Enforcement Of Award Under Arbitration And Conciliation Act, 1996

This Article is written by Shivangi Singh & this article discuss the concept of Enforcement of Award under Arbitration and Conciliation Act, 1996

Introduction

The procedure in the Indian judicial system for achieving vital justice in society, like the Enforcement of the Arbitral Award, plays a crucial role. One must enforce this Award with the Court’s help, or it will remain on paper only. Several questions are a barrier to approaching the proper Court with jurisdiction for enforcing the said Award. To pass an execution order, one must approach the Court as directed under the Code of Civil Procedure of 1908. Section 36 of the Arbitration and Conciliation Act of 1996 enforces an arbitral award like a court decree. This article shall give the reader an in-depth analysis of the provisions governing the aspect of the Award, along with related provisions and case laws.

The 2015 Arbitration and Conciliation (Amendment) Act section 36, relates to enforcing arbitration awards. According to the law, an arbitration award can be enforced once the time limit for applying to set it aside under Section 34 of the Act has expired. This Award will be enforced like a court decree, using the Code of Civil Procedure provisions, 1908. The Amendment Act added sub-clause (2) to Section 36. This provision clarifies that applying to set aside an arbitral award under Section 34 does not automatically stay the Enforcement of the Award. Only a separate application can stay such an award. If, on such an application being filed, the Court grants an order of stay of the arbitral Award, it shall record its reasons in writing. This provision would act as a deterrent against frivolous applications seeking to set aside arbitral awards, and it will also permit the courts to impose terms on the party challenging the Award, including the power to order deposit of amounts, prior to admission of the stay application.

It is important to note that, under the Arbitration and Conciliation Act of 1996 (Old Act), the arbitral Award could only be enforced after the deadline for making an application to set aside the Award under Section 34 had passed or if such an application was made but then refused. It is important to note that when the Court issues notice on an application under Section 34, it automatically stays the Enforcement of the Award in question. There was no specific provision stating that a separate application before the Court needs to be filed to obtain an order of stay of the operation of the Award.

As an application is made to set aside the arbitral Award under Section 34, which has expired, it shall be subjected to sub-section (2), and the Award shall be further enforced in compliance with the Code of Civil Procedure of 1908, as it will be done in the same manner as a decree of the Court.
Section 34 talks about setting aside the arbitral Award that is filed in Court, and if filed, it shall not make the Award enforceable until and unless the Court gives direction in the form of a stay on the arbitral Award in compliance with the subsection (3), which talks about an application that is made separately for the said purpose.
Suppose the application is filed under sub-section (2) for putting a stay on the arbitral Award. In that case, the Court can further give directions upon the stay for the Award concerning the reasons to be recorded in writing.

Essential Elements of Arbitral Award  It should be in written form.

The Arbitrator should sign the document.
Shall contain the reason for the passing of the Award.
Date and place at which the arbitration took place.

After receiving an arbitral award, the recipient must wait 90 days before filing for compliance and execution. Challenging the Award while in the transitional period is possible, as per Section 34 of the Act. However, once this period has passed, if a court deems the Award enforceable at the execution stage, its authenticity cannot be further questioned. Before the recent Amendment Act, a petition to set aside an award could lead to a stay in the award execution proceedings. However, if a party wishes to oppose an arbitral award, they must file a separate application to request a stay of execution under the Amendment Act.

India ratified the 1927 Geneva Convention, Enforcement of Foreign Arbitral Awards, and the 1958 Convention on Recognition.

Suppose a party receives a legally binding award from a state that has signed either the Geneva Convention or the New York Convention. The Award is made in the territory India recognizes as a convention country. In that case, the Award can be enforced in India. In India, implementing a foreign award involves a two-stage procedure beginning with filing a request for execution. A judge will then determine if the Award meets the law’s criteria.

The rationale behind Section 34:

The position of an arbitrator has been explained quite a few times by the Supreme Court. The decisions rendered by an arbitral tribunal have a binding nature. Therefore, its verdict can hardly be questioned. Nevertheless, at times, the arbitral tribunal may fail to deliver justice. The law’s primary goal is to deliver justice to ensure that the Court of law has been bestowed with the power of intervention to indemnify the aggrieved party.

Enforcement under the New York Convention

Chapter I of Part II (Sections 44-52) of the Arbitration and Conciliation (Amendment) Act, 2015, deals with foreign awards passed under the New York Convention.

According to the New York Convention, a “foreign award” is an arbitral award that deals with disputes between individuals arising from legal relationships, whether they are contractual or not. These disputes must be considered commercial under Indian law, and the Award must have been made on or after October 11, 1960 –

By a written agreement for arbitration to which the Convention outlined in the First

Schedule is applied

In territories where reciprocal provisions have been made, the Central Government may declare the territories to which the Convention applies in the Official Gazette.

Enforcement under the Geneva Convention

Chapter II of Part II (Sections 53-60) of the Arbitration and Conciliation (Amendment) Act, 2015, refers to the provisions related to foreign awards issued under the Geneva Convention. As per the Geneva Convention, a ‘foreign award’ is an arbitral award that deals with commercial matters under Indian law. The Award must have been made after July 28, 1924 –

By an agreement for arbitration, the Protocol outlined in the Second Schedule shall apply.
When one person is subject to the jurisdiction of a government that has signed the Convention outlined in the Third Schedule, and the other person is subject to the jurisdiction of another government that has also signed the Convention. Both parties may be declared as parties to the Convention by the Central Government. It is done through a notification in the Official Gazette, provided that reciprocal provisions have been made.
If the Central Government is content that reciprocal provisions have been made, they may declare certain territories subject to a particular Convention. However, for this Chapter, an award will not be considered final if ongoing proceedings challenge its validity in whichever country it is being issued.

Conditions For Enforcement Of Arbitral Awards: Domestic As Well As Foreign

If the following condition is proved, the Enforcement of foreign award may be refused, and a domestic award may be set aside. The individuals involved in the agreement had some limitations that prevented them from fully carrying out the terms of the agreement.
The agreement in question may not be subject to the law chosen by the parties or the law of the country where the Award was granted, particularly in the case of foreign awards.
The appointment of the Arbitrator’s proper notice or arbitral proceedings was not given, or the party against whom the Award was rendered was unable to present their case.
The Award is ultra vires the agreement or submission to arbitration.
The Award includes rulings on issues that are not covered by the arbitration submission.
The arbitral procedure or the arbitral tribunal agreement is beyond the legal authority.
The arbitral procedure or arbitral tribunal composition is not by the law of the country where the arbitration occurred.
The foreign Award has not become has been set aside or is binding or suspended by a competent authority under the law of the country in which it was made.
The dispute cannot be resolved through arbitration under Indian law.
The enforcement of the Award would violate India’s public policy.

Also, Before applying for execution of foreign awards, the following requirements should be adequately adhered to, as has been laid down in the A&C Act, which the Hon’ble Supreme Court clarified in the judgment of PEC Ltd. v/s. Austbulk Shipping.

Original awards must be presented in the proper form or a duly authenticated copy, as required by the country in which they were issued.

Original agreement or duly certified copy.

The evidence necessary to prove the Award is foreign, wherever applicable.

CONCLUSION

The preparatory works of the UNCITRAL Model Law clarify that the drafters intended for parties with grievances against an arbitral award to seek remedies from the arbitral tribunal for rectifiable defects or to have the Award set aside as the only available options. The drafters intended to avoid clothing the Court’s hearing challenges under Article 34 of the UNCITRAL Model Law with the power to vary or modify the arbitral awards. It is for this reason that the UNCITRAL Secretariat and the Working Group initially sought to engraft provisions setting out the consequences of setting aside the arbitral Award, which provided that, on setting aside of the arbitral Award, the parties involved may start fresh arbitration proceedings for adjudication of the dispute. Further, there was also a proposal to exclude the time from commencement of arbitration till the date of setting aside the arbitral Award for reckoning claims if the arbitral Award was to be ultimately set aside. These proposals were not adopted since such provisions were needed to deal sufficiently with procedural questions arising in various legal systems. However, it would have been wholly unnecessary to consider proposals to incorporate such provisions if the courts had the power to modify or vary the arbitral Award and settle the dispute between the parties by varying or modifying the findings of the Arbitral Tribunal. Section 34 of the Arbitration Act is pari materia to Article 34 of the UNCITRAL Model Law.

Moreover, since Section 34 of the Arbitration Act was enacted to give effect to the UNCITRAL Model Law, an interpretation in conformity with Article 34 of the UNCITRAL Model Law should be adopted. Hence, a Section 34 Court can modify or vary the findings in the arbitral Award. If conditions set out in sub-sections (2) and (2-A) of Section 34 are satisfied, only then the arbitral award can be set aside.

However, nothing in the Arbitration Act prohibits partial setting aside of the arbitral awards. Therefore, modification or variation of the arbitral Award by partially setting aside the arbitral Award is permissible. The doctrine of severability and setting aside the arbitral Award in part only holds good if the wrong parts of the arbitral Award are severable from the sustainable parts. Suppose the right parts of the arbitral Award must be severed from the sustainable parts of the Award. In that case, the Court will have no option but to set aside the entirety of the arbitral Award, leaving parties to commence fresh arbitration proceedings.