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January 02, 2025
What Are Arbitration Awards? Understanding the Basics
Arbitration has become an increasingly popular method of dispute resolution in India, as it offers a faster and more flexible alternative compared to traditional litigation. However, obtaining an arbitration award is only the first step; the challenge lies in enforcing the arbitral award.
In this blog, we will see the legal steps and practical considerations involved in the enforcement of arbitration awards in India, providing legal steps for parties seeking to ensure that their arbitral victories translate into actual relief.
The Legal Framework Governing Arbitration in India
The Arbitration and Conciliation Act, 1996 (“the Act’) is the primary legislation in India governing Arbitration in India which provides a framework for the process of arbitration outlining from how arbitration proceedings are to be conducted to how arbitral awards are to be challenged and enforced.
How Are Arbitral Awards Treated as Decrees in India?
Unlike a decree passed by the courts, the award is passed after the completion of arbitral proceedings and in the case of the arbitral tribunal, they are not empowered to enforce such award. Although the act outlines that the award shall be treated in the same manner as if it were a decree of the court, it is to be enforced by the courts in accordance with the provisions of the Code of Civil Procedure, 1908. Consequently, despite not being an execution decree, the arbitral award after getting passed by the arbitral tribunal, requires enforcement through a competent court.
Types of Awards
Domestic Awards:
In India, enforcement of domestic awards has been provided under Section 36 of the Act stating that an arbitral award can be enforced only if it has not been challenged within the specified time limit of three months following its issuance by the arbitral tribunal. Once, these three months are lapsed, the award can be enforced by the court as it may deem fit and cannot be further challenged during the enforcement period. To enforce an arbitral award, a petition must be filed in the jurisdiction where the decree is to be executed seeking its enforcement.
Which Court has jurisdiction for enforcement of such award?
The Act under Section 42, which addressed the jurisdiction, outlines that if an application related to an arbitration agreement is made to a specific Court under this Part, only that Court will have jurisdiction over the arbitral proceedings and all subsequent applications arising from that agreement. It also states that any further applications related to the arbitration and the proceedings must be made in that Court and no other. This creates confusion as the application for enforcement is only to be made.
However, in the landmark judgment by the Supreme Court in Sundaram Finance Limited vs. Abdul Samad and Ors. establishes a clear legal principle regarding the enforcement of arbitration awards. It states that execution proceedings can be initiated in any jurisdiction where the decree is executable, removing the necessity of transferring the decree from the Court that has jurisdiction over the arbitral proceedings. It confirms that an award under the Arbitration Act is considered a decree, though not an execution decree, and requires enforcement by a competent Court. It also further adds that there is no requirement for obtaining a transfer of the decree from the Court, which had jurisdiction over the arbitral proceedings.
Foreign Awards:
India is a signatory to both, the Convention on the Execution of Foreign Arbitral Awards 1927 (the Geneva Convention) and the Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958 (the New York Convention). So, in a case where a party receives an award from a country that is a signatory to either of these Conventions, and the award originates from a territory designated as a convention country by India, it becomes enforceable within India.
Additionally, India is also a signatory to bilateral investment treaties, which commonly contains a dispute resolution clause. The Act also outlines provisions for the enforcement of the foreign award in accordance with the Conventions wherein it starts with the filing of an execution petition whereby courts evaluate that conditions as stipulated for enforcement of foreign awards are met and that award meets the criteria outlined in the Arbitration Act. If the Court determines that the arbitral award is enforceable, it would be executed in the same manner as a decree issued by that court.
It is also provided that in case the award received is in a foreign language it is to be produced in English translation by a diplomatic or consular agent of that party’s country.
Registration of the Award
Section 17 of the Registration Act of 1908 lays down what documents would require compulsory registration. It mandates that any award affecting any immovable property would have to compulsorily be registered and that if such an arbitral award requiring compulsory registration is not registered, then the arbitral award could not be admitted as evidence in respect of immovable property. an award should be registered within 4 months of time duration from the date it is passed.
Conclusion
The enforcement of arbitration awards in India requires a clear understanding of the Arbitration and Conciliation Act, 1996, and its provisions. While dealing in both domestic or foreign awards, conforming to timelines, jurisdictional nuances, and compliance with legal requirements such as registration are essential steps in the process. Adhering to these legal frameworks, parties can effectively translate their arbitral victories into tangible outcomes, reinforcing arbitration as a quick and reliable alternative compared to traditional litigation in resolving disputes
