Assignment on the subject:

LAW OF ARBITRATION

“Annulment of Arbitration Award”

Submitted by:
VIDHI SHARMA

(CLASS: III-III-C. ROLL NO: 38)

Government Law College, Mumbai

Professor in charge:
Prof. Cristina Carlos

Government Law College, Mumbai

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 ARBITRATION

Arbitration is a process where parties mutually agree to resolve a dispute through one or more
arbitrators, who deliver a legally binding decision. Opting for arbitration means choosing a private
dispute resolution method over going to court, and its key features include:

The Arbitration Act was enacted in 1996 to update the law of arbitration in India and make it more
responsive to contemporary requirements. The Act is modelled along the lines of the UNCITRAL
Model Law on International Commercial Arbitration, 1985, and while seeking to restrict the
intervention of courts, it envisages cooperation between the judicial and arbitral process.

The Act is divided into four parts:

 Part I contains provisions relating to the commencement and conduct of arbitral proceedings
held in India, as also challenge to and enforcement of awards.
 Part II deals with referring parties to (foreign seated) arbitration and enforcement of foreign
awards.
 Part III deals with conciliation.
 Part IV contains supplementary provisions (such as the power of a High Court to make rules
etc.).

ARBITRATION AWARD

The award must be in writing, dated and signed by the tribunal and must state the place of arbitration.
The award must also state the reasons on which it was based unless the award is based on agreed
terms, or the parties have waived the requirement of a speaking award. Within thirty days from the
receipt of the arbitral award, a party may request the arbitral tribunal to correct any computation,
typographical errors or other similar errors occurring in the award. A party may also (if so agreed by
all parties), request the arbitral tribunal to give an interpretation of a specific point or part of the
award.

SECTION 34: ANNULMENT OF ARBITRAL AWARD

Section 34 outlines the process for annulling an Arbitral Award through the submission of an
application before the competent court. This provision has a limited scope, subject to specific
constraints. The grounds specified in this section mainly focus on the procedural aspects of the
Arbitral proceedings or the presence of any illegality within them. Even the intervention of the High
Court through writ petitions is not entertained, as a mechanism for addressing grievances arising from
an Arbitral Award already exists.

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

SETTING ASIDE AN ARBITRAL AWARD:

Parties are precluded from appealing against an arbitral award on its merits, and the court cannot
intervene in such matters lightly, given the arbitrator's role as a judge appointed by the parties.
Although there is a limitation on challenging the arbitrator's conduct, certain remedies against an
award are available under the law.

Under the repealed 1940 Act, three remedies—modification, remission, and setting aside—were
available against an award. The 1996 Act has reorganized these remedies into two groups. The
remedy for rectifying errors has been delegated to the parties and the Tribunal, while the remedy for
setting aside has been adjusted to involve returning the award to the Tribunal for defect removal.

GROUNDS FOR SETTING ASIDE AN ARBITRAL AWARD (SECTION 34):

Section 34(1) of the Act permits a court to set aside an arbitral award based on specific grounds,
including:

1. Incapacity of a party.

2. Invalidity of the arbitration agreement.

3. Lack of proper notice to a party regarding arbitral proceedings or arbitrator appointment.

4. The dispute's nature not falling within the arbitration submission terms.

5. Arbitral procedure not aligning with the agreement.

Section 34(2)(b)(2) empowers the court to decide on two additional grounds:

1. The dispute not being arbitrable.

2. The award conflicting with the public policy of India.

If the decision on submitted matters can be separated from those not submitted, only the portion of the
award addressing matters outside the submission may be set aside.

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SCOPE AND LIMITATIONS (SECTION 34(3)):

Section 34(3) limits the scope of award-setting provisions, reflecting a deliberate move to curtail
judicial intervention, as stated in Municipal Corp. of Greater Mumbai v. Prestress Products (India).
Section 34(8) further restricts challenges to an award.

An aggrieved party must file an application under Section 34(9) stating the grounds of challenge.
While the application is typically made by a party to the arbitration agreement, a legal representative
can apply as a person claiming under them.

In Sanshin Chemical Industry v. Oriental Carbons & Chemical Ltd, the Supreme Court clarified that a
decision on the arbitration venue does not qualify as an award or interim award, making it non-
appealable under Section 34(12).

If parties act on an arbitral award during a challenge to its validity, as in Brijendra Nath v. Mayank, it
may stop them from later attacking the award.

EFFECTS OF SETTING ASIDE AN AWARD:

Setting aside an award renders it unenforceable by law, restoring the parties to their pre-award
positions. This process rejects the award's validity, making the matter open for decision through
arbitration or court proceedings.

GROUNDS FOR SETTING ASIDE - DETAILED ANALYSIS:

1. Incapacity of Parties: If a party lacks capacity or proper representation, the award may be set
aside. Section 9(14) enables an application for the appointment of a guardian.

2. Invalidity of Agreement: The agreement's validity can be challenged on grounds applicable to

contract validity. The law governing the agreement determines its validity.

3. Notice Not Given to Parties: Section 34(2)(a)(iii) permits challenge if proper notice is not given,
ensuring adherence to the prescribed timeline and sufficient notice for hearings.

4. Award Beyond Scope of Reference: If the award goes beyond the defined dispute reference, it is
liable to be set aside. Section 16 grants the Tribunal initial jurisdiction.

5. Illegality in Arbitral Procedure: Section 34(2)(a)(v) allows challenges for procedural

misconduct, deviation from agreed procedures, and arbitrator misconduct.

6. Dispute Not Arbitrable: Only matters affecting private rights are arbitrable. Criminal,
insolvency, and public rights matters cannot be arbitrated.

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 7. Award Against Public Policy: Section 34(2)(b)(ii) allows setting aside if the award conflicts
with public policy. Fraud or corruption in obtaining the award is also against public policy.

CONCLUSION:

Section 34's narrow scope emphasizes legislative intent to preserve the sanctity of arbitration, limiting
judicial interference and upholding principles of party autonomy and minimal court intervention.

LIMITATION FOR FILING APPLICATION

Section 34(3) provides that an application for setting aside an arbitral award must be made within 3
months of receiving the award or disposition of application by the arbitral tribunal. The importance of
this is emphasized by Section 36 which provides that the award becomes enforceable as soon as the
limitation period under Section 34 expires.

The proviso to Section 34(3) allows the party a further period of 30 days after the expiry of three
months if the court is satisfied that the party was prevented by a sufficient cause from making the
application. No application for setting aside the award can be entertained by the court after the expiry
of these additional thirty days.

In National Aluminum Co Ltd v. Presteel Fabrication (P) Ltd, proceedings were instituted before the
Supreme Court under the wrong belief that it had jurisdiction in the matter of setting aside. Time
spent on a bona fide prosecution of an application in a wrong forum was held by the Supreme Court to
be a sufficient cause for condonation of delay.

In Union of India v. Shring Construction Co (P) Ltd, sometime was lost in challenging the award in a
writ court which was declared to be not maintainable because the petitioner had his remedy under
Section 34 by the proceeding before the District Judge. The District Judge was then approached along
with an application for condonation of delay. He rejected it as time barred. The Supreme Court held
that the District Judge should have decided whether the application was within time after excluding
the period lost in a wrong court.

In Union of India v. Microwave Communication Ltd the Delhi High Court noted that, in contradiction
with Section 5, Section 4 “does not enlarge the period of limitation but it only enables the party to file
any suit, application, etc. on the reopening day of the Court if the Court is closed on a day when
limitation expires.” As there was no overlap of any sort between Section 4 and Section 34(3) the
Court held that Section 4 would apply in cases where there was not any lack of due diligence on the
part of the applicant. Interestingly, the Court also held that S. 4 was applicable even to situations
where the proviso to Section 34(3) was attracted – i.e., the thirty day condonation period.

A bare reading of Section 34(3) read with the proviso makes it abundantly clear that the application
for setting aside the award will have to be made within three months. The period can further be
extended, on sufficient cause being shown, by another period of thirty days but not thereafter. Section

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29 (2) of the Limitation Act, provides that when any special statute prescribes certain period of
limitation as well as provision for extension upto specified time limit, on sufficient cause being
shown, then the period of limitation prescribed under the special law shall prevail and to that extent
the provisions of the Limitation Act shall stand excluded. The provisions of Section 5 of the
Limitation Act would not be applicable because of the provisions of Section 29 (2) of the Limitation
Act.

REMISSION BY TRIBUNAL

When an application for setting aside an arbitral award has been made, the court may, instead of
adjudicating upon the grounds raised, adjourn the proceedings for a determined period of time to
enable the tribunal to deal with the grounds on which objection have been raised and to eliminate
them.

In T.N. Electricity Board v. Bridge Tunnel Constructions, the court held that where an award is
vitiated by an error of jurisdiction, the court can send it back to the arbitrator for rectification of the
error. Upon such adjournment the Arbitral Tribunal shall resume the arbitral proceedings and take
such action as will eliminate the grounds. The resumed proceedings can only be relating to the
grounds raised in the application under Section 34. It may become necessary to record fresh findings
and to amend the award. Thereafter the court would consider whether the grounds raised have been
eliminated and whether the award is liable to be set aside.

FOREIGN AWARDS

The grounds to challenge of awards given in Part I (section 34) of the Indian Arbitration Act are
applicable only to Domestic Awards and not to Foreign Awards. On September 6, 2012,
Supreme Court in Bharat Aluminum Co. v. Kaiser Aluminium Technical Service Inc. reconsidering its
previous decisions concluded that the Indian Arbitration Act should be interpreted in a manner to give
effect to the intent of Indian Parliament. In this case the Court reversed its earlier rulings in cases of
Bhatia International v. Bulk Trading S.A. & Anr. and Venture Global Engg v Satyam Computer
Services Ltd & Anr. stating that findings in these judgments were incorrect. Part I of the Indian
Arbitration Act has no application to arbitrations seated outside India irrespective of whether parties
chose to apply the Indian Arbitration Act or not. Most importantly, these findings of the Supreme
Court are applicable only to arbitration agreements executed after 6 September 2012. Thus all
disputes pursuant to arbitration agreement entered into upto 6 September 2012 shall be decided by old
precedents irrespective of fact that according to the Supreme Court such rulings were incorrect and
have been reversed.

Conclusively, we see that the law relating to setting aside of arbitral award in India is consonance
with the UNCITRAL model law as the national law is based on the same only. However, the
interpretation of the Supreme Court in several decisions like Bhatia International have raised serious
issues which to some extents have been resolved in the BAL Co case. The judicial intervention should
be minimal, and this practice has to be promoted in India so that arbitration may be succe

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 REFERENCES

 https://www.mondaq.com/india/arbitration--dispute-resolution/935374/arbitration--a-
perspective
 https://www.cyrilshroff.com/wp-content/uploads/2020/09/Guide-to-Arbitration-in-India.pdf
 https://blog.ipleaders.in/what-is-the-application-for-setting-aside-the-arbitral-awards/

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