Project on Arbitration and Conciliation Act, 1996 Arbitral Award

Contents
Introduction ............................................................................................................................................................ 2 Definition of Arbitral Award .................................................................................................................................. 3 Arbitral Award Form and Contents of ......................................................................................................... 4 Terms and Contents of Arbitral Award .............................................................................................................. 4 (i) Arbitral Award operates as res judicata ..................................................................................................... 5 (ii) Essentials of Arbitral Award ..................................................................................................................... 5 (iii) Arbitral award may be final or interim .................................................................................................... 5 (iv) Time limit for making the arbitral award ................................................................................................. 6 (v) Arbitral award by consent ......................................................................................................................... 6 (vi) Contents of the arbitral award .................................................................................................................. 6 (vii) Arbitral award to be made by majority ................................................................................................... 6 (viii) Arbitral award shall be final and binding on the parties ........................................................................ 6 (ix) Law of Limitation Applicable to Arbitral Award .................................................................................... 7 (x) Whether stamp duty payable on arbitral award ......................................................................................... 7 (xii) Whether arbitrator can award interest ..................................................................................................... 7 (xiii) An Interim award is a part of final award .............................................................................................. 8 (xiv) An arbitral award treated as a decree of a court ..................................................................................... 8 (xv) Foreign arbitral awards ........................................................................................................................... 8 (xvi) Arbitral Award under Act, 1996 distinguished from the Arbitral Award under old Arbitration Act, 1940 ................................................................................................................................................................ 8 Making Of Arbitral Award ..................................................................................................................................... 9 Section 28 to 33 of the Act deals with the Award by arbitrators and termination of proceedings. ..................... 9 a) Rules Applicable To Substance Of Dispute ................................................................................................... 9 b) Decision Of The Arbitral Tribunal-{ Section 29) ......................................................................................... 10 c) Settlement (Section 30) ................................................................................................................................ 10 d) Forms and Contents Of Arbitral Award (Section 31) ................................................................................... 10 e) Termination Of Proceedings {Section 32) .................................................................................................... 11 f) Additional Award (Section 33) ..................................................................................................................... 11 Setting Aside of Arbitration Award (Section 34} ................................................................................................. 12 Application for Setting Aside A. Award .......................................................................................................... 15 Enforcement of Awards ........................................................................................................................................ 16 Bibliography ......................................................................................................................................................... 17

1 University Institute of Legal Studies, Panjab University, Chandigarh

Project on Arbitration and Conciliation Act, 1996 Arbitral Award

Introduction
Arbitration is a legal process, which takes place outside the courts, but still results in a final and legally binding decision similar to a court judgment. Arbitration is a flexible method of dispute resolution, which can give a quick, inexpensive, confidential, fair and final solution to a dispute. It involves the determination of the dispute by one or more independent third parties rather than by a court. The third parties, called arbitrators, are appointed by or on behalf of the parties in dispute. The arbitration is conducted in accordance with the terms of the parties' arbitration agreement, which is usually found in the provisions of a commercial contract between the parties. For an arbitration to take place, the disputing parties must agree to take their dispute to arbitration. In practice, this agreement is often made before the dispute arises and is included as a clause in their commercial contract. In signing a contract with an arbitration clause, the parties are agreeing that their dispute will not be heard by a court but by a private individual or a panel of several private individuals. If parties have agreed to arbitration, they will generally have to go to arbitration rather than court as the courts will normally refuse to hear their case by staying it to force the reluctant party to honour their agreement to arbitrate. Arbitration Award is a determination on the merits by an arbitration tribunal in arbitration, and is analogous to the judgment in the Court of Law. Arbitration is particularly a means of dispute resolution in the commercial sphere. One of the reasons for doing so is that in international trade it is often easier to enforce a foreign arbitral award than to enforce a judgment of the Court. The closing decades of the twentieth century saw arbitration gain worldwide acceptance as the normal means of resolving commercial disputes. National laws on arbitration have been modernized on all continents. The Arbitration & Conciliation Act, 1996 is one such step by India to make the arbitration law more responsive to contemporary requirements, taking into account the Model law and Rules adopted by the United Nations Commission on International Trade Law (UNCITRAL). International treaties on arbitration have been signed or adhered to with impressive success. With the gradual removal of political and trade barriers and the rapid globalization of the world economy, new challenges have been created for arbitration institutions in response to the growing demand of parties for certainty and predictability, greater rapidity and flexibility as well as neutrality and efficacy in the resolution of disputes. An arbitration award (or arbitral award) is a determination on the merits by an arbitration tribunal in arbitration, and is analogous to a judgment in a court of law. It is referred to as an 'award' even where the entire claimant's claims fail (and thus no money needs to be paid by either party), or the award is of a non-monetary nature. Arbitration is particularly popular as a means of dispute resolution in the commercial sphere (for a summary of the various arenas in which arbitration is usually generally, see the specific article on "arbitration"). One of the reasons for doing so is that, in international trade, it is often easier to enforce an arbitration award in a foreign country than it is to enforce a judgment of the court.

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Under the New York Convention 1958, an award issued a contracting state can generally be freely enforced in any other contracting state. Virtually every significant commercial country in the world is a party to the Convention, but relatively few countries have a comprehensive network for cross-border enforcement of judgments of the court. Hence in many countries, particularly in emerging markets, a foreign arbitration award is much easier to enforce than an award of the court. The other characteristic of cross-border enforcement of arbitration awards that makes them appealing to commercial parties is that they are not limited to awards of damages. Whereas in most countries only monetary judgments are enforceable in the cross-border context, no such restrictions are imposed on arbitration awards and so it is theoretically possible (although unusual in practice) to obtain an injunction or an order for specific performance in an arbitration proceeding which could then be enforced in another New York Convention contracting state. The New York Convention is not actually the only treaty dealing with cross-border enforcement of arbitration awards. The earlier Geneva Convention on the Execution of Foreign Arbitral Awards 1927 remains in force, but the success of the New York Convention means that the Geneva Convention is rarely utilised in practice. The Arbitration and Conciliation Act, 1996 of India recognizes and provides for statutory enforcement mechanisms and shall form the base for our study in the following pages.

Definition of Arbitral Award

Under Section 2 (1)(c) the word Arbitral Award is not defined but it states that the Arbitral Award includes an interim award. Although Section 31(6) submits explanation in this regard as under The Arbitral Tribunal may, at any time during the arbitral proceeding, make an interim arbitral award on any matter with respect to which it may make a final arbitral award. Thus, an interim award may be the Arbitral Award. So, an interim award may be a final award. According to H. Lexicon It is an instrument which embodies a decision of an arbitrator or arbitrators as regards matters referred to him or them. Although, according to Russell An award in order to be valid, must be final, certain, consistent and possible and must decide matters to be submitted and no more than the matters submitted. An arbitral award is not a contract but the decision determined out of the contract. An award, whether it is arbitral or interim award is a decision of the arbitrator or arbitrators which is determined after contentions of the parties are considered and an arbitrator or the arbitrators put his or their opinion in the form of decision. The consent of the parties may not be present
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in a decision. An arbitral award decided by the Arbitral Institution judicially will have binding effect in respect of the parties in dispute. The contents of an arbitral award must be in writing, not oral. An arbitral award is like a decree which comes into effect from the date on which it has been signed and right of the related parties come into effect from that date onward.1 Any agent on behalf f the parties to dispute if authorised by the parties may refer the matter o arbitration for settlement of dispute. In Kishan Lal v. Ram Swaroop,2the Allahabad High Court held that the Vakalatnama submitted by the parties differ in respect of their contents. The Vakalatnama submitted by the plaintiff authorised the counsel to compromise the suit or proceeding. In another aspect the Vakalatnama on record, authorises the counsel to refer the matter to arbitration which includes power to compromise in arbitration. Therefore, if an agent in authorised to compromise the dispute it is deemed that he has power to refer the matter for arbitration. It is expected that the arbitrator has accepted all claims and counter-claims and considered them all in quasi-judicial manner before it could arrive at the final award.

Arbitral Award Form and Contents of It is to be noted that the definition of

arbitral award in Section 2(1) (c) of the Arbitration and Conciliation Act, 1996 is not an exhaustive definition. However, every arbitral award must contain the following five things: 1. 2. 3. 4. 5. Factual aspect of disputed matter; Submission of the parties; Contention of parties to rival submission; Arbitrators view; Delivery of an arbitral award.

There is no prescribed form of arbitral award. However, Section 31 of the Act, 1996 provides certain criteria, which is to be followed by the arbitrator while delivering the arbitral award.3

Terms and Contents of Arbitral Award The following terms and contents are
required to be mentioned in the arbitral award: 1. 2. 3. 4.
1 2

The arbitral award must be in writing and signed by the arbitrator/s. The arbitral award must be based on reasoning. It must be a speaking award. The arbitral award must show date and place of arbitration. A certified copy of arbitral award is required to be delivered to each party.

Lal Das v. Bai Lal, 11 Bom LR 20 !965 ALJ 698 at 705 3 Charan Sharan Khemka v. Achint Chemicals, 2005 (2) Raj 465 (Raj) 4 University Institute of Legal Studies, Panjab University, Chandigarh

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5. If the arbitral award is for payment of money, the arbitral award may include interest at such rate as the arbitral tribunal deems reasonable. 6. The costs of the arbitration shall be fixed by the arbitral award. 7. The language used in passing the arbitral award must free from any ambiguity.

In Shashi Sekhareswar v. Lalit Mohan, 4the Privy Council, inter alia observed that a decree passed on the foundation of arbitral award would have the same effect as an ordinary judgment of a court and on the question which has already been decided by the arbitrators it operates as res judicata. But, where a claim in question has not been included as a subject-matter of reference to arbitration, it was held that principle of res judicata will n ot applied in respect of the claim.5
(i) Arbitral Award operates as res judicata

In the view of the Apex Court an arbitral award is to be treated as a decree passed by the Civil Court, and it is binding on the parties.6 It is submitted that an arbitral award is not a contract but a decision given on the basis of terms of a contract. An arbitral award must be in writing because it is like a decree of the Civil Court. It is well settled legal position that a valid, proper and enforceable arbitral award must have the following essential ingredients, which are as follows
(ii) Essentials of Arbitral Award

1. An arbitral award must be in writing and signed. 2. The parties must be competent to initiate arbitral proceedings. 3. A sustainable arbitral award must be reasoned one Section 31 (3) of the Arbitration and Conciliation Act, 1996. 4. There must be arbitration clause to assign disputes or differences before arbitral tribunal. 5. The contents of an arbitral award must be connected with the subject-matter of the dispute arbitrated. 6. An arbitral award must be founded on the principle of mutuality. Where the arbitral award is based on mutual settlement of the dispute by the parties, no reason need be given.7

An arbitral award may be a final award or an interim award unless there is an agreement to the contrary between the parties and depending upon the nature of the dispute, the arbitrator could make an interim award. An
(iii) Arbitral award may be final or interim
4 5

AIR 1925 PC 34 Damoder Engineering Construction Co., In Re, (1994) 1 Arb. LT 133 6 Satish Kumar v. Surendra Kumar, AIR 1970 SC 833 7 Section 30(3)of the Arbitration and Conciliation Act, 1996 5 University Institute of Legal Studies, Panjab University, Chandigarh

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interim award has the same sanctity as final award. If it was not complied with, it could not be enforced through the court by the same procedure as in the case of final award.8 The Arbitration and Conciliation Act, 1996 does not provide any time limit as such for completing the arbitration. However, mandate of an arbitrator can be terminated if he fails to act without undue delay which means in fact if he is guilty of undue delay.9
(iv) Time limit for making the arbitral award

The Arbitration and Conciliation Act, 1996 recognizes the liberty of the parties to come to a settlement. The arbitrator, if satisfied about the genuineness and validity of the settlement has to give an award in terms of the settlement has to give an award in terms of the settlement. The Act further envisages that the arbitrator may encourage efforts at settlement.10 It is to be noted that the Arbitration Act, 1940 was silent on this point.
(v) Arbitral award by consent (vi) Contents of the arbitral award

The requirements of the content and form of arbitral

award are as under 1. An arbitral award shall be made in writing and shall be signed by the member of the arbitral tribunal. 2. For the purpose of Section 31(1), in arbitral proceedings with more than one arbitrator, the signatures of the majority of all the members of the arbitral tribunal shall be sufficient so long as the reason for any omitted signature is stated. 3. The arbitral award shall state its date and the place of arbitration as determined in accordance with Section 20 and the award shall be deemed to have been made at that place. It is mandate of Section 29(1) of the Arbitration and Conciliation Act, 1996 that the decision of the arbitral tribunal shall be made by the majority of all its members. An arbitral award was required to be signed by the arbitrator to give it validity. Where there were more than two arbitrators, then unless the arbitration agreement provided for a unanimous decision, the award would have to be the decision of the majority. In case an arbitrator dissented from the majority decision, he could append his dissenting opinion to the majority decision, though it is not obligatory.12
(vii) Arbitral award to be made by majority

11

As provided under Section 35 of the Arbitration and Conciliation Act, 1996 an arbitral award shall be final and binding on the parties and persons claiming under them. Where the time for making the application to set aside an arbitral award has expired or where such application has been refused by the court, the award shall be enforced as if it were the decree of the court.13
(viii) Arbitral award shall be final and binding on the parties

8 9

Section 27 of the Arbitration and Conciliation Act, 1996 Section 14 of the Arbitration and Conciliation Act, 1996 10 Section 30 of the Arbitration and Conciliation Act, 1996 11 Section 31 of the Arbitration and Conciliation Act, 1996 12 Section 2(1)(c) and 29(1) of the Arbitration and Conciliation Act, 1996 13 Section 36 of the Arbitration and Conciliation Act, 1996 6 University Institute of Legal Studies, Panjab University, Chandigarh

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It is to be noted that under the present Act it will not be necessary to make the award a rule of the court and to pass a decree in terms of the award, as is mandatory under the repealed law. It is the mandate of the present Act that the enforcement of an arbitral award shall be subject to Limitation Act, 14 as it is applicable to contracts and thus a suit for specific performance could be filed within the period of limitation as prescribed under Article 54 of the Limitation Act, 1963. Therefore, after the expiry of period of limitation an arbitral award cannot be set aside. It would amount to waiver of rights by the parties.
(ix) Law of Limitation Applicable to Arbitral Award

On the point of limitation for setting of arbitral award, Section 34 of the Act provides that an application for setting aside the arbitral award may not be made after three months have elapsed from the date on which the party making that application has received an award on ground specified in the section. In fact the Arbitration and Conciliation Act, 1996 contains no provision regarding payment of stamp duty on the arbitral award. Thus, an arbitral award has to be stamped with requisite stamp duty in accordance with the Indian stamp Act, 1899. This point is outside the scope of law of arbitration. In case arbitral award is not adequately stamped or there is insufficiency as to stamp duty, even then the arbitral award can be admitted in evidence after payment of proper stamp duty together with the penalty prescribed under the Indian Stamp Act, 1899.
(x) Whether stamp duty payable on arbitral award

(xi) Evidence admissibility of unstamped arbitral award In Kodandapami v. Kadidela Raja Mouli,15it was held that if an unstamped and unregistered arbitral award is admitted in evidence without objection, it cannot be ignored in view of Section 36 of the Stamp Act. But, if it is compulsorily registrable as creating a lease for six years in immovable property, it cannot be relied upon as evidence of acquisition of any right in immovable property. It cannot be used to resist the claim of the landlord for recovery of possession of the demised premises.

Section 31(8) of the Arbitration and Conciliation Act, 1996 empowers the arbitrator to award interest from the date of submission to arbitration to the date of the arbitral award. Thus, under this Act the arbitrators power extends to the pre-arbitration period and also to the period for which the arbitration remains pending.
(xii) Whether arbitrator can award interest

The Apex Court in Secretary to the Government of Orissa v. Raghunath Mahapatra,16has held that even under the Arbitration Act, 1940, the arbitrator could award interest from the date of submission to arbitration to the date of the award. Section 31(d) of the Arbitration and Conciliation Act, 1996 empowers the arbitrator, in a monetary award to include interest on the amount, unless otherwise agreed by the parties. Thus, the provision under the new Act has widened the powers of the arbitrator because the power is expressed as covering the whole
14 15

257Section 34(3) of the Arbitration and Conciliation Act, 1996 AIR 2003 AP 16 (1992) CLA 54 7 University Institute of Legal Studies, Panjab University, Chandigarh

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or any part of the period between the date on which the cause of action arose and the date on which the arbitral award is made. According to Section 2(1)(c) of the Arbitration and Conciliation Act, 1996 the expression arbitral award shall include an interim award also. Thus, under this provision the arbitrator is empowered to make interim award is it is sought or it depends upon the nature of dispute. An interim award shall have the same sanctity as final award. Thus, an interim award, if it is passed, shall be binding on the parties to arbitration.17
(xiii) An Interim award is a part of final award

The Apex Court in Satish Kumar v. Surendra Kumar, has held hat an arbitral award is treated as a decree of a court and it does not matter whether it has passed into decree or not hence it is binding upon the parties.
(xiv) An arbitral award treated as a decree of a court
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Under Part II of the Arbitration and Conciliation Act, 1996 the foreign arbitral awards are enforceable in accordance with the Geneva Convention and New York Convention and such foreign arbitral awards are considered as a decree of a court. However, if neither of the convention is adopted, by any country such country shall be outside scope of Part II of the Act and such foreign arbitral awards cannot be enforced in India.19
(xv) Foreign arbitral awards (xvi) Arbitral Award under Act, 1996 distinguished from the Arbitral Award under old Arbitration Act, 1940 The Supreme Court in Morgan Securities and Credit (P) Ltd. v. Modi Rubber

Ltd.,20has held that under old Arbitration Act, 1940 an arbitral award was required to be made by use of Court to make enforceable, but under the new Arbitration and Conciliation Act, 1996, an arbitral award is to be treated to be a decree even without intervention of the court only for the limited purpose of its enforceability. In view of the Supreme Court an arbitral award under the Arbitration and Conciliation Act, 1996 indisputable stands on a different footing vis-a-vis an arbitral award made under the Arbitration Act, 1940. Whereas under the Act, 1940, an arbitral award was required to be made a rule of the Court to make it enforceable, the Arbitration and Conciliation Act, 199, however raises a legal fiction. Once an application challenging an award is filed, the remains under suspension in the sense that it would not be enforceable. Only upon expiry of the period specified in Section 34 of the Act, 1996 to challenge an award or when such objection is refused, would the same become enforceable. Section 36 of the Act, 1996 merely specifies as to how such an award can be enforced by laying down that it can be enforced as if it were a decree. The legal fiction created under Section 36 of the Act, has therefore, a limited application. An arbitral award is to be treated to be a decree even without intervention of the court only for limited purpose of its enforceability.
17 18

Section 35 of the Arbitration and Conciliation Act, 1996 AIR 1970 SC 833 19 Sections 49 and 58 of the Arbitration and Conciliation Act, 1996 read with Section 44-A of the Code of Civil Procedure, 1908 20 AIR 2007 SC 683 8 University Institute of Legal Studies, Panjab University, Chandigarh

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Making Of Arbitral Award

The document that gives and explains the decision(s) of an arbitrator is called an award. An award is binding on both parties An arbitrator has authority to issue interim, partial and final awards Having issued a final award, the arbitrator has no further duty or authority upon the arbitration, except for the right to correct any minor slips. Either party can, within a reasonable time may seek to challenge art award in the High Court However, the court will only interfere on limited grounds relating to the capacity of the parties, the validity or scope of the arbitration agreement, or unfairness or impropriety in me conduct of the proceedings for domestic arbitrations, and the court may also, unless otherwise agreed by the parties, consider an appeal on a question of law arising from the award. In this case, the court may confirm, vary, set aside the award, or refer it back to the arbitrator for reconsideration in the light of the courts opinion on the question of law.

Section 28 to 33 of the Act deals with the Award by arbitrators and termination of proceedings. Salient features of the same are discussed herewith a) Rules Applicable To Substance Of Dispute
Generally the Arbitral Tribunal decides the dispute submitted to arbitration in accordance to the substantive law for the time being in force in India (sec 28 (1) (a)] For example, dispute between the partners of a firm shall be resolved by application of the provision of the Indian Partnership Act. However, In case of International Commercial arbitration, the parties have been allowed autonomy to designate the Law. Where the parties fail to designate any law, the Arbitral Tribunal is to apply the law as considered appropriate in the circumstances of dispute. Section 28(1) (b) lays down that in international commercial arbitration 1) The arbitral tribunal shall decide the dispute in accordance with the rules of law designated by the parties as applicable to the substance of the dispute. 2) Any designation by the parties of the law or legal system of a given country shall be construed, unless otherwise expressed as directly referring to the substantive law of that country and not its conflict of laws. 3) Failing any designation of the law under clause (a) by the parties the Arbitral Tribunal shall apply the rules of Law it considers to be appropriate given all the circumstances surrounding the dispute.
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The parties to the arbitration can authorize the Arbitral Tribunal to decide ex acquo et bono i.e. based on equity and good conscience or as amiable compositeur (as friendly compromiser) i.e. without applying strict legal rules of interpretation as to the obligation of the parties whether contractual or otherwise [section 28(2)] In all cases the Arbitral Tribunal is to decade an accordance with the terms ot the contract by taking into account the usage of the trade applicable to the transaction [section 28(3)]

b) Decision Of The Arbitral Tribunal-{ Section 29)

The decision of the arbitral tribunal is required to be made by majority of all its members unless the parties have agreed otherwise. For example, the parties may decide that the decision should be unanimous and not be majority.

The parties or all the member of the arbitral tribunal may agree that the question of procedure in the arbitration proceedings may be decided by the presiding arbitrator.

c) Settlement (Section 30)

The arbitral tribunal may encourage the parties to settle their dispute at any times during the arbitration proceedings The tribunal can take initiative and fmd out whether there is an element of settlement, and for this purpose it may use mediation, conciliation and other procedures. If a settlement is reached, the same may be incorporated in an arbitral award and signed by the arbitrators. However, this can be done only if requested by the parties and not objected to by the arbitral tribunal. An arbitral award on agreed terms shall have the same status and effect as an other arbitral award on the substance of the dispute. In another words, an arbitral award out of settlement can also be enforced as a decree of the court

d) Forms and Contents Of Arbitral Award (Section 31)

1) The award shall be made in writing and shall be signed by arbitrators. 2) Where there is more than one arbitrator, the signature of majority of the arbitrators shall be sufficient. However, in such cases, the reason for any omitted signature must be stated. 3) The award shall be reasoned one subject to the following exceptions: 1. The parties have agreed that reasons are not to be given 2. The award is the outcome of settlement and on agreed terms as mentioned in section 30. 3. The award shall state its date and the place of arbitration. 4. A signed copy of the award shall be delivered to each party.

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5. The arbitrators may make an interim award, In practice, a request for interim award by a party is entertained by arbitrators, when there are numerous subject matters in the same dispute arid each one of them is separate and distinct from the other 6 The arbitrators have power to award interest for the whole or part of the period between the date on which cause of action arose and the date on which the award is made. However, the parties can by their agreement take away the power of the arbitrators to award interest.

The rate of interest may be such as may be considered reasonable by the arbitrators. However, the rate of interest, for the period from the date of award to the date of payment, shall be lS. pa. unless the arbitrators decide otherwise. Termination of Proceedings (Section 32) and Enforcement of Award

e) Termination Of Proceedings {Section 32)

This section contains the provisions regarding conditions and procedure for termination of arbitral proceedings. The same is summarized in the following paragraphs. 1. The arbitration proceeding is terminated as soon as the final arbitral award is made by the arbitrators. 2. The proceedings stand terminated by an order of the arbitral tribunal where: a) The claimant withdraws his claims b) Both the parties agree on the termination of the proceedings. c) The tribunal finds that the continuation of the proceedings has for any other reason became unnecessary or impossible. However, within 30 days of the receipt of the arbitral award, any of the parties may move the Arbitral tribunal for correction of any computation errors, any clerical or typographical error. The party may also require the tribunal to give interpretation of any specific point or part of the award. The tribunal may correct the error and give interpretation after notice to the other party.

f) Additional Award (Section 33)

A party with notice to the other party may request the arbitral tribunal to make an additional award as to claim presented in the arbitral proceedings but omitted from the arbitral award. The party can do so within 30 days from the receipt of the award unless the tribunal extends the time. The arbitral tribunal shall make the additional award within sixty days of the receipt of the request provided it considers the request to be justified. g) Finality And Enforcement Of Awards(Section 35 & 36)

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An arbitral award is considered final and binding on both the parties. However, an unsatisfied party has the right to make an application to the court for setting aside the order. Therefore. in real sense, an arbitral award shall be considered final only after the time limit to apply for setting it aside has elapsed. In case, a party has made such application, the award will not be final and binding till the application is refused by the court Once the award becomes final as mentioned above, it shall be enforced as if it were a decree of the court.

Setting Aside of Arbitration Award (Section 34}

The grounds for setting aside an award rendered in India (in a domestic or international arbitration) are provided for under Section 34 of the Act. These are materially the same as in Article 34 of the Model Law for challenging an enforcement application. An award can be set aside if: a) a party was under some incapacity; or b) the arbitration agreement was not valid under the governing law; or c) a party was not given proper notice of the appointment of the arbitrator or on the arbitral proceedings; or d) the award deals with a dispute not contemplated by or not falling within the terms of submissions to arbitration or it contains decisions beyond the scope of the submissions; or e) the composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties; or f) the subject matter of the dispute is not capable of settlement by arbitration; or g) the arbitral award is in conflict with the public policy of India. A challenge to an award is to be made within three months from the date of receipt of the same. The courts may, however, condone a delay of maximum 30 days on evidence of sufficient cause. Subject to any challenge to an award, the same is final and binding on the parties and enforceable as a decree of the Court. Considerable controversy has been generated as to whether an award is liable to be challenged under Section 34 on merits. The earlier view, as expounded by the Supreme Court in RenuSagar Power Co. Ltd. v. General Electric Co.21 was that an award could be set side if it is contrary to the public policy of India or the interests of India or to justice or morality but not on the grounds that it is based on an error of law or fact. The Supreme Court in that case was faced with the issue to determine the scope of public policy in relation to proceedings for enforcement of a foreign award under the Foreign Awards (Recognition and Enforcement) Act, 1961. The Court also held that in proceedings for enforcement of a foreign award the scope of enquiry before the court in which the award is sought to be enforced would not entitle a party to the said proceedings to impeach the award on merits.

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(1994) Supp (1) SCC 644 12 University Institute of Legal Studies, Panjab University, Chandigarh

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However, in a later Supreme Court of India decision in Oil and Natural Gas Corporation vs. Saw Pipes22 the Court added an additional ground of patent illegality, thereby considerably widening the scope of judicial review on the merits of the decision. In Saw Pipes case the court accepted that the scheme of Section 34 which dealt with setting aside the domestic arbitral award and Section 48 which dealt with enforcement of foreign award were not identical. The court also accepted that in foreign arbitration, the award would be subject to being set aside or suspended by the competent authority under the relevant law of that country whereas in domestic arbitration the only recourse is to Section 34. The Supreme Court observed: But in a case where the judgment and decree is challenged before the Appellate Court or the Court exercising revisional jurisdiction, the jurisdiction of such Court would be wider. Therefore, in a case where the validity of award is challenged there is no necessity of giving a narrower meaning to the term 'public policy of India'. On the contrary, wider meaning is required to be given so that the 'patently illegal award' passed by the arbitral tribunal could be set aside. .. Similarly, if the award is patently against the statutory provisions of substantive law which is in force in India or is passed without giving an opportunity of hearing to the parties as provided under Section 24 or without giving any reason in a case where parties have not agreed that no reasons are to be recorded, it would be against the statutory provisions. In all such cases, the award is required to be set aside on the ground of 'patent illegality'. The court in Saw Pipes case although adopted the wider meaning to the term public policy but limited its application to domestic awards alone. The Saw Pipes case has generated some controversy, and it remains to be seen if it will stand the test of time. The position of a foreign award has also undergone some recent controversy. A foreign award is enforceable under Part II of the Act if it is rendered in a country that is a signatory to the New York Convention or Geneva Convention and that territory is notified by the Central Government of India. Once an award is held to be enforceable it is deemed to be a decree of the court and can be executed as such. Under the Act there is no procedure for setting aside a foreign award. A foreign award can only be enforced or refused to be enforced but it cannot be set aside. This fundamental distinction between a foreign and a domestic award has been altered by the Supreme Court in the recent case of Venture Global Engineering v. Satyam Computer Services Ltd.23 (Venture Global). Here the Supreme Court was concerned with a situation where a foreign award rendered in London under the Rules of the LCIA was sought to be enforced by the successful party (an Indian company) in the District Court, Michigan, USA. The dispute arose out of a joint venture agreement between the parties. The respondent alleged that the appellant had committed an event of default under the shareholders
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(2003) 5 SCC 705 (2008) 4 SCC 190. 13 University Institute of Legal Studies, Panjab University, Chandigarh

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agreement and as per the said agreement exercised its option to purchase the appellants shares in the joint venture company at book value. The sole arbitrator appointed by the LCIA passed an award directing the appellant to transfer its shares to the respondent. The respondent sought to enforce this award in the USA. The appellant filed a civil suit in an Indian District Court seeking to set aside the award. The District Court, followed by the High Court, in appeal, dismissed the suit holding that there was no such procedure envisaged under Indian law. However, the Supreme Court in appeal, following its earlier decision in the case of Bhatia International v. Bulk Trading24 held that even though there was no provision in Part II of the Act providing for challenge to a foreign award, a petition to set aside the same would lie under Section 34 Part I of the Act (i.e. it applied the domestic award provisions to foreign awards). The Court held that the property in question (shares in an Indian company) are situated in India and necessarily Indian law would need to be followed to execute the award. In such a situation the award must be validated on the touchstone of public policy of India and the Indian public policy cannot be given a go by through the device of the award being enforced on foreign shores. Going further the Court held that a challenge to a foreign award in India would have to meet the expanded scope of public policy as laid down in Saw Pipes (supra) (i.e. meet a challenge on merits contending that the award is patently illegal). The Venture Global case is far reaching for it creates a new procedure and a new ground for challenge to a foreign award (not envisaged under the Act). The new procedure is that a person seeking to enforce a foreign award has not only to file an application for enforcement under Section 48 of the Act, it has to meet an application under Section 34 of the Act seeking to set aside the award. The new ground is that not only must the award pass the New York Convention grounds incorporated in Section 48, it must pass the expanded public policy ground created under Section 34 of the Act. In practice, the statutorily enacted procedure for enforcement of a foreign award would be rendered superfluous till the application for setting aside the same (under Section 34) is decided. The statutorily envisaged grounds for challenge to the award would also be rendered superfluous as notwithstanding the success of the applicant on the New York Convention grounds, the award would still have to meet the expanded public policy ground (and virtually have to meet a challenge to the award on merits). The Venture Global case thus largely renders superfluous the statutorily envisaged mechanism for enforcement of foreign awards and substitutes it with a judge made law. The Judgement thus is erroneous. Moreover, in so far as the Judgment permits a challenge to a foreign award on the expanded interpretation of public policy it is per incuriam as a larger, three Bench decision in the case of Renu Sagar holds to the contrary. Further Saw Pipes (on which Venture Global relies for this proposition) had clearly confined its expanded interpretation of public policy to domestic awards alone (lest it fall foul of the Renu Sagar case which had interpreted the expression narrowly). The Supreme Court in Venture Global did not notice this self-created limitation in Saw Pipes nor did it notice the narrower interpretation of public policy in Renu Sagar and therefore
24

2002) 4 SCC 105. 14 University Institute of Legal Studies, Panjab University, Chandigarh

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application of the expanded interpretation of public policy to foreign awards is clearly per incuriam. The decision thus needs to be reviewed.

Application for Setting Aside A. Award

A dissatisfied party may take recourse section 34(1) and make an application to the court for setting aside the Arbitration award. There is no special form of drafting required for an application to the cowl However the High Courts may lay down procedures to be complied with under Section 82 of the Act Conditions for Setting Aside Award Section 34(2) of the Act provides that an Arbitral award may set aside by the court only a) The party making the application furnishes proof that 1. A party was under some incapacity, or ii. The arbitration agreement is not valid under law to which the panics have subjected it or. failing any indication thereon under the law for the time being in force; or iii The party making the application was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings or was otherwise unable to present his case; iv. The arbitral award deals with disputes not contemplated by or not falling whether the terms of the submission to arbitration, or it contains decisions on matters beyond the scope of the submission to arbitration v. The composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the panics, unless such agreement was in conflict with a provision of this part from which the parties cannot derogate, or, failing such agreement, was not in accordance with this Part; or b) the court finds that: . a party making the application furnishes proof that. ii. the arbitration agreement is not under the law to which the parties have subjected it or, failing any indication thereon, under the law for the time being in force or iii. the party making the application was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings or was otherwise unable to present his Case. iv. The arbitral award deals with a dispute not contemplated by or not failing within the terms of the submission to arbitration or it contains decisions on matters beyond the v. The composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the panics, unless such agreement was in conflict with a provision of this pan from which the panics cannot derogate, or, failing such agreement was not in accordance with this Pan; or
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b) the court finds that the subject matter of the dispute is not capable of settlement by arbitration under the law for the time being in force, or if the arbitration under the law fix the time being in force, Time limit for making a application for setting aside award Section 34(3) lays do that the maximum permissible period for an application to set aside the award is a period of three months. One months condonation can be allowed. There is no special form prescribed for making an application

Enforcement of Awards
One of the factors for determining arbitration as an effective legal institution is the efficiency and efficacy of its award enforcement regime. Under Section 36 of the 1996 Act, an arbitral award is enforceable as a decree of the court, and could be executed like a decree in a suit under the provisions of the Civil Procedure Code, 1908.25 An award resulting from an international commercial arbitration is enforced according to the international treaties and conventions, which stipulate the recognition and enforcement of arbitral awards. Enforcement of foreign awards in India is governed by the 1958 New York Convention and the 1927 Geneva Convention, which are incorporated in Chapter II, Part I and Part II, respectively, in the 1996 Act.26 The provisions of enforcement are the same under the 1940 Act and the 1996 Act. Any party interested in foreign awards must apply in writing to a court having jurisdiction over the subject matter of the award. The decree holder must file the award, the agreement on which it is based and evidence to establish that the award comes under the category of foreign award under the 1996 Act.27 The rate of enforcement of arbitral awards is high. Under the 1996 Act, the Supreme Court of India declined to enforce or recognize awards in only two out of twenty four cases relating to enforcement of arbitral awards (Section 36 of the 1996 Act) that came before it. Both cases involved Indian parties and Indian law.28

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Section 36 of the Arbitration and Conciliation Act, 1996 Enforcement - Where the time for making an application to set aside the award under Section 34 has expired, or such application having been made, it has been refused, the award shall be enforced under the Code of Civil Procedure, 1908 (5 of 1908) in the same manner as if it were a decree of the court. 26 Chapter I, Part II of the Arbitration and Conciliation Act, 1996, deals with enforcement of foreign awards pursuant to New York Convention, while Chapter II, Part II of the said Act deals with foreign awards pursuant to the Geneva Convention 27 Sections 37 and 56 of the Arbitration and Conciliation Act, 1996, contain provisions relating to the documents to be produced before a Court executing a foreign award. 28 S.K. Dholakia, Analytical Appraisal of the Arbitration and Conciliation (Amendment) Bill, 2003, ICAs Arbitration Quarterly, ICA, 2005, vol. XXXIX/No.4 at p 23. 16 University Institute of Legal Studies, Panjab University, Chandigarh

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Bibliography
1. O P Malhotra, The Law and Practice of Arbitration and Conciliation,New Delhi Lexis Nexis-Butterworths: 1sted., 2002. 2. P C Markanda, Law relating to Arbitration and Conciliation,Nagpur: Wadhwa and Co.: 6th ed., 2006.

are: Rajinder Krishan Khanna vs. Union of India (1998) 7 SCC 129; and Oil and Natural Gas Corporation vs. Saw Pipes (2003) 5 SCC 705. The data given here is from the Supreme Court Cases Journal. Dholakia is a member of ICC International Court of Arbitration & is a Senior Advocate, Supreme Court of India. 17 University Institute of Legal Studies, Panjab University, Chandigarh