VOILA! LET’S ARBITRATE! BLOG POST-9:Award them with the Award!

We have finally come to the that point for which we actually started to understand the complete process of International Commercial Arbitration.

That is…

The Arbitration Award!!

After considering all the written and oral submission of both the parties, the tribunal gives the much-awaited decision which is also known as Arbitral Award. This decision of the arbitral tribunal must be by a majority and in writing and signed by all the members of the tribunal. It must state the reasons for the award unless the parties have agreed that no reason for the award is to be given. The arbitral award should be dated and the place where it is made should be mentioned (i.e., the seat of arbitration) and a copy of the award should be given to each party. It is to be noted that Arbitral tribunals can also make interim awards.

The award should be stamped under the Indian Stamps Act and if it is not stamped or is insufficiently stamped is inadmissible for any purpose, which may be validated on payment of the deficiency and penalty (provided it was original). However, a foreign award is not liable to be stamped.

Now, coming to the interest and cost of arbitration to be paid by the parties. Cost of arbitration means reasonable cost relating to fees and expenses of arbitrators and witnesses, legal fees and expenses, administration fees of the institution supervising the arbitration and other expenses in connection with arbitral proceedings. The tribunal can decide the cost and share of each party. If the parties refuse to pay the costs, the arbitral tribunal may refuse to deliver its award. In such a case, any party can approach the court. The court will ask for a deposit from the parties and on such deposit, the award will be delivered by the tribunal.

Then the court will decide the cost of arbitration and shall pay the same to arbitrators. Balance, if any, will be refunded to the party. The regime for costs has been established which has applicability to both arbitration proceedings as well as the litigations arising out of arbitration.

As of now, the interest rate payable on damages and costs awarded shall be 18 per cent per annum, calculated from the date of the award to the date of payment unless the arbitration award mentions any other specific rate.

So, now what happened if one of the parties does not find the award to be fair or invalid due to any procedural or substantive reasons. In this case, Section 34 provides for the manner and grounds for challenge of the arbitral award. Before the expiry of 3 months from the date of receipt of the award, the party can challenge the award on the grounds provided under Section 34. However, if that period expires, the award holder can apply for execution of the arbitral award as a decree of the court.

Under Section 34, a party can challenge the arbitral award on the following grounds-

• the parties to the agreement are under some incapacity;
• the agreement is void;
• the award contains decisions on matters beyond the scope of the arbitration agreement;
• the composition of the arbitral authority or the arbitral procedure was not in accordance with the arbitration agreement;
• the award has been set aside or suspended by a competent authority of the country in which it was made;
• the subject matter of dispute cannot be settled by arbitration under Indian law; or
• the enforcement of the award would be contrary to Indian public policy.

This section provide two more grounds which are left with the Court itself to decide whether to set aside the arbitral award:

• Dispute is not capable of settlement by arbitral Process
• The award is in conflict with the public policy of India

Also, Previously, there was an automatic stay on the enforcement of the award once an application to set aside the award under Section 34 of the Act had been filed before the Indian courts. However, the 2015 Amendment Act required parties to file an additional application, and specifically seek a stay by demonstrating the need for such stay, to an Indian court, and the court can impose certain conditions on granting such stay, in the exercise of its discretion.

Coming to enforcement and execution of the award, which is governed by the Act read with the CPC. While the former lays down the substantive law governing enforceability and execution of an award, the latter deals with the procedures required to be followed when seeking execution of an award. According to Section 35 of the Act, an arbitral award shall be final and binding on the parties and persons claiming under them. Thus, an arbitral award becomes immediately enforceable unless challenged under Section 34 of the Act.

When the period for filing objections has expired or objections have been rejected, the award can be enforced under the CPC in the same manner as if it were a decree passed by a court of law. For the execution of an arbitral award the procedure as laid down in Order XXI of the CPC has to be followed. Order XXI of the CPC lays down the detailed procedure for enforcement of decrees. Where execution of an arbitral award is sought under Order XXI CPC by a decree-holder, the legal position as to objections to it is clear. At the stage of execution of the arbitral award, there can be no challenge as to its validity.

Also, the mere fact that an application for setting aside an arbitral award has been filed in the court does not itself render the award unenforceable unless the court grants a stay in accordance with the provisions of Arbitration and Conciliation Act in a separate application. It is the discretion of the court to impose such conditions as it deems fit while deciding the stay application.

Question of Week:

Can the award be enforceable before the expiry of 3 months provided to the parties to challenge the award?

No, if the application for the challenging the award has been made, as long as this period of 3 months has not elapsed, enforcement of the award is not possible.

So, with this we have come to an end of this season of Voila! Let’s Arbitrate.

That’s right. We are coming up with another season very very soon to discuss some of the major and recent developments in the world of International Arbitration.

Thank you so much reading these Blog posts till now and we hope to meet you again on another beautiful Saturday to update you with fresh and interesting content on Arbitration.

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