Arbitration and Conciliation Act - Challenging Arbitral Award, Section 34 of the Act

Introduction

The whole purpose of Arbitration and Conciliation is speedy and cost effective dispute resolution. Just imagine, if every arbitral award is allowed appeal ? First Matter will go to High Court, then Supreme Court, and it will take years. It would defeat the whole purpose of arbitration and conciliation. Therefore, act provides extremely limited grounds on which arbitral award can be challenged. These grounds are covered under section 34 of the act. There are other grounds discussed in section 13 and section 16 which deals with challenging a procedure and challenging a jurisdiction of arbitral tribunal respectively.

Challenge to procedure or arbitrator (Section 13)

Section 12 mandates that arbitrator should disclose any relationship with any parties for impartiality. If it appear to any party of any relationships or doubt abut arbitrator, then appointment can be challenged.

Such an appointment should be first challenged before arbitral tribunal. If this challenge is not accepted by Arbitral tribunal, then award given by such a tribunal can be challenged later after final awards.

Challenge about jurisdiction (Section 16)

Now if A and B decided to go to C for arbitration, and they have agreed that C can give an award up to 5 Lakh, but in dispute, C awards more than 5 Lakh to any party, such an award would be overstepping out of jurisdiction.

Section 16 have provision related to challenge to jurisdiction. 

Arbitrator is creation of an arbitration agreement between the parties. He will be having jurisdiction as parties confers in arbitration agreement.

If it appears to any party that Arbitrator is acting beyond jurisdiction or scope granted to him, they can challenge it first before arbitrator only.

If Arbitrator rejects the please and continue with proceedings, then after final award affected party may go to court for setting aside an award.

Section also provides that objection to jurisdiction must be raised before submission of statement by defence.

Section 34-Application for setting aside an award

Party which think they are aggrieve are meted out injustice, may make an application to the court with proof to set aside the award. 

Grounds which party can raise

1) Incapacity of Party : If one of the party is minor or insolvent or any other incapability which makes party from entering into agreement. If party is incapacitated, then arbitral award can be set aside by court

2) Invalid Arbitration Agreement: If arbitration agreement is invalid, then also arbitral awarded by tribunal will be invalid. What constitute valid agreement. Check here. Invalidity could arise out non-consent, ambiguous intention etc.

3) Notice : If party is not given notice of (1) Proceeding (2) Appointment of arbitrator, in these cases final award by tribunal could be challenged in court. If you don't give proper notice to another party, then party may not be able to justify or produce defence properly.

4) Award not related to dispute submitted : For example dispute is related to failure of timely delivery in contract of sale, but award is related to quality of items delivered, then such award can be challenged in Court.

5) Composition of tribunal or proceeding was not according to law : If you remember, section 18 mandates that tribunal should treat both the parties equally in arbitration proceedings. What if tribunal don't give a fair chance to one of the party. It would be travesty and injustice to a party to whom reasonable opportunity was not given. If you have proof that proceedings followed by tribunal was not according to law, you can go to court to challenge the award.

Other grounds by which court can acts on it's own

Non arbitrability of matter : Some disputes cannot be settled by arbitration. If you insert any matter in your arbitration agreement to be submitted to arbitration, it won't work all the time. Some disputes must go to court. So if such dispute instead of going to court are settled by tribunal, then such award can be set aside by court.

Awards that are contrary to public policy : What are matters that comes under this ? Whenever any awards that hampers the welfare of people, or state or it's citizen then such an award can be set aside by court. For example, there is matter related to environmental issue, and award is granted to party which could hamper or deteriorate environment, then such award can be challenge by court.


Time Limit for raising an objection

Section 34(3) provides that an application for setting aside may not be made after three months have elapsed after parties received an award. Also party can request for an award, and when such award is disposed, that date will be calculated for 3 months period.

However, if there is justifiable reason then 30 days grace period can be granted.



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