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Enforcement of Arbitral Awards: Domestic and Foreign

Before going into the legislative language and judicial interpretation of the enforcement of arbitral awards, whether domestic or foreign, it is worthy to have basic nuances of the terminologies used herein and the enactment which governs the process of the same.

The Arbitration and Conciliation Act, 1996 (hereinafter referred to as A&C Act') accompanied by certain provisions of the Code of Civil Procedure, 1908 form a complete code on the enforcement of arbitral awards in India. The term arbitral award' may be defined in simple language as final decision reached by the Arbitration tribunal so constituted to resolve a dispute and connotes to the last stage in arbitration proceeding. It is worthy to mention that arbitral award is not defined in the A&C Act, but the Hon'ble Supreme Court up to a certain extent has been able to define the same in the case of Centro trade Mineral and Metal Inc v. Hindustan Copper Ltd[i], wherein the court observed:
In view of subsection 2 and 7 of section 2 read with section 44 of the Act the award passed by the ICC arbitrator was not a domestic award. Subsection 7 of 2 provides that an arbitral award made under part-I shall be considered as domestic award. So, the domestic award means an award made under the territory of India (under Domestic Arbitration) and it also includes an international arbitral award, where one party is other than India on any citizen, government or institution other than India but award made in the territory of India. [ii]

And in lieu of the same, the enforcement or execution of the Arbitral Award is governed by Chapter VIII (Section- 36 & 36) under Part-I of the A&C Act, which in depth is discussed in the latter parts of this write-up.
Further, to understand the term foreign award it is worthy to peruse section-44 of the A&C Act, which defines foreign award' as:
In this Chapter, unless the context otherwise requires, foreign award means an arbitral award on differences between persons arising out of legal relationships, whether contractual or not, considered as commercial under the law in force in India, made on or after the 11th day of October 1960:
  1. in pursuance of an agreement in writing for arbitration to which the Convention set forth in the First Schedule applies, and
  2. in one of such territories as the Central Government, being satisfied that reciprocal provisions have been made may, by notification in the Official Gazette, declare to be territories to which the said Convention applies.
And, the enforcement of the same is governed by Part-II titled as Enforcement of Certain Foreign Awards' of the A&C Act, which is discussed in the latter parts of this article.

The Arbitration & Conciliation Act, 1996: A Brief Overview

The A&C Act was enacted on the lines and in recognition of the UNCITRAL Model Law 1985 and the UNCITRAL Conciliation Rules, 1980 and came into effect on 22nd August 1996 which extends to the whole of India with a rider for the State of J&K u/s. 1(2) of the Act (which has no significance after the abrogation of Article 370 of the Indian Constitution) for achieving the following purpose as has been defined in its long title,
An Act to consolidate and amend the law relating to domestic arbitration, international commercial arbitration and enforcement of foreign arbitral awards as also to define the law relating to conciliation and for matters connected therewith or incidental thereto.

Preamble. —WHEREAS the United Nations Commission on International Trade Law (UNCITRAL) has adopted the UNCITRAL Model Law on International Commercial Arbitration in 1985;
AND
WHEREAS the General Assembly of the United Nations has recommended that all countries give due consideration to the said Model Law, in view of the desirability of uniformity of the law of arbitral procedures and the specific needs of international commercial arbitration practice; AND WHEREAS the UNCITRAL has adopted the UNCITRAL Conciliation Rules in 1980;
AND
WHEREAS the General Assembly of the United Nations has recommended the use of the said Rules in cases where a dispute arises in the context of international commercial relations and the parties seek an amicable settlement of that dispute by recourse to conciliation;
AND
WHEREAS the said Model Law and Rules make a significant contribution to the establishment of a unified legal framework for the fair and efficient settlement of disputes arising in international commercial relations;
AND
WHEREAS it is expedient to make a law respecting arbitration and conciliation, taking into account the aforesaid Model Law and Rules….[iii]

Thus, this article will now trace the stage after the publication of the award, as has been shown in the image hereinabove attached.

Enforcement Of Domestic Awards

Section 36 of the A&C Act is a complete guide on the enforcement of domestic awards, which shall be executed and enforced in the way identical to that of execution of Decree under C.P.C. 1908, as awards are at par as Decree as has been defied u/s. 2(2) of C.P.C. 1908.

It is pertinent to mention here, that the award holder (the person in whose favour the arbitral award is made or passed) have to wait for 90 days before applying for the enforcement or execution proceeding of the arbitral award (which can also include the extension of further 30 days, on sufficient grounds for condonation of delay) either from the date of passing of award or any correction made, thereby, whichever is later.

It is noticeable that, Prior to the recent Arbitration and Conciliation (Amendment) Act, 2015 (Amendment Act), an application for setting aside the award would tantamount to a stay on proceedings for execution of the award. However, by virtue of the Amendment Act, a party challenging an award would have to move a separate application in order to seek a stay on the execution of an award.

Enforcement Of Foreign Awards

Prior to the enactment of A&C Act 1996, India being the signatory of NYC and GC, had operated in its jurisdiction 2 different statutes for enforcement of foreign awards, which are hereby illustrated:
  1. The Arbitration (Protocol & Convention) Act, 1937: It was enacted as a result of Geneva Protocol (1923) & Geneva Convention, 1927 (the GC, 1927) under the auspices of League of Nations.
  2. The Foreign Awards (Recognition & Enforcement) Act, 1961: It was enacted as a result of the NYC (1958), under the auspices of United Nations Organization.
The enforcement of a foreign award in India is a two-stage process which is initiated by filing an execution petition. Initially, a court would determine whether the award adhered to the requirements of the Act. Once an award is found to be enforceable it may be enforced like a decree of that court. However, at this stage parties would have to be mindful of the various challenges that may arise such as objections taken by the opposite party, and requirements such as filing original/ authenticated copy of the award and the underlying agreement before the court.

Thus, before applying for execution of foreign awards, the following requirements should be properly adhered, as has been laid down in the A&C Act which was clarified by the Hon'ble Supreme Court in the judgment of PEC Ltd. v/s. Austbulk Shipping.
  • Original award or a duly authenticated copy in the manner required by the country where it is made.
  • Original agreement or duly certified copy.
  • Evidence necessary to prove the award is a foreign award, wherever applicable.

Section 47 of the Act provides that the above shall be produced before the court, at the time of the application for enforcement of the foreign award. However, in a recent judgment, the Supreme Court of India interpreted that the word shall appearing in Section 47 of the Act relating to the production of the evidence as specified in the provision at the time of application has to be read as may. It further observed that such an interpretation would mean that a party applying for enforcement of the award need not necessarily produce before the court a document mentioned therein at the time of the application. Nonetheless, it further clarified that such interpretation of the word shall as may is restricted only to the initial stage of the filing of the application and not thereafter.[vii]

Conditions For Enforcement Of Arbitral Awards: Domestic As Well As Foreign

In case the following condition is proved, then the Enforcement of a foreign award may be refused[viii] and a domestic award may be set aside[ix]:
  • The parties to the agreement were under some incapacity.
  • The agreement in question is not in accordance with the law to which the parties have subjected it, or under the law of the country where the award was made (especially in case of foreign awards).
  • There is a failure to give proper notice of appointment of arbitrator or arbitral proceedings or the party against whom the award was rendered was otherwise unable to present his case.
  • Award is ultra vires the agreement or submission to arbitration.
  • Award contains decisions on matters beyond the scope of submission to arbitration.
  • Composition of the arbitral authority or the arbitral procedure is ultra vires agreement.
  • Composition of the arbitral authority or the arbitral procedure is not in accordance with the law of the country where the arbitration took place.
  • The award (specifically a foreign award) has not yet become binding on the parties, or has been set aside or suspended by a competent authority of the country in which, or under the law of which that award was made.
  • Subject matter of the dispute is not capable of settlement by arbitration under Indian law.
  • Enforcement of the award would be contrary to the public policy of India.[x]

Stamping And Registration Requirements Of Awards – Domestic And Foreign

  1. Domestic Awards.
    The Indian Stamp Act 1899 provides for stamping of arbitral awards with specific stamp duties and Section 35 provides that an award which is unstamped or is insufficiently stamped is inadmissible for any purpose, which may be validated on payment of the deficiency and penalty (provided it was original). Issues relating to the stamping and registration of an award or documentation thereof, may be raised at the stage of enforcement under the Act.[xi].

    The Supreme Court had also observed that the requirement of stamping an award and registration is within the ambit of Section 47 of the C.P.C. 1908 and not covered by Section 34 of the A&C Act.
    The quantum of stamp duty to be paid would vary from state to state depending on where the award is made. Currently, as per the Maharashtra Stamp Act, the stamp duty for arbitral awards stands at five hundred rupees in Maharashtra; and in case of Delhi, as per Schedule 1A to the Stamp (Delhi Amendment) Act 2001, the stamp duty is calculated at roughly 0.1% of the value of the property to which the award relates.
    Under Section 17 of the Registration Act, 1908 an award has to be compulsorily registered if it affects immovable property, failing which, it shall be rendered invalid.
     
  2. Foreign Awards
    As far as foreign awards are concerned, the Supreme Court of India has categorically held that a foreign award is not liable to be stamped.[xii]
    Previously, the Delhi High Court had observed that a foreign award would not require registration and can be enforced as a decree, and the issue of stamp duty cannot stand in the way of deciding whether the award is enforceable or not.[xiii] Noting the trend, the similar observations also binds the Bombay High Court and Madhya Pradesh High Court, by virtue of the judicial pronouncements of their respective High Courts.[xiv]

Appropriate Forum For Application Of Enforcement Of Arbitral Awards: Domestic & Foreign Awards

The Supreme Court in its recent ruling in, Sundaram Finance Ltd. v. Abdul Samad and Anr.[xv] clarified that an award holder can initiate execution proceedings before any court in India where assets are located. In case the subject-matter of the arbitration is of a specified value, commercial courts established under the Commercial Courts, Commercial Division and Commercial Appellate Division of High Courts Act 2015 (Commercial Courts Act) would have jurisdiction, as given below:
  1. Award arising out of an India seated arbitration (being an international commercial arbitration)
    By virtue of the Commercial Courts Act and the Amendment Act, the Commercial Division of a High Court where assets of the opposite party lie shall have jurisdiction for applications relating to enforcement of such awards if the subject matter is money. In case of any other subject matter, Commercial Division of a High Court which would have jurisdiction as if the subject matter of the award was a subject matter of a suit shall have jurisdiction, i.e., where the opposite party resides or carries on business or personally works for gain.
     
  2. Award arising out of an India seated arbitration (not being an international commercial arbitration)
    As per the Commercial Courts Act and the Amendment Act, for such cases, the appropriate court would be the Commercial Court exercising such jurisdiction which would ordinarily lie before any principal Civil Court of original jurisdiction in a district, as well as the Commercial Division of a High Court in exercise of its ordinary original civil jurisdiction.
     
  3. Foreign Awards
    Where the subject matter is money, the Commercial Division of any High Court in India where assets of the opposite party lie shall have jurisdiction. In case of any other subject matter, Commercial Division of a High Court which would have jurisdiction as if the subject matter of the award was a subject matter of a suit shall have jurisdiction.
Hereby, quoting the limitation period for execution and enforcement of domestic as well as foreign awards which is regarded to be12 years as has been associated in the case of execution of Decree under the Code of Civil Procedure, 1908 r/w. Limitation Act, 1963. This, owes from the interpretation by the Hon'ble Supreme Court in plethora of cases, where Domestic & Foreign Awards have been treated and regarded as Decree, per se.[xvi]

Conclusion
Thus, enforcement of arbitral awards though being specifically guided by the Arbitration & conciliation Act, 1996 but the same doesn't exhaustively lays down the entire code for execution. When A&C Act is accompanied and read with its allied rules, international commitments, Code of Civil Procedure 1908 with the Rules laid down therein and the Limitation Act 1963 with a peer review of the Judicial Pronouncements that focuses on clear interpretation of substantive as well as procedural aspects, brings on the table a complete guide for enforcement of arbitral awards in India, including both Domestic as well as Foreign, as has been briefly discussed in the present article.

End-Notes:
  1. Centro trade Mineral and Metal Inc v. Hindustan Copper Ltd, (2006) 11 S.C.C. 245 (India).
  2. Shodhganga, Enforcement of Domestic Arbitral Awards, SHODHGNAGA (Apr. 11, 2020, 11:30 AM), https://shodhganga.inflibnet.ac.in/bitstream/10603/267070/12/12_chapter%204.pdf.
  3. Government of India- Legislative Department, The Arbitration & Conciliation Act 1996, GOVERNMENT OF INDIA- LEGISLATIVE DEPARTMENT (Apr. 11, 2020, 12:05 PM), http://legislative.gov.in/sites/default/files/A1996-26.pdf.
  4. Amit Moza & Virendra Kumar Pal, Review of the Effectiveness of Arbitration, ASCE LIBRARY (Apr. 11, 2020, 12:11 PM), https://ascelibrary.org/doi/10.1061/%28ASCE%29LA.1943-4170.0000204.
  5. Nishith Desai Associates, Enforcement of Arbitral Awards and Decrees in India, NISHITH DESAI ASSOCIATES (Apr. 11, 2020, 12:33 PM), http://www.nishithdesai.com/fileadmin/user_upload/pdfs/Research%20Papers/Enforcement_of_Arbitral_Awards.pdf.
  6. Nishith Desai Associates, supra v.
  7. PEC Limited v. Austbulk Shipping SDN BHD, Civil Appeal No. 4834 of 2007 (India).
  8. Government of India, supra iii.
  9. Ibid.
  10. Shodhganga, Enforcement of Foreign Arbitral Awards in India, SHODHGANGA INFLIBNET (Apr. 11, 2020, 01:10 PM), https://shodhganga.inflibnet.ac.in/bitstream/10603/110130/16/16_chapter%206.pdf.
  11. M. Anasuya Devi and Anr v. M. Manik Reddy and Ors, (2003) 8 S.C.C. 565 (India).
  12. M/S. Shri Ram EPC Limited v Rioglass Solar SA, (2018) S.C.C. Online 147 (India).
  13. Naval Gent Maritime Ltd v Shivnath Rai Harnarain (I) Ltd, 174 (2009) D.L.T. 391 (India).
  14. Nishith Desai Associates, supra v.
  15. Sundaram Finance Ltd. v. Abdul Samad and Anr, (2018) 3 S.C.C. 622 (India).
  16. Shodhganga, supra x.
Written By: Harshit Sharma, 5th Year, B.A., LL.B.(Hons.), Amity Law School, Amity University Madhya Pradesh.

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