Introduction -The Arbitration and Conciliation Act, 1996

Whenever a reference is made in the form of an arbitration clause in a contract or in a form of a separate agreement or in an exchange of statement of claim and defence in which the existence of the agreement is alleged by one party and not denied by other, arbitrator or arbitrators are appointed as per the provisions of section 11of the Arbitration and Conciliation Act, 1996

Arbitrator so appointed has to conduct arbitral proceedings and finally has to make an award that is called as an arbitral award. The reference of an arbitral award is made under the provision of section 31 of the Act. Award means final determination of arbitral proceedings. Under the Act “Arbitral Award” includes an interim award. The form and contents of an arbitral award shall be in writing and signed by an arbitrator and also shall state reasons upon which it is based unless the parties have agreed that no reasons are to be given. It shall also state its date and the place of arbitration in accordance with section 20 of the Act. The copy of an order shall be delivered to each party. Now the question arises that if a person is appointed as an arbitrator what and how much care should be taken by him legally or otherwise under the provision of the Act or otherwise?

One has to understand thoroughly the answer of this question since arbitral award can be set aside on the grounds enumerated in section 34 of the Act and if an award is made void then the whole exercise of the object of the Act is nullified.

Statutory Provision-Section 34- Recourse against arbitral award

Application for setting aside arbitral award.-

(1) Recourse to a Court against an arbitral award may be made only by an application for setting aside such award in accordance with sub-section (2) and sub-section (3).

(2) An arbitral award may be set aside by the Court only if---A. the party making the application furnishes proof that-----

I. a party was under some incapacity, orII. 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; or

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

IV. 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 matter beyond the scope of the submission to arbitration:

Provided that, if the decisions on matters submitted to arbitration can be 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; or

Page 1 of 22

V. 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 Past; or

B. the Court finds that------I. the subject-matter of the dispute is not capable of settlement by arbitration

under the law for the time being in force, orII. 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 of affected by fraud or corruption or was in violation of section 75 or section 81.

(3) 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 a request had been made under section 33, from the 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 the application within the said period of three months if may entertain the application within a further period of thirty days, but not thereafter.

(4) On receipt of an application under sub-section (1), the Court may, where it is appropriate and 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.

Backdrop of S.34:

 The purpose of arbitration is to ensure effective, quick and consensual decision making process avoiding the arduous process of courts. The need for such a procedure is greater in a country like India where delay has ingrained itself as part of the system of administration of justice. While arbitration is indeed a quick procedure, the interference by court in the process acts as a clog to its development. The enactment of the Arbitration Act, 1940, was a reflection of the legislature's determination to ensure speedy resolution of disputes. However, the 1940 Act, though sound in principle, was bogged down by procedural delays. There was no uniform procedure in terms of a unified code for the enforcement of foreign awards under the New York Convention and the Geneva Convention. The Foreign Awards (Recognition and Enforcement) Act, 1961 for the enforcement of arbitral awards under the New York Convention and the Arbitration (Protocol and Convention), Act 1937 hitherto held the field. With the adoption, by the United Nations Commission for International Trade Law of the UNCITRAL Model Arbitration Law and the subsequent adoption of the same by various

Page 2 of 22

countries in the world, it was but necessary that India adopt the Model Law to govern arbitrations and this saw the genesis of the more dynamic Arbitration and Conciliation Ordinance leading to the Arbitration and Conciliation Act, 1996. Whereas, the new Act of 1996, has consolidated and amended the law relating to arbitration and is comprehensive in the sense that it covers both domestic and foreign arbitrations.

Section 30(a) of the Arbitration & Conciliation Act, 1940 opens with the restrictive wording: “an arbitral award shall not be set aside except on one or more” of the three grounds set forth in it. These grounds were: --

1. An arbitrator or umpire has misconducted himself or the proceeding.2. An award has been made after the issue of on order by the court superseding the

arbitration or after arbitration proceedings have become invalid under S.35, &3. An award has been improperly procured or is otherwise invalid.

Whereas S.16 (1) of the 1940 Act, empowers the court to remit the award to the arbitral tribunal for reconsideration. But now this two sections i.e. Sec. 30 & 16 (1) of the 1940 act has now been replaced by Sec. 34 of the Arbitration & Conciliation Act, 1996. This provision reinforces the current trend in the Indian law to allow judicial scrutiny of the merits of arbitral awards only on an exceptional basis. As, it can be inferred from the various judicial pronouncements of the courts.

Interpretation of Section 34

Sec.5 of the said act regulates the court intervention in the arbitral process. It provides that notwithstanding anything contained in any other law for the time being in force in India, in matters governed by Part I of the 1996 Act, the court will not intervene except where so provided in this part. The wordings of the bill introduced in the parliament, had the intention to curb the judicial interference in the arbitral proceedings. This act indented to reduce the legal challenge to arbitral award (as can be inferred from S. 351 of the Act which talks about the finality of the Arbitral Award) But Sec.34 of the act calls for the need of the judicial intervention as, the objection filed under Sec.34 of Arbitration & Conciliation Act, 1996 has to be first tested on the touchstone of the provisions of S.34 of the Act & only when the court finds that the objections raised in the petition are covered by any of the grounds mentioned therein, may the court consider the same & proceed to dispose them off on merits 2 .Pursuant to this policy S.34 also imposes certain restrictions on the right of the courts to set aside an arbitral award. These grounds for challenge of an arbitral award are strictly limited. Indeed the five grounds contained in S.34(2) on which the party making the application to set aside the award is entitled to rely on, are concerned with largely procedural irregularities, either in the arbitral proceedings or in the award itself. If a challenge is successful, the award generally will be set aside, in whole or in part- although there is a possibility of ‘rescue' by remission to the arbitral tribunal for reconsideration. However the objection that the award has become 1 Finality of arbitral awards -Subject to this Part an arbitral award shall be final and binding on the parties and persons, claiming under them respectively.2 UOI v. Hakam Chand ad Co., 2003 (Supp) Arb LR 537 ( Del )

Page 3 of 22

null & void in view of subsequent agreement between the parties is not one of the grounds available under S.35(2) to challenge the award3 .

a. Where a party making the application was under some incapacity.

b. The arbitration agreement is not valid under the law to which the parties are subjected or failing such indication thereon, under the law for the time being in force.

c. The party making the application was not given proper notice of the appointment of arbitrators or of the Arbitral Tribunal or was otherwise unable to present his case.

d. Arbitral award deals with a dispute not contemplated by the parties or beyond the terms of submission.

e. Composition of the Arbitral Tribunal was not in accordance with the agreement of the parties.

f. Subject-matter of dispute is not capable of settlement by arbitration under the law for the time being in force.

g. The arbitral award is in conflict with the public policy of the country4.

In Sanshin Chemical Industry v. Oriental Carbons & Chemical Ltd.,5 there was a technical collaboration agreement between parties for referring any dispute or claim arising out of, or relating to the agreements to be settled by arbitration of an arbitral tribunal and another part of the agreement related to a decision as to venue of arbitration which in the event of lack of agreement between the parties, was required to be determined by a Joint Arbitration Committee of three members. There arose a dispute between the parties regarding the decision of the Joint Arbitration Committee relating to agreement as regards venue of arbitration and the question before the Supreme Court was whether an appeal against such decision can be filed. Answering in the negative, the Apex Court held that, "decision on the question of venue will not be either an award or an interim award so as to be appealable under Section 34 of the Act". The Court further held that the conclusion of the Joint Committee is a conclusion on the guidelines contained in clauses of agreement and, therefore, it is not a judicial determination and as such the said conclusion would not amount to an award. According to the Court, 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 proceeding could come within the sweep of Section 34 (2). The decision of the Joint Arbitration Committee, not being an award or interim award, was, therefore, not appealable.

3 Manasuya Devi v. M Manik Reddy , (2003) 8 SCC 5654 Section 34 (2), Arbitration & Conciliation Act, 19965 AIR 2001 SC 1219.

Page 4 of 22

In order to set the machinery in motion for setting aside the arbitral award, it is necessary for the aggrieved party to make an application under Section 34 stating the grounds of challenge. An application for setting aside the award has to be made by 'a party to arbitration agreement and not a stranger'. But a legal representative' can apply for it because he is a person who is bound by the award as per Section 35 of the Act which states that an award is final and binding on the parties and the pe r sons c l a im ing unde r t hem.

The Calcutta High Court held in Ramniwas v. Banars idas 6 that "an award is not discharged by the death of a party, it is enforceable and binding on the legal representative of the deceased party and the legal representative may apply for setting aside the award or oppose it. Besides, the legal representative, the executor and Administrator of a deceased party or an assignee7 also has a right to apply for setting aside the award.

There is no special form prescribed for making an application under Section 34 of the Act. The Supreme Court has held in Madan La i v. Sunder la l & another , 8 that in appropriate cases, an objection to an award can be made in a written statement and such an objection may be treated as an application for setting aside the award provided it is filed within the period of limitation. It is the duty of the court to satisfy that one or more grounds listed in this section (i.e., Section 34) exist before proceeding with the application for setting aside the award.

An application for setting aside the award on purely technical grounds cannot be entertained by the court. For instance, non-registration of award cannot be a ground to oppose the validity of the award.9

Where the parties have acted upon the arbitral award during the pendency of the application challenging its validity, it would amount to estoppel against attacking the award and, therefore, the award would not be set aside. Thus in Br i j endra Nath v. Mayank , 10

the party who applied to the court for setting aside the award, had alienated several properties which had come to their share as a result of the arbitral award. The party's objection was that the shares allotted to them were unequal. The Court refused to interfere and set aside the award on the ground that they were estoppel from challenging the validity of award because of their act of alienation of properties.

Incapacity of Parties: Section 34{2)(a)(i).

Under Section 34(2)(a)(i) an arbitral award can be set aside if one of the parties is found to be incapacitated from entering into the agreement, and on that account be not in a position to effectively participate in the arbitration proceedings. Order XXXII of the CPC refers to minors and persons of unsound mind to be the persons who are not in a capacity to sue or to be sued. A minor is incapacitated to enter into any agreement. Hence, an arbitration agreement in which one of the parties is a minor would be void unless he enters into the

6 AIR 1968 Cal 3147 Russell on Arbitration (13th Ed.) p.-218.8 AIR 1967 SC 1233.9 Ashok v. Sudha, AIR 1987 SC 851. See also S. V. Chandra v. S. V. Shivlinga, (1993) 1 SC 589.10 AIR 1994 SC 2562.

Page 5 of 22

agreement through proper guardian, that too in case the reference is for the benefit of the minor.11

Under the Mohammedan law the father is the natural guardian of a minor. The mother as a de facto guardian of a minor is not authorized to enter into an arbitration agreement on minor's behalf. Such an award would be void.12

If a minor is not properly represented and the guardian fails in his duly to protect the minor's interest, the award cannot be held to be binding on the minor.13

Invalidity of Arbitration Agreement: Section 34(2)(a)(ii)

According to sub-clause (ii) of Clause (a) of Section 34(2), the award may be set aside by the Court if the arbitration agreement is proved to be not valid under the law to which the parties have subjected it or under the law for the time being in force.

The term 'agreement' has been defined in Clause (e) of Section 2 of Indian Contract Act to mean:—

"Every promise and every set of promises, forming the consideration for each other, is an agreement".

Clause (g) of Section 2 of Contract Act makes it clear that an agreement not enforceable by law is said to be void. According to Clause (h) of Section 2 an agreement enforceable by law is a contract. According to Clause (i), an agreement which is enforceable by law at the option of one or more parties thereto, but not at the option of the other or others, is a voidable contract. According to Clause (j), a contract which ceases to be enforceable by law becomes void when it ceases to be enforceable.

The term "agreement in writing" was to include an arbitral clause in a contract or an arbitration agreement and that term was stated to mean something by which the parties undertook to submit to arbitration all or any differences which had arisen or which might arise between them in respect of any defined legal relationship whether contractual or not concerning a subject-matter capable of settlement by arbitration. Thus, the term "agreement in writing" embraced an arbitral clause or an agreement simpliciter to refer to arbitration as also an actual submission of the disputes to the arbitrator. It was equivalent to 'arbitration agreement' as defined in the Arbitration Act. M/s. V. O. Tractoroexport, Moscow v. M/s. Tarapore & Company and another, (1969) 3 SCC 562: AIR 1971 SC 1.

Absence of Notice: Section 3492)(a)(iii)

This provision is based on the principles of natural justice and public policy. It is the enlargement of the principle of audi alteram partem. If a party is not given proper notice of appointment of arbitration or of arbitral proceedings, or he was, for good reasons, unable to present his case, the award can be challenged on these grounds.

The expression "proper" means appropriate, in the required manner, fit, suitable, apt. The mere making of a request of leave, which has not been accepted, is not a proper intimation. It

11 Memmon v. Allah Baksh AIR 1931 Lahore 72612 Mohammad Ejaz Husain v. Mohammad Iftikhar Husain MANU/MH/0202/193113 Sadashiv Ramchandra Datar v. Trimbak Keshav Vaze MANU/MH/0150/1919

Page 6 of 22

cannot be said that the word is a surplusage. The intention of the legislature is primarily to be gathered from the language used, and as a consequence a construction, which results in rejection of words as meaningless has to be avoided. Mithilesh Singh v. Union of India and others, (2003) 3 SCC 309.

"Notice' according to the Oxford Concise Dictionary, means intimation, intelligence, warning' and has this meaning in expressions like 'give notice, have notice' and it also means "formal intimation of something, or instructions to do something' and has such a meaning in expressions like "notice to quit, till further notice'. Nilkantha Shidramappa Ningashetti v. Kashinath Somanna Ningashetti and others, (1962) 2 SCR 551: AIR 1962 SC 666.

Section 12 gives a party the right to challenge the arbitrator on the ground of existence of justifiable doubts as to his independence or impartiality or absence of qualifications agreed upon by the parties. If a party is not given notice of the appointment of arbitrator, he is debarred of his valuable right. Hence, notice of appointment is necessary. It is equally essential that the parties are given proper notice of arbitral proceedings so that they may file their statements of claim or defence or take other steps as required under the Act. Failure to give such notice may deprive the parties of the said opportunity to place their case before the tribunal.Sub-section (2) of Section 34 mandates giving of sufficient advance notice of hearing and of any meeting of the tribunal for the purpose of inspection of documents, goods or other property. If there is non-compliance of these sections in reference to a party, the award can be set aside at his instance.Hearing of one party in the absence of the other, failure to give opportunity to meet the case of the party will fall under this sub-clause.14 The fact that no actual prejudice is caused to the other side because of non-compliance with this principle of natural justice, will make no difference in the legal position.15

Award Limited by the Reference: Section 34(2)(a)(iv)

Under sub-clause (2) (a) (iv) of Section 34, the arbitral award may be set aside by the Court if the ‘award deals with a dispute not contemplated by or not falling within the terms of the submission to arbitrator or if it contains a decision on matters beyond the scope of the submission to arbitration. The dispute must be arbitrable and must have been actually referred. Travelling beyond the reference is without jurisdiction. Award to the extent it dwells upon and decides the issues beyond reference is invalid.16

A dispute about the construction of contract can be decided by the arbitrator. Dealing with the claim for extra work may not be outside the contract. However, matters, expressly excluded from arbitration, which are generally left for the sole decision of the engineer or architect, are outside the jurisdiction of the arbitrator.17

14 Payyavula Vengamma v. Payyavula Kesanna MANU/SC/0002/195215 International Airport Authority of India v. K.D. Bali MANU/SC/0197/1988: AIR16 P.M. Paul v. Union of India MANU/SC/0399/1989.17 State of Orissa v. Gokula Chandra Kanungo MANU/OR/0055/1981:

Page 7 of 22

Where the award containing adjudication of matters within the jurisdiction as well as outside the jurisdiction are severable, the part of the valid award can be maintained and the other Invalid part alone can be set aside.18

The above accepted principle is now codified in the proviso to sub-clause (a)(iv) of sub-section (2) of Section 34.A dispute regarding quantum of consumer's liability under the Electricity Act, 1948, was referred to the arbitrator, for examining whether the formula contained in the agreement was correctly applied. In order to calculate the units of energy sold, unit lost in transit were relevant to the formula. By refusing to take Into consideration such losses in transmissions to the determination of losses, the arbitrator was held to have travelled beyond the scope of reference and hence the omission amounted to error apparent on the face of the award.19

The Supreme Court in Olympus Super -S truc tures Pv t . L td . v. Meena Vi jay Khetan & Others , 2 0 held that scope of Section 34 which provides for setting aside of award is far less than under Sections 30 and 33 of the old Arbitration Act, 1940. The question involved for decision of the Court in this case was whether the request for setting aside the award on the ground of lack of jurisdiction or exceeding of jurisdiction can be raised for the first time before the Court under Section 34 of the new Act of 1996. The Court held that a dispute relating to non-arbitrable matter such as relating to specific performance of contract is non-arbitrable dispute and hence provision of sub-section (2) (b) (i) of Section 34 is not attracted.

In the instant case, the parties had entered into two agreements. One was for construction of flat and the other was for its interior designing. Both the agreements were executed on the same date. Each contained a separate arbitration clause. The arbitration clause contained in the construction agreement permitted reference to arbitration not only of issues arising under the main agreement but also those disputes or difference which were 'connected' with the dispute arising under the main agreement. The arbitration clause contained in interior designing agreement provided for reference to named arbitrator. Dispute arose between parties relating to both the agreements. An arbitrator was appointed by the Court who passed an award covering disputes under both the agreements. The award was challenged on the ground that arbitration clause in the main agreement did not permit the arbitrator to deal with the disputes relating to interior designing; hence the award in respect of interior designing agreement was void.

The Supreme Court held that the arbitration clause in construction agreement refers to "any other matters" connected with or arising out of construction. There were many items such as flooring, toilet, marble skirting, lobby entrance etc. which came under both, construction as well as interior designing and therefore, the award was not wholly superfluous. He ld , interior designing agreement is connected with construction agreement hence both the agreements are covered by arbitral clause in construction agreement hence the award was valid and cannot be set aside.

18 Abdul Taiyab Abbas Bhai Malik v. Union of India MANU/MP/0029/197719 DCM Ltd v. Municipal Corporation of Delhi MANU/SC/0814/199720 AIR 1999 SC 2120

Page 8 of 22

Non-compliance with Arbitral Procedure and Composition of Tribunal: Section 34(2)(a)(v)

Chapters III and V of Part I confer on parties an autonomy to agree on the composition of the arbitral tribunal and the arbitral procedure. The agreement for being enforceable should not be in conflict with the mandatory provisions of Part I from which the parties cannot derogate. This sub-section provides for setting aside an award if the composition of the arbitral tribunal making such award or the arbitral procedure followed for making such award is not in accordance with the agreement of the parties, or failing such agreement with Part I. The provision thus gives primacy to party autonomy underlying Part I.

Sub-clause (2) (v) of the section contemplates that if the arbitral procedure was not in accordance with the agreement of the parties or in accordance with the law of the country in which the arbitration took place, this will be a ground on which the validity of the arbitral award may be challenged by an application for setting aside the award. Where in an arbitration proceeding all the arbitrators did not meet to deliberate on the matter jointly in the arbitral proceedings, it will tantamount to non-compliance with the procedure and the award shall be rendered invalid.

The case of Larsen & Toubro v. S ta t e o f Rajas than ,21 is an illustration on the point. In this case the state alleged that award was invalid and liable to be set aside because arbitrators did not hold joint deliberations in arriving at a conclusion. On behalf of Larsen & Toubro, it was argued that there was no procedure which required arbitrators to meet after the conclusion of the arbitral proceedings. The Supreme Court upheld the contention of Larsen & Toubro and rejected the application for setting aside the arbitral award.

In Sulekha Clay Mines v. M/ s A lpha Clays & o thers , 22 the setting aside of award under Section 34 of the Act was sought by the appellant on the ground of procedural irregularities committed by the arbitrator. It was alleged that oral hearings were granted by the arbitral tribunal at the premises of parties without notice to the appellant. That apart, inspections were conducted without notice to both the parties. Even rejoinder or evidence collected from one party was kept secret from the other party and evidence was not disclosed at the time of hearing. The place of arbitration was also not intimated to parties. Thus gross procedural irregularities were committed by the arbitral tribunal violating the provision of Sections 18, 19, 20, 24 of the Act and therefore the award was liable to be set aside.

The Court in this case noted that the arbitrator was not fair and had not treated both the parties equally but if the award was set aside for procedural violation, the aggrieved party will be left without any remedy, therefore, it would be proper that the appellant shoujd approach the Civil Court for redressal of its grievance. The lower Court rightly set aside the award but the same could not be remitted back to the arbitrator in view of the allegations against him and a new arbitral tribunal could not be appointed in absence of a specific provision in this regard in the arbitration agreement.

21 (1994) 2 Arb. LR 15 Del.22 AIR 2005 Kerala 3.

Page 9 of 22

In Narayan Prasad Loh ia v. N ikunj Kumar Loh ia and Others , 2 3 the award was challenged on the ground that the Arbitral Tribunal consisted of two arbitrators which was contrary to the provision contained in Section 10 of the Act that the number of arbitrators shall not be an even number. Rejecting the objection, the Supreme Court held that "arbitration is a creature of an agreement and there can be no arbitration unless there is an arbitration agreement in writing between the parties. Any agreement which permits the parties to appoint an even number of arbitrators would not be contrary to provision of Section 10 and such an agreement would not be invalid and void." That apart, the objection as to improper composition of the Tribunal was not taken by the appellant before the Tribunal itself or within the time limit presented under Section 16 (2). It could, therefore, be deemed as waiver of objection under Section 4 of the Arbitration Act, 1996.

The Court clarified that Section 34(2)(a)(v) only applies if "the composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties". These opening words make it very clear that if the composition of the arbitral tribunal or the arbitral procedure is in accordance with the agreement of the parties, as in this case, then there can be no challenge under this provision. The question of "unless such agreement was in conflict with the provisions of this Act" would only arise if the composition of the arbitral tribunal or the arbitral procedure is not in accordance with the agreement of the parties. When the composition or the procedure is not in accordance with the agreement of the parties then the parties get a right to challenge the award. But even in such a case the right to challenge the award is restricted. The challenge can only be provided the agreement of the parties is in conflict with a provision of Part I which the parties cannot derogate. In other words, even if the composition of the arbitral tribunal or the arbitral procedure is not in accordance with the agreement of the parties but if such composition or procedure is in accordance with the provisions of the said Act, then the party cannot challenge the award. The words "failing such agreement" have reference to an agreement providing for the composition of the arbitral tribunal or the arbitral procedure. They would come into play only if there is no agreement providing for the composition of the arbitral tribunal or the arbitral procedure. If there is no agreement providing for the composition of the arbitral tribunal or the arbitral procedure and the composition of the arbitral tribunal or the arbitral procedure was not in accordance with Part I of the said Act then also a challenge to the award would be available. Thus so long as the composition of the arbitral tribunal or the arbitral procedure are in accordance with the agreement of the parties, Section 34 does not permit challenge to an award merely on the ground that the composition of the arbitral tribunal was in conflict with the provisions of Part I of the said Act. This also indicates that Section 10 is a derogable provision.

A non-reasoned award is liable to be set aside by the Court as contemplated by Section 31 (3) (a) which requires that arbitral award shall state reasons upon which it is based unless the parties have mutually agreed that no reasons are to be given. The old Arbitration Act of 1940 did not require the arbitral tribunal to record the reasons for the award. Therefore, this

23 AIR 2002 SC 1139.

Page 10 of 22

change of law envisaged by Section 30 of the present Arbitration and Conciliation Act, 1996 has rendered the earlier decisions24 of the Supreme Court on this point redundant.

Non-Arbitrable Matters: Section 34(2)(b)(i).

There are certain disputes which are not arbitrable at all. This sub-section states that arbitral award may be set aside if it has dealt with non-arbitrable disputes whether in domestic arbitration or in International commercial arbitration. Section 2(3) of the 1996 Act states that Part I does not affect any other law of India by virtue of which certain disputes may not be submitted to arbitration. Insolvency proceedings, probate proceedings, questions relating to genuineness of a will or revocation of probate, proceedings for winding of a company under the Companies Act, suit under Section 92 of the Code of Civil Procedure, proceedings for appointment of a guardian, proceedings for possession under the Rent Control Act, disputes in admiralty suit, questions pertaining to non- compoundable criminal matters are all matters outside the jurisdiction of the Arbitration Act. The Supreme Court of India25 has held that the scope of Section 34 of the 1996 Act for setting aside an award is far less than Sections 30 and 33 of the 1940 Act. Whether the question of lack of jurisdiction or exceeding of jurisdiction by the arbitral tribunal can be raised for the first time before the court under Section 34 was the question left open.The Supreme Court of India farther held that dispute relating to specific performance of contract is not a non-arbitrable dispute and therefore Section 34(2)(b)(i) of the 1996 Act is not attracted.A right for specific performance of an agreement to sell deals with contractual sale and it is certainly open to the parties to agree to refer the issues relating to specific performance to arbitration. There is no prohibition. There is no prohibition under the Specific Relief Act, 1963, against referring the dispute about specific performance of a contract relating to immovable property to arbitration. There is no such prohibition even under the 1996 Act as contrasted with Section 15 of the English Arbitration Act, 1950, or Section 48(5) (b) of the English Arbitration Act, 1996, which contains the prohibition relating to specific performance of contract relating to immovable properly.Moreover, disputes pertaining to specific performance of personal service etc. which are prohibited under the Specific Relief Act are not arbitrable.

An Analysis of Public Policy

S. 34(2)(b)(ii) provides that if the award is in conflict with public policy of India it can be set aside. However the term “public policy” has not been defined anywhere in the act. Simplistically speaking, the expression “public policy” connotes some matter which concerns the public good and public interest.26 An attempt to define public policy was made by Winfield when he identified it as “a principle of judicial legislation or interpretation founded

24 Raipur Dev. Authority v. Chokhumal, AIR 1990 SC 1426 (now rendered in fructuous).25 Olympus Superstructures Pvt. Ltd. v. Meena Vijay Khetan and Ors MANU/SC/0359/ 199926 See Sunil Gupta, ‘Challenge to Arbitral Awards on the ground of ‘public policy’, 2003 (2) Arbitration Law Review 5 (SC) at 2

Page 11 of 22

on the current needs of the community”.27 However, current needs being a changing concept, it is impossible to pigeon hole the same.28

It is this lack of definition and certainty of the concept which has led to judicial statements against the extension of public policy. As Chitty rightly put it, the doctrine of public policy is somewhat open-textured and flexible, and this flexibility has been the cause of judicial censure of the doctrine.29By far, the most famous expression of disapproval against public policy is its description as a ‘very unruly horse’ which ‘you never know where it will carry you’.30 Other expressions of disdain include descriptions such as “a treacherous ground for legal decision” and “a very unstable and dangerous foundation on which to build until made safe by decision”.31 However, in the second half of the 20 thcentury, the positive function of the court in matters of public policy increasingly gained recognition. In fact, Lord Denning stated, “With a good man in the saddle, the unruly horse can be kept in control. It can jump over obstacles. It can leap the fences put up by fictions and come down on the side of justice.”32

There are two conflicting positions with respect to ‘public policy’ which is especially witnessed in English decisions, usually referred to as the ‘narrow view’ and the ‘broad view’. According to the ‘narrow view’, courts cannot create new heads of public policy while the ‘broad view’ permits judicial law making. Indian courts over the years, till the infamous ONGC verdict has been inclined towards a narrow interpretation of the term public policy.

Renusagar Power Plant Co. Ltd. Vs. General Electric Co33

As early as 1959, in the case of Gherulal Parekh vs. Mahadeodas Maiya,34 the Hon’ble Supreme Court of India acknowledged that there could be a broad and narrow view of interpreting the expression public policy and favored the narrow view. The court held,

“…though the heads of public policy are not closed and theoretically it may be possible to evolve a new head under exceptional circumstances of a changing world, it is admissible in the interest of stability of society not to make any attempt to discover new heads of public policy in these days.”

27 Percy H. Winfield, ‘Public Policy in English Common Law’, 42 Harvard Law Review 76 at 7728 This is primarily because not only does the term vary with the social and cultural concepts of different nations but it also varies from generation to generation in each nation. are two reasons for this. Firstly, it varies with the socal and cultural concepts of different nations.29 Chitty 836 (1999)30 Richardson v. Mellish, (1824) 2 Bing. 229, per Burrough J. at p. 252 c.f. Anson’s Law of Contract (J. Beatson ed., Oxford: Oxford University Press, 1998, 27th edn.) at 348.31 Janson v. Drienfontein Consolidated Mines Ltd., [1902] A.C. 484, 500, perLord Davey.32 Enderby Town Football Club Ltd v. The Football Association Ltd. [1971] Ch 591, 606, per Lord Denning.33 (1994) Suppl. (1) SCC 64434 AIR 1950 SC 781

Page 12 of 22

However in later cases, till the historic judgment of Renusagar in 1994, courts in India took a relatively broad stance with respect to public policy by reading the term on the pillars of public conscience, public good and public interest.35

In the landmark decision of Renusagar Power Co. Ltd. vs. General Electric Company36, a three judge bench of the Apex Court in deciding the enforcement of an award passed in the State of New York held that an award would be considered as being in conflict with the public policy on the following three grounds:

(a) Fundamental policy of Indian law;

(b) Interest of India;

(c) Justice or morality.

The court further held that an award shown to be suffering merely from error of law without anything more could not be said to be in conflict with public policy of India. The court in this case while acknowledging that the expression “public policy” can be construed both in the narrow and wide sense observed that,

“It is obvious that since the Act is calculated and designed to sub serve the cause of facilitating international trade and promotion thereof by providing for speedy settlement of disputes arising in such trade through arbitration, any expression or phrase occurring therein should receive, consisting with its literal and grammatical sense, a liberal construction. This would imply that the defense of public policy which is permissible under S. 7(1)(b)(ii) should be construed narrowly…”

This interpretation of public policy is clearly in line with the various interpretations given by the international organizations and decisions of other jurisdictions, thus bringing Indian arbitral law at par with international standards.

Renusagar was a case of private international law involving enforcement of a New York Convention foreign arbitral award governed by the Foreign Awards (Recognition and Enforcement) Act, 1961 of India which was based on the principle of speedy enforcement of arbitral awards with minimum court interference. In 1996, two years after the Renusagar judgment, the Indian Parliament with the objective of consolidating the law relating to domestic and foreign arbitration enacted the Arbitration and Conciliation Act, 1996 which was divided into two parts- part I dealt with domestic awards, while Part II dealt with foreign awards. The 1996 Act (S. 34, Part I and S. 48, Part II) based itself on the same motto as the 1961 Act (S. 7) which was to achieve speed and efficiency in arbitrations by interpreting public policy in a narrow manner i.e. by limiting the role of courts in arbitration.

35 Central Inland Water Transport Corporation vs. Brojo Nath Ganguly.AIR 1986 SC 1571. Also see, Murlidhar Agarwal and Anr vs. State of U.P and Ors. 1974 2 SCC 472. Where the court observed, “…the difficulty of discovering what public policy is at any given moment certainly does not absolve the judges from the duty of doing so…the judges must look beyond the narrow field of past precedents…judges will have to look beyond the jurisprudence and that in doing so, they must consult not their own personal standards or predilections but those of the dominant opinion at a given moment or what has been termed customary morality36 Ibid

Page 13 of 22

S. 34 of the Act, contains the main grounds for setting aside the award and like Article 34 of the Model law from which it drew inspiration, it stated that the grounds contained therein are the “only” grounds on which and award may be set aside. Thus under S. 34, courts had no power to get into the merits of an arbitral dispute

ONGC v Saw Pipes Ltd Case37

The Supreme Court in the case of ONGC v Saw Pipes Ltd. Vs. (2003) 5 SCC 705 examined the scope and ambit of jurisdiction of the Court under section 34 of the Act. It was held that if the award is

(a) contrary to the substantive provision of law, or

(b) the provisions of the Act, or

(c) against the terms of the contract, it would be patently illegal which could be interfered u/s 34. Supreme Court further held that phrase “public policy of India” use in Section 34 is required to be given a wider meaning and stated that the concept of public policy connotes some matter which concerns public good and the public interest. The award which is on face of it, patently in violation of statutory provisions cannot be said to be in public interest.

In ONGC v. Saw Pipes Ltd. reiterating several principles of construction of contract and referring to the contractual provisions which were the subject matter of the arbitral award, the court ruled that “in the facts of the case, it can not be disputed that if contractual term, as it is, is to be taken into consideration, the award is, on the face of it, erroneous and in violation of the terms of the contract and thereby it violates Section 28(3) of the Act”.

Culling out the ratio from the decisions rendered under the 1940 Act, the court held:

“It is true that if the Arbitral Tribunal has committed mere error off act or law in reaching its conclusion on the disputed question submitted to it for adjudication then the court would have no jurisdiction to interfere with the award. But, this would depend upon reference made to the arbitrator:

(a) if there is a general reference for deciding the contractual dispute between the parties and if the award is based on erroneous legal proposition, the court could interfere;

(b) it is also settled law that in a case of reasoned award, the court can set aside the same if it is, on the face of it, erroneous on the proposition of law or its application;

(c) if a specific question of law is submitted to the arbitrator, erroneous decision in point of law does not make the award bad, so as to permit its being set aside, unless the court is satisfied that the arbitrator had proceeded illegally”.

The decision in ONGC case, though rendered by a bench of two Hon’ble judges, has far reaching consequences. Firstly, the decision construes the new Act, as, in its entirety

37 AIR 2003 SC 26299

Page 14 of 22

(Sections 2 to 43), laying down only rules of procedures (vide para 8 of the judgment). It rules that “power and procedure are synonymous” and that “there is no distinction between jurisdiction/power and the procedure”. Referring to Sections 24, 28 and 31 of the Act and construing the words “arbitral procedure” in Section 34(2)(v) (and after observing that all the provisions appearing in part I of the Act lay down arbitral procedure) it concludes that “the jurisdiction or the power of the Arbitral Tribunal is prescribed under the Act and if the award is de hors the said provisions, it would be, on the face of it, illegal”.

Construing the phrase “public policy of India” appearing in Section 34(2)(b)(ii), the court held that in a case where the validity of the award is challenged on the ground of being opposed to “public policy of India”, an wider meaning ought to be given to the said phrase so that “patently illegal awards” could be set aside. The court distinguished the earlier decision in Renu Sagar case38 on the ground that in the said case the phrase “public policy of India” appearing in Section 7(1)(b)(ii) of the Foreign Awards (Recognition and Enforcement) Act, 1961 was construed which necessarily related to enforcement of foreign award after it became final. Though the court accedes that “it is for the Parliament to provide for limited or wider jurisdiction of the court in case where award is challenged”, it still holds that, in its view, a wider meaning is required to be given to the phrase “public policy of India” so as to “prevent frustration of legislation and justice”. Stating the reasons in support of its view the court held that “giving limited jurisdiction to the court for having finality to the award and resolving the dispute by speedier method would be much more frustrated by permitting patently illegal award to operate. Patently illegal award is required to be set at naught, otherwise it would promote injustice”.

Critical Appraisal

Two errors of great magnitude that have been committed in this case are:

1. While reviewing the merits of the ONGC case,39 the court failed to consider the labour strike in entire European continent, something which was neither under the control nor could be predicted by SAW Pipes. This particular aspect has been completely overlooked by the court.

2. The decision of the two judges Bench in ONGC has bypassed the ruling of the three judges Bench of Supreme Court in the Renusagar case. That shows both judicial indiscipline and violation of the binding precedent of a larger Bench. While the Bench in Renusagar case held that the term ‘public policy of India’ was to be interpreted in a narrow sense, the Division Bench went ahead unmindful of the prior precedent and expanded the same to such an extent that arbitral awards could now be reviewed on their merits. This is a huge step backwards in laws relating to alternate dispute resolution in the era of globalisation

38 Ibid 39 ONGC v. SAW Pipes Ltd., AIR 2003 SC 26299

Page 15 of 22

Accordingly in order to nullify the effect of above decision of the Supreme Court, it is proposed that the existing Explanation in section 34 be renumbered as Explanation 1 and after that Explanation as so renumbered the following Explanation shall be inserted.

“Explanation II‐ For the purposes of this section “an award is in conflict with the public 

policy of India” only in the following circumstances, namely:‐ When the award is contrary to the‐ 

(i) fundamental policy of India; or (ii) interests of India; or (iii) justice or morality.’” 

Limitation Period: Section 34(3)

Section 34 (3) provides that an application for setting aside an arbitral award must be made within three months from the date on which the party making application has received the arbitral award or within three months from the date on which the application of the party was disposed of by the arbitral tribunal.

The p rov i so to sub-section (3) allows the party a further period of thirty days after the expiry of three months if the court is satisfied that the party was prevented by a sufficient cause from making application within the said period of three months. However, no application for setting aside the award can be entertained by the court after the expiry of these additional 30 days period.

The Supreme Court in Sta te o f Goa v. M/ s . Wes tern Bu i lders , 40 clarified by virtue of sub-section (3) of Section 34 of the Arbitration Act 1996, the application for filing and setting aside the award a period has been prescribed as three months and delay can be condoned to the extent of 30 days. It is only to this extent that the applicability of Section 5 of Limitation Act, 1963 will stand excluded, but there is no provision in the Act which excludes operation of Section 14 of the Limitation Act. The Court further held that the statement of objects and reasons also nowhere indicates that Section 14 of the Limitation Act shall be excluded. On the contrary, as evident from the provision of Section 43 of the Arbitration and Conciliation Act, 1996, the Limitation Act as a whole would be applicable to the Arbitration Act and it is only by virtue of Section 29 (2) of the Limitation Act that its operation is excluded to the extent of the area which is covered under the Arbitration Act, 1996. Thus laying down the r a t i o of the case, the Supreme Court concluded that the Arbitration Act, 1996 does not expressly exclude the applicability of Section 14 of the Limitation Act, 1963 and this prohibitory provision has to be construed strictly.

40 AIR 2006 SC 2525.

Page 16 of 22

Provision to Eliminate Ground: Section 34(4)

Sub-section (4) postulates that the court may, on request by a party, give an opportunity to the arbitral tribunal to resume the arbitral proceedings or take such other action as in the opinion of the arbitral tribunal will eliminate the ground for setting aside the arbitral award. The court may adjourn its proceedings during this period.

There was no provision corresponding to this under the 1940 Act. Nearest provision was Section 16 which empowered the court to remit the award to the arbitrator for reconsideration.Where the arbitrator instead of passing a fresh award passed a supplementary award, both awards must be merged to make the final decree. Otherwise it cannot be executed.41

Where the court sent back the case to the tribunal for rectification of error relating to jurisdiction on application by a party to set aside the award, the court may adjourn the proceedings for a specified period to enable the tribunal to deal with the grounds on which objections have been raised and to eliminate them.42

Which Court has Jurisdiction to set aside an award?

The place of subject-matter of arbitration is generally the Court that is competent to entertain application under Section 34 for setting aside the award. Thus where the work under the agreement was done at Kanpur, the Delhi Court could not have jurisdiction just because the Union of India, the concerning party was head quartered in Delhi or the arbitration had taken place in Delhi and award was made at Delhi.43

Where the properties in dispute are located within the jurisdiction of two courts at different places, either of the two courts will have jurisdiction to decide an application for setting aside the arbitral award irrespective of the extent of property. But once one of these courts has assumed jurisdiction and entertained the application under this section, that court alone shall have jurisdiction to dispose of the case and no other court shall be competent to have jurisdiction in the case.44

The question as to which Court has the jurisdiction to entertain application for setting aside the award came up for consideration before the Supreme Court in Kha lee l Ahmad Dakhan i v. Hat t i Go ld Mines Co . L td . 45 In this case the State Government of Karnataka awarded a contract to build school at Hatti in District Raichur. A dispute arose between the Government and the building contractor and the award was passed in State capital Bangalore. The Government filed application for setting aside of award in Bangalore Court. Pending such application, the contractor sought enforcement of the award by District Court, Raichur. The Raichur Court entertained the execution application holding the State Capital Court had no jurisdiction to entertain application for setting aside the award. The

41 Madan Mohan Agarwal v. Suresh Agarwal MANU/MP/0048/199842 TN Electricity Board v. Bridge Tunnel Construction & Co. MANU/SC/0321/199743 AIR 1980 Del. 43.44 AIR 1988 SC 1347.45 AIR 2000 SC 1926.

Page 17 of 22

Supreme Court held that the order passed by the Raichur Court was not proper in view of Section 20 CPC because it cannot be always said that only one Court has jurisdiction to entertain such application.

Where the arbitration relates to an international commercial arbitration, the provision of Para 1 (a) Article V of the New York Convention or Article 3 of the Geneva Convention may be applied. According to these provisions the Court of the country i n wh ich o r unde r t he l aw o f wh ich the award was made, would have jurisdiction to set aside the award. However, in In t e rna t i ona l S t anda rd E l ec t r i c Corpo ra t i on v. B r ida s Soc i edas Anomia 46 it was held that only the court of the country in which the award was made has the jurisdiction to vacate or set aside the award.

An award rendered by a panel of arbitrators that was tainted with 'bias' or 'impartiality' may be set aside under Article V (2) (b) of the New York Convention as violative of public policy.47 It is for the party challenging the award to prove that under those circumstances 'a reasonable person would conclude that the arbitrator was partial to one party to the arbitration'.48

Misconduct of Arbitrator/Arbitral Proceedings

The arbitral award can be set aside on the ground of misconduct of arbitrators as also the misconduct of arbitral proceedings by the arbitrators. If the arbitral tribunal takes up the matter which is clearly beyond the scope of its authority and outside its jurisdiction, it would tantamount to misconduct of arbitrator. An award in which the arbitrator has deliberately deviated from the terms of reference and arbitration agreement will amount to misconduct of the arbitrator.49

Where the arbitrator failed to take into consideration the counter-claim of the respondent while proceeding with the arbitration, the award was liable to be set aside on the grounds of misconduct.50

The Supreme Court held in the case of In ternat iona l A ir Por t Author i ty v. K. D . Ba l i , 51 that where the party to an arbitration proceeding contributed for the Air-Ticket and hotel accommodation of the arbitrator, it could not be said to amount to misconduct so as to invalidate the arbitration proceedings. The Supreme Court in Vi rend ra Swarup v. K . Swarup , 52 observed that "bias also amounts to misconduct."

46 Y.B. XVII (1992) U.S. 115.47 York Hannover v. American Arbitration Association, Y. B. XX (1995) US 169. See also P. T. Rea Suransi v. Evanston, YB XIX (1994) US 149.48 Morelite Construction Corporation v. New York...Funds, 748 F 2d 79 (2d Cir. 1994).49 Associated Engineers v. Government of Andhra Pradesh, (1991) 4 SCC 93.50 K. V. George v. Secretary to Govt., AIR 1990 SC 5?.51 AIR 1988 SC 1099.52 (1994) Supp. 2 SCC 337.

Page 18 of 22

In Sta te Trad ing Corpora t ion v. Mo las se s Co . , 53 the Bengal Chamber of Commerce, a permanent arbitral Institution, did not allow a Company to be represented by its Law Officer, who was full time employee of the Company. The Company thereupon moved an application against the award of the arbitral tribunal on the ground of misconduct. The Court held that it was not only misconduct of the arbitrator but also misconduct of the arbitration proceedings.

Some of the glaring illustrations of misconduct are proceeding without giving the due notice of time and place of arbitral tribunal's meeting; proceeding e x par t e without Sufficient cause; excluding persons entitled to be present; improper delegation of duties; denial of opportunity to parties, acting against the mandate given to the arbitrator under the agreement, failure or refusal to consider counter-claim of the respondent etc.

Insertion of new Section 34A: 

Law Commission while suggesting amendment in Section 34 also recommended that in case of domestic arbitration, new ground for challenges viz. mistake appearing on face of award may be made available.

Accordingly it recommended for inserting a new Section 34A.

It is desirable to provide some recourse to a party aggrieved by a patent and serious illegality in the award which has caused substantial injustice and irreparable harm to the applicant. It is a delicate task to strike a balance between two equally important but conflicting considerations, namely giving finality to the arbitral award and redressing substantial injustice caused by some patent and serious illegality in the award. As no tribunal is infallible, it is desirable to provide some recourse to a party who has suffered substantial injustice due to patent and serious illegality committed by the arbitral tribunal. It is true that whatever expression is used in the grounds of recourse to take care of such situation, the possibility of abuse thereof by a disgruntled party cannot be ruled out. However, one cannot lose sight of the ground realties. There is no denying the fact that the overall scenario in the field of arbitration is not as ideal as it should be. As pointed by Lord Mustill, arbitration has become a business, often involving very large sums, and bringing in its train substantial monetary earnings for all concerned and there has been a concurrent decline in the standards of at least some of those who take part in it. It is no good wringing hands about this, for it is a fact to be faced, and part of facing is to recognise that some means must be found of protecting this voluntary process from those who will not act as they have agreed or as is expected of them. Here lies the need for providing some ground of recourse in case of patent and serious illegality causing substantial injustice.

In this context it may be necessary to refer to the case of Sikkim Subba Associates v. State of Sikkim54, wherein the arbitrator awarded an astronomical sum as damages without any basis or proof of such damages as required by law in total disregard to the basic and fundamental principles, is a glaring example of misuse of power by the arbitrator and the

53 AIR 1981 Cal. 440.54 (2001) 5 SCC 629

Page 19 of 22

need for some recourse at least in such extreme cases. In that case, the arbitrator made an award determining a sum of over Rs.33 crores with proportionate costs and future interest at the rate of 12% p.a. on the said amount as the amount payable by the State of Sikkim to the organizing agents of the lottery. The Supreme Court set aside the award on the ground of gross illegality. The grave nature of the illegality in the award in that case is evident from the following observations of the Supreme Court:

“The arbitrator who is obliged to apply law and adjudicate claims according to law, is found to have thrown to the winds all such basic and fundamental principles and chosen to award an astronomical sum as damages without any basis or concrete proof of such damages, as required in law”.

“Though the entire award bristles with numerous infirmities and errors of very serious nature undermining the very credibility and objectivity of the reasoning as well as the ultimate conclusions arrived at by the arbitrator, it would suffice to point out a few of them with necessary and relevant materials on record in support thereof to warrant and justify the interference of this Court with the award allowing damages of such a fabulous sum, as a windfall in favour of the appellants, more as a premium for their own defaults and breaches.”

“The manner in which the arbitrator has chosen to arrive at the quantum of damages alleged to have been sustained by the appellants not only demonstrates perversity of approach, but per se proves flagrant violation of the principles of law governing the very award of damages. The principles enshrined in Section 54 in adjudicating the question of breach and Section 73 of the Contract Act incorporating the principles for the determination of the damages, are found to have been observed more in their breach.”

It is therefore proposed that that an additional ground of challenge, namely, “patent and serious illegality, which has caused or is likely to cause substantial injustice to the applicant” may be added as a ground for recourse in case of purely domestic awards. Accordingly, it is proposed to insert a new

Section 34A as suggested by the Law Commission with some changes:

“34A. Application for setting aside arbitral award on additional ground of patent and 

serious illegality.‐  Recourse to a Court against an arbitral award made in an arbitration other than an International commercial arbitration, can also be made by a party under subsection (1) of section on the additional ground that there is a patent and serious illegality ,which has caused or likely to cause substantial injustice to the applicant .

(2)Where  the  ground  referred  to  in  sub‐section  (1)  is  invoked  in  an application 

filed  under  sub‐section  (1)  of  section  34,  while considering  such  ground,  the  Court  must  be  satisfied  that the illegality identified by the applicant is patent and serious and has caused or is likely to cause substantial injustice to the applicant”

Page 20 of 22

Conclusion

The law of arbitration in India is very much at its crossroads. An eminent personality has commented at the state of affairs of arbitration laws in India as “arbitration in India is not for the faint-hearted”.55 It is largely upto the Indian Judiciary to step in and contain the interventionist role it has assumed for itself and have greater trust in the arbitral process. Mr. Javed Gaya56 has stated that the Supreme Court’s judgment in SAW Pipes would encourage further litigation by the aggrieved party to arbitration, and in doing so diminish the benefits of arbitration as a mode of dispute resolution. The harsh reality is that courts are totally unequal to the task of meeting the basic expectations of the litigating community. Mr. Kachwaha57opines that these very courts cannot be leaned upon to salvage the perceived inadequacies of the arbitral system through their greater intervention. Rather, the courts must take the law forward based on trust and confidence in the arbitral system.

Very recently, the Supreme Court in McDermott International Inc Vs. Burn Standard Company Ltd.,58 accepted that the ONGC judgment was “subjected to considerable adverse comments and went on to observe that only a larger Bench can consider its correctness or otherwise”.59  One wonders why it felt shy of referring the matter to a larger Bench. Similarly, the court does not miss an opportunity to criticise the legislature, where it said, “It must be stated the recent act (Arbitration and Conciliation Act, 1996) does not appear to be a well drafted legislation”. In our view, the court has ignored that certainty of law is one of the basic requirements of law and it is more so in international business transactions.

55 Gaya, Javed, ‘Judicial Ambush of Arbitration in India’, L.Q.R.2004, 120 (OCT), 571-57456 Ibid57 Kachwaha, Sumeet, ‘The Indian Arbitration Law : Towards a New Jurisprudence’, Int. A.L.R. 2007, 10(1), 13-1758 McDermott International Inc v. Burn Standard Company Ltd., (2006) 11 SCC 181, at p.21159 Bhatia International v. Bulk Trading SA, (2003) 5 SCC 105

Page 21 of 22

Bibliography

(1) O P Malhotra, ‘The Law and Practice of Arbitration and Conciliation’, (New Delhi: Lexis Nexis-Butterworths: 1sted., 2002.)

(2) P C Markanda, ‘Law relating to Arbitration and Conciliation’,(Nagpur: Wadhwa and Co.: 6th ed., 2006).

(3) R S Bachawat, ‘Law of Arbitration and Conciliation’, (Nagpur: Wadhwa and Co.: Vol. I, 4th ed., Justice M. Jagannadha Rao, ‘Arbitration in India: Section 34, ONGC vs. SAW Pipes, Manifets illegality and similar approaches in UK and US’ Halsbury’s Law Monthly, May 2009.

(4) Justice D. R. Dhanuka, ‘A critical analysis of the judgment ONGC vs. SAW Pipes Limited’, 2003 (2) Arbitration Law Review 51 (JS).

(5) V.K Gupta, ‘In Defence of ONGC Ltd. vs. SAW Pipes Ltd.’, 2004 (1) Arbitration Law Review 54 (JS) 2005).

Websites

1. http://www.manupatra.com/2. http://scconline.com/3. http://www.google.com/4. http://www.wikipedia.org/ 5. http://www.yahoo.com/6. http://jurisonline.in/2010/03/is-judicial-intervention-in-arbitration-justified/ 7. http://arbitration.indlaw.com/search/articles/ 8. http://www.unilawonline.com/articles/RECOURSE%20_%20SECTION%2034%20OF%20A&C

%20ACT,%201996.htm9. http://www.legalblog.in/2011/01/public-policy-under-arbitration.html

Page 22 of 22