How to set aside an Arbitration Award

The court of the seat of arbitration has the power to set aside an award. In India, an application for setting aside an award can be filed under Section 34, which lists down the following grounds:

Award may be set aside if the party making the application establishes that:

• A party was under some incapacity,
• Arbitration agreement is not valid,
• It was not given proper notice of the appointment of an arbitrator or of the proceedings or was unable to present their case,
• The award deals with a dispute beyond the scope of the submission to arbitration, or
• Composition of the tribunal or the procedure was not in accordance with the agreement of the parties.

Award may be set aside also if the Court finds that:

• The subject matter of the dispute is not capable of settlement by arbitration, or
• The award is in conflict with the public policy of India

The Section explains that violation of public policy entails an award induced by fraud or affected by fraud or corruption, or in violation of fundamental policy of Indian law or the most basic notions of morality and justice. This enquiry shall involve no review on the merits of the dispute.

In the recent amendment of 2016, a new ground was added as per which award may be set aside if it is vitiated by patent illegality. However, it cannot be set aside merely on the ground of erroneous application of the law or by reappreciation of evidence.

The application for setting aside an award can be made within 3 months from the date on which party had received the award. Court may entertain application within further period of 30 days if it is satisfied that there was a sufficient cause for not making the application within 3 months.

Under Section 34(4), a party can file an application to adjourn the proceedings to give arbitral tribunal an opportunity to eliminate the grounds for setting aside an arbitral award.

An application for setting aside has to be disposed within 1 year from the date of notice served upon other party.

The text of the Section 32 can be found below:

“34.   Application for setting aside arbitral awards.

(1) Recourse to a Court against an arbitral award may be made only by an application for setting aside such award in accordance with sub-section (2) and sub-section (3).

(2) An arbitral award may be set aside by the Court only if--

(a) the party making the application 1[establishes on the basis of the record of the arbitral tribunal that]--

(i) a party was under some incapacity, or

(ii) the arbitration agreement is not valid under the law to which the parties have subjected it or, failing any indication thereon, 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 his case; or

(iv) the arbitral award deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration, or it contains decisions on matters beyond the scope of the submission to arbitration:

Provided that, if the decisions on matters submitted to arbitration can be separated from those not so submitted, only that part of the arbitral award which contains decisions on matters not submitted to arbitration may be set aside; 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 was in conflict with a provision of this Part from which the parties cannot derogate, or, failing 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.

Explanation 1.-For the avoidance of any doubt, it is clarified that an award is in conflict with the public policy of India, only if,

(i) the making of the award was induced or affected by fraud or corruption or was in violation of section 75 or section 81; or

(ii) it is in contravention with the fundamental policy of Indian law; or

(iii) it is in conflict with the most basic notions of morality or justice.

Explanation 2.-For the avoidance of doubt, the test as to whether there is a contravention with the fundamental policy of Indian law shall not entail a review on the merits of the dispute.

(2A) An arbitral award arising out of arbitrations other than international commercial arbitrations, may also be set aside by the Court, if the Court finds that the award is vitiated by patent illegality appearing on the face of the award:

Provided that an award shall not be set aside merely on the ground of an erroneous application of the law or by reappreciation of evidence.

(3) An application for setting aside may not be made after three months have elapsed from the date on which the party making that application had received the arbitral award or, if a request had been made under section 33, from the date on which that request had been disposed of by the arbitral tribunal:

Provided that if the Court is satisfied that the applicant was prevented by sufficient cause from making the application within the said period of three months it may entertain the application within a further period of thirty days, but not thereafter.

(4) On receipt of an application under sub-section (1), the Court may, where it is appropriate and it is so requested by a party, adjourn the proceedings for a period of time determined by it in order to give the arbitral tribunal an opportunity to resume the arbitral proceedings or to take such other action as in the opinion of arbitral tribunal will eliminate the grounds for setting aside the arbitral award.

(5) An application under this section shall be filed by a party only after issuing a prior notice to the other party and such application shall be accompanied by an affidavit by the applicant endorsing compliance with the said requirement.

(6) An application under this section shall be disposed of expeditiously, and in any event, within a period of one year from the date on which the notice referred to in sub-section (5) is served upon the other party.”