Scope of Section 34 of Arbitration and Conciliation Act, 1996

 

Court while hearing objections under the scope of section 34 of the arbitration act cannot interfere unless the findings and conclusions of the arbitrator are totally perverse and illegal. Perversity of the award goes to the root of the matter without there being a possibility of alternative interpretation which may sustain the arbitral award. Perversity or irrationality of decisions is tested on the touchstone of Wednesbury principle of reasonableness. Decisions that fall short of the standards of reasonableness are open to challenge in a court of law often in writ jurisdiction of the superior courts but no less in statutory processes wherever the same are available.

Intervention of the courts is envisaged in few circumstances only like in case of fraud or bias by the arbitrators; violation of principal of natural justice etc. courts can correct the error of arbitrator.

An award contrary to substantive provisions of law or the provisions of Arbitration and conciliation Act, 1996 or against the terms of the contract, would be patently illegal and opposed to the public policy of India and if it affects the rights of the parties, would be open to interference by the court under section 34(2) of Arbitration act, 1996. If an award is non speaking, the court before making it a rule of the court can look into question as to whether the arbitrator has travelled beyond the scope of the reference. An award can be set aside in case of misconduct apparent on the face of the award and on the proof of the legal misconduct. An award may also be set aside if it is vitiated by non-reception of material and non-consideration of the relevant aspects of the matter and is unfair and unreasonable so as to shock the conscience of the arbitrator.

Arbitrator cannot act arbitrarily, irrationally, capriciously or independently of the contract between the parties. Deliberate departure or conscious disregard to the agreement tantamount to mala fide action rendering the award liable to be quashed. Arbitrator has no jurisdiction to unilaterally enlarge the scope of reference and pass a non-speaking award on that basis. The decision of the arbitrator must be supported by reasons in terms of Section 31(3) of the Arbitration Act, 1996.

In other words, An Award which is:

i)                   Contrary to substantive provisions of law; or

ii)                the provisions of the arbitration and conciliation act, 1996

iii)              against the terms of the respective contract or

iv)              patently illegal or

v)                prejudicial to the rights of the parties;

is open to interference by the court under Secstion 34(2) of the Arbitration and conciliation act, 1996.

(b) The award could be set aside if it is contrary to:

(i) fundamental policy of Indian law; or

(ii) the interest of India; or

(iii) justice or morality.

(c) The award could also be set aside if it is so unfair and unreasonable that it

shocks the conscience of the court.

(d) It is open to the court to consider whether the award is against the specific

terms of contract and if so, interfere with it on the ground that it is patently illegal and opposed to the public policy of India.

 

 

 

 

 

 

 

 

 

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