This article is written by Aditi, a second-year LL.B. student at ILS Law College, Pune during her internship at LeDroit India.

KEYWORDS

• The Arbitration and Conciliation Act 1996
•  Arbitral Award
• Arbitration Tribunal
• Section 31
• Section 32
• Section 34

ABSTRACT

The concept of an arbitral award is central to the Arbitration and Conciliation Act, 1996, which governs arbitration proceedings in India. An arbitral award is the final determination made by an arbitration tribunal, resolving disputes between parties in a legally binding manner. Section 31 of the Act specifies that an arbitral award must be in writing, signed by the arbitrators, and provide reasoning unless the parties agree otherwise. Arbitral awards can take various forms, including final, interim, partial, consent, and default awards, each addressing different aspects of dispute resolution.

Interim awards, as per Section 31(6), provide temporary relief before the final award, while consent awards under Section 30 record mutually agreed settlements, reinforcing arbitration as a flexible and efficient mechanism. The enforceability of arbitral awards under Sections 35 and 36 equates them with court decrees, ensuring compliance. However, Section 34 allows limited grounds for challenging an award, including procedural irregularities and violations of public policy. By streamlining the resolution process and reducing litigation burdens, arbitral awards play a crucial role in alternative dispute resolution, ensuring effective and legally sound outcomes for commercial and civil disputes.

INTRODUCTION

The Arbitration and Conciliation Act, 1996, governs arbitration proceedings in India and establishes a structured mechanism for resolving disputes outside the formal judicial system. Arbitration serves as an alternative dispute resolution (ADR) method, allowing parties to settle conflicts efficiently without resorting to traditional court litigation.

This legislation incorporates principles from the UNCITRAL (United Nations Commission on International Trade Law) Model Law on International Commercial Arbitration, ensuring that arbitral awards are recognized and enforced both domestically and internationally. Given the heavy caseload of Indian courts, ADR methods like arbitration, mediation, and negotiation provide effective solutions for dispute resolution.

Arbitration resembles judicial proceedings, as both parties present their arguments before an arbitrator, who functions similarly to a judge. The arbitrator’s decision, known as an arbitral award, is legally binding and holds the same enforceability as a court decree, requiring compliance from both parties involved.

ARBITRAL AWARD

WHAT IS AN ARBITRAL AWARD?

An Arbitral award is the final decision given by an Arbitration Tribunal after hearing the arguments and examining the evidence presented by both parties in an arbitration proceeding. It serves as a legally binding resolution to the dispute and is enforceable in the same manner as a court judgment. The award may settle all or some of the issues in dispute, depending on the nature of the arbitration.

An arbitral award can be either monetary or non-monetary. A monetary award requires one party to pay a specified sum to the other, whereas a non-monetary award may include obligations such as enforcing a contract, preventing a party from taking certain actions, or granting specific relief. The award may be final, meaning it completely resolves the dispute, or interim, which provides temporary relief or decides specific issues before the final determination.

Although the term “Arbitral Award” is not defined in the Arbitration and Conciliation Act, 1996, but as per Section 2(1)(c) arbitral award includes an interim award. Section 31(6) defines an Interim award as an award passed by an arbitral tribunal at any time during the arbitral proceedings. This type of award can address particular claims or procedural matters that require resolution before the final award is rendered. Additionally, under Section 30, if the parties reach a mutual settlement during arbitration, the tribunal can record the agreement as a consent award, which has the same legal status as a regular arbitral award and results in the termination of proceedings.

Thus, an arbitral award is a crucial outcome of arbitration, offering a structured and enforceable resolution to disputes. Whether through a final decision, an interim order, or a settlement between the parties, arbitral awards play a significant role in ensuring fair and efficient dispute resolution outside traditional litigation.

TYPES OF ARBITRAL AWARD

Arbitral awards can be classified based on their nature, procedural aspects, and territorial jurisdiction. These include final awards, interim awards, partial awards, consent awards, default awards, additional awards, and costs awards. Furthermore, arbitral awards are categorized as either domestic or foreign, depending on where they are rendered and the governing legal framework.

1. FINAL AWARD

The final award is the most common type and concludes the arbitration process by resolving all disputes submitted to the arbitral tribunal. It is binding on the parties and generally prevents them from re-litigating the same issues. Once issued, a final award has the same enforceability as a court decree, with very limited grounds for appeal under the Arbitration and Conciliation Act, 1996.

2. INTERIM AWARD

An interim award is issued during the arbitration proceedings before the final award is rendered. It deals with specific issues that require immediate resolution, such as interim reliefs, preservation of assets, or procedural matters. Although temporary in nature, interim awards are enforceable, ensuring compliance during the arbitration process.

3. PARTIAL AWARD

 A partial award Resolves some, but not all, of the disputes submitted for arbitration. This is particularly useful in complex cases where certain claims can be decided independently of others. The issues settled in a partial award become final and binding, while the remaining disputes continue to be adjudicated. This approach helps expedite the resolution of some matters, potentially leading to settlements on the unresolved issues.

4. CONSENT AWARD

A consent award arises when parties reach a mutual settlement during arbitration and request the tribunal to record their agreement as an award. This type of award reflects the settlement terms agreed upon by the parties and has the same binding effect as a final award. Consent awards encourage amicable dispute resolution while saving time and costs.

5. DEFAULT AWARD

A default award is issued when one party fails to participate in the arbitration proceedings without a valid reason. In such cases, the tribunal proceeds ex parte and decides the case based on the evidence presented by the participating party. This ensures that the claims of the present party are addressed, while the absent party is still bound by the award.

6. ADDITIONAL AWARD

An additional award is granted when certain claims or issues that were initially presented during arbitration are inadvertently omitted from the final award. The parties can request the arbitral tribunal to issue an additional award to address these overlooked matters. This ensures that all disputes submitted to arbitration are comprehensively resolved.

7. COSTS AWARD

Costs award specifically deals with the allocation of expenses incurred during arbitration, including arbitrators’ fees, legal costs, and other procedural expenses. The tribunal may issue this award separately from the final award if necessary, and it is binding on the parties.

8. DOMESTIC AWARD

A domestic arbitral award is one rendered within India under the Indian legal framework, governed by Part I of the Arbitration and Conciliation Act, 1996. These awards apply to disputes where all parties are Indian entities or where arbitration is seated in India. They are enforceable as a decree of an Indian court under Section 36 of the Act, with limited grounds for challenge under Section 34, such as incapacity, invalid arbitration agreement, or violation of public policy.

9. FOREIGN AWARD

A foreign arbitral award, on the other hand, is rendered in arbitration proceedings conducted outside India or under a foreign legal framework. Governed by Part II of the Arbitration and Conciliation Act, 1996, foreign awards must meet specific recognition and enforcement requirements under international conventions like the New York Convention and the Geneva Convention. Indian courts may refuse enforcement of a foreign award on limited grounds, such as lack of due process, invalid arbitration agreement, or conflict with Indian public policy.

PROVISIONS RELATED TO ARBITRAL AWARD

• DECISION-MAKING BY ARBITRATORS (SECTION 28)

The Arbitration and Conciliation Act, of 1996, mandates that arbitrators decide disputes based on legal principles, justice, and good faith, provided the parties authorize them to do so. In domestic arbitration, Indian law applies, while in international arbitration, parties may choose applicable laws. This provision ensures that arbitral decisions are fair and legally sound.

• MAJORITY RULE IN ARBITRAL TRIBUNALS

 (SECTION 29)

When arbitration is conducted by a panel of arbitrators, decisions must be made by the majority. However, parties may agree that a particular arbitrator’s decision will be binding instead of a majority ruling. This provision ensures flexibility while maintaining a structured decision-making process.

• ENCOURAGEMENT OF SETTLEMENT (SECTION 30)

Arbitral tribunals are encouraged to facilitate settlements between parties. If a settlement is reached, it can be recorded as an arbitral award on agreed terms, which holds the same legal validity as any other award. This provision promotes amicable dispute resolution.

• REQUIREMENTS OF AN ARBITRAL AWARD 

(SECTION 31)

An arbitral award must be in writing, signed by all or the majority of arbitrators, and include reasoning unless the parties agree otherwise. It must also specify the date and place of arbitration, and each party must receive a signed copy. Tribunals can also issue interim awards for urgent matters.

• TERMINATION OF ARBITRAL PROCEEDINGS (SECTION 32)

Arbitral proceedings terminate upon the final award or if the claimant withdraws the claim, both parties agree to termination, or further proceedings become unnecessary. Once terminated, the tribunal loses its authority over the matter.

• CORRECTION AND INTERPRETATION OF AWARDS (SECTION 33)

Tribunals can correct clerical or computational errors in an award. If certain claims were omitted from the final award, an additional award may be granted within 30 days of receiving the original award. This ensures accuracy in arbitral decisions.

• SETTING ASIDE AN ARBITRAL AWARD (SECTION 34)

An arbitral award can be set aside on grounds such as incapacity of parties, an invalid arbitration agreement, lack of proper notice, or decisions beyond the tribunal’s scope. The challenge must be filed within three months, extendable by 30 days at the court’s discretion.

• FINALITY AND ENFORCEABILITY OF AWARDS (SECTIONS 35 & 36)

An arbitral award becomes binding once the time for challenging it expires or if no challenge is successful. It is then enforceable as a court decree under the Code of Civil Procedure, 1908, ensuring its execution like any judicial order.

• APPEALS IN ARBITRATION (SECTION 37)

Appeals can be made against certain arbitration-related orders, including those granting or refusing interim relief under Section 9, setting aside or refusing to set aside an award under Section 34, and jurisdictional rulings. Appeals must be filed within 90 days in a High Court or within 30 days in any other court.

ESSENTIALS OF AN ARBITRAL AWARD

As per Section 31 of the Arbitration and Conciliation Act, 1996, an arbitral award must meet the following essential requirements:

1. Written Form and Signature: The award must be in writing and signed by all members of the arbitral tribunal. If any arbitrator does not sign, the reason for the omission must be stated.
2. Statement of Reasons: The award must include the reasoning on which it is based unless the parties have agreed otherwise.
3. Date and Place of Arbitration: The award must mention the date and place of arbitration, as it determines the timeline for challenging the award.
4. Complete and Unambiguous: The award must comprehensively address all matters submitted for arbitration and should not be contradictory or incomplete.
5. Certainty: The award must be clear and free from any uncertainty.
6. Feasibility: The award should be capable of being performed and must not require actions that are impossible or illegal.
7. Consistency with Public Policy: The award must not violate public policy, as an award against public policy can be set aside by a court.

PROCEDURE FOR ISSUING AN ARBITRAL AWARD

The process for issuing an arbitral award is outlined in the Arbitration and Conciliation Act, 1996, and follows a structured procedure similar to a trial proceeding. The arbitration process commences as per Section 21 when the respondent receives a notice referring the dispute to arbitration. Following this, the constitution of the arbitral tribunal takes place, where parties appoint arbitrators as per their agreement. If they fail to do so within the stipulated period, Sections 10 to 15 provide the procedure for appointing an arbitrator. Once the tribunal is constituted, the submission of pleadings begins, wherein the claimant submits a statement of claims, and the respondent submits a statement of defense. These submissions must be made within the agreed time, but in any case, should be completed within six months from the date the arbitrators receive written notice of their appointment.

Subsequently, the arbitral tribunal conducts proceedings, determining whether to hold oral hearings or decide the matter based on documents and other materials submitted by the parties. Finally, the issuance of the arbitral award takes place, where the tribunal deliberates and renders the award in compliance with Section 31 of the Act. A signed copy of the award must be delivered to each party, ensuring that the arbitration process concludes with a legally binding decision.

GENERAL PRINCIPLES FOR CHALLENGING AN ARBITRAL AWARD

Only a party to the arbitration agreement has the right to challenge an arbitral award; third parties lack standing to do so. Domestic arbitration awards can be contested in a District Court or a High Court with original jurisdiction, whereas awards from international commercial arbitration can only be challenged before a High Court. A challenge must be filed within three months from the date the award is received, with a possible extension of up to thirty days at the court’s discretion.

KEY REQUIREMENTS OF AN ARBITRAL AWARD

An arbitral award must be made by a majority of the tribunal, documented in writing, and signed by the arbitrators. The date of the award is crucial for determining enforcement and challenge timelines. Unless otherwise agreed by the parties, the award must include reasons to reflect the tribunal’s consideration of facts and arguments. The award should mandate practical, legal, and enforceable actions while ensuring conformity with public policy, as any violation of public policy can result in the award being set aside by a court.

CONCLUSION

The concept of an arbitral award under the Arbitration and Conciliation Act, 1996, is crucial for resolving disputes outside traditional courts. An arbitral award, whether final, interim, or consent-based, is legally binding and enforceable as a court decree. Section 31 mandates that awards be in writing, signed, and reasoned unless agreed otherwise. Challenges to an award can be made under Section 34 on limited grounds, such as procedural irregularities or public policy violations. Arbitration ensures swift and efficient dispute resolution, reducing the burden on courts while maintaining legal sanctity and enforceability in domestic and international disputes.