Enforcement as a decree, stay on deposit, the grounds for setting aside, and the position of foreign awards under Part II.
An arbitral award settles the dispute only on paper. The creditor still has to collect, and the award debtor often applies to set the award aside to delay payment. The Arbitration and Conciliation Act, 1996, as amended in 2015, has made enforcement more direct than it once was. This note explains how a domestic award is enforced, the grounds on which it can be challenged and the position for foreign awards. It is general information, not advice on a particular award.
Enforcement as a decree
Section 36 provides that where the time for making an application to set aside the award under Section 34 has expired, or such application has been refused, the award is enforced under the Code of Civil Procedure in the same manner as if it were a decree of the court. Since the 2015 amendment, the mere filing of an application under Section 34 does not make the award unenforceable. The award debtor must apply separately for a stay, and under Section 36(3) the court may grant it on conditions. Where the award is for the payment of money, the court must have due regard to the provisions for grant of a stay of a money decree under the Code, and in practice the court commonly requires a deposit of all or part of the sum.
Where to file
Execution is filed in the court which would have had jurisdiction to decide the questions that are the subject matter of the award if it had been the subject matter of a suit, and where the court is a High Court exercising original jurisdiction, in that High Court. Where the assets are elsewhere, the decree can be transferred for execution under Section 39 of the Code. The petition is accompanied by the award, the arbitration agreement and a statement of the amount due with interest.
Setting aside: Section 34
An award may be set aside only on the grounds in Section 34(2). The principal ones are that:
- a party was under some incapacity, or the arbitration agreement was not valid;
- the party was not given proper notice of the appointment of an arbitrator or the proceedings, or was otherwise unable to present its case;
- the award deals with a dispute not contemplated by the submission, or contains decisions on matters beyond its scope;
- the composition of the tribunal or the procedure was not in accordance with the agreement; or
- the subject matter is not capable of settlement by arbitration, or the award conflicts with the public policy of India.
The Act explains that an award conflicts with public policy if it was induced or affected by fraud or corruption, contravenes the fundamental policy of Indian law, or conflicts with the most basic notions of morality or justice. A domestic award may also be set aside for patent illegality appearing on the face of the award, but not merely for an erroneous application of the law or a re-appreciation of evidence. The Supreme Court stressed the narrowness of the ground in Associate Builders v. Delhi Development Authority (2015) and in Ssangyong Engineering and Construction Co. Ltd. v. NHAI (2019).
The application must be made within three months of the date the party received the award, with a further thirty days allowed if the court is satisfied that there was sufficient cause. The court does not rehear the merits.
Foreign awards
Part II of the Act implements the New York Convention and the Geneva Convention. A foreign award made in a country notified as a reciprocating territory is enforceable in India as a decree under Section 49, once the court is satisfied that it is enforceable. The party seeking enforcement files the original or a certified copy of the award and of the agreement, with translations if needed (Section 47). The grounds of refusal in Section 48 are narrower than in Section 34, and include incapacity, invalidity of the agreement, lack of notice, matters beyond the scope of the submission, and conflict with the public policy of India. The Supreme Court has held that the public policy ground for foreign awards is to be construed narrowly. There is no right to apply to set aside a foreign award in India, since the proper court for that is at the seat.
Limitation
Because the award is treated as a decree, the period for enforcement is the twelve years under Article 136 of the Limitation Act, 1963. The period for an application under Section 34 is shorter and strict.
Preparing for enforcement
- Identify the debtor's assets while the challenge period runs, so that execution can start the day the award becomes enforceable.
- If the debtor files under Section 34, oppose any unconditional stay and ask for a deposit.
- Consider an interim application under Section 9 if there is a risk that assets will be moved.
This note is general information on the law at the date of publication. It is not legal advice, and it should not be relied on without advice on the facts of a particular matter.
