Scope of Judicial Interference Under Section 34 of the Arbitration Act
I'll research the key Supreme Court precedents and principles governing the scope of a court's power to interfere with an arbitral award under Section 34 of the Arbitration and Conciliation Act, 1996.
Scope of Judicial Interference Under Section 34 of the Arbitration and Conciliation Act, 1996
The scope of a court's power when hearing a petition under Section 34 challenging an arbitral award is one of the most heavily litigated questions in Indian arbitration law. The jurisprudence has evolved significantly — from an initially narrow standard, through an expansive phase, and back to a narrowed standard following the 2015 Amendment. Below is a comprehensive analysis of the current settled position.
I. The Statutory Framework
Section 34 provides the exclusive recourse against an arbitral award. Its key components are:
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Section 34(2)(a): Award may be set aside if the applicant establishes: (i) party incapacity; (ii) invalid arbitration agreement; (iii) lack of proper notice / inability to present case; (iv) award deals with disputes beyond submission; (v) irregular tribunal composition or procedure.
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Section 34(2)(b): Court may set aside if: (i) subject-matter is not arbitrable; or (ii) award conflicts with public policy of India.
- Explanation 1 (inserted by 2015 Amendment): "Public policy of India" is limited to — (i) fraud or corruption in the making of the award; (ii) contravention of fundamental policy of Indian law; (iii) conflict with most basic notions of morality or justice.
- Explanation 2 (inserted by 2015 Amendment): The test for contravention of fundamental policy shall not entail review on merits.
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Section 34(2A) (inserted by 2015 Amendment): For domestic arbitrations only, an award may also be set aside if vitiated by patent illegality appearing on the face of the award. Proviso: The award shall not be set aside merely on the ground of an erroneous application of the law or by re-appreciation of evidence.
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Section 34(4): The court may adjourn proceedings to give the tribunal opportunity to resume and cure grounds for setting aside.
Section 34, Arbitration and Conciliation Act, 1996 ()
II. Evolution of the Law
The jurisprudence has passed through four distinct phases:
Phase 1: Narrow Standard (Renusagar, 1993)
The Supreme Court in Renusagar Power Co. v. General Electric Co., 1994 Supp (1) SCC 644 (), held that "public policy" should be construed in a narrower sense, encompassing only three heads: (a) fundamental policy of Indian law; (b) interests of India; and (c) justice or morality.
Phase 2: Expansion (Saw Pipes and Western Geco, 2003–2014)
ONGC v. Saw Pipes Ltd., (2003) 5 SCC 705 (), added a fourth head — "patent illegality" — holding that an award patently violating statutory provisions conflicts with public policy. This significantly widened the scope of interference.
ONGC v. Western Geco International, (2014) 9 SCC 263 (), further expanded "fundamental policy of Indian law" to include (i) a judicial approach, (ii) natural justice, and (iii) Wednesbury reasonableness.
Associate Builders v. DDA, (2015) 3 SCC 49 (), — the most-cited case on Section 34 (cited over 2,182 times) — laid down the most comprehensive pre-amendment framework, elaborating all four heads and establishing the perversity/irrationality test.
Phase 3: Legislative Narrowing (2015 Amendment)
The Arbitration and Conciliation (Amendment) Act, 2015, based on the Law Commission's 246th Report, legislatively overruled the Saw Pipes and Western Geco expansion by: (a) inserting Explanation 1 narrowing "public policy"; (b) inserting Explanation 2 prohibiting merits review; and (c) creating Section 34(2A) as a separate, cabined ground for patent illegality in domestic awards only.
Phase 4: Post-Amendment Jurisprudence (2019–present)
Ssangyong Engineering v. NHAI, (2019) 15 SCC 131 (), provided the definitive interpretation of the amended Section 34, holding that both Saw Pipes and Western Geco have been "expressly done away with." This was refined by DAMEPL v. DMRC (2021), confirmed by the Constitution Bench in Gayatri Balasamy v. ISG Novasoft (2025), and most recently applied in Prakash Atlanta JV v. NHAI (2026).
III. The Current Settled Position
A. What Courts Cannot Do Under Section 34
As observed by Justice Nariman in DAMEPL v. DMRC ():
"There is a disturbing tendency of courts setting aside arbitral awards, after dissecting and re-assessing factual aspects of the cases to come to a conclusion that the award needs to be set aside."
B. Permissible Grounds for Interference
1. Public Policy of India — Section 34(2)(b)(ii)
(Applies to both domestic and international commercial arbitrations)
Post the 2015 Amendment as interpreted in Ssangyong, "public policy of India" is now confined to:
Note: The "interest of India" ground from Renusagar has been removed by the 2015 Amendment.
2. Patent Illegality — Section 34(2A)
(Available ONLY for domestic arbitrations; NOT available for international commercial arbitrations or foreign awards: Ssangyong ¶31; Patel Engineering v. NEEPCO, AIR 2020 SC 2488 (); Vijay Karia v. Prysmian, AIR 2020 SC 1807 ())
The DAMEPL v. DMRC judgment synthesised the permissible sub-heads of patent illegality:
3. The Perversity Test (the practical working test)
The most frequently invoked ground in practice is perversity, which the Supreme Court has held now falls under the rubric of "patent illegality" (post-2015 Amendment). As held in DAMEPL v. DMRC ():
"A finding based on no evidence at all or an award which ignores vital evidence in arriving at its decision would be perverse and liable to be set aside on the ground of patent illegality."
Per Associate Builders v. DDA (), perversity is established where:
- (i) The finding is based on no evidence at all;
- (ii) The tribunal takes into account something irrelevant to the decision;
- (iii) The tribunal ignores vital evidence in arriving at its decision;
- (iv) The view taken is one that no reasonable person would take.
However, as the proviso to Section 34(2A) and multiple Supreme Court judgments emphasise: if there is some evidence on record that is acceptable and could be relied upon — however limited — the conclusion cannot be treated as perverse. The court cannot re-weigh evidence.
4. The "Possible View" Doctrine
This is the most important shield protecting arbitral awards. As stated in Prakash Atlanta JV v. NHAI (2026) ():
"If an arbitral tribunal's view is found to be a possible and plausible one, it cannot be substituted merely because an alternate view is possible. Construction and interpretation of a contract and its terms is a matter for the arbitral tribunal to determine. Unless the same is found to be one that no fair-minded or reasonable person would arrive at, it cannot be interfered with."
C. Gaps in Reasoning vs. Complete Perversity — The Section 34(4) Route
Dyna Technologies v. Crompton Greaves, (2019) 20 SCC 1 (), drew an important distinction:
- Gaps in reasoning → the court should exercise its power under Section 34(4) to remit the matter to the tribunal to cure defects, rather than setting aside the award.
- Complete perversity in reasoning → the court may set aside the award under Section 34.
Reasoning must be "proper, intelligible and adequate" — unintelligible reasoning is equivalent to providing no reasons at all.
D. Domestic vs. International Commercial Arbitrations
E. No Power to Modify — Only Uphold or Set Aside
The Constitution Bench in Gayatri Balasamy v. ISG Novasoft Technologies (2025) () settled the long-debated question: a Section 34 court has no general power to modify an arbitral award. It can only:
- Uphold the award (dismiss the Section 34 petition); or
- Set aside the award (wholly, or sever the bad part if severable under S.34(2)(a)(iv)); or
- Remit to the tribunal under Section 34(4) to give it opportunity to eliminate the grounds for setting aside.
The Court recognised a very limited power to modify only within the confines of Section 34 — essentially severance of independently identifiable bad portions from the rest.
IV. Table of Key Authorities
V. Summary
The scope of a court's power under Section 34 is, in the Supreme Court's own words, "highly constricted." The court does not sit in appeal. It cannot re-appreciate evidence, substitute its own view for a plausible view of the arbitrator, or modify the award. Interference is permissible only on the specific, limited grounds enumerated in Section 34(2) and (2A) — principally, fraud/corruption, contravention of fundamental policy of Indian law, conflict with the most basic notions of morality/justice, and (for domestic awards only) patent illegality going to the root of the matter. The most frequently invoked practical ground is perversity — a finding based on no evidence, or one that ignores vital evidence — but even this must be distinguished from mere disagreement with the arbitrator's assessment of evidence, which is impermissible.