GUJARAT GUJA RAT NATIONAL NATIONAL LAW LAW UNIVERSITY UNIVERS ITY
Analysis of Section 34 of the Aritration an! "onciliation Act# Settin$ Asi!e of o f Aritral Aritral A%ar! A%ar! an! "o&rts' Interference ALTERNATIVE (IS)UTE RESOLUTION Se*ester V
Submitted to Dr. Vikas Gandhi Pavani Nath 12B091 B.A. LL.B. (ons.! (2012 " 201#!
TA+LE TA+LE O, "ONTENTS
Analysis of Section 34 of the Arbitration and Conciliation Act: Setting Aside of Arbitral Award Award and Courts’ Interference
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A$kno%&ed'ement Abstra$t *ntrodu$tion *n$a+a$it, o- a Part, *nva&idit, o- the A'reement ant o- Pro+er Noti$e A%ard Dea&s %ith Dis+ute Not /e-erred to Arbitration Arbitra& ribuna& ribuna& %as De-e$tive in its om+osition Dis+ute %as not a+ab&e o- a Sett&ement Pub&i$ Po&i$,3 under the A$t Se$ti e$tion on )(! )(! o- the Arbit bitrati ation A$t and and Li Limita itatio tion on$&usion Bib&io'ra+h,
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4 20 21
A"-NOWLE(GE.ENT *t is indeed m, +rivi&e'e to +resent this +ro5e$t on Ana&,sis o- Se$tion ) o- the Arbitr Arbitratio ation n and on$i& on$i&iati iation on A$t6 A$t6 Settin Settin' ' Aside Aside o- Arbit Arbitra& ra& A%ard and ourts ourts33 *nter-eren$e37 to m, tea$her7 Dr. Vikas Vikas Gandhi.
* %ou&d &ike to e8+ress m, dee+est 'ratitude to r. Bima& Pate&7 Dire$tor7 Gu5arat Nationa& La% :niversit,7 -or +rovidin' this %onder-u& o++ortunit, to $arr, out resear$h on this si'ni-i$ant to+i$.
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Analysis of Section 34 of the Arbitration and Conciliation Act: Setting Aside of Arbitral Award and Courts’ Interference
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* %ou&d &ike to thank Vikas Sir7 Assistant Pro-essor o- La%7 Gu5arat Nationa& La% :niversit,7 -or 'ivin' us the -reedom to resear$h on the to+i$ in %hatever %a, %e deemed -it7 and -or 'ivin' us va&uab&e in-ormation and advi$e re'ardin' the same. his +a+er has broadened m, understandin' o- the $urrent s$enario o- arbitration in *ndia. Vikas Sir3s $ontinuous su++ort and 'uidan$e throu'hout the $ourse o- +re+arin' this +ro5e$t has been a mora&e"booster and has made me %ork harder.
* %ou&d a&so &ike to thank ever,one ; tea$hers7 -ami&, and +eers ; -or 'ivin' me va&uab&e in-ormation and he&+in' me -ormu&ate ideas throu'h stimu&atin' dis$ussions and a $ohesive %ork environment to turn m, ideas and stra, thou'hts into this $oherent resear$h +a+er.
INTRO(U"TION
s+e$ia&&, b, virtue o- Se$tion 0($! o- 19)0 A$t7 ever, a%ard %as made $ha&&en'eab&e b, raisin' a&& kinds o- a&&e'ations. But the 199= A$t has &aid do%n the 'rounds on&, and on&, on %hi$h an a%ard $an be $ha&&en'ed %hi$h thus has $urbed
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Analysis of Section 34 of the Arbitration and Conciliation Act: Setting Aside of Arbitral Award and Courts’ Interference
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the tenden$, o- a++roa$hin' the $ourt at dro+ o- a hat. *- a +art, -ai&s to estab&ish his $ase %ithin the -our $orners o- se$tion )7 the a%ard $annot be set aside. 1 he ne% A$t has -i8ed the time &imit on arbitra& +ro$eedin's and time -rame to $ha&&en'e an, arbitra& a%ard. *t -urther has +rohibited $ourts to entertain an, $ha&&en'e on an, 'round be-ore +assin' o- the a%ard.
Provision
:nder Se$tion ) o- the ne% A$t7 an a%ard $an be set aside on&, b, an a++&i$ation o- the +art,. An a''rieved +art, has to a++&, to the $ourt %ithin three months o- re$ei+t o- the a%ard -or settin' aside the a%ard %hi$h ma, be e8tended -or a -urther +eriod o- 0 da,s i- the +art,3s a++&i$ation satis-ies the $ourt. he 'rounds under %hi$h a +art, ma, a++&, to the $ourt to set aside an a%ard are on&, those mentioned in Se$tion )(2! o- the A$t. hus the s$o+e o- inter-eren$e %ith the a%ard b, the $ourt is ver, &imited and is restri$ted to the -o&&o%in'6
− − − − − −
Incapacity of a party [Section 34 (2)(a)(i)] Invalidity of the agreement [Section 34 (2)(a)(ii)] Want of proper notice [Section 34 (2)(a)(iii)] Aard deals ith disp!te not referred to ar"itration [Section 34 (2)(a)(iv)] Ar"itral #ri"!nal as defective in composition [Section 34 (2)(a)(v)] S!"$ect matter of the disp!te not "eing capa"le of settlement "y ar"itration !nder the
la for the time "eing in force [ Section 34 (2)(")(i)] − Ar"itral aard "eing in conflict ith p!"lic policy [Section 34 (2)(")(ii)] he +art, $ha&&en'in' the a%ard has to estab&ish an, o- these 'rounds be,ond reasonab&e doubt to set aside the a%ard7 -ai&in' %hi$h7 the $ourt %i&& u+ho&d the arbitra& a%ard.
# State of %a$asthan v& 'av harat onst& o&7 A*/ 2002 S 24?. Gujarat National Law ni!ersity
Analysis of Section 34 of the Arbitration and Conciliation Act: Setting Aside of Arbitral Award and Courts’ Interference
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IN"A)A"ITY O, A )ARTY *- the +art, $ha&&en'in' the a%ard -urnishes +roo- that he %as under some in$a+a$it, then the $ourt i- it is satis-ied ma, set aside the a%ard. Grounds o- in$a+a$it, o- a +art, to enter into a va&id $ontra$t under the *ndian ontra$t A$t7 1?#2 are s@uare&, a++&i$ab&e in de$idin' the $ases -a&&in' under this $ate'or,. he Su+reme ourt b, its 5ud'ment he&d that in$a+a$it, o- a +art, is a 'ood 'round -or settin' aside an a%ard.2 *t %as he&d b, the adras i'h ourt in
" S!"hash handra *as +!shi" v& ,anga Prosad *as +!shi" and others 7 A*/ 19=# S ?#?
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Analysis of Section 34 of the Arbitration and Conciliation Act: Setting Aside of Arbitral Award and Courts’ Interference
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-a.shminarayana #antri v& %amachandra #antri 3 that an a%ard %hi$h is inva&id under the &a% 'overnin' minors ou'ht to be set aside.
INVALI(ITY O, T/E AGREE.ENT
3 A*/ 1919 ad 1029. 4 A*/ 19?2 Pat 2?. Gujarat National Law ni!ersity
Analysis of Section 34 of the Arbitration and Conciliation Act: Setting Aside of Arbitral Award and Courts’ Interference
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he De&hi i'h ourt in *irector ,eneral of S!pplies and *isposals v& ovenry +etals orporation (P) -td&0 he&d that %here there %as no $on$&uded $ontra$t bet%een the +arties %ith res+e$t to the dis+uted items7 sin$e the -orma& a$$e+tan$e %as sent %hen the tender o--er a&read, stood &a+sed7 the arbitration $&ause in su$h a $ontra$t %as a&so not in e8isten$e and an, a%ard made in su$h a re-eren$e %as &iab&e to be set aside.
*t is -rom the terms o- the arbitration a'reement that the arbitrator derives his authorit, to arbitrate7 i- in &a% there is no va&id a'reement the +ro$eedin's o- arbitrator %ou&d be unauthoried.=
he Su+reme ourt he&d that inva&idit, o- an a'reement $an be a 'round o- an a++&i$ation -or settin' aside an a%ard %hi$h is based on su$h inva&id a'reement. # *n vie% o- the s+e$i-i$ ob5e$tion that there %as no arbitration a'reement bet%een the +arties and $onse@uent&, there %as not and $ou&d not have been an, re-eren$e to the arbitrators7 -ai&ure o- the ria& ourt to order +rodu$tion o- arbitration a'reement and o- re-eren$e and to de$ide thereon vitiated its 5ud'ment. ?
WANT O, )RO)ER NOTI"E *- the +art, makin' the a++&i$ation %as not 'iven +ro+er noti$e o- the a++ointment o- an arbitrator or o- the arbitra& +ro$eedin's or %as other%ise unab&e to +resent his $ase then the ourt $an set aside the a%ard. his 'round is derived -rom the +rin$i+&e o- natura& 5usti$e. here the +art, to the arbitration %as not served %ith the noti$e o- hearin' and %as not served %ith the $o+, o- the a%ard7 the a%ard %ou&d be &iab&e to
$ A*/ 19?) N< 14 (De&hi!. % 1nion of India v& A&-& %allia %am 7 A*/ 19= S 1=?4. & 1nion of India v& m Pra.ash7 A*/ 19#= S 1#)4. ' !lmani *evi v& Sheo ,ovind Prasad Agaral 7 A*/ 19?4 Pat 14=. Gujarat National Law ni!ersity
Analysis of Section 34 of the Arbitration and Conciliation Act: Setting Aside of Arbitral Award and Courts’ Interference
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be set aside.9 An arbitra& a%ard $an be set aside b, the $ourt i- the +art, makin' the a++&i$ation %as not 'iven +ro+er noti$e.10
hen dis+ute on sett&ement o- a$$ounts on retirement o- a +artner %as re-erred to arbitrator %hi$h %as sou'ht to be so&ved b, him on the basis o- va&uation re+ort $a&&ed b, him but the arbitrator at no +oint o- time su++&ied $o+, o- va&uation re+ort to the said retired +artner7 there %as brea$h o- +rin$i+&es o- natura& 5usti$e and the a%ard o- arbitrator %as &iab&e to be set aside.12
AWAR( (EALS WIT/ A (IS)UTE NOT RE,ERRE( TO AR+ITRATION *- the arbitra& a%ard dea&s %ith a dis+ute not $ontem+&ated b, or not -a&&in' %ithin the terms o- the submission to arbitration7 or it $ontains de$isions on matters be,ond the s$o+e o- the submission to arbitration then the $ourt $an set aside the a%ard. Arbitrator3s 5urisdi$tion is $on-ined to the -our $orners o- the $ontra$t. e $annot i'nore the +rovisions o- the $ontra$t other%ise he %ou&d be a$tin' %ithout
( (199?!2 ah L/ ?)4 (?)?! Bom. #) Shin5ts! hemical o& -td& v& A.sh ptifi"re -td& and another 7 A*/ 2004 S #==. ## 2002 (2! Bom L/ 2#1. #" Shri %a$endra /& /oshi v& *ilip /& /oshi 6 others7 (2000! 1 Bom L/ =14.
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5urisdi$tion.1 here an a%ard is $ontrar, to the terms o- the a'reement7 the same $ou&d be inter-ered %ith under se$tion ) (2! (b! (ii! as bein' +atent&, i&&e'a& and is o++osed to +ub&i$ +o&i$, o- *ndia. *- an arbitrator makes an a%ard7 %hi$h is in $on-&i$t %ith the +ri$e variation -ormu&a $ontained in the Pur$hase
*n order to determine %hether the arbitrator has a$ted in e8$ess o- 5urisdi$tion %hat has to be seen is %hether the $&aimants $ou&d raise a +arti$u&ar dis+ute or $&aim be-ore the arbitrator. *- the ans%er is in a--irmative7 then it is $&ear that the arbitrator %ou&d have the 5urisdi$tion to dea& %ith su$h a $&aim.
hen an a%ard is 'ood in +art and bad in +art and the t%o +arts are severab&e7 the a%ard $an be set aside in +art 1= ho%ever i- a +art o- the a%ard is $&ose&, inter&inked %ith the entire amount and is inse+arab&e7 the %ho&e a%ard shou&d -ai& in &a%.1#
he assum+tion o- 5urisdi$tion not +ossessed b, the arbitrator renders the a%ard7 to the e8tent to %hi$h it is be,ond the arbitrator3s 5urisdi$tion inva&id and i- it is not +ossib&e to sever su$h inva&id +art -rom the other +art o- the a%ard7 the a%ard must -ai& in its entiret,.1?
#3 harato.ing oal -td& v& Annap!rna onst .7 (200! ? S 14). #4 7ind!stan 8inc -td& v& riends oal ar"oni9ation7 (200=! ) S ))4. #$ 7imachal Pradesh State 5lectricity oard v& %&/& Shah7 (1999! ) S 21). #% 1nion of India v& Apee$ay Pvt& -td .7 A*/ 19? a& 2#1(DB!. #& hinoy halani and o& v& An$iah 7 A*/ 194? AP ?). #' /!ira$ "hai 1$amshi Sheth v& hintamanrao ala$i7 A*/ 19=4 S 21). Gujarat National Law ni!ersity
Analysis of Section 34 of the Arbitration and Conciliation Act: Setting Aside of Arbitral Award and Courts’ Interference
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*t %as he&d b, the Su+reme ourt in il and 'at!ral ,as orporation -td& v& SAW Pipes -td &:; that i- the arbitra& tribuna& has not -o&&o%ed the mandator, +ro$edures +res$ribed under the A$t7 it %ou&d mean that it has a$ted be,ond its 5urisdi$tion and thereb, the a%ard %ou&d be +atent&, i&&e'a& %hi$h $ou&d be set aside. hus arbitrator $annot a%ard an, amount ru&ed out b, terms o- a'reement. 20
AR+ITRAL TRI+UNAL WAS (E,E"TIVE IN ITS "O.)OSITION
he a%ard $an be set aside i-6 " $om+osition o- arbitra& tribuna& is not in a$$ordan$e %ith the a'reement " the arbitra& +ro$edure is not in a$$ordan$e %ith the a'reement bet%een the +arties " in the absen$e o- su$h an a'reement7 the $om+osition o- arbitra& tribuna& or arbitration +ro$edure is not in a$$ordan$e %ith Part * o- the A$t.
#( 2000 (! S ))9. ") Shyama haran Agarala 6 Sons v& 1nion of India (1I) 7 A*/ 2002 S 2=49. Gujarat National Law ni!ersity
Analysis of Section 34 of the Arbitration and Conciliation Act: Setting Aside of Arbitral Award and Courts’ Interference
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he Su+reme ourt in 'arayan Prasad -ohia v& 'i.h!n$
here the arbitration $&ause +rovided -or arbitration b, a +ane& o- arbitrators7 the assum+tion o- 5urisdi$tion b, a so&e arbitrator %as he&d b, the Su+reme ourt to be i&&e'a& and $onse@uent&, the a%ard +assed b, su$h an arbitrator %as set aside. 2
*t %as he&d b, the Su+reme ourt in 1nion of India v& Pra"hat
(IS)UTE IS NOT "A)A+LE O, A SETTLE.ENT *- the sub5e$t matter o- the dis+ute is not $a+ab&e o- sett&ement b, arbitration under the &a% -or the time bein' in -or$e then the $ourt $an set aside the a%ard. *t %as he&d in lymp!s S!perstr!ct!res Pvt& -td& v& +eena =i$ay that dis+utes re&atin' to s+e$i-i$ +er-orman$e o- a
"# A*/ 2002 S 119. "" (200)! 1 A&& / =4) (Bom!. "3 *harma Prathishthanam v& +adho. onstr!ction Pvt& -td&7 A*/ 2004 S 21). "4 A*/ 199) S =)9. "$ A*/ 1999 S 2102. "% A*/ 1991 De&hi 1. Gujarat National Law ni!ersity
Analysis of Section 34 of the Arbitration and Conciliation Act: Setting Aside of Arbitral Award and Courts’ Interference
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$ontra$t $an be re-erred to arbitration and a&so that under sub $&auses 2 (a! (iv! o- Se$tion ) o- the A$t7 Arbitra& A%ard ma, be set aside b, the ourt i- the A%ard dea&s %ith the dis+ute not $ontem+&ated b, or not -a&&in' %ithin the terms o- the submission to Arbitrator.
Dis+ute re&atin' to $&aim o- a++e&&ant %ho had submitted a su++&ementa& bi&& -or e&e$tri$a& ener', su++&ied but not re$orded. *n absen$e o- a dis+ute as to %hether the matter %as or %as not $orre$t su$h a dis+ute %as arbitrab&e and %as not &iab&e to be set aside.2#
here the res+ondent or+oration had raised the dis+ute be-ore the arbitrator that the $&aim %ith re'ard to re-und stora'e $annot be de$ided b, the arbitrator and the, submitted to the 5urisdi$tion o- the arbitrator sub5e$t to said ob5e$tion7 the res+ondent $an take the +&ea be-ore the i'h ourt that to that e8tent the arbitrator had no 5urisdi$tion to 'o into the said $ontrovers,.2?
here the dis+ute or di--eren$e in re&ation to the a'reement is arbitrab&e and the @uestion o- restoration o- distributorshi+ does not arise under the a'reement7 the arbitrator %as in error and had no 5urisdi$tion to dire$t restoration o- distributorshi+ to res+ondent.29
*t %as he&d b, the Su+reme ourt in %a$asthan State +ines 6 +inerals -imited v& 5astern 5ngineering 5nterprises 6 another 3? that an a%ard %hi$h is $ontrar, to the +rovisions o- &a% %i&& be i&&e'a&. Arbitrator $annot i'nore the +rovisions o- the $ontra$t and 'ive an a%ard not re&ated to the a'reement. 1
"& #he #ata 7ydro5lectric Poer S!pply o& -td& and thers v& 1nion of India (1I)7 A*/ 200 S 14?1. "' 1999 A* 10)2. "( 5& =en.ata.rishna v& Indian il orporation and anothers7 2000 (#! S #=). 3) A*/ 1999 S =2#. 3# 200 (?! S 14).
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0)U+LI" )OLI"Y' UN(ER T/E A"T *- the arbitra& a%ard is in $on-&i$t %ith the +ub&i$ +o&i$, o- *ndia then the $ourt $an set aside the a%ard. he term +ub&i$ +o&i$, is not de-ined in the A$t thou'h it is used in Se$tion ) (2! (b! (ii! o- the A$t. he term E+ub&i$ +o&i$,F %as inter+reted in %en!sagar Poer o& v& ,eneral 5lectric o& 32 b, the Su+reme ourt %hi&e dea&in' %ith Se$tion #(1! (b! (ii! o- the orei'n A%ards (/e$o'nition and >n-or$ement! A$t7 19=1 re&atin' to en-or$ement o- a -orei'n a%ard takin' the vie% that E+ub&i$ +o&i$,F $onsisted o- (a! the -undamenta& +o&i$, o- *ndian &a% (b! the interests o- *ndia7 and ($! 5usti$e and mora&it,. en$e the e8+ression +ub&i$ +o&i$, o- *ndia -or the +ur+ose o- this se$tion re-ers to the
3" 199) Su++ (1! S =)). Gujarat National Law ni!ersity
Analysis of Section 34 of the Arbitration and Conciliation Act: Setting Aside of Arbitral Award and Courts’ Interference
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+rin$i+&es and standards $onstitutin' the 'enera& or -undamenta& +o&i$, o- the state estab&ished b, the onstitution the e8istin' &a%s o- the $ountr, and the +rin$i+&es o- 5usti$e and mora&it,.
he $on$e+t o- +ub&i$ +o&i$, $onnotes some matter %hi$h $on$erns +ub&i$ 'ood and the +ub&i$ interest. o%ever %hat is 'ood in +ub&i$ interest or -or +ub&i$ 'ood or %hat %ou&d be in5urious or harm-u& to the +ub&i$ 'ood or +ub&i$ interest %ou&d var, -rom time to time.
he a%ard %hi$h is on the -a$e o- it7 +atent&, in vio&ation o- statutor, +rovisions $annot be said to be in +ub&i$ interest. Su$h a%ard is &ike&, to adverse&, a--e$t the administration o- 5usti$e.
*n il and 'at!ral ,as orporation v& SAW Pipes -td& 347 the Su+reme ourt added the additiona& 'round o- E+atent i&&e'a&it,F as bein' a $om+onent o- E+ub&i$ +o&i$,F %ithin the meanin' o- Se$tion ) (2! (b! (ii! o- the A$t o- 199=. *&&e'a&it, must 'o to the root o- the matter and i- the i&&e'a&it, is o- trivia& nature it $annot be he&d that a%ard is a'ainst the +ub&i$ +o&i$,. Su$h a +rovision in the *ndian A$t %ou&d +ermit $ourts to intervene not on&, %hen the a%ards are a resu&t o- a +ro$edura& mis$ondu$t on the +art o- the arbitra& tribuna& but a&so %here there has been an irre'u&arit, o- a kind %hi$h has $aused substantia& in5usti$e. here an a%ard is $ontrar, to the terms o- the a'reement7 the same $ou&d be inter-ered %ith under se$tion )(2!(b!(ii! as bein' +atent&, i&&e'a& and is o++osed to +ub&i$ +o&i$, o- *ndia. 4 A%ard $ou&d a&so be set aside i- it is so un-air and unreasonab&e that it sho$ks the $ons$ien$e o- the $ourt. Su$h a%ard is o++osed to +ub&i$ +o&i$, and is re@uired to be ad5ud'ed void. An a%ard based on a $ontra$t %hi$h is void %ou&d be arbitrar, and %ou&d be $ontrar, to the +ub&i$ +o&i$, o- *ndia and is &iab&e to be set aside.=
33 Smita ond!ctors -td& v& 5!ro Alloys -td .7 (2001! # S #2?. 34 (200! 4 S #04. 3$ 7ind!stan 8inc -td& v& riends oal ar"oni9ation7 (200=! ) S ))4. 3% +anaging *irector@ #he 'agar$!na ooperative S!gars -imited v& #&<& +ohan %ao@ %etd& hief 5ngineer and another 7 A*/ 1994 AP =4.
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he term H+ub&i$ +o&i$,H as a++&i$ab&e to +etitions under S. ) o- the Arbitration I on$i&iation A$t7 199= has been e8amined b, the De&hi i'h ourt in %amesh hander Arora v&
he Su+reme ourt in the $ase o- in the $ase o- ', v& Sa Pipes 3B7 has been +&eased to inter+ret as -o&&o%s6
he +hrase Pub&i$ Po&i$, o- *ndia3 is not de-ined under the A$t. en$e7 the said term is re@uired to be 'iven meanin' in $onte8t and a&so $onsiderin' the +ur+ose o- the se$tion and s$heme o- the A$t. *t has been re+eated&, stated b, various authorities that the e8+ression +ub&i$ +o&i$,3 does not admit o- +re$ise de-inition and ma, var, -rom 'eneration to 'eneration and -rom time to time. en$e7 the $on$e+t +ub&i$ +o&i$,3 is $onsidered to be va'ue7 sus$e+tib&e to narro% or %ider meanin' de+endin' u+on the $onte8t in %hi$h it is used. La$kin' +re$edent the ourt has to 'ive its meanin' in the &i'ht and +rin$i+&es under&,in' the Arbitration A$t7 ontra$t A$t and onstitutiona& +rovisions.
hi&e dea&in' %ith the $on$e+t o- +ub&i$ +o&i$,7 this ourt in entral Inland Water #ransport orporation -imited and Anr& v& ro$o 'ath ,ang!ly and Anr& 3;7 S has observed thus6 #he Indian ontract Act does not define the eCpression Dp!"lic policyE or Dopposed to p!"lic policyE& rom the very nat!re of things@ the eCpressions Dp!"lic policyE@ Dopposed to p!"lic policyE@ or Dcontrary to p!"lic policyE are incapa"le of precise definition& P!"lic policy@ hoever@ is not the policy of a partic!lar government& It connotes some matter hich concerns the p!"lic good and the p!"lic interest& #he concept of hat is for the p!"lic good or in the p!"lic interest or hat o!ld "e in$!rio!s or harmf!l to the p!"lic good or the p!"lic interest has varied from time to time&
3& De$ided
Analysis of Section 34 of the Arbitration and Conciliation Act: Setting Aside of Arbitral Award and Courts’ Interference
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As ne% $on$e+ts take the +&a$e o- o&d7 transa$tions %hi$h %ere on$e $onsidered a'ainst +ub&i$ +o&i$, are no% bein' u+he&d b, the $ourts and simi&ar&, %here there has been a %e&& re$o'nised head o- +ub&i$ +o&i$,7 the $ourts have not shirked -rom e8tendin' it to the ne% transa$tions and $han'ed $ir$umstan$es and have at times not even -&in$hed -rom inventin' a ne% head o- +ub&i$ +o&i$,. here are t%o s$hoo&s o- thou'ht ; Ethe narro% vie%F s$hoo& and Ethe broad vie%F s$hoo&. A$$ordin' to the -ormer7 $ourts $annot $reate ne% heads o- +ub&i$ +o&i$, %hereas the &atter $ountenan$es 5udi$ia& &a%"makin' in this area. he adherents o- the Ethe narro% vie%F s$hoo& %ou&d not inva&idate a $ontra$t on the 'round o- +ub&i$ +o&i$, un&ess that +arti$u&ar 'round had been %e&&" estab&ished b, authorities.
*t is thus $&ear that the +rin$i+&es 'overnin' +ub&i$ +o&i$, must be and are $a+ab&e7 on +ro+er o$$asion7 o- e8+ansion or modi-i$ation. Pra$ti$es %hi$h %ere $onsidered +er-e$t&, norma& at one time have toda, be$ome obno8ious and o++ressive to +ub&i$ $ons$ien$e. *- there is no head o- +ub&i$ +o&i$, %hi$h $overs a $ase7 then the $ourt must in $onsonan$e %ith +ub&i$ $ons$ien$e and in kee+in' %ith +ub&i$ 'ood and +ub&i$ interest de$&are su$h +ra$ti$e to be o++osed to +ub&i$ +o&i$,. Above a&&7 in de$idin' an, $ase %hi$h ma, not be $overed b, authorit, our $ourts have be-ore them the bea$on &i'ht o- the Preamb&e to the onstitution. La$kin' +re$edent7 the $ourt $an a&%a,s be 'uided b, that &i'ht and the +rin$i+&es under&,in' the undamenta& /i'hts and the Dire$tive Prin$i+&es enshrined in our onstitution.
he norma& ru&e o- ommon La% has been that a +art, %ho seeks to en-or$e an a'reement %hi$h is o++osed to +ub&i$ +o&i$, %i&& be non"suited. he t,+e o- $ontra$t to %hi$h the +rin$i+&e -ormu&ated b, us above a++&ies are not $ontra$ts %hi$h are tainted %ith i&&e'a&it, but are $ontra$ts %hi$h $ontain terms %hi$h are so un-air and unreasonab&e that the, sho$k the $ons$ien$e o- the $ourt. he, are o++osed to +ub&i$ +o&i$, and re@uire to be ad5ud'ed void.F
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Analysis of Section 34 of the Arbitration and Conciliation Act: Setting Aside of Arbitral Award and Courts’ Interference
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SE"TION 34132 O, T/E AR+ITRATION A"T AN( LI.ITATION
/e$ent&,7 the De&hi i'h ourt %as $a&&ed u+on to ad5udi$ate u+on a -e% interestin' issues arisin' out o- the inter+retation o- Se$tion ) o- the Arbitration A$t in 'enera&7 and its re&ationshi+ %ith the Limitation A$t in +arti$u&ar. *n :nion of India v& +icroave omm!nication -td& 4?7 the @uestion be-ore the ourt %as %hether7 in the event that the s+e$i-ied +eriod -or -i&in' an a++&i$ation -or settin' aside an arbitra&
4) i'h ourt o- De&hi7 20"12"2011. Gujarat National Law ni!ersity
Analysis of Section 34 of the Arbitration and Conciliation Act: Setting Aside of Arbitral Award and Courts’ Interference
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a%ard under S. ) has e8+ired7 S. ) o- the Limitation A$t $an be a++&ied to neverthe&ess render the a++&i$ation admissib&e.
S. )(! o- the Arbitration A$t states6 DAn application for setting aside may not "e made after three months have elapsed from the date on hich the party ma.ing that application had received the ar"itral aard or@ if a reF!est had "een made !nder section 33@ from the date on hich that reF!est had "een disposed of "y the ar"itral tri"!nal Provided that if the o!rt is satisfied that the applicant as prevented "y s!fficient ca!se from ma.ing the application ithin the said period of three months it may entertain the application ithin a f!rther period of thirty days@ "!t not thereafter&E
S. ) o- the Limitation A$t states6 DWhen the prescri"ed period for any s!it@ appeal or application eCpires on a day hen the co!rt is closed@ the s!it@ appeal or application may "e instit!ted@ preferred or made on the day hen the co!rt reopens&E
*n order to assess the a++&i$abi&it, o- S. ) o- the Limitation A$t not%ithstandin' the s+e$i-ied +eriod under S. )(!7 the ourt %as $a&&ed u+on to $onsider the 2001 de$ision o- the A+e8 ourt in 1nion of India v& +Gs Pop!lar onstr!ction ompany 4:. *n that $ase7 it %as he&d that S. 4 o- the Limitation A$t7 %hi$h +rovided -or a 'enera& e8tension o- the &imitation +eriod +rovided that su--i$ient $ause %as sho%n to the ourt7 $ou&d not be used to save an a++&i$ation that %as in brea$h o- both the three" month +eriod under S. )(!7 as %e&& as the e8tended time +eriod o- thirt, da,s under the +roviso. hi&e admitted&, the Su+reme ourt3s de$ision %as &imited to S. 47 its observations %ere Eso s%ee+in' that most o- the i'h ourts treated it as sa$rosan$t and took the vie% thatJS.) K%as not a++&i$ab&eF to an issue invo&vin' S. )(!. hus7 the term Eand not therea-terF at the end o- the +roviso to S. )(! %as inter+reted b, the i'h ourts to mean that the s+e$i-ied time under S. ) %as Eabso&ute and une8tendab&eF.
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*n 200?7 ho%ever7 the Su+reme ourt in onsolidated 5ngineering 5nterprises v& Principal Secretary@ Irrigation *ep&427 noted that the +rovisions o- S. 4 %ere im+&ied&, e8$&uded b, the +roviso to S. )(!. his is be$ause S. 4 +rovides -or a 'enera& e8tension o- the &imitation +eriod %here su--i$ient $ause is sho%n7 %hi&e S. ) s+e$i-i$a&&, +rovides -or a thirt,"da, e8tension -or the ver, same reason. *n a$$ordan$e %ith the %e&& a$$e+ted +rin$i+&e o- s+e$i-i$ statutes overridin' 'enera& ones in $ases o- over&a+7 S. )(! %ou&d there-ore e8$&ude the o+eration o- S. 4. his7 in e--e$t7 %as the ho&din' o- the ourt.
he De&hi i'h ourt then noted that7 in $ontradistin$tion %ith the ob5e$t o- S. 47 S. ) Edoes not en&ar'e the +eriod o- &imitation but it on&, enab&es the +art, to -i&e an, suit7 a++&i$ation7 et$. on the reo+enin' da, o- the ourt i- the ourt is $&osed on a da, %hen &imitation e8+ires.F As there %as no over&a+ o- an, sort bet%een S. ) and S. )(! ; indeed7 the t%o dea&t %ith $om+&ete&, di--erent issues ; the ourt he&d that S. ) %as not e8$&uded7 and %ou&d $ontinue to a++&, in $ases %here there %as neither an, ina$tion7 nor a &a$k o- due di&i'en$e on the +art o- the a++&i$ant. *nterestin'&,7 the ourt a&so he&d that S. ) %as a++&i$ab&e even to situations %here the +roviso to S. )(! %as attra$ted ; i.e.7 the thirt,"da, $ondonation +eriod. *n the +resent $ase7 bureau$rati$ de&a,s bet%een de+artments %ere the main reasons -or the de&a,7 and %ere there-ore he&d to $onstitute su--i$ient $ause -or attra$tin' both the thirt,"da, e8tension +eriod7 as %e&& as $onse@uent&, ne$essitatin' the a++&i$ation o- S. ).
he ourt a&so had o$$asion to dea& %ith another +oint o- interest7 i.e.7 the meanin' o- Ethe +art,J K%ho had re$eived the arbitra& a%ardF under S. )(!. :nder S. 2(h! o- the Arbitration A$t7 the %ord E+art,F means a E+art, to an arbitration a'reementF. An ar'ument %as raised that7 in &i'ht o- a re$ent Su+reme ourt de$ision #eccho #richy 5ngineers7 Ein the $onte8t o- a hu'e or'aniation &ike /ai&%a,s the $o+, o- the A%ard has to be re$eived b, the +erson %ho has kno%&ed'e o- the +ro$eedin's and %ho %ou&d be the best +erson to understand and a++re$iate the arbitra& A%ard and a&so to take a de$ision in the matter o- movin' an a++&i$ation.F /e5e$tin' this $ontention7 the ourt he&d that su+ervision o- the da,"to"da, %orkin' under the $ontra$t7 as %e&& as bein' in"$har'e o- a&& $orres+onden$e thereto %as irre&evant in determinin' %ho the E+art,F to the arbitration a'reement %as. /ather7 it %as the si'nator, to the arbitration
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Analysis of Section 34 of the Arbitration and Conciliation Act: Setting Aside of Arbitral Award and Courts’ Interference
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a'reement %ho %as deemed to be the re@uisite +art,7 as de-ined under the Arbitration A$t. hi&e that %as the determinin' -a$tor7 other as+e$ts su$h as the +art, in %hose name the a++&i$ation -or settin' aside the arbitra& a%ard %as -i&ed7 or a subse@uent a++ea&7 %ere a&so re&evant as+e$ts that needed to be taken into a$$ount.
*n m, submission7 the ourt is $orre$t on both $ounts. *t $orre$t&, identi-ied that the rationa&e o- the Pop!lar onstr!ction ompany %as not the overridin' or abso&ute nature o- S. )(!7 but rather7 the -a$t that it e8$&uded the o+eration o- S. 4 due to their over&a++in' nature. As S. ) and S. )(! dea& %ith t%o ver, di--erent t,+es o- e8$e+tions to &imitations7 it is reasonab&e to 'ive both their -u&& e--e$t. Se$ond&,7 %hi&e the ar'ument that an e--e$tua&7 or +ur+osive inter+retation shou&d be 'iven to the %ord E+art,F7 it must be remembered that E+art,F is a term o- art that has a s+e$i-i$ &e'a& de-inition. he ourt %as bound both b, the +rovisions o- the Arbitration A$t as %e&& as #eccho #richy 5ngineers in re5e$tin' the $ontention.
"ON"LUSION Subse@uent to the de$ision in Sa% Pi+e $ase7 the @uestion that needs to be ans%ered is %hat e8a$t&, did the ourt mean %hen it stated that an a%ard %ou&d a&so be $ontrar, to +ub&i$ +o&i$, i- it %ere E+atent&, i&&e'a&FM Be-ore that one has to kno% %hat Ei&&e'a&it,F means in the arbitration $onte8t. *&&e'a&it, in arbitration $onte8t has three-o&d meanin'. irst&,7 the i&&e'a& nature o- the under&,in' $ontra$t7 se$ond&, its sub5e$t matter and &ast&,7 the $ir$umstan$es surroundin' the enterin' into o- the $ontra$t or the arbitration a'reement.) But the A+e8 ourt in Sa% Pi+e $ase 'ave a %ho&e ne% dimension to the term i&&e'a&it, in arbitration $onte8t b, e@uatin' it to mean Eerror o- &a%F.)) Arbitration is a $onsensua& ad5udi$ation +ro$ess. his im+&ies
43 Dar%aeh and /.. Linnane7 DSetaside and enforcement proceedingsH #he :;;> Ar"itration Act !nder threatE7 #(! *nt. A.L./. (200)!. 44 *d.
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Analysis of Section 34 of the Arbitration and Conciliation Act: Setting Aside of Arbitral Award and Courts’ Interference
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that +arties have a'reed to a$$e+t the a%ard 'iven b, the arbitrator even i- it is %ron'7 as &on' as +ro+er +ro$edures are -o&&o%ed b, him.
here-ore7 ourts $annot inter-ere %ith the en-or$ement o- a%ard on the 'round o- error o- &a% or error o- -a$t. *- the ourts are 'iven the +o%er to revie% on the 'round o- error o- &a% or error o- -a$t then it %i&& de-eat the ob5e$tives o- the A$t and %i&& a&so make arbitration the -irst ste+ in the +ro$ess %hi$h %i&& &ead to the hi'hest ourt o- the &and b, %a, o- su$$essive a++ea&s.
he Su+reme ourt itse&- has he&d in %a$asthan State +ines and +inerals -imited v& 5astern 5ngineering 5nterprise 40 that the ourt $annot inter-ere %ith the de$ision o- an arbitrator on the 'round that his de$ision is based on error o- &a% or -a$t. But this is disa'reed %ith. he A$t $&ear&, does not +rovide -or the a++ea& to a $ourt on the merits o- an arbitra& a%ard. *- the %ordin' o- the A$t is seen7 a $ourt hearin' an a++&i$ation to set aside an a%ard under the A$t is +re$&uded -rom revie%in' even indire$t&, the merits o- the a%ard sin$e set"aside is no &on'er +ossib&e -or errors o- &a% or -a$t.
he A$t on&, +rovides -or s+e$i-i$ heads under Se$tion ) on %hi$h a++ea&s $an be made to the ourt to set aside the a%ard. *- the &e'is&ators %anted to in$&ude Eerror o- &a%F as a 'round -or settin' aside the a%ard7 the, %ou&d have +rovided -or it in Se$tion ) itse&-. here are t%o &e'is&ative +ro+osa&s be-ore the *ndian Par&iament %hi$h $&ear&, sho% that the &e'is&ature did not intend to in$&ude Eerror o- &a%F as a +ub&i$ +o&i$, 'round under Se$tion )(2!(b!(ii! o- the A$t. Both the A+ri& 2001 Bi&& and De$ember 200 Bi&& have +ro+osed amendments to the 199= A$t as -o&&o%s6 D34A(:) In the case of an ar"itral aard made in an ar"itration other than an international ar"itration (hether commercial or not)@ reco!rse to the folloing additional gro!nds can "e had in an application for setting aside an aard referred to in s!"section (:) of section 34@ namely(a) that there is an error hich is apparent on the face of the ar"itral aard giving rise to a s!"stantial F!estion of la &&&E4>
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Analysis of Section 34 of the Arbitration and Conciliation Act: Setting Aside of Arbitral Award and Courts’ Interference
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hese +ro+osed amendments une@uivo$a&&, sho% the intention o- the &e'is&ature not to in$&ude Eerror o- &a%F as a se+arate 'round -or settin' aside domesti$ a%ards under the A$t. *n -a$t7 the ourt3s inter+retation o- +ub&i$ +o&i$, is so broad that it +otentia&&, o+ens the -&ood'ates to more and more $ha&&en'es o- arbitra& a%ards be-ore the *ndian $ourts. Ar'uab&,7 it is +re$ise&, this 5udi$ia& revie% o- the merits o- the $ase that Se$tion ) o- the A$t as %e&& as the $orres+ondin' :N*/AL ode& La% +rovisions %ere intended to +revent in order to ensure the -ina&it, o- arbitra& a%ards on the merits. he ratio o- the 5ud'ment is not in &ine %ith the ob5e$tive o- the A$t. Some authors advo$ate a midd&e +ath. As +er them there is need to ado+t the so" $a&&ed Eerror a++arent on the -a$e o- re$ordF test as an Ea&& %eatherF so&ution. )# o%ever7 su$h a so&ution is unne$essar, 'iven the e8haustive nature o- the 'rounds 'iven in Se$tion ).
+I+LIOGRA)/Y *.
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a. Avtar Sin'h (200#! D-a of Ar"itration and onciliationE 7 Lu$kno%6 >astern Book om+an,. b. <.P. a&hotra7 D#he -a and Practice of Ar"itration and onciliationE (Ne% De&hi6 Le8is Ne8is Butter%orths7 2002!. $. P.. arkanda7 D-a %elating to Ar"itration and onciliationE7 20017 adh%a Pub&ishers.
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4& A. uru+6 D%eposing faith in the ar"itral processH A restrained eCercise of $!dicial discretion hen constr!ing the Jp!"lic policy of IndiaKE7 )(! om+an, La% Courna& (200!7 at 1)#.
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a. htt+6indiankanoon.or'do$#219= a& -ast accessed on 2? +arch@ 2?:4
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