Grounds for Setting Aside an Arbitral Award
Under the Arbitration and Conciliation Act 1996, when two parties sign the arbitration agreement under Section 7 of the Act, the agreement has a binding effect on both the parties. Later on, when a dispute arises and the parties opt for arbitration, in this case the award provided by the appointed arbitrator will be binding on both the parties.
But there are instances when both the parties or either of the party is not satisfied with the award, in that case a recourse is also provided in the Act. In such cases they have an option to adress there concerns. For this, Section 34 of the Act provides certain grounds in which application for setting aside of an award can be made and further Section 37 provides for the provision of appeal regarding certain orders.
Section 34(2) of the Act provides following grounds for setting aside of an arbitral award by the Court-
- If there was some incapacity, or
- The law which the parties are subjected to makes the agreement void, or
- The party making the application was not provides with proper notification about the appointment of arbitrator or about arbitral proceedings or was not give a chance to present his case, or
- The award deals with the matters beyond the scope the arbitration agreement, or
- The composition of the arbitral tribunal or the arbitral procedure was not according with the agreement of the parties, or
- Where the subject-matter of the dispute is not capable of settlement by arbitration or the award is in conflict with any public policy of India.
Further, sub-section (3) of Section 34, limits the time period for making application up to 3 months from the date of receiving of the arbitral award and if a sufficient cause is shown it may be accepted later also. The court is of desecration as to provide for adjournment of proceedings or take any action which in its opinion is appropriate and requested by the party.
Under sub-clause (5) of Section 34, it is mandatory to issue a prior notice to the other party, then only can the application can be made by the applicant under this Act. When the award is either partial or some part of it consist the subject matter for which application for setting aside of the award has been made, in that case the other agreed or valid part of the award will be held as valid and it won’t be set aside. In these cases, the complete award is not under court’s view for setting aside only the matters for which application has been made are.
the Act only includes domestic arbitration under it's per-view and not the foreign awards. These provisions were not as it is in the old 1940 Act and further amendments has been made into this to add or amend the laws according to the present circumstances.
The court also has the power to set aside the award where it is in violation of patent legality which is not under the perview of this act. Till now, in many cases, Section 34 has be applied and interpreted by the court and forms one of the important sections of this Act.