Enforcement of Arbitral Awards

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Enforcement of Arbitral Awards

Enforcement of domestic awards

A person who holds an awardhas to wait for at least a period of 90 days after the person has received the award before applying for enforcement and execution. During this period,[i]the award can also be challenged according to Section 34 of the Act. This period is like a limitation period, thus at the end of this period if a court finds the award to be enforceable, at the stage of execution, there can be no more challenges to the validity of the arbitral award. Before the recently amended Arbitration and Conciliation (Amendment) Act, 2015 (“Amendment Act”), an application for setting aside an award would amount imposes a stay on the proceedings. However, due to the Amendment Act, a party that is challenging an award will have to move a separate application in order to seek a stay on the execution of an award.

Enforcement of foreign awards

India is a signatory to the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, 1958 (“New York Convention”) as well as the Geneva Convention on the Execution of Foreign Arbitral Awards, 1927 (“Geneva Convention”). If a party is the receipt of a binding award from a country, which is a signatory to the New York Convention or the Geneva Convention and the award is made in a territory, which has been notified as a reciprocating territory by India, the award would have then be enforceable in India. Out of the 196 countries in the world only 50 countries have been notified in the gazette of India by the Government of India as reciprocating or convention countries, most recently Mauritius was added to this list.[ii] The filing an execution petition starts the enforcement of a foreign award. Originally, a court would decide whether the award adhered to the requirements of the Act. An award can beenforced like a decree of that court, in the event that it is capable of being enforced.However at this point parties would have to be well aware of the various challenges that may arise for example even frivolous objections taken by the opposite party, and requirements such as filing original/ authenticated copy of the award and the underlying agreement before the court.

Requirements for enforcement of foreign awards

Either the Original award or a duly authenticated copy in the form as prescribed by the country where it is made.

The Original arbitration agreement or duly certified copy.

All the evidence, which is necessary to prove that the award is a foreign award, and wherever it is applicable.Section 47 of the Act provides that the aforementioned,“shall” should be submitted before the court, at the time of the filing the application for enforcement of the foreign award. However, in a recent judgment, the Supreme Court of India interpreted that the word “shall” appearing in Section 47 of the Act has to be read as “may”.[iii] It also stated that such an interpretation would mean that a party applying for enforcement of the award does not necessarily have to produce in front of the court a document mentioned therein “at the time of the application”. Nevertheless, it further clarified that such interpretation of the word “shall” as “may” is restricted “only to the initial stage of the filing of the application and not thereafter.”[iv]

Conditions for enforcement of arbitral awards Domestic and foreign

A party has the option of resorting to the following grounds to challenge an award. An award can berendered unenforceable in the following situations:

  • The parties to the agreement suffer from incapacity.
  • The agreement in question does not comply with the law to which the parties have subjected it,or to the law of the country where the award the was received (especially in case of foreign awards).
  • The parties also did not give proper notice of appointment of arbitrator or arbitral proceedings.
  • Award is different from the agreement or submission to arbitration and hence is ultra vires.
  • Award consists of decisions on matters irrelevant to the submissions to arbitration.
  • Composition of the arbitral authority or the arbitral procedure goes against the agreement and hence would be ultra vires.
  • The arbitrators in the arbitral authority or the arbitral procedure are not in compliance with the law ofthe country of the seat of the arbitration (in case of foreign awards).
  • The award does not yet become binding on the parties, or has been setaside or suspended by a competent authority of the country in which, or under whose law thataward was made.
  • Subject matter of the dispute is that which cannot be arbitrated upon in India.
  • Enforcement of the award would go against the public policy in India.

 

Stamping and registration requirements of awards – domestic and foreign

  • Domestic Awards

There are specific stamp duties provided for under the Stamps Act 1899 and the act further provides that an award which is unstamped or is insufficiently stamped is inadmissible for anypurpose[v], which can however be fixed upon payment of the deficiency and penalty (provided it was original).Issues pertaining to the stamping and registration of an award or on the documentation following that, can be brought forwardat the stage of enforcement under the Act.[vi]

The amount of stamp duty to be paid differsin different state depending on the location where the award is made. Currently, according to the Maharashtra Stamp Act, the stamp duty for arbitral awards stands atfive hundred rupees in Maharashtra; and in the territory of Delhi[vii], the stamp duty is calculated at roughly 0.1% of the value of the propertyto which the award relates.

An award concerning immovable property has to be registered, if not it would be considered invalid.[viii]

  • Foreign Awards

With respect to foreign award it is made amply clear by the Supreme Court of India that a foreign award is not liable to be stamped.[ix]

Previously, the Delhi High Court had observed that a foreign award does not require registration and can be enforced as a decree[x], andthe problem of stamp duty cannot interfere in deciding whether the award is enforceable or not.The Bombay High Court has also adopted a similar approach[xi] and also the High Court of Madhya Pradesh.[xii]

Enforcement of arbitral awards: Appropriateforum & limitation

The Supreme Court has very recently[xiii]clarifiedthat an award holder can initiate execution proceedings before any court in India where assets arelocated. In the event that the subject-matter of the arbitration is of a specified value commercial courtsestablished under the Commercial Courts, Commercial Division and Commercial Appellate Divisionof High Courts Act 2015 (“Commercial Courts Act”) would have jurisdiction.

Due to the Commercial Courts Act and the Amendment Act, The jurisdictionfor applications relating to enforcement of such awards if the subject matter is money should be the Commercial Division ofa High Court which is the location of the assets of the opposite party lie. In cases where the subject matter is not money, it will be the commercial division of the high court of the location of the opposite party resides orcarries on business or personally works for gain.

For the award from an India seated arbitration (not beingan International Commercial Arbitration)According to the Commercial Courts Act and the Amendment Act, for such cases, the correct court should be the Commercial Court exercising such jurisdiction which would which under normal circumstances would lie before anyprincipal Civil Court of original jurisdiction in a district, as well as the Commercial Division of a HighCourt in exercise of its ordinary original civil jurisdiction.

Foreign Awards

Where the subject matter is money, the Commercial Division of any High Court in India whereassets of the opposite party lie shall have jurisdiction. In case of any other subject matter, CommercialDivision of a High Court would have jurisdiction just like the way the process is for that of a civil suit.

 

Frequently Asked questions

 

1. What is the limitation period for enforcement of awards for domestic awards?

Since arbitral awards are deemed decrees for the purposes of enforcement and hence are also treated as one.[xiv] TheLimitation Act 1963 is also applicable to arbitrations. The limitation period for the enforcement of such anaward is twelve years.

 

2. What is the limitation period for enforcement of awards for foreign awards? 

Several High Courts have given different interpretations on the limitation period within which an award may be enforced. The courts[xv] have observed that since a foreign award is notaexactly a decree and cannot be deemed to be binding on parties unless a competent court records it as enforceable,it would have to go through a process. Therefore, the application for the enforcement of a foreign award falls in the residuary provision of the Schedule to the Limitation Act that means the limitation periodwould be three years for even foreign award. And upon the considering of the award as a decree the limitation period forexecution of such a decree would be twelve years. However, there was a contrary opinion by the Madras High Court. They referred to foreign awards as deemed decrees, and the corresponding limitationperiod would be twelve years. It held that, “the foreign award is already stamped as a decree and the partyhaving a foreign award can straight away apply for enforcement of it and in such circumstances, the partyhaving a foreign award has got 12 years’ time like that of a decree holder.”[xvi]The Act provides that certain conditions have to be assessed prior to enforcement of aforeign award, and where the court is satisfied that the foreign award is enforceable, the award wouldbe deemed to be a decree of that court.15 The Supreme Court in M/s. Fuerst Day Lawson Ltd v. JindalExports Ltd.16, held that under the Act a foreign award is already stamped as the decree. It observedthat, “In one proceeding there may be different stages. In the first stage the Court may have to decide about theenforceability of the award having regard to the requirement of the said provisions. Once the court decides thatforeign award is enforceable, it can proceed to take further effective steps for execution of the same. There arisesno question of making foreign award as a rule of court/decree again.”17

Edited by Shuvneek Hayer

Approved & Published – Sakshi Raje

[i]A further period of 30 days may be granted by a court upon sufficient cause being shown for condonation of delay.

[ii]Australia; Austria; Belgium; Botswana; Bulgaria; Central African Republic; Chile; China (including Hong Kong and Macau) Cuba;

Czechoslovak Socialist Republic; Denmark; Ecuador; Federal Republic of Germany; Finland; France; German Democratic Republic;

Ghana; Greece; Hungary; Italy; Japan; Kuwait; Mauritius, Malagasy Republic; Malaysia; Mexico; Morocco; Nigeria; Norway; Philippines;

Poland; Republic of Korea; Romania; Russia; San Marino; Singapore; Spain; Sweden; Switzerland; Syrian Arab Republic; Thailand; The

Arab Republic of Egypt; The Netherlands; Trinidad and Tobago; Tunisia; United Kingdom; United Republic of Tanzania and United

States of America. India has entered into an agreement with the United Arab Emirates for Juridical and Judicial co-operation.

[iii]PEC Limited v. Austbulk Shipping SDN BHD (Civil Appeal No. 4834 of 2007) decided on 14 November 2018

[iv] Ibid

[v] Section 35

[vi]M. Anasuya Devi and Anr v. M. Manik Reddy and Ors

[vii]Schedule 1A to the Stamp (Delhi Amendment) Act 2001

[viii] Section 17 Registration act

[ix]M/S. Shri Ram EPC Limited v Rioglass Solar SA (2018) SCC Online 147

[x]Naval Gent Maritime Ltd v Shivnath Rai Harnarain (I) Ltd.

[xi]Vitol S.A v. Bhatia International Limited

[xii]in Narayan Trading Co. v. Abcom Trading Pvt. Ltd.

[xiii]Sundaram Finance Ltd. v. Abdul Samad and Anr10

[xiv]M/s Umesh Goel v. Himachal Pradesh Cooperative Group Housing Society

[xv]NoyVallesina v Jindal Drugs Limited 2006 (5) BomCR 155

[xvi]Compania Naviera ‘Sodnoc’ v. Bharat Refineries Ltd. AIR 2007 Mad 251