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The arbitral award has been treated at par with the decree of the Court.

The arbitral award is


enforceable in the same manner as a decree of a law court. This change has enabled the
reduction of litigation in some areas of arbitration. Earlier an award could not be executed in its
own right unless the court ordered that award is filed and a decree issued in terms thereof.

There is no provision for appeal against an arbitral award and it is final and binding between the
parties. However, an aggrieved party may take recourse to law court for setting aside the
arbitration award on certain grounds specified in Section 34 of the Arbitration and
Conciliation Act, 1996.
The parties cannot appeal against an arbitral award as to its merits and the court cannot interfere
on its merits. The Supreme Court has observed “an arbitrator is a judge appointed by the parties
and as such an award passed by him is not to be lightly interfered with.” But this does not mean
that there is no check on the arbitrator’s conduct. In order to assure proper conduct of the
proceeding, the law allows certain remedies against an award.

Under the repealed 1940 Act three remedies were available against an award- modification,
remission and setting aside. These remedies have been put under the 1996 Act into two groups.
To the extent to which the remedy was for rectification of errors, it has been handed over to the
parties and the Tribunal. The remedy for setting aside has been moulded with returning back the
award to the Tribunal for removal of defects.

Section 34 provides that an arbitral award may be set aside by a court on certain grounds
specified therein. These grounds are:
1. Incapacity of a party
2. Arbitration agreement not being valid
3. Party not given proper notice of arbitral proceedings
4. Nature of dispute not falling within the terms of submission to arbitration
5. Arbitral procedure not being in accordance with the agreement
Section 34(2)(b) mentions two more grounds which are left with the Court itself to decide
whether to set aside the arbitral award:
1. Dispute is not capable of settlement by arbitral process
2. The award is in conflict with the public policy of India
If the decision on matters submitted to arbitration can be separated from those not submitted;
only that part of the arbitral award which contains decisions on matters not submitted to
arbitration may be set aside.

Section 34 of the Act is based on Article 34 of the UNCITRAL Model Law and the scope of the
provisions for setting aside the award is far less than it was under the Sections 30 or 33 of the
1940 Act. In Municipal Corp. of Greater Mumbai v. Prestress Products (India)[i], the court
held that the new Act was brought into being with the express Parliamentary objective of
curtailing judicial intervention. Section 34 significantly reduces the extent of possible challenge
to an award.
It is necessary for the aggrieved party to make an application under Section 34 stating the
grounds of challenge. An application for setting aside the award has to be made by a party to the
arbitration agreement. But a legal representative can apply for it because he is a person claiming
under them. There is no special form prescribed for making an application under Section 34 of
the act except it has to be a written statement filed within the period of limitation.
NOTICE NOT GIVEN TO PARTIES
Section 34(2)(a)(iii) permits challenge to an award if the party was not given proper notice of
the appointment of an arbitrator, or the party was not given proper notice of the arbitral
proceedings, or the party was for some reasons unable to present his case.

AWARD BEYOND SCOPE OF REFERENCE


The reference of a dispute under an agreement defines the limits of the authority and jurisdiction
of the arbitrator. If the arbitrator had assumed jurisdiction not possessed by him, the award to the
extent to which it is beyond the arbitrator’s jurisdiction would be invalid and liable to be set
aside.

Section 34(2)(a)(iv) of the Act provides that an arbitral award is liable to be set aside if it deals
with a dispute not contemplated by the reference, or not falling within the terms of the reference,
or it contains a decision in matters beyond the reference.
In Gautam Construction & Fisherie Ltd v. National Bank for Agriculture and Rural
Development[vii], the Supreme Court modified the award to the extent that the rate of
construction meant for ground floor could not be applied to the construction of the basement
area.
ILLEGALITY IN ARBITRAL PROCEDURE
Section 34(2)(a)(v) provide that an award can be challenged if the composition of the Tribunal
was not in accordance with the agreement, or the procedure agreed to by the parties was not
followed in the conduct of proceedings, or in the absence of agreement as to procedure, the
procedure prescribed by the Act was not followed.
Failure to follow the agreed procedure or the procedure prescribed by the Act is procedural
misconduct. If the arbitral tribunal takes the matter which is clearly beyond the scope of its
authority, it would tantamount to misconduct of arbitrator. An award in which the arbitrator has
deliberately deviated from the terms of reference and arbitration agreement will amount to
misconduct of the arbitrator.

Section 12(3)(a) provides that an arbitrator may be challenged if there justifiable doubt as to his
independence or impartiality. Section 13 says that if the challenge is not successful and the
award is made, the party challenging the arbitrator may apply to the court under Section 34 for
setting aside the award.
In State Trading Corp. v. Molasses Co., the Bengal Chamber of Commerce[x], a permanent
arbitral institution, did not allow a company to be represented by its Law Officer, who was full
time employee of the company. The Court held that it was not only misconduct of the arbitrator
but also misconduct of the arbitration proceedings.
In ONGC Ltd v. Saw Pipe Ltd [xii], the Supreme Court held that in exercising jurisdiction, the
Arbitral Tribunal cannot act in breach of some provisions of substantive law or the provision of
the Act. In Section 34(2)(a)(v) of the Act, the composition of the Arbitral Tribunal should be in
accordance with the agreement. The procedure which is required to be followed by the arbitrator
should also be accordance with the agreement. If there is no such agreement then it should be in
accordance with the procedure prescribed in Part 1 of the Act.
In the above case, the losses caused by delay were deducted from the supplier’s bill. The
direction of the Arbitral Tribunal that such deduction should be refunded with interest was held
to be neither in accordance with law, nor contract. The award was set aside to that extent.

AWARD AGAINST PUBLIC POLICY


Section 34(2)(b)(ii) provides that an application for setting aside an arbitral award can be made
if the arbitral award is in conflict with the public policy of India.
The explanation to clause (b) clarifies that an award obtained by fraud or corruption would also
be an award against the public policy of India. An award obtained by suppressing facts, by
misleading or deceiving the arbitrator, by bribing the arbitrator, by exerting pressure on the
arbitrator, etc. would be liable to be set aside.

The concept of public policy connotes some matter which concerns public good and public
interest.

In Venture Global Engg v. Satyam Computer Service Ltd [xv], it was held that an award could
be set aside if it is contrary to fundamental policy of Indian law, or the interest of India, or
justice or morality, or it is patently illegal.
If the award is contrary to the substantive provisions of law or the provisions of the Act or
against the terms of the contract, it would be patently illegal, which could be interfered under
Section 34. Award could also be set aside if it is as unfair and unreasonable as to shock the
conscience of the court as it is against public policy.

Limitation For Filing Application


Section 34(3) provides that an application for setting aside an arbitral award must be made
within 3 months of receiving the award or disposition of application by the arbitral tribunal.
The importance of this is emphasized by Section 36 which provides that the award becomes
enforceable as soon as the limitation period under Section 34 expires.
The proviso to Section 34(3) allows the party a further period of 30 days after the expiry of three
months if the court is satisfied that the party was prevented by a sufficient cause from making
the application. No application for setting aside the award can be entertained by the court after
the expiry of these additional thirty days.
In National Aluminum Co Ltd v. Presteel Fabrication (P) Ltd [xvi], proceedings were
instituted before the Supreme Court under the wrong belief that it had jurisdiction in the matter
of setting aside. Time spent on a bona fide prosecution of an application in a wrong forum was
held by the Supreme Court to be a sufficient cause for condonation of delay.
Remission By Tribunal
When an application for setting aside an arbitral award has been made, the court may, instead of
adjudicating upon the grounds raised, adjourn the proceedings for a determined period of time to
enable the tribunal to deal with the grounds on which objection have been raised and to
eliminate them.

In T.N. Electricity Board v. Bridge Tunnel Constructions [xix], the court held that where an
award is vitiated by an error of jurisdiction, the court can send it back to the arbitrator for
rectification of the error.
Upon such adjournment the Arbitral Tribunal shall resume the arbitral proceedings and take such
action as will eliminate the grounds. The resumed proceedings can only be relating to the
grounds raised in the application under Section 34.
It may become necessary to record fresh findings and to amend the award. Thereafter the court
would consider whether the grounds raised have been eliminated and whether the award is liable
to be set aside.
Section 34. Application for setting aside arbitral award.—

(1) Recourse to a Court against an arbitral award may be made only by an

application for setting aside such award in accordance with sub-section (2)

and sub-section (3).

(2) An arbitral award may be set aside by the Court only if—

(a) the party making the application “establishes on the basis of the

record of the arbitral tribunal that”—

(i) a party was under some incapacity, or

(ii) the arbitration agreement is not valid under the law to which the

parties have subjected it or, failing any indication thereon, under the law

for the time being in force; or

2019 Amendment.

(iii) the party making the application was not given proper notice of the

appointment of an arbitrator or of the arbitral proceedings or was

otherwise unable to present his case; or

(iv) the arbitral award deals with a dispute not contemplated by or not

falling within the terms of the submission to arbitration, or it contains

decisions on matters beyond the scope of the submission to arbitration:

Provided that, if the decisions on matters submitted to arbitration can be

separated from those not so submitted, only that part of the arbitral

award which contains decisions on matters not submitted to arbitration

may be set aside; or

(v) the composition of the arbitral tribunal or the arbitral procedure was

not in accordance with the agreement of the parties, unless such

agreement was in conflict with a provision of this Part from which the
parties cannot derogate, or, failing such agreement, was not in accordance

with this Part; or

(b) the Court finds that—

(i) the subject-matter of the dispute is not capable of settlement by

arbitration under the law for the time being in force, or

(ii) the arbitral award is in conflict with the public policy of India.

Explanation 1.—For the avoidance of any doubt, it is clarified that an

award is in conflict with the public policy of India, only if,—

(i) the making of the award was induced or affected by fraud or corruption

or was in violation of section 75 or section 81; or

(ii) it is in contravention with the fundamental policy of Indian law; or

(iii) it is in conflict with the most basic notions of morality or justice.

Explanation 2.—For the avoidance of doubt, the test as to whether there

is a contravention with the fundamental policy of Indian law shall not

entail a review on the merits of the dispute.

(2A) An arbitral award arising out of arbitrations

other than international commercial arbitrations,

may also be set aside by the Court, if the Court

finds that the award is vitiated by patent illegality

appearing on the face of the award:

Provided that an award shall not be set aside

merely on the ground of an erroneous application

of the law or by re-appreciation of evidence.

(3) An application for setting aside may not be made

after three months have elapsed from the date on

which the party making that application had received

the arbitral award or, if a request had been made

under section 33, from the date on which that request


had been disposed of by the arbitral tribunal:

Provided that if the Court is satisfied that the applicant

was prevented by sufficient cause from making the

application within the said period of three months it

may entertain the application within a further period

of thirty days, but not thereafter.

(4) On receipt of an application under

sub-section (1), the Court may, where it is

appropriate and it is so requested by a party,

adjourn the proceedings for a period of time

determined by it in order to give the arbitral

tribunal an opportunity to resume the arbitral

proceedings or to take such other action as in

the opinion of arbitral tribunal will eliminate

the grounds for setting aside the arbitral

award.

(5) An application under this section shall be filed

by a party only after issuing a prior notice to the

other party and such application shall be

accompanied by an affidavit by the applicant

endorsing compliance with the said requirement.

(6) An application under this section shall be

disposed of expeditiously, and in any event,

within a period of one year from the date on

which the notice referred to in sub-section (5) is

served upon the other party.

Public policy
It is clear that, The Arbitration and Conciliation Act, 1996 was conceived by the compulsions of globalisation
leading to adoption of the United Nations Commission on International Trade Law (UNCITRAL) Model Law. This
Act is by and large an integrated version of the 1940 Act which governed the domestic arbitration, the Arbitration
(Protocol and Convention) Act, 1937 and the Foreign Award (Recognition and Enforcement) Act, 1961, which
governed international arbitral awards. Apparently, Chapter I to VIII of the UNCITRAL are replicas of Chapters I
to VII of the Part-I of the 1996 Act, with the difference that in the UNCITRAL the provisions are called ‘Article’
whereas under the Act they are called ‘Section’.[12] The main objectives set out in the Statement of Objects and
Reasons of the 1996 Act are “to minimise the supervisory role of courts in the arbitral process” and “to provide
that every final arbitral award is enforced in the same manner as if it were a decree of the Court”. [13]
Public policy is that principle of law which holds that no subject can lawfully do, which has a tendency to be
injurious to the public or against the public good, which may be termed, as it sometimes has been, the policy of
the law or public policy in relation to the administration of the law. Public policy connotes some matter which
concerns public good and public interest. The concept of public policy varies from time to time.[14]
The UNCITRAL Model Law Commission stated in its report[15] that the term “public policy” comprises
“fundamental principles of justice”. It was understood that the term public policy which was used in the 1958 New
York Convention and many other treaties, covered fundamental principles of law and justice in substantive as
well as procedural respects. Thus, instances such as corruption, bribery, or fraud and similar serious cases
would constitute a ground for setting aside an award.

In the case of Renusagar Power Plant Co. Ltd. Vs. General Electric Co.,[16] the court in view of the absence of a
workable definition of “international public policy” found it difficult to construe the expression “public policy” in
Article V(2)(b) of the New York Convention to mean international public policy as it could be, construed both in
narrow or wide sense. In the Renusagar case, it has been observed: “It is obvious that since the Act is calculated
and designed to subserve the cause of facilitating international trade and promotion thereof by providing for
speedy settlement of disputes arising in such trade through arbitration, any expression or phrase occurring
therein should receive, consisting with its literal and grammatical sense, a liberal construction.”

The Supreme Court, while construing the term ‘public policy’ in Section 7(1)(b)(ii) of Foreign Awards
(Recognition and Enforcement) Act, applied the principles of private international law and held that an award
would be contrary to public policy if such enforcement would be contrary to (i) fundamental policy of Indian law;
or (ii) the interests of India; or (iii) justice or morality.

The trend in India is similar to that in England i.e. public policy could be interpreted in a narrow sense and a
broad sense.

ONGC Vs. Saw Pipes[17] case


The limited grounds of challenge provided under Section 34[18] are universally recognised. It is well accepted
that the courts have no power to get into the merits of the dispute. However, this basic proposition was put to test
and suffered a setback in the case of ONGC Vs. Saw Pipes Ltd. In this case, an award was challenged on the
ground that the arbitral tribunal had incorrectly applied the law of the land in rejecting a claim for liquidated
damages.

Two errors of great magnitude that have been committed in this case are:
· While reviewing the merits of the ONGC case,[19] the court failed to consider the labour strike in entire
European continent, something which was neither under the control nor could be predicted by SAW Pipes. This
particular aspect has been completely overlooked by the court.

· The decision of the two judges Bench in ONGC has bypassed the ruling of the three judges Bench of Supreme
Court in the Renusagar case.

That shows both judicial indiscipline and violation of the binding precedent of a larger Bench. While the Bench in
Renusagar case held that the term ‘public policy of India’ was to be interpreted in a narrow sense, the Division
Bench went ahead unmindful of the prior precedent and expanded the same to such an extent that arbitral
awards could now be reviewed on their merits. This is a huge step backwards in laws relating to alternate
dispute resolution in the era of globalisation. This is a reason that ONGC case is considered to be a villain in this
regard giving an open opportunity other than the limited grounds of challenge provided under Section 34[20]
The Supreme Court’s judgment in this case expanded the concept of public policy to add that the award would
be contrary to public policy if it was “patently illegal”. The Supreme Court distinguished SAW Pipes case[21] from
that of Renusagar on the ground that the Renusagar judgment12 was in context of a foreign award, while the
ratio of SAW Pipes[22] would be confined to domestic awards only. And in the name of public policy, the court
went on to re-appreciate the question of facts, mixed question of fact and law and pure question of law, which is
most undesirable in international commercial arbitration, as it would lead to uncertainty, a factor which no
businessman in international business transaction would like to have.

It may be correctly stated that the ratio set in ONGC Vs. Saw Pipes[23] makes a significant dent in the
jurisprudence of arbitration in India and has come in for some sharp nonetheless deserving criticism. Mr. Fali S.
Nariman, one of the greatest lawyers of our generation, remarks on the judgment as having “virtually set at
naught the entire Arbitration and Conciliation Act of 1996…To have introduced—by judicial innovation—a fresh
ground of challenge and placed it under the head of ‘public policy’ was first contrary to the established doctrine of
precedent—the decision of three judges being binding on a bench of two judges. It was also contrary to the plain
intent of the new 1996 law, namely the need of finality in alternative methods of dispute resolution without court
interference.

If courts continue to hold that they have the last word on facts and on law—notwithstanding consensual
agreements to refer matters necessarily involving facts and law to adjudication by arbitration—the 1996 Act
might as well be scrapped.

The Division Bench of two judges of the court has altered the entire road-map of arbitration law and put the clock
back to where we started under the old 1940 Act.”[24]

Foreign arbitral awards


Post ONGC approach :
The Act of 1996 does not provide for challenge for foreign arbitral award specifically. Although Section 48 and
more particularly Section 48(1)(e) read with other substantive provisions makes it abundantly clear that although
it is not permissible to challenge a foreign award, it could be resisted in its enforcement on the same grounds as
are available while challenging a domestic award. While a bare reading of Section 48(1)(e) would demonstrate
that a foreign award can be challenged in a country in which it was made or the country under law of which it
was made.

The most recent decision of the Supreme Court on the subject of setting aside an award on the ground of public
policy under Section 34 is Venture Global Engineering Vs. Satyam Computer Services Ltd.[25] Based on the
earlier judgment in Bhatia International,[26] the Supreme Court held that it is open to the parties to exclude the
application of the provisions of part I by express and implied agreement, failing which the whole of part I would
apply. Further, it held that to apply Section 34 to a foreign award would not be inconsistent with Section 48 of the
1996 Act, or any other provision of part II and that the judgment-debtor cannot be deprived of his right under
Section 34 to evoke the public policy of India, to set aside the award. Thus, the extended definition of public
policy cannot be bypassed by taking the award to foreign country for enforcement.

On 10-1-2008 the Supreme Court rendered its decision in Satyam Computer Services Ltd. case[27] and held
that even a foreign award can be challenged in India on the ground of public policy. The decision was passed
basically relying on the decision of the Court in Bhatia International v. Bulk Trading S.A[28]in which it was held
that Part I of the 1996 Act will also apply to Part II unless expressly or impliedly excluded by the parties through
agreement. The Supreme Court upheld a challenge in India to a foreign arbitration award on the grounds that the
relief contained in the award violated certain Indian statutes and was therefore contrary to Indian public policy
pursuant to Part I of the Indian Arbitration and Conciliation Act, 1996.

The case arose from a challenge in India by a US company, Venture Global Engineering (VGE), to set aside an
award rendered against it in an arbitration proceeding in London under the rules of the LCIA. The relief in the
award implicated VGE’s interests in India and called for the transfer of certain shares that VGE owned in an
Indian joint venture. VGE’s challenge asserted that the relief in the award violated certain Indian corporate and
foreign investment statutes, specifically the Foreign Exchange Management Act, 1999, and therefore constituted
a "conflict with the public policy of India" pursuant to the general provisions contained in Section 34 of Part I of
the Arbitration Act. The court held that:

“The provisions of Part I of the Act (Arbitration and Conciliation Act, 1996) would apply to all arbitrations including
international commercial arbitrations and to all proceedings relating thereto. We further hold that where such
arbitration is held in India, the provisions of Part-I would compulsorily apply and parties are free to deviate to the
extent permitted by the provisions of Part-I. It is also clear that even in the case of international commercial
arbitrations held out of India provisions of Part-I would apply unless the parties by agreement, express or
implied, exclude all or any of its provisions.”

The decision has important implications both for companies doing business involving India and for companies
with substantial assets located in India and for companies required to enforce foreign arbitration awards in India.
This decision has made the foreign awards open to challenge under the grounds listed in section 34 of Part I of
the Act, which includes the ground that the award is against Indian public policy. Public policy in this sense is
stated to encompass the illegality and fundamental policy, interests, justice and morality of India. If an arbitration
agreement does not specifically exclude the application of this part of the Act, the award is open to a challenge
under the Act.
Although, scope of Part I can be avoided by the parties by accepting to the same under their contract. However,
this shall not help to as the grounds for opposing enforcement are found in Part II of the Act. These grounds are,
for the most part, the same as the grounds for challenging the award set out in Part I. The Part II grounds are set
out in section 48 of the Act and, as in section 34, cover an award which is considered to be against Indian public
policy. There is no case law on the point, but it is generally accepted that any attempt to exclude the effect of
Part II of the Act would fail.

Following the judgment in Venture Global Engineering, if the arbitration agreement does not specifically exclude
the application of Part I of the Act, foreign awards are open to challenge by the losing party under the grounds
listed in section 34 of Part I. However, the grounds for opposing enforcement under Part II of the Act mirror those
in Part I. Therefore an exclusion of Part I will be ineffective where Part II applies. Part II of the Act will always
apply to foreign awards when they are enforced in India.

Therefore, although technically the judgment has not made any material changes to the status quo in relation to
enforcing foreign awards in India, it appears to have had significant practical effects:
· The decision is likely to result in an increase in challenges to foreign arbitral awards in India; and

· It has set alarm bells ringing over the extent to which India is willing to comply with its New York Convention
obligations.

This judgment of the Supreme Court is contrary to the object and scheme of the New York Convention and also
in violation of Article III of the Convention, in as much as it introduces an additional ground for challenging a
foreign award. The decision is contrary to the intention of the Indian legislature, since it:

· Exposes a foreign award to an additional ground of challenge, (introduced by way of judicial legislation) meant
for domestic awards only.

· Makes provision of Section 48 of 1996 Act of enforcement of foreign award redundant, as every time an
enforcement application is filed before Indian courts under Section 48, the opposite party would file objection
under Section 34, availing the benefit of challenging the foreign award on merits.

· Seeks to introduce a procedure to challenge a foreign award through judicial legislation in the absence of such
a procedure under the 1996 Act.

The decision is also contrary to the precedent laid in ONGC Vs. Saw Pipes,[29] wherein the court had accepted
that the scope of Section.34 and Section.48 are not identical and hence the assumption of the court that the
effort of the respondent was to avoid enforcement of the award under Section 48 of 1996 Act, thereby depriving
the appellant the benefit of the rule of public policy of India, is not correct.

The Supreme Court’s intervention in the Satyam case[30] on grounds of public policy is most unfortunate, as it
does not take into account the decision of the three judges Bench in Renusagar case.[31] The present decision,
thus exposes foreign awards to challenge on merits on the ground that it is “patently illegal”, notwithstanding the
enforcement proceedings in any other jurisdiction. In effect, the decision treats a foreign award as a domestic
award, if the execution of the award is to be done as per the laws of India.

Thus, it is easily inferred that the direction these decisions have taken the law on the subject and in all such
cases, the judgments depart from the spirit through judicial lawmaking and they disclose a lack of trust in the
arbitral process.

Steps For Enforcement Of Arbitral Award.


Domestic
One of the declared objectives of the 1996 Act is that every final award: ‘is enforced in the same manner as if it
were a decree of the Court’[32]. Hence, the scheme of the Act is that it is up to the losing party to object to the
award and petition the court for setting it aside. The winning party has to make no procedural move. If the
objections to the award are not sustained (or if there are no objections within the time allowed) the award itself
becomes enforceable as if it were a decree of the court[33]. It would be noticed that the Indian law has thus
fundamentally departed from the Model Law in this regard. The Model Law requires an application for
enforcement (Art 35) and the grounds on which enforcement of an award may be refused are as set forth in Art
36 thereof. This has been departed from under the Indian regime as stated above with the result, that in so far as
domestic awards are concerned, if there is no application to set aside an award under s 34 (or if the objections if
made have been rejected), the award can straightaway be executed as a decree of the court. Thus, when the
period for filing objections has expired or objections have been rejected, the award can be enforced under the
Civil Procedure Code (CPC) in the same manner as if it were a decree passed by a court of law. Section 36
declares that an arbitral award has the force of the decree, though in fact it is not a decree. An ex parte Award
passed by an Arbitral Tribunal under Section 28 of the Act is also enforceable under Sec. 36. Even a settlement
reached by the parties under Section 30 of the Act can be enforceable under Sec. 36 of the Act as if it is a
Decree of the Court.

Foreign arbitral award


India's Arbitration and Conciliation Act, 1996 provides a statutory framework for the enforcement of foreign
arbitral awards given in countries which are signatories to either the 1927 Convention on the Execution of
Foreign Arbitral Awards (Geneva Convention) or the 1958 Convention on the Recognition and Enforcement of
Foreign Arbitral Awards (New York Convention).

One of the prerequisites for the enforcement of a foreign arbitral award in India's courts is that it should be a
foreign award under the Geneva Convention or the New York Convention.

In the case of Bhatia International vs Bulk Trading, AIR 2002 SC 1432, the Supreme Court held that an
arbitration award not made in a convention country will not be considered a foreign award and, as such, a
separate action will have to be filed on the basis of the award.

Enforceable awards
There are several requirements for a foreign arbitral award to be enforceable under the AC Act.

(i) Commercial transaction: The award must be given in a convention country to resolve commercial disputes
arising out of a legal relationship. In the case of RM Investment & Trading vs Boeing, AIR 1994 SC 1136, the
Supreme Court observed that the term "commercial" should be liberally construed as having regard to manifold
activities which are an integral part of international trade.

(ii) Written agreement: The Geneva Convention and the New York Convention provide that a foreign arbitral
agreement must be made in writing, although it need not be worded formally or be in accordance with a
particular format.

(iii) Agreement must be valid: The foreign award must be valid and arise from an enforceable commercial
agreement. In the case of Khardah Company vs Raymon & Co (India), AIR 1962 SC 1810, the Supreme Court
held that an arbitration clause cannot be enforceable when the agreement of which it forms an integral part is
declared illegal.

(iv) Award must be unambiguous: In the case of Koch Navigation vs Hindustan Petroleum Corp, AIR 1989 SC
2198, the Supreme Court held that courts must give effect to an award that is clear, unambiguous and capable of
resolution under Indian law.

Unenforceable awards
Under sections 48 and 57 of the AC Act, an Indian court can refuse to enforce a foreign arbitral award if it falls
within the scope of the following statutory defenses:
(i) the parties to the agreement are under some incapacity;

(ii) the agreement is void;

(iii) the award contains decisions on matters beyond the scope of the arbitration agreement;

(iv) the composition of the arbitral authority or the arbitral procedure was not in accordance with the arbitration
agreement;

(v) the award has been set aside or suspended by a competent authority of the country in which it was made;

(vi) the subject matter of dispute cannot be settled by arbitration under Indian law, or

(vii) the enforcement of the award would be contrary to Indian public policy.

Enforcement and execution


The party seeking enforcement of a foreign award under the provisions of the Act must make an application to
the court of competent jurisdiction with the following documents:

(i) the original/duly authenticated copy of the award;


(ii) the original/duly authenticated copy of the agreement, and

(iii) such evidence as may be necessary to prove that the award is a foreign award.

In the case of Fuerst Day Lawson vs Jindal Exports[34], the Supreme Court held that a single application will
hold good to decide the question of the execution of the foreign arbitral award as well as the decree of the
award.

A binding agreement
On fulfilling the statutory conditions mentioned above, a foreign award will be deemed a decree of the Indian
court enforcing the award and thereafter will be binding for all purposes on the parties subject to the award.

Difficulties Experienced In Enforcement


Main difficulties which a party experiences while seeking enforcement of an Arbitral Award are :
· An Arbitral Award under the 1996 Act cannot be enforced as a Decree till the period of challenge under Sec.34
(3) is over or the objections filed have been dismissed. It is a common practice that whenever an Arbitral Award
is made, the party adversely affected by it files a petition u/s 34 of the Act in the Court and the Court issues
notice. Then, till the time this objection petition is dismissed the said award cannot be enforced. Given the delays
in our judicial system, it almost takes years for the Objection Petition to be disposed off and till such time the
party having the arbitral award in its favour remains in limbo. Thus, the laudable objective behind doing away of
legal proceedings to make the arbitral award a Rule of Court under the 1940 Act by introducing Sec.36 in the
1996 Act has been diluted to a great extent.

It is proposed to provide for, inter alia, that mere filing objection petition under Sec.34 will not operate as stay of
the award and the court may grant stay of the operation of the award subject to imposition of such conditions as
it may deem fit to impose and the power to impose conditions include the power to grant interim measures not
only against the parties to the award but also against the third parties in order to protect the interest of the party
in whose favour the award is passed.

· The Execution procedure laid down in Order XXI of CPC is lengthy, complex and time consuming and almost a
never ending story.

· By the time the stage of filing execution comes, the party against whom the award had come, cleverly disposes
off its assets so as to defeat the execution proceedings. Unless a party has taken interim orders u/s 9 of the Act
against disposal of assets etc. there are good chances that by the time execution application is filed, the
judgment debtor would have practically spirited away all its assets.

In conclusion
The Parliament has enacted the Arbitration and Conciliation Act with a view to provide speedy remedy by
arbitration and to achieve this objective, section 5 of the Act puts a complete bar on the intervention of the courts
in matters where there exists an arbitration clause. The law of arbitration in India is very much at its crossroads.
As things stand today, arbitration is poised to effect great changes to the ways in which dispute resolution is
conducted. It brings with it the solemnity and finality of the judicial process and couples it with the procedural
flexibilities of non-conventional dispute resolution methods. There is, however, an equally pressing need to
recognize that much more can and should be done to improve the conduct of arbitral proceedings in India but
most importantly, we feel that there is a need to effect a change in perceptions. As our nation moves towards
increasing litigiousness, alternative methods of dispute resolution might just provide the key to resolving the
problems of overburdened case loads, long pendency of cases and an all too frequent case of justice being
delayed. For long, the problem plaguing the effective implementation of ADR methods has been their perception
as being subordinate to the court process- a perception shared and fostered by lawyers and people alike. It is
imperative, that this be changed and this can only be achieved if there is active engagement from all the
stakeholders in this process. Certainly, there are some disputes inherently unsuited for alternative channels but
there are so many more which fit perfectly within the vision envisaged for a system of rendering justice that runs
concurrent to the Courts. It is necessary for the Courts themselves to mandate recourse to ADR methods in inter
alia international commercial disputes, employment disputes, matrimonial cases, compoundable criminal
offences, to name just a few.. Saw Pipe case’s expanded judicial review is especially unsuitable in the Indian
context where courts are overwhelmed with backlog. In such scenario to permit a challenge on merits would
considerably delay the enforcement proceedings. A majority of parties opting for arbitrations do so to avoid court
delays and legal niceties. An unfortunate side effect of this decision is that it has become a ground for parties to
shift the venue of arbitration outside India. The Supreme Court’s decision (Venture Global Engineering case)
flies in the face of modern commercial practice. At the end of the day, what should take precedence is the
provision of justice, in substance more than in form. As our country grows and flowers, taking wing on issues
unimagined before, it is time also for our dispute resolution systems, the undisputed backbone of our nation, to
follow suit. At the end of the day arbitration would see the day light of reality and true success when people
would start accepting the arbitral award and its finality as that of a judgment by the Supreme Court not because it
is justice always but because it is final always, having no further appeal.
http://www.legalservicesindia.com/article/433/Arbitral-Award-Its-Challenge-&-Enforcement.html

http://www.manupatra.com/roundup/326/Articles/Arbitration.pdf

https://www.lawctopus.com/academike/arbitral-award-setting-aside/

https://blog.ipleaders.in/prior-notice-requirement-under-section-345-of-the-arbitration-and-conciliation-act/

https://www.vakilno1.com/legalviews/short-notes-on-arbitral-proceedings.html

SCOPE OF INTERFERENCE BY THE COURT

The jurisdiction of the court in setting aside an

award is limited.

The court cannot correct the errors of the

arbitrator of the award.

It can only quash the award leaving the parties

free to begin the arbitration again if they so

desired.
History of enforcement of arbitral awards:

Prior to January 1996, the law of enforcement of arbitration awards in India was spread between three
enactments. Enforcement of domestic awards was dealt with under a 1940 Act1. Enforcement of foreign
awards was divided between two statutes a 1937 2Act to give effect to Geneva Convention 3awards and a
1961 Act4 to give effect to the New York Convention5 awards. As the Geneva Convention became virtually
otiose (by reason of Article VII of the New York Convention) enforcement of foreign awards, for all practical
purposes, was under the 1961 Act and for domestic awards was under the 1940 Act. The enforcement
regime between these two statutes was however quite distinct. The 1961 Act confined challenge to an
arbitral award only on the limited grounds permitted under the New York Convention. The scope of
challenge to domestic awards under the 1940 Act was much wider. This Act permitted judicial scrutiny inter
alia on the ground that the arbitrator had "misconducted" himself or the proceedings6 - an expression which
came to be widely interpreted and awards were interfered with inter alia on the ground of fundamental
errors of law apparent on the face of the record. However even under this wide judicial scrutiny regime,
courts restrained themselves and interfered only when the error was grave and the judicial conscience was
shocked. It may be worthwhile to cite a few illustrative cases:

 In State of Rajasthan v. Puri Construction Co. Ltd.,7 the Supreme Court held: "over the decades,
judicial decisions have indicated the parameters of such challenge consistent with the provisions of
the Arbitration Act. By and large the courts have disfavoured interference with arbitration award on
account of error of law and fact on the score of mis-appreciation and misreading of the materials on
record and have shown definite inclination to preserve the award as far as possible. This Court has
held that the court does not sit in appeal over the award and review the reasons. The court can set
aside the award only if it is apparent from the award that there is no evidence to support the
conclusions or if the award is based upon any legal proposition which is erroneous."
 In State of U.P. v. Allied Constructions8, the Court held: "the arbitrator is a Judge chosen by the
parties and his decision is final. The court is precluded from reappraising the evidence. Even in a
case where the award contains reasons, the interference therewith would still be not available within
the jurisdiction of the court unless, of course, the reasons are totally perverse or the judgment is
based on a wrong proposition of law. An error apparent on the face of the records would not imply
closer scrutiny of the merits of documents and materials on record. Once it is found that the view of
the arbitrator is a plausible one, the court will refrain itself from interfering (see U.P. SEB v. Searsole
Chemicals Ltd. and Ispat Engg. & Foundry Works v. Steel Authority of India Ltd.)."

This article has belaboured somewhat on the "old" law since thanks to a 2003 Supreme Court Judgment
(which shall be elaborated upon later) the "new" law on the subject has begun to resemble the "old" law.

C. The New Regime:

In January 1996, India enacted a new Arbitration Act (hereinafter Act or Arbitration Act).9 This Act repealed
all the three previous statutes (the 1937 Act, the 1961 Act and the 1940 Act)10. The new Act has two
significant parts. Part I provides for any arbitration conducted in India and enforcement of awards
thereunder. Part II provides for enforcement of foreign awards. Any arbitration conducted in India or
enforcement of award thereunder (whether domestic or international) is governed by Part I while
enforcement of any foreign award to which the New York Convention or the Geneva Convention applies, is
governed by Part II of the Act.

D. Domestic Awards:

Grounds for setting aside awards

Part I is modelled on the UNCITRAL Model Law 11and the UNCITRAL Arbitration Rules12 with few
departures. The relevant provisions are briefly outlined below:

Section 13 of the Act, corresponding to Article 13 of the Model Law, provides for challenge to an arbitrator
on the ground of lack of independence or impartiality or lack of qualification. In the first instance, a
challenge is to be made before the arbitral tribunal itself.13 If the challenge is rejected the tribunal shall
continue with the arbitral proceedings and make an award. 14Section 13 (5) of the Act provides that where
the tribunal overrules a challenge and proceeds with the arbitration, the party challenging the arbitrator may
make an application for setting aside the arbitral award under Section 34 of the Act (corresponding to
Article 34 of the Model Law). Hence approach to a court is only at the post-award stage. This is a departure
from the Model Law which provides for an approach to the court within 30 days of the arbitral tribunal
rejecting the challenge.15

The second departure from the Model Law (relevant to enforcement) is to be found in Section 16 of the Act
(corresponding to Article 16 of the Model Law). Section 16 incorporates the Competence Competence
principle and enables the arbitral tribunal to rule on its jurisdiction, including with respect to the existence or
validity of the arbitration agreement. If the arbitral tribunal rejects any objection to its jurisdiction, or to the
existence or validity of the arbitration agreement, it shall continue with the arbitral proceedings and make an
award. 16 Section 16 (6) provides that a party aggrieved by such award may make an application for setting
aside the same in accordance with Section 34. Article 16 of the Model Law, in contrast, provides that where
the arbitral tribunal overrules any objection to its jurisdiction, the party aggrieved with such decision may
approach the court for resolution within 30 days. The Indian Act permits approach to the court only at the
award stage (and not during the pendency of the arbitration proceedings).

Hence Sections 13 (5) and 16 (6) furnish two additional grounds for challenge of an arbitral award (over and
above the ones stipulated in Section 34 of the Act referred to below).

Section 34 of the Act contains the main grounds for setting aside the award. It is based on Article 34 of the
Model Law and like Article 34 states that the grounds contained therein are the "only" grounds on which an
award may be set aside. However in the Indian context the word "only" prefixing the grounds is a bit of a
misnomer as two additional grounds have been created by the Act itself as mentioned above. Besides
another ground is to be found in an Explanation to the public policy ground in Section 34. The same reads
as follows:

"Explanation.... it is hereby declared, for the avoidance of any doubt, that an award is in conflict with the
public policy of India if the making of the award is induced or affected by fraud or corruption or was in
violation of Section 75 or Section 81."

Section 75 referred to above is part of the conciliation scheme under the Act and states that the conciliator
and parties shall keep confidential all matters relating to the conciliation proceedings. Section 81 prohibits
any reference in arbitral or judicial proceedings to views, suggestions, admissions or proposals etc. made
by parties during conciliation proceedings.

Save for the Exception, referred to above, Section 34 of the Act is a faithful reproduction of Article 34 of the
Model Law.

New ground for challenge to award through judge made law.

To the above mentioned legislatively stipulated grounds, came to be added a new "judge made" ground.
This came about in the Supreme Court decision of ONGC v. Saw Pipes Ltd.  17The issue here was whether
an award could be set aside on the ground that the arbitral tribunal had incorrectly applied the law of
liquidated damages to the case. The question turned around the scope of Section 34 of the Act (which on a
plain reading does not permit a challenge on merits).

The Supreme Court in Saw Pipes came to the conclusion that the impugned award was legally flawed in so
far as it allowed liquidated damages on an incorrect view of the law. In the process it held, that an award
can also be challenged on the ground that it contravenes "the provisions of the Act (i.e. Arbitration Act) or
any other substantive law governing the parties or is against the terms of the contract." Further, the
judgment expanded the concept of public policy to add that the award would be contrary to public policy if it
is "patently illegal."

The Supreme Court in Saw Pipes confined the expansion of public policy to domestic awards alone as an
earlier larger Bench decision of the Court in the case of Renusagar Power Co. v. General Electrical
Corporation  18had construed narrowly this ground as limited to "fundamental policy of Indian law".19

The Saw Pipes Judgment has come in for some sharp criticism from several quarters.20 Read literally the
Judgment sets the clock back to the old position where an award could be challenged on merits and indeed
renders the court (testing enforceability of an award) as a court of appeal. Some judicial decisions have
tried to reign in the effect of Saw Pipes. One instance of this is the Supreme Court decision in the case
of McDermott International Inc. v. Burn Standard Co. Ltd.21 where the Court somewhat read down Saw
Pipes. It held:

"The 1996 Act makes provision for the supervisory role of courts, for the review of the arbitral award only to
ensure fairness. Intervention of the court is envisaged in few circumstances only, like, in case of fraud or
bias by the arbitrators, violation of natural justice, etc. The court cannot correct the errors of arbitrators. It
can only quash the award leaving the parties free to begin the arbitration again if it is desired. So, the
scheme of the provision aims at keeping the supervisory role of the court at minimum level and this can be
justified as parties to the agreement make a conscious decision to exclude the court's jurisdiction by opting
for arbitration as they prefer the expediency and finality offered by it."

Commenting on ONGC v. Saw Pipes  22the Court held:

"We are not unmindful that the decision of this Court in ONGC had invited considerable adverse comments
but the correctness or otherwise of the said decision is not in question before us. It is only for a larger
Bench to consider the correctness or otherwise of the said decision. The said decision is binding on us. The
said decision has been followed in a large number of cases."

A few High Court decisions have also sought to narrowly read Saw Pipes on the ground that literary
construed the judgment would expand judicial review beyond all limitations contained not only under the
Arbitration Act but even under the old regime. These High Court decisions have (rightly) held that one
Judgment of the Supreme Court cannot render naught the entire law on the subject. The High Court of
Bombay in the case of Indian Oil Corporation Ltd. v. Langkawi Shipping Ltd.23 held that to accept a literal
construction on Saw Pipes:

"would be to radically alter the statutorily and judicially circumscribed limits to the Court's jurisdiction to
interfere with Arbitration Awards. It would indeed confer a First Appellate Court's power on a court
exercising jurisdiction under Section 34 of the 1996 Act. There is nothing in the 1996 Act which indicates
such an intention on the part of the legislature. That the intention is to the contrary is clear inter alia from the
Arbitration and Conciliation Bill, 1995 which preceded the 1996 Act which stated as one of its main
objectives the need "to minimize the supervisory role of Courts in the Arbitral process.....

In the circumstances, the aforesaid principles laid down consistently by the Supreme Court and the various
High Courts cannot be said to be no longer good law in view of the 1996 Act. Nor can it be said that the
observations of the Supreme Court in Oil and Natural Gas Corporation v. SAW Pipes Ltd. (Supra), have
expressly or impliedly rendered the aforesaid judgments and the principles contained therein no longer
good law in view of the 1996 Act. The principles apply with equal force under the 1996 Act."24

The High Court of Gauhati following the above Bombay High Court decision held:

"The observations of the Apex Court in ONGC v. Saw Pipes, supra, did not expressly or impliedly render
the ratio decidendi on the issue contained in a plethora of judgments and the laid down principles therein
non est. On a due consideration of the entire gamut of the provisions of the Act and the precedential law,
we unhesitantly subscribe to the view expressed in IOC Ltd., supra. The decision in Saw Pipes, supra, does
not depart from the judicially evolved precepts bearing on the authority and jurisdiction of an arbitrator in
determining a dispute referred to him, the norms and measures to be applied for assessment of damages
and the scope of Court's interference with his findings.... The above decision does not intend, according to
our construction, to efface the time tested legal prepositions and judicial tenets on arbitration and thus
ought not to be construed away from the well established trend set by string of decisions preceding the
same."25

The Saw Pipes Judgment has quite rightly been criticised. To begin with it is contrary to the plain language
of the Arbitration Act and indeed also the spirit of the law. It's expanded judicial review is especially
unsuitable in the Indian context where courts are overwhelmed with backlog. In such scenario to permit a
challenge on merits would considerably delay the enforcement proceedings. A majority of parties opting for
arbitrations do so to avoid court delays and legal niceties. To embroil them back into the same system at
the enforcement stage would be ironic. An unfortunate side effect of this decision is that it has become a
ground for parties to shift the venue of arbitration outside India (lest an arbitration in India render the award
more vulnerable or judicial review delay enforcement).

Miscellaneous and procedural aspects:

(i) Steps for enforcement:

One of the declared objectives of the Act is that every final award: "is enforced in the same manner as if it
were a decree of the Court".26 Hence the scheme of the Act is that it is up to the losing party to object to the
award and petition the Court for setting it aside. The winning party has to make no procedural move. If the
objections to the award are not sustained (or if there are no objections within the time allowed) the award
itself becomes enforceable as if it were a decree of the Court.27 It would be noticed that the Indian law has
thus fundamentally departed from the Model Law in this regard. The Model Law requires an application for
enforcement (Article 35) and the grounds on which enforcement of an award may be refused are as set
forth in Article 36 thereof. This has been departed from under the Indian regime as stated above with the
result, that in so far as domestic awards are concerned, if there is no application to set aside an award
under Section 34 (or if the objections if made have been rejected), the award can straightaway be executed
as a decree of the court.

(ii) The relevant court:

As India is a large jurisdiction identification of the relevant court is important. For the purposes of the Act
"court" means the Principal Civil Court having original jurisdiction to decide the question forming the subject
matter of the arbitration, if the same were a subject matter of a suit.28 The aggrieved party can thus bring its
application to set aside the award before the Court where the successful party has its office or where the
cause of action in whole or in part arose or where the arbitration took place.

(iii) Time limit:

Any application for setting aside the award must be made within three months from receipt of the same.
This period can be extended by the court by a further period of 30 days on sufficient cause being shown
"but not thereafter."29

The Supreme Court has clarified with respect to the date from which the aforesaid limitation shall begin to
run. This was in the case of Union of India v. Tecco Trichy Engineers & Contractors.30 The Court here was
concerned with a situation where the award was despatched to the General Manager, Railways (Union of
India) as he had referred the matter to arbitration. However the entire arbitration was conducted by the
Chief Engineer. The Union of India contended that as the award had not been despatched to the concerned
relevant person (the Chief Engineer) there was some delay in raising of objections. Under the
circumstances the Supreme Court held that for large organisations like Governments, time would count
from the date the award was received by the relevant person. It held:

"We cannot be oblivious of the fact of impersonal approach in the government departments and
organisations like Railways. In the very nature of the working of government departments a decision is not
taken unless the papers have reached the person concerned and then an approval, if required, of the
competent authority or official above has been obtained. All this could not have taken place unless the
Chief Engineer had received the copy of the award when only the delivery of the award within the meaning
of sub-section (5) of Section 31 shall be deemed to have taken place."

(iv) Stamping / registration requirements:

The Arbitration Act does not talk of stamping or registration of an award. However stamping is required
under the provisions of the Indian Stamp Act, 1899. Section 35 of the said Act states the documents which
are required to be stamped, if inadequately stamped (or not stamped) will not be admissible in evidence "for
any purpose". Further they are liable to be impounded and subjected to penal duties. Though the Indian
Stamp Act is a Central Legislation, various States have prescribed their own schedule of applicable stamp
duties. Hence stamp duties vary from State to State.

(v) Registration requirements:

This again is not provided for under the Arbitration Act. The Registration Act, 1908 provides that if any non-
testamentary document "purports or operates to create, declare, assign limit or extinguish &., any title, right
or interest" in any immovable property, the same is required to be registered and if it is not, it is
invalid.31 Hence if an award purports to impact any immovable property it is required to be registered.
Registration fees again varies from State to State.

The effect of non-stamping or non-registration of an award came to be considered by the Supreme Court of
India in the case of M. Anasuya Devi v. Manik Reddy.32 The Court held that Section 34 of the Arbitration Act
permits an award to be set aside "only" on the grounds enumerated therein and non-stamping or non-
registration of an award is not one of them. Accordingly an award cannot be set aside on the ground that it
is non-stamped / improperly stamped or unregistered. However if it is not, it may become relevant at the
stage where it is sought to be executed as a decree. Hence the Supreme Court deferred the issue of non-
stamping or non - registration to the execution stage. Since Registration fees can be quite substantial, the
decision affords relief to the winning party to first overcome the objections to the award stage (Section 34)
and then pay the fees.
Section 36: The Supreme Court interpreted this Section in Fiza Developers and
Inter-trade Pvt. Ltd. v. AMCI (India) Pvt. Ltd. and Anr, and National Aluminum Co. Ltd.
(NALCO) v. Pressteel & Fabrications (P) Ltd. and Anr., and held that an arbitral award
can be enforced as a decree of the court only if the time for setting-aside
application expires or such application has been refused by the court under
Section 34 of the Act. That means, until the disposal of the application under
Section 34 of the Act, there is an implied prohibition of enforcement of the
arbitral award. Thus, the very filing and pendency of an application under Section
34, in effect, operate as an automatic stay of the enforcement of the award. These
cases followed the literal rule of interpretation while reading Section 36 of the
Act. The literal rule of interpretation states that ‘the first and primary rule of
construction is that the intention of the legislature must be found in the words used by the
legislature itself.
But the Supreme Court in the hindutan construction co ltd. V. uoi observed that
Section 36 of the Act was enacted for a different purpose and that purpose
cannot be fulfilled by doing the literal interpretation of the said Section as it
permits a mischievous outcome. Attention must be given to Kehar Singh & Others
v. The State (Delhi Administration) where Hon’ble Justice Shetty has observed that
the court will consider the provisions to ensure coherence and consistency
within the law as a whole to avoid undesirable consequences, and this adventure
enlarges the court’s discretion as to interpretation.
Therefore, the court in the instant case resorts to the purposive rule of
interpretation in the instant case to achieve the actual purpose or intention of the
legislature while passing this legislation. In order to apply the purposive rule of
interpretation, the court firstly refers to the United Nations Commission on
International Trade Law (hereinafter UNCITRAL) Model Law, as the whole
Arbitration Act of India is explicitly based on it. The legislative intent and essence
of the Arbitration Act was to bring domestic as well as international commercial
arbitration in consonance with the UNCITRAL Model Rules, the New York
Convention and Geneva Convention. In fact, the New York Convention was
physically present before the legislature and available for its consideration when
it enacted the 1996 Act. Article II of the New York Convention provides that if the
parties had agreed to settle any dispute by arbitration, courts are seized of action
concerning such subject matter unless the agreement itself is null and void,
inoperative or incapable of performance. Moreover, Article 36 (2) of the
UNCITRAL Model Law states that:
“If an application for setting aside or suspension of an award has been made to a court
referred to in paragraph (1) (a) (v) of this article, the court where recognition or enforcement
is sought may, if it considers it proper, adjourn its decision and may also, on the application
of the party claiming recognition or enforcement of the award, order the other party to
provide appropriate security.”
A reference to Article 36 (2) of UNCITRAL Model Law impels the court to hold that
an award, when challenged under Section 34, becomes inexecutable merely by
virtue of such a challenge being made because of the language of Section 36 as
laid down in Fiza Developers and NALCO is plainly incorrect.
Furthermore, reading Section 36 along with Section 35 of the Act makes the
award enforceable and binding on the parties as a decree under the Code of Civil
Procedure. This position is supported by Section 9 of the Act which specifically
enables a party to apply to a court for relief “…after the making of the arbitration
award but before it is enforced in accordance with Section 36.” The Court in the instant
case observed that Section 9 has been overlooked in Fiza
Developers and NALCO judgments and therefore they reached the conclusion that
there was no discretion left with the court to pass any interlocutory order
concerning the award in dispute under Section 34 of the Act. Such narrow
interpretation of Sections 34 and 36 flies in the face of Section 9 of the Act. Thus,
the court in the instant case held that the said precedents are per incuriam in not
reading Section 36 along with Sections 9 and 35 of the Act and therefore do not
commend themselves to the Court.
Therefore, a purposive interpretation of Section 36 along with Section 9 and 35
serves the purpose and intention of the Arbitration Act and rescues it from
conflicting with other provisions of the same Act and UNCITRAL Model Law.
Amendments according to 2019 act:
https://singhania.in/highlights-of-amendment-to-the-arbitration-and-conciliation-act-1996-via-
arbitration-ordinance-2015/

1. Amendment of Section 34 (Limiting the gamut of Public Policy of India): As per the
new amendment, an award passed in an international arbitration, can only be set aside on the
ground that it is against the public policy of India if, and only if, – (i) the award is vitiated by fraud or
corruption; (ii) it is in contravention with the fundamental policy of Indian law; (iii) it is in conflict with
basic notions of morality and justice. The present amendment has clarified that the additional
ground of “patently illegality” to challenge an award can only be taken for domestic arbitrations and
not international arbitrations. Further, the amendment provides that the domestic awards can be
challenged on the ground of patent illegality on the face of the award but the award shall not be set
aside merely on the ground of an erroneous application of law or by re-appreciation of evidence.
The new Act also provides that an application for setting aside of an award can be filed only after
issuing prior notice to the other party. The party filing the application has to file an affidavit along
with the application endorsing compliance with the requirement of service of prior notice on the
other party. A time limit of one year from the date of service of the advance notice on the other
parties has been fixed for disposal of the application under Section 34. Significantly, there is no
provision in the new Act which empowers the court or the parties to extend the aforesaid limit  of
one year for disposal of the application under Section 34.
2. Amendment to Section 36 (Stay on enforcement of award): The Ordinance provides
that an award would not be stayed automatically by merely filing an application for setting aside
the award under Section 34. There has to be a specific order from the Court staying the execution
of award on an application made for the said purpose by one of the parties. The Ordinance aims to
remove the lacunae that existed in the previous Act where pending an application under Section
34 for setting aside of arbitral award, there was an automatic stay on the operation of the award.
The new law also empowers the Court to grant stay on operation of arbitral award for payment of
money subject to condition of deposit of whole or a part of the awarded amount.
3. Amendment to Section 37:Under Section 37(1), the new law makes provision for filing of
an appeal against an order of judicial authority refusing to refer the parties to arbitration under
Section 8.
4. As regards enforcement of certain foreign awards, the new law seeks to add explanation of
Sections 48 and 57 thereby clarifying as to when an award shall be considered to be in conflict
within public policy of India. The parameters are the same as are provided under Section 34.
Similarly, the expression “Court” used in Sections 47 and 56 have been defined to mean only the
High Court of competent jurisdiction.