This paper focuses on the grounds on which an arbitral award can be challenged. Arbitration is an auxiliary process where the parties can resolve their dispute rather than determining their rights in court of Law. Arbitration is cheaper when compared to court proceedings and attorney's fee. It also resolves the dispute in the shortest time possible unlike court's procedure.

In this paper, you can see how a domestic award can be set aside and how an award entirely can be declared void. In the same way you can also see how an International award is enforced in India, when arbitral proceedings are of foreign laws. This paper also delineate some of the important judgments of the court on the matters where an arbitral award is challenged.

Synopsis:
An Arbitral Award is an award which includes an interim direction by the tribunal. It includes financial and non-financial award and a final award determining the rights of the parties. An Arbitral Award is passed by an Arbitrator or by an arbitral tribunal. Interim awards include orders which restrain parties from performing certain activities, such as stopping business activities which might alienate the main essence of the dispute.

Therefore any decision rendered during the arbitration proceedings which is passed by the arbitrator/s is called as an Arbitral Award. Arbitral Award is defined under section 2(1)(c) of the Arbitration and Conciliation Act 1996. There are two kinds of Award, Domestic Award and Foreign Award. Domestic award is an award which is rendered as a result of domestic arbitral proceedings, whereas Foreign award is an award which is a result of foreign arbitral proceedings, when dispute is between an Indian Origin party and a foreign party.

An Arbitral award consists of requisites which enables the enforcement of the award. There are certain ways by which an arbitral award could be changed, modified and clarified. However, this paper focuses on grounds available to aggrieved party to set aside an arbitral award passed by the arbitrator/s during arbitration proceedings through an application filed under Section 34 of Arbitration and Conciliation Act, 1996 or by appealing to High Courts. In this paper the procedure required to set aside an arbitral award is clearly demonstrated along with grounds substantiated with case laws.

Introduction:
Arbitration is one of the methods in resolving dispute without approaching the Court. Usually the decision is rendered by a tribunal, and both the parties will get monetary benefits rather than deciding their rights and liabilities. The main aim of ADR system is to reduce burden of judiciary due to pendency of many cases. It also aims to provide a systematic, strategic, effective and satisfied resolution to the parties. Arbitration and the ADR system aid Indian Judiciary in adjudicating matters in less time, however any award passed in arbitration proceedings can be challenged in court, if the aggrieved party feels that justice has not been served.

Object of study
By reading this paper, a student, a scholar and a lawyer will understand the grounds on which an arbitral award can be challenged. They can also understand the procedure to be followed for setting aside an arbitral award under section 34 of Arbitration and Conciliation Act, 1996.

Definition of Arbitration

Under section 2(1)(a) of Arbitration and Conciliation Act 1996 defined arbitration as, any arbitration whether or not administered by permanent arbitral institution.

WIPO has defined arbitration as:

"Arbitration is a procedure in which a dispute is submitted, by agreement of the parties, to one or more arbitrators who make a binding decision on the dispute. In choosing arbitration, the parties opt for a private dispute resolution procedure instead of going to court".

Courts have consistently adopted the view that the process of arbitration requires as essential ingredients the existence of a dispute or the potential of a dispute requiring resolution between the parties, an agreement to refer such disputes to a third person as arbitrator and whose decision is to be final and binding upon the parties.

An Arbitration is a reference to the decisions of one or more persons either with or without an umpire, a particular matter in difference between the parties.

In simple arbitration is a mechanism of resolving dispute using arbitrator and other private entities. The person who is resolving the dispute is called as arbitrator, where any decision made by the arbitrator in due course of process is called as arbitral award. An arbitral award is equivalent to the decree or order passed by a civil court. Arbitration provides in speedy resolution and disposal of dispute without hampering the relation between parties.

Any decision passed by the arbitrator is binding on parties and have clean enforceability. Arbitration is considered as a substitute to your of law which removes hassle to the court in deciding large amount of pending cases. Any arbitral award can be challenged in court of law by an appeal filed under section 96 of Civil procedure code, 1908 or it can be declared void or set aside or cancelled under section 34 of Arbitration and Conciliation Act, 1996.

Characteristics of Arbitration:

1. Arbitration is consensual, where both the parties mutually agree to resolve the matter without going to court.
2. Parties have liberty to choose their arbitrators.
3. Arbitration is a confidential procedure and it is easy to enforce an arbitral award.

Kinds of Arbitration:

1. Domestic Arbitration:
   Domestic Award is not specifically defined in Arbitration and Conciliation Act of 1996, however the definition and the scope can be derived from interpreting section 2(2)(7) of Arbitration and Conciliation Act, 1996. Therefore when the Indian procedural and substantive law is followed in rendering arbitral award, then it is called as domestic arbitration.
    
2. International Arbitration:
   When the arbitral award is rendered in an arbitration procedure following the International procedural law. Usually this type of arbitration happens outside India, and parties may of any origin. To constitute an international arbitration there are certain to be fulfilled: 1. Parties must be domiciled aboard, and 2. Subject matter i.e., trade must be international in nature.
    
3. Institutional Arbitration:
   When parties to dispute decided to follow and resolve their dispute through a selected Arbitral institute. Usually institutional arbitrators are people who are expertise in particular trade matters.
    
4. Ad-hoc arbitration:
   this type arbitration don't adhere to any rules of arbitration and parties are under no obligation to submit their problem in prescribed manner. The parties have privilege to set their own rules for arbitration and their choice in choosing geographical jurisdiction.
    
5. Fast track arbitration:
   Fast track arbitration is similar to a normal arbitration, but the proceedings must be disposed within 6 months. The aim to FTA is to speed up the process. It was introduced in the year 2015 by Government of India in Arbitration and Conciliation Act, 1996.

The court said that the new Act was enacted to curtail the judicial intervention, however judiciary is open in deciding the validity of an arbitral award.

Grounds for challenging an arbitral award under Arbitration and Conciliation Act, 1996

An arbitral award cannot be challenged under any provision of 1996 Act, however it can be set aside through an application filed under section 34 of 1996 Act. The following are the grounds of setting aside or cancelling an arbitral award by court:

1. The court may set aside an arbitral award through an application filed by either of parties under section 34(1) of 1996 Act, under grounds mentioned in section 34(2) and 34(3) of 1996 Act.
2. A domestic may be set aside by the court, if the applicant (party to the dispute) submits the proof that the other party is incompetent or insolvent or mentally unstable or lunatic or of unsound mind or minor. (Section 34(2)(a)(i) of Arbitration and Conciliation Act, 1996)
3. A domestic award may be set aside when the arbitration agreement is not valid. (Section 34(2)(a)(ii) of Arbitration and Conciliation Act, 1996)
4. A domestic award may be set aside by the court, when the parties did not enter into an arbitral agreement to resolve their dispute through means of ADR. (Section 34(2)(a)(ii) of Arbitration and Conciliation Act, 1996.
5. A domestic award may be set aside when the intended party did not give a proper prior notice to the other party inviting him for arbitration. (Section 34(2)(a)(iii) of Arbitration and Conciliation Act, 1996). It is the duty of appellant to send a notice regarding the appointment of arbitrator. When an ex-parte award is granted by the arbitrator against respondent, which is a result of not sending notice, shall order or award shall be considered as illegal.
6. A domestic award may be set aside by the court, when arbitral award is not passed based on submission made during arbitration. (Section 34(2)(a)(iv) of Arbitration and Conciliation Act, 1996). In the case of Rajinder Kishan v. Union of India, the matter of arbitration was referred by the High Court, directing that the arbitration should not decide on the matter of compensation. However, the arbitral award prescribed the compensation to be paid, and the High Court held such award as void, as the arbitration acted out of its scope.
7. A domestic award may be set aside if the composition was not as prescribed in section 11 or part I of the 1996 Act, or not in compliance with the agreement made by the parties. (Section 34(2)(a)(v) of Arbitration and Conciliation Act, 1996)
8. A domestic award may be set aside, when court is under impression that the settlement is out of purview of the arbitration under section 34(2)(b)(i) of 1996 Act.
9. A domestic award may be set aside, if court feels that the said arbitral award is against public policy of India, where it affects economy of India or influenced by fraud or corruption or award is in contravention with the fundamental policy of Indian law or when such award is in conflict with basic notion of morality and social justice under section 34(2)(b)(ii) of Arbitration and Conciliation Act, 1996.

Requisites for challenging the award before court

1. The applicant must file within 3 months from the date of receipt of arbitral award, and it may be extended if the party have made any objections under 1996 Act
2. The applicant must serve a proper notice to the other party after filing application. The notice must be accompanied by application and an affidavit by the applicant endorsing the compliance with all requirements.
3. The party must submit proper evidence demonstrating grounds mentioned in section 34 of Arbitration and Conciliation Act. 1996.

Proceedings:

1. The court must satisfy to the prima facie that the arbitral award can be set aside.
2. The application shall be filed within stipulated time under section 34(3) of Arbitration Act and in compliance with section 34(1) of 1996 Act.
3. The party must submit proper evidence justifying his claims and submissions.
4. The court must dispose the said application within one year under section 34(6) of the Act. However this rule is not mandatory in nature, merely a direction.

Appeal for the order passed in set aside application: Under section 37(1)(c), the applicant can file an appeal for the order passed in accordance with section 34 or refusal of set aside petition. In Sunshine Chemical Industry v. Oriental Carbons & Chemical Ltd., it was said that apex court have authority to hear the second appeal through special leave petition under article 136 of the Constitution.

Enforcement of Foreign arbitral awards in India

The Indian Arbitration act provides the enforcement of foreign award in India in Part - II of the Arbitration and Conciliation Act, 1996. The New York Convention and the Geneva Convention recognised foreign awards by adopting the UNCITRAL model law. In the Chapter II of part II. Section 48 and 49 provides conditions for enforcing a foreign award by Court. After the court order's for enforcing, the award will act same as an order passed by a Civil Court. If the court is satisfied that the foreign award is not violating any conditions under section 48, it shall enforce the foreign award under section 49 of the Arbitration and Conciliation Act, 1996.

Grounds for Challenging a foreign arbitral award in India under Part-II, chapter I New York Convention of Arbitration and Conciliation Act, 1996

1. Incapacity of parties: The parties were not competent to enter into an arbitral agreement or one of parties may be minor or lunatic or insolvent or any case maybe, then the court have power to object the enforceability of foreign award. (Section 48(1)(a))
2. No Proper notice to respondent about appointment of arbitrators, then court may refuse to enforce a foreign award. (Section 48(1)(b))
3. When the dispute is beyond the jurisdiction and scope of the arbitration, in such cases the court may refuse to enforce foreign award under section 48(1)(c) of the Arbitration and Conciliation Act, 1996
4. If such foreign award is against public policy or when award is affected by fraud or corruption, or it is in contravention with the fundamental policies of India and Indian law or in conflict with the basic notion of morality and justice and welfare. In these cases the court may refuse to enforce foreign award under section 48(2)(b).
5. When composition of arbitrators or arbitral authority is not in accordance with section 11 and part- I of the 1996 Act, the court may refuse to enforce a foreign award.
6. The subject matter of arbitration is beyond its power or not capable to adjudicate using arbitration, then court may refuse to enforce under section 48(2)(a).

Grounds for Challenging a foreign award in India under part - II, Chapter II Geneva Convention Awards of Arbitration and Conciliation Act, 1996

1. If the subject matter of foreign arbitration is not capable of settlement through arbitration, the court may refuse to enforce under section 57(1)(b).
2. When the foreign award is contrary to public policy or any laws of India, the court may reject to enforce such foreign award under section 57(1)(e).
3. Other grounds are same as grounds which are prescribed in section 34 of part -I and the New York Convention of 1996 Act.
4. The court shall enforce a foreign award, if it is satisfied that the foreign award is enforceable under Chapter II.

Judicial trends
Haryana Tourism Limited v. Kandhari Beverages Limited
In this case the Apex Court said, any arbitral award which is contrary to public policy and against public morality shall be declared void and has zero enforceability value.

Ongc V. Saw Pipes, in this case the grounds under section 34 of Arbitration and Conciliation act was universally recognised. This is a landmark judgement where the term 'public policy' was widely interpreted and it add few other grounds under the term public policy.

Venture Global Engineering v. Satyam Computers Service, it interpreted the term 'public policy' mentioned in conditions for enforcement of foreign award. Where it said that the term public policy is social justice, welfare and economy of India and an award which is against the public policy and equity, it shall be void.

In the case of Brahmani River Pellets Limited v. Kamachi Industries Limited, the Supreme Court held that the High Court cannot set aside an arbitral award, if the agreement oust the jurisdiction of the Court to do. The parties must file the application in competent court as per their agreed jurisdiction and venue for arbitration.

Conclusion and Suggestion
The Indian legal system facilitates parties to resolve their dispute without hampering their relationship in business. The UNCITRAL Model law 1985 provides a faster mechanism for resolving commercial dispute without approaching the Court of law. This model law has been adopted by India, and India is successful in following this method in resolving the commercial disputes in shorter time than expected.

Unlike court proceedings, the arbitration doesn't require much paper work and parties may sometimes come to a settlement in one proceeding only. However, the enforcement of foreign award is a big question, when such enforcement is against public policy. In certain cases such enforcement may affect the economy of India, which was acknowledged in ONGC case and Ventura Global Engineering cases.

The Indian Legislation must address the issue relating to enforcement of foreign award. The parliament has enacted the 1996 Act with a vision to provide speedy disposal of cases involving business matters, and in order to achieve this aim, Indian Government must encourage businesses to enter into arbitral agreement and resolve their dispute through arbitration.

However, to achieve the aforementioned aim, there is a requirement of establishing arbitral tribunals in accessible areas. Judicial review enables the parties to challenge any arbitral award, if they feel that the passed award is unconstitutional. Arbitration Act without judicial review will have adverse effects on Indian economy and such act will be in obsolete in nature. The Indian Legislation can achieve international standards of arbitration if the intervention of courts are curtailed.

End-Notes:

1. Mayers v. Dlugash High Court, CLOUT Case No. 690, Hong Kong, 1994
2. Collins v. Collins 53 E.R. 916 ROLLS COURT, UK
3. Municipal Corp. of Greater Mumbai v. Prestress Products(India)(2003) 4 RAJ 368 (Bom)
4. Dual Podda v. Executive Engineer, Dona Canal Division, (2004) 1 SCC 73
5. AIR 1999 SC 463
6. State of Bihar v. Bihar Rajya Bhumi, AIR 2018 SC 3862
7. Supra N 1
8. Haryana Tourism Limited v. Kandhari Beverages Limited, CA No. 266/22
9. ONGC v. SAW Pipes Ltd., AIR 2003 SC 2629
10. Ventura Global Engineering v. Satyam Computer service, 2008