SIKKIM GOVERNMENT LAW COLLEGE

GANGTOK EAST SIKKIM

YEAR-2020

TOPIC- MAKING OF ARBITRATION AWARD AND TERMINATION OF

PROCEEDING

SUBMITTED BY- SUBMITTED TO-

KALAWATI SUBBA DR SHARITA

SEMESTER – 8THSEMESTER SHARMA MAAM

16GLB049

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ACKNOWLEDGEMENT

First and foremost I thank the almighty for the inspiration and strength to complete this project
report successfully.

I would firstly like to thanks maam dr sharita sharma who has provided me the kind opportunity
to do this project and finish it in a successful manner.

My heartily thanks to Dr T,D lama the vice principal of Sikkim government law college and
other faculties who provided all the facilities to completed this project.

I consider it my proud privilege and immense pleasure working under the guidance of professor
Ajay pradhan who gave me constant guidance valuable suggestions, an inspiring encouragement
to make my project success.

My sincere thanks to my Dr sharita sharma has done me the correction and formatting of project
report and helped me by providing details and quotations of my topic, this helped me make my
project very precise and accurate to a great extent.

On a personal note, I wish to thank my family members and friends for their constant support in
helping me accomplish my mission.

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TABLE OF CONTENT.

SERIAL NO. TOPIC PAGE NO.

1 ABSTRACT 4
2 INTRODUCTION 5 to 6
3 DEFINITION 7 to 8
4 -FORM AND 8
CONTENT OF
ARBITRAL AWARD
5 TERMS AND 8 to 14
CONTENT OF
ARBITRAL AWARD
6 MAKING OF 14 to 15
ARBITRAL AWARD

7 SECTION 28 TO 33 15 to 17
OF THE ACT.
8 TERMINATION OF 18 to 22
PROCEEDINGAND
ENFORCEMENT
AWARD
9 SETTING ASIDE OF 23 to 24
ARBITRAL AWARD
10 ENFORCEMENT OF 24
AWARD
11 CONCLUSION 25
BIBLIOGRAPHY 26

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ABTRACT

The phenomenon of the ‘arbitral award’ is always at the centre of attention with scholars.
However, practical needs call the interest mainly to the formal characteristics of the arbitral
award – the description of its form, the rendering procedure, the legal construction and the
different types of the awards. In my opinion, the essence of the award comes first; it determines
the place of the arbitral award in the legal system as well as its contacts with the civil justice
sphere. All these issues became a point of departure in research of the phenomenon of the
arbitral award as an act of law implementation, of its basic requirements and legal effect. A
comprehensive comparison of court judgments and arbitral awards allows not only the discovery
of the important correlation between the essential characteristics of the arbitral award and
remedies against it, but it also draws the conclusion that the generally accepted legal construction
based on the New York Convention and UNCITRAL Model Law provisions is the most effective
model of judicial control of
arbitral awards. Recognition and enforcement of the arbitral awards as well as the setting aside
procedures, should take into account all essential features of the award as an act of law
application, otherwise the arbitration and its judicial control techniques run risks of inefficiency.

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INTRODUCTION

Arbitration is a legal process ,which takes place outside the courts ,but still results in a final
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 involve 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 behave 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 provision 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 include 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 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 honor 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 dispute
resolution in the commercial sphere. One of the reasons for doing so is that in international trade
it is often easier to enforce of foreign or 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 dispute. National laws on arbitration have been
modernized on all continents. The arbitration and conciliation act, 1996 is one such step by India
to make the arbitration law more responsive to contemporary requirement, taking into account
the model law and rules adopted by the United Nations commission on 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 institution in response to the growing
demand of parties for certainty and predictability, greater rapidity and flexibility as well as

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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 claimants’ 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 reason 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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 DEFINATION

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 Arbitration Tribunal’ may, at any time during the 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 final may be an award.

According to H. Lexicon - ‘it is an instrument which embodies a decision of an arbitrator or

arbitrators as regards matter 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 matter 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 arbitrators or arbitrators which is
determined after contention of the parties are considered and an arbitrator or the arbitrators put
his or their opinion in the form of decision. The consent may not be present 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 behalf the parties to dispute if the authorities by parties may refer the matter o
arbitration for settlement of dispute .

In Kishan Lal v. Ram Swaroop, the Allahabad High court held that the vakalatnama submitted by
the parties differ in respect of their contents. The vakalatnama submitted by the plaintiff
authorized the counsel to the compromise the suit or proceeding. In another aspect the
vakalatnama on record , authorized the counsel to refer the matter to arbitration which include
power to compromise in arbitration .therefore ,if an agent in authorized to compromise the
dispute it is deemed that he has power to refer the matter for arbitration.
1
Lal das v.bai lal.11bom LR 20

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It is expected that the arbitrator has accepted all claims and counter-claims and considered them
all in queasy-judicial manner before it could arrives at the final award.2

FORM AND CONTENT OF ARBITRAL AWARD

It is to be notes 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.factual aspect of disputed matter

2.submission of the parties,

3.contention of parties to rival submission

4.arbitrator’s view

5.delivery of an arbitral award.

There is no prescribed form of arnitral award,hoever,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 CONTENT OF ARBITRAL AWARD

The following terms and contents are required to be mentioned in the arbitral award;

1.The arbitral award must be in writing and signed by the arbitrator or arbitrators.

2.The arbitral award must be based on reasoning.it must be a speaking award.

3. The arbitral award must be show date and place of arbitration.

4. A certified copy of arbitral award is required to be delivered to each party.

2
1965ALJ 698 at 705
3
Charan sharan khemaka v.achint chemicals,2005(2)raj 465 (Raj)

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5 if the arbitral award is for pqyement of money,the arbitral award may include interest at such
rate as the tribunal deems reasonable.

6.the costs of gthe arbitration shall be fixed by the arbitral award .

7.the language used in passing the arbitral award must from any ambiguity.

(i) ARBITRAL AWARDOPERATES AS RES JUDICATA-in shashi sekhareswar

v.lalit mohan,the party council,inter alia obsereved that a decree passed on the
foundation of arbitral award would have the same effect as ordinary judgement of a
court and on the question which has already been decided by the arbitrators its
operates as res judicata.but where a claim in question has not been included as a
subject matter of reference to arbitarton,it was held that principle of resjudicata will
not applied in respect of the claim.

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.it is submitted that an arbitral award is not a
contract but decision given on the basis of the terms of a contract.an arbitral must be in
writing because it is like a decree of the civil court.4

ii) ESSENTIAL OF ARBITRAL AWARD-

it is well settled legl position that a valid,proper and enforceable arbitral award must have
the following essential ingredient,which are as follows:

1.An arbitral award must be in writing and signed.

2.the parties must be comptenet to initiate arbitral proceedings.

3. A sustainable arbitral award must be reasoned one –section 31(3) of the

arbitration and conciliation act 1996.

4
AIR 1925 PC 34

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 4.there must be arbitration clause to assign dispute 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 is based on mutual settlement of the dispute by the parties ,no reason need be
given.5

iii)ARBITRAL AWARD MAY BE FINAL OR INTERIM

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.aninterim award has the same sancity as final award .if it
was not compled with ,it could not be enforced through the court by the same orocedure
as in the case of final award.6

IV) TIME LIMIT FOR MAKING THE ARBITRAL AWARD-

The arbitration and conciliation act 1996 does not provide any time limit as such for completing
the arbitatration.however, mandate of an arbitrator can be terminated if he fails to act without
undue delay”which means in fact if he is guilty ofundue delay.”7

V) ARBITRAL AWARD BY CONSENT-

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. The act further envisages that the arbitrator may
encourage efforts at settlement. It is to noted that the arbitration act, 1940 was silent on this
point.8

5
Section 30(3)of the arbitration and conciliation act,1996
6
Section 27 of the arbitration and conciliation act 1996.
7
Section 14 of the arbitration and conciliation act 1996.
8
Section 30 of the arbitration and conciliation act 1996.

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 VI) CONTENT OF THE ARBITRAL AWARD-

The equirement of the content and form of arbitral award are as under”

i)”an arbitral award shall be made in writing and shall be signed by the member of the arbitral
tribunal.

ii)for the purpose of section 31(1),in arbitral proceeding wit h 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 ststed.

iii)the aribitral award shall state is adte and the place of arbitration as determined in accordance
with section 20 and the would be deemed to have been made at that place.9

VII) ARBITRAL AWARD TO BE MADE BY MAJORITY-

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 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.10

VIII) ARBITRAL AWARD SHALL BE FINAL AND BINDING ON THE

PARTIES-

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 are times 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. It is to be
9
Section 31 of the arbitration and conciliation act 1996.

10
Section 21(3) and 29(1) of tha arbitration and conciliation act 1996.

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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 law11

IX) LAW OF LIMITATION APPLICABLE TO ARBITRAL AWARD-

It is the mandate of the present act that the enforcement of an arbitral award shall be subject to
limitation act, 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.

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.12

X) WHETHER STAMP DAY DUTY PAYABLE ON ARBITRAL AWARD-

In fact the arbitration and conciliation act 1996 contains no provision regarding payement 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 adequelty stamped or there is insufficiency as to stamp
duty,even then the arbitral award can be admitte in evidence after payement of proper stamp duty
together with thepenalty prescribed under the Indian stamp act,1899.

XI) EVIDENCE ADMISSIBILITY OF UNSTAMPED ARBITRAL AWARD

In kadandapami v.kadidela raja mouli,it 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
stampact.but,if it is compulsorily registerable of acquisition of any right in immovable property.it

11
Section 36 of the arbitration and conciliation act 1996.
12
257 section 34(3) of the arbitration and conciliation act 1996.

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cannot be used to resist the clim of landlord for recovery of possession of the demised
premises.13

XII) WHETHER ARBITRATOR CAN AWARD INTEREST-

section 31(8)of the arbitration and conciliation act 1996 empowers the arbitrator to awards
interest from the date of submission to arbitration to the dae of the arbitral award .thus ,under this
act the arbitrator’s power extends to be pre arbitration period and also to the period for which the
arbitration remains pending.

The apex court in secretary to the government of orissav.raghunath mahapatra,has held that even
under the arbitration act 1940,the arbitrator could award interest from the date of submission to
arbitaration 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 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 made14.

XIII) AN INTERIM AWARD IS A PART OF FINAL AWARD

according to section2(1)(c) of the arbitration and conciliation act 1996’arbitral award” shall
include an interim award also.Thus,under this provision the arbitrator is empwerd to make
interim award is it is sought or it depends upon the nature of dispute.an interim award shall have
the same sancity as final award.Thus, interim award ,if it nis apseed shall be binding on the
parties to arbitration.15

XIV) AN ARBITRAL AWARD TREATED AS A DECREE OF COURT

13
AIR2003 AP
14
{1992)CLA 54
15
Section 35 of the arbitration and conciliation act 1996.

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The apex court in satishkumarv. Surendra kumar,has held that and arbitral award is treated aas
decree of a court and its doesnot matter whether it has passed into a decree or not hence it is
binding upon the parties.16

xv)FOREIGN AWARD ARBITRAL

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. 17

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., has held that
under old arbitration act, 1940 an arbitration 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 the arbitration and conciliation act,
1996 indisputable stands on a different footing vis-à-vis an arbitral award was required to be
made a rule a rule of the court to make it enforceable , the arbitration and conciliation act, 199,
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. 18

16
AIR 1970 SC 833
17
Section 49 and 58 0f the arbitration and conciliation act 1996bwith section 44-of the code of civil procedure 1908
18
AIR 2007 SC 683

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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 and arbitrator has authority to issue interim, partial an final
award having issued a final award, the arbitrator has no further duty or authority upon the
arbitration accept for the right to correct any minor slips.

Either party can , within a reasonable time may seek to challenge arts 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 o f the arbitration agreement , or unfairness or impropriety in me conduct of
the proceedings for the domestic arbitration, and the court many 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 conform very set aside the award, or refer it back to the arbitrator for reconsideration
the light of the court opinion on the question of law.

SECTION 28 TO 33 OF THE ACT DEALS WITH THE AWARD BY ARBITRATORS

AND TERMINATION OF PROCEEDINGS .

A] RULES APPLICABLE TO SUBSTANCE OF DISPUTE

Generally the arbitral tribunal decided 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 o f a firm shall be resolve 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 circumstance 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 .

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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 and 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.the parties to the arbitral tribunal to decide ‘ex acquo et bono ‘ie
baed on equity and good conscience’or as amicable compositeur’{as friendly
crompomiser}ie. Without applying strict legal rules of interpretation as to the obligation
of the partied whether contractual or otherwise {section 28(2)}.

B}DECISION OF THE ARBITRAL TRIBUNAL{29}

The decision of the arbitral tribunal is required to be made by majority of all the member
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 proceeding 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 find 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.

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 D} FORMS AND THE CONTENT OF ARBITRAL AWARD {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 arbitration shall
be sufficient.however, in such case ,the reason of any omitted signature must be stated.

3}the award shall be reasoned one subject to the following expectation:

i]the parties have agreed that reasons are not be given.

ii]the award is the outcome of settlement and on agreed terms as mentioned in section 30.

iii]the award shall state its date and the place of arbitration.

iv]a signed copy of the award of the award shall be delivered to each party.

v]the arbitrators may make an interim award,in practice,a request of interim award by a
party is entertained by arbitrators,when there are numerous subject matters in the same
dispute and each one of them is separate and distinct from the other.

vi]the arbitrators have power to award to 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 paeties can by their agreement take away the power of the arbitrator to
award interest.
The rate of interest may be such as may be considered reasonable by the
arbitrators,hoever the rate of interest,for the period from the date of award to the date of
payment shall be IS.pa unless the arbitrators decide otherwise.19
19
SK dholakia ’Analytical Apprasial of the arbitration and conciliation (amendment)Bill 2003,ICA’s arbitration
quarterly ICA {2005} Vol N0 -4

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TERMINATION OF PROCEEDING [SECTION 32]AND
ENFROCEMENT AWARD.

E] TERMINATION OF PROCEEDING {32}

This section contains provisions regarding condition and procedure for termination of arbitral
proceedings.the same is summarized in the following paragraphs.

i]the arbitration proceeding is terminated as soon as the final arbitral award is maqde by the
arbitrators.

ii]the proceeding stand terminated by an order of the arbitral tribunal where-

a]the claiment withdraws his claim.

b]both the parties agree on the termination of the proceedings.

c]the tribunal finds that the continuation of the proceeding has for any reason became uneccesary
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 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 parties.

F} ADDITIONAL AWARD{SECTION 33}

A party with notice to the other party request the arbitral to make an additional award 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 shall

18
make the additional award within sixty days of the receipt of the request provided its considers
the request to be justified.

G}FINALITY AND ENFORCEMENT OF AWARD SECTION 35 AND 36.

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
the real sense , an arbitral award shall be considered final only after the time limit to apply for
setting it aside has elapsed. In case , the 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 (SECTION34)

The grounds for setting aside an award rendered in the 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
proceeding ; or
d) The award deals with a dispute not contemplated by or not falling within the terms of
submissions to arbitration or it contains decision beyond the scope of the submission;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 the settlement by arbitration ;or

The arbitral award is in conflict with the public policy of India.

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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 views as expounded by the supreme court
in RenuSagar Power Co.Ltd.v. General Electric Co. was that an award could be set side if
it is contrary to the public policy of India or the interests of India or 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 proceeding for
enforcement of a foreign award under the foreign awards (recognition and enforcement) act,
1961. The court also held that in proceeding 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 . however in a later supreme court of
India decision in oil and natural gas corporation vs. Saw pipes 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 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 jurisdication, the juridication 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 ‘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

20
 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 the domestic awards alone . The saw pipes case has generated some
controversy. A foreign award is enforceable under part 2 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 aside20

The fundamental distinction between a foreign and a domestic award has been altered by the
supeme court in the recent case of venture global engineering v.satyam computer services ltd,
{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 arose out of a joint venture agreement
between the parties.the respondent alleged that the appellant had committed and event of
defaultunder the shareholdersagreement and as per the said agreement exercised its option to
purchase the appellant shares in the joint venture company at book value.the sole arbitrator
appointed by the LCIApassed an award directing the appellant to transfer its shares to the
respondent the respondent sought to enforce in the USA.21

The appellant filed a civil suit in an Indian district court seeking to set the award.the district
court,followed by the hight court in appeal dismissed the suit holding that there was no such
procedure envisaged undefr Indian law.however the supreme court in appeal,following its earlier
decision in the case of Bhatia international v.bulk trading 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 same would lie under section 34 part I of the act {i.e.it applied the domestic award

20
( 2003)5 SCC 705
21
(2008)4 SCC 190

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provision to foreign award}.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 validated on the touchstone of public policy of
India and the Indian public policy cannot be given a go by though the device of the award being
enforced on forign sghores.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 9nit 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 s3t aside
the award.the new ground is that not only must be award pass the newyork 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 nothwithstanding the success of the applicant on the newyork 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 staturorily envisaged mechanism for
enforcement of foreign award and substitute it with a judge made la.the judgement thus is
erroneous.moreover,in so far as the judgement 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,case had clearly confined its expanded interpretation of public policy to
domestic awards alone lest{ which had interpreted the expression narrowly}.

The supreme court in venture global did notice this self created limitation in saw pipes nor did it
notice the narrower interpretation of public policy in renu sagar and therefore application of the
expanded interpretation of public polkcy to foreign award is clearly per incurim.the decision thus
needs to be reviewed.22
22
( 2002 ) 4 SCC 105

22
 APPLICATION FOR SETTING ASIDE ARBITRAL AWARD

A dissatisfied party may take resource section 349[1]and make an application to the court for
setting aside the arbitration award.there is no form of drafting required for an application to cowl
however the high courts may lay down procedures to be complied with under section of the act

Condition for setting aside award section34(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-

i)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 indiction thereon under the law for the time being in force :or

iii)the party making the application was not given proper notice of thed appointed of an
arbitrator or the arbitral proceedings orwas othertwise unable to ptesent his case.

iv)the arbitral award deals with dispute 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 or the arbitral procedure was not in accordance with the
agreement of the panics,unless such was in conflict with a provisions of this part from
which the parties cannot derogate,or failing such agreement,was not in accordance with
this part.

b) The court finds that:

i)A party making the application furnishes proof that.

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 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 notgiven proper notice of the appointment of an
arbitrator or of the arbitral proceedings or was unable to present his case.

iv)the qarbitral award deals with a dispute not contemplated by or not failing within the
terms of the submission to arbitration or it contains decision on matter 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

c) 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 month’s condonation can be allowed. There is
no special form prescribed for making an application.23

23
O P malhotra,the law and practice of arbitration and conciliation’ New Delhi Lexis Nexis-butter worths 1-ed
(2002)

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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

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 geneve convention which are incorporated in chapter 2 , part 1 and part 2, respectively, in
the 1996 act.

The provisions of enforcement are the same under the 1940 act and 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 established that the award comes under the category of foreign award under the
1996 act.

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 , the both cases
involved Indian parties and Indian law.24

24
P,C markanda,Law relating to arbitration and conciliation:Nagpur;Wadhwa and co:6th ed,2006

25
CONCLUSION
India has in place a modern, an efficient Arbitration Act. There have been some decisions which
are not in tune with the letter or spirit of the Act. Hopefully, these would be addressed by the
judiciary in the near future and continuing popularity of arbitrations would be served by a truly
efficient ADR mechanism.

Arbitration in India is a difficult process because of a large number of reason one of which is the
inordinate delay in the final conclusion of the arbitration proceeding.

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BIBLIOGRAPHY

Sk Dholakhia,analytical appraisal of the arbitration and conciliation (amendment )

bill2003,ICA arbitration quarterly,ICA VOL NO-4.

OP malhotra the law and practice of arbitration and conciliation,,new delhi lexis nexis
butter worths ed -1 (2002)

P,C markanda,law relating to a arbitration and conciliation ,Nagpur ,wadhwa co, ed-6
(2006).

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