Setting Aside Arbitral Awards Under Section 34

Section 34 of the Arbitration and Conciliation Act, 1996 is the only way to challenge an arbitral award before a court in India: you file an application to set the award aside, and the court can grant it only on the limited grounds listed in sub-sections (2) and (2A). The application must normally be filed within three months of receiving the award, with a further 30 days possible if you show sufficient cause. The court does not rehear the dispute on its merits, and filing the challenge does not by itself stop the award from being enforced.

This explainer is written for B.A. LL.B. and LL.B. students preparing for an Alternative Dispute Resolution paper, and for anyone who has lost an arbitration over a business contract, a lease or a construction dispute and wants to know what is still possible. Arbitration clauses now appear in many ordinary agreements, so knowing the limits of a Section 34 challenge saves time, money and false hope.

What does Section 34 actually say?

Sub-section (1) is the gateway. Recourse to a court against an arbitral award may be made only by an application under sub-sections (2) and (3). There is no regular appeal against an award, and a party cannot file an ordinary civil suit to reopen it. The Act itself is Act 26 of 1996, enacted on 16 August 1996 and in force from 22 August 1996, and Section 34 has been amended by Act 3 of 2016 and Act 33 of 2019.

The section has three layers of grounds:

• Section 34(2)(a): grounds the applicant must establish on the basis of the record of the arbitral tribunal (wording substituted by the 2019 amendment for the older words "furnishes proof that").
• Section 34(2)(b): grounds the court can find on its own, namely that the subject matter is not capable of settlement by arbitration, or that the award conflicts with the public policy of India.
• Section 34(2A): patent illegality appearing on the face of the award, available only for arbitrations that are not international commercial arbitrations.

What are the grounds under Section 34(2)(a)?

The applicant must show, from the tribunal's record, one of these:

1. A party was under some incapacity.
2. The arbitration agreement is not valid under the law the parties chose or, failing that, under the law in force.
3. The applicant was not given proper notice of the appointment of an arbitrator or of the proceedings, or was otherwise unable to present the case.
4. The award deals with a dispute not contemplated by, or beyond the scope of, the submission to arbitration. A proviso allows the court to set aside only the offending part if it can be separated from the rest.
5. The composition of the tribunal or the procedure did not follow the parties' agreement (or, where there was no agreement, Part I of the Act).

Take a simple example. A contractor in Nagercoil and a homeowner agree to arbitration. The arbitrator decides a separate dispute about a second property that was never referred. The homeowner can ask the court to set aside that portion under Section 34(2)(a), while the rest of the award may survive.

What does "public policy of India" mean now?

After the 2015 amendment, Explanation 1 to Section 34(2)(b) closes the list. An award is in conflict with the public policy of India only if:

• the making of the award was induced or affected by fraud or corruption, or was in violation of Section 75 or Section 81;
• it is in contravention with the fundamental policy of Indian law; or
• it is in conflict with the most basic notions of morality or justice.

Explanation 2 adds that the test of fundamental policy of Indian law shall not entail a review on the merits of the dispute. This is the key idea for any exam answer: the court checks the legality of the process and the outer limits of the award, not whether the arbitrator reached the best answer.

What is patent illegality under Section 34(2A)?

For domestic arbitrations (not international commercial arbitrations), the court may also set aside an award that is vitiated by patent illegality appearing on the face of the award. The proviso is strict: an award shall not be set aside merely on the ground of an erroneous application of the law or by reappreciation of evidence. So a party in Madurai who simply feels the arbitrator weighed the witness evidence wrongly will not succeed. The illegality has to be visible on the face of the award itself.

Where, when and how do you file?

• Which court: Under Section 2(1)(e), for a domestic arbitration "Court" means the principal civil court of original jurisdiction in a district, and includes the High Court in exercise of its ordinary original civil jurisdiction, but not a civil court of a lower grade or a Court of Small Causes. For an international commercial arbitration, it is the High Court in exercise of its ordinary original civil jurisdiction or, in other cases, the High Court that hears appeals from the subordinate courts.
• Time limit: Section 34(3) gives three months from the date the applicant received the award, or from the disposal of a request under Section 33 for correction or interpretation. The court may allow a further 30 days if sufficient cause is shown. Section 33 requests must themselves be made within 30 days of receiving the award, unless the parties agreed otherwise.
• Prior notice: Section 34(5) requires the applicant to give prior notice to the other party and to file an affidavit confirming compliance.
• Disposal: Section 34(6) directs the court to decide the application expeditiously, and in any event within one year from the date the notice under sub-section (5) is served.
• Curing defects: Under Section 34(4), the court may, on a party's request, adjourn the matter so the tribunal can resume proceedings or take other action that removes the grounds for setting aside.

Does filing a Section 34 application stop enforcement?

No. Section 36(2) says the filing of such an application shall not by itself render the award unenforceable. The losing party must file a separate application for stay, and under Section 36(3) the court may grant it subject to conditions it thinks fit, recording reasons in writing. For an award for payment of money, the court must have due regard to the Code of Civil Procedure, 1908 provisions on stay of a money decree, which in practice often means a deposit or security. Where the court is satisfied that a prima facie case is made out that the arbitration agreement or contract behind the award, or the making of the award, was induced or effected by fraud or corruption, the second proviso requires it to stay the award unconditionally until the Section 34 challenge is decided.

An order setting aside or refusing to set aside an award is itself appealable under Section 37(1)(c).

How should you write about Section 34 in an exam?

1. Open with Section 34(1): the application is the exclusive remedy, and there is no review on merits.
2. Set out the grounds in three groups: 34(2)(a), 34(2)(b) with both Explanations, and 34(2A) with its proviso.
3. Mention the 2015 and 2019 amendments and what they changed (the closed public policy list, patent illegality for domestic awards, decision on the tribunal's record).
4. Cover procedure: Section 2(1)(e), the 3 months plus 30 days limit, prior notice, the one year disposal target.
5. Link it to Section 36 (no automatic stay) and Section 37 (appeal).
6. Add the leading Supreme Court and Madras High Court judgments from your syllabus case list, with the citation exactly as your teacher or the official report gives it.

If you want to see arbitration and settlement in practice, ask about the work of the college legal aid clinic.

Sources

• Section 34, Arbitration and Conciliation Act, 1996 (Indian Kanoon): full text of Section 34 with amendment notes.
• Section 34(2A) (Indian Kanoon): patent illegality ground and its insertion by Act 3 of 2016.
• Arbitration and Conciliation Act, 1996, full text (Indian Kanoon): Sections 2(1)(e), 33, 36 and 37.
• Arbitration and Conciliation Act, 1996 (India Code): official record of the Act, its number and dates.