Arbitral award and setting aside under section 34

1. Form and contents: section 31

• The award shall be in writing and signed by the members of the tribunal (section 31(1)).
• With more than one arbitrator, the signatures of the majority suffice, so long as the reason for any omitted signature is stated (section 31(2)).
• It shall state reasons, unless the parties agreed otherwise or it is an award on agreed terms under section 30 (section 31(3)). Reasons must be proper, intelligible and adequate: Dyna Technologies Pvt. Ltd. v. Crompton Greaves Ltd., 2019 INSC 1395.
• It shall state its date and the place of arbitration, and is deemed made there (section 31(4)).
• A signed copy is delivered to each party (section 31(5)); limitation for a challenge runs from receipt.
• The tribunal may make an interim award (section 31(6)).
• Interest: pre-award interest at a reasonable rate unless otherwise agreed (section 31(7)(a)); post-award interest, unless the award directs otherwise, at two per cent above the current rate of interest on the date of the award (section 31(7)(b)).
• Costs are fixed under section 31A: the general rule is that the unsuccessful party pays the successful party's costs, though the tribunal may order otherwise for reasons recorded, considering conduct, partial success, frivolous counterclaims and refused settlement offers.

2. Correction, interpretation and additional award: section 33

Within 30 days of receipt, a party may ask the tribunal to correct computation, clerical or typographical errors, or (if agreed) to interpret a point; the tribunal may correct such errors on its own within 30 days; and a party may ask for an additional award on claims presented but omitted, which is to be made within 60 days.

3. Grounds for setting aside: section 34(2) and (2A)

Recourse to a court lies only by an application under section 34 (section 34(1)). The award may be set aside only if:

(a) the applicant establishes on the basis of the record of the arbitral tribunal (words substituted in 2019) that:

• (i) a party was under some incapacity;
• (ii) the arbitration agreement is not valid under the law the parties chose or, failing that, Indian law;
• (iii) he was not given proper notice of the appointment of an arbitrator or of the proceedings, or was otherwise unable to present his case;
• (iv) the award deals with a dispute outside the submission, or decides matters beyond its scope (the part within the submission may be saved if separable);
• (v) the composition of the tribunal or the procedure was not in accordance with the agreement (unless the agreement conflicted with a non-derogable provision) or, failing agreement, with Part I;

(b) the court finds that:

• (i) the subject matter is not arbitrable; or
• (ii) the award is in conflict with the public policy of India, which after 2015 means only: the making of the award was induced or affected by fraud or corruption or violated section 75 or 81; it contravenes the fundamental policy of Indian law; or it conflicts with the most basic notions of morality or justice (Explanation 1). The fundamental policy test shall not entail a review on the merits (Explanation 2).

Section 34(2A): a domestic award (not an international commercial arbitration award) may also be set aside for patent illegality appearing on the face of the award, but not merely for erroneous application of the law or by reappreciation of evidence.

4. Public policy: the cases

• Oil & Natural Gas Corporation Ltd. v. Saw Pipes Ltd., 2003 INSC 241, (2003) 5 SCC 705. The Court gave “public policy” a wider meaning for domestic awards than the Renusagar test for foreign awards, adding patent illegality: an award contrary to the substantive law, the Act or the terms of the contract could be set aside. It upheld deduction of liquidated damages under the contract, setting aside the award that had refused it.
• Associate Builders v. Delhi Development Authority, 2014 INSC 809, (2015) 3 SCC 49. The Court organised the heads: fundamental policy of Indian law (compliance with statutes and judicial precedent, a judicial approach, natural justice, and Wednesbury reasonableness, so that a perverse award based on no evidence fails); the interest of India; justice or morality (an award that shocks the conscience of the court); and patent illegality (contravention of substantive law, the Act, or the contract terms where no fair-minded person could so construe them). It stressed that the arbitrator is the final judge of the quality and quantity of evidence.
• The 2015 amendment, on the Law Commission's 246th Report, removed “the interest of India”, confined fundamental policy without merits review, and placed patent illegality in section 34(2A) for domestic awards only.
• Ssangyong Engineering and Construction Co. Ltd. v. National Highways Authority of India, 2019 INSC 647, (2019) 15 SCC 131. The Court held that after 2015 the expansion in Saw Pipes and Associate Builders no longer holds: “fundamental policy” returns to the narrow Renusagar sense, Wednesbury unreasonableness is not a ground, and “justice or morality” means only the most basic notions. Patent illegality covers an award that is perverse (based on no evidence or ignoring vital evidence), that decides without reasons, or in which the tribunal travels outside the contract; it does not cover mere errors of law or contravention of a statute not linked to public policy. A tribunal that rewrites the contract for the parties, or relies on material behind a party's back, offends the most basic notions of justice. On facts, the majority award was set aside because it applied a new price-adjustment formula that one party had introduced unilaterally and the other had never agreed to.
• Delhi Metro Rail Corporation Ltd. v. Delhi Airport Metro Express Pvt. Ltd., 2024 INSC 292. In a rare curative petition, the Court set aside its own 2021 judgment (2021 INSC 464), which had restored an award, and upheld the High Court's view that the award was patently illegal for ignoring vital evidence and misreading the contract.

5. Limitation, stay and appeal

• The application must be filed within three months of receipt of the award (or of disposal of a section 33 request), extendable by 30 days for sufficient cause, “but not thereafter” (section 34(3)). Section 5 of the Limitation Act cannot extend it further.
• Prior notice to the other party and an affidavit of compliance are required (section 34(5)), and the application is to be disposed of within one year (section 34(6)).
• The court may adjourn to let the tribunal eliminate the grounds for setting aside (section 34(4)).
• Filing does not automatically stay the award (section 36(2)); see the next note.
• An appeal lies under section 37(1)(c) against an order setting aside or refusing to set aside an award, but no second appeal (section 37(3)), apart from the Supreme Court's jurisdiction.

6. Can the court modify an award? Gayatri Balasamy (2025)

In M. Hakeem (2021 INSC 344) a two-judge Bench held that a court under section 34 cannot modify an award, only set it aside. Other Benches had modified awards. The question went to a Constitution Bench in Gayatri Balasamy v. ISG Novasoft Technologies Limited, 2025 INSC 605, decided on 30 April 2025. By a majority of four to one (K.V. Viswanathan J. dissenting), the Court held that the court has a limited power to modify an award:

• where the invalid part is severable from the valid part (drawing on the proviso to section 34(2)(a)(iv)), the court may set aside only the invalid part;
• to correct clerical, computational or typographical errors apparent on the face of the record;
• to modify post-award interest in certain circumstances; and
• the Supreme Court may use Article 142, sparingly and with great caution, consistent with the Act.

The power does not permit a review of the award on its merits.

7. Problem

Manjula and Suma appoint A, B and C as arbitrators. The award is signed only by A and B. Is it valid? (June 2019)

Issue. Whether an award signed by two of three arbitrators is valid.

Law. Section 29(1): decisions of a tribunal of more than one arbitrator are made by a majority of all its members. Section 31(1) and (2): the award must be signed by the members, but the signatures of the majority are sufficient so long as the reason for any omitted signature is stated.

Application. A and B are a majority of the three-member tribunal. If C took part in the deliberations and dissented, or was unable or refused to sign, the award is valid provided it records why C's signature is missing. If it does not state the reason, the award does not comply with section 31(2); a party may ask the tribunal under section 33 to correct the omission, failing which it may be challenged under section 34(2)(a)(v) as made in a procedure not in accordance with Part I. If C was excluded from the deliberations altogether, the award is open to challenge for the same reason, and the parties' equal treatment under section 18 is also in question.

Conclusion. The award is valid as a majority award if the reason for C's omitted signature is stated in it; C's dissent may be recorded separately.

How this is examined

Asked as “arbitral award” (syllabus) or as setting aside. Write section 31 clause by clause, then section 34(2)(a), (b) and (2A), then the line of cases: Saw Pipes, Associate Builders, the 2015 amendment, Ssangyong, and Gayatri Balasamy on modification. The majority-signature problem is a regular.