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Arbitral award and its execution

Introduction

The arbitration is governed by “The Arbitration and Conciliation Act 1996,” this act was passed based on the “United Nations Commission on International Trade Law (UNICTRAL) model law on International Commercial Arbitration.” This model law provides uniform procedures relating to arbitration and the specific needs of the International Commercial Arbitration Practice. An important feature of the model law is that they have harmonized concepts on arbitration and conciliation of the different legal systems of the world and thus contains provisions that are designed for universal application.

What is arbitration

Arbitration is the procedure for the settlement of issues between parties, avoiding recourse to courts for the determination of the rights and obligations of the parties to a contract. The reasons for the development of arbitration are mainly because the courts below take more time to determine the rights of the parties as they were already overburdened with a variety of cases. According to “sec. 2(1)(a) of the Arbitration and Conciliation Act 1996”- “Arbitration means any arbitration whether or not administered by a permanent arbitral institution.” This section does not define the meaning of arbitration but it must be understood as adjudication and decisions on the dispute referred by the parties to a contract (arbitration contract) to the arbitrator or arbitrators, for their decisions under the mechanism of arbitration, as provided in the Act.

Arbitral award

The arbitral award is the final decision of arbitrators, which is passed by the arbitrators after hearing both the parties, and the conclusion will be the called arbitral award. “The Arbitration and Conciliation Act, 1996 sec. 2(1)(c)” defines arbitral award keeping given general meaning stated in the dictionary hence arbitral award includes the interim award. Thus, the act has not defined the term award. “Undersec.17 of the Act,” the Arbitral Tribunal may pass interim order or award. While the proceeding is pending before an arbitrator or tribunal interim orders may be passed under “sec. 17 of the Act.” So,”sec.17” is providing discretion to the tribunal or arbitrator to pass orders during the proceeding.

Sec. 31” of the Act providing that the award made should be written properly and signed by the arbitrators giving proper reasons for such passing award and provided such conditions which are reasonable for the proper adjudication of the matter.

Finality of an arbitral award

The arbitral award can be challenged by applying to the courts. The courts defined under“sec.(2)(e)” accordingly the courts in cases of domestic arbitration means the Principal Civil Court of original jurisdiction in a district and includes the High Court in the exercise of its ordinary civil jurisdiction having help this is diction jurisdiction to decide the question forming the subject matter of the arbitration, if the same had been the subject matter of the suit, but does not include any civil court of a grade inferior to such principal civil court or any court of small causes. In the case of international arbitration, the court will be the High Court as provided in“sec.2(1)(e).” The limitation for applying is 3 months before the court as provided under “sec.33” but in case reasonable reasons are given then the court may allow the further extension of 30 days but not more than that.

Types of the arbitral award

The arbitral award is of two types:

  1. Domestic arbitral award
  2. Foreign arbitral award

The domestic award is passed by the domestic tribunal while the award passed by the international arbitral tribunal is a foreign arbitral award.

The domestic arbitral award is executed according to “sec. 36” of the “Arbitration and Conciliation Act” while the foreign award is enforced under “sec. 49 and sec.58” of the Act. Also, the courts will differ in case the party challenges the award passed by the tribunal. The court for the international award is the High Court while the domestic award is the principal court of original civil jurisdiction.

Execution of arbitral award

  1. Execution of domestic arbitral award:

The arbitral award by the domestic tribunal is executed by“sec.36” of the Act. Under “sec. 36” the enforcement of the award is to take place after the expiry of the time to make an application to set aside the award or such application has been refused. After the award made is final then it is executed by the “Code of Civil Procedure” as it is a decree.

Sec.36” provides as follows:

“36. Enforcement (1) 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-section (2), such award shall be enforced by 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 by the provisions of sub-section (3), on a separate application made for that purpose.

(3) Upon the filing of an application under sub-section (2) for a stay of the operation of the arbitral award, the Court may, subject to such conditions as it may deem fit, grant a 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).

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 affected 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 about arbitral proceedings, irrespective of whether the arbitral or court proceedings were commenced before or after the commencement of the Arbitration and Conciliation (Amendment) Act, 2015 (3 of 2016).”

  1. Execution of foreign arbitral award:

According to “sec.49” where the court is satisfied that the foreign award is enforceable then it is the decree of the court. The “sec. 48” lays down the condition for enforcement of foreign awards as:

“(1) Enforcement of a foreign award may be refused, at the request of the party against whom it is invoked, only if that party furnishes to the court proof that—

(a) the parties to the agreement referred to in section 44 were, under the law applicable to them, under some incapacity, or the said agreement is not valid under the law to which the parties have subjected it or, failing any indication thereon, under the law of the country where the award was made; or

(b) the party against whom the award is invoked was not given proper notice of the appointment of the arbitrator or the arbitral proceedings or was otherwise unable to present his case; or

(c) the award deals with a difference not contemplated by or not falling within the terms of the submission to arbitration, or it contains decisions on matters beyond the scope of the submission to arbitration:

Provided that, if the decisions on matters submitted to arbitration can be separated from those not so submitted, that part of the award which contains decisions on matters submitted to arbitration may be enforced; or

(d) the composition of the arbitral authority or the arbitral procedure was not by the agreement of the parties, or, failing such agreement, was not by the law of the country where the arbitration took place; or

(e) the award has not yet become binding on the parties, or has been set aside or suspended by a competent authority of the country in which, or under the law of which, that award was made.

(2) Enforcement of an arbitral award may also be refused if the Court finds that—

(a) the subject matter of the difference is not capable of settlement by arbitration under the law of India; or

(b) the enforcement of the award would be contrary to the public policy of India.

Explanation 1. —For the avoidance of any doubt, it is clarified that an award conflicts with the public policy of India, only if, —

(i) the making of the award was induced or affected by fraud or corruption or was in violation of section 75 or section 81; or

(ii) it is in contravention with the fundamental policy of Indian law; or

(iii) it conflicts with the most basic notions of morality or justice.

Explanation 2. —For the avoidance of doubt, the test as to whether there is a contravention with the fundamental policy of Indian law shall not entail a review on the merits of the dispute.

(3) If an application for the setting aside or suspension of the award has been made to a competent authority referred to in clause (e) of sub-section (1) the Court may, if it considers it proper, adjourn the decision on the enforcement of the award and may also, on the application of the party claiming enforcement of the award, order the other party to give suitable security.”

Similarly, “sec. 58” provides that where the court is satisfied that the foreign award is enforceable under this chapter, the award shall be deemed to be a decree of the court. And “sec.57” provides for a condition that is like that of ”Sec.57.”

So, both the provision was there which can be used to enforce the foreign awards but before that, the courts check whether the country is the official signatory of “the Geneva Convention and New York Convention.”

Conclusion

The execution of the awards in India is governed the same as the decree and the provision regarding the decree will apply to it but the major problem in its execution is that the execution will be generally carried out by administrative officers of the district which generally takes time the due to which the main purpose of the Act becomes infructuous. Therefore, there is a need to improve the execution proceeding by setting up a distinct execution commission consisting of person experts in this field. Except for execution, the Act provides all the provisions that help fasten the procedure of arbitration.

Author(s) Name: Ayush Shukla (Pt. Ravishankar University Raipur (C.G))