Introduction
Arbitration has emerged as a preferred method for resolving commercial disputes in India, thanks to its speed, flexibility, and confidentiality. Once an arbitral tribunal renders its decision, the arbitral award is considered final and binding between the parties. However, the law allows a limited scope for judicial intervention to ensure fairness and justice.
In India, Section 34 of the Arbitration and Conciliation Act, 1996 provides the legal grounds to challenge and set aside an arbitral award. This provision is not an appeal—courts do not re-evaluate the merits of the case—but rather a judicial review to determine whether the award suffers from procedural or substantive defects as specified in the statute.
This blog explains what an arbitral award is, outlines the statutory grounds for setting it aside, and highlights key judicial interpretations that shape the application of Section 34.
What is an Arbitral Award?
An arbitral award is the final decision delivered by an arbitral tribunal after evaluating evidence, hearing arguments, and applying relevant laws. It signifies:
- The conclusion of the arbitration process.
- A binding resolution of the dispute.
- The basis for enforcement, enabling parties to seek compliance.
Arbitration offers a private, quicker, and more specialized process than litigation. Arbitrators—often retired judges or industry experts—are chosen for their deep understanding of the subject matter. The award they deliver represents the culmination of the dispute resolution process.
However, despite its finality, certain circumstances can make an award vulnerable to being set aside under Section 34.
Section 34: Application for Setting Aside an Arbitral Award
Section 34 allows a party to apply to the court to set aside an arbitral award only on specific, limited grounds. These include:
1. Incapacity of a Party – [Section 34(2)(a)(i)]
If the party against whom the award is made was under legal incapacity (e.g., a minor or a person of unsound mind) and was not adequately represented, the award can be set aside. This ensures protection for those unable to safeguard their own legal rights.
2. Invalidity of the Arbitration Agreement – [Section 34(2)(a)(ii)]
If the arbitration agreement itself is invalid under applicable law—due to fraud, coercion, or illegality—the award arising from it is also invalid. A void main contract renders its arbitration clause ineffective.
3. Lack of Proper Notice or Inability to Present the Case – [Section 34(2)(a)(iii)]
An award can be challenged if:
- The party was not given proper notice of the arbitrator’s appointment or the proceedings.
- The party was denied a reasonable opportunity to present its case.
This reflects the fundamental principle of natural justice.
4. Award Beyond the Scope of Submission – [Section 34(2)(a)(iv)]
If the award addresses matters outside the scope of the arbitration agreement, it can be set aside. However, if these extraneous parts are separable, only that portion will be struck down.
Case Reference:
Olympus Superstructures (P) Ltd. v. Meena Vijay Khaitan – The Court held that jurisdictional issues cannot be conferred by consent.
5. Illegality in Composition of the Tribunal or Procedure – [Section 34(2)(a)(v)]
If the composition of the tribunal or the procedure followed violated the parties’ agreement or the Act, the award may be invalid. Arbitrators must act in accordance with Indian substantive law unless expressly authorized otherwise.
Case Reference:
ONGC Ltd. v. Saw Pipes Ltd. – The Supreme Court set aside an award that violated statutory provisions, emphasizing that tribunals must decide disputes in line with applicable law.
6. Subject Matter Not Arbitrable – [Section 34(2)(b)(i)]
Certain matters—such as criminal offences, divorce, or guardianship—are not arbitrable under Indian law. If an award deals with such matters, it can be annulled.
7. Conflict with the Public Policy of India – [Section 34(2)(b)(ii)]
This is one of the most debated grounds. In ONGC Ltd. v. Saw Pipes Ltd., the Court interpreted “public policy” broadly to include:
- Fundamental policy of Indian law
- Interest of India
- Justice or morality
- Patent illegality
Earlier, in Renusagar Power Co. Ltd. v. General Electric Co., the Court adopted a more restrictive view, limiting interference.
2015 Amendments: Narrowing Judicial Review
The 2015 Amendment Act refined Section 34 to reduce excessive court interference:
- Explanation 1: Expanded “public policy” to include fraud, corruption, breach of confidentiality, and conflict with basic morality or justice.
- Explanation 2: Clarified that a review on merits is not allowed under the “fundamental policy” ground.
- Section 34(2A): Introduced “patent illegality” as a separate ground for domestic awards.
- Section 34(5) & 34(6): Introduced procedural requirements, including advance notice and a one-year disposal timeframe.
These changes aimed to preserve finality while ensuring fairness.
Time Limit for Challenging an Award
Under Section 34(3):
- The application must be filed within three months from receipt of the award.
- Courts may extend this by a maximum of 30 days if sufficient cause is shown.
- No further extension is allowed.
Judicial View:
In Union of India v. Popular Construction Co. and reiterated by the Delhi High Court in National Research Development Corporation v. Chromous Biotech Pvt. Ltd., the time limit under Section 34 is absolute.
Conclusion
Section 34 strikes a careful balance between upholding the finality of arbitral awards and allowing judicial oversight to prevent injustice. It is not an appeal—courts cannot re-examine the merits—but a safeguard against awards tainted by procedural irregularities, jurisdictional errors, or violations of public policy.
The 2015 amendments have further restricted interference, making arbitration a more robust and reliable dispute resolution method in India.
For any party considering a challenge under Section 34, it is vital to:
- Understand the specific statutory grounds.
- File the application within the strict timelines.
- Support the challenge with sound legal reasoning.
Ultimately, while arbitration brings finality, Section 34 ensures that fairness is never compromised.
Disclaimer: The information provided in this blog is for general informational purposes only and does not constitute legal advice. Laws and interpretations may vary based on specific facts and jurisdictions. Readers should not act upon this information without seeking professional legal counsel. For advice tailored to your situation, consult experienced professionals like Bisani Legal, who can provide guidance based on your unique circumstances. The authors and publishers disclaim any liability for actions taken based on the contents of this blog.
Published by: Mr. Saket bisani
Date: 12/08/2025
