The Pro-Arbitration Trend
Indian courts have increasingly adopted a pro-arbitration stance, limiting grounds for judicial intervention in arbitral awards. The Supreme Court's jurisprudence has consistently emphasised that courts should not sit in appeal over awards and that the grounds under Section 34 of the Arbitration and Conciliation Act are exhaustive.
This shift represents a marked departure from earlier judicial attitudes. For decades, Indian courts were perceived as hostile to arbitration, with awards routinely challenged and proceedings dragging on for years. The legislative amendments of 2015 and 2019, combined with progressive judicial interpretation, have transformed this landscape.
Patent Illegality Standard
The concept of patent illegality appearing on the face of the award has been the subject of extensive judicial interpretation. Courts have clarified that mere errors of law or fact do not constitute patent illegality. The illegality must be so fundamental that it shocks the conscience of the court.
This is a high threshold, deliberately so. The Supreme Court has repeatedly stated that parties who choose arbitration must accept the consequences of that choice, including the possibility that the arbitrator may make errors. Only when those errors amount to a perverse disregard of basic legal principles will courts intervene.
The practical implication is clear: do not enter arbitration expecting to use the courts as a safety net. The tribunal's decision on facts and law will, in the overwhelming majority of cases, be final.
Public Policy Considerations
The public policy ground for setting aside awards has been narrowly construed in recent years. Courts have held that this ground is attracted only when the award is contrary to the fundamental policy of Indian law, the interests of India, or justice and morality. Commercial disputes rarely meet this threshold.
The Supreme Court has expressly rejected attempts to expand the public policy exception. Arguments that an award violates statutory provisions, misinterprets contracts, or reaches commercially unreasonable conclusions have generally failed. The public policy ground is not a licence for de novo review of the tribunal's reasoning.
Time Limits for Challenge
Section 34 petitions must be filed within three months of receipt of the award, with a maximum condonable period of 30 days. The Supreme Court has strictly enforced these timelines, emphasising that arbitration must provide finality to disputes.
This is not mere procedural formality. Courts have refused to condone delays beyond 120 days even in cases where the challenging party presented seemingly compelling reasons. The message is unambiguous: treat the limitation period with the seriousness it deserves.
Implications for Commercial Parties
The judicial trend towards minimal interference provides greater certainty to parties choosing arbitration. An award, once rendered, is highly likely to be enforced. This makes the choice of arbitrator and the conduct of proceedings critically important.
However, this also places greater responsibility on parties during the arbitral proceedings itself. Procedural objections not raised before the tribunal are often waived. Substantive challenges become difficult to sustain if not properly articulated during the arbitration.
Best Practices
Parties should focus on building a strong case before the tribunal rather than relying on post-award challenges. This includes meticulous documentation, timely objections to procedural irregularities, and comprehensive written submissions addressing all relevant legal and factual issues.
The days of treating arbitration as a preliminary round before the real battle in court are over. The tribunal's decision is, for practical purposes, the final decision. Act accordingly.