DEAR KHUSHI,
Following is the answer against your question:
SETTING ASIDE OF ARBITRAL AWARD
The effect of an award no doubt is that the parties cannot appeal against it as to its merits and the court cannot interfere with it on merits. The Supreme Court has observed : " An arbitrator is a judge appointed by the parties and as such an award passed by him is not to be lightly interfered with." The conclusion of an arbitrator on facts, even if erroneous in the opinion of the court cannot be interfered with. Where the view of the arbitrator is plausible view and cannot be ruled as one which it is that of the arbitrator. But this does not means that there is no check on the arbitrator's conduct. In order, therefore, to assure proper conduct of proceedings, the law allows certain remedies against an award. These remedies can be obtained through a court of law having jurisdiction over the matter.
The court can set aside an arbitral award on the following grounds:-
Incapacity of party :- Section 34(2)(a)(i) of the Arbitration and Conciliation Act,1996 says that If a party to an arbitration is not capable of looking after his own interest, and he is not represented by a person who can protect his interests, the award will not be binding on him and may be set aside on his application. Thus, if a minor, or a person of unsound mind is a party, he must be properly represented by a proper guardian otherwise the award would be liable set aside.
Invalidity of agreement:- Section 34(2)(a)(ii) says that If the agreement is invalid, the reference there under and consequently the award on the basis of such reference would be invalid and can be set aside. The validity of a n arbitration agreement can be challenged on any of the grounds on which the validity of a contract may be challenged.
Notice not given to party:-
Section 34(2)(a) permits challenge to an award on the grounds:-
(i) That the party was not given proper notice of the appointment of an arbitrator.
(ii) That the party was not given proper notice of the arbitral proceedings, or
(iii) That the party was for some reason unable to present his case.
Section 12 gives a party the right to challenge the appointed of an arbitrator on the ground of his integrity and impartiality being doubtful and of challenging the award on this ground. If the party is not given notice of the appointment of a n arbitrator he is deprived of this valuable right.
Award beyond scope of reference:-
According to Section 34(2)(a)(iv) ,the reference of a dispute under an agreement defines the limits of the authority and jurisdiction of the arbitrator. The arbitrator's authority has its source in the reference. He cannot traverse beyond the reference. If he does so he acts without jurisdiction. The Jurisdiction of the arbitrator is limited by the reference and if the arbitrator has assumed jurisdiction not possessed by him, the award to the extent to which it is beyond the arbitrator's jurisdiction would be invalid and liable to be set aside.
Illegality in Composition of Tribunal or in arbitral procedure :-
An application under Section 34(2)(a)(v) for setting aside an arbitral award can be made on the grounds;
(a) That the composition of the Tribunal was not in accordance with the agreement;
(b) That the procedure agreed to by the parties was not followed in the conduct of proceedings; or
(c) That, in the absence of agreement as to procedure, the procedure prescribed by the Act was not followed.
Failure to follow the agreed procedure or the procedure prescribed by the Act is a procedural misconduct. Where the parties agreed that the counsel's opinion should be sought on the legal questions surrounding the arbitration, such opinion and the award base on it should not be lightly overturned.
Dispute not arbitrable:-
According to Section 34(2)(b)(i) ,the existence of an arbitrable dispute is a condition precedent for exercise of power by an arbitrator.
Generally speaking, almost all matters in dispute, not being of a criminal nature, may be referred to arbitration. Where the law has given jurisdiction to determine a particular matter to specified tribunals only, determination of that matter by other tribunals is excluded.
Public Policy : Fraud and Corruption:-
Section 34(2)(b)(ii) provides that an application for setting aside an arbitral award can be made if the arbitral award is in conflict with the public policy of India. The explanation of clause (b) clarifies that an award obtained by fraud or corruption would also be an award against the public policy of India. Thus ,an award obtained by suppressing facts, by misleading or deceiving the arbitrator, by bribing the arbitrator, by exerting pressure on the arbitrator,etc., would be liable to be set aside.
Limitation for filing application for setting aside
Sub section 3 of Section 34 prescribes the limitation of three months for filing an application for setting aside an award. The application cannot be made after the expiry of three months-
(i) From the date on which the party received the arbitral award, or
(ii) From the date of the disposal of the application under Section 33, if made, for the correction , interpretation or making of additional award.
The provision to sub-section (3) empowers the Court to extend, for sufficient cause, the time by a further maximum period of thirty days.
Stamp duty and registration
Section 34 of the Act provides for setting aside of the award on the grounds enumerated therein and none other. The question as to whether the award is required to be stamped and registered, would be relevant only when the parties would file the award for its enforcement under Section 36 of the Act.
