SETTING ASIDE OF ARBITRAL AWARD
INTRODUCTION
An arbitral award can be set aside by the court if it violates public policy, if there is evidence of partiality by the arbitrator, if one of the parties was under an incapacity if there were procedural irregularities, or if the subject matter of the dispute is not capable of being resolved through arbitration.
GROUNDS FOR SETTING ASIDE OF AN ARBITRAL AWARD
Section 34 of the Arbitration and conciliation act 1996
Sec 34(2) of the said act deals with the arbitral award set aside by the court.
(2) An arbitral award may be set aside by the Court only if—
(a) The party making the application establishes that:
(i) a party was under some incapacity; or
(ii) the arbitration agreement is invalid under the law to which the parties have subjected it, or, in the absence of such indication, under the law for the time being in force; or
(iii) the party making the application was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings or was otherwise unable to present their case; or
(iv) the arbitral award addresses a dispute not contemplated by or not falling within the terms of the submission to arbitration; or
(v) the composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties, unless such agreement conflicts with a provision of this Part from which the parties cannot derogate, or, in the absence of such agreement, was not in accordance with this part or
(b) the Court finds that—
(i) The subject-matter of the dispute is not capable of settlement by arbitration under the law for the time being in force, or
(ii) The arbitral award is in conflict with the public policy of India
Nakshatra Infrastructure Ltd. v. Brigade Enterprises Ltd. (2020)
When talking about this specific case, the Karnataka High Court in part decided on the grounds for setting aside arbitral awards and stressed the court’s adopting a hands-off approach in cases where the award is not in violation of public policy or contrary to the fundamental principles of justice and morality.
TIME LIMIT FOR APPLYING FOR THE SETTING ASIDE
According to sec 34(3) of the said act states that the application for setting aside the arbitral award needs to be filed within the three months from date on which the application of arbitral award received or additional award under section 33 of the act had been disposed by the tribunal.
The Court may accept the application within thirty days of this period if it is satisfied that a sufficient cause prevented the applicant from applying in accordance with the above three-month period.
Waaree Energies Limited, vs. Sahasradhara Energy Pvt. Ltd.
The Honble court held that if there is no proper presentation of a petition filed under Section 34 of the Arbitration and Conciliation Act, 1996 within the limitation period prescribed under Section 34(3) of the Arbitration and Conciliation Act, 1996, either on account of non payment of court fees or payment of deficit court fees, condoning the delay in representation beyond the period prescribed under Section 34(3) of the Arbitration and Conciliation Act, 1996 is not permissible.
PROCEDURE FOR APPLICATION
- Issuing the prior notice
According to Section 34(5) of the Arbitration and Conciliation Act, 1996, it is required that before submitting an application to set aside an arbitral award, the party must first give prior notice to the other party regarding their intention to file such an application
In Dulal Podda v. Executive Engineer, Dona Canal Division (2003),
the Court held that the appointment of an arbitrator at the request of the appellant of the dispute without sending a notice to the respondent and an ex-parte decree given by the arbitration Tribunal will be held illegal and liable for setting aside.
- The application to set aside an arbitral award.
According to section 34(3) an application to set aside an arbitral award cannot be made after three months have passed from the date when the party received the arbitral award or, if a request was made under section 33, from the date when that request was resolved by the arbitral tribunal. However, if the Court determines that the applicant had a valid reason that prevented them from making the application within the initial three-month period, it may consider the application within an additional thirty-day period.
- Enforcement
According section 36 of the 1996 act states that if the period for filing an application to set aside the arbitral award under section 34 of the act has expired then the award can be enforced using the procedure in the code of civil procedure 1908.
Angle Infrastructure Pvt.Ltd. vs Ashok Manchanda & Ors.
The Hon’ble court mentioned that “Therefore, enforcement of such settlement would have to be effected in accordance with Section 36 under Chapter-VIII of the Arbitration and Conciliation Act, 1996. It is dealt under Section 36 for Enforcement that an arbitral award would be enforced "under the Code of Civil Procedure, 1908 (5 of 1908) in the same manner as if it were a decree." Hence, such conciliation initiated by voluntary acts as contained in Part-III of the Arbitration and Conciliation Act, 1996 does not envisage intervention of the court except for the purposes of enforcement thereof which has to be by the civil court as it were a decree of the court. A settlement in the conciliation, therefore, would not result in a decree."
CASE LAW
J.G. Engineers Pvt. Ltd. v. Union of India, (2011) 5 SCC 758,
The Supreme Court held that in the event an award decides several claims separately and distinctly, and an error is identified in some of the claims, then the unaffected claims must be segregated and upheld. In this case, the High Court of Guahati had found an error only in relation to some of the claims but it proceeded to set aside the entire award as a whole on the reasoning that if the arbitral tribunal allowed certain counterclaims, the amounts granted under the upheld claims would also have to be adjusted. The Supreme Court, however, disagreed with the reasoning adopted by the High Court. The Supreme Court relied upon the doctrine of severability to uphold the power of courts to partially set aside awards where the claims were separate and distinct.