This article has been written by Mr. Sriganesh Ji, a 1st year B.A.LLB Student from Lloyd School Of Law.

Introduction

Since Ancient and Medieval India, it has been common practice to settle a dispute outside of court with the help of a third party. Therefore, the idea of arbitration dates back a long way. The East India Company wrote the modern law of arbitration, which was based on the regulatory framework that the courts use to refer cases to the arbitration process.

The arbitration procedure is unquestionably governed by the law of the arbitration’s seat. In this way, in the event of worldwide business mediation having the seat of assertion in India, and in the event of home-grown discretion (the two players are Indian), segment 34 under Part I of the Discretion and Appeasement Demonstration of 1996 (hereinafter alluded as 1996 Demonstration) sets out the arrangements under which applications could be recorded to save arbitral honours.

Section 34 of the Arbitration and Conciliation Act of 1996 is the subject of this attempt to critically analyse it in light of the Act’s most recent amendment in 2015 and judicial pronouncements.

Evolution of Arbitration System

The English Arbitration Act of 1889 served as the foundation for the initial Indian Arbitration Act of 1899. The Indian Arbitration Act of 1940 followed, and the Arbitration & Conciliation Act of 1966, enacted by the Indian Parliament, incorporated the internationally recognized concept of arbitration.

Meaning of Arbitration

The Arbitral Tribunal helps the parties resolve their disagreements outside of court through the process of arbitration. The parties to the dispute can either appoint an arbitral tribunal, or the court can appoint one at a party’s request.

We can also say that arbitration takes the place of litigation as a means of resolving disputes. The Indian Arbitration Law is based on the United Nations Commission on International Trade Law. Unless all parties declare that the arbitration process and decisions are non-binding, the arbitrator’s decision is deemed legally binding and enforceable by the court.

Why does Arbitration take place?

When a contract dispute has an arbitration clause, arbitration usually takes place. A clause like this is signed to accept arbitration as a means of resolving any potential future disputes. Additionally, the arbitration clause will specify whether this decision is binding or non-binding. If the arbitration is binding, the parties must accept the arbitrator’s decision as final on the pending dispute. If the arbitration is non-binding, the parties can still take the matter to court if they disagree with the arbitrator’s decision.

Arbitral awards

• The decision made by the arbitration tribunal in an arbitration proceeding is referred to as an arbitral or arbitration award.
• Non-monetary or monetary awards may be made by an arbitrator. It can be monetary, which calls for the transfer of a specific amount of money between two parties, or it can be non-monetary, which refers to decisions like ceasing a particular business practice or raising unemployment benefits and incentives.
• The Arbitration Act of 1996 stipulates that an award must be certain and contain the decision in order to be valid.
• The arbitrator must write and sign the award, and the reasons for the award’s passing in each case must be included.
• The parties’ responsibilities and liabilities should be laid out in detail in the arbitral award, and no aspect of the dispute should be left unresolved.
• It ought to be extremely clear and conclusive in relation to the issues and claims of the dispute. The award in Union of India v. Punjab Communications did not specify the amount that one party was required to pay the other, and the decision was ambiguous and unenforceable. As a result, the arbitral decision was overturned.

Application for setting aside arbitral awards

The law allows for certain remedies against an arbitral award to ensure that the arbitration proceedings are carried out in an appropriate manner. A wronged party might turn to the law Court for saving the arbitral honor on specific Grounds referenced under Discretion and Placation Act, 1966.

Grounds

Section 34 of the Arbitration and Conciliation Act provides the provisions of certain specific grounds on the basis of which an arbitral award rendered in India can be set aside. They are-

1. Incapacity of a party while making an application to enter the agreement.
2. Arbitration agreement not being valid under the law.
3. Parties were not given proper notice of the appointed Arbitrators or the Arbitral Tribunal.
4. Nature of dispute not capable of settlement by arbitration.
5. Composition of the arbitral award was not in accordance with the agreement of parties.
6. The Arbitral award is in the violation of the public policy of a state.
7. The Arbitral award deals with a dispute not falling within the terms of submissions to an arbitration.

(1). Incapacity of Parties

If a party to the arbitration is unable to protect their interests and is not represented by a person who can protect their rights, an application to set aside an arbitral award may be filed. If the court determines that a party to a contract is a minor or an unsound person who is not being represented by a Guardian to protect his interests, the award may be cancelled. Segment 9 of the Intervention and Pacification Act,1996 gives that the arrangement of a gatekeeper for a minor of shaky psyche for his/her matter’s arbitral procedures.

(2). The Invalidity of Arbitration Agreement under Laws

The same grounds that can be used to challenge the validity of a contract can also be used to challenge the validity of an arbitration agreement. In situations where the understanding Condition is included an agreement by the gatherings to it, the mediation will be viewed as invalid on the off chance that the agreement is invalid.

(3). Notice not given to the parties of arbitration proceedings

Section 34(2)(a)(iii) says that if a party to an arbitration proceeding did not receive proper notice of the appointment of an arbitrator or any other notice of arbitration proceedings, this could be used as a reason to overturn the arbitral award.

According to Section 23(1) of the Arbitration and Conciliation Act of 1966, the arbitral tribunal is responsible for determining when the statement must be submitted. Section 24(2) stipulates that the parties must be informed in advance of any Tribunal hearing or meeting for the purpose of inspecting documents, goods, or other property, among other things. This must be communicated to the parties in a timely manner.

In Dulal podda v. Executive Engineer, Dona Canal Division, the court ruled that the arbitration tribunal’s ex-parte decree and the appointment of an arbitrator at the request of the appellant of the dispute were illegal and liable for setting aside.

(4). An Award not falling within the terms of Submission to Arbitration

The boundaries of an Arbitral Tribunal’s authority and jurisdiction are established by the testimonials of a dispute in an agreement. The arbitrator’s award would be invalid and subject to annulment if the jurisdiction fell outside the Tribunal’s purview. Contrary to the terms of the contract, an arbitrator cannot act.

A matter brought up in a writ petition was referred to arbitration in Rajendra Krishan Kumar v. Union of India. The opposition party’s release of effluents and slurry on that other party’s land is not the subject of a claim for compensation in the writ petition for any harm to the perfectibility of the land. The court decided that because the award of such compensation was outside the scope of reference, it could be overturned.

(5). Composition of Tribunal- Not in accordance with the Agreement

Segment 34(2)(a)(v) spreads out that honour can be disposed of or tested on the off chance that the synthesis of the arbitral court was not in acquiescence with the understanding of the gatherings or on the other hand on the off chance that the technique of direct of procedures was not followed as expected. If the arbitrator makes a decision on an award that goes against the terms of the reference and the arbitration agreement, the award would be overturned and the arbitrator would have committed misconduct.

The Arbitral Tribunal refused to allow a company that was a party in the case of State Trading Corporation v. Molasses Co. the Bengal Chamber of Commerce to have its law officer, who was a full-time employee of the company, represent the company. In this case, the court decided that it was the arbitrator’s misconduct as well as a violation of the arbitration process.

The Supreme Court ruled in the case of ONGC Ltd. v. Saw Pipe Ltd. that the arbitral Tribunal cannot violate certain substantive law or Arbitration and Conciliation Act, 1966 provisions while exercising its jurisdiction.

(6). Disputes not arbitral

Arbitration should be an option for resolving the dispute’s nature. In general, the arbitration process can be used to settle any private rights-related dispute that cannot be resolved by a civil court. Arbitration proceedings cannot, therefore, resolve issues pertaining to public rights or crimes.

(7). Award against public policy

If an arbitral award violates India’s public policy, Section 34 states that an application can be made to set it aside. Concerns pertaining to the public good and the public interest are implied by the term “public policy.” The clarification of this part explains that such honor which is gotten either by misrepresentation or by defilement would be considered against the public arrangement of India. Additionally, the award that is necessitated by suppressing the actual facts of the case, either by bribing the arbitrator or using force on the arbitrator, for example. would be responsible for the setting aside because it was against public policy.

The Supreme Court ruled in Venture Global Engineering v. Satyam Computer Services Ltd. that an arbitral award can be overturned if it conflicts with the fundamental policies of Indian law or with India’s interests, justice, or morality.

Limitation

• An aggrieved party’s appeal to set aside an arbitration order must be filed within three months of receiving it, according to Section 34(3), regarding the limitation period for filing an application. The significance of this is set out by Segment 36 which declares that the honor becomes enforceable when the constraint time frame under Area 34 lapses. However, if the court is satisfied based on the evidence that there is sufficient cause, it may grant the aggrieved party a 30-day extension under section 33. In the case of National Aluminum Co. Ltd. v. Presteel Fabrication (P.) Ltd., the Supreme Court was notified that it did not have the authority to overturn the arbitral tribunal’s decision in the case. The Supreme Court ruled that the amount of time spent on a legitimate prosecution of an application in the wrong venue was sufficient justification for allowing delay.
• In accordance with the 1908 Code of Civil Procedure, an executing court may execute the decree if the appellate court does not stay it. In a similar vein, once an application to set aside an arbitral award is filed under section 34 of the Arbitration Act, the executing Court has no power to implement the award until the application is dismissed or rejected under section 34.
• A party to the arbitration agreement must submit a request to set aside the award in accordance with Section 34. However, because he is a person claiming under that, a legal representative in the case of any such party can also apply for it. When an award is set aside, the law no longer applies to it. By “setting aside,” it is deemed invalid. In terms of their claims in the dispute, the parties return to their previous positions, and the issue is once more up for decision. After an order is overturned, the parties can choose to have the matter decided by a court of law or go back to arbitration.

Constitutional Validity of Sec 34

In the case of TPI Ltd. v. Union of India, the petitioner argued in a writ petition that section 34 should be deemed unconstitutional in the absence of an inherent right to set aside an arbitral award on the grounds provided. In this case, the court denied the writ petition, stating that arbitration is an alternative venue for resolving a dispute and that parties can choose to participate in it of their own free will and mutually agree to the arbitral tribunal’s decision. The parties are not required to use the arbitration process by any statute.

Setting aside the foreign award

The grounds to challenge or set aside an award are provided in Section 34 of Part 1 of the Indian Arbitration Act of 1996, and they are only applicable to awards made within a state and not to awards made abroad. In Bharat Aluminium company v. Kaiser Aluminium Technical Service, the Supreme Court ruled on September 6, 2012, that the Indian Arbitration Act should be interpreted in accordance with the Indian parliament’s intended goal or objective. These Supreme Court findings only apply to arbitration agreements signed after September 6, 2012.

Therefore, regardless of whether the parties choose to apply the Indian Arbitration Act or not, part 1 of the Arbitration and Conciliation Act does not apply to arbitrations that take place outside of India.

Bhatia Intern. In the Bulk Trading case, the Supreme Court ruled that despite the absence of a challenge to a foreign award in Part 2 of the act, a petition to set aside the award would be filed under section 34 (part 1) of the act, which states that domestic award provisions will apply to foreign awards. The court decided that in order to carry out the award, the property in a dispute involving shares in an Indian company located in India had to be governed by Indian law. According to the Court, the implementation of the award on any foreign strand or support cannot substantiate Indian public policy in such a situation, and the award must be based on India’s public policy.

Conclusion 

India has a cutting-edge Arbitration Act that works well. An arbitral award can be challenged in court for a variety of reasons, as outlined in Sections 34 and 37. All of these grounds are utilized in both domestic and international arbitration decisions. The basis of public policy should only be interpreted insofar as it serves to expand the public interest without infringing on the fundamental principles of Indian law. For the success of arbitration in India and its continued promotion, judicial intervention should also be minimal.

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