Enforcement of Arbitral Awards
The credibility of an arbitration-friendly jurisdiction rests primarily on the competence and ability of its award enforcement regime. A favorable enforcement of arbitral awards is just a half-won battle, the half is won after its enforcement. In India, the arbitral awards are primarily governed by the Arbitration and Conciliation Act, 1996 (the Act). Awards can be of two types, domestic award, and foreign award. Enforcement and execution of both the award are different, the former is done under Part I of the Act while the latter is done through part II of the Act.
Enforcement of Domestic Awards
Chapter VIII of the Act deals with the finality and enforcement of arbitral awards. Section 35 of the Act states that the arbitral award is final and binding on the parties while Section 36 of the Act deals with enforcement of arbitral awards. It states that when the time to file an application for setting aside an arbitral award under Section 34 of the Act has expired, then subject to the order of stay granted by the court on the operation of the award, the same can be enforced in accordance with the provisions of Civil Procedure Code, 1908 (CPC).
If an application of setting aside an arbitral award is filed under Section 34 of the Act then the court subject to reasonable conditions may grant a stay of the operation of such award under Section 36(c) of the Act. However, such reasons need to be recorded by court in writing. Section 36(2) requires the opposite party to file a separate application for demanding such stay on the award.
An award holder has to wait for a period of three months after the receipt of the award prior to applying for enforcement and execution. An extension of 30 days can also be granted by the court upon sufficient cause being shown for condonation of delay. During this period of 3 months and an additional 30 days, the award may be challenged by the opposite party under section 34 of the Act. However, after the expiry of the said period, the validity of the award cannot be challenged and the court can enforce the award provided an appropriate application is moved in an appropriate forum.
Enforcement of Foreign Awards
India is a signatory of both, the New York Convention (Recognition and Enforcement of Foreign Arbitral Awards, 1958) and the Geneva Convention (Geneva Convention on the Execution of Foreign Arbitral Awards, 1927), if a binding award is passed in any country which is a signatory of either of the two conventions the same can be enforced in India.
While applying for the enforcement of a foreign award the party along with the application must also produce original award or an authenticated copy, original agreement for arbitration, and other such evidence required to prove that the award is a foreign award. Section 48 of the Act gives conditions for the enforcement of the award. If any of the conditions are not fulfilled the court can refuse the enforcement of the award. However, if the Court is satisfied that the foreign award is enforceable under this Chapter I of part II of the Act, the award shall be deemed to be a decree of that Court.
Conditions For Enforcement Of Arbitral Awards
Enforcement of a domestic award may be set aside under Section 34 of the Act and enforcement of a foreign award may be refused under Section 48 of the Act if it is proved that:
- One of the party was under some incapacity
- The arbitration agreement in question is not in accordance with the law to which the parties have subjected it, or in case of a foreign award, under the law of the country where the award was made.
- There was a failure to give proper notice of appointment of arbitrator or initiation of arbitral proceedings.
- The party against whom the award was rendered was unable to present its case fairly.
- The award contains decision which is beyond the scope of the arbitration or Award is ultra vires to the agreement
- The composition of the arbitral tribunal was not in accordance with the law.
- The subject matter of the dispute is not arbitrable.
- Enforcement of the award would be contrary to the public policy of India.
Process for filing application of execution
Enforcement and execution of both the domestic and foreign awards in India are governed by the Arbitration and Conciliation Act, 1996, and the Civil Procedure Code, 1908. The Act provides that the award must be enforced in accordance with the provisions of CPC and in the same manner as a decree of the Court. Section 38 of CPC provides that a decree can be executed by the Court which has passed it and also by the Court to which it is sent for execution. Therefore, a party that needs to execute a favorable award must file an application of execution under Section 36 or Section 49 of the Act. The application can be filed in any court capable of executing the award.
In the case of domestic awards, the principal civil court having original jurisdiction is the High Court. The High Court will have jurisdiction to hear the application for enforcement under section 36 read with section 2 of the Act. However, the Supreme Court of India in Sundaram Finance v Abdul Samad & Anr (2018) held that enforcement of a domestic arbitral award under the Act may be filed in any jurisdiction in the country where the award is capable of being executed.
In case of foreign awards, Where the subject matter is money, the Commercial Division of any High Court in India where assets of the opposite party lie shall have jurisdiction. The Court will have jurisdiction over an enforcement application under section 47 to section 49 of the Act.
One of the objectives of the Act is that every final award is enforced in the same manner as if it were a decree of the Court. The arbitral award is final and binding on both parties. After the passing of the final award by the tribunal, the objecting party has to file for setting aside the award within a specified period of time failing which the party cannot object the award, and the court can enforce the award. The arbitration regime in India is developing with each passing day and the courts have been following the pro-arbitration approach to strengthening the regime further. If the Indian judiciary and legislature want disputing parties to resort to arbitration, then the enforcement mechanism must be strong and easy for parties to understand.
Written By : Garvish