Why Arbitral Awards Get Set Aside: Top Grounds Courts Accept

On what grounds can an award be set aside in India?

Only on the ones in Section 34 of the Arbitration and Conciliation Act, 1996. It's a closed list. Whatever your complaint, if it doesn't fit there, the court won't set the award aside. The grounds sort into three groups. The first, in Section 34(2)(a), is about the arbitration itself, and the challenger has to prove these on the basis of the arbitral tribunal's record. Those grounds are: a party was under some incapacity; the arbitration agreement isn't valid; the party wasn't given proper notice of the arbitrator's appointment or of the proceedings, or couldn't otherwise present its case; the award decides disputes outside the reference; or the tribunal's composition, or the procedure, didn't follow the agreement or the Act.

The court can find the second group on its own, under Section 34(2)(b). Either the subject matter can't be settled by arbitration under Indian law, or the award conflicts with the public policy of India. The third ground is Section 34(2A), added in 2015. It lets a court set aside a domestic award (not one from an international commercial arbitration) for patent illegality appearing on the face of the award.

Knowing the list is easy. Using it isn't. For the deadline, the right court and the filing itself, read our step-by-step guide on challenging an arbitral award under Section 34. This post stays with the grounds: what each one means after the 2015 and 2019 amendments, which ones courts actually accept, and the kind of facts you need before one will stick.

Why do most Section 34 challenges fail?

Mostly because they ask the court to decide the dispute all over again. The Act forbids exactly that. Under the proviso to Section 34(2A), an award isn't to be set aside just because the law was wrongly applied or the evidence could be read another way. Explanation 2 to Section 34(2)(b) adds that the fundamental policy test mustn't become a review on the merits. In Ssangyong Engineering v. NHAI (2019), the Supreme Court read these changes as Parliament deliberately cutting down court interference. Every judgment since has built on that.

So a client tells us the arbitrator believed the wrong witness. Or should have given more interest. Or read a clause the wrong way when it could honestly be read either way. We have to be straight with them: none of that is a ground. In South East Asia Marine Engineering v. Oil India (2020), the Supreme Court said it again. If the arbitrator's view of the contract is a possible one, the court won't put its own view in place, even if it likes another reading better. What does work is narrower and more concrete. A finding with no evidence under it. A reading of the contract no fair-minded person could arrive at. An unfair hearing. An arbitrator who should never have sat at all, or an award that goes beyond what was referred.

The grounds in one table: what you have to show, and what usually fails

When does an award count as patently illegal?

Patent illegality is illegality you can spot on the face of the award without going back through all the evidence. It's only available against domestic awards. The Supreme Court mapped out what qualifies in Associate Builders v. DDA (2014) and again in Ssangyong (2019), and courts work from that map today. An award with no reasons breaches Section 31(3) and is patently illegal, unless the parties agreed reasons weren't needed. A finding resting on no evidence at all is too. So is one that ignores evidence that plainly mattered. Courts call that perversity. Then there's the contract read in a way no fair-minded or reasonable person would read it; the Supreme Court applied that test in Patel Engineering v. North Eastern Electric Power Corporation (2020). And if the arbitrator decides something outside the contract, in effect writing the parties a new bargain, that's a jurisdictional error that lands here as well.

Recent cases show how it works in practice. In PSA Sical Terminals v. V.O. Chidambaranar Port Trust (2021), the Supreme Court set aside an award that rewrote the parties' contract. In State of Chhattisgarh v. Sal Udyog (2021), it held that ignoring a specific contract term binding on both sides was patent illegality, and let the point be argued even at the appeal stage. Then Delhi Metro Rail Corporation v. Delhi Airport Metro Express (2024). A three-judge bench, using its rare curative jurisdiction, set aside its own earlier judgment upholding a large award. The award, it said, had overlooked material evidence and reached a conclusion on the termination clause that no reasonable person could reach.

OPG Power Generation v. Enexio Power Cooling Solutions (2024) restated the limit. The illegality has to go to the root of the matter. An error that wouldn't change the result isn't enough, and nor is a point the arbitrator might have explained better. When Advocate B.K. Singh reads an award with a challenge in mind, he takes every operative finding and follows it back to a page in the record: a pleading, a document, a line of oral evidence. If a finding traces back cleanly, attacking it is almost never worth it. The finding that leads nowhere, or leads to a document neither side filed? That's usually where the patent illegality ground lives.

What does public policy mean for an award today?

A lot less than it used to. Before 2015, courts read public policy very broadly. Some judgments used it to ask whether the arbitrator had taken a judicial approach, or whether the award was simply unreasonable. The 2015 amendment shut that door. Explanation 1 to Section 34(2)(b) now limits it to three situations. One, the award was induced or affected by fraud or corruption (or broke the conciliation confidentiality and evidence rules in Sections 75 and 81). Two, it contravenes the fundamental policy of Indian law. Three, it conflicts with the most basic notions of morality or justice.

Each of these is tight. Fraud or corruption here means fraud in how the award was made. Think of a bribed arbitrator, or forged evidence the tribunal relied on. A general complaint that the other side was dishonest in the contract won't do. If the court is satisfied prima facie (at first look) that the award or the underlying contract was induced by fraud or corruption, the 2021 proviso to Section 36(3) also lets it stay the award without conditions while the challenge is heard. After Ssangyong, fundamental policy of Indian law covers breach of natural justice, ignoring binding orders of superior courts, and violating a statute that exists to protect the public interest. Breaking an ordinary statute that only governs the parties' private dealings doesn't count. The most basic notions of justice head is kept for awards that shock the court's conscience. Ssangyong was one: the majority award applied a government circular that wasn't part of the contract, and in effect forced a new contract on an unwilling party.

So a public policy challenge is rarely about the amount. It's about how the award got there. If all you're saying is that the figure is too high, this ground won't help. Not unless the figure rests on something the law treats as fundamentally unfair.

The arbitrator took years to give the award. Is that a ground?

Sometimes. Delay on its own isn't. In Lancor Holdings v. Prem Kumar Menon (31 October 2025), the Supreme Court had before it an award delivered years after arguments closed. It held that delay by itself doesn't justify setting an award aside. But unexplained delay that has visibly affected the findings is another matter. Suppose the award fails to resolve the dispute and leaves the parties to start fresh litigation after their positions have changed. That can conflict with public policy, or amount to patent illegality. The court added that a party doesn't first have to apply under Section 14(2) to end the arbitrator's mandate before it raises delay in a Section 34 challenge.

Since 2015, Section 29A has required the award within twelve months of completion of pleadings, extendable by six months by consent and after that only by the court. So the very long delays are rarer now. They haven't vanished, especially in older references or where extensions kept being granted. If your award came long after the hearing, read it for signs the delay told: arguments recorded wrongly, evidence that seems forgotten, issues left hanging.

What if you weren't properly heard?

Then you may have one of the stronger grounds. In our experience it holds up better than most, because it rests on what the record shows, not on arguments about the merits. Section 34(2)(a)(iii) covers a party that didn't get proper notice of the arbitrator's appointment or of the proceedings, or that was otherwise unable to present its case. Section 18 requires equal treatment and a full opportunity for each side. Section 24(3) says every statement, document and expert report the tribunal relies on must go to the parties. Build an award on material one side never saw and you've broken both.

Ssangyong put reliance on material behind a party's back under this head. You'll typically see it as an award that uses a market rate the arbitrator looked up online, or an expert report filed after arguments with no chance to reply, or a site visit with only one side present. Notice failures are the other usual route. They're common in bulk arbitrations on online platforms, where the notice goes to an old email address and the case runs ex parte (without one side). Our post on how online arbitration runs in India explains notice and service when the whole thing is virtual.

It doesn't help a party that had every chance and wasted it. A tribunal that refused a fifth adjournment hasn't denied anyone a hearing. Nor has one that closed evidence after affidavits weren't filed on three dates running. Courts go through the arbitration's order sheets carefully. Make sure yours say what you'd want them to say.

What if the arbitrator decided something nobody referred?

That's Section 34(2)(a)(iv): an award that deals with a dispute not contemplated by, or not falling within, the terms of the submission, or that contains decisions beyond its scope. The question is what the parties actually sent to arbitration, and you find that by reading the arbitration agreement, the notice invoking arbitration and the pleadings together. Relief nobody asked for. A counter claim that was never filed. A ruling on a separate contract that has its own dispute clause. Each of those goes beyond the reference.

There's a useful proviso. Where the decisions on referred matters can be separated from the rest, only the part that exceeds the reference gets set aside. That often matters more than the ground itself. Attack the whole award on a ground that touches one head of claim, and you may find everything else left standing. Plan your challenge one head at a time.

Can a flaw in how the arbitrator was appointed sink the award?

It can. And it's the ground that's grown fastest in recent years. Section 34(2)(a)(v) covers a tribunal not composed as the agreement or the Act required. Section 12(5), read with the Seventh Schedule, bars some people from acting at all: a party's employees, consultants and advisers, people with close business or family ties to it, and others on that list. The Supreme Court held in TRF v. Energo Engineering (2017) and Perkins Eastman v. HSCC (2019) that someone who is ineligible can't appoint a sole arbitrator either. Then, in Central Organisation for Railway Electrification v. ECI-SPIC-SMO-MCML (2024), a Constitution Bench held that clauses letting one party control the appointment offend equal treatment. Our post on why one-sided arbitrator appointments are invalid traces those cases.

Section 12(5) ineligibility can only be waived by an express written agreement made after the dispute arose. In Bharat Broadband Network v. United Telecoms (2019), the Supreme Court said that taking part in the proceedings, even filing a statement of claim before an ineligible arbitrator, isn't that kind of waiver. That's why an award by an arbitrator a bank, an employer or a big buyer appointed on its own can be challenged even if the losing side said nothing at the time. Ordinary doubts about independence under the Fifth Schedule work differently. They have to be raised under Section 13 within 15 days of learning the facts. Stay quiet, and you usually can't raise them later. Our guide on objecting to an arbitrator who isn't independent covers the timing.

With appointment challenges, Advocate B.K. Singh first asks for three things: the appointment letter, the arbitrator's written disclosure under Section 12, and every email where the client accepted or questioned the appointment. Those three usually tell us which of two things we're looking at: Section 12(5) ineligibility, which survives silence, or a Fifth Schedule doubt that was lost by not objecting in time.

When is the arbitration agreement itself the problem?

Incapacity and an invalid agreement sit in Section 34(2)(a)(i) and (ii). They tend to come up when a company gets pulled into arbitration under a contract a group company signed. Or the person who signed had no authority. Or the clause is in an unsigned draft, or in a document the challenger says it never accepted. Courts can sometimes bind a non-signatory under the group of companies principle, so this ground is anything but automatic. Our post on when a non-signatory is bound by an arbitration clause deals with that.

Timing counts. Section 16(2) says a jurisdiction plea must be raised no later than the statement of defence. Raised it and lost? You can renew it under Section 34. Never raised it? The court won't be keen to hear it for the first time.

Non-arbitrability under Section 34(2)(b)(i) is the court's own business, and it can take the point even if neither party does. The Supreme Court set out the test in Vidya Drolia v. Durga Trading Corporation (2020). Disputes about rights in rem (rights good against the whole world), disputes a statute reserves for a particular forum, and disputes touching sovereign or public functions can't be arbitrated. The usual examples are insolvency, criminal offences, matrimonial status, guardianship, probate of wills and evictions under rent control laws. Most commercial fraud allegations, by contrast, can go to arbitration. Our guide on disputes that can't go to arbitration in India gives the fuller picture.

Is weak reasoning a ground to set an award aside?

It can be, if the reasons are missing, can't be followed, or are so thin that nobody could tell how the arbitrator got from the evidence to the result. In Dyna Technologies v. Crompton Greaves (2019), the Supreme Court said an award's reasons must be proper, intelligible and adequate, and that unintelligible reasoning is as bad as none. Short isn't the problem. A two-page award that explains each finding is safer than a fifty-page one that copies out the pleadings and then announces a number.

Where the flaw is a gap in reasoning, not a wrong conclusion, the court has another option. Under Section 34(4), it can adjourn the petition so the tribunal can resume proceedings and fill the gap. I-Pay Clearing Services v. ICICI Bank (2022) put a limit on this. The tribunal can add reasons for a finding it already made. It can't use the adjournment to make findings it never recorded. If someone challenges your award on reasoning grounds, ask the court to look at Section 34(4) before it sets anything aside.

Complaints courts won't treat as grounds

• The arbitrator believed their witness, not yours. Judging who's telling the truth is the arbitrator's job. A court won't reweigh oral evidence.
• The law was applied wrongly. The proviso to Section 34(2A) shuts out a mere erroneous application of the law. You can only raise an error that goes to the root of the matter or offends fundamental policy.
• The clause could be read differently. If the arbitrator's reading is a possible one, it stays, even where the judge would have read the clause another way.
• The interest or costs feel too high. Interest under Section 31(7) and costs under Section 31A are for the arbitrator to decide. The exceptions are an award that ignores a binding contract term, or one that gives no reasons.
• Evidence you could have filed earlier. Since the 2019 amendment, the Section 34(2)(a) grounds are judged on the arbitral tribunal's record. Fresh evidence gets in only in narrow cases.
• Something you never raised before the arbitrator. Jurisdiction objections not taken under Section 16, and procedural breaches you knowingly let go, are usually treated as waived under Section 4. The big exceptions are Section 12(5) ineligibility and non-arbitrability.

Testing your award against the grounds, step by step

Do this in the first two or three weeks after the award arrives. It tells you whether a challenge is worth filing at all. And it leaves time to draft properly before the three-month deadline.

1. Pin down the date you received it

   Write down exactly when the signed award reached you, whether by hand, by post or by email. Section 34(3) gives you three months from that date, and the court can add only 30 more days for sufficient cause. Put both dates in the diary.

2. List every operative finding

   Write out each head of claim and counter claim, what was awarded or refused, and the paragraph where it's decided. That's your map. A challenge gets built finding by finding. Not against the award as one lump.

3. Trace each finding back to the record

   For every finding, find the pleading, document or evidence it stands on. Mark the ones that stand on nothing, on documents nobody filed, or on a clause read in a way neither side argued. Those are where patent illegality and fair hearing grounds tend to be.

4. Check the reference, and the tribunal

   Set what the award decides against what the notice and the pleadings asked for. Then look at the appointment. Who appointed the arbitrator, under which clause? Does the Section 12 disclosure show any Seventh Schedule relationship?

5. Test each possible ground against the case law

   For each one, ask whether it goes to the root of the matter or would leave the result the same. Drop the weak ones. A petition with three strong grounds gets read more carefully than one with fifteen.

6. Decide, and plan for the stay

   If a real ground is left, file in the court of the seat, and get ready for the Section 36 stay application, which usually needs a deposit or security for the amount awarded. If nothing's left, spend the time negotiating payment terms instead.

Holding the award and facing a challenge? Do the same exercise from the other side. It shows which grounds the court will take seriously, and that shapes your reply and any settlement offer.

The papers you'll need to prove a ground

Time and money: what a set-aside petition takes

What happens if the court accepts a ground?

Usually the award, or the part that's affected, is set aside. The court doesn't write its own award in its place. The parties go back to where they stood before the arbitration, and the claimant can normally start again with a fresh one. Section 43(4) helps here. When working out limitation for the fresh claim, the period between the start of the arbitration and the court's order is left out, so the claim doesn't die just because years went by. Our post on how limitation works for arbitration claims shows the arithmetic.

Since the Constitution Bench ruled in Gayatri Balasamy v. ISG Novasoft (2025), courts also have a limited power to modify an award. They can sever the bad part, fix clerical or arithmetical mistakes and adjust post-award interest. What they can't do is review the merits or rewrite the outcome. Our guide on whether a court can modify an arbitral award explains how far that goes.

Either side can appeal under Section 37. The appeal court asks an even narrower question: did the Section 34 court stay within its own limits? In MMTC v. Vedanta (2019), the Supreme Court said the appeal court can't make its own independent assessment of the award's merits. Read our note on Section 37 appeals before you plan a second round.

Holding an award, or facing one? What to do now

If the award's against you, start with the receipt date and the finding-by-finding map above. Then decide fast whether any ground really goes to the root of the matter. A weak challenge still costs you a stay deposit, and a year or two of interest piling up on the award. A strong one deserves careful drafting. The deadline won't move for either. If the award came from an MSME Facilitation Council, the grounds are the same, but Section 19 of the MSMED Act makes you deposit 75 percent of the amount awarded before the challenge is heard. Our post on how a buyer challenges an MSME Council award walks through that route. For DIAC awards, there's a separate guide on challenging a DIAC award under Section 34.

If you hold the award and a petition's been filed, read it against the grounds in this post, and oppose any unconditional stay. Our guide on stays against enforcement of an arbitral award explains what courts usually ask for. Want your award, the arbitral record or a petition you've been served looked at? Share them with Advocate B.K. Singh's team through the contact page, for advice on your papers or for updates on the law.