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Exploring The Scope Of Section 34 In The Arbitration And Conciliation Act

The first Indian Arbitration Act of 1899 was based on the English Arbitration Act of 1889. Then came the Indian Arbitration Act, 1940, and finally the Arbitration and Conciliation Act, 1996 (the "Act") was enacted by Parliament based on the UNCITRAL Model Law on International Commercial Arbitration, 1985. The Arbitration and Conciliation Act, 1996, has been a cornerstone in providing an effective alternative dispute resolution mechanism in India.

Section 34 of the Act is a crucial provision that deals with the setting aside of arbitral awards. This article aims to delve into the scope of Section 34, its implications, and the jurisprudential developments surrounding its application.

Understanding Section 34:

Section 34 of the Arbitration and Conciliation Act provides the grounds on which a party can challenge and seek to set aside an arbitral award. It serves as a safeguard to ensure that the arbitral process is fair, just, and free from any irregularities that may affect the validity of the award.

Salient Features of Section 34

1. It prohibits any recourse against arbitral award other than the one provided for in Sub-section (1) of Section 34.

2. It limits the grounds on which the award can be assailed in Sub-section (2) of Section 34.

3. It promises a fairly short period of time in Sub-section (3) of Section 34 within which the application for setting aside may be made.

4. It provides for remission of award to the arbitral tribunal to cure defects therein.

Key Grounds for Challenge:

The grounds for challenging an arbitral award under Section 34 are explicitly enumerated in the Act. Some of the key grounds include:

• A party was under some incapacity

• Invalid Arbitration Agreement: If the agreement to arbitrate is found to be invalid under the law, the award can be set aside.

• Procedural Impropriety: If there is a procedural flaw in the arbitration process, such as a violation of the principles of natural justice, it can be a ground for challenging the award.

• The composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties

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

• Public Policy: If the award is against public policy, morality, or if it involves fraud, it can be set aside under Section 34.

• Exceeding the Scope of Authority: If the arbitrator exceeds the scope of the authority granted to them or decides matters beyond the scope of the arbitration agreement, the award may be challenged.

Jurisprudential Developments:

Over the years, the judiciary has played a significant role in interpreting the scope of Section 34. Several judgments have shaped the understanding of this provision. Courts have emphasized the minimal interference principle, stating that the grounds for challenging an arbitral award should be narrowly construed to promote the finality and enforceability of awards. That the Courts in a plethora of judgments have time and again held that "The scope of grounds on which an Arbitral Award can be challenged under Section 34 of the Act is limited". It has been further held that under the provisions of Section 34 of the Act merits of the case cannot be re-appreciated.In various decisions the Supreme Court and the High Courts have stressed not only on the curbs imposed on courts against engaging with the facts and evidence but also against substituting a plausible view taken by the arbitrator on those facts by that of a court sitting in a section 34 jurisdiction. The arbitrator is seen as the final authority on the appraisal of facts and unless such appraisal is found to be perverse or manifestly unreasonable, the Award should remain undisturbed.

Latest Judicial Pronouncements:

That in the matter "National Highways Authority of India v. M. Hakeen and Another (2021) 9 SCC 1" ,the Hon'ble Supreme Court categorically held that any court under Section 34 would have no jurisdiction to modify the arbitral award, which at best, given the same to be in conflict with the grounds specified under Section 34 would be wholly unsustainable in law. The Court categorically observed that any attempt to "modify an award" under Section 34 would amount to "crossing the Lakshman Rekha".

In the matter Konkan Railway Corpn. Ltd. v. Chenab Bridge Project (2023) 9 SCC 85 it was held that if the view taken by the Arbitrator is a plausible view, no interference on the specified grounds is warranted.

Conclusion:

The scope of Section 34 of the Arbitration and Conciliation Act is pivotal in maintaining the integrity of the arbitral process. While providing a safety net for parties aggrieved by an award, it is essential to strike a balance between allowing legitimate challenges and preserving the finality of arbitral awards. As the legal landscape evolves, the scope of Section 34 will continue to be refined through judicial decisions, contributing to the growth and effectiveness of arbitration in India.

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