Setting Aside Awards Grounds
Setting Aside Arbitral Awards
The grounds for setting aside an arbitral award in India are primarily contained in Section 34 of the Arbitration and Conciliation Act, 1996. These grounds are limited, specific, and exhaustive, ensuring minimal judicial interference.
1. Nature of Grounds
- Courts exercise supervisory jurisdiction, not appellate
- Awards can only be set aside for:
- Procedural defects
- Jurisdictional errors
- Substantive illegality (limited scope)
2. Statutory Grounds under Section 34
(A) Grounds Raised by Parties
(i) Incapacity of a Party
- If a party was legally incompetent
- Example: minor, unsound mind
📌 Case Law:
Dharangadhara Chemical Works Ltd v State of Saurashtra
- Established principles for determining legal relationships and capacity.
(ii) Invalid Arbitration Agreement
- Agreement not valid under applicable law
📌 Case Law:
Khardah Company Ltd v Raymon & Co (India) Pvt Ltd
- Arbitration clause invalid if main contract is void.
(iii) Lack of Proper Notice / Inability to Present Case
- Violation of natural justice
📌 Case Law:
State of Orissa v Binapani Dei
- Emphasized right to fair hearing.
(iv) Award Beyond Scope of Submission
- Arbitrator exceeds jurisdiction
📌 Case Law:
Associated Engineering Co v Government of Andhra Pradesh
- Arbitrator must act within contract terms.
(v) Improper Composition of Tribunal
- Tribunal not constituted as per agreement
📌 Case Law:
Union of India v U.P. State Bridge Corporation Ltd
- Improper procedure can invalidate award.
(B) Grounds Considered by Court (Suo Motu)
(i) Subject Matter Not Arbitrable
- Certain disputes cannot be arbitrated
📌 Case Law:
Booz Allen and Hamilton Inc v SBI Home Finance Ltd
- Defined arbitrable vs non-arbitrable disputes.
(ii) Conflict with Public Policy of India
This is the most important ground, expanded and later narrowed by courts.
Includes:
(a) Fraud or Corruption
(b) Violation of Fundamental Policy of Indian Law
(c) Conflict with Justice or Morality
📌 Case Laws:
- ONGC v Saw Pipes Ltd
- Introduced patent illegality under public policy
- ONGC v Western Geco International Ltd
- Expanded “fundamental policy of Indian law”
- Associate Builders v DDA
- Structured public policy into categories
(iii) Patent Illegality (Domestic Awards Only)
- Must be:
- Apparent on face of award
- Not requiring detailed review
📌 Case Law:
Ssangyong Engineering v NHAI
- Narrowed scope of patent illegality
- Courts cannot reappreciate evidence
3. Additional Important Judicial Principles
(i) No Reappreciation of Evidence
📌 Case Law:
McDermott International v Burn Standard Co Ltd
- Courts cannot act as appellate authority
(ii) Limited Scope of Interference
📌 Case Law:
Delhi Airport Metro Express Pvt Ltd v DMRC
- Reinforced minimal judicial interference
(iii) Narrow Public Policy for Foreign Awards
📌 Case Law:
Renusagar Power Co Ltd v General Electric Co
- Very limited grounds for foreign awards
4. Summary of Grounds
Procedural Grounds
- Incapacity
- Invalid agreement
- No proper notice
- Excess of jurisdiction
- Improper tribunal
Substantive Grounds
- Non-arbitrable subject
- Public policy violation
- Patent illegality
5. Key Observations
- Grounds are exhaustive (closed list)
- Courts favor finality of arbitration
- Judicial trend → narrow interpretation
6. Conclusion
The grounds for setting aside arbitral awards ensure a balance between finality and fairness. Courts intervene only when:
- There is serious procedural injustice
- The award is legally flawed or against public policy
Modern jurisprudence (especially after Ssangyong case) reflects a pro-arbitration approach, limiting unnecessary interference and promoting India as an arbitration-friendly jurisdiction.
RELATED Blog
comments