Abstract
This paper explores the scope of post-award judicial review under Indian arbitration law, with respect to Section 34 of the Arbitration and Conciliation Act, 1996 (the “Act”). It was initially designed as a narrow supervisory mechanism; however, Indian courts have broadened its application through interpretations on “public policy” and “patent illegality”. The paper examines the evolution of judicial precedents from Bhatia International[1] and Venture Global Engineering[2] to BALCO[3] and Gayatri Balasamy[4] on the significance of the power to modify awards. The central argument is that while India’s statutory framework aspires for arbitral finality, judicial intervention has transformed post-award review into a quasi-appellate process. The paper concludes by engaging with the reforms given in the 246th Law Commission Report and the Arbitration and Conciliation (Amendment) Bill, 2024, to assess whether India is on the right trajectory to achieve the requisite balance.
Part I: Introduction- The Paradox
Arbitration is premised on the fact that the award that parties receive after a settlement will be final and binding and can be enforced like a decree of the Court, without the unnecessary delays and costs that often form a part of litigation. However, there is a fundamental tension of what is the extent of intervention by Courts because they are involved to enforce awards, challenge the appointment of arbitrators and arbitral awards, and provide a safety valve against errors, as articulated by the 246th Law Commission of India in its report, where it stated that the paradox arises because arbitration “seeks the co-operation of the very public authorities from which it wants to free itself”. The Commission also quoted Lord Mustill that courts must act as “partners, not superiors or antagonists” during arbitration, essentially advocating for minimal intervention by the judiciary.[5]
The Act was enacted with the idea of minimal interference by the judiciary, which can be inferred from the Objects and Reasons of the 1995 Bill, the precursor to the Act.[6] Furthermore, Section 34[7], which provides the grounds for setting aside an award, was drawn from the UNCITRAL Model Law to keep the grounds narrow and unambiguous. However, Indian courts have not always adhered to the legislative intent and expanded their interpretations to “public policy” and “patent illegality”, effectively examining the merits of the case, which precedents like Pravin Electricals Pvt. Ltd.[8] held that courts were limited only to a prima facie review of whether an arbitration agreement exists or not. Therefore, it is argued that arbitral awards are treated as “the first step in a ladder of appeals”.
Part II: Statutory Framework
Scheme of the Act
Section 34[9] is central to post-award judicial review for domestic-seated arbitration because it provides specific grounds where an award can be set aside by courts. It is argued that the language of the section was meant to be restrictive. This argument is supported by Justice Vishwanathan’s reasoning in his dissent in Gayatri Balasamy[10], where he stated that the phrase “only if” preceding the listed grounds in the section indicatesthe legislative intent to limit courts’ interpretation and that it should not be expanded. Also, the section only permits setting aside of awards and not their modification or variation, and this distinction has become an area of contention.
The Structural Problem
An example of how the post-award review mechanism was prone to abuse can be seen through the original functioning of Section 36 of the Act before the amendment in 2015, where the enforcement of an award was automatically stopped until a challenge under Section 34[11] was resolved. The Law Commission critiqued this in its report, where it stated that,
“Section 36 of the Act makes it clear that an arbitral award becomes enforceable as a decree only after the time for filing a petition under section 34 has expired or after the section 34 petition has been dismissed. In other words, the pendency of a section 34 petition renders an arbitral award unenforceable… Admission of a section 34 petition, therefore, virtually paralyzes the process for the winning party/award creditor.”[12]
Therefore, the party against whom the award was passed went to Court under this section to delay its enforcement, irrespective of the merits of their grounds. This made the statute a tool to prolong disputes, which was contradictory to the efficiency that arbitration promised. The amendment in 2015 removed the automatic stay, but the broader issue of using the section to delay persisted.
[1]Bhatia International v. Bulk Trading SA, (2002) 2 SCC 395.
[2]Venture Global Engg. v. Satyam Computer Services Ltd., (2010) 8 SCC 660.
[3]Bharat Aluminium Company v. Kaiser Aluminium Technical Service Inc., (2012) 9 SCC 552.
[4]Gayatri Balasamy v. ISG Novasoft Technologies Ltd., 2024 SCC OnLine SC 1681.
[5] Law Commission of India, Amendments to the Arbitration and Conciliation Act 1996 (Law Com No 246, 2014) para 20, quoting Lord Mustill.
[6] ‘Objects and Reasons, Arbitration and Conciliation Bill 1995’ (Law Commission Report, para 10).
[7]Arbitration and Conciliation Act 1996, s 34.
[8]Pravin Electricals Pvt Ltd v. Galaxy Infra and Engineering Pvt Ltd., 2021 SCC Online SC 190.
[9] ACA 1996, s 34.
[10]Gayatri Balasamy (n 4).
[11] ACA 1996, s 34.
[12] Law Commission Report (n 5) para 43; see also ibid para 44.