Introduction
The course of Arbitration is considered to be a alternate mention of dispute resolution, primarily aiming at reducing the burden of pending cases on the courts and providing an effective mechanism of resolution to the aggrieved parties. This structure has proved to be the core of dispute resolution in the last few decades worldwide and has aided Indian judiciary system to allow for a mechanism that can deal with legal matters outside the courts, without getting into the nitty gritty of courts.
The award or order pronounced by the arbitrator is considered to be binding on the parties and the legislature has left very limited scope for challenging the award by appealing in the higher courts. The intention behind such a structure is to limit the interference of litigation in the matters and bestow complete trust in the acumen of the arbitrators.
The legality of challenging an arbitral award
The legislature does not believe in leaving the aggrieved party through the arbitral award without any remedy and has ensured to incorporate a provision which can allow appeals to higher courts in certain cases on valid grounds mentioned thereof, making it in consonance to the principles of natural justice.
In case one of the parties fear or have substance to believe that the arbitrator is prejudiced, biased or does have the jurisdiction on the matter, an application before the arbitrator itself is filed under Section 13 of the Act. In case the arbitrator sets it aside and continue the proceedings, leading the party to find themselves at a loss through the award pronounced; then the arbitral award can be challenged in the Hugh Court under Section 34, stating this prejudice as the preliminary ground. Hence, the legislature seems to have served a dual purpose- a) limiting the interference of the judiciary in arbitration and b) providing the required remedy to the aggrieved parties.
Section 34 provides that an arbitral award may be set aside by a court on certain grounds specified therein, which are as follows:
- the parties to the agreement are under some incapacity;
- the agreement is void;
- the award contains decisions on matters beyond the scope of the arbitration agreement;
- the composition of the arbitral authority or the arbitral procedure was not in accordance with the arbitration agreement;
- the award has been set aside or suspended by a competent authority of the country in which it was made;
- the subject matter of dispute cannot be settled by arbitration under Indian law; or
- the enforcement of the award would be contrary to Indian public policy.
Further there is an explanation provided on the subject of what constitutes public policy, which essentially substantiates that any award which is induced with fraud or corruption violating section 75 and 81 of the Act, or is against the fundamentals of public policy mentioned under the Indian Law or the moral code of conduct laid down in the country; would be considered as against public policy.
Further, there was an amendment made to the Section to lay down further clarifications on the subject laying down two more grounds under sub-clause 2 of Section 34, which are as follows:
Section 34(2)(b) mentions two more grounds which are left with the Court itself to decide whether to set aside the arbitral award:
- Dispute is not capable of settlement by arbitral Process
- The award is in conflict with the public policy of India
Judicial approach on the subject matter
The amendment added explanation to the meaning of public policy, which makes it crystal clear that an arbitral award cannot be challenged in the court merely on re-application of evidence or erroneous interpretation of law. The grounds have to be valid and substantiated through matter proving a need to set aside the award and deemed interference of litigation in the matter. The Amendment Act has also introduced a new section providing that the award may be set aside if the court finds that it is vitiated by patent illegality which appears on the face of the award in case of domestic arbitrations.
The court has the liberty to adjourn the proceedings for a definite period of time upon an application that has been made for challenging the arbitral award, instead of adjudicating upon the grounds raised. This feature enables the tribunal to deal with the grounds on which objections were raised and eliminate them.
Further, even the proceeding that has been erred on the basis of the jurisdiction can also be sent to the concerned arbitrator for resolving the dispute and rectifying the error; as per the guidelines issued by the court[1]. However, the resumed proceedings should be mandatorily based on the grounds raised in the application under the act and no new ground shall be raised. The court makes a provision for ensuring that the tribunal records additional findings to the case and then subsequently amend the award; as it might consider the veracity and validity of the amended award by scrutinizing whether the grounds of contention are eliminated or not.
As far as jurisdiction is concerned on the matter, the landmark judgement[2] of the Apex Court widens the ambit of arbitral tribunal for adjudicating the matters on diverse nature and successfully included the matters on specific performance of the contract in the jurisdiction of the tribunal.
Section 34 of the Act finds its origin and underlying principle from Article 34 of the UNICTRAL model of common law, which certainly aims at limiting and defining the scope of the arbitral award, and reducing it further from what was guaranteed under Article 30 of the repealed act of 1940. The court in a landmark case[3] held that the primary objective and legislative intention of the new legislation was to limit the intervention of the judiciary in the process of Arbitration.
Conclusion
It is an established principle that the intent of the section was to achieve the standards of international arbitral mechanism by lowering the intervention of judiciary in any form as much as possible, in order to provide for an independent mechanism of dispute resolution. The parliament, as mentioned in the aforementioned analysis, has focused on curating a forum for speedy trial and justice through effective dispute resolution as also reflected under Section 5 of the Act. This section is a limitation clause which bars the judicial intervention completely on any contractual dispute where an arbitration clause was inserted by the parties. An exclusive arbitration clause in the contracts, reflects the clear intentions of the parties of selecting a forum for the resolution of dispute. However, the question of the extent of jurisdiction of the courts in cases of void or unenforceable contracts is another significant issue raised, while discussing the grounds for challenging the arbitral award.
References:
[1] T.N. Electricity Board v. Bridge Tunnel Constructions, CA No: 1766-67 of 1997.
[2] Union of India v. Om Prakash Baldev Krishna, AIR 2000 J&K 79
[3] Municipal Corp. of Greater Mumbai v. Prestress Products (2003) 4 RAJ 363 (Bom)
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