This paper focuses on the grounds on which an arbitral award can be challenged.
Arbitration is an auxiliary process where the parties can resolve their dispute
rather than determining their rights in court of Law. Arbitration is cheaper
when compared to court proceedings and attorney's fee. It also resolves the
dispute in the shortest time possible unlike court's procedure.
In this paper,
you can see how a domestic award can be set aside and how an award entirely can
be declared void. In the same way you can also see how an International award is
enforced in India, when arbitral proceedings are of foreign laws. This paper
also delineate some of the important judgments of the court on the matters where
an arbitral award is challenged.
An Arbitral Award is an award which includes an interim direction by the
tribunal. It includes financial and non-financial award and a final award
determining the rights of the parties. An Arbitral Award is passed by an
Arbitrator or by an arbitral tribunal. Interim awards include orders which
restrain parties from performing certain activities, such as stopping business
activities which might alienate the main essence of the dispute.
decision rendered during the arbitration proceedings which is passed by the
arbitrator/s is called as an Arbitral Award. Arbitral Award is defined under
section 2(1)(c) of the Arbitration and Conciliation Act 1996. There are two
kinds of Award, Domestic Award and Foreign Award. Domestic award is an award
which is rendered as a result of domestic arbitral proceedings, whereas Foreign
award is an award which is a result of foreign arbitral proceedings, when
dispute is between an Indian Origin party and a foreign party.
An Arbitral award
consists of requisites which enables the enforcement of the award. There are
certain ways by which an arbitral award could be changed, modified and
clarified. However, this paper focuses on grounds available to aggrieved party
to set aside an arbitral award passed by the arbitrator/s during arbitration
proceedings through an application filed under Section 34 of Arbitration and
Conciliation Act, 1996 or by appealing to High Courts. In this paper the
procedure required to set aside an arbitral award is clearly demonstrated along
with grounds substantiated with case laws.
Arbitration is one of the methods in resolving dispute without approaching the
Court. Usually the decision is rendered by a tribunal, and both the parties will
get monetary benefits rather than deciding their rights and liabilities. The
main aim of ADR system is to reduce burden of judiciary due to pendency of many
cases. It also aims to provide a systematic, strategic, effective and satisfied
resolution to the parties. Arbitration and the ADR system aid Indian Judiciary
in adjudicating matters in less time, however any award passed in arbitration
proceedings can be challenged in court, if the aggrieved party feels that
justice has not been served.
Object of study
By reading this paper, a student, a scholar and a lawyer will understand the
grounds on which an arbitral award can be challenged. They can also understand
the procedure to be followed for setting aside an arbitral award under section
34 of Arbitration and Conciliation Act, 1996.
Definition of Arbitration
Under section 2(1)(a) of Arbitration and Conciliation Act 1996 defined
arbitration as, any arbitration whether or not administered by permanent
WIPO has defined arbitration as:
"Arbitration is a procedure in which a dispute
is submitted, by agreement of the parties, to one or more arbitrators who make a
binding decision on the dispute. In choosing arbitration, the parties opt for a
private dispute resolution procedure instead of going to court".
Courts have consistently adopted the view that the process of arbitration
requires as essential ingredients the existence of a dispute or the potential of
a dispute requiring resolution between the parties, an agreement to refer such
disputes to a third person as arbitrator and whose decision is to be final and
binding upon the parties.
An Arbitration is a reference to the decisions of one or more persons either
with or without an umpire, a particular matter in difference between the
In simple arbitration is a mechanism of resolving dispute using arbitrator and
other private entities. The person who is resolving the dispute is called as
arbitrator, where any decision made by the arbitrator in due course of process
is called as arbitral award. An arbitral award is equivalent to the decree or
order passed by a civil court. Arbitration provides in speedy resolution and
disposal of dispute without hampering the relation between parties.
passed by the arbitrator is binding on parties and have clean enforceability.
Arbitration is considered as a substitute to your of law which removes hassle to
the court in deciding large amount of pending cases. Any arbitral award can be
challenged in court of law by an appeal filed under section 96 of Civil
procedure code, 1908 or it can be declared void or set aside or cancelled under
section 34 of Arbitration and Conciliation Act, 1996.
Characteristics of Arbitration:
- Arbitration is consensual, where both the parties mutually agree to resolve the
matter without going to court.
- Parties have liberty to choose their arbitrators.
- Arbitration is a confidential procedure and it is easy to enforce an arbitral
Kinds of Arbitration:
- Domestic Arbitration:
Domestic Award is not specifically defined in Arbitration
and Conciliation Act of 1996, however the definition and the scope can be
derived from interpreting section 2(2)(7) of Arbitration and Conciliation Act,
1996. Therefore when the Indian procedural and substantive law is followed in
rendering arbitral award, then it is called as domestic arbitration.
- International Arbitration:
When the arbitral award is rendered in an arbitration
procedure following the International procedural law. Usually this type of
arbitration happens outside India, and parties may of any origin. To constitute
an international arbitration there are certain to be fulfilled: 1. Parties must
be domiciled aboard, and 2. Subject matter i.e., trade must be international in
- Institutional Arbitration:
When parties to dispute decided to follow and resolve
their dispute through a selected Arbitral institute. Usually institutional
arbitrators are people who are expertise in particular trade matters.
- Ad-hoc arbitration:
this type arbitration don't adhere to any rules of
arbitration and parties are under no obligation to submit their problem in
prescribed manner. The parties have privilege to set their own rules for
arbitration and their choice in choosing geographical jurisdiction.
- Fast track arbitration:
Fast track arbitration is similar to a normal
arbitration, but the proceedings must be disposed within 6 months. The aim to FTA is to speed up the process. It was introduced in the year 2015 by Government
of India in Arbitration and Conciliation Act, 1996.
The court said that the new Act was enacted to curtail the judicial
intervention, however judiciary is open in deciding the validity of an arbitral
Grounds for challenging an arbitral award under Arbitration and Conciliation
An arbitral award cannot be challenged under any provision of 1996 Act, however
it can be set aside through an application filed under section 34 of 1996 Act.
The following are the grounds of setting aside or cancelling an arbitral award
- The court may set aside an arbitral award through an application filed by either
of parties under section 34(1) of 1996 Act, under grounds mentioned in section
34(2) and 34(3) of 1996 Act.
- A domestic may be set aside by the court, if the applicant (party to the
dispute) submits the proof that the other party is incompetent or insolvent or
mentally unstable or lunatic or of unsound mind or minor. (Section 34(2)(a)(i)
of Arbitration and Conciliation Act, 1996)
- A domestic award may be set aside when the arbitration agreement is not valid.
(Section 34(2)(a)(ii) of Arbitration and Conciliation Act, 1996)
- A domestic award may be set aside by the court, when the parties did not enter
into an arbitral agreement to resolve their dispute through means of ADR.
(Section 34(2)(a)(ii) of Arbitration and Conciliation Act, 1996.
- A domestic award may be set aside when the intended party did not give a proper
prior notice to the other party inviting him for arbitration. (Section 34(2)(a)(iii)
of Arbitration and Conciliation Act, 1996). It is the duty of appellant to send
a notice regarding the appointment of arbitrator. When an ex-parte award is
granted by the arbitrator against respondent, which is a result of not sending
notice, shall order or award shall be considered as illegal.
- A domestic award may be set aside by the court, when arbitral award is not
passed based on submission made during arbitration. (Section 34(2)(a)(iv) of
Arbitration and Conciliation Act, 1996). In the case of Rajinder Kishan v. Union
of India, the matter of arbitration was referred by the High Court, directing
that the arbitration should not decide on the matter of compensation. However,
the arbitral award prescribed the compensation to be paid, and the High Court
held such award as void, as the arbitration acted out of its scope.
- A domestic award may be set aside if the composition was not as prescribed in
section 11 or part I of the 1996 Act, or not in compliance with the agreement
made by the parties. (Section 34(2)(a)(v) of Arbitration and Conciliation Act,
- A domestic award may be set aside, when court is under impression that the
settlement is out of purview of the arbitration under section 34(2)(b)(i) of
- A domestic award may be set aside, if court feels that the said arbitral award
is against public policy of India, where it affects economy of India or
influenced by fraud or corruption or award is in contravention with the
fundamental policy of Indian law or when such award is in conflict with basic
notion of morality and social justice under section 34(2)(b)(ii) of Arbitration
and Conciliation Act, 1996.
Requisites for challenging the award before court
- The applicant must file within 3 months from the date of
receipt of arbitral award, and it may be extended if the party
have made any objections under 1996 Act
- The applicant must serve a proper notice to the other party after filing
application. The notice must be accompanied by application and an affidavit by
the applicant endorsing the compliance with all requirements.
- The party must submit proper evidence demonstrating grounds mentioned in section
34 of Arbitration and Conciliation Act. 1996.
- The court must satisfy to the prima facie that the arbitral award can be set
- The application shall be filed within stipulated time under section 34(3) of
Arbitration Act and in compliance with section 34(1) of 1996 Act.
- The party must submit proper evidence justifying his claims and submissions.
- The court must dispose the said application within one year under section 34(6)
of the Act. However this rule is not mandatory in nature, merely a direction.
Appeal for the order passed in set aside application: Under section 37(1)(c),
the applicant can file an appeal for the order passed in accordance with section
34 or refusal of set aside petition. In Sunshine Chemical Industry v. Oriental
Carbons & Chemical Ltd., it was said that apex court have authority to hear the
second appeal through special leave petition under article 136 of the
Enforcement of Foreign arbitral awards in India
The Indian Arbitration act provides the enforcement of foreign award in India in
Part - II of the Arbitration and Conciliation Act, 1996. The New York Convention
and the Geneva Convention recognised foreign awards by adopting the UNCITRAL
model law. In the Chapter II of part II. Section 48 and 49 provides conditions
for enforcing a foreign award by Court. After the court order's for enforcing,
the award will act same as an order passed by a Civil Court. If the court is
satisfied that the foreign award is not violating any conditions under section
48, it shall enforce the foreign award under section 49 of the Arbitration and
Conciliation Act, 1996.
Grounds for Challenging a foreign arbitral award in India under Part-II, chapter
I New York Convention of Arbitration and Conciliation Act, 1996
- Incapacity of parties: The parties were not competent to enter into an arbitral
agreement or one of parties may be minor or lunatic or insolvent or any case
maybe, then the court have power to object the enforceability of foreign award.
- No Proper notice to respondent about appointment of arbitrators, then court may
refuse to enforce a foreign award. (Section 48(1)(b))
- When the dispute is beyond the jurisdiction and scope of the arbitration, in
such cases the court may refuse to enforce foreign award under section 48(1)(c)
of the Arbitration and Conciliation Act, 1996
- If such foreign award is against public policy or when award is affected by
fraud or corruption, or it is in contravention with the fundamental policies of
India and Indian law or in conflict with the basic notion of morality and
justice and welfare. In these cases the court may refuse to enforce foreign
award under section 48(2)(b).
- When composition of arbitrators or arbitral authority is not in accordance with
section 11 and part- I of the 1996 Act, the court may refuse to enforce a
- The subject matter of arbitration is beyond its power or not capable to
adjudicate using arbitration, then court may refuse to enforce under section
Grounds for Challenging a foreign award in India under part - II, Chapter II
Geneva Convention Awards of Arbitration and Conciliation Act, 1996
Haryana Tourism Limited v. Kandhari Beverages Limited
- If the subject matter of foreign arbitration is not capable of settlement
through arbitration, the court may refuse to enforce under section 57(1)(b).
- When the foreign award is contrary to public policy or any laws of India, the
court may reject to enforce such foreign award under section 57(1)(e).
- Other grounds are same as grounds which are prescribed in section 34 of part -I
and the New York Convention of 1996 Act.
- The court shall enforce a foreign award, if it is satisfied that the foreign
award is enforceable under Chapter II.
In this case the Apex Court said, any arbitral award which is contrary to public
policy and against public morality shall be declared void and has zero
Ongc V. Saw Pipes
, in this case the grounds under section 34 of Arbitration and
Conciliation act was universally recognised. This is a landmark judgement where
the term 'public policy' was widely interpreted and it add few other grounds
under the term public policy.
Venture Global Engineering v. Satyam Computers Service
, it interpreted the term
'public policy' mentioned in conditions for enforcement of foreign award. Where
it said that the term public policy is social justice, welfare and economy of
India and an award which is against the public policy and equity, it shall be
In the case of Brahmani River Pellets Limited v. Kamachi Industries Limited
Supreme Court held that the High Court cannot set aside an arbitral award, if
the agreement oust the jurisdiction of the Court to do. The parties must file
the application in competent court as per their agreed jurisdiction and venue
Conclusion and Suggestion
The Indian legal system facilitates parties to resolve their dispute without
hampering their relationship in business. The UNCITRAL Model law 1985 provides a
faster mechanism for resolving commercial dispute without approaching the Court
of law. This model law has been adopted by India, and India is successful in
following this method in resolving the commercial disputes in shorter time than
Unlike court proceedings, the arbitration doesn't require much paper
work and parties may sometimes come to a settlement in one proceeding only.
However, the enforcement of foreign award is a big question, when such
enforcement is against public policy. In certain cases such enforcement may
affect the economy of India, which was acknowledged in ONGC case and Ventura
Global Engineering cases.
The Indian Legislation must address the issue relating
to enforcement of foreign award. The parliament has enacted the 1996 Act with a
vision to provide speedy disposal of cases involving business matters, and in
order to achieve this aim, Indian Government must encourage businesses to enter
into arbitral agreement and resolve their dispute through arbitration.
to achieve the aforementioned aim, there is a requirement of establishing
arbitral tribunals in accessible areas. Judicial review enables the parties to
challenge any arbitral award, if they feel that the passed award is
unconstitutional. Arbitration Act without judicial review will have adverse
effects on Indian economy and such act will be in obsolete in nature. The Indian
Legislation can achieve international standards of arbitration if the
intervention of courts are curtailed.
- Mayers v. Dlugash High Court, CLOUT Case No. 690, Hong Kong, 1994
- Collins v. Collins 53 E.R. 916 ROLLS COURT, UK
- Municipal Corp. of Greater Mumbai v. Prestress Products(India)(2003) 4 RAJ 368 (Bom)
- Dual Podda v. Executive Engineer, Dona Canal Division, (2004) 1 SCC 73
- AIR 1999 SC 463
- State of Bihar v. Bihar Rajya Bhumi, AIR 2018 SC 3862
- Supra N 1
- Haryana Tourism Limited v. Kandhari Beverages Limited, CA No. 266/22
- ONGC v. SAW Pipes Ltd., AIR 2003 SC 2629
- Ventura Global Engineering v. Satyam Computer service, 2008