A Detailed Guide To Enforcement Of Arbitral Award

You may have come out on top in an Arbitration-Based Legal Battle, only to wonder, "What Now?" The triumph is only complete once the Arbitral Award is put into effect. However, how does that occur? Is it as easy as it looks, or are there challenges to face?

This Article will walk you through the steps, potential obstacles, and crucial elements of enforcing an arbitral award. You'll obtain a thorough grasp of what it takes to make that Award a Reality, even though you're New to Arbitration or Just reading up on the topic.

What Is An Arbitral Award

The ultimate and legally binding ruling rendered by a single Arbiter or an Arbitral Tribunal that settles all or a portion of the issue brought before him or her is known as an Arbitral Award. It resembles a Ruling from a Court of law. The proceedings will end when the Arbitrator determines that all of the parties have submitted their facts and Arguments. This Implies that no additional justifications or proof will be accepted.

Types Of Arbitral Award

Among the categories for Arbitral Awards are:

• Domestic Award

• Foreign Award

Domestic Arbitral Award

Part 1 of the Arbitration and Conciliation Act of 1996 addresses Domestic Awards. One can differentiate between a Domestic Award and an International or Foreign honour. The Country in which an International Award is made may consider it to be local.

When India serves as the venue for both International and Domestic Arbitration, Part 1 of the Act is applicable to both types of Arbitration. Section 34 of the Act permits a challenge to a Domestic Award; however, no "Challenge" action is considered in relation to a Foreign Award. 

An exception exists in that a Domestic Award encompasses an International Arbitration Award rendered on Indian Territory even if one of the parties is not an Indian Citizen or the Government. 

Foreign Arbitral Award

Conversely, An Award made in An Arbitration or other Procedure with a seat outside of India is referred to as a Foreign Award. Typically, the term "Foreign Award" only becomes important when it comes to enforcement in a Nation other than the one where it was originally made.

Article V of the New York Convention is relevant to section 48 of the legislation. A party may file an application under certain conditions listed in section 48 of the Act to have a Foreign Award enforced. Therefore, even if Indian Law Governs the contract, no "Challenge" actions to annul the award may be undertaken against a Foreign Award in India under the Act. 

Indian Courts will not consider merit-based challenges to Foreign Awards that are requested to be implemented in India. The Court may refuse to enforce the Foreign Award in an enforcement action if the party challenging the execution of the decision gives the Court enough "Proof" of any of the Grounds Specified in Section 48(1).

The Defences available to a party opposing the implementation of a Foreign Award are outlined in the aforementioned section.   

Implementation Of An Arbitral Award

The Arbitral decision shall be enforceable as a Court Judgment complies with the Code of Civil Procedure 1908, provided that an application under Section 34 is submitted after the deadline. The execution of the Arbitral Award is contingent upon both its finality and legitimacy. The winning party cannot submit a valid claim after the award becomes final. 

Additionally, it keeps the losing side from bringing up a lost case because they think they can get a better Counsel, a more accommodating Judge, or credible witnesses in the second place. Thus, the Award of Arbitration shall be final and binding on the parties and those making claims under them, respectively, according to section 35 of the Act.

The Initiation of the Arbitration Procedure does not mean that the option to make an Award is Permanent, nor does it constitute an Award when the parties enter into an Agreement outside of the manner specified under section 35 of the 1996 Act.

A question of Jurisdiction other than an Arbitration agreement may be raised in the case, and the Award becomes final and a Court Judgment under section 35 of the Act if it is not disputed.

Grounds And Conditions For Challenging The Enforcement Of Arbitral Awards

If a party chooses to contest the Arbitral Award, they may do so for any of the following reasons:

• There was a degree of inability among the parties to the Arbitration Agreement.

• The Arbitration agreement in question does not follow the law of the Nation where the Arbitral decision was issued, particularly in the Case of a Foreign Award, or the relevant law selected by the Parties.

• Either the party seeking the Award failed to present its Case Convincingly Enough, or there was insufficient notification provided on the Arbitrator's appointment or the commencement of the Arbitral Procedures. 

• The Arbitral Panel's Authority goes beyond the Award agreement's terms.

• Decisions on issues not covered by the Arbitration Agreement or the Tribunal's Jurisdiction. 

• Despite the rules of the Arbitration Agreement and Local Laws, the formation of the Arbitral Tribunal and the Arbitration Process are Unlawful.

• The Arbitral Ruling is obviously unlawful or goes against Indian National Policy.

• Because of an application for its suspension or revocation submitted to the appropriate Authorities of the Nation where the Arbitral Award was formed, or because of the laws of that Nation, the Arbitral Award, especially a Foreign Award has not yet been enforceable against the parties.

Limitation For Enforcement Of Arbitral Awards

The time constraints must be understood in order to enforce Arbitral Rulings. To Guarantee that the Enforcement Procedure Complies with the Limitation Act of 1963, the Supreme Court has made clarifications on the statute of limitations for both Domestic and Foreign Awards.

The most important deadlines for implementing both Local and International Arbitral rulings are outlined here:

Restrictions On The Execution Of Domestic Awards

The Supreme Court held that, for the purposes of enforcement, an Arbitral Award is regarded as a decree. Thus, Arbitration is likewise subject to the 1963 Limitation Act. Consequently, the 12-year Statute of Limitations that extends to implementing any decision is also applicable to enforcing Domestic Awards.

Restrictions On The Execution Of Foreign Awards 

The Supreme Court has decided that the statute of limitations for the execution of a Foreign Award should be three years in Compliance with the residuary condition under Article 137 of the Schedule of the Limitation Act. As soon as the applicant's Right to Seek Enforcement was established, the Limitation would go into place.

Cases Related To The Enforcement Of Arbitral Awards

Some significant instances related to the enforcement of Arbitral Awards are as follows:

Case1: Jindal Exports Ltd. v. Fuerst Day Lawson Ltd. (2001)

In this instance, the New York Convention's application to a Foreign Arbitral decision's Adoption was in question.

The Arbitration and Conciliation Act, of 1996 allows International Arbitral Awards to be enforced in India, according to a Court Decision. The Court affirmed the notion of finality in International Arbitration and Stressed that there is little chance of contesting the application of such a decision.

Case 2: National Aluminium Co. Ltd. v. Pressteel & Fabrications (P) Ltd. (2004)

In this case, the Arbitral decision was being implemented in Compliance with Section 34 of the Arbitration and Conciliation Act, 1996, following an attempt by the losing party to challenge the outcome.

The Supreme Court Ruled that after the time for disputing an Award given under Section 34 has elapsed, it becomes a Court Judgment and is legally binding.  The request by the losing party to postpone enforcement was denied, confirming the binding character and finality of Arbitral Rulings.

Case 3: Western Geco International Ltd. v. ONGC Ltd. (2014)

In this Case, the ONGC contended that enforcing a Domestic Arbitral Ruling was against Public Interests.

The Interpretation of "Public Policy" as specified in Section 34 of the 1996 Arbitration and Conciliation Act was broadened by the Supreme Court. It states that an Award can only be nullified in cases where it contradicts Fundamental Legal principles, India's Interests, Equity, or Ethics. The Ruling strengthened the enforcement of verdicts by highlighting the few grounds for contesting an Arbitral Award.

Conclusion

To sum up, one of the most important ways to Guarantee that the results of Arbitration are honored and put into practice is to enforce the Arbitral Ruling. Comprehending the Legal Structure and deadlines is crucial while handling both local and Foreign Awards.

The procedure preserves the idea of finality and offers both parties closure and clarity. The Arbitration Process is a potent instrument for settling conflicts since an Arbitral Ruling may be successfully enforced by following the Correct Legal Procedures.

About The Author:

Adv. Rajeev Kumar Ranjan, practicing since 2002, is a renowned legal expert in Arbitration, Mediation, Corporate, Banking, Civil, Criminal, and Intellectual Property Law, along with Foreign Investment, Mergers & Acquisitions. He advises a diverse clientele, including corporations, PSUs, and the Union of India. As founder of Ranjan & Company, Advocates & Legal Consultants, and International Law Firm LLP, he brings over 22 years of experience across the Supreme Court of India, High Courts, tribunals, and forums. With offices in Delhi, Mumbai, Patna, and Kolkata, his firms provide specialized legal solutions. Adv. Ranjan is also Government Counsel in the Supreme Court and has earned numerous national and international awards for his expertise and dedication to clients.