Making Of Arbitral Award

The document that gives and explains the decision(s) of an arbitrator is called an award. An award is
binding on both parties An arbitrator has authority to issue interim, partial and final awards Having
issued a final award, the arbitrator has no further duty or authority upon the arbitration, except for
the right to correct any minor slips. Either party can, within a reasonable time may seek to challenge
art award in the High Court However, the court will only interfere on limited grounds relating to the
capacity of the parties, the validity or scope of the arbitration agreement, or unfairness or
impropriety in misconduct of the proceedings for domestic arbitrations, and the court may also,
unless otherwise agreed by the parties, consider an appeal on a question of law arising from the
award. In this case, the court may confirm, vary, set aside the award, or refer it back to the arbitrator
for reconsideration in the light of the court‘s opinion on the question of law.

Section 28 to 33 of the Act deals with the Award by arbitrators and termination of proceedings.

Salient features of the same are discussed herewith

a) Rules Applicable To Substance Of Dispute

Generally the Arbitral Tribunal decides the dispute submitted to arbitration in accordance to the
substantive law for the time being in force in India (sec 28 (1) (a)]For example, dispute between the
partners of a firm shall be resolved by application of the provision of the Indian Partnership Act.
However, In case of International Commercial arbitration, the parties have been allowed autonomy
to designate the Law. Where the parties fail to designate any law, the Arbitral Tribunal is to apply
the law as considered appropriate in the circumstances of dispute. Section 28(1) (b) lays down that
in international commercial arbitration1) The arbitral tribunal shall decide the dispute in accordance
with the rules of law designated by the parties as applicable to the substance of the dispute.2) Any
designation by the parties of the law or legal system of a given country shall be construed, unless
otherwise expressed as directly referring to the substantive law of that country and not its conflict of
laws.3) Failing any designation of the law under clause (a) by the parties the Arbitral Tribunal shall
apply the rules of Law it considers to be appropriate given all the circumstances surrounding the
dispute.

The parties to the arbitration can authorize the Arbitral Tribunal to decide ‗ex acquo et bono
i.e. ‗based on equity and good conscience‘ or as amiable compositeur‘ (as friendly compromiser) i.e.
without applying strict legal rules of interpretation as to the obligation of the parties whether
contractual or otherwise [section 28(2)]In all cases the Arbitral Tribunal is to decade an accordance
with the terms ot the contract by taking into account the usage of the trade applicable to the
transaction [section 28(3)]

b) Decision Of The Arbitral Tribunal-{ Section 29)

The decision of the arbitral tribunal is required to be made by majority of all its membersunless the
parties have agreed otherwise. For example, the parties may decide that thedecision should be
unanimous and not be majority.The parties or all the member of the arbitral tribunal may agree that
the question of procedurein the arbitration proceedings may be decided by the presiding arbitrator.
c) Settlement (Section 30)

The arbitral tribunal may encourage the parties to settle their dispute at any times during
thearbitration proceedings The tribunal can take initiative and fmd out whether there is anelement
of settlement, and for this purpose it may use mediation, conciliation and otherprocedures.If a
settlement is reached, the same may be incorporated in an arbitral award and signed bythe
arbitrators. However, this can be done only if requested by the parties and not objected toby the
arbitral tribunal.

An arbitral award on agreed terms shall have the same status and effect as an‖ other arbitr

alaward on the substance of the dispute. In another words, an arbitral award out of settlementcan
also be enforced as a decree of the court

d) Forms and Contents Of Arbitral Award (Section 31)

1) The award shall be made in writing and shall be signed by arbitrators.2) Where there is more than
one arbitrator, the signature of majority of the arbitrators shall besufficient. However, in such cases,
the reason for any omitted signature must be stated.3) The award shall be reasoned one subject to
the following exceptions:1. The parties have agreed that reasons are not to be given2. The award is
the outcome of settlement and on agreed terms as mentioned in section 30.3. The award shall state
its date and the place of arbitration.4. A signed copy of the award shall be delivered to each party

5. The arbitrators may make an interim award, In practice, a request for interim award by aparty is
entertained by arbitrators, when there are numerous subject matters in the samedispute arid each
one of them is separate and distinct from the other6 The arbitrators have power to award interest
for the whole or part of the period between thedate on which cause of action arose and the date on
which the award is made.However, the parties can by their agreement take away the power of the
arbitrators to awardinterest.The rate of interest may be such as may be considered reasonable by
the arbitrators.However, the rate of interest, for the period from the date of award to the date of
payment,shall be lS. pa. unless the arbitrators decide otherwise.

Termination of Proceedings (Section 32) and Enforcement of Award

e) Termination Of Proceedings {Section 32)

This section contains the provisions regarding conditions and procedure for termination of arbitral
proceedings. The same is summarized in the following paragraphs.1. The arbitration proceeding is
terminated as soon as the final arbitral award is made by thearbitrators.2. The proceedings stand
terminated by an order of the arbitral tribunal where: -a) The claimant withdraws his claimsb) Both
the parties agree on the termination of the proceedings.c) The tribunal finds that the continuation of
the proceedings has for any other reason becameunnecessary or impossible.However, within 30
days of the receipt of the arbitral award, any of the parties may move theArbitral tribunal for
correction of any computation errors, any clerical or typographical error.The party may also require
the tribunal to give interpretation of any specific point or part of the award. The tribunal may correct
the error and give interpretation after notice to the otherparty.

f) Additional Award (Section 33)

A party with notice to the other party may request the arbitral tribunal to make an additionalaward
as to claim presented in the arbitral proceedings but omitted from the arbitral award.The party can
do so within 30 days from the receipt of the award unless the tribunal extendsthe time. The arbitral
tribunal shall make the additional award within sixty days of the receiptof the request provided it
considers the request to be justified.g) Finality And Enforcement Of Awards(Section 35 & 36)

An arbitral award is considered final and binding on both the parties. However, an unsatisfiedparty
has the right to make an application to the court for setting aside the order. Therefore. inreal sense,
an arbitral award shall be considered final only after the time limit to apply forsetting it aside has
elapsed. In case, a party has made such application, the award will not befinal and binding till the
application is refused by the courtOnce the award becomes final as mentioned above, it shall be
enforced as if it were a decreeof the court.

Introduction

Arbitration is a legal process, which takes place outside the courts, but still results in a finaland
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 toa dispute. It
involves the determination of the dispute by one or more independent thirdparties rather than by a
court. The third parties, called arbitrators, are appointed by or onbehalf of the parties in dispute.
The arbitration is conducted in accordance with the terms of the parties' arbitration agreement,
which is usually found in the provisions of a commercialcontract between the parties.For an
arbitration to take place, the disputing parties must agree to take their dispute toarbitration. In
practice, this agreement is often made before the dispute arises and is includedas a clause in their
commercial contract. In signing a contract with an arbitration clause, theparties are agreeing that
their dispute will not be heard by a court but by a private individualor a panel of several private
individuals. If parties have agreed to arbitration, they willgenerally have to go to arbitration rather
than court as the courts will normally refuse to heartheir case by staying it to force the reluctant
party to honour their agreement to arbitrate.Arbitration Award is a determination on the merits by
an arbitration tribunal in arbitration,and is analogous to the judgment in the Court of Law.
Arbitration is particularly a means of dispute resolution in the commercial sphere. One of the
reasons for doing so is that ininternational trade it is often easier to enforce a foreign arbitral award
than to enforce
a judgment of the Court. The closing decades of the twentieth century saw arbitration gainworldwid
e acceptance as the normal means of resolving commercial disputes. National lawson arbitration
have been modernized on all continents. The Arbitration & Conciliation Act,1996 is one such step by
India to make the arbitration law more responsive to contemporaryrequirements, taking into
account the Model law and Rules adopted by the United NationsCommission on International Trade
Law (UNCITRAL). International treaties on arbitrationhave been signed or adhered to with
impressive success. With the gradual removal of political and trade barriers and the rapid
globalization of the world economy, new challengeshave been created for arbitration institutions in
response to the growing demand of parties forcertainty and predictability, greater rapidity and
flexibility as well as neutrality and efficacyin the resolution of disputes.An arbitration award (or
arbitral award) is a determination on the merits by an arbitrationtribunal in arbitration, and is
analogous to a judgment in a court of law. It is referred to as an'award' even where the entire
claimant's claims fail (and thus no money needs to be paid byeither party), or the award is of a non-
monetary nature. Arbitration is particularly popular as ameans of dispute resolution in the
commercial sphere (for a summary of the various arenas inwhich arbitration is usually generally, see
the specific article on "arbitration"). One of thereasons for doing so is that, in international trade, it
is often easier to enforce an arbitrationaward in a foreign country than it is to enforce a judgment of
the court.

Under the New York Convention 1958, an award issued a contracting state can generally befreely
enforced in any other contracting state. Virtually every significant commercial countryin the world is
a party to the Convention, but relatively few countries have a comprehensivenetwork for cross-
border enforcement of judgments of the court. Hence in many countries,particularly in emerging
markets, a foreign arbitration award is much easier to enforce thanan award of the court.The other
characteristic of cross-border enforcement of arbitration awards that makes themappealing to
commercial parties is that they are not limited to awards of damages. Whereas inmost countries
only monetary judgments are enforceable in the cross-border context, no suchrestrictions are
imposed on arbitration awards and so it is theoretically possible (althoughunusual in practice) to
obtain an injunction or an order for specific performance in anarbitration proceeding which could
then be enforced in another New York Conventioncontracting state.The New York Convention is not
actually the only treaty dealing with cross-borderenforcement of arbitration awards. The earlier
Geneva Convention on the Execution of Foreign Arbitral Awards 1927 remains in force, but the
success of the New York Conventionmeans that the Geneva Convention is rarely utilised in
practice.The Arbitration and Conciliation Act, 1996 of India recognizes and provides for
statutoryenforcement mechanisms and shall form the base for our study in the following pages.

Definition of Arbitral Award

Under Section 2 (1)(c) the word ―Arbitral Award‖ is

not defined but it states that the ArbitralAward includes an interim award. Although Section 31(6)
submits explanation in this regard

as under ―The Arbitral Tribunal‖ may, at any time during the arbitral proceeding, make an

interim arbitral award on any matter with respect to which it may make a final arbitral award.Thus,
an interim award may be the Arbitral Award. So, an interim award may be a finalaward.According to

H. Lexicon

―It is an instrument which embodies a decision of an arbitrator or

arbitr

ators as regards matters referred to him or them.‖

Although, according to

Russell

―An award in order to be valid, must be final, certain,

consistent and possible and must decide matters to be submitted and no more than the matters

submitted.‖

An arbitral award is not a contract but the decision determined out of the contract. An
award,whether it is arbitral or interim award is a decision of the arbitrator or arbitrators which
isdetermined after contentions of the parties are considered and an arbitrator or the arbitratorsput
his or their opinion in the form of decision. The consent of the parties may not be present

in a decision. An arbitral award decided by the Arbitral Institution judicially will havebinding effect in
respect of the parties in dispute.The contents of an arbitral award must be in writing, not oral. An
arbitral award is like adecree which comes into effect from the date on which it has been signed and
right of therelated parties come into effect from that date onward.

Any agent on behalf f the parties to dispute if authorised by the parties may refer the matter
oarbitration for settlement of dispute.In
Kishan Lal v. Ram Swaroop,2

the Allahabad High Court held that the Vakalatnamasubmitted by the parties differ in respect of
their contents. The Vakalatnama submitted by theplaintiff authorised the counsel to compromise
the suit or proceeding. In another aspect theVakalatnama on record, authorises the counsel to refer
the matter to arbitration whichincludes power to compromise in arbitration. Therefore, if an agent
in authorised tocompromise the dispute it is deemed that he has power to refer the matter
for arbitration.It is expected that the arbitrator has accepted all claims and counter-claims and
consideredthem all in quasi-judicial manner before it could arrive at the final award.

“Arbitral Award” – Form and Contents of –

It is to be noted that the definition of [arbitral award] in Section 2(1) (c) of the Arbitration and
Conciliation Act, 1996 is not an exhaustive definition.

However, every arbitral award must contain the following five things:

1. Factual aspect of disputed matter;

2. Submission of the parties;
3. Contention of parties to rival submission;
4. Arbitrator‘s view;
5. Delivery of an arbitral award.

There is no prescribed form of arbitral award. However, Section 31 of the Act, 1996 provides certain
criteria, which is to be followed by the arbitrator while delivering the arbitral award.
Terms and Contents of Arbitral Award

The following terms and contents are required to be mentioned in the arbitral award:

1. The arbitral award must be in writing and signed by the arbitrator/s.

2. The arbitral award must be based on reasoning. It must be a speaking award.

3. The arbitral award must show date and place of arbitration.

4. A certified copy of arbitral award is required to be delivered to each party. If the arbitral award is
for payment of money, the arbitral award may include interest at such rate as the arbitral tribunal
deems reasonable.

6. The costs of the arbitration shall be fixed by the arbitral award.

7. The language used in passing the arbitral award must free from any ambiguity.

(i) Arbitral Award operates as res judicata

In Shashi Sekhareswar v. Lalit Mohan,4 the Privy Council, inter alia observed that a decree passed on
the foundation of arbitral award would have the same effect as an ordinary judgment of a court and
on the question which has already been decided by the arbitrators it operates as res judicata. But,
where a claim in question has not been included as a subject-matter of reference to arbitration, it
was held that principle of res judicata will not applied in respect of the claim.5

In the view of the Apex Court an arbitral award is to be treated as a decree passed by the Civil Court,
and it is binding on the parties.6

It is submitted that an arbitral award is not a contract but a decision given on the basis of terms of a
contract. An arbitral award must be in writing because it is like a decree of the Civil Court.

(ii) Essentials of Arbitral Award

It is well settled legal position that a valid, proper and enforceable arbitral award must have the
following essential ingredients, which are as follows

1. An arbitral award must be in writing and signed.

2. The parties must be competent to initiate arbitral proceedings.
3. A sustainable arbitral award must be reasoned one .Section 31 (3) of the Arbitration and
Conciliation Act, 1996.
4. There must be arbitration clause to assign disputes or differences before arbitral tribunal.
5. The contents of an arbitral award must be connected with the subject-matter of thedispute
arbitrated.
6. An arbitral award must be founded on the principle of mutuality.
7. Where the arbitral award is based on mutual settlement of the dispute by the parties, no
reason need be given.

(iii) Arbitral award may be final or interim

An arbitral award may be a final award or an interim award unless there is an agreement to the
contrary between the parties and depending upon the nature of the dispute, the arbitrator could
make an interim award. An interim award has the same sanctity as final award. If it was not
complied with, it could not be enforced through the court by the same procedure as in the case of
final award.8

(iv) Time limit for making the arbitral award

The Arbitration and Conciliation Act, 1996does not provide any time limit as such for completing the
arbitration. However, mandate

of an arbitrator can be terminated if he fails to act without undue delay ―which means infact if he is
guilty of undue delay.‖

(v) Arbitral award by consent

The Arbitration and Conciliation Act, 1996 recognizes the liberty of the parties to come to a
settlement. The arbitrator, if satisfied about the genuineness and validity of the settlement has to
give an award in terms of the settlement has to give an award in terms of the settlement. The Act
further envisages that the arbitrator may encourage efforts at settlement.10 It is to be noted that
the Arbitration Act,1940 was silent on this point.

(vi) Contents of the arbitral award

The requirements of the content and form of arbitralaward are as under11

-1. An arbitral award shall be made in writing and shall be signed by the member of the arbitral
tribunal.
2.For the purpose of Section 31(1), in arbitral proceedings with more than one arbitrator, the
signatures of the majority of all the members of the arbitral tribunal shall be sufficient so long as the
reason for any omitted signature is stated.

3.The arbitral award shall state its date and the place of arbitration as determined in accordance
with Section 20 and the award shall be deemed to have been made at that place.

(vii) Arbitral award to be made by majority

It is mandate of Section 29(1) of the Arbitration and Conciliation Act, 1996 that the decision of the
arbitral tribunal shall be made by the majority of all its members. An arbitral award was required to
be signed by the arbitrator to give it validity. Where there were more than two arbitrators, then
unless the arbitration agreement provided for a unanimous decision, the award would have to be
the decision of the majority. In case an arbitrator dissented from the majority decision, he could
append his dissenting opinion to the majority decision, though it is not obligatory.12

(viii) Arbitral award shall be final and binding on the parties

As provided under Section 35 of the Arbitration and Conciliation Act, 1996 an arbitral award shall be
final and binding on the parties and persons claiming under them. Where the time for making the
application to set aside an arbitral award has expired or where such application has been refused by
the court, the award shall be enforced as if it were the decree of the court.13

It is to be noted that under the present Act it will not be necessary to make the award a rule of the
court and to pass a decree in terms of the award, as is mandatory under the repealed law.

(ix) Law of Limitation Applicable to Arbitral Award

It is the mandate of the present Act thatthe enforcement of an arbitral award shall be subject to
Limitation Act,14 as it is applicable to contract and thus a suit for specific performance could be filed
within the period of limitation as prescribed under Article 54 of the Limitation Act, 1963. Therefore,
after the expiry of period of limitation an arbitral award cannot be set aside. It would amount to
waiverof rights by the parties.On the point of limitation for setting of arbitral award, Section 34 of
the Act provides that anapplication for setting aside the arbitral award may not be made after three
months haveelapsed from the date on which the party making that application has received an
award onground specified in the section.

(x) Whether stamp duty payable on arbitral award

In fact the Arbitration and ConciliationAct, 1996 contains no provision regarding payment of stamp
duty on the arbitral award.Thus, an arbitral award has to be stamped with requisite stamp duty in
accordance with theIndian stamp Act, 1899. This point is outside the scope of law of arbitration. In
case arbitralaward is not adequately stamped or there is insufficiency as to stamp duty, even then
thearbitral award can be admitted in evidence after payment of proper stamp duty together withthe
penalty prescribed under the Indian Stamp Act, 1899.

(
xi) Evidence admissibility of unstamped arbitral award
In Kodandapami v. Kadidela Raja Mouli, 15 it was held that if an unstamped and unregistered
arbitral award is admitted inevidence without objection, it cannot be ignored in view of Section 36 of
the Stamp Act. But,if it is compulsorily registrable as creating a lease for six years in immovable
property, itcannot be relied upon as evidence of acquisition of any right in immovable property. It
cannotbe used to resist the claim of the landlord for recovery of possession of the demised
premises.

(xii) Whether arbitrator can award interest

Section 31(8) of the Arbitration and ConciliationAct, 1996 empowers the arbitrator to award
interest from the date of submission to arbitration to the date of the arbitral award. Thus, under this
Act the arbitrator‘s power extends to thepre-arbitration period and also to the period for which the
arbitration remains pending. The Apex Court in Secretary to the Government of Orissa v. Raghunath
Mahapatra,16 has held that even under the Arbitration Act, 1940, the arbitrator could award
interest from thedate of submission to arbitration to the date of the award. Section 31(d) of the
Arbitration andConciliation Act, 1996 empowers the arbitrator, in a monetary award to include
interest onthe amount, unless otherwise agreed by the parties. Thus, the provision under the new
Act has widened the powers of the arbitrator because the power is expressed as ―covering the
whole or any part of the period between the date on which the cause of action arose and the date
onwhich the arbitral award is made.‖

(xiii) An Interim award is a part of final award

According to Section 2(1)(c) of the Arbitration and Conciliation Act, 1996 the expression ―arbitral
award‖ shall include an interim awardM also. Thus, under this provision the arbitrator is empowered
to make interim award is it issought or it depends upon the nature of dispute. An interim award shall
have the samesanctity as final award. Thus, an interim award, if it is passed, shall be binding on the
partiesto arbitration.17

(xiv) An arbitral award treated as a decree of a court

The Apex Court in Satish Kumar v. Surendra Kumar, 18 has held hat an arbitral award is treated as a
decree of a court and it doesnot matter whether it has passed into decree or not hence it is binding
upon the parties.

(xv) Foreign arbitral awards

Under Part II of the Arbitration and Conciliation Act, 1996 theforeign arbitral awards are
enforceable in accordance with the Geneva Convention and NewYork Convention and such foreign
arbitral awards are considered as a decree of a court.However, if neither of the convention is
adopted, by any country such country shall beoutside scope of Part II of the Act and such foreign
arbitral awards cannot be enforced inIndia.19
(xvi) Arbitral Award under Act, 1996 distinguished from the Arbitral
Award under old Arbitration Act, 1940

The Supreme Court in Morgan Securities and Credit (P) Ltd. v. Modi Rubber Ltd., 20

has held that under old Arbitration Act, 1940 an arbitral award was required to be madeby use of
Court to make enforceable, but under the new Arbitration and Conciliation Act,1996, an arbitral
award is to be treated to be a decree even without intervention of the courtonly for the limited
purpose of its enforceability.In view of the Supreme Court an arbitral award under the Arbitration
and Conciliation Act,1996 indisputable stands on a different footing vis-à-vis an arbitral award made
under theArbitration Act, 1940. Whereas under the Act, 1940, an arbitral award was required to
bemade a rule of the Court to make it enforceable, the Arbitration and Conciliation Act,
199,however raises a legal fiction. Once an application challenging an award is filed, the
remainsunder suspension in the sense that it would not be enforceable. Only upon expiry of
theperiod specified in Section 34 of the Act, 1996 to challenge an award or when such objectionis
refused, would the same become enforceable. Section 36 of the Act, 1996 merely specifiesas to how
such an award can be enforced by laying down that it can be enforced as if it werea decree. The legal
fiction created under Section 36 of the Act, has therefore, a limitedapplication. An arbitral award is
to be treated to be a decree even without intervention of thecourt only for limited purpose of its
enforceability.
Enforcement of Awards
One of the factors for determining arbitration as an effective legal institution is the efficiencyand
efficacy of its award enforcement regime. Under Section 36 of the 1996 Act, an arbitralaward is
enforceable as a decree of the court, and could be executed like a decree in a suitunder the
provisions of the Civil Procedure Code, 1908.

25

An award resulting from an international commercial arbitration is enforced according to

theinternational treaties and conventions, which stipulate the recognition and enforcement of
arbitral awards.Enforcement of foreign awards in India is governed by the 1958 New York
Convention andthe 1927 Geneva Convention, which are incorporated in Chapter II, Part I and Part
II,respectively, in the 1996 Act.

26

The provisions of enforcement are the same under the 1940 Act and the 1996 Act. Any
partyinterested in foreign awards must apply in writing to a court having jurisdiction over thesubject
matter of the award. The decree holder must file the award, the agreement on whichit is based and
evidence to establish that the award comes under the category of foreign awardunder the 1996 Act.

27

The rate of enforcement of arbitral awards is high. Under the 1996 Act, the Supreme Court of India
declined to enforce or recognize awards in only two out of twenty four cases relating toenforcement
of arbitral awards (Section 36 of the 1996 Act) that came before it. Both casesinvolved Indian parties
and Indian law.

28