Government, through an Official Gazette notification, as areas where the said Convention is effective, provided there are reciprocal provisions in place.

Part 1 (Section 34) of the 1996 Act furnishes the grounds to challenge or set aside the award to be applicable only to the awards within a state and not to foreign awards. On 6^th September 2012, In Bharat Aluminium Company v. Kaiser Aluminium Technical Service (2012), the Supreme Court held that the Indian Arbitration Act should be interpreted in a way to give effect to the objective or purpose of the Indian parliament that drafted this legislation. Such findings of the Supreme Court apply only to the arbitration agreement executed after 6 September 2012.

So part 1 of the 1996 Act has no application to the arbitrations occurring in matters outside India irrespective of the fact that whether parties choose to apply the 1996 Act or not.

In Bhatia Int. v. Bulk Trading case (2002), the Supreme Court held that even though there was no provision in Part 2 of the 1996 Act providing for the challenge to a foreign award, a petition to set aside the same would lie under Section 34 (part 1) of the 1996 Act which provides that provisions of the domestic award will be applicable to the foreign awards. The court held that the property in a dispute related to the shares in the Indian Company situated in India necessarily needed Indian laws to be followed to execute the award. The Court stated that in such a situation the award must be attested to the measurement of public policy of India and the Indian public policy cannot be affirmed through the implementation of the award on any foreign strand/support. Such a decision initiated the practice of setting aside a foreign arbitral award by Indian Courts and therefore the Supreme Court in the case of Bharat Aluminium Co v. Kaiser Aluminium Technical Services Inc (2012) changed its 2002 ruling and held that Part 1 of the 1996 Act shall not be applicable to the foreign awards.

In the case of Bulk Trading SA v. Dalmia Cement (Bharat Ltd.), (2006), the Delhi High Court held that in the case of a foreign award, as defined in Section 44 of the 1996 Act, a notable distinction exists regarding the remedy available. Unlike a domestic award under Part I of the 1996 Act, which can be set aside through an application under Section 34, there is no corresponding provision for such an application concerning a foreign award falling under Part II of the 1996 Act. Instead, Section 48 outlines the conditions for the enforcement of a foreign award. The procedural framework suggests that a party challenging the enforceability of a foreign award can raise objections when another party seeks its enforcement. Only at this juncture can the court, upon request from the party against whom enforcement is sought, refuse the enforcement based on the conditions stipulated in Section 48 of the 1996 Act.

Case laws related to setting aside arbitral award

Union of India v. Reliance Industries Limited & Ors (2023)

In this case, the decision passed by the Supreme Court of India has a direct implication on the parties who entered into an agreement with Indian counterparts before 6th September 2012 (pre-balco), wherein the contract has not expressly excluded the application of Part I of the 1996 Act. Moreover, this ruling marks an important step in the recent trend of the Indian courts acknowledging the independence of the arbitrators.

Background of the case

International parties engaged in arbitration agreements with Indian counterparts have been cautious regarding the participation of Indian courts in the arbitration proceedings. This concern stems from the applicability of Part 1 of the 1996 Act wherein an application can be filed to annul or set aside an arbitration award. The jurisdiction to annul or set aside an award is usually vested with the courts where the arbitral award was made.

Generally part I of the 1996 Act is applicable to arbitration proceedings conducted in India. However, the court in the case of Bhatia International v. Bulk Trading SA (2002) (“Bhatia Case”) expanded the application of Part I to arbitration seated outside India, unless expressly or impliedly excluded by the parties. Such an application resulted in setting aside foreign arbitral awards by an Indian court. Consequently, the Supreme Court in the case of Bharat Aluminium Co v. Kaiser Aluminium Technical Services Inc (2012) (“Balco case”) rectified the ruling passed in the Bhatia case by clarifying that Part I of the 1996 Act only applies to arbitration seated in India. However, the ruling passed in the Balco case was applicable to the arbitration agreements that were formed after the judgment was passed on 6th September 2012 and not to the agreements formed before this date.

The decision made by the Supreme Court in the recent case of Union of India v. Reliance Industries Limited & Ors (2023) has further weakened the impact of the Bhatia case ruling on the arbitration agreement formed before 6th September 2012.

Facts of the case

In the year 2000, the Ministry granted exploration and extraction rights for natural gas in Andhra Pradesh to M/s. Reliance and Niko. Subsequently, in 2011, Reliance transferred a part of its participating interest to British Petroleum through a Supplementary Contract. The dispute emerged when ONGC, in 2013, informed the Directorate General of Hydrocarbons about potential connectivity between gas reservoirs in the Reliance Block and ONGC Blocks. This led to litigation, and in response to a claim of USD 1.7 billion raised by the Ministry, Reliance invoked the arbitration clause in the contract. The arbitral tribunal, with a majority of 2:1, issued an award in favour of Reliance. However, this award faced a legal challenge before the Delhi High Court.

Issues involved

Whether the ruling passed in the Bhatia case is applicable to the arbitration agreement where the seat of arbitration is outside India?

Judgment

Undermining the influence of Bhatia on arbitration agreements predating Balco

The Supreme Court of India through its ruling diminished the influence of the Bhatia case on an arbitration agreement. The court recognized that since the arbitration agreement in question predates the Balco decision, the principles established by the Bhatia Case hold relevance in the present case. However, the court refused the applicability of Part I of the 1996 Act to the concerned arbitration agreement as the parties had explicitly mentioned that the seat of arbitration shall be London and the law governing the arbitration agreement shall be the English law. Due to this express agreement between the parties, the court decided that the applicant could no longer contend that Part I of the 1996 Act was applicable to the arbitration agreement. Through this judgment, the Supreme Court highlighted the potential chaos that would ensue if the parties were allowed to shuttle between Indian and England laws for dispute resolution.

Severability doctrine and the significance of the express choice of law clause in arbitration agreements

The doctrine of severability in international arbitration law stipulates that the law governing an arbitration agreement may differ from the governing law mentioned in the main contract. The issue often arises in cases where the main contract does not mention a governing law for the arbitration agreement. The court emphasised that the argument that the law of the arbitral seat should govern the arbitration agreement is not definitive as such an argument leaves room for another party to assert that the law governing the substantive contract should apply to the arbitration government. 

The decision passed by the Supreme Court in this case highlights the importance of incorporating an express choice of law clause for the arbitration agreement. Such an express mention in a contract simplifies potential disagreement, especially when an opposing party aims to question the appropriate law for the arbitration agreement. In the present case, the express choice of English law as the governing law for the arbitration agreement played a pivotal role in the decision passed by the Supreme Court for the non-invocation of Part I of the 1996 Act.

Reliance Infrastructure Limited v. State of Goa

Arbitration is a process that involves the resolution of the dispute outside of the traditional court set up by an unbiased and neutral third party, called an arbitrator. The responsibility of an arbitrator is to carefully listen to both parties and then make a decision and pass an arbitral award. Such an award can either be in writing or oral. Such an award is binding on both the parties involved. In a recent case of Reliance Infrastructure Limited v. State of Goa (2023), the Supreme Court emphasised the minimum court interference on the matters related to arbitration and opinionated that the award that is patently illegal on the face of it is liable to be set aside by the court.

Facts of the case

The facts of the case were that in the year 1997, the government of Goa entered into a Power Purchase Agreement (PPA) with Reliance Infrastructure for the production and purchase of power, together with several other agreements. Later on, as was mutually decided by the parties, Reliance Infrastructure converted their generating stations from open Cycle Generating Stations to a Combined Generating Machine. Such a conversion increased the price of generated power. Consequently, the state decided to stop buying power from Reliance Infrastructure. Following the negotiations with Reliance Infrastructure, which proposed to use Reclassified Natural Gas brought up to Goa by GAIL, the state agreed to repurchase the power at the mutually decided rates until the PPA expired. However, the state was not able to make the monthly payment despite multiple notices for such payments made by the company.

In order to recover the unpaid amount from the government, Reliance Infrastructure took assistance from the Joint Electricity Regulatory Commission (JERC) by filing the petition. The commission referred the matter for arbitration. Following this, an arbitral tribunal passed an award against the state and ordered it to pay an amount of Rs. 278.29 Crores along with interest. 

The state challenged an award by filing an application for setting aside an award at the Commercial Court under Section 34 of the 1996 Act. The Commercial Court refused to set aside an order, and hence, the state proceeded to file an appeal to the High Court under Section 37 of the 1996 Act. The High Court while hearing an appeal reviewed and reassessed the entire claim and evidence presented by the parties and thereafter partially set aside an award.

The company, being dissatisfied, challenged an order passed by the High Court by filing a special leave petition before the Supreme Court on the grounds of interference by the High Court into an award passed by the arbitral tribunal.

Issues involved

Whether the High Court passed a judgment by going beyond its authority and thus amounts to an interference by the court.

Judgment

The Supreme Court of India in this case set aside the decision made by the High Court and reinstated the arbitral award in its entirety. In their respective judgments, Justice Dinesh Maheshwari and Sanjay Kumar called out the High Court for erring in assessing the merits of an award. By referring to the judgment passed in the case of Delhi Airport Metro Express Pvt. Ltd. v. Delhi Metro Rail Corporation Ltd.(2021), the court emphasised that the court should exercise the practice of restraining themselves whenever they are approached for scrutinising an arbitral award and should always attempt to align it with the objectives of the 1996 Act. The court ruled that the reassessment of the factual aspects of an award amounts to interference by the court and thereby against the purpose of the 1996 Act. In addition to this, the court also held that the grounds of patent illegality should be strictly interpreted and should not be invoked in the case of minor errors in the award. The court thus observed that no patent illegality was evident in the award and the alleged errors did not fall under the scope of Section 34 of the 996 Act.

Conclusion

India has a modern and efficient Arbitration Act. Sections 34 and 37 provide for recourse against an arbitral award which may be set aside by a court on certain specified grounds. All these grounds are common to both domestic as well as international arbitral awards. The ground of public policy should only be interpreted as far as it aims towards broadening the public interest and not violating the basic notions of Indian laws. The judicial intervention should also be minimal for success and further promotion of Arbitration in India.

Frequently Asked Questions (FAQs)

Can we challenge the arbitration award?

Yes, an arbitration award can be challenged on the basis of the grounds mentioned under Section 34 (2) of the Arbitration and Conciliation Act, 1996.

Can an award be enforced while an application for setting aside the arbitral award is made?

Yes. Filing an application under Section 34 of the 1996 Act does not automatically stop the enforcement of an award. For staying an enforcement of an award a separate application under Section 36(2) of the 1996 Act must be filed with the setting-aside application, which, if allowed by the court, will result in a stay of the enforcement of the award.

References

• https://www.legalmatch.com/law-library/article/what-is-an-arbitration-award.html
• https://www.lawteacher.net/free-law-essays/commercial-law/setting-aside-an-arbitral-award-commercial-law-essay.php
• https://www.lawctopus.com/academike/arbitral-award-setting-aside/
• https://www.advocatekhoj.com/library/bareacts/arbitration/34.php?Title=Arbitration%20Act,%201940&STitle=Application%20for%20setting%20aside%20Arbitral%20Award
• https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3034688

• https://pdf4pro.com
• https://globalarbitrationreview.com/insight/know-how/challenging-and-enforcing-arbitration-awards/report/india#33D654EE3C1409C62E9122E560938071056FF751
• https://www.cyrilshroff.com/wp-content/uploads/2021/05/Challenge-to-an-arbitral-award-2021.pdf

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