Whether section 34(4) of the Arbitration Act can be invoked to eliminate any ground under section 34(2) of the Arbitration

Whether section 34(4) of the Arbitration Act can be invoked to eliminate any ground under section 34(2) of the Arbitration

Section 34(2) deals with in which situation the arbitral award should be set aside. Section 34(2) of the Arbitration act provides two sets of grounds on which an award may be set aside. Section 34(2)An arbitral award may be set aside by the court only if , the party making an application furnishes to proof that, (a) sets out grounds of challenge such as incapacity of a party, invalidity of the arbitration agreement, lack of proper notice of appointment of the arbitrator or of the arbitral proceedings or inability of a party to present case, an award which deals with disputes not submitted to arbitration, improper composition of the arbitral tribunal or procedure contrary to the agreement between the parties etc. theses grounds must be established by the party challenging the award on the basis of the record of the  arbitral tribunal. In simple words if the first party is proved that the second party is incapable for taking award. If the person is unsound mind, insane, minor in this situation the arbitral award should be set aside. In section 34 deals with set aside the application for arbitration award.

ii.the invalidity of arbitration agreement under laws. The validity of an arbitration agreement can be challenged in the same way on the same grounds on which the validity of a contract is challenged. In cases where the agreement clause is added in a contract by the parties to it, the arbitration will be considered invalid if the contract is invalid. The arbitration agreement is not valid under the law to which the parties have subjected it or failing any indication thereon, under the law for the time being in force.

iii. The party making the application was not given the proper notice of the appointment of an arbitrator or of arbitral proceedings or was unable to present his case.

iv. An award not falling within the terms of submission to arbitration. The testimonials of a dispute in an agreement determine the limits of the authority and jurisdiction of an arbitral tribunal. If the jurisdiction does not come within the ambit of the tribunal, then the award to extent to which it is beyond the arbitrators jurisdictional powers would be considered as invalid and such award would be liable for setting aside. An arbitrator cannot act in contradiction to the terms of the contract. The arbitral award deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration, or it contains decision on matters beyond the scope of submission to arbitration. Provided that, if the decision on matters submitted to arbitration can be submitted, only that part of the arbitral award which contains decisions on matters not be submitted to arbitration may be set aside.

v. Composition of tribunal not in accordance with agreement. Sec 34(2) lays out an award can be discarded or challenged if the composition of the arbitral tribunal was not in obedience with 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 to be set aside and will amount to the misconduct of the arbitrator.The composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties unless such agreement was in conflict with a provision of this part from which the parties cannot derogate, or failing such agreement, was not in accordance with this part.

vi. Disputes not arbitral– the nature of the dispute should be capable of settlement by arbitration. Generally all disputes which can be decided by a civil court involving private rights can be referred to the arbitration.

2(b) the court finds that

The subject matter of the dispute is not capable of settlement by arbitration under the law for the time being in force:

The arbitral award is in conflict with the public policy of India.

Explanation: without prejudice to the generality of sub-clause ii.it is hereby declared, for the avoidance of any doubt, 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 sec 75 or sec 81.

Explanation: [2a] an arbitral award arising out of arbitrations other than international commercial arbitrations, may also is set aside by the court, if the court finds that the award is vitiated by patent illegality appearing on the face of award:

Provided that an award shall not be set aside merely on the ground of an erroneous application of the law or by appreciation of evidence.

Sec 34(4) On receipt of an application under sub clause (1), the court may, where it is so requested by a party, adjourn the proceedings for a period of time determined by it in order to give the arbitral tribunal an opportunity to resume the arbitral proceedings or to take such other action as in the opinion of arbitral tribunal will eliminate the grounds for setting aside the arbitral award.

An application for setting aside may not be made after three months have elapsed from the date on which the party making that application had received the arbitral award or, if request had made under sec 33 from date on which that request had been disposed of by the arbitral tribunal:

Provided that if the court is satisfied that the applicant was prevented by sufficient cause from making application within the said period of three months  it may entertain the application within the further period of thirty days, but not thereafter.

The ground under section 34(2) (b) of the arbitration act are substantive and go to root of the award. If an award deals with a dispute which cannot be settled by arbitration, then this is logically not a ground that is capable of elimination and the court must set aside the award in such a case, notwithstanding an application under sec 34(4) of the arbitration act. The ground of conflict with public policy is not also capable of elimination by the arbitral tribunal that it may not only be wasteful, but possibly prejudicial, to send parties back to an arbitral tribunal which has passed an award in conflict with public policy. Even if sending back an award which is in conflict with public policy were neither wasteful nor prejudicial, the intention of the parliament could never have been to give an arbitral tribunal a second bite at the cherry by reviewing and rewriting the awards on merits.

Section 34(4) of the Arbitration act invoked by a party before the award is set aside by the court. Once the main proceedings under section 34 of arbitration act are disposed of the, court become functus officio. If the party fails to request the court to defer the section 34 proceedings before the award is formally set aside, then the party is precluded from moving an application under section 34(4) of the arbitration act. The application under section 34(4) of the arbitration act must be in writing, by a party to the arbitration proceedings. The power under section 34(4) of the arbitration act cannot be exercised by the court suo moto.

Case related to sec 34

MMTC v. Vicnivass Agency 2009

Suresh Prabhu v. Bombay Mercantile Co-op Bank Ltd. Ors. 2007

Conclusion

Arbitration and conciliation act, 1996 provides that mere delivery amount would be deemed receipt of the award and the limitation period for the purpose of setting aside the award could be calculated from the delivery. Only on actual receipt of the award can an application for setting aside the arbitral award be filed in India. The said period of 3 months can be condoned for further period of 30 days if the applicant satisfies the court that there was sufficient ground prevented him to move application.

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