Unlike litigation, an arbitration proceeding concludes by announcing of an award by the arbitrator. There are certain grounds under which an arbitration award can be set aside.
The grounds and circumstances in which an award may be set aside are provided in section 34 of the Arbitration and Conciliation act of 1996 as follows:—
- Party’s incapacity
When a party to arbitration who is incapable of protecting his own interests and also that he is not being represented by a person who could be capable for the protection of interests of such persons, then, in such cases the award will not be binding on that party and the award may be set aside on an application by the party.(for instance when a party is a minor or of unsound mind)
- When the agreement is invalid
When the award is given on the basis of an agreement that is invalid, such an award can be set aside.
An arbitration agreement can be invalid when the agreement was with respect to such a subject that could not be referred to arbitration. For instance in when the matter relates to the authenticity and legality of a will, such a matter cannot resolved by arbitration, and such a matter has to be looked into under the provisions of the Succession Act. Another example would be questions relating to matters which are categorised as non- compoundable under the Code of Criminal procedure.
- When proper Notice is not given to the party
An award can be challenged on the following grounds:
(a) When there was no proper notice given to the party regarding the appointment of arbitrator;
(b) When a proper notice regarding the arbitral proceedings was not given to the party;
(c) In circumstances when the party was unable to present its case.
- Award beyond the scope of reference
When an award is against the terms of the arbitration agreement and cannot make any reference to anything outsides the terms of the contract.
- When there is Illegality in the composition of tribunal or in proceedings of arbitration
An arbitration award can be set aside by an application under section 34 on the following:
(a) When the tribunal was not composed according to the agreement or,
(b) In situation when the procedure followed in the arbitration proceedings was not in accordance to the procedure that was agreed upon in the arbitration agreement
(c) In cases where there was no agreement the procedure was not followed in accordance with the procedure prescribed in the Act.
- Award in conflict of Public Policy
When an award is in conflict with the public policy, an application for setting aside such award can be made.
Thus if a party thinks that he did not agree to the procedure that was followed to reach to a decision, such a decision can be challenged. Similarly the award can be challenged when no proper notice was served to the party or when the award is against the public policy. The main motive behind the provisions under which an arbitration award can be challenged is to ensure a just and a fair procedure.