Enforcement of Award under Arbitration and Conciliation,1996 | Law Optional Notes for UPSC PDF Download

What is an Arbitral Award?

• When arbitration concludes, an arbitral award is issued by the tribunal, settling the disputes between parties. This award is legally binding, establishing rights and duties. The losing party, if compliant, fulfills the award voluntarily. However, if disputes arise regarding the tribunal's decision, legal action can be taken.
• If the losing party contests the award, they can seek court intervention under section 34 of the Arbitration and Conciliation Act, 1996. The court reviews the case based on specified grounds.
• If the losing party refuses to comply, the award-creditor can enforce the award through legal means.
• Even if an application to set aside the award is filed, the award remains enforceable unless a separate stay order is granted by the court. Once finalized, the award is executory like a court decree.

Arbitral awards can be categorized as domestic or foreign:

• Domestic award
• Foreign award

Domestic Arbitral Award

Domestic awards fall under Part 1 of the Arbitration and Conciliation Act, 1996, distinct from international awards. Challenges to domestic awards can be made under section 34 of the Act. This category also includes international awards made within India's territory but involving foreign parties.

Foreign Arbitral Award

Foreign awards are issued in arbitrations outside India. Section 48 of the Act aligns with the New York Convention's Article V. Enforcement of foreign awards in India is limited by section 48 grounds. Indian courts do not review foreign awards on merit; enforcement can be refused based on specific grounds mentioned in section 48(1).

Enforcement of an Arbitral Award

• Section 36 explains the enforcement process of an arbitral award after the time limit for applying under section 34 has passed. The award is enforced following the procedures outlined in the Code of Civil Procedure 1908, treating it akin to a court decree.
• For an arbitral award to be enforced, it must be both final and valid. Once an award is final, it prevents the winning party from bringing new claims and the losing party from re-opening the case with hopes of a more favorable outcome based on different circumstances.
• According to section 35 of the Act, the arbitral award is binding and final on the parties and those claiming under them.
• The arbitration process begins when parties enter into an agreement, not automatically under section 35 of the 1996 Act. This initial agreement does not constitute an award and does not imply that the options for awards are permanent.
• An award can be challenged under section 34 of the Act. If not challenged, it becomes final and is treated as a court decision under section 35, with no jurisdictional disputes allowed except those related to the arbitration agreement.

Enforcement of Domestic Award

• An order issued by the Arbitral Tribunal through formal arbitration in India is considered a court order and can be enforced under the provisions of the Arbitration and Conciliation Act, similar to a court order, specifying its applicability.
• Once the arbitral award is finalized and operational, the awardee must apply to the debtor before a commercial court or High Court, based on jurisdiction. If the award is challenged during this time, the court can provide interim protection and grant relief until the challenge is resolved.

Enforcement of Foreign Award

• India is a signatory to the Geneva Convention on the Execution of Foreign Arbitral Awards, 1927, and the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, 1958. An external arbitral award can be enforced in India if it complies with these conventions and is from a country recognized by India as a reciprocating territory.
• Enforcing a foreign award in India involves a two-stage process: first, ensuring compliance with the Act's requirements, and second, enforcing the award as a court decision.

Requirements for the Enforcement of Foreign Awards

• Submission of the original or certified copy of the award issued by the Arbitral Tribunal.
• Submission of the original or certified copy of the agreement related to the award.
• Providing evidence to establish the existence of the foreign award.

In this summary, we have elaborated on the enforcement of arbitral awards, both domestic and foreign, highlighting the key aspects and procedures involved. The content is presented in a structured and concise manner, making it easier for students to grasp the information effectively.

Conditions for Enforcement of Domestic and Foreign Arbitral Awards

• When parties fail to reach an agreement.
• Specifically in the case of foreign awards, if the agreement in question is not recognized by the law of the country where the award was issued or under the law chosen by the parties.
• If a party neglects to request mediation or provide prior notice of arbitrator or arbitral tribunal appointment.
• When the award primarily relies on the decision's delivery or the agreement itself.
• If the foreign award has never been binding on the parties, has been suspended, or set aside by the relevant state authority where it was granted.
• If the arbitrator is incapable of resolving the underlying dispute under Indian law.
• Enforcement of the award contradicts Indian public policy.

Types of Domestic and Foreign Arbitral Awards That Can Be Enforced

• Awards that prohibit certain actions or issue injunctions.
• Decisions or awards from emergency arbitral authorities that provide interim injunctions.
• Declaratory awards.
• Other types of awards.
• Monetary awards.

Limitation Period for Enforcement of Arbitral Awards

Domestic Award

• The Supreme Court, in the case of Umesh Goel v. Himachal Pradesh Cooperative Group Housing Society, established that arbitral awards are subject to the Limitation Act 1963 for enforcement. This implies that the maximum period for enforcing such awards is twelve years.

Foreign Award

• Various High Courts have differing perspectives on the limitations regarding when a party can enforce a foreign award.
• The Bombay High Court outlined a two-step process for enforcing foreign awards, emphasizing that such awards are not automatically binding on parties. Initially, the foreign award needs to be recognized by the appropriate court to be enforceable. This recognition process may fall under the provisions of the Limitation Act, possibly setting a time limit of three years for the application of enforcement. Once the court recognizes the award, the party has twelve years to execute the enforcement.
• The Madras High Court's stance is that a foreign award, once stamped as a decree, allows the party holding it to directly apply for enforcement. In this scenario, the party with a foreign award has a twelve-year window for enforcement, similar to a decree holder.

Conclusion

• In conclusion, prior to the introduction of laws governing the enforcement of foreign awards in India, there was a notable absence of regulations in this regard. The legal system in India seems to be moving towards creating a conducive environment for the effective enforcement of foreign awards. The primary challenge within the Arbitration and Conciliation Act of 1996 lies in enforcement, encompassing both foreign mediation awards and court decisions from abroad. 
• The lack of a clear distinction between foreign awards and court decisions in Indian law poses challenges, particularly in addressing issues related to foreign awards. To address these concerns, additional developments, such as providing clarity on host country arrangements and enacting legislation specifically applicable to foreign arbitral awards, are necessary. These measures can bring more structure to the arbitral process, aligning India with global standards and enhancing its reputation as a world-class jurisdiction.