This article has been authored by Ali Hyder.

Arbitration, a type of Additional Dispute Resolution (ADR) system gaining its significance due to the factors that are fruitful outside the traditional courts in India. Encyclopedically spreading its wings as a substitute to lengthy court protocols proven by the reports specifically in the United States of America (USA) and the United Kingdom (UK), in the USA, according to the American Arbitration Association, 63% of Fortune 1000 Companies use arbitration method to settle disputes, Worldwide 90% of Arbitration cases involves parties from the USA according to USA Council for International Business. Whereas in the UK, according to the Queen Mary University of London survey, London is the top global arbitration hub, and according to the Chartered Institute of Arbitrators, UK, 70% of UK Companies use arbitration as a form of dispute resolution due to the following factors.

• Efficient dispute resolution. 
• Flexibility.
• Alternative to court.
• Specialist expertise.

The above factors help both the parties involved in Arbitration in many ways, understanding the mutual benefits, parties prefer Arbitration as an Additional Dispute Resolution (ADR) mechanism when compared to the Judicial Dispute Resolution (JDR) mechanism. 

In India mechanisms and techniques of ADR consisting of Arbitration, Conciliation, and Mediation are young and lack popularity when compared to developed nations’ scenarios. The reason behind this may be a lack of awareness of the benefits arrived through these systems. But in India, Arbitration is regulated by the Arbitration and Conciliation Act, of 1996. The act provides guidelines and proper channels for the process of Arbitration in India. An arbitral award passed through this act determines the issues in controversy made by the arbitral tribunal. That’s why it adopted the UNCITRAL (United Nations Commission on International Trade Law) Model Law on International Commercial Arbitration to uphold the passed arbitral awards internationally as well as domestically.  Arbitral tribunals are empowered and the Arbitral Award passed by the arbitrator is enforceable similar to the decree of the Court and both parties have to comply with it. An award can be monetary as well as non-monetary like providing compensation to any party or restricting a party from performing any task beyond the contractual agreement.  Similar to the Court there is a provision for Interim Awards too under Section 2(1)(6) and Section 31(c) empowers Arbitral tribunals to pass Interim Awards during the proceedings. 

As discussed above are the boons and adaptivity of Arbitration globally as well as in the domain of India. Still, the other side of the coin arises with the question, “What if either party involved in the Arbitration process is unsatisfied with the award?” The answer to the question itself is presented in Section 34, which laid down the legal framework to challenge the arbitral award passed. It allows either party to apply for setting aside the award passed by the Arbitrator on specific grounds, the judiciary ensures minimum intervention as in Indu Engineering & Textiles Ltd vs Delhi Development Authority,  the Supreme Court of India exclaimed that  “an arbitrator is a Judge appointed by the parties and as such the award passed by him is not to be lightly interfered with”.in the matter of Additional Dispute Resolutions (ADR), so the courts do not get involved in the merits of these cases as it reflects in this section but review the awards passed on specific grounds given under    Sections 34(2)(a) and 34(2)(b), which include, 

• Incapacity of a party.
• An invalid arbitration agreement.
• Improper notice of the arbitration process.
• If the award goes beyond the terms of the agreement. 
• If it violates public policy in India.

(Instances of fraud, corruption, or fundamental unfairness.)

Let us understand every single concept in depth to understand the insights in a better way, the grounds on which an Arbitral award can be set aside on applying within 90 days of the award received, and additionally Section 34(3) allows for an extension of 30 days if the applicant shows sufficient cause for the delay in filing the petition.

• Incapacity of a party: –

If a person is minor or of unsound mind, he/she is considered an Incapable person or simply unfit for taking part in the Arbitration process, but through Section 9 he can request the court to appoint the guardian or a sound person. Once the guardian or a person of sound minded is appointed on his behalf in the process of Arbitration, the party will not be treated as an Incapable party.

• An Invalid Arbitration Agreement: –

It can be understood simply that even if the process of the Arbitration is clear and as per the law, but the whole Agreement stands void, then automatically the Arbitration process and award will also stand void as envisaged in the case of Jaikishan Dass Mull v. L. Kanoria & Co.

• Improper notice of the arbitration process: –

If either party doesn’t receive a proper notice stating the appointment of the Arbitrator and other essentials then it will result in the inefficient presentation of the affected side and violate the right of the suffering party going against the natural justice. So it becomes essential to serve proper notice. An Arbitrator cannot pass an award as Nemo Judex Sine Actore, (No one should be judged without being heard) and an Arbitrator must pass an award after Audi Alteram Partem, (Hear the other side), in the case of Dulal Poddar vs Executive Engineer, Dona Canal Division, Supreme Court dictated that the award given by the arbitrator was ex-parte and such award which has been made by the Arbitrator having been passed without giving an opportunity of hearing to the respondent herein, was illegal and void. In another case where the Award was set aside when the Arbitrator failed to consider the counterclaim of the party, the verdict in the case of K.V. George v Secy to Government, water and Power dept.

• If the award goes beyond the terms of the agreement: –

There are many instances where different courts of India including the Supreme Court have set aside the award passed beyond the terms of the agreement, Pilanji Sundaram Agencies Pvt. Ltd. v. M/s. Rithwik Projects Pvt. Ltd. Madras High Court held that the award succeeding beyond the terms of agreement is illegal, and if it is illegal then it can be surpassed and set aside, In the very recent case of Dhansar Engineering Company Pvt Ltd v. Eastern Coalfields Ltd. Calcutta High Court reiterated the passed award as it exceeded the scope of the agreement because the process of Arbitration was not specified in the parent agreement, it was informed by the way of an additional circular.

• If it violates public policy in India: –

Public policy is nothing but fraud, corruption or against the fundamental morality of the Nation, in any situation, if it violates the public policy then it is against the law, arbitrary, and can be set aside. In the case of N.N. Global Mercantile Pvt. Ltd. v. M/s. Indo-Arab Fisheries, Hon’ble Supreme Court ruled that any award violating public policy, fraud, or corruption can be set aside, similarly in the case of ONGC v. Saw Pipes Ltd. An arbitral award can be set aside if it is contrary to India’s public policy, which includes fundamental legal principles, justice, and morality.

But everything works with the proper channel of application and the proper protocol should be followed, the aggrieved party should apply within three months from the date of receiving the award. It is not necessary that the award can be set aside based on the above specific grounds, think for a moment, “If the appointed Arbitrator proved to be unfit?”  In the case of Telecommunication Consultants India Ltd. v. Shivaa Trading,The arbitrator has forgone the claims of Petitioner and awarded to Respondent was considered void when Petitioner moved to the High Court under sections 14 & 15. Where Petitioner only appointed Arbitrator and submissions were duly given in writing by both the parties. The court held that, unless there is an express agreement in writing between the parties subsequent to disputes having arisen between them, the mandate of a learned Arbitrator appointed unilaterally by one of the parties falling within the relationships as contemplated in section 12(5) of A&C Act read with the Seventh Schedule automatically terminates because of de jure ineligibility. In another very recent judgment of the Union of India through Garrison Engineers v. Yauk Engineers, Allahabad High Court partially set aside the Arbitral award stating Arbitrators’ dangerous precedent undermines the sanctity of contracts and trust in the Arbitration.

Way forward in the context of this decade, Arbitration as a method of resolving disputes is establishing its position separately outside the Indian courts and gaining significant importance day by day, due to the lack of awareness concerning the benefits of Arbitration as a dispute-solving mechanism running slow in the race. But proper awareness among citizens through the legal professionals and academicians can drive them towards a more pocket-friendly and time-conscious additional dispute resolution mechanism, the business owners can opt for an Arbitration process as a substitute to the lengthy and time-consuming court process, the award passed also holds an equal reputation as a decree from the court. Finding insights where the Arbitration award is set aside, it is very rare to find that it is based on specific grounds and the court holds discretionary power on the application filed within the stipulated time frame.