Application for setting aside arbitral award
(1) Recourse to a Court against an arbitral award may be made only by an application for setting aside such award in accordance with sub-section (2) and sub-section (3).
(2) An arbitral award may be set aside by the Court only if—
| (a) | the party making the application [establishes on the basis of the record of the arbitral tribunal that]— |
| (i) | a party was under some incapacity; or | |
| (ii) | the arbitration agreement is not valid under the law to which the parties have subjected it or, failing any indication thereon, under the law for the time being in force; or | |
| (iii) | the party making the application was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings or was otherwise unable to present his case; or | |
| (iv) | the arbitral award deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration, or it contains decisions on matters beyond the scope of the submission to arbitration: | |
| Provided that, if the decisions on matters submitted to arbitration can be separated from those not so submitted, only that part of the arbitral award which contains decisions on matters not submitted to arbitration may be set aside; or | ||
| (v) | the composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties, unless such agreement was in conflict with a provision of this Part from which the parties cannot derogate, or, failing such agreement, was not in accordance with this Part; or |
| (b) | the Court finds that— |
| (i) | the subject-matter of the dispute is not capable of settlement by arbitration under the law for the time being in force, or | |
| (ii) | the arbitral award is in conflict with the public policy of India. |
[Explanation 1.—For the avoidance of any doubt, it is clarified that an award is in conflict with the public policy of India, only if,—
| (i) | the making of the award was induced or affected by fraud or corruption or was in violation of section 75 or section 81; or | |
| (ii) | it is in contravention with the fundamental policy of Indian law; or | |
| (iii) | it is in conflict with the most basic notions of morality or justice. |
Explanation 2.—For the avoidance of doubt, the test as to whether there is a contravention with the fundamental policy of Indian law shall not entail a review on the merits of the dispute.]
[(2A) An arbitral award arising out of arbitrations other than international commercial arbitrations, may also be set aside by the Court, if the Court finds that the award is vitiated by patent illegality appearing on the face of the award:
Provided that an award shall not be set aside merely on the ground of an erroneous application of the law or by reappreciation of evidence.]
(3) An application for setting aside may not be made after three months have elapsed from the date on which the party making that application had received the arbitral award or, if a request had been made under section 33, from the date on which that request had been disposed of by the arbitral tribunal:
Provided that if the Court is satisfied that the applicant was prevented by sufficient cause from making the application within the said period of three months it may entertain the application within a further period of thirty days, but not thereafter.
(4) On receipt of an application under sub-section (1), the Court may, where it is appropriate and it is so requested by a party, adjourn the proceedings for a period of time determined by it in order to give the arbitral tribunal an opportunity to resume the arbitral proceedings or to take such other action as in the opinion of arbitral tribunal will eliminate the grounds for setting aside the arbitral award.
[(5) An application under this section shall be filed by a party only after issuing a prior notice to the other party and such application shall be accompanied by an affidavit by the applicant endorsing compliance with the said requirement.
(6) An application under this section shall be disposed of expeditiously, and in any event, within a period of one year from the date on which the notice referred to in sub-section (5) is served upon the other party.]
CASE LAWS
■ This Court stated that if the provisions of the old Act, i.e. Arbitration Act, 1940, were applicable to the case, then the objections under section 34 of Arbitration and Conciliation Act, 1996, were not maintainable. – Sanjay Madan v. National Insurance Company MANU/HP/0728/2010.
■ The Courts discerned the limits of judicial Interference with an Arbitration Award under section 34. An Arbitrator’s Award may be set aside for error of law appearing on the face of it, though the jurisdiction is not lightly to be exercised. The jurisdiction is one that exists at common law independently of statute. In order to be a ground for setting aside the award, an error in law on the fact of the award must be such that there can be found in the award, or in a document that is actually incorporated with it, some legal proposition which is the basis of the award and which is erroneous. If a specific question of law is submitted to the arbitrator for his decision and he decides it, the fact that the decision is erroneous does not make the award bad on its face so as to permit its being set aside; and where the question referred for arbitration is a question of construction, which is, generally speaking, a question of law, the arbitrator’s decision cannot be set aside only because the Court would itself have come to a different conclusion; but if it appears on the face of the award that the arbitrator has proceeded illegally, as, for instance, by deciding on evidence which was not admissible, or on principles of construction which the law does not countenance, there is error in law which may be ground for setting aside the award.- The Tata Hydro-Electric Power Supply Co. Ltd. v. Union of India, MANU/MH/0056/2001.
■ Section 34(1) confers substantive right on a party to challenge an arbitral award. section 34(5) does not prescribe the nature of the notice or the contents of the notice and the said provision is vague. Section 34(5) of the Act does not provide for any consequences of non-compliance and leaves the consequences of non-compliance to the discretion of the Court. Section 34(5) and 34(6) inserted by the Amendment Act is concerned, the same being directory and not mandatory, all such arbitration petitions filed without issuing such notice prior to the date of filing of the arbitration petition cannot be dismissed on that ground. – Haresh N. Awatramani v. The Saraswat Co-opertaive Bank 2018 SCC OnLine Bom 233.
UNION TERRITORY AMENDMENT
JAMMU AND KASHMIR/LADAKH
♦ Section 34
| – | After sub-section (2), insert the following sub-section, namely:— |
| “(2A) An arbitral award may also be set aside by the Court, if the Court finds that the award is vitiated by patent illegality appearing on the face of the award: | ||
| Provided that an award shall not be set aside merely on the ground of an erroneous application of the law or by re-appreciation of evidence.”; |
| – | in sub-section (3),— |
| (i) | for “three months” substitute, “six months”; | |
| (ii) | in proviso for, “three months” and “thirty days” substitute respectively “six months” and “sixty days”. – Vide the Jammu and Kashmir Reorganisation (Adoption of Central Laws) Order, 2020, w.e.f. 18-3-2020 and the Union Territory of Ladakh Reorganisation (Adoption of Central Laws) Order, 2020, w.e.f. 23-10-2020. |