Arbitration, as an alternative dispute resolution mechanism, has gained significant traction in India due to its efficiency, flexibility, and cost-effectiveness. However, the finality of an arbitral award does not entirely preclude judicial scrutiny. The Arbitration and Conciliation Act, 1996 (as amended) outlines specific grounds under which an arbitral award can be challenged, ensuring a balance between the autonomy of the arbitration process and the sanctity of justice.
Legal Framework for Challenging Awards
Section 34 of the Arbitration and Conciliation Act, 1996 provides the framework for challenging arbitral awards in India. An award can be set aside by a court only if the party making the application furnishes proof of one or more of the following:
- Incapacity of Parties: If a party to the arbitration agreement was under some incapacity.
- Invalid Arbitration Agreement: If the arbitration agreement is not valid under the law governing it.
- Lack of Proper Notice or Opportunity: If the aggrieved party was not given proper notice of the arbitral proceedings or was otherwise unable to present its case.
- Award Beyond Scope of Arbitration: If the award deals with disputes not contemplated by or not falling within the terms of the submission to arbitration.
- Improper Composition of the Tribunal: If the arbitral tribunal or procedure was not in accordance with the agreement of the parties or the applicable law.
Apart from these party-driven grounds, the court may also set aside an award if:
- The subject matter of the dispute is not arbitrable under Indian law.
- The award is in conflict with the public policy of India.
Public Policy and Recent Developments
The term “public policy” has been the subject of extensive judicial interpretation. Initially, in the landmark case of Renusagar Power Co. Ltd. v. General Electric Co. (1994), the Supreme Court restricted “public policy” to instances of fraud, corruption, or contravention of Indian law. However, the scope was expanded in ONGC Ltd. v. Saw Pipes Ltd. (2003), where the court allowed challenges on the ground of “patent illegality.” The 2015 and 2019 amendments to the Act significantly narrowed this scope. The term “public policy” now excludes challenges based on erroneous application of law unless it amounts to a patent illegality appearing on the face of the award. Furthermore, post-2015, challenges based on patent illegality are not permissible in international commercial arbitrations seated in India.
Judicial Approach
Indian courts have progressively embraced a pro-arbitration stance, emphasizing minimal interference. This shift is evident in cases like Venture Global Engineering v. Satyam Computer Services Ltd. (2008), where the Supreme Court clarified that the courts should not act as appellate authorities over arbitral awards.
Conclusion
Challenging an arbitral award in India is deliberately restrictive, reflecting a pro-arbitration regime aimed at reducing judicial intervention. While this ensures that arbitration remains an efficient dispute resolution mechanism, it also underscores the importance of a fair and robust arbitral process to uphold the credibility of the awards. Parties seeking to challenge awards must carefully navigate the statutory grounds, as Indian courts continue to strengthen the principle of limited interference in arbitration.
