Application for setting aside arbitral award

(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 furnishes proof 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.—Without prejudice to the generality of sub-clause (ii) it is hereby declared, for the avoidance of any doubt, that an award is in conflict with the public policy of India if the making of the award was induced or affected by fraud or corruption or was in violation of section 75 or section 81.

(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.

Comments

Arbitration Court cannot interfere on the ground of award being erroneous

The arbitration court cannot interfere with the award on the ground that the award is erroneous if the award is otherwise proper. It is not open to the arbitration court to re-appreciate reasonableness of reasons in the arbitral award; Union of India v. Pam Developments P. Ltd., AIR 2004 NOC 353 (Cal).

Award based on account of overlooking contents

The award made by the arbitrator was partially vitiated on account of overlooking the contents of the document brought to his notice and therefore, to that extent the award should have been modified by the High Court. Virtually allotment of land was not in recognition of any statutory entitlement but was only by way of compassion; State of Karnataka v. Siddaiah, AIR 2001 SC 397.

Court must not look to the reasonableness of reasons

Where an arbitrator passed a non-speaking award granting certain lumpsum amount and award did not contain any decision or arbitrability of the claims, such award is liable to be set aside; Tamil Nadu Electricity Board v. Bridge Tunnel Constructions, AIR 1997 SC 1376.

Interference with arbitral award

While considering legality and validity of award, High Court cannot substitute its own findings as if sitting in appeal over award. High Court has no jurisdiction to interfere with award; Ram Prasad Sharma v. Jharkhand State Housing Board, AIR 2006 NOC 258 (Jhar).

Limitations

It is axiomatic that the arbitrator being a creative of the agreement must operate within the four corners of the agreement and cannot travel beyond it. More particularly, he cannot award any amount, which is ruled out or prohibited by the terms of the agreement. In the present case, the agreement between the parties clearly says that in measuring the built up area, the balcony areas should be excluded. The arbitrators could not have acted contrary to the said stipulation and awarded any amount to the appellant on that account; New India Civil Erectors (P) Ltd. v. Oil and Natural Gas Corporation, AIR 1997 SC 980.

Right to get an award set aside is statutory

The right to file an application under section 34 to set aside an award is statutory and the same is unconditional and unqualified; The Supdtg. Engineer (Highway & Rural Works), Chennai v. D.G. Deivasigamani, AIR 2005 Mad 59.