On 18 December, the Supreme Court referring to the provisions of Section 31(3) of the Arbitration and Conciliation Act, 1996 has set aside an arbitral award on the grounds of insufficient and inadequate reasoning, stating it to be “unintelligible,” and therefore, unsustainable.
The bench headed by Justices N V Ramana, Mohan Shantangoudar and Ajay Rastogi observed that an arbitral award with improper reasons indicates disfigurement of justice.
“The mandate under Section 34 is to respect the finality of the arbitral award and the party autonomy to get their dispute adjudicated by an alternative forum as provided under the law. If the Courts were to interfere with the arbitral award in the usual course on factual aspects, then the commercial wisdom behind opting for alternate dispute resolution would stand frustrated,” stated the bench.
In the case of “impropriety or perversity of reasoning”, the award can be challenged under Section 34 of the Act, which deals with an application for setting aside of the order.