Article by Vijay Pal Dalmia, Advocate, Supreme Court of India and Delhi High Court, Partner & Head of Intellectual Property Laws Division, Vaish Associates Advocates, India

ADR means Alternative Dispute Resolution which includes various methods of settling a dispute without getting into the intricacies of the court. It is a method where parties try to resolve their disputes privately in front of a third-person expert. The decision is binding on the parties like the decision of the court.

What are the types of ADR processes?

Broadly there are four ADR processes, namely Arbitration, Mediation, negotiation, and conciliation. These processes are an alternative to litigation and can be very beneficial to the parties in dispute. It is less time-consuming compared to litigation. Here's a brief of what these processes mean-

  • Arbitration This process is very much similar to litigation and court setup. There's a judge (referred to as the ‘arbitrator'), there are hearings and evidence, etc. But it is a private form of dispute resolution, where the parties decide the rules of the process and appoint their own judge.

 The parties in dispute appoint a neutral third party, referred to as an Arbitrator, who decides the matter between the parties. The process is rather flexible and technical aspects of court proceedings can be dispensed away with by the parties at their discretion. The decision of the Arbitral Tribunal is referred to as an “Award” and has the same effect as that of an order of the court. It is also pertinent to mention that Arbitration in India is governed by the Arbitration and Conciliation Act, 1996.

  • Mediation This process also involves a neutral third party, referred to as the mediator, whose role is to facilitate discussions between the parties.   The mediator does not give a decision, but rather helps the parties in dispute to come to a mutual understanding or resolve the dispute between them. The outcome of the mediation process is usually materialized in the form of a contract between the parties which is enforceable by law.
  • Conciliation:  Conciliation falls somewhere between mediation and arbitration. As an arbitrator, a conciliator is a neutral third party appointed by the parties who assist them in resolving the disputes. A conciliator cannot pass an award, however, he or she can make proposals for a settlement of the dispute. These proposals are not binding on the parties, and they may choose to disregard them. The settlement reached by the parties is then turned into a settlement agreement. It is also pertinent to mention that Conciliation in India is governed by the Arbitration and Conciliation Act, of 1996.
  • Negotiation:  The most informal form of dispute resolution, where the parties negotiate the dispute among themselves. There is no third party involved, and the parties are free to settle the disputes by negotiating.

Why there is a need for ADR?

ADR processes are full of advantages. Ever wondered how these big companies solve their disputes? Their disputes involve millions and billions of dollars, and they can't wait for years for a decision from the court. To address that, almost every contract they enter has a dispute resolution clause which provides for dispute resolution mechanisms as per their convenience. There are tiered processes as well which might include multiple dispute resolution processes. It is only after these mechanisms don't work out that the parties decide to knock on the court's doors. Here are a few of the advantages that ADR offer:

  • These processes are cost-effective, and the parties can decide the fee of the neutral third party.
  • These processes are less time-consuming, and the parties can settle their disputes quickly and efficiently.
  • The parties have the autonomy to decide on the procedural aspects of the mechanism and hence, it's convenient.
  • The parties get to interact with each other and hear their concerns directly from them. This helps the parties in maintaining future business relations even if one of the parties loses.
  • The parties can keep the process confidential.
  • The parties have the option to appoint experts on the subject matter for better adjudication and settlement of disputes.
  • Disputes solved through ADR would help the congestion in courts since it helps avoid lengthy litigation.

Provisions under the (Indian) Arbitration and Conciliation Act pertaining to the procedure of arbitration

Section 7  - Arbitration Agreement:

 (1) In this Part, “arbitration agreement” means an agreement by the parties to submit to arbitration all or certain disputes which have arisen or which may arise between them in respect of a defined legal relationship, whether contractual or not.

(2) An arbitration agreement may be in the form of an arbitration clause in a contract or in the form of a separate agreement.

(3) An arbitration agreement shall be in writing.

 (4) An arbitration agreement is in writing if it is contained in—

 (a) a document signed by the parties;

(b) an exchange of letters, telex, telegrams or other means of telecommunication which provide a record of the agreement; or

 (c) An exchange of statements of claim and defence in which the existence of the agreement is alleged by one party and not denied by the other.

(5) The reference in a contract to a document containing an arbitration clause constitutes an arbitration agreement if the contract is in writing and the reference is such as to make that arbitration clause part of the contract.

An arbitration agreement is the raison d'être of an arbitration proceeding. It is only through an arbitration agreement that parties can submit their issues to be adjudicated by the arbitral tribunal. An arbitration agreement not only engenders an arbitral tribunal but also gives shape to it. Therefore, it is crucial to understand the position of the arbitration agreement under the statute.

An arbitration agreement is formed when two parties enter into a contract and agree in writing that any disputes arising between them out of that contract will have to be resolved without going to the courts and with the assistance of a neutral person: a third party appointed by both of the parties, known as the Arbitrator, who would act as a judge and whose decision will be binding upon the parties.  

Also, the 1996 Act ascribes an inviolable position to the arbitration agreement. Section 8 clearly states that after taking cognizance of a valid arbitration agreement between the parties the court shall abstain from dwelling into the merits of the dispute and refer the parties to arbitration. 

In the case of Rukmanibai Gupta v. Collector, Jabalpur (1980) 4 SCC 556 (AIR 1981 SC 479) (MANU / SC / 0002 / 1980) the Supreme Court held that as per the arbitration agreement the dispute will refer to the arbitration and the decision of the arbitrator would be final and binding.

Also, in the case of M. Dayanand Reddy v. A.P. Industrial Infrastructure Corpn. Ltd. (1993) 3 SCC 137 (AIR 1993 SC 2268) (MANU / SC / 0337 / 1993) ([ 1993 ] 2 SCR 62)

the decision in the case of Rukmanibai Gupta (supra) has been followed by the Supreme Court Commenting on the special characteristics of an arbitration agreement the Court has further observed in the above case that an arbitration agreement embodies an agreement between the parties that in case of a dispute such dispute shall be settled by an arbitrator or an umpire of their own constitution or by an arbitrator to be appointed by the Court. The Supreme Court has further observed that it is to be decided whether the existence of an agreement to refer the dispute to arbitration can be clearly ascertained in the facts and circumstances of the case. This, in turn, depends on the intention of the parties to be gathered from the relevant documents and surrounding circumstances.

Section 8  - Power of court to refer the parties to arbitration:

Section 8 of the Arbitration and Conciliation Act, 1996 deals with the power of the judicial authority to refer the parties to arbitration. The crux of the provision is that if there is an arbitration agreement between the parties and a dispute arises between the parties which is a subject matter of arbitration, then the judicial authority before whom either of the parties has brought the case is obligated under Section 8 of the Arbitration and Conciliation Act, 1996 to direct the parties to resolve their dispute through arbitration. To amplify the scope of arbitration, the 2015 Amendment to Section 8 of the said Act mandates the judicial authority to refer the parties to arbitration irrespective of any decree/court order/judgment. This section is based on Section 34 of the erstwhile Arbitration Act, of 1940.

It provides that the party to arbitration merely needs to insinuate the judicial authority about the arbitration clause before the filing of the first statement. Thereafter, the judicial authority has to compulsorily refer the parties to the arbitration. For invoking the arbitration clause, Section 8 provides a time limit and within that limit, the parties need to intimate the judicial authority about the arbitration clause, the said limitation is described in the provision as “not later than the date of submitting his first statement on the substance of the dispute.” 

In the case of Rashtriya Ispat Nigam Ltd vs. Verma Transport Company [MANU/SC/3491/2006] (AIR 2006 SC 2800)  (( 2006 ) 7 SCC 275) ([ 2006 ]Supp( 4 )SCR 332) The Hon'ble Supreme Court of India held that in deduced that the ‘First statement' with respect to section 8 should be different from the expression ‘written statement'. Further, the court goes on to say that it is the duty of the judicial authority to find whether the party has waived its right to invoke arbitration by filing the first statement.

Essential ingredients of section 8

The following are the essential ingredients of it-

  1. There should be a valid arbitration agreement between the parties.
  2. Action should be brought before the judicial authority and that action should be a subject matter of the arbitration.
  3. Either of the parties or any person related to the dispute should invoke the arbitration clause or agreement before the date of submitting their first statement on the substance of the dispute before the judicial authority.
  4. The application of the party to refer the case to arbitration should be filed with the original arbitration agreement or its duly certified copy.

In the case of P.Anand Gajapathi Raju and Ors vs. P.V.G Raju and Ors [MANU/SC/028/2000] (AIR 2000 SC 1886) (( 2000 ) 4 SCC 539) ([ 2000 ] 2 SCR 684)

 the Supreme court held that

  • There must be an arbitration agreement or an arbitration clause between the parties; 
  • A party to the arbitration agreement  files a case against the other party before the judicial authority;
  • The subject matter of the case so filed must be the same as the subject matter of the arbitration agreement; 
  • The defendant or any other party related to the case moves the Court seeking a reference of the parties to arbitration before the submission of  first statement on the substance of the dispute.

Grounds for Rejection of Application under Section 8 of the Act

The judicial authority can reject the application on the following grounds:

  • When it appears that the party has waived his right to invoke the arbitration clause before submission of the first statement on the substance of the dispute.
  • When the Judicial authority is of the view that no adequate relief would be available to the party.
  • When the Court or the Judicial authority is satisfied that no contract has been concluded between the parties.
  • When the contract itself is fraudulent in nature.
  • When the main contract is void abinitio or illegal or non-existent.
  • Where the suits or claim is based on Negotiable Instruments.

Section 9 - Interim Orders by Court

Section 9 of the Arbitration and Conciliation Act, 1996 deals with interim relief in an arbitration proceeding. It entitles any party to obtain an interim relief at three stages – 

  1. Before the commencement of the arbitration proceedings
  2. During the course of arbitration proceedings
  3. After when the arbitral award is given but before its enforcement

A considerable time may elapse between the time of invoking the arbitration and the appointment of an arbitral tribunal by the Court. During the time in between, if an urgent relief is sought and there is hardly any time to wait, Section 9 specifically provides before that “arbitral proceedings”, an individual is also entitled to move the Court if he/she feels the urgency. Therefore, the entire purpose of Section 9 is to provide relief to the parties when the arbitral tribunal is not even in existence. 

Though arbitration is supposed to be undertaken by the arbitral tribunal alone, the Act recognises the fact that the rights of the parties should not be frustrated. Hence, in a period when the tribunal may not be in existence, the parties may approach the Court for relief.

According to Section 9(1)(i) of the Arbitration and Conciliation Act, 1996, an individual may file an application to appoint a guardian for a minor or for a person of unsound mind for arbitral proceedings. 

Section 9(1)(ii) provides a broad category of power to grant interim measures of protection to the Court or the adjudicating authority for the following:

  • According to Section 9(1)(ii)(a), the Court may provide interim relief to preserve, interim custody or sale of goods, being the subject matter of the arbitration agreement under section 7.
  • Under 9(1)(ii)(b), the Court may grant an interim relief to secure the amount in dispute.
  • In any property related disputes, subject to arbitration proceedings, under 9(1)(ii)(c), the Court may grant interim relief through the authorisation of any person entering the land or the building in possession to either of the party or to take samples, for making any observations or any experiments whichever is necessary to obtain full information or total evidence.
  • The Court may also grant the relief of interim injunction under Section 9(1)(ii)(d) provided that the conditions of establishment of prima facie  case, balance of convenience in favour and irreparable damages are maintained. Under this clause, the Court may also appoint a receiver, a court officer appointed by the Court to supervise disputed properties or things in question.
  • Apart from these, Section 9(1)(ii)(e) provides the Court discretionary power to provide any interim protections other than the ones listed above If the court deems it fit, just and convenient. In this regard, the Court has the same power to give orders like any proceedings before it.

In the case of Sunderam finance ltd vs. NEPC India Ltd [MANU//SC/0012/1999] (AIR 1999 SC 565) ((1999 ) 2 SCC 479) ([ 1999 ] 1 SCR 89) the Supreme Court held that the word before in section 9 before the arbitral proceedings commence as u/s 21 and therefore it would not be necessary to give notes of invoking the arbitration clause to other party. Also, if any application is so made, the court will first have to be satisfied that there exist a valid arbitration agreement and the applicant take the dispute to arbitrators. Only when the court satisfies such an intention of the applicant it shall have the jurisdiction for interim orders from the courts.

Section 10: Number of Arbitrators

As per Section 10 of The Arbitration and Conciliation Act, 1996 the parties are free to choose the desired number of arbitrator but the number shall not be an even number, and if the parties are unable to do so then the tribunal shall consist of a sole arbitrator. It is the mandatory provision of the Act and even the parties can't derogate this provision.

Section 11:  Appointment of arbitrators

  1. The nationality of an arbitrator is not essential unless the parties otherwise agree upon it. 
  2. The parties can also form an agreement on the procedure for appointing arbitrators. 
  3. In case of failure to reach an agreement on the procedure of appointment, clause (3) prescribes the following procedure for the appointment of three arbitrators: 
    1. Each party appoints an arbitrator. 
    2. The two arbitrators then jointly appoint the third arbitrator, who acts as the presiding arbitrator. 
  4. The Supreme Court and high courts have the power to designate arbitral institutions. The arbitral institutions are graded by the Arbitration Council of India under Section 43-I of the Act. If a high court has no graded arbitral institution, the Chief Justice of the concerned high court may maintain a panel of arbitrators and also review it from time to time. 
  5. Clause 4 states that when the procedure mentioned in clause (3) is applied, there are two conditions, which are the following: 
    1. Each party must appoint an arbitrator within thirty days of receiving the request from the other party to do so. 
    2. The two arbitrators must reach an agreement on appointing the third arbitrator within thirty days from the date of their appointment.

In case of failure of either of the two conditions, the appointment shall be made by the arbitral institution designated by the Supreme Court or a high court upon the application or request of a party. 

  1. Clause 5 provides that in case of failure to reach an agreement on the procedure of appointment, the parties must agree on appointing a sole arbitrator within thirty days of receipt of the request by either party. 

If there is no such appointment within thirty days, an appointment shall be made by the arbitral institution designated by the Supreme Court or a high court upon the application or request of a party. 

  1. Clause 6 states that where an agreement on the appointment procedure has been made by the parties, if 
    1. A party fails to act as prescribed by the procedure, or
    2. The parties or the appointed arbitrators fail to reach an agreement as prescribed by the procedure, or  
    3. The person or institution entrusted with a function by the procedure fails to perform it, 

then the parties may perform the alternative steps provided by the agreement, if any. Or, an appointment shall be made by the arbitral institution designated by the Supreme Court or a high court upon the application or request of a party. 

  1. Designation by the Supreme Court or the high court shall not be treated as a delegation of judicial power. 
  2. When the decision is given by the arbitral institution, it should be done while considering the following factors: 
    1. Qualifications required for an arbitrator as per the agreement of the parties,
    2. Contents of disclosure and other considerations for appointing an independent and impartial arbitrator 
  3. In cases where the parties belong to multiple nationalities and there is a need to appoint a sole arbitrator or a third arbitrator, the arbitral institution designated by the Supreme Court or a high court may appoint an arbitrator of a nationality other than the nationalities of the parties.  
  4. If there has been more than one request or application made to several arbitral institutions during the application of any of the aforementioned provisions, the arbitral institution receiving the first request alone will be competent. 
  5. In matters concerning international commercial arbitration, only the arbitral institution of the Supreme Court gets involved and not those of the high courts. 
  6. An application or request for the appointment of arbitrators shall be disposed of expeditiously by the arbitral institution. It shall be disposed of within thirty days from the date of service of notice on the opposite party. 
  7. When there is an involvement of a high court, it is always the high court within whose local limits the principal civil court of the district is situated. 
  8. The arbitral institution shall determine the fee and manner of its payment to the arbitral tribunal after considering the rates prescribed in the Fourth Schedule of the Act. However, the explanation of this subsection provides that in the case of international arbitration in non-commercial matters, the parties may agree to determine fees as per the rules prescribed by an arbitral tribunal. 

In the case of Duro Felguera v Gangavaram Port Ltd ([2017] 9 SCC 729) (AIR 2017 SC 5070) (MANU / SC / 1352 / 2017) ([2017] 10 SCR 285) The Supreme Court of India held that as per the section 11 of the Arbitration Act, the power of court is confined to examining the existence of the arbitration agreement. It was held that a bare reading of section 11(6) of the Arbitration Act clearly shows that the courts should only need to investigate one aspect – that is, the existence of an arbitration agreement. The Supreme Court further held that in making this determination, it needs to be established whether the agreement contains a clause which provides for arbitration pertaining to the disputes which have arisen between the parties to the agreement. It is relevant to note that despite the omission of section 11(6A) by the 2019 Amendment, the judicial intent behind the provision is still to be the guiding force for the courts while examining an application under section 11 of the Arbitration Act. Therefore, under section 11, the court's jurisdiction is confined to just identifying the existence of the arbitration agreement and an arbitral dispute.

The Supreme Court in Garware Wall Ropes Ltd. v Coastal Marine Constructions & Engg Ltd ([2019] 9 SCC 209) (AIR 2019 SC 2053) (MANU / SC / 0511 / 2019) ([2019 ] 5 SCR 579)  held that a plain reading of section 11(6A) of the Arbitration Act, when read with section 7(2) of the Arbitration Act and section 2(h) of the Contract Act 1872, would make it clear that an arbitration clause in an agreement would not exist when it is not enforceable by law. This is also an indicator that the decision passed by the Supreme Court in SMS Tea Estates (P) Ltd v Chandmari Tea Co (P) Ltd ([2011] 14 SCC 66) has, in no manner, been affected by the amendment of section 11(6A) of the Arbitration Act.

Section 12: Grounds for challenge

A specific provision in regards to impartiality and disclosure by the arbitrator was added under Section 12 of Arbitration and Conciliation Act, 2015. Under this provision, any person who has been approached for the appointment of an arbitrator by the disputant partiers must disclose all the facts in writing, any direct or indirect, about the past or present relationship with the parties, counsel or subject matter and the outcome of the arbitration which may be financial, professional, business or any other kind which may probably give rise to justifiable doubt so as to impartiality and independence which would also lead to the incapability to devote sufficient time for the arbitration and the arbitrator ‘s ability to accomplish and provide a decision to the parties within 12 months. The disclosure is necessary to be made by the arbitrator under the norms and conditions prescribed under the sixth schedule. Thus, it is the responsibility of the arbitrator to disclose all the facts before the commencement of the arbitration proceedings. On the basis of the disclosure made by the arbitrator, it would be determined whether any such circumstance exists or whether it falls under any of the grounds prescribed in the 5th or 6th Schedule.

In the case of HRD Corporation Vs.GAIL (India) Ltd. [MANU /SC/ 1066/2017] the Hon'ble Supreme Court held that it was noticed that if the person falls under the category of Schedule Seven, it lies under the ineligibility for an appointment. Section 12(5) read with Seven Schedule makes it very clear that if the arbitrator falls under any of the categories mentioned under Seventh Schedule the arbitrator is considered as ineligible for the appointment as an arbitrator to the dispute and will be substituted by another arbitrator under Section 14(1) of the Act. On the contrary, if the disclosure falls under the Fifth Schedule and which leads to a raise of justifiable doubts, the arbitrator's impartiality and independence can be challenged before the Arbitral Tribunal under Section 13 of the Act.

Section 14: Termination of appointed arbitrator

In case an arbitrator becomes De Jure and De Facto unable to perform their function or fails to act without undue delay, it constitutes grounds for termination of the arbitrator's mandate. De Jure inability of an arbitrator refers to their legal incapacity to execute their functions and is disentitled from holding their office. For instance, if the arbitrator is an undischarged insolvent, bankrupt or a convict. De Facto or factual inability refers to circumstantial drawbacks of the arbitrator during the course of arbitration, such as physical ailment or illness, that makes them incapable to deliver themselves.

This provision is applicable to the instance where an arbitrator fails to adjudicate a dispute within a time frame that has been stipulated within the arbitration agreement and exceeds that time limit to deliver an award. Post the 2015 Amendment Act, the time period for each step of an arbitral proceeding has been specified and the law demands strict adherence to them. Therefore, it is binding upon the tribunals to produce and award within respective timespan, violating which shall result in termination of the tribunal's mandate.

Section 16: Jurisdiction

Section 16 gives the arbitral tribunal the authority to decide whether or not it has jurisdiction to hear the issue. Furthermore, the arbitral tribunal has the authority to determine on any challenge to the existence or validity of the arbitration agreement. A plea for an objection to the arbitral tribunal's jurisdiction should be presented before the arbitral tribunal, according to Section 16 of the Arbitration and Conciliation Act of 1996. This objection should be raised before the statement of defence is submitted. Furthermore, a party is not barred from submitting such an issue simply because he participated in the appointment of an arbitrator.

Furthermore, an objection that the arbitral tribunal is exceeding the extent of its jurisdiction must be raised as soon as the matter is brought up during the arbitration proceedings.

If the arbitral tribunal believes the delay is reasonable, it may accept a plea of objection at a stage later than each of those listed above. However, if the arbitral tribunal determines that the delay is unjustified after investigating the situation, it has complete power to dismiss the case. If such an application is submitted directly to the courts, the courts must reject it and direct the parties to transfer the matter to an arbitral tribunal.

The Supreme Court in the case of Centrotrade Minerals and Metals v. Hindustan Copper Ltd [AIR 2017 SC 185, MANU / SC / 1609 / 2016, ( 2017 ) 2 SCC 228, [ 2016 ] 9 SCR 83], held that any issue related to the jurisdiction can be raised by people in the proceedings or anyone from outside. But if it is made by the party then it must be done during the proceedings or at the initial stage.  

Section 17: Interim measures by Arbitral Tribunal

If the arbitration agreement does not prohibit, Arbitral Tribunal at the request of a party, may order the other party to take such interim measures of protection as it may deem necessary in respect of subject matter of dispute. In the process, it can order for providing appropriate security in exercise of its power. This power also has to be exercised within the terms of reference or arbitration agreement. The power of the tribunal is limited and any interim award necessarily has to merge with the final award for attaining enforceability.

The powers to pass interim orders during arbitration proceedings have been conferred on that arbitration tribunal pursuant to Section 17 of the Act. Section 17 and Section 9 of the Act deal with matters of interim measures, whereby a party seeking to get an interim order passed in his favour can file an application with the court under Section 9 and apply to the tribunal under Section 17.

In the case of Gulmali Amrulla Babul v. Shabbir Salebhai Mahimwala [MANU/MM/2926/2015], the court held that party seeking enforcement of the order made under Section 17 would subsequently file a Section 9 petition for the same reliefs, on the basis of the order made by the arbitral tribunal.  Thus, proceeding under section 9 is not enforcement proceedings made by the arbitral tribunal. This does not mean that the order passed by an arbitral tribunal cannot be enforced in any manner whatsoever, even the court can take the same view under section 9 proceedings.

Section 34: Conditions in which Arbitral Award can be set aside

Section 34(2)(a) and Section 34(2)(b) of the Arbitration and Conciliation Act, 1996 provide several grounds on account of which the Court can set aside the arbitral award, which are as follows:

  1. Incapacity of the party

If any of the parties is under the age of majority or is a minor, they are not obligated to follow any agreement in place. As a result, the agreement becomes void, and any award made in such a case may be revoked by the court. The incompetent person can, however, apply to the court for the appointment of a guardian for arbitral proceedings under Section 9 of the arbitration act and, after that, the ground for incapacity of the party will cease to exist.

  1. Agreement is not valid

In order for a contract to be enforceable, all of its essential elements must be met. If the contract is illegal, the arbitration agreement will be declared void as well, and the arbitral award can be revoked. In Adarsh Kumar Khera v. Kewal Kishan Khera [MANU/DE/5645/2019], the arbitral award was set aside since it was made without giving the parties a chance to be heard, it was deemed void, and both parties wanted it overturned.

  1. Other party was not notified

Arbitral award shall be revoked if the party filing the application was not provided with an advance notice of the arbitrator's appointment or the arbitral procedures or was otherwise unable to submit his case.

In AKM Enterprise Pvt Ltd v Ahluwalia Contract (India) Ltd [MANU/DE/0958/2019] an arbitral award was set aside on the basis that the Arbitrator wouldn't arbitrate upon a counter case of the applicant on merits on the ground that no notification had been given preceding the subject assertion and hence the council didn't have ward to engage something very similar, which is in opposition to the settled place of regulation that reason for the counter case is to limit assortment of procedures and that in such cases the court would have the purview to arbitrate upon them even without an earlier notification.

  1. Subject matter beyond the arbitration clause

The arbitral award will be challenged if it deals with an issue that is not addressed by the arbitration agreement or contains decisions on subjects that are outside the scope of the arbitration agreement. Also, if the judgments on items submitted to arbitration can be differentiated from those not so submitted, only that portion of the arbitral award, including decisions on subjects not submitted to arbitration, may be set aside.

In the case of India Yamaha Motor Pvt Ltd v. Divya Ashish Jamwal [MANU/DE/0389/2019] the court held that the arbitral award was set aside because it was issued in violation of the contract's provisions, without taking into account relevant evidence on file, and based on assumptions.

  1. Composition of arbitral tribunal not as per contract

If the arbitrator is not appointed in accordance with the provisions of the agreement or by the parties, or if any other administrative aspect of the agreement that was determined earlier by the parties has not been fully implemented, the aggrieved party may seek to have the award set aside in court.

In  Bharat Sanchar Nigam Ltd. v. Maharashtra Knowledge Corporation Ltd. (2019),  the award was partially set aside because the arbitrator failed to examine important information while making his decision on the account of which the Arbitral Tribunal was formed and this resulted in the breach of terms of the contract.

Section 34 (3) of the Arbitration and Conciliation Act, 1996 talks about limitations in which an arbitral award cannot be set aside, which are as follows:

Application filed after three months of when the award was received

The Court will not consider an application to set aside an award if it is filed after three months have passed since the applicant received the arbitral award, according to Section 34(3). The caveat to this section further states that if the Court is convinced that the applicant was prevented from making the application within the necessary time by sufficient reason, the Court may hear the application for an additional 30 days but not beyond.

Erroneous application of law or misrepresentation of evidence

In Haryana Urban Development Authority v. M/S Mehta Construction Company (2022) (Special Leave Petition (civil) no. 6137 of 2022)  the supreme court held while quashing aside the judgment of Punjab and Haryana High Court that an arbitral award cannot be set aside simply because of erroneous application of law or misrepresentation of evidence.


Vijay Pal Dalmia, Advocate

Supreme Court of India & Delhi High Court

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Mobile No.: +91 9810081079



Twitter: @vpdalmia

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