In this blog post,  Mansumyer Singh, Advocate and a student pursuing a Diploma in Entrepreneurship Administration and Business Laws by NUJS, discusses the rectification of a domestic arbitral award concerning the contemporary scenario in India. 

Introduction

Arbitration is a form of dispute settlement system where the parties settle their disputes out of Court through an arbitral tribunal. The purpose of arbitration proceedings is to cut-short delay and to provide speedy and inexpensive Justice[1].

The earlier arbitration law in India was based on the English Arbitration Law. However, the subsequent advancements in arbitration law on the global scale prompted the substitution of the old Arbitration Act 1940 with the new Arbitration and Conciliation Act 1996. The Arbitration and Conciliation Act, 1996 is based on the UNCITRAL model of arbitration.

There is no provision for appeal against an arbitral award and it is final and binding between the parties to the arbitration proceedings. However, an aggrieved party can move to the court of law enjoying jurisdiction to hear the matter for setting aside the arbitral award on certain grounds specified in Section 34 of the Arbitration and Conciliation Act, 1996.

The present article analyses the rectification of domestic arbitral awards concerning Section 34 of the 1994 Act which lays down the conditions under which an arbitral award may be set aside.

Rectification of Domestic Arbitral Award

The mechanism provided in the 1996 Act aims to limit judicial intervention in arbitral proceedings. There is a substantial departure from the Act of 1940. The Arbitration Act of 1940 provided for three recourse against an arbitral award;

(a) rectification;

(b) remission and

(c) setting aside.

The recourses as mentioned above are now grouped into two. The Arbitral Tribunal, as well as the parties to the arbitration proceedings, can address the rectification of an award without the intervention of the Court[2].

As per the Arbitration and Conciliation Act, 1996, there is no provision to review the award passed by the Arbitral Tribunal on its own. There is no scope under the Act to review its award. A party to the proceedings who has suffered as a result of the arbitral award is required to challenge the same in accordance with law. When a party to the arbitration proceedings has not challenged the arbitral award by making an application under Section 34, the question of conducting a de novo inquiry by setting aside the award passed by the Tribunal on its own does not arise at all[3].

The 1996 Act makes provisions for the supervisory role of Courts, and for the review of the arbitral award only to ensure fairness. The intervention of the Court is envisaged in a handful of circumstances only, like, in the case of fraud or bias by the Arbitrators, violation of natural justice, etc.

The Court cannot correct errors of Arbitrators. It can only quash the award leaving the parties free to begin the arbitration again if so desired. Thus, the scheme of the provision aims at keeping the intervention of the Court to a minimum, and this can be justified as parties to the Arbitration agreement make a conscious decision to exclude the Court’s jurisdiction by opting for arbitration as they prefer the expediency and finality offered by it[4].

The parties cannot appeal against an arbitral award on its merits, and the court cannot interfere in such a situation. The Apex Court has observed that “an arbitrator is a judge appointed by the parties and as such an award passed by him is not to be lightly interfered with.”[5]

But this does not imply that there is no power vested in the court to keep an eye on the arbitrator’s actions. Keeping in mind the end goal, which is to guarantee legitimate action from the arbitrator in the interest of justice, the law permits certain cures against an award.

It is apparent that where a Court or quasi-judicial authority having jurisdiction to adjudicate on merit proceeds to do so, its judgment or order can be reviewed on merit only if the Court or the quasi-judicial authority is vested with the power of review by express provision or by necessary implication. The order passed is liable to be recalled and reviewed not because it is found to be erroneous, but because it was passed in a proceeding which was itself vitiated by an error of procedure or mistake which went to the root of the matter and invalidated the entire proceedings[6].

Setting Aside an Arbitral Award

Section 34 of the Act is based on Article 34 of the UNCITRAL Model Law on Arbitration, and the scope of the provisions for setting aside an arbitral award is far less than it was under the Sections 30 or 33 of the 1940 Act. The new Act was brought into being with the express Parliamentary objective of curtailing judicial intervention. Section 34 significantly reduces the extent of a possible challenge to an award[7].

Section 34 provides that an arbitral award may be set aside by a court on certain grounds specified therein. These grounds are:

• Incapacity of a party
• Arbitration agreement not being valid
• Party not given proper notice of arbitral proceedings
• Nature of dispute not falling within the terms of submission to arbitration
• Arbitral procedure not being by the agreement

Section 34(2)(b) mentions two more grounds which are left with the Court itself to decide whether to set aside the arbitral award:

• Dispute is not capable of settlement by arbitral process
• The award is in conflict with the public policy of India

To challenge the validity on an arbitral award, a party to the arbitration proceedings must make an application under Section 34 stating the grounds of challenge. An application for setting aside an arbitral award has to be made by a party to the arbitration agreement. But a legal representative can also apply for it on behalf of a party since she/he is a person claiming under them.

There is no special form prescribed for making an application under Section 34 of the Act except that it has to be a written statement.

References:

[1] Food Corporation of India v. Joginderpal Mohinderpal MANU/SC/0183/1989: AIR 1989 SC 1263.

[2] Food Corporation of India v. Joginderpal Mohinderpal MANU/SC/0183/1989: AIR 1989 SC 1263.

[3] Ultra Entertainment Solutions Pvt. Ltd., Rep. by its Authorised Signatory Vs.The Arbitral Tribunal Comprising of (Mr. Justice K. Jagannatha Shetty, Mr. Justice L. Sreenivasa Reddy, and Mr. Justice R.G. Vaidyanatha) and The State of Karnataka Through Under Secretary, Department of Finance MANU/KA/2569/2013

[4] Mc Dermott International INC. v. Burn Standard Co. Ltd. and Ors.

[5] Indu Engineering & Textiles Ltd. vDelhi Development Authority [2001]3SCR916,

[6] Kapra Mazdoor Ekta Union v. Birla Cotton Spinning and Weaving Mills Ltd.(2005) 13 SCC 777: AIR 2005 SC 1782

[7] Municipal Corp. of Greater Mumbai v. Prestress Products (India) (2003) 4 RAJ 363 (Bom)