Partial Set Aside of Arbitral
Awards: Scope of Court’s Power under the Arbitration and Conciliation Act, 1996
Introduction
Arbitration has become a
preferred method of dispute resolution in India, providing a faster and more
cost-effective alternative to traditional litigation. The Arbitration
and Conciliation Act, 1996 (hereinafter referred to as the
"Act") governs arbitration proceedings, ensuring fairness and
efficiency in dispute resolution. However, one critical aspect of arbitration
that often leads to legal complexities is the partial setting aside of
arbitral awards.
Courts play a crucial role in
upholding the sanctity of arbitration while ensuring that awards comply with
legal principles. But to what extent can a court partially set aside an
arbitral award? This article explores the legal framework governing this
issue, analyzing the scope of judicial intervention, relevant legal
provisions, and landmark case laws that shape the doctrine
of partial set aside under Indian arbitration law.
Key Concepts Explained
What is an Arbitral Award?
An arbitral award is
the final decision issued by an arbitration tribunal, resolving a dispute
between parties. These awards are legally binding and enforceable in the same
manner as a court judgment. Under Section 31 of the Act, an arbitral award must
be:
- In writing and signed by the arbitrators.
- Clear in its reasoning, unless otherwise agreed by the parties.
- Final and binding unless challenged under the
provisions of the Act.
What Does Partial Set Aside
Mean?
A partial set aside of
an arbitral award occurs when a court invalidates only a portion of the award
while allowing the remainder to stand. This concept recognizes that not all
aspects of an award may suffer from legal infirmities—allowing courts to
preserve valid portions rather than annulling the entire decision.
Why is the Partial Set Aside
Doctrine Important?
- Preserves efficiency: If only part of an award is defective, setting aside the entire award could lead to unnecessary delays.
- Balances party autonomy and legal compliance: Courts can rectify only the affected portion without interfering with the overall arbitration process.
- Reduces unnecessary re-litigation: Parties
can avoid having to restart arbitration from scratch.
Legal Provisions and Framework
Section 34 of the Arbitration
and Conciliation Act, 1996
The primary provision governing
the setting aside of arbitral awards is Section 34 of the Act.
It allows courts to set aside an award on limited grounds, such as:
- Incapacity of parties or invalid arbitration agreement.
- Violation of natural justice, such as lack of due process.
- Award exceeding the scope of arbitration (ultra vires).
- Conflict with public policy of India.
However, the Act does not
explicitly mention the power of courts to partially set aside an
arbitral award. Instead, Indian courts have interpreted the Act to allow
partial annulment when only certain portions of the award violate legal
principles.
Scope of Court’s Power in
Partially Setting Aside Awards
The Supreme Court and High Courts
of India have recognized that courts possess the inherent power to
set aside only portions of an award when possible. This aligns with international
arbitration principles, such as those under the UNCITRAL Model Law,
which provides a framework for partial annulment.
When Can a Partial Set Aside
be Applied?
A court may opt for a partial
set aside in the following scenarios:
- Severability of Issues – If the invalid part of the award is distinct from the rest, it can be severed without affecting the entire decision.
- Jurisdictional Excess – When an arbitral tribunal exceeds its jurisdiction for only part of the award, courts can strike down the excessive portion.
- Violation of Public Policy in Part – If
only certain findings contravene public policy, the remainder of the award
can remain enforceable.
Relevant Case Laws on Partial
Set Aside in India
MMTC Ltd. v. Vedanta Ltd.
(2019) SCC Online SC 194
The Supreme Court held that courts
should interfere minimally with arbitral awards and can set aside only
the portion of the award that is legally unsustainable, provided it does not
affect the enforceability of the remaining award.
Dyna Technologies Pvt. Ltd. v.
Crompton Greaves Ltd. (2019) 20 SCC 1
The Court clarified that if a
portion of the award is patently illegal, but severable from the
rest, then only the offending portion should be set aside.
J.G. Engineers Pvt. Ltd. v.
Union of India (2011) 5 SCC 758
The Supreme Court ruled
that if an arbitral award contains separate and independent claims,
only the erroneous portions should be set aside while enforcing the valid
portions.
Rashtriya Ispat Nigam Ltd. v.
Dewan Chand Ram Saran (2012) 5 SCC 306
In this case, the Court
emphasized that setting aside an entire award should be a last resort,
and courts should strive to uphold arbitration outcomes whenever possible.
Comparative Perspective:
Partial Set Aside in International Arbitration
UNCITRAL Model Law on
International Commercial Arbitration
Many countries follow the UNCITRAL
Model Law, which permits courts to set aside only the objectionable
parts of an award rather than nullifying it entirely.
English Arbitration Act, 1996
Under Section 68,
English courts can intervene in awards but must limit their interference to
portions that are legally untenable, ensuring minimal disruption to
arbitration.
Singapore International
Arbitration Act
Singapore courts also recognize
the principle of severability, allowing partial annulment in cases
where only part of the award is affected by errors.
Conclusion
The partial set aside of
arbitral awards is an evolving area of Indian arbitration law.
Although the Arbitration and Conciliation Act, 1996 does not
expressly provide for partial annulment, courts have interpreted their powers
under Section 34 to uphold valid portions of awards while
setting aside defective parts.
Understanding the scope
of judicial intervention is crucial for arbitration practitioners,
businesses, and legal scholars. Courts have consistently emphasized that
arbitration should remain efficient and final, and judicial
interference should be limited to correcting legal errors without
dismantling the entire award.
Key Takeaways
Indian courts recognize partial setting aside under Section 34 of the Act.
- Judicial interference in arbitration should be minimal and proportional.
- Case law supports the doctrine of severability to protect enforceable portions of awards.
-
International arbitration laws also uphold partial annulment as
a best practice.
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