Section 31(3) Arbitration and Conciliation Act, 1996 mandates that the arbitral award shall state the reasons upon which it is based, unless the parties otherwise agree. The Supreme Court of India refused to accept an argument that this stipulation is merely a formality and further, disagreed with certain views expressed by high courts that summarising the submissions made by the parties is good enough for the compliance of the provisions.
The Supreme Court noted that “reasons are the links between the materials on which certain conclusions are based and the actual conclusions”, and held that “The requirement of reasons in support of the award under Section 31(3) is not an empty formality. It guarantees fair and legitimate consideration of the controversy by the arbitral tribunal. It is true that arbitral tribunal is not expected to write judgment like a court nor it is expected to give elaborate and detailed reasons in support of its finding/s but mere noticing the submissions of the parties or reference to documents is no substitute for reasons which the arbitral tribunal is obliged to give. Howsoever brief these may be, reasons must be indicated in the award as that would reflect thought process leading to a particular conclusion. To satisfy the requirement of Section 31(3), the reasons must be stated by the arbitral tribunal upon which the award is based; want of reasons would make such award legally flawed.”
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