Arbitration and Conciliation Act Section 34 — Application for setting aside arbitral award
CHAPTER VII — Recourse against arbitral award
Civil
Summary
Sub-section (1) states that the only way to challenge an arbitral award in a Court is by filing an application to set aside the award, and this must be done in the manner described in sub-sections (2) and (3).
Sub-section (2) says that a Court can set aside an arbitral award only on the grounds listed in this sub-section. Under clause (a), the party asking for the award to be set aside must prove, based on the record of the arbitral tribunal, one of the following: (i) a party lacked the legal capacity to enter into the arbitration; (ii) the arbitration agreement is not valid under the law the parties chose, or if no choice was made, under the law in force at the time; (iii) the party making the application was not given proper notice of the appointment of an arbitrator or of the arbitration proceedings, or was otherwise unable to present their case; (iv) the award deals with a dispute that was not covered by or did not fall within the terms of the arbitration agreement, or it contains decisions on matters beyond the scope of the arbitration agreement — however, if the decisions on matters that were submitted to arbitration can be separated from those that were not, only the part dealing with matters not submitted may be set aside; or (v) the composition of the arbitral tribunal or the arbitration procedure was not in line with the parties' agreement, unless that agreement conflicted with a provision of this Part that the parties cannot deviate from, or if there was no agreement, the composition or procedure was not in line with this Part.
Under clause (b) of sub-section (2), the Court can also set aside an award if it finds that (i) the subject-matter of the dispute is not capable of being settled by arbitration under the law in force, or (ii) the award is in conflict with the public policy of India. Explanation 1 clarifies that an award is in conflict with the public policy of India only if its making was induced or affected by fraud or corruption, or it violated section 75 or section 81, or it contravenes the fundamental policy of Indian law, or it conflicts with the most basic notions of morality or justice. Explanation 2 clarifies that the test for whether there is a contravention of the fundamental policy of Indian law does not involve a review of the merits of the dispute.
Sub-section (2A) provides that an arbitral award from arbitrations that are not international commercial arbitrations may also be set aside by the Court if the Court finds that the award is vitiated by patent illegality appearing on the face of the award. However, an award shall not be set aside merely because the law was applied erroneously or because the evidence was reappreciated.
Sub-section (3) states that an application to set aside an award cannot be made after three months have passed from the date the party making the application received the award, or if a request was made under section 33, from the date that request was disposed of by the arbitral tribunal. However, if the Court is satisfied that the applicant was prevented by sufficient cause from making the application within those three months, it may entertain the application within a further period of thirty days, but not beyond that.
Sub-section (4) says that upon receiving an application under sub-section (1), the Court may, where appropriate and if requested by a party, adjourn the proceedings for a period of time it determines, in order to give the arbitral tribunal an opportunity to resume the arbitral proceedings or to take other action that, in the tribunal's opinion, will eliminate the grounds for setting aside the award.
Sub-section (5) requires that an application under this section must be filed by a party only after giving prior notice to the other party, and the application must be accompanied by an affidavit from the applicant confirming that this notice requirement has been complied with.
Sub-section (6) states that an application under this section must be disposed of expeditiously, and in any event, within one year from the date on which the notice referred to in sub-section (5) is served upon the other party.
Official Text
(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 1[establishes on the basis of the record of the arbitral tribunal 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. 2[Explanation 1.—For the avoidance of any doubt, it is clarified that an award is in conflict with the public policy of India, only if,—
(i) the making of the award was induced or affected by fraud or corruption or was in violation of section 75 or section 81; or
(ii) it is in contravention with the fundamental policy of Indian law; or
(iii) it is in conflict with the most basic notions of morality or justice.
Explanation 2.—For the avoidance of doubt, the test as to whether there is a contravention with the fundamental policy of Indian law shall not entail a review on the merits of the dispute.] 3[
(2A) An arbitral award arising out of arbitrations other than international commercial arbitrations, may also be set aside by the Court, if the Court finds that the award is vitiated by patent illegality appearing on the face of the award:
Provided that an award shall not be set aside merely on the ground of an erroneous application of the law or by reappreciation of evidence.]
(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. 1[
(5) An application under this section shall be filed by a party only after issuing a prior notice to the other party and such application shall be accompanied by an affidavit by the applicant endorsing compliance with the said requirement.
(6) An application under this section shall be disposed of expeditiously, and in any event, within a period of one year from the date on which the notice referred to in sub-section (5) is served upon the other party.]