ENFORCEMENT OF ARBITRATION AWARDS

ABSTRACT

Arbitration is a legal procedure for settling disputes outside of court, with results that are binding and enforceable for all parties concerned. It provides an option when ordinary courts are deemed unsatisfactory. Arbitration is frequently considered as a combination of justice and charity, and with the growth of worldwide commerce, an effective settlement technique is critical. This article addresses the acceptance and execution of arbitral awards in India, as defined by the Act of 1996[1]. Domestic and foreign awards like court rulings are legally binding in India. The country’s position as an arbitration-friendly setting is dependent on the efficacy of its award enforcement mechanism. Under the act, foreign arbitral awards can only come from nations that have been notified by the central government of India. Notably, the 2021 Amendment Act concentrates on executing foreign arbitral rulings with no provisions for nullification or interim remedies. The study will also shed light on judicial consistency in enforcing foreign awards and make legislative proposals to improve enforcement methods.

INTRODUCTION

Arbitration is one of the oldest means of resolving disputes without the need for judicial proceedings. Arbitration, like other forms of alternative conflict resolution such as mediation and conciliation, takes a distinct approach to dispute settlement. Arbitration is related to a trial in traditional courts in that both parties present and argue their claims in the same manner. After hearing both sides, the arbitrator makes an opinion and gives a conclusion like a court which is called an award. Yet, it is equally correct to state that arbitration outperforms traditional litigation in many aspects. The parties’ option to choose their own arbitrators, the speedier and more flexible procedure, the eased procedural requirements, secrecy, and the speed with which matters are resolved and awards are issued are the key reasons for this.

The successful enforcement of foreign arbitration awards in India has recently emerged as a key concern. The growth of arbitration methods to handle domestic challenges, along with the adoption of international arbitration procedures in India, have become increasingly important. Indian court’s verdict in certain instances has essentially created institutional arbitration in the nation. This advancement has resulted in new methods for addressing challenges in international transactions. Several factors affect this foreign transaction but arbitration is seen as the key problem-solving aspect. Arbitration based on party agreements usually settles conflicts, but implementing the arbitration award remains difficult. In India, the losing side frequently seeks frequently seeks court intervention, arguing that the award violates public policy. This article looks at how Indian courts handle the execution of arbitration awards putting slight on domestic as well as international arbitration processes.

THE ENFORCEMENT OF ARBITRATION AWARDS

The procedure for this enforcement is typically categorized as follows:

1. Domestic Awards
2. Foreign Awards

• Enforcement of Domestic Awards

An Arbitrator’s decision formally referred to as an award, is the ultimate settlement of a dispute through arbitration. When such a verdict is awarded in India, it is referred to as a domestic award. To enforce this award, the person who received it must wait three months. During these three months, the parties concerned can dispute the award under section 34 of the Arbitration and Conciliation Act. If no challenge is filled during this time frame, the award becomes enforceable. To stop its execution, a second application must be filled in the courts, this procedure is controlled by the Act, 2015[2].

Conditions

Under Section 34 (2)[3] of the Arbitration and Conciliation Act, the execution of an arbitral award can be set aside under the following circumstances:

1. The absence of a legitimate arbitral agreement.
2. One of the parties was incapacitated.
3. Parties were not provided advance notice regarding the beginning of the proceedings or choosing the arbitrator.
4. The dispute’s subject matter is not arbitrable and implementing the award would violate India’s sovereignty, or public decency.
5. The award is not established in writing and does not include the tribunal member’s signatures.
6. For monetary rewards, there is insufficient information on the payout amount and the interest.
7. The composition of the arbitration board violates legal restrictions or exceeds legal jurisdiction.
8. Fraud or influence prompted the award
9. The award goes against the provisions of Indian Law
10. The arbitral award handles matters that were not envisaged in the arbitration agreement or felt outside of its scope.

An award cannot be overturned only because of improper application of the law or re-evaluation of evidence.

Registration requirements

According to the Indian Stamp Act of 1899, the stamp duty on an arbitrator’s award must be paid. Stamp duty rates vary from state to state. Section 35[4] of the act states that an award without a stamp or with inadequate stamping for any purpose is not acceptable until authenticated by the requisite fee. For instance, under 1-A of the act which applies to Haryana, the stamp duty is 0.1 % of the property’s value associated with the award.

Additionally, section 17(1) (e) of the Registration Act of 1908 requires that an award affecting the immovable property be registered, if not it would invalidate the award. In its full-bench ruling in M. Venkataratnam v. M Chelamayya[5], the Andhra Pradesh High Court ruled that a private arbitral award must be registered. Similarly, the Punjab and Haryana High Court, along with the Patna High Court, ruled that an arbitral award ruling must be registered under section 17(1) (b)[6] and 17(1) (e)[7] of the registration act. The Supreme Court upheld this viewpoint in Satish Kumar v. Surendra Kumar.

Limitation period

According to Section 29 A (1) of the arbitration act[8], “an arbitral award must be issued within twelve months from the arbitral tribunal entering into the reference.” The explanation to this section says that the tribunal is deemed to have entered into the reference on the day the arbitrator, or all arbitrators, receives written notification of their appointment.

Section 36(1)[9] stipulates that “once the deadline for submitting an application to set aside the arbitral decision under section 34[10] has elated, and subject to the terms of proviso (2), the award shall be enforced as a court decree under the civil procedure code, 1908.”

Correction and interpretation

Section 33(1) of the Arbitration and Conciliation Act [11] “permits a party to seek that the arbitral tribunal fixes any computational, clerical or typographical mistakes in the award within thirty days of getting it unless the parties have agreed on a different time limit. Furthermore, if the parties agree, one party may request that the tribunal offer an interpretation of a specific issue or part of the award, with a notice to the other party.”

Section 33(2)[12] specifies that if the tribunal considers the request reasonable, it shall make the necessary change or offer an interpretation within thirty days of receiving it. The interpretation becomes part of the arbitral award. When an arbitral award becomes final and the court grants no stay of execution under section 36(3) of the arbitration act[13], the award holder seeks the relevant executing court to enforce the award as if it were a court judgment. Because the arbitration act does not establish a method for enforcing arbitral awards, the award holder is forced to face the courts they hoped to avoid by pursuing alternate dispute resolution.

Section 33(3)[14] allows the tribunal to amend any errors, notably typographical or clerical errors within thirty days after the award is given by the tribunal.

In Chopra Fabricators case[15], the Supreme Court after studying Uttar Pradesh data, noticed the serious court backlog in enforcement procedures. The court emphasized that the arbitration act was intended to facilitate the prompt settlement of commercial disputes in light of the lengthy delays in civil courts. The court also noted that neglecting to address these disputes expeditiously might have serious consequences, ultimately affecting the country’s economy.

• Enforcement of Foreign Awards

Foreign awards can be enforced in India under two frameworks provided by the Arbitration Act of 2015: the Geneva and the New York Conventions. According to the provision mentioned in the act, such awards are enforceable in India and bind the parties concerned. They can be used by any party as a defense, set off, or in any other legal procedure.

1. New York Convention[16]

Section 44-52 of the Act of 2015[17] concerns the enforcement of foreign awards under the New York Convention. Two conditions must be completed before an award may be enforced under this convention:

• The country that received the award must be a signatory to the New York Convention.
• The award must be made in the territory of another contracting state that has been designated as such by the central government.

To enforce a foreign award, one must file an execution petition. The court then determines whether the Arbitration and Conciliation Acts criteria were fully fulfilled. If the award complies with the law, it can be enforced as a court order under Section 49[18] of the Act. However, parties must be aware of the potential difficulties, such as opposition party objections and the requirement to produce the original or certified copy of the award and underlying agreement to the court. After filing the execution petition, the opposing party can raise an objection to the award’s enforcement under section 48[19] of the act.

       2. Geneva Convention[20]

Section 53-60 of act, 2015[21] pays attention to the enforcement of foreign awards under the Geneva Convention. To enforce an award under this convention, the following conditions must be met:

• The award must be based on an arbitration agreement to which the protocol in the schedule second is applicable.
• The award should be made between parties, at least one of whom is subject to the jurisdiction of a power designated a party to the convention in the official gazette by the central government after mutual arrangements are made, as stipulated in the third schedule.

Section 56[22] of the act requires a party seeking to enforce a foreign award under the Geneva Convention to submit an application in the court. This application must contain the original or authenticated copy of the award along with documentation that the award complies with the act. The award shall be enforced in line with applicable law and the party’s consent. As per the act, petitions for the execution of a foreign award can only be filled with the High Court.

Conditions

Section 57[23] of the Arbitration and Conciliation Act specifies the requirements for enforcing foreign verdicts as follows:

1. The award must be the outcome of a proper arbitration process under the applicable laws.
2. Settlement of the subject matter must be through arbitration in Indian laws.
3. The award must be made by an arbitral tribunal named in the arbitration agreement or the tribunal must be formed by the parties’ agreement and the arbitration rules.
4. The award must be final in the nation where it was made, which means it cannot be objected to appealed, or challenged elsewhere.
5. The arbitral award shall not be in opposition to Indian public policy. Criteria for considering an award in contradiction with public policy are:
6. Fraud made or influenced the award,
7. The award violates the fundamental policy of Indian law
8. The award contradicts the most fundamental principles of morality or justice.

An award cannot be overturned just because of improper application of the law or re-evaluation of evidence.[24]

Registration

In the M/s Shriram EPC Ltd. case[25], the Supreme Court of India has declared that a foreign award does not need stamping.

Section 47[26] of the act requires that the following papers be presented to the court when asking for the execution of a foreign award:

• Actual award or a properly verified duplicate copy prepared in accordance with the law of that issuing nation.
• Original arbitration agreement or copy with attestation.
• Provide any necessary documentation that the award qualifies as a foreign award.

Limitation

Foreign awards are regarded as decrees under Indian laws. After determining that a foreign award is enforceable, the court can take additional steps to secure its implementation. This was said in the Fuerst Day Lawson case[27].

However, Indian law does not set a timeframe for filing an application in Indian courts. Article 137 of the Limitation Act[28], which specifies a three-year timeframe, governs the execution of a foreign award given in Part II of the Arbitration Act.

Payment

When an Indian citizen sends a payment to someone who lives outside India, the Reserve Bank of India often requires approval. However, if the payment is for an arbitration award, no such approval is required. This was said in NTT Docomo Inc. v. Tata Sons Ltd[29].

To enforce a foreign award in India in INR, the conversation rate provided in the award or contract will be applied to calculate the foreign exchange rate. If there is no rate specified in the award, the exchange rate on the day the award is concluded shall be used.

CONCLUSION & SUGGESTIONS

Based on the topic at hand, it is possible to infer that India formerly lacked laws and procedures for enforcing local and foreign awards preventing the development of an open environment for its arbitration and its enforcement. However, the 2015 amendment act made major improvements resulting in a more efficient and timely means of conflict settlement. Even the enforcement of foreign awards has improved international trade. While certain awards have changed the arbitration landscape, the fundamental ethos of ADR remains unchanged. To enhance arbitration in India, the following actions might be implemented courts, and ADR institutions should be widely distributed in India. Additionally, each court should have its own arbitration and mediation centers. This will guarantee that ADR forums handle disputes that can be settled using ADR approaches before referring them to regular courts. If the parties are unable to achieve an agreement through ADR, the dispute should be taken before the court. The continued judicial delays in enforcement procedures demonstrate that the route to achieving one’s right may be filled with obstacles. To overcome these complications and guarantee more efficient proceedings, applicants must proactively address any possible concerns that may occur during the enforcement stage as this would further speed up the process. ADR should be promoted until it becomes a parallel mechanism to the judicial system. However, the Arbitration Act of 1996 has a major enforcement flaw: it regards foreign arbitral awards and foreign court judgments equally. Indian law does not adequately handle difficulties specific to foreign arbitral awards and judicial judgments. Making specific changes, such as clarifying which convention nations have reciprocal provisions to be disclosed in the official gazette, might lend structure to the arbitral procedure and link India with modern legal systems throughout the world.

 REFERENCES

• Tony Khindria, Enforcement of Arbitration Awards in India, 23 INT’l BUS. LAW 11 (1995).
• Aakash Vishwakarma, Commercial Arbitration: Enforcement of a Foreign Arbitral Award, 4 INDIAN J.L. & LEGAL RSCH. 1 (2022).
• Talat Chaudhary, Enforcement of Foreign Arbitral Awards in India, 4 INT’l J.L. MGMT. & HUMAN. 1477 (2021).
• Anushree Pandey, Foreign Awards in International Commercial Arbitration: Recognition, Enforcement and Challenges to an Award, 4 INDIAN J.L. & LEGAL RSCH. 1 (2022).
• Anjali Singh, Challenges to Arbitration in India, 2 JUS CORPUS L.J. 93 (2022).

[1] Arbitration and Conciliation Act, 1996, No. 26, Acts of Parliament, 1996 (India).

[2] Arbitration and Conciliation (Amendment), 2015, No. 3, Acts of Parliament, 2016 (India).

[3] Arbitration and Conciliation (Amendment), 2015, § 34 (2), No. 3, Acts of Parliament, 2016 (India).

[4] Indian Stamp Act, 1899, § 35, No. 2, Acts of Parliament, 1899 (India).

[5] M. Venkataratnam v. M. Chelamayya, AIR 1972 SC 1121

[6] Registration Act, 1908, § 17(1)(b), No. 16, Acts of Parliament, 1908 (India).

[7] Registration Act, 1908, § 17(1)(e), No. 16, Acts of Parliament, 1908 (India).

[8] Arbitration and Conciliation (Amendment), 2015, § 29(A)(1), No. 3, Acts of Parliament, 2016 (India).

[9] Arbitration and Conciliation (Amendment), 2015, § 36 (1), No. 3, Acts of Parliament, 2016 (India).

[10] Arbitration and Conciliation (Amendment), 2015, § 34, No. 3, Acts of Parliament, 2016 (India).

[11] Arbitration and Conciliation (Amendment), 2015, § 33(1), No. 3, Acts of Parliament, 2016 (India).

[12] Arbitration and Conciliation (Amendment), 2015, § 33(2), No. 3, Acts of Parliament, 2016 (India).

[13] Arbitration and Conciliation (Amendment), 2015, § 36(3), No. 3, Acts of Parliament, 2016 (India).

[14] Arbitration and Conciliation (Amendment), 2015, § 33(3), No. 3, Acts of Parliament, 2016 (India).

[15] Chopra Fabricators & Manufacturers (P) Ltd. v. Bharat Pumps & Compressors Ltd., (2023) 2 SCC 481.

[16] 1958 Convention on the Recognition and Enforcement of Foreign Arbitral Awards, 330 UNTS 38

[17] Arbitration and Conciliation (Amendment), 2015, No. 3, Acts of Parliament, 2016 (India).

[18] Arbitration and Conciliation (Amendment), 2015, § 49, No. 3, Acts of Parliament, 2016 (India).

[19] Arbitration and Conciliation (Amendment), 2015, § 48, No. 3, Acts of Parliament, 2016 (India).

[20] Convention on the Execution of Foreign Arbitral Awards 1927, 21 UST 2517

[21] Arbitration and Conciliation (Amendment), 2015, No. 3, Acts of Parliament, 2016 (India).

[22] Arbitration and Conciliation (Amendment), 2015, § 56, No. 3, Acts of Parliament, 2016 (India).

[23] Arbitration and Conciliation (Amendment), 2015, § 57, No. 3, Acts of Parliament, 2016 (India).

[24] Aakash Vishwakarma, Commercial Arbitration: Enforcement of a Foreign Arbitral Award, 4 INDIAN J.L. & LEGAL RSCH. 1 (2022).

[25] Shriram EPC Limited v. Rioglass Solar SA, 2016 SCC OnLine Mad 33608

[26] Arbitration and Conciliation (Amendment), 2015, § 47, No. 3, Acts of Parliament, 2016 (India).

[27] M/s Fuerst Day Lawson Ltd. v. Jindal Exports Ltd, AIR 2001 SC 2293

[28] Limitation Act, 1963, art. 137, No. 36, Acts of Parliament, 1963 (India).

[29] NTT Docomo Inc. v. Tata Sons Limited, 2017 SCC OnLine Del 8078