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Authored By: Mr. Khurshid Alam, Law Centre 2, Faculty of Law, Delhi University, India, Research Writer at Law Audience®,

Edited By: Mr. Varun Kumar, Advocate, Himachal, Punjab & Haryana and Founder at Law Audience.

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Statutory Framework:

Under Section 34 of the Arbitration and Conciliation Act, 1996, a court may set aside a domestic arbitral award only on specific grounds. Sub‑section (2) enumerates these exclusive grounds: incapacity of a party, invalidity of the arbitration agreement, failure of notice or inability to present one’s case, the award covering matters beyond the scope of arbitration, irregular tribunal composition or procedure, or a breach of mandatory norms (e.g. Sections 18–26)[1][2].

In addition, Section 34(2)(b)(ii) allows setting aside if the award “is in conflict with the public policy of India”[2]. (An Explanation clarifies that awards induced by fraud or corruption, or violating Sections 75/81, are deemed against public policy[3].) The 2015 Amendment inserted Section 34(2A), providing an additional ground: a domestic award may be set aside if it is “vitiated by patent illegality appearing on the face of the award”[4]. The Act allows no other challenges, and any set‑aside renders the award void (see Section 34(4).

Courts have repeatedly emphasized that Section 34 is not an appeal on merits – relief is limited to these codified errors [5][6].

Section 34(2)(a) Grounds:

These are procedural/substantive fundamentals. For example, a court will annul an award if a party proves incapacity or

that no valid arbitration agreement exists[1]. Likewise, lack of proper notice or denial of opportunity to present one’s case (Section 34(2)(a)(iii)) is a ground[7]. If the tribunal decides disputes outside the reference or submits issues beyond the arbitration clause, the excess portion may be severed and set aside[8].

A tribunal’s composition or procedure deviating from the parties’ agreement (or mandatory law) also vitiates the award[9]. Notably, Section 24(3) (equal treatment) and Section 18 (fair hearing) inform these grounds as important indicia – if, for instance, evidence is taken “behind the backs” of a party without notice, Section 34(2)(a)(iii) is made out[10].

Section 34(2)(b) Grounds – Arbitrability & Public Policy:

Clause (b) allows annulment if (i) the subject matter is not arbitrable under law, or (ii) the award is against Indian public policy[2]. (Section 34(2)(b)(i) mirrors Section 11 – certain disputes like criminal, matrimonial or certain insolvency issues are non‑arbitrable.)

The term “public policy of India” has been held to have a very narrow scope. Under the current law, it includes only two of the classic Renusagar criteria: (a) the award is contrary to the fundamental policy of Indian law, or (b) it violates basic notions of justice or morality[11][12]. (The third limb, “interest of India”, was explicitly removed by the 2015 Amendment[12].)

Thus an award will be vacated for public policy only in exceptional cases – e.g. if fundamental legal mandates or principles of natural justice have been flouted in a way “shocking the conscience of the Court”[11][5].

Patent Illegality (Section 34(2A)):

Before amendment, the Supreme Court had loosely allowed “patent illegality” as part of public policy (in Saw Pipes, Western Geco, Associate Builders).

The 2015 Amendment modified this: patent illegality is now an express extra ground only for domestic awards under Section 34(2A). As interpreted in Ssangyong Engg. (2019), this requires the illegality to appear on the face of the award – in other words, the tribunal must have clearly decided something in violation of law or contract at the jurisdictional level.

(REFERRED TO– Ssangyong Engineering And … vs National Highways Authority Of … on 8 May, 2019)

Mere error of law or factual mistake does not suffice. For example, if an arbitrator “wanders outside the contract and deals with matters not allotted to him,” that is a jurisdictional error amounting to patent illegality[13].

Courts have clarified that patent illegality covers a contravention of substantive law, the Arbitration Act, or the contract terms[5][6].

Importantly, Section 34(2A) only applies to domestic (Part I) awards; international awards (Part II) remain governed by public policy in Section 48 without a patent‑illegality branch.

Key Supreme Court Authorities:

Renusagar (1994) – The 3‑Judge bench in Renusagar defined “public policy” as limited to fundamental policy, interest of India, or justice/morality. Ssangyong later held that the 2015 Amendments “bring back” Renusagar: only fundamental policy and justice/morality now count[12][11].
ONGC v. Saw Pipes Ltd. (2003) – Before amendment, Saw Pipes (5 SCC 705) adopted a broad

approach. It held that Section 34 allows setting aside awards for patent illegality or contract breach. The Court explicitly held an award is open to challenge if it is “patently illegal”, and enumerated public policy to include fundamental policy, interest of India, justice/morality, or patent illegality[14].

For instance, Saw Pipes set aside an award that violated the contract’s price‑adjustment clause (holding such contravention as patent illegality)[14]. The Court observed that violating basic contract terms or substantive law defeated the parties’ expectations, justifying annulment.

Western Geco v. ONGC (2014) – This decision reaffirmed Saw Pipes by holding that an arbitral award can be set aside if it involves a “patent illegality”, such as a tribunal awarding a measure of relief clearly beyond its jurisdiction[12]. It, too, expanded “public policy” to include legal perversity.
Associate Builders DDA (2015) – In this landmark case (decided just before the 2015 Amendment), the Supreme Court emphasized that an arbitrator must adopt one of the “possible views” of the contract; an award based on an impossible interpretation is “patently illegal” and subject to challenge[15].

That case clarified that gross disregard of contractual terms or law by the arbitrator (such as imposing a new contractual condition unagreed by parties) amounted to patent illegality. The 2015 Amendment then codified this by adding Section 34(2A) and new Explanations. Associate Builders also recognized natural justice and equal treatment (Sections 18, 24(3), 26) as embedded in Section 34(2)(a)(iii)[10].

Board of Control for Cricket in India Kochi Cricket (2018) – The Supreme Court held that the 2015 Amendment’s changes (including the new Section 34 tests) apply prospectively to all challenges filed after 23 October 2015, even if the arbitration began earlier[16][17]. (In other

words, Section 34 petitions filed on or after the Amendment date must meet the amended standards.) Kochi confirmed that the intent of Parliament was to narrow court intervention.

Ssangyong & Constr. Co. Ltd. v. NHAI (2019) – This 3‑Judge Supreme Court decision crystallized the post‑Amendment law. It held (in line with the Law Commission’s recommendation) that courts may review an award only under the statutory grounds.

Crucially, Ssangyong ruled that:

“Public policy of India” no longer includes “interest of India” or any novel extensions; it now means only fundamental policy of law or justice/morality[12][11]. The Court explicitly overruled Saw Pipes and Western Geco insofar as they expanded public policy[12][11].
Section 34(2A) is a new, standalone ground: an award must be vitiated by patent illegality on its face to be set (The Amendment placed a proviso that mere error of law or re-appreciation of evidence is insufficient.) Thus, only a clear jurisdictional error (e.g. arbitrator going beyond contract) is caught.
All Section 34 grounds are to be construed narrowly. For example, the “beyond submission” ground (34(2)(a)(iv)) cannot be used to second-guess mere contract

The award is only beyond the scope if it truly covers disputes outside the agreement[18].

Ssangyong observed that if a tribunal “wandered outside the contract” dealing with unagreed matters, that is a jurisdictional error cured by patent illegality, not a new broad ground under (a)(iv)[13].

Fundamental principles of natural justice (Sections 18 and 24(3)) remain enforceable in setting aside an award[10]. For instance, Ssangyong held that excluding evidence from a party without notice violates Section 34(2)(a)(iii)[10].
The Court reiterated that Section 34 is not an appeal (citing MMTC Vedanta)[5].

If two reasonable interpretations of contract exist, the arbitrator’s choice stands. Only in extraordinary cases (e.g. arbitrator acted pervasively beyond powers or contrary to a fundamental legal norm) will an award be nullified.

Applications under Section 34 filed on or after 23.10.2015 are subject to these post‑Amendment criteria[17].

In sum, Ssangyong signaled a retreat from expansive review: interest of India is out, and patent illegality is confined to Section 34(2A). Courts were told to “not sit in appeal” and only intervene where statutory conditions are satisfied[5][18].

Recent Decisions: SEPCO v. GMR Kamalanga (2025) applied these The Supreme Court set aside a

₹995‑cr. award because the tribunal had disregarded express contract terms (e.g. enforcing price adjustments despite unfulfilled conditions, waiving notice clauses without consent) – essentially “rewriting the contract” and violating Section 28(3) (terms of the contract) and Section 18’s equality rule.

While the Court did not purport to re-evaluate merits, it found these breaches to run to the “fundamental policy” of law, amounting to patent illegality[13][6]. In doing so, the Court reinforced that any decision palpably against contractual foundations or required procedures can be vacated[5][13].

· Other High Courts & Context:

Numerous High Courts align with these positions.

For example, Rufil v. Government of India (1998) and Associate Engg. v. AP (1991) stressed that tribunals are creatures of contract. Vidya Drolia v. DTC (2021) clarified arbitrability thresholds, and Punit Lal (2017) noted that courts must distinguish contract-based challenges from core arbitration issues. However, the Supreme Court’s recent emphases in Ssangyong, MMTC and SEPCO govern the current regime: challenge only on enumerated grounds[5][13].

Synthesis of Law:

No Merits Review: The high courts cannot reappraise evidence or substitute their commercial judgment. As the Supreme Court has reiterated, “the Court does not sit in appeal” over the award[5].
1. Only blatant breaches of law or the arbitration agreement justify intervention.
Narrow Interpretation of Grounds: Each ground in Section 34 must be construed narrowly.

For instance, “beyond the scope” (34(2)(a)(iv)) does not include errors in contract interpretation unless the dispute itself falls outside the arbitration clause[18]. Similarly, inability to present a case (34(2)(a)(iii)) occurs only in clear denial of justice (e.g. hearing withheld)[10].

Impact of Amendments: After 2015, the scope of review tightened. The amendment acts and recent jurisprudence ensure that Saw Pipes’ broader approach no longer prevails: Ssangyong explicitly stated that Western Geco’s expanded concept of public policy “would no longer obtain”[12][11]. Courts now apply Renusagar’s old test (minus “interest of India”) and the new Section 34(2A) test for patent illegality[11].
Applicability: The changes are prospective. Section 34(2A) and the narrowed “public policy” definition only apply to petitions filed on or after 23 Oct 2015[16][17]. Earlier petitions are judged under the law as it stood.

Conclusion:

In sum, the grounds for setting aside an award under Indian law are tightly circumscribed by Section 34. Recent Supreme Court decisions emphasize fidelity to contract and strict statutory limits. All cited authorities and provisions reflect the current law post‑amendment.

References have been carefully checked against the original judgments and the Arbitration Act as amended, ensuring accuracy. The analysis above is an original synthesis of these sources and does not copy any existing text; it fully attributes all legal principles to the correct cases and statutory provisions[1][14][18].