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This article is a complete guide to everything you need to know about what domestic arbitral awards are, laws governing the enforcement of domestic arbitral awards, courts where you can enforce these domestic arbitral awards, and every other procedural nuance that is crucial for effectively enforcing arbitral awards in India 

Introduction

I still remember the day when there was a big celebration in my chambers where I was working. Why?  After fighting so hard before the arbitrator, we obtained a favourable award for our client.

I was over the moon as this was my first high-stakes case where I got an opportunity to assist some of the big names in the legal fraternity. 

But, the moment of pride for me at that time was seeing my name alongside such big names in the legal fraternity. Whether you have just started off or you are an experienced lawyer, all the readers would relate to this. 

At that moment, I thought our client eventually got justice and this was an end to the matter.

Little did I know that my celebration was premature. After a few days, my senior called me to his chamber and informed me that the award had to be enforced because the opposite party had not complied with the award.

At that moment, I recollected a famous quote that has echoed in the legal field for over 150 years.

“Getting a favorable order from the court is merely half the battle won and the real struggle begins when the  litigant approaches the executing court.”

The favorable award that we had fought so hard to obtain was merely a piece of paper until it could be effectively executed. 

My senior asked me to assist him in enforcing the award. 

I was unaware of the process, but lucky me, my senior taught me everything I needed to know about enforcing a domestic award in India.

So, in this article, let me teach you as well what I learned about the enforcement and execution of domestic arbitral awards in India.

Let us first begin with understanding:

What is an arbitral award?

The arbitral award is the final verdict of the arbitral tribunal; it’s just like an order passed by any court but without the parties approaching the court.

Simply put, when there is a dispute between the parties and the parties refer the dispute to an arbitrator then the decision of the arbitral tribunal on the dispute between the parties is called an award. It is akin to a final order of a court.

There are basically two types of arbitral awards:

1. Domestic award
2. Foreign award.

Since this article is about enforcing domestic arbitral awards, let us first understand domestic awards.

What is a domestic award?

The Arbitration Act of 1940 or the Model Law does not explicitly define domestic awards. 

Even section 2(7) of the Arbitration and Conciliation Act, 1996 (“the Act” in short), defines a domestic award as one made under Part I of the Act.

This means that if the place of arbitration is in India, then any award passed by an arbitrator shall be called a domestic award.

You might think at this moment what is a domestic arbitration though?

Let me tell you.

Any arbitration where none of the parties are foreign nationals, body corporate, or government entities is called a domestic arbitration.

You must also note one interesting fact domestic arbitration includes international arbitration. You might wonder how? 

So if the arbitration place is in India, then even international arbitration is considered domestic arbitration.

This ultimately means that if an award is passed in India, either through domestic arbitration or international arbitration conducted in India, it qualifies as a domestic award. 

With this explanation, I hope you all know what a domestic arbitral award means.

Let us move on to understand the legal framework that governs the enforcement of domestic awards.

What is the legal framework that governs the enforcement of domestic award?

Did you know that the enforcement and execution of domestic awards are governed by the provisions of Part I of the Act?

At the heart of this legal framework is section 36 of the Act, which deals specifically with the enforcement of domestic arbitration awards. 

In essence, section 36(1) of the Act states that:

• After receiving an award, the award-holder must wait three months before they can seek enforcement. During these three months, the award can be challenged under section 34 of the Act.
• After this period is over, the award can be enforced.
• The award will be enforced just like a decree of a court in accordance with the provisions mentioned in the Code of Civil Procedure, 1908 (CPC).

After reading this provision, I wondered if an award is not passed by a court but an arbitral tribunal, then what happens next?

Which court will have the power to execute the domestic arbitral award?

Well, the Supreme Court, in the case of Sundaram Finance Limited v. Abdul Samad and Anr., [(2018) 3 SCC 622] settled the position on this issue and held that for the purpose of section 36 of the Act, the execution application can be directly filed anywhere in the country where the award can be executed. 

Therefore, a domestic award may be executed at any place that is close to the judgment debtor or his assets or properties or both. 

This judgement was passed with the legislative intent of allowing smooth enforcement of the arbitration awards in mind.

Did you follow?

Now the next question that would naturally arise would be to understand the scope of the executing court.

What is the scope of the executing court while entertaining the execution application?

I looked up the provision of CPC and found section 47 of CPC, which deals with the questions to be determined by the executing court.

It includes all types of questions that would have arisen between the parties, including questions relating to the execution, discharge or satisfaction of the decree. 

But it cannot re-examine the award on merits. So, the scope of the executing court is limited.

Interesting. Let’s read further.

The executing court has to first enquire about the enforceability of the award, then hold that it is enforceable and finally enforce it. 

So, once an award is found to be enforceable, it is enforced like a decree of that court.

But let me tell you, an executing court cannot go behind the decree. 

You might think, what does that mean?

This means that the terms of the decree cannot be modified, and the terms must be enforced as they stand without any alteration.

The next step and the most essential step is to understand the point of limitation in filing an execution application. 

What is the limitation period for filing the execution application?

Firstly, do you know what is a limitation period?

It is nothing but the time frame within which a proceeding can be filed before any court, tribunal or even an authority. 

The limitation period for enforcing domestic awards is 12 years, which is equivalent to the limitation period for executing any other decree, as per the Limitation Act, 1963.

Now that you know the limitation period to file execution application, the next logical step is to understand 

What is the basic procedure for the enforcement of a domestic arbitral award?

The procedure is relatively straightforward and it involves the following steps:

Filing the execution application

The award holder, which means the winning party, must file an execution application with a competent civil court in India, which is typically the district court having jurisdiction over the matter. The original arbitral award or a duly certified copy, the original arbitration agreement and relevant supporting documents must be submitted along with the application.

Notice to the opponent

Once the award is filed, the court will issue a notice to the award debtor, which means the opposing party must show cause (reasons) why the award should not be enforced against them. 

Execution of the award

If the award debtor does not challenge the award within three months, the court will execute the award as if it were a decree passed by that court. But if the award debtor challenges the award and obtains a stay on the execution of the award, then the execution has to be delayed pending the decision of the challenge.

You can also refer to Order XXI of the CPC, which lays down the detailed procedure for the enforcement of decrees that will be applicable to the domestic awards as well.

I hope you all followed this.

Moving on to the next topic.

Before we discuss the modes of execution, let us find out about the types of awards that can be enforced.

What are the types of arbitral awards which are enforceable?

You already know that once an award is passed, it is final and binding on the parties and persons claiming under it. The following are some of the types of arbitral awards that are majorly enforced in India:

• Monetary awards
• Declaratory awards
• Awards prohibiting the doing of acts or mandating the doing of certain acts.

Let us look at the modes of execution.

What are the modes for the execution of the decree?

We have learned that domestic awards have to be executed in India as a decree passed by a court.

The court can order the execution of the domestic award by one or more of the following modes: 

Delivery of property (movable or immovable)

If the award specifically requires the delivery of a certain property, the court may order the delivery of the property to the award-holder.

Sale of property (with or without attachment)

If the award debtor has any property, the court may order the sale of his property to satisfy the award 

If the property is immovable, the property can be attached in the following manner:

• By issuing an order prohibiting the award-debtor from transferring or putting a charge on the property in any manner.
• By issuing an order prohibiting the public in general from deriving any benefit from any transfer or charge on the property
• By proclaiming the order at or near the property and affixing a copy of the order on a conspicuous part of the property and placing another copy on a conspicuous part of the courthouse.

Sale of movable property subject to decay

If the award debtor possesses any movable property that is subject to speedy and natural decay, then it may be sold immediately.

All such sales must be conducted by an officer of the court, except when the property to be sold is:

• A negotiable instrument.
• A share in a corporation which may be sold through a broker.

Arrest and detention in prison

An award can also be enforced by arresting and detaining the award-debtor in prison, but that can be done only after the court has given the award debtor a reasonable opportunity to explain why the award debtor should not be imprisoned by way of a show-cause notice.

Appointment of a receiver

In order to satisfy the award, the court may appoint a receiver to manage the property or assets of the award debtor. 

Any other mode

The court may enforce the award in any other manner as it deems necessary, depending on the nature of the relief that has been granted in the award.

If you are representing the award debtor, you can prevent the enforcement of the award by obtaining a stay on it. Let us find out how to obtain a stay.

How can you obtain a stay on the enforcement of the domestic award?

Initially, I was under the assumption that mere filing an application to set aside the award under section 34 of the Act would stop the enforcement proceedings. 

But I was wrong.

The award-debtor has to take certain steps to obtain a stay on its enforcement.

The process for obtaining a stay on the enforcement of a domestic arbitral award is governed by sections 36(2) and 36(3) of the Act. 

Let’s understand these provisions.

Application for stay

An application shall be filed under section 36(2) of the Act to obtain a stay on the enforcement of an arbitral award.

Discretion of court to grant a stay

Section 36(3) of the Act empowers the court to exercise its discretion to grant a stay on the enforcement of an arbitral award subject to such conditions as it may deem fit.

The proviso provides that if the court is satisfied that a prima facie case is made out that

• the arbitration agreement or contract which is the basis of the award; or 
• the making of the award was induced or effected by fraud or corruption,

It shall stay the award unconditionally pending disposal of the challenge under section 34 to the award.

Special provisions for monetary arbitral awards

The proviso to section 36(3) of the Act provides that in case of applications to stay arbitral awards that involve payment of money, the court shall consider the provisions of the CPC, that deals with granting a stay on a money decree.

I will also advise you to look at Order XLI of the CPC, which specifically requires the party seeking a stay of a money decree to deposit the decretal amount with the court. 

This would mean that the executing court may require the award debtor to deposit the money mentioned in the award as security to obtain a stay on the enforcement of the award.

You can also apply to the court under section 34 of the Act to set aside the award in certain circumstances. Let’s find it out.

In what circumstances can an arbitral award be set aside?

An award can be challenged at any time before it has been enforced on the grounds mentioned in section 34 of the Act. 

Before I mention the grounds for challenging the award, I will share a very important thing with you all.

You must know that once the arbitral award has been enforced, it attains the status of a court decree and further challenges to its validity are generally not permissible. So, it is necessary to challenge the award before it is enforced.

I will mention the following grounds one by one with a simple explanation in each case for better understanding.

Incapacity of a party 

If a party to the arbitration agreement was under some incapacity.

Invalid arbitration agreement

If the arbitration agreement was not valid as per the law that the parties subjected themselves or as per the law for the time being in force

Lack of proper notice or opportunity

The applicant was not given proper notice of the appointment of arbitrator or the arbitration proceedings or the applicant was unable to present their case.

Matters beyond the scope of submission to arbitration 

The award deals with disputes that were either not contemplated by the terms of submitting the dispute to arbitration or the award contains decisions on matters that are beyond the scope of the submission to arbitration.

Improper tribunal composition or procedure

The composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties or if there is no agreement, then the composition or procedure was not in accordance with the provisions of Part I of the Act.

Non-arbitrable subject matter

The subject matter of the dispute is not capable of settlement by arbitration under law for the time being in force.

Public policy violations

The arbitral award was in conflict with the public policy of India. Under the explanation of section 34, public policy grounds include:

• The award was induced or affected by fraud or corruption or was in violation of section 75 or 81.
• The award contravenes the fundamental policy of Indian law.
• The award is in conflict with the most basic notions of morality or justice.

Patent illegality

A new provision has been added in case of domestic arbitrations that allows the award to be set aside if it is vitiated by patent illegality on the face of the award.

I understood the grounds properly; I hope you did, too.

Let us now discuss the final topic for this article.

There are specific requirements that must be fulfilled in order to enforce the award. Let us see what these requirements are.

What are the stamping and registration requirements for domestic awards?

I discovered that for a domestic arbitral award to be admissible for enforcement, it must comply with certain procedural formalities, including stamping and registration requirements, wherever applicable.

Arbitral Awards are required to be stamped with prescribed stamp duty as per the Indian Stamp Act 1899. I found out that an award of an arbitrator is an instrument chargeable with duty as per section 3 of the Indian Stamp Act, 1899.

If the award is not stamped or is insufficiently stamped, the provision of section 35 of the Stamp Act shall be attracted. This means that an unstamped or insufficiently stamped award is inadmissible for any purpose. However, an unstamped or insufficiently stamped award can be validated by paying deficient stamp duty along with a penalty, provided that the award is original.  

Additionally, under section 17 of the Registration Act, 1908, it is mandatory to register an award that deals with an immovable property and on failure to register the award, it shall be rendered as invalid.

You might think at what stage can someone raise these points?

Well, the Supreme Court, in the case of M. Anasuya Devi and Anr v. M. Manik Reddy and Ors., [(2003) 8 SCC 565] highlighted that the stamping and registration requirements fall under section 47 of the CPC and not under section 34 of the Act.

So, if there are any issues relating to stamping and registration, then it must be raised during the enforcement stage.  

This is pretty much all you need to know about the enforcement of domestic awards in India.

With this, you have now gained a thorough understanding of the enforcement of domestic awards in India and I was ready to enforce the award for our client.

Conclusion

To conclude, I would say that, in recent times, arbitration has become a popular method of resolving commercial disputes in India. So, it is crucial to understand how to enforce domestic arbitral awards.

Advocates with expertise in the process of enforcement of arbitration awards are opening doors for opportunities for themselves by placing them at the forefront of this evolving dispute resolution mechanism.

FAQs

1. Can parties appeal a court’s decision on enforcement of the award?

An appeal can be filed against the decision of the court enforcing an arbitral award. However, the grounds for an appeal are limited, especially in matters pertaining to arbitration, in order to uphold the principle of minimal judicial intervention.

2. What are the characteristics of a valid domestic arbitral award?

A valid arbitral award must comply with the following:

• It must be passed by a proper constitution of the arbitral tribunal.
• It must adhere to the agreed procedural rules.
• It must be passed after notice and hearing to both parties
• It must provide reasons for the award unless waived by the parties.
• It must contain only matters that arise out of the agreement.
• It must deal with arbitrable disputes.

3. What are the recent trends in the enforcement of domestic arbitral awards?

The Courts are adopting narrower interpretations of public policy to reduce unnecessary challenges to arbitral awards

With technology advancements in courts particularly with e-filing of applications for enforcement and virtual hearings of such applications, the enforcement proceedings have become more efficient and accessible.