This article is written by Nandini who is pursuing a Certificate Course in Arbitration: Strategy, Procedure and Drafting from Lawsikho.
Alternative Dispute Resolution (ADR) includes arbitration. ADR procedures have several advantages, including lower costs, better procedural flexibility, increased confidentiality, increased possibility of settlement, choice of forum, choice of remedies, and so on. Arbitration, on the other hand, is one of the most well-known and widely used kinds of ADR.
The Act of 1996 is the fundamental source of Indian arbitration law. An act enacted to bring together the laws governing domestic and international arbitration, as well as their enforcement. Some substantial revisions were implemented in the years 2015 and 2019 to make arbitration a favoured form of resolving commercial disputes and to make India a centre of international commercial arbitration. The current law is made up of multiple similar revisions, the most recent of which were enacted in 2019.
Definition of award
The passing of decisive reasoning to the questions, issues, and disputes that are brought before the arbitral tribunal to be resolved is known as an award. After all parties have had a reasonable opportunity to state their case and exhibit evidence, the award is made. The form and content of arbitral awards are governed by Section 31 of the Arbitration and Conciliation Act which was enacted in 1996. The following are the fundamental parts of a legitimate Award, as determined by a cursory perusal of this Section: –
- The award shall be made in writing. [Section 31(1)]
- Subject to the exclusions set forth in Section, it must be signed by all members of the panel.
- Subject to the exceptions set forth in Section 31(3), the award should describe the reasons for its existence.
- The date of the award should be stated. [Section 31(4)]
- The award shall identify its location; [Section 31(4)]
- An interim award can also be given under Section 17; and
- After the award is made, each party should receive a signed copy. [Section 31(5)]
- In the case of a Tribunal with more than one Arbitrator, Section 31(2) states that signing the Award by the majority of the Arbitrators is sufficient as long as the Award reflects the reasons for any of the Arbitrators’ refusal to sign the Award.
- The Award may be made without stating any grounds if the parties agree. [See Section 31(3) of the Code of Federal Regulations.] Giving reasons for the award is not required in the case of a settlement [Section 30].
- Arbitration proceedings are stopped after the final award is made, as per Section 32 of the Arbitration and Conciliation Act, 1996. The Parties may, however, approach the Arbitral Tribunal for rectification and/or interpretation of the judgement and/or additional award under Section 33 of the Arbitration and Conciliation Act, 1996. Upon receiving such a request, the arbitral tribunal may analyse it, and if it considers the request to be reasonable, it may make any necessary corrections or interpret the request as it sees fit. It may also pass any Additional Award that is warranted. Any such corrections, award interpretations, and/or additional Awards will be included in the final Award.
- Award as may be justified. Any such correction, interpretation of award and/or additional award shall form as a part of the final Award.
- An Award becomes final either upon expiry of the period provided under the statute to challenge the Award or if challenged, after the final decisions on such challenges.
- As may be justifiable. Any such corrections, award interpretations, and/or additional awards will be included in the final Award. An Award becomes final either when the statute’s challenge time expires or, if challenged when the final decisions on the challenges are made.
- It is important to note that, in addition to the above applicable statute requirements, there are a number of guiding best practises supported by judicial precedents and provisions in the Arbitration and Conciliation Act,1996 that must be observed in order for the Award to be valid in law. Here are a few examples:
- The Award must be rendered within the provisions of the reference, and the Arbitral Tribunal’s jurisdiction should not be exceeded while passing the award.
- The Award should not be in violation of public decency or the law of the state.
- An Award cannot compel the parties to undertake something that is impossible or illegal in and of itself.
- The Award must resolve all pertinent and substantial questions addressed and implicated in the Arbitration.
- The Tribunal must provide the parties with the opportunity for fair hearings when adjudicating the issues, and
- The Award should not be arbitrary or contrary to the evidence on the record, and it should not be based on assumptions or speculations.
- Stamp duty payable on the Final Award must be paid so as to make it enforceable in the eyes of the laws.
It is further pertinent to note that the Act also cast a duty upon the Arbitrator by virtue of Section 12 of the Arbitration and Conciliation Act, 1996 to disclose any kind of interests in any of the parties which may give justifiable reasons for doubt as to impartiality or independence of the Arbitrator.
Similarly, the Arbitrators are also duty-bound to disclose any compelling circumstances, which is likely to prevent them to discharge their duty. However, Party/s may opt to waive that. A court of law’s ruling is analogous to an arbitral award. In other terms, an arbitral award is a decision made by the arbitral tribunal on numerous matters in a case that the parties had brought before it.
There are numerous types of awards: Interim Award and Settlement Award are included in the final award. Because a Settlement Award is made by agreement between the parties, it is not appealable. The 1996 Arbitration and Conciliation Act establishes specific standards for arbitral awards. The following are the requirements:
- Must be a majority decision – An Arbitration Tribunal of three arbitrators must issue an award based on a majority consensus, and they must also record the objection of the arbitrator who is not in agreement with the other two arbitrators.
- Must be in writing, signed, and dated – An Award must be in writing and signed by the majority of the arbitral tribunal members.
- Must be justified – An Award must be justified. The Award would be void if the reasons were not stated. It can’t be ambiguous. The Arbitral Award should be certain and specify which party is responsible for what.
- Capable of being carried out – In addition to being enforceable, it should be reasonable in what it proposes and not require parties to undertake something that is impossible or illegal. Unenforceable awards would be overturned.
Grounds on which award can be set aside.
Awards can be contested and overturned in a variety of ways and on a variety of reasons. An award can be contested under Section 34 of the Arbitration Act by filing a court application to set aside the Award on the following grounds based on the Arbitral tribunal’s record: The arbitral Award decided on a dispute outside the scope of the reference to arbitration or contains decisions outside the scope of the submission to arbitration; the arbitration agreement being invalid under the law.
Improper notice of the appointment of an arbitrator or of the arbitral proceedings to the applicant, or the applicant was unable to present his or her case; the Arbitral Award decided on a dispute outside the scope of the reference to arbitration or contains decisions outside the scope of the submission to arbitration; the subject matter of the dispute cannot be resolved by arbitration under the law in effect at the time; or the Arbitral Award is in violation of public policy (this includes awards that are: tainted by fraud or corruption;) in violation of fundamental policy of Indian law or basic notions of morality or justice; and those that violate confidentiality and admissibility of evidence).
An application to set aside an Award must be filed within three months of the day the applicant received the arbitral award unless the court extends the time limit for a further 30 days provided the applicant shows good cause for delay.
Judicial precedents elaborating what is an award.
Parties to a foreign-seated arbitration no longer have recourse to any Indian courts after the Supreme Court’s ruling in Bharat Aluminium Company v Kaiser Aluminium Technical Service Inc 2012 (8) SCALE 333 (the BALCO verdict). Courts in India have likewise given public policy a broad interpretation, holding that even a violation of Indian law is against public policy.
Any party to a foreign-seated arbitration no longer has the option to set aside an Award under Section 34, which was previously expanded by the courts through judicial interpretation. Upon receipt of an Award of a foreign arbitration, all parties to the arbitration must: If such an award is necessary to be executed in India, it must be presented for enforcement under section 48 of the Arbitration Act.
To the extent permitted by Section 48, an Indian court can review a Foreign Award to determine whether it should be enforced. BALCO applies to all agreements that have been executed after 6 September 2012 for foreign-seated arbitrations.
By inserting a caveat to Section 2 of the 2015 Amendment Act, the reversal of position in the BALCO verdict was clarified (2). Sections 9 (interim relief by courts), 27 (court assistance in taking evidence), 37(1)(a) (appeals in respect of interim relief by courts) and 37(3) (appeals to the Supreme Court) will be made applicable to international commercial arbitrations, even if the seat of arbitration is outside India, according to the proviso.
In the case of Shri Lal Mahal v Progetto Grano Spa Civil Appeal No. 5085 of 2013, decided on July 3, 2013, the Supreme Court not only limited the interpretation of “public policy” in enforcement proceedings, but also held that the scope of public policy under section 48 is narrower than under Section 34.
The court ruled that enforcement under Section 48 can only be challenged on public policy grounds if it is in violation of Indian law’s fundamental policy, the country’s interests, or justice and morality.
The extent of public policy under Section 34(2)(b)(ii) of the Arbitration Act was once again considered in the case of ONGC v Western Geco International Ltd Civil Appeal No. 3415 of 2007. The Supreme Court lowered Western Geco’s award by one-third, citing a “palpable error” on the part of the Tribunal. In addition, the court expanded the scope of “fundamental policy of Indian law” to include three principles to be followed by the tribunal: a judicial approach, natural justice principles, and the Wednesbury principle of reasonableness, while determining whether the Award was in conflict with “public policy of India.”
In the matter of Associate Builders v Delhi Development Authority Civil Appeal No. 10531 of 2014, the Supreme Court held that section 34 of the Arbitration Act does not allow courts to reconsider arbitrators’ conclusions of facts, and so reinstated the award. The court just defined and did not limit the legislation relating to public policy, stating that an award might be set aside if it is in violation of Indian law’s fundamental policy, India’s interest, justice, or morality, or if it is clearly illegal.
An application for setting aside an award on the grounds of “patent illegality” as a violation of the public policy will only be relevant to awards in domestic arbitrations, according to the 2015 Amendment Act’s insertion of section 34(2A). Furthermore, an award will no longer be subject to reversal only based on an incorrect application of the law or reappraisal of the evidence.
According to the change to Section 36 of the Arbitration Act, just filing a challenge to an award under Section 34 does not render the judgement unenforceable until the challenged party files an application with the court, whereby the court may issue a stay on the award’s enforcement. To put it another way, submitting a Section 34 application does not automatically result in a stay of enforcement proceedings. It will be necessary to submit a second application for permission to stay.
The preceding article covers the fundamentals of statutory legislation pertaining to the Award. Award writing is a difficult task. It should begin with a description of the Arbitral Tribunal’s introductory narration, terms of reference, disclosure of the Arbitrator’s interests and circumstances, etc., the parties’ presences’ position, notices status and presence of the parties, brief of proceedings, rival parties’ cases, issues framed, evidence led, contentions raised during arguments, and the Tribunal’s views on. It also determines who is responsible for the costs and how they will be paid. It also documents the dates, location, and conclusion of the Award proceedings on the date of the final award’s signature. On all of the issues, an award must be given.
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