ENFORCEMENT OF ARBITRAL AWARD IN INDIA

TABLE OF CONTENTS

Object of Study ............................................................................................................................... 2

Hypothesis................................................................................................................................... 2
Methodology............................................................................................................................... 3
Sources of Data ........................................................................................................................... 3
Chapter-(1) ...................................................................................................................................... 4
Introduction ..................................................................................................................................... 4
Chapter-(2) ...................................................................................................................................... 5
THE OLD LAW ............................................................................................................................. 5
Chapter-(3) ...................................................................................................................................... 6
THE NEW REGIME ...................................................................................................................... 6
Domestic awards ............................................................................................................................. 6
Grounds for setting aside award ..................................................................................................... 6
New Ground for Challenge to Award through Judge-made Law................................................ 8
Chapter-(4) ...................................................................................................................................... 9
Foreign arbitral award ..................................................................................................................... 9
Comparison with Domestic Enforcement of arbitral award....................................................... 9
Chapter-(5) .................................................................................................................................... 10
PUBLIC POLICY ......................................................................................................................... 10

CHANAKYA NATIONAL LAW UNIVERSITY Page 1

ENFORCEMENT OF ARBITRAL AWARD IN INDIA

Chapter-(6) .................................................................................................................................... 12
Enforcement of arbitral award ...................................................................................................... 12
Chapter-(7) .................................................................................................................................... 13
Conclusion .................................................................................................................................... 13
References ..................................................................................................................................... 14

OBJECT OF STUDY

The main objective of the Researcher is:

1. To study enforcement of arbitral award in India.
2. To study the various aspect of enforcement.
3. To study important case laws relevant to the topic.

HYPOTHESIS

The award given by the arbitrator is equivalent to a decree of a court of law and the
same can be enforced directly, without making it a decree of the court.

CHANAKYA NATIONAL LAW UNIVERSITY Page 2

ENFORCEMENT OF ARBITRAL AWARD IN INDIA

METHODOLOGY

The methodology of the present project with includes Doctrinal techniques.

DOCTRINAL

In doctrinal method we solve any problem with the help of law. Only with the help of legal
resource, we see legal provision. We can solve any kind of problem from legal provision. It is
only based on the legal proposition. In which researcher analyze any problem with the help of
law and it is based on the only the written material.
Doctrinal research involves analyze of case law, arranging, ordering and systematizing legal
proposition and study of legal institution through legal reasoning or rational deduction.
In this research field work is not needed and library reference is through enough. It is only based
on library. The source of data is act judgment, legislation, and judiciary. It is not concerned with
people.

SOURCES OF DATA

Primary Sources: includes acts and statutes related to offences against Public order Crimes.

Secondary Sources: includes opinions of jurists, journals, books, newspapers, magazines etc.

CHANAKYA NATIONAL LAW UNIVERSITY Page 3

ENFORCEMENT OF ARBITRAL AWARD IN INDIA

CHAPTER-(1)
INTRODUCTION

To avoid the infamous Tareekh pe Tareekh defect our judicial system suffers from, alternate
dispute resolution (ADR) mechanisms were adopted with major changes to the previous legal
theories by putting in legal parlance the Arbitration and Conciliation Act, 1996 in post LPG era.
Arbitration is increasingly becoming a more popular mode of dispute resolution due to several
factors its consensual nature, dispute resolution by non-governmental decision-makers,
flexibility as compared to most court proceedings and a binding award capable of enforcement.
The very nature of an arbitration agreement mandates that parties have their own choice of
arbitrators or an arbitral institution, their own choice of law including choices albeit with
certain inevitable limitations as to the law governing the capacity of parties to enter into an
arbitration agreement, the law governing the arbitration agreement, the law governing the
arbitration itself (the lex arbitri), the substantive law or proper law of the contract and the law
governing recognition and enforcement of the award.

In the absence of express choice of any of these laws by the parties to the arbitration, the same
may be decided by the tribunal or the arbitral institute. 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.

CHANAKYA NATIONAL LAW UNIVERSITY Page 4

ENFORCEMENT OF ARBITRAL AWARD IN INDIA

CHAPTER-(2)
THE OLD LAW
Prior to January 1996, the law of enforcement of arbitration awards in India was spread between
three enactments. Enforcement of domestic awards was dealt with under a 1940 Act.1
Enforcement of foreign awards was divided between two statutes a 1937 Act2 to give effect to
the Geneva Convention awards and a 1961 Act 3to give effect to the New York
Convention4awards.
Enforcement of foreign awards, for all practical purposes, came under the 1961 Act and domestic
awards came under the 1940 Act. The enforcement regime between these two statutes was,
however, quite distinct. The 1961 Act contained challenge to an arbitral award only on the
limited grounds permitted under the New York Convention. The scope of challenge to domestic
awards under the 1940 Act was much wider. This Act permitted judicial scrutiny, inter alia, on
the ground that the arbitrator had misconducted himself or the proceedings an expression
which came to be widely interpreted and awards were interfered with, inter alia, on the ground of
fundamental errors of law apparent on the face of the record.
In the case of State of Rajasthan v Puri Construction Co Ltd,5the Supreme Court held: over the
decades, judicial decisions have indicated the parameters of such challenge consistent with the
provisions of the Arbitration Act. By and large the courts have disfavored interference with
arbitration award on account of error of law and fact on the score of mis-appreciation and
misreading of the materials on record and have shown definite inclination to preserve the award
as far as possible. This court has held that the court does not sit in appeal over the award and
review the reasons. The court can set aside the award only if it is apparent from the award that
there is no evidence to support the conclusions or if the award is based upon any legal
proposition which is erroneous.

1
the Arbitration Act, 1940 (No 10 of 1940) (the 1940 Act)
2
The Arbitration (Protocol & Convention) Act 1937 (No 6 of 1937) (the 1937 Act).
3
The Foreign Awards (Recognition & Enforcement) Act 1961 (No 45 of 1961) (1961 Act).
4
The Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York, 10 June 1958) (the
New York Convention). India became a signatory to this Convention on 13 July 1960.
5
(1994) 6 SCC 485.

CHANAKYA NATIONAL LAW UNIVERSITY Page 5

ENFORCEMENT OF ARBITRAL AWARD IN INDIA

CHAPTER-(3)
THE NEW REGIME

In January 1996, India enacted a new Arbitration Act. This Act repealed all the three previous
statutes (the 1937 Act, the 1961 Act and the 1940 Act). The new Act has two signi cant parts.
Part I provides for any arbitration conducted in India and enforcement of awards thereunder. Part
II provides for enforcement of foreign awards. Any arbitration conducted in India or enforcement
of award thereunder (whether domestic or international) is governed by Part I, while enforcement
of any foreign award to which the New York Convention or the Geneva Convention applies, is
governed by Part II of the Act.

DOMESTIC AWARDS
GROUNDS FOR SETTING ASIDE AWARD
Part I of the 1996 Act is modelled on the UNCITRAL Model Law and the UNCITRAL
Arbitration Rules with few departures. The relevant provisions are briefly outlined below.
Section 13 of the 1996 Act, corresponding to Art 13 of the Model Law, provides for challenge to
an arbitrator on the ground of lack of independence or impartiality or lack of qualification. In the
first instance, a challenge is to be made before the arbitral tribunal itself.6 If the challenge is
rejected, the tribunal shall continue with the arbitral proceedings and make an award. Section
13(5) of the 1996 Act provides that where the tribunal overrules a challenge and proceeds with
the arbitration, the party challenging the arbitrator may make an application for setting aside the
arbitral award under s 34 of the 1996 Act (corresponding to Art 34 of the Model Law). Hence,
approach to a court is only at the post-award stage. This is a departure from the Model Law
which provides for an approach to the court within 30 days of the arbitral tribunal rejecting the
challenge.7
The second departure from the Model Law (relevant to enforcement) is to be found in s 16 of
the 1996 Act (corresponding to Art 16 of the Model Law). Section 16 incorporates the

6
The 1996 Act, s 13(2).
7
The Model Law, Art 13(3).

CHANAKYA NATIONAL LAW UNIVERSITY Page 6

ENFORCEMENT OF ARBITRAL AWARD IN INDIA

competence-competence principle and enables the arbitral tribunal to rule on its jurisdiction,
including with respect to the existence or validity of the arbitration agreement. If the arbitral
tribunal rejects any objection to its jurisdiction, or to the existence or validity of the arbitration
agreement, it shall continue with the arbitral proceedings and make an award.16 Section 16(6) of
the 1996 Act provides that a party aggrieved by such award may make an application for setting
aside the same in accordance with s 34. Article 16 of the Model Law, in contrast, provides that
where the arbitral tribunal overrules any objection to its jurisdiction, the party aggrieved with
such decision may approach the court for resolution within 30 days.
Section 34 of the 1996 Act contains the main grounds for setting aside the award. It is based on
Art 34 of the Model Law and, like Art 34, states that the grounds contained therein are the only
grounds on which an award may be set aside. However, in the Indian context the word is a bit of
a misnomer as two additional grounds have been created by the Act itself as mentioned above.
Besides, another ground is to be found in an Explanation to the public policy ground in s 34.
The same reads as follows: It is hereby declared, for the avoidance of any doubt, that an award is
in conflict with the public policy of India if the making of the award is induced or affected by
fraud or corruption or was in violation of Section 75 or Section 81. Section 75 referred to above
is part of the conciliation scheme under the Act and states that the conciliator and parties shall
keep confidential all matters relating to the conciliation proceedings. Section 81 prohibits any
reference in arbitral or judicial proceedings to views, suggestions, admissions or proposals, etc.
made by parties during conciliation proceedings.

CHANAKYA NATIONAL LAW UNIVERSITY Page 7

ENFORCEMENT OF ARBITRAL AWARD IN INDIA

NEW GROUND FOR CHALLENGE TO AWARD THROUGH JUDGE-MADE LAW

To the above-mentioned legislatively stipulated grounds, came to be added a new judge-made
ground. This came about in the Supreme Court decision of Oil and Natural Gas Corp v Saw
Pipes Ltd.8 The issue here was whether an award could be set aside on the ground that the
arbitral tribunal had incorrectly applied the law of liquidated damages to the case. The question
turned around the scope of s 34 of the 1996 Act (which on a plain reading does not permit a
challenge on merits).

The Supreme Court in Saw Pipes came to the conclusion that the impugned award was legally
awed in so far as it allowed liquidated damages on an incorrect view of the law. In the process it
held, that an award can also be challenged on the ground that it contravenes the provisions of
the Act (ie Arbitration Act) or any other substantive law governing the parties or is against the
terms of the contract. Further, the judgment expanded the concept of public policy to add that
the award would be contrary to public policy if it is patently illegal.

The Supreme Court in Saw Pipes did the expansion of public policy to domestic awards alone
as an earlier larger Bench decision of the court in the case of Renu Sagar Power Co v General
Electrical Corp had construed narrowly this ground as limited to fundamental policy of Indian
law.

8
2003 (5) SCC 705 (Saw Pipes).

CHANAKYA NATIONAL LAW UNIVERSITY Page 8

ENFORCEMENT OF ARBITRAL AWARD IN INDIA

CHAPTER-(4)
FOREIGN ARBITRAL AWARD

In order to be considered as a foreign award (for the purposes of the Act), the same must fulfill
two requirements. First it must deal with differences arising out of a legal relationship (whether
contractual or not) considered as commercial under the laws in force in India. The expression
commercial relationship has been very widely interpreted by Indian courts. Court in the case of
RM Investments Trading Co Pvt Ltd v Boeing Co & Anor,9 while construing the expression
commercial relationship, held: The term commercial should be given a wide interpretation
so as to cover matters arising from all relationships of a commercial nature, whether contractual
or not. The second requirement is more significant and that is that the country where the award
has been issued must be a country noticed by the Indian government to be a country to which the
New York Convention applies.10

COMPARISON WITH DOMESTIC ENFORCEMENT OF ARBITRAL AWARD

There are two fundamental differences between enforcement of a foreign award and a domestic
award. A domestic award does not require any application for enforcement. Once objections are
rejected, the award is by itself capable of execution as a decree. A foreign award, however, is
required to go through an enforcement procedure. The party seeking enforcement has to make an
application for the said purpose. Once the court is satisfied that the foreign award is enforceable,
the award becomes a decree of the court and executable as such.
The other difference between the domestic and foreign regime is that (unlike for domestic
awards) there is no provision to set aside a foreign award. In relation to a foreign award, the
Indian courts may only enforce it or refuse to enforce it they cannot set it aside. This lacuna
was sought to be plugged by the Supreme Court in the recent decision of Venture Global,where
the court held that it is permissible to set aside a foreign award in India applying the provisions
of s 34 of Part I of the Act.

9
1994 (4) SCC 541.
10
The 1996 Act, s 44(b).

CHANAKYA NATIONAL LAW UNIVERSITY Page 9

ENFORCEMENT OF ARBITRAL AWARD IN INDIA

CHAPTER-(5)
PUBLIC POLICY

"Public Policy is an unruly horse, and when you get astride it you never know where it will carry
you.11
The scope and width of the concept of 'public policy' as a ground for setting aside an arbitral
award has been the source of much debate across all jurisdictions, but India has been perceived
to be a forerunner in stirring the debate. The term public policy has been used twice in the 1996
Act. An award can be set aside under Section 34 of the 1996 Act (Part I) if the award is in
conflict with the public policy of India. Further, a foreign award may be refused enforcement
under Section 48 of the 1996 Act (Part II of the 1996 Act) if the award is contrary to the public
policy of India.
The first time the question of public policy arose as an exception for enforcement of a foreign
arbitral award was in the case of Renusagar Power Electric co v. General Electric Co
(Renusagar)12, which involved enforcement of an ICC Award. This was the pre-1996 Act
case and the award was being enforced under the 1961 Act. The Supreme Court held that the
expression "public policy" could be construed widely or narrowly and adopted a narrow view in
reference to the enforcement of a foreign award. The Court stated that the term "public policy"
"has been used in a narrower sense and in order to attract to the bar of public policy the
enforcement of the award must invoke something more than the violation of the law of India.
Applying the said criteria it must be held that the enforcement of a foreign award would be
refused on the ground that it is contrary to public policy if such enforcement would be contrary
to:
Fundamental policy of Indian law; or
The interests of India; or
Justice or morality.

11
Mr Justice Burrough noted "Public Policy is an unruly horse, and when you get astride it you never know where it
will carry you. It may lead you from sound law. It is never argued at all but when other points fail Richardson v.
Mellish (1824) 2 Bing 228.
12
AIR 1994 SC 860

CHANAKYA NATIONAL LAW UNIVERSITY Page 10

ENFORCEMENT OF ARBITRAL AWARD IN INDIA

The defence of public policy to set aside an award under Section 34 of the 1996 Act then arose in
the case of Oil and Natural Gas Corporation v. Saw Pipes Ltd13 case ("Saw Pipes case"). The
issue was whether an award made in India could be set aside on the ground of public policy; that
the arbitral tribunal had incorrectly applied the law of liquidated damages.
Despite the Renusagar precedent, the Supreme Court held that any arbitral award which violates
Indian statutory provisions is "patently illegal" and contrary to public policy. The court in Saw
Pipes differentiated the case from that of Renusagar on the ground that the question in the latter
case was related to an execution of an award which had attained finality under the 1961 Act. By
contrast, in Saw Pipes, the validity of the award was in question. The argument accepted by the
court was that the foreign award could be set aside under the relevant law by the competent
authority where it was being enforced. Thus, in the Saw Pipes case the domestic award would be
supervised by Indian courts as they were the primary courts. Further, it held that if a narrow
meaning was given to the term "public policy," some of the provisions under the 1996 Act would
become inapplicable. Therefore, the Supreme Court interpreted Section 34 (2)(b)(ii) of the 1996
Act to include the additional ground of "patent illegality." The illegality must go to the "root of
the matter" and must not be of a trivial nature. In another case, the Supreme Court held that an
award that is contrary to the specific terms of the contract is patently illegal and can be thus set
aside on public policy grounds.14

This however changed after the ruling of the Supreme Court in Bhatia International Vs
Bulk Trading.15 In Bhatia International, the court categorically erased the distinction
between Part I & Part II of the Act, stating that provisions of Part I would apply to all
arbitrations and all related proceedings. On September 6, 2012, a five-member constitutional
bench in Bharat Aluminium Company v. Kaiser Aluminium Technical Services
(BALCO)16, overturned the Bhatia principle and held that Part I of the Act applies only to
arbitrations seated in India.

13
(2003) 5 SCC 705
14
Hindustan Zinc Ltd v Friends Coal Carbonization, [2006] 4 SCC 445 (India)
15
2002 (4) SCC 105 (Bhatia)
16
2012 (8) SCALE 333 (India)

CHANAKYA NATIONAL LAW UNIVERSITY Page 11

ENFORCEMENT OF ARBITRAL AWARD IN INDIA

CHAPTER-(6)
ENFORCEMENT OF ARBITRAL AWARD

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, 1908.17
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.18 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.19 The provisions of enforcement are 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.20

17
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.
18
Sunil Malhotra, Enforcement of Arbitral Awards, at p 20, ICAs Arbitration Quarterly, ICA, 2006, vol.
XL/No.4.
19
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.
20
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.

CHANAKYA NATIONAL LAW UNIVERSITY Page 12

ENFORCEMENT OF ARBITRAL AWARD IN INDIA

CHAPTER-(7)
CONCLUSION

Arbitration as a method of Alternative Dispute Resolution is not free from loopholes. Of late,
this method of ADR has been a subject of criticism chiefly on account of difficulty in
enforcement of arbitral awards. In this respect, the practicality of arbitration as an efficient
mechanism of dispute resolution has come under question. To promote commerce and amicable
resolution of disputes, the authors suggest that domestic court interference should be limited and
not extend to arbitrations held overseas. courts in India should not cross the fine line between
assistance and interference and should endeavor to have a pro-arbitration stance. In theory,
arbitration; whether international or national, has become the duplication of a Court process that
even provides for appeals. These discrepancies highlight that law in action and law in books
are not one and the same. Legal Realism is not that which exists only in Statutes and Acts but in
the Judges interpretations thus resulting in the politics of law.

An examination of the working of arbitration in India reveals that arbitration as an institution is

still evolving, and has not yet reached the stage to effectively fulfill the needs accentuated with
commercial growth. The dilemma of the Indian situation, evidently, has its roots in the failure to
adopt different standards for foreign and domestic awards. It is because of this lack of clarity that
the judiciary has been unable to demarcate standards for domestic and foreign awards. Arbitral
institutions in India along with arbitrators and other associated persons would also benefit,
encouraging the growth of commerce and business in India.

CHANAKYA NATIONAL LAW UNIVERSITY Page 13

ENFORCEMENT OF ARBITRAL AWARD IN INDIA

REFERENCES
1. PRIMARY SOURCES
The Arbitration Act 1940
Arbitration and Conciliation Act 1996
The New York Convention of 1958.
UNICITRAL Model Law
176th Report of the Law Commission of India
246th Report of the Law Commission of India

2. SECONDARY SOURCES

a) Articles
K Ravi Kumar, Alternative Dispute Resolution in Construction Industry,
International Council of Consultants (ICC)
Sherina Petit and Matthew Townsend with Sneha Janakiraman, International
Arbitration in India International arbitration report issue 1
Sumeet Kachwaha and Dharmendra Rautray, Kachwaha & Partners, Arbitration
in India (April 9, 2010)

b) Books
Julian D Lew, Loukas Mistelis and Stefan Kroll, Comparative International
Commercial Arbitration.

c) Papers
Indu Malhotra, Fast Track Arbitration, ICAs Arbitration Quarterly, ICA, 2006,
vol. XLI/No.1
Krishna Kanta Handiqui State Open University, Introduction to the Arbitration
And Concilliation Act.
Pramod Nair, Quo vadis arbitration in India? Business Line, October 19, 2006,
University of Cambridge.
S K Dholakia, Analytical Appraisal of the Arbitration and Conciliation
(Amendment) Bill, 2003, ICAs Arbitration Quarterly, ICA, New Delhi, 2005
vol. XXXIX/No.4.
Sharma, Krishna Development and Practice of Arbitration in India Has it
Evolved as an Effective Legal Institution

CHANAKYA NATIONAL LAW UNIVERSITY Page 14