Enforcement of Arbitral Award [Detailed research on Section 36 of A&C Act,1996]

Points discussed below :

  1. Introduction to Arbitration
  2. What is an Arbitral Award
  3. Who passes the Arbitral Award?
  4. What does Enforcement of Arbitral Award means?
  5. Enforcement of arbitral award and it’s detailed procedure.
  6. Conditions for Enforcement of an Arbitral Award
  7. Amendments of Section 36. (Enforcement of Arbitral Award)
  8. Conclusion

Abstract

Arbitration right now is a booming sector of Law. Nowadays contracts and business agreements mandatorily have an arbitration clause mentioned under it.

Section 36 of the Arbitration & Conciliation Act, 1996 lays down the rules and regulations behind the Enforcement of an Arbitral Award. Once an award is passed by the Arbitral Tribunal it is the duty of the award-holder to make sure that the award passed is properly executed in order to obtain benefits of it.

Enforcement of Arbitral Award has gone through evaluations since the year 1940, when the Act itself came into existence. It has been amended through years after that.

This research paper talks about in details about the Enforcement of Arbitral Award and mentioned procedures about it.

In India, a foreign judgment may be implemented either through execution proceedings or through a suit. An arbitral award is an arbitration tribunal’s decision on the merits of an arbitration tribunal and is equivalent to a court judgment. Arbitration is particularly popular in the commercial sphere as a means of resolving disputes. One of the reasons for this is that it is often easier to enforce an arbitration award in a foreign country in international trade than to enforce a court judgment. The implementation of international arbitration awards in India is regulated by the Arbitration and Conciliation Act, 1996 through the New York Convention and the Geneva Convention, and a non-conventional award in India will be enforceable on the grounds of justice, equality and good conscience under common law.

Introduction To Arbitration

Alternative Dispute Resolution mechanism provides scientifically developed techniques to Indian judiciary which helps in reducing the burden on the courts. ADR provides various modes of settlement including, arbitration, conciliation, mediation, negotiation and Lok Adalat.

[1]Arbitration is a procedure in which a dispute is submitted, by agreement of the parties, to one or more arbitrators who make a binding decision on the dispute. In choosing arbitration, the parties opt for a private dispute resolution procedure instead of going to court. The number of pending cases in India makes the use of Arbitration fruitful. It not only escalates the process to get a solution to any legal problem but also it makes it more easier for the parties to the contract to resolve any dispute in lesser time.

Arbitration is Consensual. It can only be in existence when both the parties agree that they want an Arbitration Process.

The Parties to the Arbitration can choose their own arbitrators. Just because the parties to the agreement itself are choosing who the Arbitrator will be, the responsibility of the Arbitrator increases even more in terms of his ethics and unbiased conclusions. Also the Arbitration itself is a very confidential process

[2]The arbitration flourished in India since the end of nineteenth century. It was first recognised in the year 1899, but it was to extent of only three presidencies of India, Bombay (now Mumbai), Madras and Calcutta (now Kolkata). Later it was confined in Section 89 and Schedule II of Civil Procedure Code, 1908. Then in the year 1940 the Arbitration Act was reformed and the old Act of 1899 was repealed. The 1940 Arbitration Act was a reflection of English Arbitration Act 1934. Then through years the 1940 act was reformed and amended in many ways, where several new laws were introduced and old laws were revised too.

What is an Arbitral Award?

Arbitral awards refer to the decision of an arbitral tribunal, whether in a domestic or international arbitration. Arbitral awards include interim awards.

Domestic awards are governed by Part I whereas foreign awards are governed by part II of the Arbitration and Conciliation Act of India. A domestic award is an award passed under the provisions of Section 2 to 43 of the Act.

A domestic award is a result of domestic arbitration, hence it confines itself to the territory of India, the parties should have a nexus or birth to Indian origin, basically territory comes into play in order to asses a domestic arbitration. Award given by an arbitral institution in India or an award even if given by a foreign state for a dispute where both the parties are of an Indian origin and the nationality is also governed by the Indian laws shall also come within the purview of domestic arbitration.[3]

A Foreign award as per section 44 means an arbitral award which relates to differences relating to the matters considered as commercial under the law in force in India.[4] Hence it’s safe to say that a ‘Foreign Award’ means an arbitral award made as a result of foreign arbitration not being a domestic one.

Who Passes the Arbitral Award?

Under the 1940 Act of Arbitration, sec 13 has provisions where it talks about the power of an Arbitrators or (then Umpire) where it mentions that the Arbitrator has the power to make an award conditional or alternative [Sec 13, sub-sec (c)] .

After amendment the section 13 of the old act has been revised under section 17 of the 1996 Act. It has detailed provision regarding the power of an Arbitral Tribunal & Arbitrator as well.

What does Enforcement means?

The regulation and execution of decrees in India is regulated by the Civil Procedure Code, 1908 (“CPC”), while the arbitral award procedure in India is governed mainly by the Arbitration & Conciliation Act, 1996 (“Act”) and the CPC.

Section 36 of the Arbitration and Conciliation (Amendment) Act, 2015 deals with the enforcement of domestic awards. It provides that an award shall be enforced once the time for making an application to set aside the award under Section 34 of the Act has expired. Such award shall be enforced in accordance with the provisions of the Code of Civil Procedure, 1908, in the same manner as if it were a decree of the court. 

Enforcement of an Award and It’s Detailed Procedure [5]

As an Indian Court Decree, both domestic and foreign awards are enforced through Civil Procedure Code,1908. However the difference is dependent on the seat of arbitration. Seated arbitral award (“domestic award”) would be governed by Part I of the Act, enforcement of foreign — seated awards (“international award”) would be governed by Part II of the Act.[6]

  • Enforcement of Domestic Arbitral Award :  Until filing for compliance and execution, an award recipient would have to wait 90 days after receiving the award. The award may be questioned during the transitional period in compliance with Section 34 of the Act. When the above time expires, if a court considers the award enforceable at the execution point, the authenticity of the arbitral award cannot be questioned any further. Before the recent Law on Arbitration and Conciliation (Amendment),2015 (Amendment Act), a petition to set aside an award could equate to a stay in the award execution proceedings. Nevertheless, a party opposing a award would have to transfer a separate application to demand a stay on an award execution by virtue of the Amendment Act.
  • Enforcement of Foreign Award :   India is a signatory to Geneva Convention on the Execution of Foreign Arbitral Awards, 1927 (“Geneva Convention”) and Convention on the Recognition and Enforcement of Foreign Arbitral Awards, 1958 (“New York Convention”).

If a party receives a binding award from a state signing the New York Convention or the Geneva Convention and the award is made in a territory recognized by India as a convention country, the award would then be enforceable in India. In India, implementing a foreign award is a two-stage procedure begun by filing a request for execution. Initially, a judge will decide if the award met with the law’s criteria. Once an award has been considered enforceable, it can be applied as a court order. At this point, however, parties should be aware of the various obstacles that may occur, such as frivolous complaints from the opposing party, and provisions such as bringing the award’s original / authenticated copy and the underlying agreement before the court.

Condition of Enforcement Of An Arbitral Award [7]

A party may use the following grounds to contest an award. If the other party shows this, such an award would be made unenforceable.

  1. According to the statute, the parties to the settlement were under any disability.
  2. The agreement in question did not comply with the law to which the parties are subject or with the law of the country in which the award was made.
  3. The party did not receive a proper notice of appointment from the arbitrator or the arbitral proceedings or was otherwise unable to bring his case before the arbitral tribunal.
  4. The reward deals with a distinction that does not fall within the terms of the agreement.
  5. Award contains decisions on matters beyond the scope of being referred arbitration.
  6. The arbitral proceedings did not comply with the agreement.
  7. The composition of the arbitral body or the arbitral proceedings does not comply with the law of the country in which the arbitration took place.
  8. The award (precisely a foreign award) was not made binding on the parties or was set aside or revoked by the competent authority of the state in which the award was made or by the statute of which it was made.
  9. Under Indian law, the subject matter of the dispute cannot be resolved by arbitration. Enforcing the award would be contradictory to India’s public policy.

Amendments Of Sec 36 (Enforcement of Arbitral Award)

Section1940[1]1996[2]201520192021
Sec. 16 Power of Court to remit the award.Power to remit award. (1) The Court may from time to time remit the award or any matter referred to arbitration to the arbitrators or umpire for reconsideration upon such terms as it thinks fit- (a) where- the award has left undetermined any of the matters referred to arbitration, or where it determines any matter not referred to arbitration and such matter cannot be separated without affecting the determination of the matters referred; or (b) where the award is so indefinite as to be incapable of execution; or (c) where an objection to the legality of the award is apparent upon the face of it., (2) Where an award is remitted under sub- section (1) the Court shall fix the time within which the arbitrator or umpire shall submit his decision to the Court: Provided that any time so fixed may be extended by subsequent order of the Court. (3) An award remitted under sub- section (1) shall become void on the failure of the arbitrator or umpire to reconsider it and submit his decision within the time fixed.              
Sec. 36 Enforcement of Arbitral AwardAmended(1) Where the time for making an application to set aside the arbitral award under section 34 has expired, or such application having been made, it has been refused  then, subject to the provisions of sub-section (2), such award shall be enforced in accordance with the provisions of the Code of Civil Procedure, 1908 (5 of 1908), in the same manner as if it were a decree of the court. (2) Where an application to set aside the arbitral award has been filed in the Court under section 34, the filing of such an application shall not by itself render that award unenforceable, unless the Court grants an order of stay of the operation of the said arbitral award in accordance with the provisions of sub-section (3), on a separate application made for that purpose. (3) Upon filing of an application under sub-section (2) for stay of the operation of the arbitral award, the Court may, subject to such conditions as it may deem fit, grant stay of the operation of such award for reasons to be recorded in writing: Provided that the Court shall, while considering the application for grant of stay in the case of an arbitral award for payment of money, have due regard to the provisions for grant of stay of a money decree under the provisions of the Code of Civil Procedure, 1908 (5 of 1908).In the Amendment of 2015 the sub-sec (1) of the said section has been revised as “ where the time for making an application to set aside the arbitral award under section 34 has expired, then subject to the provisions of sub-sec (2), such award shall be enforced in accordance with the provisions of the Code of Civil Procedure, 1908 (5 of 1908), in the same manner as if it were a decree of the court.   In the year 2021, a set of new provisions has been added to this section. That is as followed – 2[Provided further that where the Court is satisfied that a Prima facie case is made out that,-(a) the arbitration agreement or contract which is the basis of the award; or (b) the making of the award,was induced or effected by fraud or corruption, it shall stay the award unconditionally pending disposal of the challenge under section 34 to the award. Explanation.–For the removal of doubts, it is hereby clarified that the above proviso shall apply to all court cases arising out of or in relation to arbitral proceedings, irrespective of whether the arbitral or court proceedings were commenced prior to or after the commencement of the Arbitration and Conciliation (Amendment) Act, 2015 (3 of 2016).

Conclusion

It is to say in a nutshell that Arbitration itself in India is a very booming sector. Parties to any agreement is often opting for ADR to resolve the disputes in between. Nonetheless it is needless to say that the award given in a arbitration procedure is also beneficial to the aggrieved party in general. The process is considered to be extremely personal procedure, where it is absolutely worry free. The enforcement of such award passed by an Arbitrator is another worry free process and is discussed above in details.


[1] https://indiankanoon.org/doc/1052228/

[2] https://legislative.gov.in/sites/default/files/A1996-26.pdf


[1] https://www.wipo.int/amc/en/arbitration/what-is-arb.html#:~:text=Arbitration%20is%20a%20procedure%20in,instead%20of%20going%20to%20court.

[2] https://www.barandbench.com/columns/history-and-development-of-arbitration-law-in-india#:~:text=The%20Act%20of%201899%20and,Code%20of%20Civil%20Procedure%2C%201908.

[3] Shodhganga, ENFORCEMENT OF FOREIGN ARBITRAL AWARDS IN INDIA, shodhganga (2016) http://shodhganga.inflibnet.ac.in/bitstream/10603/110130/16/16_chapter%206.pdf.

[4] Because it is mandatory that the relationship falls within the meaning of the word “Commercial” under the law in force in India.

[5] https://blog.ipleaders.in/enforcement-arbitral-awards/#_ftn30

[6] Part II specifically deals with foreign awards which are in consonance with the provisions of the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, 1958 or Convention on the Execution of Foreign Arbitral Awards, 1927.

[7] https://blog.ipleaders.in/enforcement-arbitral-awards/#_ftn30

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