Arbitration Award Challenged in Chandigarh Panchkula Mohali

Last Updated on April 19, 2020 by Legalseva.net

CHALLENGE OF ARBITRAL AWARD IN INDIA

Arbitration is one of the upcoming dispute resolution remedies which are getting popular among people for seeking justice in simpler and faster ways. Arbitration is legitimate remedy available in India where people or parties need not go to court every time in case of any breach of their agreement. Under this remedy, the parties go to arbitrators which are pre-decided by the parties themselves or by the Court in case of request by any one party also. It is a valid alternative to avoid the time consuming and complex procedures of the court. The arbitral law holds its origin in India even before Independence and is inspired from the English Arbitral Law. The Arbitration Act was drafted and enforced in 1940 and it remained effective till 1996 when the Act got repealed and was replaced with the Arbitration and Conciliation Act, 1996.

Also Read- Appointment of an Arbitrator

Arbitration was adapted to reduce the burden of Courts and make it easily accessible to the general public. Apart from that Arbitration gives speedy judgements unlike the Courts and is comparatively cheaper also, and the judgement given by arbitral tribunal is equivalent to the decision as if given by the Court. The arbitrators are commonly known as the Outsiders, to ensure that arbitrator is not favouring any particular party and have come to resolve the dispute for the benefit of both parties. Arbitration should be conducted as per the terms mentioned and considering the both the parties which is usually aforementioned in their agreements before signing of the contract.

Also Read- MEDIATION & ARBITRATION CHANDIGARH PANCHKULA MOHALI

The Arbitration and Conciliation Act, 1996 was adapted as there were some major flaws in the earlier one and the new Act was built as per the provisions of the United National Commission on International Trade Law (UNCITRAL Model Law) so that India’s current arbitral laws were accepted globally. One of the major changes, brought in the Act of 1996 was that arbitral award were now at par with the decree of Court and had to be enforceable just as the decree of Court. In the previous Act, the award could not be performed until the Court gave an order for filing of the award and issued a decree for same. The decision given by the arbitrator is final and obligatory and there is no specific provision of appeal against the arbitral award. However, the distressed party may approach the court for annulment of the arbitral award as per the grounds mentioned under Section 34 of the Arbitration and Conciliation Act, 1996.

There are certain essentials which must be kept in mind while recognizing the arbitral award such as the award must be in writing and should be signed by all members of the Tribunal and if not all, atleast a majority of the members should sign it and a valid reason to be given for the absence of the omitted signature. The award should not be ambiguous and shall clearly state the date and place of arbitration and should also list down the reasons for the award unless stated otherwise by the parties, and each party should have a signed copy of the award. As per the act, arbitration promises speedy trials and thus the awards should be rendered within 12 months of it entering the reference, but it can be further extended for 6 months if all the parties agree to it. In case the award has not been delivered in the given time frame or even in the extended time frame then tribunal’s award will get terminated and won’t be executed further, unless the Court has ordered for further extension period.

Also Read- Landmark Judgments of Arbitration Law in India

The Arbitration and Conciliation Act, 1996 enacts no explicit limitation and follows the same limitations as of the Indian Courts. The major remedies which can be awarded by the Tribunal are specific performance or pay damages to the aggrieved party, injunctions, specific declarations and costs along with interest. As arbitration is usually resorted by the parties in case of breach of contract, and therefore Indian law forbids any punitive or exemplary awards under contractual breach. As the composition of tribunals is pending, so the courts can offer some interim relief to the parties and the courts can exercise this power throughout the proceedings also and even declare award, if the remedy issued by the tribunal is not considered operative enough. Both, the courts and tribunals are authorized to issue certain interim actions, but the courts obviously have a wider range of powers for providing interim relief for matters outside India. Some of the interim measures are injunction, orders for protection of goods, custody and sale of goods, safeguarding the amount in dispute till the final order is not declared and many more which the court or tribunal may deem just for the parties.

Also Read- High Court of Punjab and Haryana at Chandigarh

Once the award is declared by the tribunal, it cannot be challenged further as there are no provision for appeal under this Act. Neither the parties nor the Court can interfere in the merits of the award. It has been rightly stated by the Supreme Court of India that an Arbitrator is a judge who is appointed by the parties themselves and thus an award passed by him is not to be interfered with. This statement clearly means that when parties have got the right to choose their Judge, then not only the parties but even the Court cannot interfere with such matters. But this doesn’t mean that the arbitrator is not being watched, and thus law has permitted certain remedies to get against an award to keep an eye over the arbitrator’s conduct.

Also Read- Arbitration Proceedings in India

Under the Act of 1940, only two remedies were available for going against the arbitral award, that was reduction of the award or setting aside of the award. After repealing of the 1940 Act, both these remedies were divided into two groups, in case of rectification of error in the awards, it is passed onto the parties and tribunal for making the respective changes and for setting aside of the award, it is returned to the Tribunal. Section 34 of the Act gives the grounds for setting aside of the award, the grounds are as follows:

Incapacity of party
Arbitration agreement is not valid
Absence of proper notice for arbitral proceeding
Nature of dispute is not in accordance to the terms of submission required in arbitration
Arbitral procedure is not in accordance to the agreement.

There are two further grounds mentioned under Section 34 (2)(b) which are in the hands of Court to decide whether to set aside the award or not. These two grounds are when dispute cannot be settled by means of arbitral process or the award ordered is against the public policy of India. Here, public policy has been narrowed down to cases of fraud or corruption while giving the award or where there has been infringement of some fundamental policies of Indian law or the award is against the basic idea of ethics and justice.

In the famous case of Brijendra Nath v. Mayank, it was held by the court that where the parties have already acted upon their arbitral award while the application of appeal was pending in the court questioning the legitimacy, it would automatically lead to estoppel for acting against the award.

Also Read- Types of Legal Notice

Challenging of arbitral awards involves a proper procedure wherein an application for challenging the award should be filed in the court within three months of the order of the award. The court may examine and consider the application of setting aside of the award if the court thinks there was adequate cause for such appeal of the award. If the court rejects the plea of appeal for setting aside of the award then the award is to be executed as if it is the decree of Court and is binding on both the parties. The defeating party has right to appeal only once in the court, to either set aside the award or not to set aside and no second appeal can be made after the order is given from Appellate court.

Nevertheless, every citizen of India has the constitutional right to file a Special Leave petition in the Supreme Court under Article 136 of the Constitution of India. Once the appeal has been filed then, it is on the discretion of the Supreme Court whether to accept it or reject it on the basis only if there is some serious violation of law is involved or gross error in the declaring the award. And the parties are not permitted to get into any agreement which relinquishes their right to challenge an arbitral award.

Also Read- VENUE OF ARBITRATION WILL BE SEAT OF ARBITRATION

There are certain conditions where the arbitral award can be declared void such as when the arbitrator is not appointed accordingly or lacks the basic qualification to be an arbitrator, or the arbitration agreement signed by parties might not be binding and is just kept as an additional remedial option or the matter is out of scope of the agreement and many more. As per the Act of 1996, under section 13 the arbitrator can be challenged on the basis of lack of qualification or for being partial to any one of the parties. Thus, an arbitral award can be challenged in the court only if any of the grounds under section 34 is satisfied and procedures regarding the challenge of arbitral award should be followed appropriately.

Also Read- Enforcement of Arbitral Awards

For case specific advice, please contact top/expert/arbitration lawyers in Chandigarh Panchkula Mohali Kharar Zirakpur Derabassi Punjab Haryana.