Академический Документы
Профессиональный Документы
Культура Документы
It is unambiguous that the parties cannot appeal against an arbitral award as to its
merits and courts may not act as appeal courts and question on merits of the
arbitral award. As per observation of court `` an arbitrator is a judge appointed by
the parties and as such an award passed by him is not to be lightly interfered with’’.
However, the law allows certain remedies against exceptional errors like award
against public policy, substantive provisions of law, or the provisions of the Act or
against the terms of the contract or being patently illegal or being so unfair and
unreasonable so as to shock the conscience of the court.
Earlier under the repealed 1940 Act three remedies were available against the
Award modification, remission and setting aside. These remedies have been put
against under the 1996 Act into two categories.
Section 34 provides that an arbitral award may be set aside by a court on certain
grounds specified therein. These grounds are:
1. Incapacity of party.
Section 34 (2) (b) mentions two more grounds which are left with the court itself to
decide whether to set aside the arbitral award.
1. Dispute is not capable of settlement by arbitral process.
11. The ground on which an Arbitral Award can now be challenged under
the Arbitration and Conciliation Act 1996 can broadly be classified thus:
(b) If the Award deals with disputes not covered by the terms of
submission to arbitration or matters beyond the scope thereof
[Section 34 (2) (a) (iv)];
(e) If the Arbitral Award is in conflict with the public policy of India
[Section 34 (2) (b) (ii)]
12. The public policy defense which is suggested by section 34 (2) (b) (ii)
of the Act came up for consideration before the Division Bench of this court
in the Vijaya Bank Case. The Division Bench, held after referring to the
observations of the Supreme court in Renusagar Power Co. Ltd. v.
General Electric Co. that while it was not possible to attempt a definition of
the exact meaning of the expression ``public policy’’ this much was clear,
that ``whatever be the width of the expression it does not include a
mere contravention of law’’.
13. The Arbitration and Conciliation Act, 1996 was thus enacted with an
express Parliamentary objective of curtailing judicial intervention. The
grounds for challenge which were available in the earlier Act have been
substantially curtailed and a challenge can now be preferred only on one of
the ground available under Sections 12,13,16 and 34 of the Arbitration and
Conciliation Act 1996.
14. However, at the present stage it would be material to note that even
under the earlier Act of 1940, it was trite law that the reasonableness of
the reasons given by the Arbitrator cannot be challenged and that
Arbitrator is the sole judge of the quality as well as of the quantity of
evidence. Consequently, it was held by the Supreme Court that it was not
for the court to take upon the task of being a judge of the evidence before
the Arbitrator. The Court was required to approach the Award with a desire
to support it, if that is reasonably possible, rather than to destroy the Award
by calling it illegal, Bijendra Nath Srivastava V. Mayank Srivastava AIR
1995 SC 2562 [ii].
It is necessary for the aggrieved party to make and application under section 34
stating the grounds for challenge. There is no special format prescribed for making
an application under section 34 of the act except it has to be a written statement
within the period of limitation.
In Sanshin Chemical Industry V. Oriental Carbons & Chemicals Ltd. [iii] there
arose a dispute between the parties regarding the decision of the joint Arbitration
Committee relating to venue of arbitration. The Apex Court held that a decision on
the question of venue will not be either an award or an interim section 34 of the
Act. The Supreme Court observed in this case:
`` Besides bearing in mind the object behind the Arbitration and Conciliation
Act 1996, as has been indicated by this court in the case of Konkan Railway
Corpn Ltd. & Ors V. Mehul Construction Co. [2000] 7 SCC 201 [iv], which
is in consonance with the UNCITRA model law, it would not be conducive to
interpret the decision of the Joint Arbitration Committee with regard to the
venue to be an interim award, conferring a right to challenge to an aggrieved
person under section 34 of the Act.
Mr. Desai’s (Appellant’s Counsel) contention that the question of venue is of
utmost importance, since the arbitral proceedings will be conducted in
accordance with the rules applicable to the place where the arbitration
proceedings is conducted and consequently denial of a right to appeal
against the same is never contemplated of requires consideration. It is
undoubtedly true that if the arbitration is to be held in India, then the
proceeding will be conducted in accordance with the rules applicable in India
and if the arbitration is to be held in Japan, it has to be conducted in
accordance with the rules of Japan Commercial Arbitration Association and
as such the decision on question of venue is of utmost importance. But the
further contention that aggrieved party has no right to assail the same, once
the said decision is not assailed at this stage does not appear to be correct.
The ultimate arbitral award could be assailed on the grounds indicated in
sub-section (2) of section 34 and an erroneous decision on the question of
venue, which ultimately affected the procedure that has been followed in the
arbitral proceedings could come within the sweep of section 34 (2) and as
such cannot be said that an aggrieved party has no remedy at all’’.
In Brijendra Nath V. Mayank [Supra], the court held that where the parties have
acted upon the arbitral award during the pendency of the application challenging
its validity and it would amount to estoppel against attacking the award.
An award which is set aside no longer remains enforceable by law. The parties are
restored to their former position as to their claims in the dispute. Setting aside an
award means that it is rejected as invalid. The award is voided and the matter
becomes open for decision again. The parties become free to go back to arbitration
or to have the matter decided through court.
INCAPACITY OF PARTIES
If a party to arbitration is not capable of looking after his own interests and he is
not represented by a person who can protect his interests, the award will not be
binding on him and may be set aside on his application.
If a minor or a person of unsound mind is a party he must be properly represented
by a proper guardian otherwise the award would be liable to set aside. Such a
person is not capable of binding himself by a contract and therefore, an award
under a contract does not bind him.
Section 9 of the 1996 Act enables him to apply to the court for appointment of a
guardian for minor or person of unsound mind for the purpose of arbitral
proceedings. The ground for incapacity would cease to be available when the
incompetent person is represented by a guardian.
INVALIDITY OF AGREEMENT
The validity of an agreement can be challenged on any of the grounds on which
the validity of a contract may be challenged. In cases where the arbitration clause
is contained in a contract, the arbitration clause will be invalid if the contract is
invalid.
In State of UP v. Allied Construction [v] the court held that the validity of an
agreement has to be tested on the basis of the law to which the parties have
subjected it. Where there is no such indication, the validity would be examined
according to the law which is in force.
Under a contract entered into by and between the appellant (State of UP)
and the respondent (Allied Constructions), the respondent undertook
construction of bridge-cum-fall at Munda Khera Scope at the estimated cost
of Rs. 37.2 Lakhs. While the work was in progress, the work area was
flooded.
The respondent – contractor herein filed a claim on account of loss
sustained by him due to flooding of the work area. Ultimately, the matter was
referred to an arbitrator. The arbitrator gave an award for payment of a sum
of Rs. 12.55 Lakhs along with interest. The respondent filed the award for
being made rule of the court. The appellant herein filed a petition, inter alia,
on the ground that the arbitrator has misconducted the proceedings, in as
much as the force majeure clause contained in the clause 47 disentitled the
respondent from making any claim which was on account of unprecedented
rain. The said objection was rejected, and the award was made as the rule
of the court. The appellant thereafter filed a first appeal from order before
the High Court and the same was dismissed. Thus, appellant appealed
before Supreme Court.
The appellant herein did not lead any evidence before the arbitrator that the
rain as a result of which the loss was sustained by the respondent was
unprecedented and in fact it was an act of God. In absence of such an
evidence the arbitrator as well as the High Court has recorded a finding of
fact that the flood which has caused loss to the respondent was not due to
unprecedented rain and therefore clause 47 of the Agreement was not
attracted.
Any award made by an arbitrator can only be set aside only if one or other
term specified in Sections 30 or 33 of the Arbitration Act, 1940 is attracted.
It was within his jurisdiction to interpret clause 47 of the Agreement having
regard to the fact-situation obtaining therein. It is submitted that an award
made by an arbitrator may be wrong either on law or on fact and error of law
on face of it could not nullify an award. The award is a speaking one. The
arbitrator has assigned sufficient and cogent reasons in support thereof.
Interpretation of a contract, it is trite, is a matter for arbitrator to determine
(see M/s Sudarshan Trading Co. v The Government of Kerala AIR
(1989) SC 890 [vi]). Section 30 of the Arbitration Act, 1940 providing for
setting aside an award is restrictive in its operation.
Unless one or the other condition contained in section 30 is satisfied an
award cannot be set aside. The arbitration is a judge chosen by the parties
and his decision is final. The court is precluded from reappraising the
evidence. Even in a case where the award contains reason, the interference
there with would still be not available within the jurisdiction of the court,
unless of course, the reasons are totally perverse, or the judgment is based
on wrong proposition of law. An error apparent on the face of the records
would not imply closer scrutiny of the merits of the documents and materials
on record. Once it is found that the view of the arbitrator is a plausible one,
the court will refrain itself from interfering [see UP State Electricity Board
v. Sarsole Chemicals Ltd. [2001] 3 SCC 397 [vii] and ISPAT Engineering
& Foundry Works B.S. City Bokaro [2001] 6 SCC 347] [viii].
NOTICE NOT GIVEN TO PARTIES
Section 34 (2) (a) (iii) permits challenge to an award if the party was not given
proper notice of the appointment of an arbitrator, or the party was not given proper
notice of the arbitral proceedings, or the party was for some reasons unable to
present his case.
Under section 23 (i) the Arbitral Tribunal has to determine the time within which
the statements must be filed. This determination must be communicated to the
parties by a proper notice section 24 (2) mandates that the parties shall be given
sufficient advance notice of any hearing or meeting of the Tribunal for the purpose
of inspection of documents, goods or other property.
It for any good reason a party is prevented from appearing and presenting his case
before the tribunal, the award shall be liable to be set aside as the party will be
deemed to have been deprived of an opportunity of being heard the principle of
natural justice.
In Dulal Poddar v. Executive Engineer, Dona Canal Division [ix], the court held
that appointment of an arbitrator at the behest of the appellant without sending
notice to the respondent, exparte award given by the arbitrator was illegal and
liable to be set aside.
The appellant who was a contractor entered into an agreement with the
respondents for carrying on construction of a canal. The agreement provided
that in case of any dispute arising under the contract, the matter would be
decided by an Arbitrator who would be the Superintending Engineer.
Disputes and differences having been arisen between the parties, the
Arbitration Agreement was invoked by the appellant pursuant whereto the
respondent herein appointed the Superintending Engineer as the Arbitrator.
The said Arbitrator passed an interim award. Inspite of several requests
made by the appellant herein the Arbitrator did not consider his claims and
pass a final award.
The appellant herein, thereafter filed an application under section 8 of the
Arbitration Act, 1940 in the court of Subordinate Judge. It appears that the
said court appointed a retired Chief Engineer as an Arbitrator without issuing
a notice to the respondent. When the respondents came to know about the
appointment of the said Arbitrator, they filed a revision petition before the
High Court challenging the appointment of the said arbitrator as illegal. In
the revision petition no order of stay however was passed and as a result of
that the said Arbitrator proceeded to make an ex-parte award. In the
meantime, when the Civil Revision Petition came up for hearing before the
High Court, it with view that since an award has already been made by the
Arbitrator, it would be open to the respondents to challenge the appointment
of the Arbitrator by means of an objection under section 30 of the Act before
the Civil Court. Accordingly, the respondent filed an objection before the Civil
Court. The Civil Court reflected the said objection. The respondents,
thereafter preferred an appeal against the said order of the Civil Court before
the High Court. The High Court allowed the said appeal and set aside the
appointment of the Arbitrator as well as the award given by the Arbitrator.
The Contractor filed the appeal in Supreme Court against the High Court
judgment by means of special leave petition. The Supreme Court agreed
with the view of the High Court as it does not suffer from any legal infirmity.
It is not disputed that no notice at all was sent to the respondent before
appointing Arbitrator. It is also not disputed that the award given by the
Arbitrator was an ex-parte one. Furthermore, such an award which have
been made by the Arbitrator have been passed without giving an opportunity
of hearing to the respondents therein, was illegal and void. Hence the appeal
was dismissed.
In Vijay Kumar v. Bathinda Central Co-operative Bank and ors. [x], the court
observed ``It is a typical case of where the Arbitrator misconducted the
proceedings and also misconducted himself.
Arbitrator held the first and only hearing on May 17, 2010. No points for settlement
or issues were framed. The bank filed four affidavits of its employees. Appellant
was not given opportunity to cross-examine them. He was denied opportunity to
produce evidence. A complete go bye was given to the provisions of law,
procedure and rules of justice. It would be thus seen that appellant was unable to
present his case.