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Report No. 246

Amendment of Section 34

18. In section 34,

(i) In sub-section (1), after the words "sub-section (2)" add the words ", sub-section (2A)".

(ii) In sub-section (2), after the word "Explanation.-" delete the words "Without prejudice to the generality of sub-clause (ii), it is hereby declared, for" and add the word "For" and after the words "the avoidance of any doubt," add the words "it is clarified" and after the words "public policy of India" add the word "only" and after the word "if" delete the word "-" and add the word ":" and add the sub-clause "(a)" before the words "the making of the award was induced or affected by fraud or corruption or was in violation of section 75 or section 81" and add the word "; or" after the words "violation of section 75 or section 81" and add sub-clause "(b) it is in contravention with the fundamental policy of Indian law; or" and add sub-clause "(c) it is in conflict with the most basic notions of morality or justice."

[Note: The proposed Explanation II is required to bring the standard for setting aside an award in conformity with the decision of the Supreme Court in Renusagar Power Co. Ltd. v. General Electric Co., 1994 Supp (1) SCC 644 and Shri LalMahal Ltd. v. ProgettoGrano Spa,(2014) 2 SCC 433,for awards in both domestic as well as international commercial arbitrations. Ground (c) reflects an internationally recognized formulation. Such a formulation further tightens the Renusagar test and ensures that "morality or justice"- terms used in Renusagar- cannot be used to widen the test.]

(iii) After the Explanation in sub-section (2), insert sub-section "(2A) An arbitral award arising out of arbitrations other than international commercial arbitrations, may also be set aside by the Court if the Court finds that the award is vitiated by patent illegality appearing on the face of the award.

Provided that an award shall not be set aside merely on the ground of an erroneous application of the law or by re-appreciating evidence."

[Note: The proposed S 34(2A) provides an additional, albeit carefully limited, ground for setting aside an award arising out of a domestic arbitration (and not an international commercial arbitration). The scope of review is based on the patent illegality standard set out by the Supreme Court in ONGC Ltd. v. Saw Pipes Ltd., (2003) 5 SCC 705. The proviso creates exceptions for erroneous application of the law and re-appreciation of evidence, which cannot be the basis for setting aside awards.]

(iv) In sub-section (3), after the words "An application" delete the word "for setting aside" and add the word "under the above sub-sections".

(v) re-number sub-section (4) to read as sub-section (6) and insert sub-section "(4) An Application under this section shall be filed by a party only after issuing a prior Notice to the other party and such an Application shall be accompanied by an affidavit from the Applicant endorsing compliance with this requirement." and sub-section "(5) An Application under this section shall be disposed off expeditiously and in any event within a period of one year from the date on which the notice under Sub-section (4) is served."



Amendments to the Arbitration and Conciliation Act, 1996 Back




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