Enforcement of Arbitral

Awards

Abstract
In India, a foreign judgment may be implemented either through execution
proceedings or through a suit. An arbitral award is an arbitration tribunal’s
decision on the merits of an arbitration tribunal and is equivalent to a court
judgment. Arbitration is particularly popular in the commercial sphere as a
means of resolving disputes. One of the reasons for this is that it is often easier
to enforce an arbitration award in a foreign country in international trade than
to enforce a court judgment. The implementation of international arbitration
awards in India is regulated by the Arbitration and Conciliation Act, 1996
through the New York Convention and the Geneva Convention, and a non-
conventional award in India will be enforceable on the grounds of justice,
equality and good conscience under common law.

Introduction
Arbitration is the most effective and dominant form or method as Alternative
Dispute Resolution compared to conciliation, mediation, negotiations, etc[1].
Arbitration an Alternative Dispute Resolution is usually used in resolving
disputes, particularly in International Commercial transactions conducted
across national boundaries as well as in domestic transactions that are civil in
nature. It can also be used in matters of employment or consumer disputes.
Arbitration is somewhat same as mediation, but in mediation the decision
given by the mediator cannot be imposed on parties to the dispute. ‘‘An
arbitration is a reference of a dispute or difference between not less than two
parties for determination after hearing both parties in a judicial manner, by a
person or persons other than a court of competent jurisdiction.’’[2] “Where the
parties to dispute refer the matter to a person and such person holds a judicial
inquiry in deciding the dispute and comes to a judicial decision, such person is
called an arbitrator.’’[3] “An award stands at the same footing as a decree of
a court whether it has been passed into a decree or not and therefore it is
binding upon the parties.’’[4]

‘In Arbitration proceedings disputes is settled by an impartial neutral who is a

private person who is a third party to the dispute, whose decision the parties
to disputes have agreed. Arbitration is not same as judicial proceedings as it
is basically an out of court settlement process. Arbitration only deals with
disputes which are civil in nature.[5] The person by whom the disputes are
settled is known as arbitrator or arbiter and the decision given by him is known
as arbitral award. The arbitral award is final and binding on the parties to the
dispute and for the enforcement of such award the party has to move to the
court[6]. Arbitration allows the parties to have a private dispute resolution
procedure and avoid national courts.

An arbitral award can never be determined as a contract, it should be

determined as a decision out of a contract. The consent of the parties is not
necessarily to be present in a decision. An award decided has judicial binding
effect on the parties. The arbitral award can be final as well as an interim
award.[7] It may be a ‘domestic award’ or ‘foreign award’[8]. An award by the
arbitrator must always be in writing and signed by the arbitrator.

Key Characteristics of Arbitration as

Alternative Dispute Resolution[9]
• Arbitration is a consensual process of the dispute redressal.
• Arbitration is neutral to the parties to dispute.
• Parties chooses their own arbitrator who will act as a neutral to both
parties.
• Arbitration is a private proceeding.
• The decision given by arbitrator is final and binding on parties.

Process of Arbitration
• Arbitration on basis of Procedure:
• Ad-hoc arbitration[10]: Arbitration which is agreed and arranged by
the parties at there own, without the help of any arbitration
institution. The proceedings under this are conducted as per the
agreement between the parties. Arbitration can be domestic,
international or foreign.
• Institutional arbitration[11]: When the parties to dispute agrees to
have an arbitral tribunal to administer there dispute, it is known as
institutional arbitration. The proceedings under this are conducted by
the terms of the arbitral tribunal and not on the will of the parties.
Arbitration can be domestic, international or foreign.
• Fastrack Arbitration[12]: This arbitration is a time dependent. In
Fastrack arbitration the procedures are conducted in such a way that
all the unnecessary methods are abandoned which are time
consuming, this arbitration uphold the simplicity which is the purpose
of arbitration.

Arbitration on basis of Jurisdiction

1. Domestic Arbitration[13]: It is a type of arbitration in which both the
parties to dispute are from the same nation and the dispute between
them has to be decided keeping in view the substantive law of that
nation. The dispute must have been arrived and has to be decided in
that nation only.
2. International Arbitration[14]: Is that type of arbitration which
happens within the nation or outside the nation, in contains elements
which are foreign in origin in relation to the parties or the subject of
dispute. The law applicable in International Arbitration, can be
domestic or foreign, depending upon the terms of contract.
Arbitration becomes Int only when one of the party is domicile of any
other nation.
3. Foreign Arbitration[15]: When parties to dispute choose a foreign
arbitration or agrees an offshore ad-hoc arb, it is known as foreign
arbitration. The resulting award is enforced as a foreign award.
4. Statutory Arbitration[16]: It is a mandatory and compulsory
arbitration imposed on the parties to dispute by the courts. Parties
have to abide by the law of the land and the parties are not allowed
to skip this arbitration, consent of parties is also not required. If the
parties doesn’t abide by the decision of the court, strict actions can
be taken against them.

Arbitration Agreement
Parties can refer to arbitration only when they have an arbitration agreement,
or an arb clause which may be a part of the main agreement between the
parties, The agreement or arbitration clause must be in a written form and
which is between two or more parties and which is intended, consented and
signed by the parties. The arbitration agreement between parties indicates
the[17]:

• Seat and place of arbitration,

• Procedure for appointing the arbitrator,
• Number and qualification of arbitrator,
• Language governing arbitration,
• Type of arbitration,
• Name and address of Arbitration institution,
• Procedure of arbitration proceedings.

Evolution and Growth of Law of Arbitration

in India
Arbitration in India has a long history. In ancient times, people frequently
voluntarily submitted their disputes for a binding settlement to a council of a
community’s wise men — called the panchayat. In India, the Panchayati raj
system has found its place in different rules[18].

The Bengal Regulations created modern arbitration law in India in 1772, during
the British rule. Among other items, the Bengal Regulations provided for a
court’s recourse to arbitration in cases for property, partnership deeds, and
contract violation, with the consent of the parties.

Before 1996, India’s arbitration legislation consisted mainly of three statutes:

(I) the Arbitration Act of 1937, (ii) the Indian Arbitration Act of 1940, and (iii)
the International Awards Act of 1961. The 1940 Act was a general law
regulating arbitration in India in compliance with the 1934 English Arbitration
Act, and the 1937 and 1961 Amendments were designed to enact international
arbitration awards (the 1961 Act incorporated the 1958 New York Convention).
In an attempt to modernize the obsolete 1940 Act, the government passed the
Arbitration and Conciliation Act, 1996 (the 1996 Act). This Act repealed the
three existing laws (the Act of 1937, the Act of 1961 and the Act of 1940). The
primary purpose was to facilitate arbitration as a cost-effective and rapid
method for resolving trade disputes. The Act of 1996 regulates both domestic
and international arbitration[19].

Arbitral award
The arbitral award or arbitration award refers to an arbitration hearing decision
made by an arbitration tribunal. An arbitral award is equal to a court judgment.
An arbitral award may be non-monetary in nature where the claims of the
entire claimant fail and there is no need for any party to pay any money[20].

An arbitration award may be given for payment of a sum of money, judgment

of any matter to be decided in the arbitration proceedings, injunctive relief,
substantive fulfilment of a contract and rectification, setting aside or cancelling
an act or other document.

The arbitral award shall be defined[21] as any arbitral tribunal’s judgment on

the nature of the dispute referred to it and shall include a temporary,
interlocutory or partial arbitral award. The arbitral tribunal may grant an
interim arbitral award on any matter for which it will make a final arbitral award
at any time during the arbitral proceedings. The interim award may be applied
in the same way as a final award of arbitration[22]. Unless otherwise decided
by the parties, a party may ask the arbitral tribunal to make an additional
arbitral award in respect of the claims raised in the arbitral proceedings but
omitted from the arbitral award within 30 days of receipt of the arbitral
award[23].

An arbitral award can be categorised into:

1. Domestic Award: Domestic award are those awards which are the
outcomes of domestic arbitration. It is confined to the territory of
India, the parties should have a nexus or birth of Indian origin, the
territory essentially comes into play for domestic arbitration
purposes. The award given by an arbitral tribunal in India or an
award, even if it is given by a foreign state for a dispute in which both
parties are of Indian origin and the nationality is also regulated by
Indian law, also falls within the scope of domestic arbitration.[24]
Domestic awards are governed by Part I of the Arbitration and Conciliation Act,
1996. A domestic award is an award granted pursuant to Section 2 to 43 of
the Act.[25]

2. Foreign Award: Foreign Award is the outcome of Foreign Arbitration.

If the parties choose a foreign arbitration institution or agree to an ad
hoc arbitration overseas, the award granted after such proceedings
shall be referred to as foreign award.[26]
Part II of the Arbitration and Conciliation Act of 1996 deals with International
Arbitration or Foreign Arbitration.[27] Section 44 of the Act defines with
Foreign Award.[28]

In, Serajuddin v. Michael Golodetz[29] The Calcutta High Court established the
necessary conditions for an arbitration to be referred to as ‘ foreign arbitration
‘ or the essential elements of a foreign arbitration where the award could also
be referred to as a foreign arbitration award. The important points laid were
as follow:

1. “Arbitration should have been held in a foreign country.”

2. ”By a foreign arbitrator.”
3. “Arbitration by applying foreign laws.”
4. “One of the parties consists of foreign nationals.”
Essential Elements of Arbitral Award
• Should be in written form.
• Signed by the Arbitrator.
• Shall contain the reason for the passing of Award.
• Date and place at which the arbitration took place.

Enforcement of Arbitral Award

The regulation and execution of decrees in India is regulated by the Civil
Procedure Code, 1908 (“CPC”), while the arbitral award procedure in India is
governed mainly by the Arbitration & Conciliation Act, 1996 (“Act”) and the
CPC.

For the same way as an Indian court decree, domestic and international awards
are enforced. However, there is a difference depending on the seat of
arbitration. Seated arbitral award (“domestic award”) would be governed by
Part I of the Act, enforcement of foreign — seated awards (“international
award”) would be governed by Part II of the Act.[30]

• Enforcement of Domestic Arbitral Award: Until filing for compliance

and execution, an award recipient would have to wait 90 days after
receiving the award. The award may be questioned during the
transitional period in compliance with Section 34 of the Act. When the
above time expires, if a court considers the award enforceable at the
execution point, the authenticity of the arbitral award cannot be
questioned any further. Before the recent Law on Arbitration and
Conciliation (Amendment),2015 (Amendment Act), a petition to set
aside an award could equate to a stay in the award execution
proceedings. Nevertheless, a party opposing a award would have to
transfer a separate application to demand a stay on an award
execution by virtue of the Amendment Act.

• Enforcement of Foreign Arbitral Award: India is a signatory to Geneva

Convention on the Execution of Foreign Arbitral Awards, 1927
(“Geneva Convention”) and Convention on the Recognition and
Enforcement of Foreign Arbitral Awards, 1958 (“New York
Convention”).
If a party receives a binding award from a state signing the New York
Convention or the Geneva Convention and the award is made in a territory
recognized by India as a convention country, the award would then be
enforceable in India. In India, implementing a foreign award is a two-stage
procedure begun by filing a request for execution. Initially, a judge will decide
if the award met with the law’s criteria.

Once an award has been considered enforceable, it can be applied as a court

order.

At this point, however, parties should be aware of the various obstacles that
may occur, such as frivolous complaints from the opposing party, and
provisions such as bringing the award’s original / authenticated copy and the
underlying agreement before the court.
Conditions for enforcement of Arbitral Awards
(domestic and foreign)
A party may use the following grounds to contest an award. If the other party
shows this, such an award would be made unenforceable.

1. According to the statute, the parties to the settlement were under

any disability.
2. The agreement in question did not comply with the law to which the
parties are subject or with the law of the country in which the award
was made.
3. The party did not receive a proper notice of appointment from the
arbitrator or the arbitral proceedings or was otherwise unable to bring
his case before the arbitral tribunal.
4. The reward deals with a distinction that does not fall within the terms
of the agreement.
5. Award contains decisions on matters beyond the scope of being
referred arbitration.
6. The arbitral proceedings did not comply with the agreement.
7. The composition of the arbitral body or the arbitral proceedings does
not comply with the law of the country in which the arbitration took
place.
8. The award (precisely a foreign award) was not made binding on the
parties or was set aside or revoked by the competent authority of the
state in which the award was made or by the statute of which it was
made.
9. Under Indian law, the subject matter of the dispute cannot be
resolved by arbitration. Enforcing the award would be contradictory
to India’s public policy.

Limitation Period for Enforcement of Arbitral

Award
In the case of domestic arbitral awards, the 1963 limitation law applies to
arbitrations because, according to section 21, the arbitral proceedings in
respect of a specific dispute start on the date on which the respondent receives
a petition to refer the dispute to arbitration.[31] Arbitral awards are deemed
to be a decree.[32] The Arbitration Act does not place any restriction on the
execution of a foreign award, and the usual limitation period (12 years) is likely
to apply.[33]

Different high courts have given different definitions of the limitation period
within which a party can impose an award in the case of foreign awards. The
Bombay High Court observed a foreign award in ‘Noy Vallesina v Jindal Drugs
Limited’ not to be a judgment, rendering it non-binding on parties unless it
was reported as enforceable by a competent court.[34] In the ‘Compania
Naviera ‘ Sodnoc ‘ v. Bharat Refineries Ltd.,’ on the other hand, the Madras
High Court referred to international awards as considered decrees.[35]

In M/s. Fuerst Day Lawson Ltd v. Jindal Exports Ltd, the Supreme Court ruled
that there could be different stages in a single proceeding. A court can agree
on the enforceability of the award in the first proceeding. Once the
enforceability has been determined, more successful steps can be taken to
implement the same.[36]

In the case that a foreign award is implemented, the party cannot appeal
against any court decision denying the award’s objections. If the court holds
the award to be non-enforceable, an appeal can be made. Therefore, a ruling
that upholds the award cannot be appealed twice. Nevertheless, according to
Article 136[37] of the Indian Constitution, the party can look forward to a
direct appeal to the Supreme Court of India. These forms of appeals are
pursued only in the case that the court thinks there is a matter of fundamental
importance or public interest.[38]

The party seeking enforcement of a decree of a court of reciprocating country

to file a execution proceedings in India. International rulings from a
reciprocating territory’s superior courts can be specifically applied by filing an
execution petition under section 44A of the Civil Procedure Code. After which
section 51 must come into play and order XXI of CPC.[39]

In the event that a non-reciprocating nation gives the foreign judgment, a

fresh case will have to be brought before a court of competent jurisdiction in
India, where the foreign judgment will be considered as proof. The time limit
for filing a lawsuit to enforce these international judgments is three years from
the date of delivery of the judgment.[40]

Challenges in Execution of Foreign Arbitral Award

in India
Obtaining an award in your favour from an international arbitral tribunal is a
bit of a half-won fight as it still needs to be enforceable in India. There have
been various cases in which the party failed to enforce it in competent Indian
courts, despite receiving a favourable award in an international arbitral
tribunal. Therefore, in order to obtain an arbitral award, there is no way out
but to enter into litigation from which all parties at first refrained. It takes time
for an order already issued by an international arbitral tribunal to become
effective. Nonetheless, this path cannot be avoided as it offers more of a formal
procedure and guarantees that proper diligence is applied on behalf of the
courts to implement the award.

Local government pressure, especially local parties with more political power,
may attempt to cancel the award or the full impact of the award, which could
frustrate the award given by the international arbitration seat.

Part II of the 1996 Indian Arbitration & Conciliation Act (“the Act”) deals with
the enforcement of foreign awards, while Chapter I (Sections 44-52) deals
explicitly with the awards relating to the Convention. According to Section
44(b), a “international award” must be given in one of those territories as the
Government of India may, upon being satisfied with the existence of reciprocal
provisions, by notification in its Official Gazette, declare it to be the territory
in which the Convention is applicable. There is, however, a reason why it is
necessary to remove this provision to obtain gazetted notice in order to bring
India’s arbitration system into accordance with convention norms. Gazetting
provisions create unnecessary confusion about the compliance of international
awards given in countries that are contracting states to the Convention but
have not yet been informed in the Gazette.

Conclusions and Suggestions

India is not a country that has anti-arbitration prejudice. It is therefore easy
to argue that India’s legal system seeks to create a facilitative atmosphere for
applying international awards. A major issue with the 1996 Arbitration and
Conciliation Act is compliance, it handles foreign arbitral awards and foreign
court rulings in a similarly. Due to the lack of distinction between foreign
arbitral awards and court decisions, the Indian Law does not explicitly address
issues directly related to foreign awards. Some changes, such as trying to
clarify convention countries with reciprocal provisions that are yet to be
specified in the official gazette, and legislation dealing directly with
international arbitral awards would allow the arbitral system to be more
organized and India to be compatible with advanced legal regimes around the
world.