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Making of Arbitral Award and Termination of Proceedings under Arbitration and Conciliation Act, 1996 | Civil Law for Judiciary Exams PDF Download

Introduction

  • Making of an arbitral award and termination of proceedings are comprehensively addressed in CHAPTER VI of the Arbitration and Conciliation Act, 1996.
  • Sections 28 to 33 focus on the "making of an arbitral award and termination of proceedings."

Arbitrator

  • An arbitrator's role involves resolving disputes that parties have agreed to submit to arbitration.
  • The decisions of an arbitrator result in an arbitral award, a document subject to specific formalities.
  • The content and form of an arbitral award, as well as the discretion enjoyed by arbitrators in creating an award, can vary based on the procedural law applicable, the powers granted by the parties in the arbitration agreement, and the type of arbitration used.

Understanding Arbitral Awards under the Arbitration and Conciliation Act, 1996

  • Definition of Arbitral Awards: According to Section 2(c) of the Arbitration and Conciliation Act, 1996, the Act does not explicitly define arbitral awards. It confirms that arbitral awards encompass interim awards. The final decision rendered by the arbitral tribunal is considered the arbitral award (Section 2(d).
  • Nature of an Arbitral Award: An arbitral award can be described as a conclusive and binding decision issued by an arbitral tribunal or a sole arbitrator. It serves to resolve, either entirely or partially, the dispute brought before the tribunal or arbitrator.
  • Remedies Offered in an Award: Arbitral awards can provide various remedies to the involved parties based on the nature of the dispute. These may include:
    • Injunctive Remedies: In cases where a party is required by a court to perform or cease a specific action, such a directive is known as an injunction. An arbitrator may grant similar relief if a party seeks such action.
    • Monetary Compensation: Some awards may entail one party making payments to the other party as stipulated by the contract or the terms surrounding the dispute.
    • Creative Relief: Disputes often involve underlying emotions and interests that drive the parties involved. While arbitrators have less leeway compared to mediators in facilitating mutual agreements, they may, for instance, request an apology or a positive employment reference from one party.
    • Incentives: Arbitrators can include incentives in the award to encourage desired behaviors from the parties and ensure compliance with the decision.

By understanding the essence of arbitral awards and the range of remedies they can offer, parties involved in disputes can navigate through conflicts effectively and reach resolutions that align with their interests and legal obligations.

Understanding Arbitral Awards

  • Calcutta High Court defines an arbitral award as the outcome of parties' consensual justice.
  • In the case of Bhajahari v. Bihari, an arbitral award is described as the final decision on a claim or issue made by chosen arbitrators.

Definition of Arbitral Award

  • In Harinarayan Bajaj v. Sharedeal Finance, it was clarified that an arbitral award encompasses interim awards. However, for an interim award to qualify as an award, it must conclusively settle a claim. Once a claim is settled, the Tribunal cannot revisit it and is considered functus officio. Procedural orders made during arbitration are not considered part of the award.

Enforcement of Arbitral Awards

  • Paradise Hotel v. Airport Authority of India Ltd states that an award's enforcement is finalized when it is executed under the Civil Procedure Code (CPC) as if it were a court decree.

Arbitral Award as a Decree

  • Pandit Munsi Ram and Associates v. Union of India interpreted that an arbitral award is akin to a decree under Section 35 of the 1996 Act. The court ruled that an arbitral award is an order that definitively resolves the rights of involved parties by settling the actual claim during arbitration.

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Types of Arbitral Award under the Arbitration and Conciliation Act, 1996

  • Domestic Awards: These awards are governed by Part I of the Act. According to Section 2(7), domestic awards are addressed in Part I until Section 43 of the Arbitration and Conciliation Act. Enforcement of domestic awards is facilitated by Section 36, treating them akin to court decrees. When parties' assets are within the same jurisdiction, enforcing domestic awards is more straightforward compared to court judgments.
  • Foreign Awards: These awards are regulated under Part II. Chapter 1 of Part II focuses on New York Convention awards, with Section 48 covering the refusal of enforcement of foreign awards. Chapter 2, specifically Section 57, outlines provisions for enforcing Geneva Convention awards.

Details on Domestic Awards

  • Domestic awards are subject to Part I of the Arbitration and Conciliation Act.
  • Enforcement of domestic awards is expedited by Section 36, treating them similarly to court decrees.
  • Enforcement of domestic awards is simpler when parties' assets are in the same jurisdiction.

Details on Foreign Awards

  • Foreign awards fall under the purview of Part II of the Act.
  • New York Convention awards are covered in Chapter 1 of Part II.
  • Enforcement of foreign awards can be refused under certain conditions, as outlined in Section 48.
  • Geneva Convention awards are addressed in Chapter 2, specifically Section 57.

Conditions for a Foreign Arbitration as per Serajuddin v. Michael Golodetz

  • Arbitration must have taken place in a foreign country.
  • The arbitrator must be foreign.
  • Foreign laws must govern the arbitration process.
  • At least one of the parties involved must be foreign nationals.

Provisions of Arbitration and Conciliation Act, 1996 dealing with Arbitral Award

Arbitrator's Role and Decision Making Process

  • An arbitrator is responsible for resolving disputes fairly and in good faith. However, for the arbitrator to make decisions, both parties must explicitly authorize the arbitrator to adjudicate the dispute.
  • In domestic arbitrations, Indian arbitration laws apply. In the case of international arbitrations based in India, the arbitral tribunal must follow the laws agreed upon by the parties in their dispute settlement agreement. The chosen law in the agreement governs unless otherwise specified.
  • It is crucial to ensure that the substantive laws of India do not conflict with the laws of another legal system when applying them. If there is no agreement on applicable laws, the arbitral tribunal must apply relevant laws to the dispute.
  • The tribunal should interpret provisions in accordance with the contract terms. Additionally, they should consider relevant trade practices and usages that apply to the contract.

Decision Making Process and Arbitral Award

  • Under Section 29 of the Arbitration and Conciliation Act, 1996, decisions within the arbitral tribunal are made by majority rule. The arbitral award represents the final stage of the arbitration proceedings and is issued based on the decision of the majority members of the tribunal.

Settlement Encouragement by the Arbitral Tribunal

  • Section 30 allows for the facilitation of settlements among parties by the arbitral tribunal. If parties reach a settlement agreement, it can be incorporated into an award known as an arbitral award on agreed terms. Such settlements are treated with the same status as awards issued by independent tribunals.

Signing and Requirements of Arbitral Awards

  • According to Section 31 of the Arbitration and Conciliation Act, 1996, arbitral awards must be in writing and signed by all tribunal members. The rationale behind the award should be clearly explained. In cases of settlements, the reasons for the award on agreed terms are not required to be stated.
  • The award should mention the date and place of declaration, with the place also known as the seat of arbitration. Each party should receive a copy of the award. Arbitral tribunals can also issue interim awards.
  • In instances such as Sukanya Holdings Pvt. Ltd. v. Jayesh H. Pandya, non-signatories to an arbitration agreement can participate in arbitration proceedings as long as the necessary parties to the agreement are present, applicable to both international commercial arbitration and domestic arbitration.

Understanding Termination of Arbitral Proceedings

Termination of arbitral proceedings under the Arbitration and Conciliation Act, 1996 is a crucial aspect that aligns with international standards like the UNCITRAL Model Law. Section 32 of the Act outlines the grounds and procedures for terminating these proceedings.

  • Final Award Declaration: Arbitral proceedings conclude upon the declaration of the final award by the arbitral tribunal.
  • Agreement of Parties: The parties involved can mutually agree to terminate the proceedings, showcasing a voluntary decision-making process.
  • Unnecessary or Impossible Continuation: The arbitral tribunal may terminate proceedings if they find it unnecessary or impossible to continue for valid reasons.
  • Plaintiff's Withdrawal: Termination is possible if the plaintiff withdraws their claim, or if the respondent objects to the arbitral award, leading to a pursuit of final settlement.

It is noteworthy that the mandate of the arbitral tribunal ceases with the termination of the proceedings themselves, as highlighted in Sub-section (3) of Section 32. These provisions are subject to the regulations outlined in Section 34(4) and Section 33.

Recent Developments with respect to Termination of Proceedings

  • The Supreme Court in the case of Sai Babu v. M/S Clariya Steels Private Limited (2019) emphasized that once the sole arbitrator ends arbitration proceedings under Section 32(2)(c) of the Arbitration and Conciliation Act, 1996, there can be no subsequent revival of the proceedings. This decision highlighted a distinction between termination under Section 32 and Section 25 of the Arbitration and Conciliation Act.
  • In the case of SREI Infrastructure Finance Ltd v. Tuff Drilling Private Ltd, it was clarified that Section 32(3) allows for termination of the arbitrator's mandate following an order of termination under Section 32. This section also permits termination of proceedings by the Arbitral Tribunal on various grounds or when continuing the arbitration is deemed unnecessary.
  • Section 32 outlines specific conditions for termination which are absent in Section 25. However, if the claimant presents valid reasons for recommencing arbitration proceedings, they may be allowed to do so. The court stated that Section 32(3) mandates the termination of the arbitrator's authority once termination is ordered under Section 32.

Conclusion

  • The procedure for terminating arbitral proceedings and issuing an arbitral award is generally uncomplicated.
  • At times, the Supreme Court has proposed amendments and provided necessary interpretations in this regard.
  • It's important to distinguish between the termination of arbitral proceedings under Section 32 and Section 25.
  • The finality of an award signifies the conclusion of proceedings under the Arbitration and Conciliation Act, Section 32, among other grounds.
  • While there haven't been many groundbreaking judgments on this topic, the case of Sai Babu v. M/S Clariya Steels Private Limited is considered sound law.

Question for Making of Arbitral Award and Termination of Proceedings under Arbitration and Conciliation Act, 1996
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What are the different types of arbitral awards under the Arbitration and Conciliation Act, 1996?
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