The Arbitration and Conciliation Act of 1996 was enacted to consolidate and amend the law governing domestic arbitration, international commercial arbitration, and the enforcement of foreign arbitral awards. Also, to define the law relating to conciliation and matters related to or instrumental to it. The Act is meant to represent international commercial arbitration and cover the enforcement of foreign arbitral awards. Therefore, it is primarily based on the UNCITRAL Model Law on International Commercial Arbitration (“Model Law”). This was done keeping in mind the uniformity of the law of arbitral procedures and the specific needs of international commercial arbitration practice.

To put it in simple terms, this act is meant to create a standard and consistent practice for Alternate Dispute Resolution (“ADR”), which creates a synergy with the practice of the same at an international level but also is implemented in such a way that it is not far fetched and aligns with the laws in force in India.

The ideal structure of ADR would be where there is minimum judicial interference (Section 5)and the arbitral awards enforced are final and binding (Sections 35 and 36) on all the parties involved.

Section 5 of the Act deals with judicial interference in arbitration proceedings, stating, “5. The extent of judicial intervention.—Notwithstanding anything contained in any other law for the time being in force, in matters governed by this Part, no judicial authority shall intervene except where so provided in this Part”.

 In Konkan Railway Corporation Ltd. v. Mehul Construction Co., in this case, the Supreme Court has adverted to the limitation placed by the Act of 1996 when Compared to its predecessor, the Arbitration Act, 1940, upon the intervention of the Court with an arbitral process by referring to the Legislative intent behind  Section 5, as it limits the intervention of Court with an arbitral process to the minimum and that every order passed by an authority under the Act would not be a subject-matter of judicial scrutiny of a Court of law.

But this does not exclusively disallow any Judicial Authority to interfere with the arbitral proceedings. For Instance, Section 34 (Domestic Award) and Section 48 (Foreign Award) of the Act are given as recourse against the arbitral award to the parties wherein the competent judicial authority (which has jurisdiction as per Section 42 of the Act) can set aside an arbitral award after the said award is passed by the arbitral tribunal.

Now though, Section 34 states under what conditions an arbitral award can be set aside by the competent judicial authority, but the courts are silent on the specific procedure after the said order is set aside. As a result, several significant questions are raised after an order is set aside under Section 34 of the act, such as: –

  • Are the parties still bound by the arbitration agreement;
  • and if they are, do the parties in arbitration re-institute the arbitration proceeding;
  • and if so, do the parties in arbitration institute fresh arbitration proceedings or commence such proceedings from a different stage.

The ambiguity regarding the answer to the abovementioned questions is the root of much confusion and loopholes, ultimately resulting in more litigation that defeats the whole purpose of an act on ADR. This is the case for not only India but many other countries that have based their arbitration act on the MODEL Law ( 85 States in a total of 118 jurisdictions) as no clear rule, regulation, or procedure is given to clear the cavity on this subject matter in the MODEL Law. But still, in Section 34,

 AIR 2000 SC 2821

 Status: UNCITRAL Model Law on International Commercial Arbitration (1985), with amendments as adopted in 2006,, accessed on 14th October 2022

sub-section (4), it was provided the court may, where it is appropriate and is requested by a party, adjourn the proceedings for some time to allow the arbitral tribunal to Resume The arbitral proceedings or take such other action as in the opinion of the arbitral tribunal will eliminate the grounds for setting aside the arbitral award.

Though not transparent, this shows a way where despite the setting aside proceeding of the arbitral award; the legislative intent is to resolve the dispute through arbitration and not court proceedings where it can.

In the case of Kinnari Mullick and Ors. Vs Ghanshyam Das Damani, the apex court has observed that there is limited discretion available to the Court under section 34(4) that can only be exercised upon a written application made on behalf of a party to the arbitration proceedings and cannot be exercised suo moto. Furthermore, it was observed that before formally setting aside the award, if the party to the arbitration proceedings fails to request the Court to defer the pending proceedings, then it is not open to the party to move an application under section 34(4) of the Act. In simpler words, the limited remedy available under section 34(4) must be invoked by the party to the arbitral proceedings before the award is set aside by the Court.

Furthermore, the Supreme Court took the view in McDermott International Inc. vs Burn Standard Co. Ltd. and Ors.: –

“35. The 1996 Act provides the supervisory role of courts for the review of the arbitral award only to ensure fairness. The intervention of the court is envisaged in a few circumstances only, like, in case of fraud or bias by the arbitrators, violation of natural justice, etc. The court cannot correct the errors of the arbitrators. It can only quash the award leaving the parties free to begin the arbitration again if desired. So, the scheme of the provision aims at keeping the supervisory role of the court at a minimum level, and this can be justified as parties to the agreement make a conscious decision to exclude the court’s jurisdiction by opting for arbitration as they prefer the expediency and finality offered by it.”

Further, in the judgement mentioned above, the Hon’ble Court also clarified that setting aside the award does not amount to determining issues between the parties; hence, principles of Res judicata shall not apply.

This means the parties involved can re-institute proceedings should they consent. The award was not set aside due to the invalidity of the arbitration agreement or clause or any similar reason that would render the agreement void. As ruled by the Supreme Court in the case of Juggilal Kamlapat vs General Fibre Dealers Ltd. (And Connected Appeal): – 

“20. What has happened in this case is that the previous tribunal made an award. That award has been set aside on account of misconduct. In the circumstances, we believe that the previous tribunal has become incapable of acting as an arbitrator to decide this dispute because of its misconduct. Further, as the reference has not been superseded and the arbitration agreement exists, it was, in our opinion, open to the Chamber, on the respondent’s request, to appoint another arbitral tribunal under r. X. Therefore, as there is the machinery by which fresh arbitrators can be appointed according to the terms of the arbitration agreement read with the rules of the Chamber and as the reference has not been superseded, the appointment of a fresh tribunal and the carrying on of the arbitration further were within the terms of the arbitration agreement.”

Thus, The arbitral proceedings can be fresh with new arbitrators appointed or with the same but what can logically be inferred is that if the award is set aside under section 34 sub-section (2A) or due to the conduct of the Arbitrators (unfair, biased, etc.) appointed to settle the issue, then it is impossible to continue with them again. The proceedings would have to restart with new arbitrators appointed with the parties consent.

To conclude and reiterate that there is a severe need for a procedure to be set as to what should be done after the arbitral award has been set aside, which would give a solution to all the ambiguity on this subject matter and answer the question as mentioned earlier.

Dhruvil Singh Rathore, Intern, R & D Law Chambers,

Guided By Ravish Bhatt

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