Setting Aside Arbitral Awards in India: Grounds and Procedure

Introduction:

Arbitration is a widely accepted alternative dispute resolution mechanism in India, providing parties with a private and efficient means of resolving disputes outside the court system. However, in certain circumstances, parties may seek recourse to the court for setting aside an arbitral award. Section 34 of the Arbitration and Conciliation Act, 1996 governs the process of setting aside arbitral awards in India. This article provides a detailed overview of the grounds and procedure for setting aside arbitral awards under Section 34 of the Act.

Grounds for Setting Aside Arbitral Awards:

Under Section 34(2) of the Arbitration and Conciliation Act, an arbitral award may be set aside by the court if any of the following grounds are established:

1. Incapacity: If a party can prove that at the time of entering into the arbitration agreement, the other party was under some incapacity (e.g., minor or mentally incapable), the award may be set aside.

2. Invalid Arbitration Agreement: If the party shows that the arbitration agreement is not valid under the law to which the parties have subjected it or under the law in force at the time, the award may be set aside.

3. Lack of Proper Notice or Inability to Present Case: If a party was not given proper notice of the appointment of an arbitrator or the arbitral proceedings, or was otherwise unable to present its case, the award may be set aside.

4. Dispute Beyond Arbitration Scope: If the arbitral award deals with a dispute not contemplated by or falling outside the terms of the submission to arbitration, or if it contains decisions on matters beyond the scope of the submission, such portion of the award may be set aside.

5. Non-Compliance with Arbitration Agreement or Procedure: If the composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties or with the provisions of the Arbitration and Conciliation Act, and such agreement is not in conflict with non-derogable provisions of the Act, the award may be set aside.

6. Incapable of Settlement by Arbitration: If the court finds that the subject-matter of the dispute is not capable of settlement by arbitration under the law in force, the award may be set aside.

7. Conflict with Public Policy: An award may be set aside if it is found to be in conflict with the public policy of India. The Act explains that an award is in conflict with public policy if it was induced or affected by fraud, corruption, or violated Section 75 or Section 81 of the Act. Additionally, if the award contravenes the fundamental policy of Indian law or conflicts with basic notions of morality or justice, it may also be set aside.

8. Patent Illegality: For arbitral awards arising out of non-international commercial arbitrations, the court may set aside the award if it is vitiated by a patent illegality evident on the face of the award. However, mere errors in the application of the law or reappreciation of evidence are not sufficient grounds for setting aside.

Procedure for Setting Aside Arbitral Awards:

Section 34(1) stipulates that recourse to the court against an arbitral award can only be made by filing an application for setting aside the award under sub-section (2) and sub-section (3).

1. Time Limit: The application for setting aside the arbitral award must be filed within three months from the date on which the party making the application received the award or, if a request for correction or interpretation of the award was made under Section 33, from the date on which that request was disposed of by the arbitral tribunal.

2. Extension of Time Limit: In exceptional circumstances, where the court is satisfied that the applicant was prevented by sufficient cause from filing the application within the initial three months, it may entertain the application within a further period of thirty days, but not beyond that.

3. Notice Requirement: Before filing the application, the party must issue a prior notice to the other party, and the application must be accompanied by an affidavit endorsing compliance with this requirement (Section 34(5)).

4. Expedited Disposal: The court is obligated to dispose of the application expeditiously and, in any event, within one year from the date on which the notice referred to in sub-section (5) is served upon the other party (Section 34(6)).

Conclusion:

The Arbitration and Conciliation Act, 1996, provides a well-defined process for setting aside arbitral awards in India. Parties dissatisfied with an arbitral award may approach the court under Section 34 with appropriate grounds for seeking its annulment. The grounds for setting aside an award are designed to ensure that parties receive a fair and just arbitration process, while also safeguarding the sanctity of the arbitration system. It is important for parties involved in arbitration to be aware of their rights and obligations under this Act to make the best use of the alternative dispute resolution mechanism and uphold the integrity of the arbitration process.