To Challenge an Arbitration Award on Merits, You Must File a Set-Aside Case: You Can’t Raise It During Enforcement- SC
How Do You Challenge an Arbitration Award: SC Sets Out the Rules
If an arbitral award goes against you, you cannot wait, watch, and later complain when the other side goes to the Commercial High Court to enforce it. The Supreme Court has made it clear that a party who is unhappy with an arbitral award must file an application to set it aside under Section 32(1) of the Arbitration Act within sixty (60) days of receiving the award.
If you miss that deadline, the door to challenge the award on merits shuts completely. You cannot revive the dispute later when the winning party goes to the Commercial High Court to enforce the award. At that stage, you can only raise very limited objections – for example, that the enforcement application has not complied with Section 31(1)-(4) (wrong or uncertified award, wrong agreement, out of time, etc.).
The Supreme Court was very direct: “Other than the aforesaid, a party who is dissatisfied with an arbitral award has no right to participate in the enforcement application.”
The Court also reminded the High Court what it must do when there is no valid setting-aside application: under Section 31(6), the High Court must “proceed to file the award and give judgment according to the award.” The only exception, the Court said, is in “extremely exceptional situations” where the High Court has a genuine doubt about whether the award or arbitration agreement is even authentic – in which case it may call for extra documents. But that safeguard is narrow.
The Case Behind the Ruling
The story began with a finance company leasing a vehicle to a customer. When the customer defaulted on installments, the dispute went to arbitration, as required by the Agreement. The customer attended several hearings, discussed settlement, and then stopped participating. The arbitrator proceeded ex parte, and an award was delivered ordering her to pay arrears and either return the vehicle or pay its residual value.
Crucially, the customer did not file any application under Section 32 (set aside application) within the 60-day limit to set aside the award.
Later, when the finance company moved the Commercial High Court to enforce the award, the customer filed objections claiming settlement and fraud. The High Court accepted these allegations enough to call for more arbitration transcripts and finally refused to enforce the award.
The finance company appealed. The Supreme Court reversed the High Court and laid down a very clear framework on what you can and cannot do after an arbitral award is made.
What the Supreme Court Decided
Justice Arjuna Obeyesekere summarised the law at the end of the judgment in seven key points.
“…if a party wishes to set aside a domestic award, that can only be done by way of an application filed in terms of Section 32(1) of the Act, and in no other manner…”
“(1) A party who is dissatisfied with an arbitral award and who wishes to challenge such award must make an application to set aside such award in terms of Section 32(1) of the Act;
(2) Such application must be made within sixty days of the receipt of the award;
(3) If an application for setting aside has been made, the burden of proving the existence of the grounds set out in Section 32(1) is with the party seeking to set aside the award;
(4) Where an application for setting aside and an application for enforcement have been made, Court shall consolidate the two applications, consider the grounds pleaded by the party seeking to set aside provided they are within Section 32, as well as consider whether the provisions of Section 31 have been complied with;
(5) A party who has not made an application for the setting aside of an award is only entitled to receive notice of an application made to enforce such award, and the opportunity to file a statement of objections, with the contents of such objections being limited to non-compliance with the requirements of Section 31(1) ;
(4), and the burden of proving such matters being with the party claiming such noncompliance;
(6) Other than the aforesaid, a party who is dissatisfied with an arbitral award has no right to participate in the enforcement application;
(7) In considering an application under Section 31(1), the High Court may call for further material if it has any doubt regarding the authenticity of the agreement to arbitrate and/or the award but that must be done only in extremely exceptional situations, and for good reason….” – Justice Arjuna Obeyesekere
How the Supreme Court Rejected the High Court’s Approach
The Supreme Court decided that the High Court went too far. The High Court had already found that the enforcement application complied with Section 31(1)-(2) and that there was no application under Section 32. At that point, under Section 31(6), the High Court should have filed the award and entered judgment according to it, unless it had a real reason to doubt the documents.
Instead, the High Court: allowed the respondent to raise substantive objections (fraud and alleged settlement) even though no Section 32 application had been filed; got “disturbed” by unproven allegations of fraud; demanded the transcript of the arbitration proceedings; and then dismissed enforcement solely because it was not satisfied with those proceedings.
The Supreme Court pointed out that: The respondent had admitted receiving notices and attending the early hearings. She never moved to set aside the ex parte order or the award. She failed to prove fraud or settlement. The arbitration proceedings were in fact already in the High Court record and showed no settled matter.
There was no basis to doubt the authenticity of the award or the arbitration agreement. Therefore, there was no justification for calling for extra material, and no legal basis to refuse enforcement. The Supreme Court set aside the High Court judgment and directed the Commercial High Court to act under Section 31(6) and enter judgment according to the award.
The Principle Behind All This – Party Autonomy and Minimal Court Interference
The Supreme Court placed this entire framework within the principle of party autonomy in arbitration: Parties choose arbitration in their contract. They choose to be bound by the decision of a tribunal instead of going through the ordinary courts. Because of that choice, the law gives the tribunal wide authority and gives the courts limited, carefully defined roles.
The Court described party autonomy as the “golden thread” that runs through arbitration, and emphasised “minimal curial intervention” – meaning courts should not become a second forum for re-trying the same dispute just because one party is unhappy.
“…a person who has had an arbitral award made against such person in an arbitration conducted in Sri Lanka, and who has not filed an application to set aside such award is only entitled to notice of the application for enforcement, and the opportunity to file a statement of objections limited to non-compliance with the provisions of Section 31(1) – (4). Such person shall not have the right to object to the enforcement of such application on any other ground including those grounds set out in Section 32(1), and/or participate in any other manner in such application. Thus, where an application has not been filed for the setting aside of an award, the power of the High Court has been circumscribed by Section 31 and the High Court shall proceed to file the award in terms of Section 31(6) provided it is satisfied that the requirements in Section 31(1)- (4) have been complied with….” – Justice Arjuna Obeyesekere
“…Just as much as the Act providing the successful party an avenue to enforce such an award, the Act has provided a party against whom an award has been made the opportunity of setting aside such an award. It is up to such a person to be vigilant and exercise the right conferred on him by law, if he so desires. If he fails to do so, he cannot thereafter try and enter through the back door and frustrate the very object that was sought to be achieved by the parties at the time they selected arbitration as their preferred mode of dispute resolution….”
Case No: SC Appeal No. 43/2024 [Decided on 24.07.2025]
Before: Murdu N. B. Fernando, PC, CJ., Janak De Silva, J. , Arjuna Obeyesekere, J.
