ARBITRATION NOTES

1. DEFINE ARBITRATION AND D/B ARBITATION, MEDIATION AND

CONCILIATION.
DEFINITION:
1. Arbitration And Conciliation Act ,1996:
Sec 2(1)(a) of the Act defines Arbitration as, “arbitration means any arbitration
whether or not administered by permanent arbitral institution.”

2. Lord Mustill And Boyd:

"Arbitration is a method of resolving disputes outside of court in which an

independent third party, the arbitrator, gives a binding decision after considering the
arguments and evidence presented by the parties involved."

OBJECTIVE OF ARBITRATION:

1. To comprehensively cover international commercial arbitration and conciliation as

also domestic arbitration and conciliation.

2. To make provision for an arbitral procedure which is fair, efficient and capable of
meeting the needs of the specific arbitration.

3. To that the arbitral tribunal gives reasons for its arbitral award.

4. To ensure that the arbitral tribunal remains within the limits of its jurisdiction.

5. To minimise the supervisory role of courts in arbitral process.

6. To permit an arbitral tribunal to use mediation, conciliation or other procedure during

the arbitral proceedings to encourages settlement of disputes.

7. To provide that every final arbitral award is enforced in the same manner as if it were
a decree of the court.

8. To provide that a settlement agreement reached by the parties as a result of

conciliation proceedings will have the same status and effect as an arbitral award on
agreed terms on the substance of the dispute rendered by an arbitral tribunal.

ADVANTAGES OF ARBITRATION:
1. Mutual consent of both parties - Arbitration can only take place when both parties
have given their consent, and the contract includes an arbitration clause.

2. Unbiased procedure -Arbitration mandates equal treatment of parties. arbitrators are

expected to be impartial and unbiased. No party enjoys an undue advantage because
the parties are free to decide the relevant venue, language, and applicable law.

3. Confidential procedure - Arbitration is confidential in nature Any disclosure made

by the parties in the proceedings and when the arbitration award is given is to be kept
confidential. This restricts the divulgence of trade secrets and potentially damaging
information.

4. Cost-effective procedure - No exorbitant cost is charged from the parties making it

common for parties to prefer arbitration over the traditional form of litigation.

5. Simple and informal procedure - The parties do not have to separately hire an
attorney to represent them, and the outcome of the case can be adapted in compliance
with the needs of both parties. Arbitration does not follow strict rules of litigation,
which makes the process much easier, less time- consuming. The tribunal follows a
flexible way of proceeding to avoid.

6. Freedom to choose arbitrator - The parties can select an arbitrator or agree to get an
arbitrator with relevant exercise in the particular domain by the unnecessary delay.
who may be a specialist on the subject in dispute, whereas a judge may not be. This
makes arbitration beneficial in complicated and specialised matters.

7. Stipulated time period for giving an award - The tribunal will give the award
within a short tenure of twelve months from the last day of the pleadings in case of
domestic arbitration. On the other hand, in internal commercial disputes, the time
period is rather relaxed, and no stipulated time period is allotted. Hence, there are no
unnecessary delays in giving award.

8. Binding decision - The arbitration awards given are enforceable, making the decision
binding on the parties.

9. Position of control - The parties have a position to control the outcome as they can
directly participate in the decision-making procedure. In this way, the dispute is
amicably resolved.

10. Flexible - Arbitration is more flexible than the judicial process.

 11. Time consuming -Arbitration is generally faster compared to litigation, particularly
because the pronouncement is binding and not open to appeal. The right of appeal,
even if present, is very limited in scope.

DISADVANTAGES OF ARBITRATION:
Arbitration has advantages that encourage parties to opt Arbitration as
their mode of dispute. But with advantages, it brings disadvantages too which has been
discussed below:

1. Limited Appeal - The awards passed within the arbitration are subjected to limited
appeal and the same shall be presumed to be final and binding on the parties. The
appeal cannot be made with respect to such an award unless clear misconduct or error
by the arbitrator is proven.

2. Cost - Sometimes, choosing arbitration as a mode of dispute can be expensive for the
parties. Appointing quality arbitrators demands hefty amounts of fees, unlikely in
cases of litigation. Moreover, if the arbitration is non-binding upon the parties, then
the arbitrator shall not pronounce the final award and parties can refer their case to
traditional court, which in turn adds to the cost of litigation.

3. Unpredictable - Since arbitration does not follow the strict rules of evidence that are
being used in the courts, the decision of the tribunal is unpredictable. In litigation,
strict rules are followed to consider the documents as evidence, unlike in arbitration,
where the tribunal takes an informal view of documents as reliable evidence.
Moreover, if the documents or information have been presented by one party to the
court, they are not being cross examined which affects the decision and can possible
damage one of the parties.
4. Unfairness - In cases where there is mandatory arbitration, i.e., if there has been a
clause added in the contract, if any dispute arises, the same shall be followed up by
the arbitration and this mandatory arbitration leaves no option for the other party to
opt for litigation.
5. Lack of Transparency - Arbitration hearings/proceedings are held in private and
have no access to the public, unlike in the case of litigation. These private hearings
can lead to biassed decisions for one party. So, Arbitration lacks transparency, which
could be potentially disadvantageous to one party.
 6. Lack of Discovery - Arbitration has no defined standards for discovery of evidence,
which in turn leads to missing important information, documents and evidence related
to the matter in dispute. A lack of vital information can affect the quality and decision
of the case.

7. No Control -After passing a matter to arbitration, the parties lose their control over
the matter and the decision of the tribunal. Once parties’ hand over their dispute to an
arbitral tribunal, the decisions are in the hands of the tribunal, and they cannot
withdraw or step back without the consent of the other party.

8. Limited powers of arbitrator - The court possesses the power to punish the litigants
who are obstructive or dilatory in their conduct of the proceedings. However, an
arbitrator’s powers are not as strong as to find someone in contempt of court.

9. Mandatory arbitration - If arbitration is mandatory by contract, then the parties do

not have the flexibility to choose arbitration upon mutual consent. In these cases, one
party can force the other party to go to arbitration, even a jury trial maybe more
advantageous to the other party.

DIFFERENCE BETWEEN ARBITRATION, MEDIATION AND CONCILIATION:

CASE LAWS:
1. Bharat Aluminium Co. v. Kaiser Aluminium Technical Services Inc. (BALCO) (2012)
9 SCC 552

In this case, the Supreme Court of India overruled the previous ruling in Bhatia International
v. Bulk Trading SA and held that Indian courts do not have jurisdiction over arbitration
proceedings where the seat of arbitration is outside India. The Court clarified that Part I of the
Arbitration & Conciliation Act, 1996, does not apply to foreign-seated arbitrations. This
decision reinforced the principle of minimal judicial intervention and strengthened India’s
position as an arbitration-friendly jurisdiction.

2. Ssangyong Engineering & Construction Co. Ltd. v. NHAI (2019) 15 SCC 131

The Supreme Court emphasized that arbitral awards can only be set aside on limited grounds
under Section 34 of the Arbitration and Conciliation Act, 1996. The Court held that “patent
illegality” as a ground for setting aside an award applies only to domestic arbitrations and
cannot be invoked in international commercial arbitration. The judgment reinforced party
autonomy and limited judicial interference, thereby promoting the finality of arbitral awards.
Rajesh Verma v. Ashwani Kumar Khanna (2016).

3. Fuerst Day Lawson Ltd. v. Jindal Exports Ltd. (2001) 6 SCC 356

The Supreme Court ruled that an arbitral award is equivalent to a court decree and does not
require separate execution proceedings under the Civil Procedure Code. This case affirmed
the principle that arbitral awards must be enforced in a straightforward and expedited manner,
thus upholding the efficiency of arbitration as an alternative dispute resolution mechanism.

4. Renusagar Power Co. Ltd. v. General Electric Co. (1994) Supp (1) SCC 644

In this case, the Supreme Court clarified the scope of "public policy" as a ground for refusing
the enforcement of foreign arbitral awards under the Foreign Awards (Recognition and
Enforcement) Act, 1961. The Court held that public policy should be interpreted narrowly
and should include only (i) fundamental policy of Indian law, (ii) interests of India, and (iii)
justice and morality. This ruling made the enforcement of foreign arbitral awards more
predictable and aligned India’s arbitration laws with international standards.

5. M/s. Hindustan Construction Co. Ltd. v. State of Bihar (2019) 7 SCC 210
In this case, the Supreme Court clarified the legal position regarding the scope of arbitration
versus conciliation. It observed that while arbitration is conducted under a structured
framework with an objective to resolve the dispute through a binding award, conciliation
remains an informal process aimed at fostering compromise without imposing a binding
resolution. The Court further emphasized that while the conciliator may provide suggestions
for settlement, the ultimate resolution is not legally enforceable unless agreed upon by the
parties.

6. Oil & Natural Gas Corporation Ltd. v. Saw Pipes Ltd. (2003) 5 SCC 705

ONGC challenged an arbitral award on the basis that it was in conflict with the public policy
of India. The scope of "public policy" under Section 34 of the Arbitration and Conciliation
Act, 1996 was challenged. The Supreme Court expanded the definition of public policy to
include awards that are patently illegal or in contravention of the fundamental policy of
Indian law.

7. Venture Global Engineering v. Satyam Computer Services Ltd. (2008) 4 SCC 190

A dispute arose regarding the enforcement of a foreign arbitral award in India. Whether
Indian courts can set aside a foreign arbitral award on the grounds of public policy. The
Supreme Court held that Indian courts have the jurisdiction to set aside foreign arbitral
awards if they are contrary to the public policy of India.

8. Salem Bar Association v. Union of India (2005) 6 SCC 344

This case highlighted the distinction between arbitration and mediation, emphasizing that
while arbitration is a structured and legally binding process, mediation is informal and
flexible. The Court noted that arbitration involves a formal procedure where an arbitrator’s
decision is final and enforceable, whereas mediation is based on the voluntary participation of
the parties who work together to reach an agreement. The Court emphasized that mediation is
often more suitable for disputes where the parties want to preserve their business or personal
relationships, as it promotes dialogue and cooperation between the disputing parties.

3. DIFFERENT KINDS OF INTERIM AWARDS PASSED BY COURTS

UNDER SECTION 9 AND 17 OF THE 1996 ACT

Introduction
Arbitration has become the most preferred method of alternative dispute resolution which
parties resort to for resolution of any commercial dispute in a contract which contains an
arbitration clause or an arbitration agreement that exists between the parties. Although it is
well known that the time required for resolution of disputes through arbitration is much lesser
than the time required by any court of law, still it takes considerable time to complete the
entire process of arbitration – right from invocation of arbitration to enforcement of award.

Further, in some cases, it is seen that one of the parties deliberately prolong the time for the
arbitration proceedings to prejudice the rights of the other party or for some other reason
beneficial to them or to delay the pronouncement of the arbitral award against them and
thereby delay the enforcement of the award. Such tactics by one party may render
meaningless the final arbitral award for the aggrieved party unless the arbitral tribunal and/or
the court safeguards the rights of the aggrieved party before, during and after the arbitral
proceedings till the award is enforced.

Therefore, it is imperative that some interim measures or interim relief be granted by the
arbitral tribunal or the court in order to protect the rights of the aggrieved party. In some
particular instances, the interim relief may involve directives to some third parties also.
Interim relief is like an urgent remedy granted in exceptional circumstances.

Generally, interim relief is granted when:

a. prima facie there is a case;

b. the balance of convenience lies with the aggrieved party who is seeking the relied; and

c. irreparable damage or injury may be caused if the interim relief is not granted.

There are certain provisions in the Arbitration and Conciliation Act, 1996 (Amended 2015
and 2019) [hereinafter called the Act], which safeguard the interest of one party over the
other. Section 9 and Section 17 of the A&C Act enable any party to any arbitration agreement
to file an application for interim relief from the court or arbitral tribunal respectively.

Interim relief under Section 9 of the Act

Section 9 of the Act mentions that a party may put up an application for interim relief to the
court before the commencement of arbitration proceedings, during arbitration proceedings or
at any point of time before the enforcement of the arbitral award. However, generally, courts
do not allow a petition for interim relief after the arbitral tribunal has been constituted unless
the aggrieved party proves beyond doubt that the interim relief that has been / may be
provided by the arbitral tribunal under Section 17 of the Act is/shall be futile.

Nevertheless, the power to grant interim relief to the aggrieved party before the arbitral
tribunal is constituted and after the arbitral award is passed lies with the courts only. Further,
Section 9 also states that in case the court passes an order for interim relief before the
commencement of arbitral proceedings, then the arbitral proceedings shall have to be
commenced within 90 days from the date of the interim relief order or within such further
time that the court may grant.

Interim relief that can be sought under Section 9

Section 9 of the Act describes the type of interim relief that may be sought by a party.
Application for interim relief may include the following:

1. Appointment of guardian for a minor or person of unsound mind;

2. Preservation, interim custody or sale of goods (if the goods are of perishable nature) for
any goods related to the arbitration agreement;

3. Securing the amount of claims;

4. Allowing the detention, preservation or inspection of any property or thing, authorizing

any person to enter upon any land or building, authorizing any samples to be taken or
observations to be made or experiments to be tried in order to expedite the process and
obtain accurate & complete information or evidence;

5. Allowing interim injunction or appointment of receiver;

6. Any other reliefs which the court considers proper taking into account the facts and
circumstances of the case.

Any party to the arbitration agreement may file an application to the concerned court under
Section 9 before or during the course of the arbitration. However, after the pronouncement of
the arbitral award only the successful party, who is entitled to seek enforcement of the arbitral
award, may file an application for interim relief under Section 9. The unsuccessful party of an
arbitral proceeding would not be entitled to file an application for interim relief under Section
9 because there is no award which is to be enforced in its favour.
Furthermore, in case the arbitral award has been set aside, the unsuccessful party, i.e. the
party whose claims were rejected vide the award, cannot apply to a court for interim relief
under Section 9.

Jurisdiction of court for the application of Section 9

The court of the seat of arbitration has exclusive jurisdiction over the arbitration proceedings
under the Act. Therefore, Section 9 application by any party has to be made in the relevant
district court or High Court.

However, in the case of international commercial arbitration, i.e. when at least one of the
parties is non-Indian, then Section 9 application may be made only in the High Court. After
the amendment of the Act in 2015, a party of a foreign seated international commercial
arbitration may apply for interim relief under Section 9 in Indian courts, provided they have
not, in any express or implied way, agreed to exclude the applicability of Section 9 of the Act.

In case an application for interim relief is pending before a court and the arbitral tribunal is
constituted in the meantime, it does not imply that the court cannot deal with the pending
application. There is no provision in the Act which states that the court is required to relegate
or transfer a Section 9 application to the arbitral tribunal the moment it is constituted.

It would also be pertinent to mention here that all subsequent applications under Part I of the
Act must be made at the same court in which the Section 9 application has been made.

Enforceability of and appeal against interim relief granted under Section 9

The interim relief granted by a court has to be enforced like any other order of the court. Any
willful non-compliance or disobedience of the interim relief order may be treated as contempt
of court and dealt with according to the existing laws of the land. However, an appeal against
an interim order may be made to the suitable court as per Section 37(1)(b) of the Act.

Enforcing an interim relief granted by an arbitral tribunal seated outside India

As Section 17 falls under Part I of the Act, parties can apply for interim relief under Section
17 only if the seat of arbitration is in India. Any interim relief order passed by an arbitral
tribunal seated outside India cannot be directly enforced in India as there are no relevant
provisions in the Act which permit the enforceability of interim orders granted by tribunals
seated outside India. In order to enforce an interim relief order granted by an arbitral tribunal
outside India, the party shall have to file an application under Section 9 of the Act provided
the parties to the arbitration agreement have explicitly excluded the applicability of Section 9
from the contract.

Interim relief under Section 17 of the Act

Section 17 of the Act gives the arbitral tribunal the power to pass an order for interim
measures if a party applies to the tribunal for such interim relief. A party may apply for
interim relief under Section 17 of the Act only after the arbitral tribunal has been constituted
till the arbitral award is passed. During this time, generally, the courts do not allow an
application for interim relief under Section 9. The arbitral tribunal cannot pass an interim
relief order containing directives to some third party. The jurisdiction of the arbitral tribunal
is limited to the parties of the arbitration agreement only.

The interim relief that can be sought under Section 17 of the Act is the same as that can be
sought under Section 9. Application for interim relief may include the following:

1. Appointment of guardian for a minor or person of unsound mind;

2. Preservation, interim custody or sale of goods (if the goods are of perishable nature)
for any goods related to the arbitration agreement;

3. Securing the amount of claims;

4. Allowing the detention, preservation or inspection of any property or thing,

authorizing any person to enter upon any land or building, authorizing any samples to
be taken or observations to be made or experiments to be tried in order to expedite the
process and obtain accurate & complete information or evidence;

5. Allowing interim injunction or appointment of receiver;

6. Any other reliefs which the court considers proper taking into account the facts and
circumstances of the case.

Any party to the arbitration agreement may file an application to the arbitral tribunal under
Section 17 during the course of the arbitration, i.e. after the arbitral tribunal has been
constituted and up to the time the arbitral award has been made.

Enforceability of and appeal against interim relief granted under Section 17

The interim relief orders passed by the arbitral tribunal shall have the same force and shall be
deemed to be an order of the court for all purposes similar to the powers of the court under
Section 9. The order shall also be enforceable as if it were an order of the court. Further, the
non-compliance of an interim relief order by the arbitral tribunal shall be treated as a
contempt of court and can be dealt with appropriately as per the prevailing laws of the land.
However, an appeal from an order granting or refusing to grant an interim relief under
Section 17 may be made as per Section 37(2) of the Act.

Case laws:
1. ONGC Ltd. v. Western Geco International Ltd

 Issue: The case dealt with the enforcement of interim orders passed by an arbitral
tribunal under Section 17.

● Supreme Court's Ruling: The Court held that an interim order passed by an arbitral
tribunal under Section 17 is enforceable by the court under Section 9 of the Arbitration
and Conciliation Act. The court emphasized that once the tribunal is constituted, its
powers under Section 17 are as effective as those under Section 9, and the interim
measures can be enforced in the same way as any court order.

● Significance: This ruling clarified that an interim order made by the arbitral tribunal is
binding on the parties, and courts can enforce it, giving equal weight to the tribunal's
powers under Section 17 as the courts' powers under Section 9.

2. Shree Durga Construction Co. v. M. S. R. Engineering Pvt. Ltd.

● Issue: This case addressed the scope of interim reliefs under Section 9 of the Arbitration
and Conciliation Act.

● Supreme Court's Ruling: The Court emphasized that Section 9 provides interim relief
even before the constitution of the arbitral tribunal. The Court also clarified that the
relief could include preservation of assets or measures to ensure that the eventual award
is enforceable. However, the Supreme Court also observed that interim relief could not
be granted if there was no prima facie case for arbitration.

● Significance: The ruling reiterated the principle that interim relief under Section 9 is
intended to protect the parties and preserve the subject matter of the dispute while the
arbitration process is ongoing.

3. Hindustan Construction Co. Ltd. v. Union of India.

● Issue: This case concerned the scope of Section 9 and the powers of courts to grant interim
relief in disputes related to public contracts.

● Supreme Court's Ruling: The Court held that while Section 9 allows for interim measures
to be taken by the court, it must be consistent with the principles of judicial discipline and
should not overstep the role of the arbitral tribunal. The Court emphasized that interim
relief under Section 9 is an extraordinary remedy and should only be granted in exceptional
circumstances.
● Significance: The ruling highlighted the balance courts must strike between judicial
intervention and the autonomy of the arbitral tribunal under the Arbitration Act.

4. BCCI v. Kochi Cricket Pvt. Ltd.

● Issue: This case dealt with the powers of the arbitral tribunal to grant interim relief under
Section 17 and the enforcement of such interim orders by the court.

● Supreme Court's Ruling: The Court clarified that the interim measures passed by the
arbitral tribunal under Section 17 are binding on the parties, and if there is a failure to
comply, the court has the power to enforce them under Section 9. However, the Court also
reiterated that an arbitral tribunal has the authority to pass interim orders, and these orders
should be enforced by the courts unless there are valid reasons not to do so.

● Significance: This case reinforced the principle that interim measures by the arbitral
tribunal are enforceable, subject to judicial review by the courts under the specific
provisions of the Arbitration and Conciliation Act.

5. Mahanagar Telephone Nigam Ltd. v. Tata Communications Ltd.

● Issue: The issue here was regarding the power of the courts to pass interim measures under
Section 9 before the constitution of the arbitral tribunal.

● Supreme Court's Ruling: The Court held that Section 9 of the Arbitration Act provides the
courts with the power to grant interim relief even before the tribunal is constituted. The
Court emphasized that interim measures under Section 9 should ensure that the arbitral
process can proceed unhindered.

● Significance: This case provided clarity that courts can grant interim relief under Section 9
even before an arbitral tribunal is constituted, ensuring the preservation of the subject
matter of the dispute and that the eventual arbitral award can be effective.

6. NHAI v. ITD Cementation India Ltd. (2019) 5 SCC 496

● Issue: The case concerned the granting of interim reliefs under Section 9 before the arbitral
tribunal was formed, and the enforceability of those reliefs.

● Supreme Court's Ruling: The Court reiterated that Section 9 empowers courts to grant
interim reliefs at any stage, including before the arbitral tribunal is constituted. However,
 once the tribunal is formed, its powers under Section 17 come into play, and the court’s
intervention under Section 9 should be limited.

● Significance: This case reinforced that while the court has the power to grant interim relief
under Section 9, the arbitral tribunal’s powers under Section 17 should be given
precedence once it is constituted.

7. National Highways Authority of India v. M/s. Shree Balaji Construction Co. (2020) 13
SCC 457

● Issue: The case focused on the enforceability of interim relief passed under Section 9 by the
court and the powers of an arbitral tribunal under Section 17.

● Supreme Court's Ruling: The Court held that the power of courts to grant interim relief
under Section 9 of the Arbitration Act continues even if the arbitral tribunal is not yet
constituted, and that the arbitral tribunal's interim measures under Section 17 are
enforceable in the same way as orders made by courts. If there is non-compliance with the
interim relief granted by the tribunal, it can be enforced by the court under Section 9.

● Significance: The ruling underscored the concurrent jurisdiction of both the courts and
arbitral tribunals in granting interim measures. The case affirmed that interim orders from
the arbitral tribunal are as enforceable as court orders, with courts empowered to intervene
and enforce them.

8. K.K. Verma v. Union of India (2018) 8 SCC 315

● Issue: This case addressed whether an arbitral tribunal's interim order under Section 17
could be enforced directly or whether the court was required to intervene.

● Supreme Court's Ruling: The Court ruled that interim orders passed by an arbitral tribunal
under Section 17 are enforceable by the courts, without needing an independent court
order. The Court clarified that once the tribunal is constituted, the remedies under Section
17 are available, and interim measures granted under Section 17 will have the same
enforceability as a court decree.

● Significance: The decision helped establish that an interim order passed by the tribunal
does not require a fresh court order for enforcement unless the tribunal's order is stayed or
set aside by a competent court.

Conclusion
Thus, it is clear that the right of the aggrieved party is protected at every stage, i.e. even
before the commencement of arbitration, during the arbitration proceedings and even after the
passing of the arbitral award. The interim relief orders granted by the court or the arbitral
tribunal are enforceable. The provisions of Section 9 and Section 17 are of paramount
importance and are an indispensable component of the arbitration mechanism.

4. GROUNDS UNDER WHICH AWARD CAN BE SET ASIDE

AWARD:

An award in arbitration is the final decision made by an arbitrator (or arbitral panel) to resolve a
dispute between parties. It is the outcome of the arbitration process and typically carries binding
authority, meaning the parties must comply with the decision, similar to a court judgment.

WHAT ARE THE TYPES OF ARBITRAL AWARDS?

1. Final Award

The most common type of arbitral award is the final award. This award concludes the arbitration
process by resolving all the disputes submitted to the arbitral tribunal. A final award is intended to be
definitive and binding on the parties. Once rendered, it typically precludes the parties from re-
litigating the same issues.

2. Interim Award

An interim award is made by the arbitral tribunal during the course of the arbitration proceedings,
before the final award is issued. This type of award addresses specific issues that may need immediate
resolution to ensure that the arbitration can proceed effectively.

3. Partial Award

A partial award resolves some but not all of the issues in the arbitration. This type of award is
beneficial in complex cases where certain claims or issues can be decided independently of others.

4. Consent Award

A consent award is issued when the parties reach a settlement agreement during the arbitration
proceedings, and they request the arbitral tribunal to incorporate this agreement into an award.

5. Default Award

A default award is rendered when one party fails to participate in the arbitration proceedings without a
valid reason. The arbitral tribunal can proceed ex parte (without the absent party) and make an award
based on the evidence and arguments presented by the participating party.
6. Additional Award

An additional award is issued to address claims or issues that were presented during the arbitration but
were inadvertently omitted from the final award.

7. Costs Award

Costs award specifically addresses the allocation of costs associated with the arbitration proceedings,
including arbitrators’ fees, legal fees and other expenses.

8. Domestic Arbitral Awards

A domestic arbitral award refers to an award rendered in arbitration proceedings conducted within
India, under the Indian legal framework, typically governed by the Arbitration and Conciliation Act,
1996. These awards are made in disputes where all the parties involved are Indian entities or where
the arbitration is seated in India.

9. Foreign Arbitral Awards

Foreign arbitral awards are those rendered in arbitration proceedings conducted outside India or under
a legal framework different from Indian law. These awards may involve parties from different
countries and are typically governed by international arbitration rules.

GROUNDS FOR SETTING-ASIDE OF ARBITRAL AWARD:

Section 34 of the 1996 Act provides the provisions of certain specific grounds on the basis of which
an arbitral award rendered in India can be set aside. They are-

 Incapacity of a party while making an application to enter the agreement.

 Arbitration agreement not being valid under the law.

 Parties were not given proper notice of the appointed Arbitrators or the Arbitral
Tribunal.

 The arbitral award deals with a dispute not falling within the terms of submissions to
an arbitration.

 The composition of the arbitral award was not in accordance with the agreement of
the parties.

 Nature of dispute not capable of settlement by arbitration.

 The arbitral award is in violation of the public policy of a state.

1. INCAPACITY OF A PARTY:

An application for setting aside an arbitral award can be passed if a party to the arbitration is
incapable of taking care of their interest and they are not represented by a person who can safeguard
their rights. The award can be set aside by the court if it finds that a party to a contract is a minor or an
unsound person who is not being represented by a Guardian to protect his interest. Section 9 of the
1996 Act provides for the appointment of a guardian for a minor or a person of unsound mind for
arbitral proceedings.

In Dharmeswar Kalita v. Union of India1, the statute which creates a corporation expressly confer
upon the corporation the capacity to enter into contract. The statute may confer the authority to enter
into contract upon a body within the corporation. Regarding the capacity of a company to enter into
contract, the Companies Act, 1956 assumes that a company can enter into a contract. Section 46 of the
Companies Act, 1956 provides the mode of executing contracts by the company and also lays down
that such contracts shall bind the company.

2. THE INVALIDITY OF AN ARBITRATION AGREEMENT UNDER LAWS:

An arbitration award can be challenged on the grounds of invalidity of an arbitration

agreement. This implies that if an arbitration agreement or the main agreement in which the
arbitration clause is mentioned, is held invalid then an arbitration award passed by the
tribunal on the matter arising out of such agreement shall also be held invalid.

In Jaikishan Dass mull v. L. Kanoria & Co.2 case the held that, If the arbitration agreement is void
under the law, parties have been subjected to, or the agreement is not valid under the law at that
relevant time. In case where the arbitration clause contained in the contract and the contract is invalid,
then the arbitration agreement would also be considered invalid.

3. NOTICE NOT GIVEN TO THE PARTIES OF ARBITRATION PROCEEDINGS:

As provided under Section 34(2)(a)(iii), if the party to a dispute in arbitral proceedings was
not given proper notice regarding the appointment of an arbitrator or any other notice of
arbitral proceedings, then this would be considered as a ground for setting aside the arbitral
award of such proceedings. Section 23(1) of the 1996 Act, provides that the arbitral Tribunal
has to determine the time within which the statement must be filed. This must be timely

1
Dharmeswar Kalita v. Union of India, AIR 1955 Assam 86
2
Jaikishan Dass mull v. L. Kanoria & Co., AIR 1974 SC 1579.
communicated to the parties by a proper notice and Section 24(2) provides that an advance
notice shall be given to the parties regarding any hearing or meeting of the Tribunal for any
purpose of inspection of documents, goods, other property, etc.

The judgment of the Hon’ble Supreme Court in the Perkins Eastman Architects DPC and Others v.
HSCC (India) Ltd.3, case explores the notion of equal power for both parties in the appointment of
arbitrators. The Court explained that using discretion to appoint an arbitrator exclusively could result
in favouritism and even prejudice, leading to a situation where the arbitrator issues a final award
taking into consideration the political/moral/other bias of that person. This emphasises the importance
of adopting neutral and equal treatment in arbitration so as to retain the credibility of Alternate
Dispute Resolution methods.

4. AN AWARD NOT FALLING WITHIN THE TERMS OF SUBMISSION TO

ARBITRATION:

The dispute arising from an arbitration agreement serves as the basis for determining the
jurisdiction of an arbitral tribunal. If any matter arising from such an agreement does not fall
within the jurisdiction of an arbitral tribunal, an award passed on such matter shall be
deemed invalid. Auch an award can be set aside on the grounds of it not falling within the
terms submitted to arbitration. An arbitrator is required to act under the authority as
provided in the terms of an agreement and not beyond that.

In the case of Rajendra Krishan Kumar v. Union of India (2019)4, a matter that was a part
of the writ petition was referred to arbitration. Though the petition did not contain any
matter related to the compensation for releasing effluents and slurry by the party thereby
affecting the land use, the tribunal passed an award on such matter. Consequently, when an
award was challenged to set it aside, the court held that the award was invalid to the extent it
dealt with a matter not specifically authorised to decide upon.

5. JURISDICTIONAL ERROR ON THE PART OF THE ARBITRAL TRIBUNAL:

Section 34(2)(a)(iv) of the Arbitration and Conciliation Act, 1996 provides that an arbitral
award may be set aside by the court if the party making the application furnishes proof that
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. But if the decisions on matters submitted to arbitration can be
3
Perkins Eastman Architects DPC and Others v. HSCC (India) Ltd., AIR 2020 SC 59.
4
Rajendra Krishan Kumar v. Union of India, 1960 SCR (1) 452.
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.

The provisions of section 34(2)(a)(iv) contemplate two situations:

(a) cases where the arbitral award deals with a dispute not contemplated by or not
following within the terms of the submission to arbitration i.e., where the arbitral
tribunal acts outside its jurisdiction or without jurisdiction (extra petita) and

(b) cases where the award contains decision on matter beyond the scope of the
arbitration agreement (ultra petita).

In Rajendra Krishan Khanna v. Union of India5, a reference was made to an arbitrator to determine
a dispute with respect to 'damage to the crops and land by excessive pressure by effluents'. But the
arbitrator in addition to the compensation for the damage to the crops and the land, also awarded
compensation for 'loss of the potential of the land and interest thereon'. The award was set aside by
the Supreme Court on the ground that it fell outside the scope of the reference to arbitration and was
not in relation to the dispute contemplated in the submission to arbitration.

6. COMPOSITION OF TRIBUNAL NOT FOLLOWING AGREEMENT:

Section 34(2)(a)(v) lays out that an award can be discarded or challenged if the composition
of the arbitral tribunal is not in obedience to the agreement of the parties or if the procedure
of conduct of proceedings was not followed properly. If the arbitrator passes a decision of an
award which is in deviation from the terms of reference and the arbitration agreement, then
this would lead to the award being set aside and will amount to the misconduct of the
arbitrator.

In the case of ONGC Ltd v. Saw Pipe Ltd.,6 the Supreme Court held that the arbitral Tribunal, must
adhere to substantive law and the Arbitration and Conciliation Act, 1996. It emphasized that under
Section 34(2)(a)(v), the tribunal’s composition and arbitration procedure must align with the parties'
agreement. If no procedure is specified, the tribunal must follow Part 1 of the Act. This ruling
reinforced the importance of procedural compliance in arbitration.

7. DISPUTES NOT ARBITRABLE: Section 34(2)(b)(i) provides that an arbitral award may be
set aside by the court if it finds that the subject-matter of the dispute is not capable of settlement by
arbitration under the law for the time being in force.

5
Rajendra Krishan Khanna v. Union of India, (1998) 7 SCC 129.
6
ONGC Ltd v. Saw Pipe Ltd, AIR 2003 SC 2629.
The Supreme Court, in the case of Booz Allen and Hamilton Inc. v. SBI Home Finance Ltd., has
laid down an elaborate list of suits that are not arbitrable. This includes not only cases on criminal
offences but also ones regarding matrimonial disputes consisting of divorce, judicial separation,
restitution of conjugal rights, and child custody. Besides, custodial issues, bankruptcy and winding up,
testamentary matters including the issue of probate, letters of administration, as well as the eviction or
tenancy issues entailing special laws, also fall in this non-arbitrable category. In all these
aforementioned specified areas, where certain rights and protections are provided by law, only
designated courts are conferred with the jurisdiction to grant remedies or decide the disputes. In
accordance with the Supreme Court’s guidelines, these disputes are regarded as beyond the realm of
arbitration even though the parties have previously agreed to resolve these issues by way of
arbitration.

8. AWARD AGAINST PUBLIC POLICY:

Section 34(2)(b)(ii) provides that an arbitral award may be set aside by the court if it finds
that the arbitral award is in conflict with the public policy of India. The Explanation
appended to this section provides that for the avoidance of any doubt, it is hereby declared
that an award is in conflict with the public policy of India, if the making of the award was
induced or affected by fraud or corruption or was in violation of section 75 or section 81 of
the Act.

In Renusagar Power Co. Ltd. v. General Electric Co.7, it was held that the enforcement of a
foreign award would be refused on the ground that it is contrary to the public policy of India, if such
enforcement would be contrary to-

(i) fundamental policy of Indian law; or

(ii) the interest of India; or

(iii) justice or morality.

Conclusion

India has a modern and efficient Arbitration Act. Sections 34 provide for recourse against an arbitral
award which may be set aside by a court on certain specified grounds. All these grounds are common
to both domestic as well as international arbitral awards. The ground of public policy should only be
interpreted as far as it aims towards broadening the public interest and not violating the basic notions
of Indian laws. The judicial intervention should also be minimal for success and further promotion of
Arbitration in India.

7
Renusagar Power Co. Ltd. v. General Electric Co., (1994) Supp 1 SCC 644.