Section 34 Arbitration Act: Limitation
By now, the solution for ‘how to challenge an arbitration award?’ is clear. But since it is a matter of courts of law, there is a time limit as well. The application for challenge against the arbitration award should be submitted within 3 months of receiving the same. However, additional 30 days may be granted in case of some procedural delay through authorities.
In case of The State of Maharashtra & Ors. v. M/s. Ark Builders Pvt. Ltd., the hon’ble Supreme Court held that “the period of limitation prescribed under section 34(3) of The Act would start running only from the date when a signed copy of award is delivered to/ received by a party making the application for setting aside the award under section 34(1) of The Act.”
Regarding the limitation period, the apex court has also held that “The limitation period for filing the petition under Section 34 of The Act for setting aside an arbitral award would commence only after a signed copy of the award is received by the party from the Arbitral Tribunal.”
By now, it is evident that arbitration awards are not absolute. If there is evident conflict with the applicable laws, the same can be challenged in the court of law. The reason behind the enlarged scope of section 34 of Arbitration Act, 1996 is that people often use ill practices while conducting the arbitration process. Sometimes, it is the service providers like banks, builders, etc. who keep their own interests in focus while conducting such processes in case of dispute. Arbitration Act section 34 is a provision which brings recourse for people who are at loss after the matter is decided single-sidedly.
There are mainly two rules under the principle of natural justice: that a person should not be a judge in his own case, and that a person should be given a chance to be heard before deciding a matter. In case any of them is not duly followed while conducting the arbitration proceedings, the award of such proceedings can be set aside by the court.
Foresee the pain and trouble that are bound to ensue; and equal blame belongs to those who fail in their duty through weakness of will, which is the same as saying through shrinking from toil and pain. These cases are perfectly simple and easy to distinguish.
Grounds for Section 34 Arbitration Act, 1996
The Arbitration and Conciliation Act section 34 contains several grounds on which the arbitration award can be set aside by court. The scope of section 34 of Arbitration Act gives courts of law a specific path to follow while considering matters decided through arbitration as reiterated below.
The parties to a contract should be capable of entering a contract. If the legal capacity to contract is challenged, the same applies to the incapacity for arbitration agreement as well. The incapacity mentioned here could be minority, unsoundness of mind, etc. Basically, it depicts a situation when a person is not capable of making serious decisions.
Invalidity of Arbitration Agreement
If the agreement on the basis of which arbitration proceedings were conducted was itself invalid, then the arbitration award can not be regarded as a valid one.
Lack of Proper Notice
If one of the parties has not been served with proper notice of the arbitration proceedings, appointment of arbitrator, etc. the Arbitration Act section 34 allows setting aside of the award.
In case of BSNL v. M/S Nortel Networks India Pvt. Ltd., the apex court clarified that “There must be a clear notice invoking arbitration setting out the ‘particular dispute’ (including claims/ amounts) which must be received by the other party within a period of 3 years from the rejection of a final bill, failing which, the time bar would prevail.”
Inability to Present the Case
If or not, both the parties have been given proper notice of the arbitration proceedings, both have the right to represent themselves before the presiding officer, i.e. the arbitrator. If one party is initiating arbitration, appointing the arbitrator, conducting the process through arbitration lawyers, while the other one has no clue of the proceedings, not getting a chance to bring their side of the story regarding the dispute, it is not a legal process. The principle of ‘audi alteram partem’ requires both the parties to be duly heard before arriving at a decision.
If on record of the arbitration award or otherwise, there is clear illegality as clarified under the scope of section 34 of Arbitration Act, the same can be challenged. Here, the section 34 arbitration act limitation also clarifies that the process of law, eg. a lack of proper application, will not constitute the instance of patent illegality. In case of Associate Builders v. Delhi Development Authority, the hon’ble Supreme court elaborated ‘patent illegality under 3 sub-heads’. It includes contravention of substantive law of India, Arbitration Act, and the substance of the dispute.