Arbitration offers parties with a plethora of advantages over litigation in commercial disputes. The purpose of arbitration is to bring into effect a quasi-justice delivery system agreed upon by the parties to the contract. Such arrangement also has an implicit consequence that it should not be open for the parties to subject the award to a normal process of appeal in judicial Courts. The parties can move to the judicial Courts for either enforcement or setting aside of the award. But, since such arbitral tribunals are made through the creation of a contract, they lack certain powers which are entrusted upon the normal judicial Courts, including powers to enforce the fruits of the award. It is here that the role of judicial Courts comes into the process. The grounds on which an award by an arbitral tribunal can be set aside has been limited under S.34 (domestic awards) and S.48 (foreign awards) of the Arbitration and Conciliation Act, 1996.
Since the decisions rendered by arbitral tribunals are not subjected to appeal before any Court, it becomes important that these quasi-judicial bodies do not digress from the pious task of imparting justice. Broadly speaking, it may also be put that the role of the judicial body is to ensure that the realm of public policy is not set aside as public order is equally important as individual freedom. Therefore, the tribunals must ensure that in the process they do not abandon the public policy element while passing any award. The awards passed by the arbitral tribunals which are contrary or oppose to the public policy therefore, can be challenged before the judicial Courts and thereby also set aside.
The earliest of the laws on Arbitration in India was the Indian Arbitration Act, 1899 (hereinafter 1899 Act). The 1899 Act provided ‘misconduct and improper procurement of award’ as the only ground when the Court could interfere with the award and set it aside. The 1899 Act was repealed and replaced by The Arbitration and Conciliation Act, 1940 (hereinafter 1940 Act). The 1940 Act in addition to the grounds mention in the 1899 Act, added an award being ‘otherwise invalid’ as an additional ground to set aside the award by the Courts, thus giving a scope for the expansion of judicial review. The challenges faced by the 1940 Act and the need to boost the alternate dispute resolution process was realised and addressed by the lawmakers who repealed the 1940 Act and introduced The Arbitration and Conciliation Act, 1996 (hereinafter 1996 Act).
The 1996 Act was an attempt in a direction to make India an arbitration friendly jurisdiction by adopting global model laws and therefore was based largely upon the United Nations Convention on The International Trade Laws Model Law on International Commercial Arbitration (hereinafter UNCITRAL Model Law). The UNCITRAL Model Law introduced an award being opposed to ‘public policy’ as a valid ground for setting aside the arbitral award. This concept was adopted by India in the 1996 Act under S.34 (relating to the domestic awards) and under S.48 (relating to the foreign award).
In arbitration, the autonomy of the parties is kept at the highest pedestal. Therefore, any Court adjudicating upon the validity of an arbitral award is not to function as an appellate Court, but merely is to decide upon the legality of the validity of the arbitral award. But the jurisprudence related to what constitutes public policy has been a matter of debate and discussions until the Arbitration and Conciliation (Amendment) Act 2015 (hereinafter 2015 Amendment) was brought into force which amended the 1996 Act. The 2015 Amendment expressly laid down the features of public policy whose violation would be considered as being opposed to the public policy.
Originally Published by https://www.latestlaws.com/articles/ at https://www.latestlaws.com/articles/realm-of-public-policy-and-enforcement-of-domestic-arbitral-award/