Making of Arbitral Award & Termination of Proceedings

Although Section 2(c) of the Arbitration and Conciliation Act, 1996, does not define "arbitral awards" explicitly, it does include interim awards. As specified in Section 2(d), an arbitral award is the final decision made by the arbitral tribunal or sole arbitrator that resolves the dispute either in full or in part.

In essence, an arbitral award is a binding and conclusive decision delivered by an arbitrator or arbitral tribunal concerning the dispute presented. The relief granted by an arbitral award may vary depending on the nature of the dispute and may include:

• Injunctive Remedies: Orders directing a party to either take or refrain from certain actions, similar to court-issued injunctions.

• Monetary Relief: Awards that require one party to pay another, based on the terms of the contract or the resolution of the dispute.

• Creative Relief: Although less common, arbitrators may impose non-monetary terms such as requiring an apology or providing a positive reference, addressing the underlying interests of the parties.

• Incentives: Awards may include provisions designed to encourage certain behaviors from the parties involved.

Case law on Arbitral Awards.

Judicial precedents have played a significant role in shaping the understanding of arbitral awards under the Arbitration and Conciliation Act, 1996. Several key cases have provided clarity on various aspects of arbitral awards:

• Bhajahari v. Bihari - The Calcutta High Court emphasized that an arbitral award represents the outcome of the parties’ consensual resolution of their dispute. It was defined as the final determination of the claim or issue by an arbitrator appointed by the parties.

• Harinarayan Bajaj v. Sharedeal Finance - In this case, the court affirmed that, according to Section 2 of the Act, an arbitral award includes interim awards. However, for an interim award to be considered as such, it must definitively resolve a claim. Once a claim is decided, the arbitral tribunal loses jurisdiction over that claim and becomes functus officio. Procedural orders issued during arbitration are not considered arbitral awards.

• Paradise Hotel v. Airport Authority of India Ltd - The court established that the enforcement of an arbitral award is considered complete only when it has been executed under the Civil Procedure Code (CPC) in the same manner as a court decree.

• Pandit Munsi Ram and Associates v. Union of India - This case clarified that an arbitral award is deemed a decree under Section 35 of the Act. Consequently, it conclusively determines the rights of the parties by resolving the substantive claim or issue presented in the arbitration.

The Arbitration and Conciliation Act, 1996 distinguishes between two primary types of arbitral awards:

1. Domestic Awards:

Domestic awards are governed by Part I of the Act. As defined in Section 2(7), these awards are subject to the provisions from Part I up to Section 43. The enforcement of domestic awards is outlined in Section 36, which states that a domestic award is enforceable in the same manner as a court decree. This means that once a domestic award is issued, it can be enforced as if it were a judgment from a court. Typically, the enforcement of domestic awards is more straightforward, especially when the assets of the parties are located within the same jurisdiction. In general, enforcing arbitral awards domestically tends to be simpler compared to enforcing court judgments.

2. Foreign Awards:

Foreign awards are governed by Part II of the Act, which is divided into two chapters:

• Chapter 1: This chapter deals with awards under the New York Convention. Section 48 specifies the grounds on which the enforcement of such foreign awards may be refused.

• Chapter 2: This chapter pertains to awards governed by the Geneva Convention. Section 57 outlines the provisions related to the enforcement of these awards.

In summary, while domestic awards are regulated by Part I and have a straightforward enforcement process akin to court decrees, foreign awards are subject to the provisions of Part II, with specific sections addressing the enforcement and refusal grounds for awards under the New York and Geneva Conventions.

Case law on foreign arbitral awards.

In Serajuddin v. Michael Golodetz [6], the Calcutta High Court provided important insights into what constitutes a 'foreign arbitration,' clarifying the criteria that determine whether an arbitral award qualifies as a foreign arbitral award. The key factors outlined in this case include:

• Arbitration Conducted in a Foreign Country: The arbitration must take place outside the jurisdiction where the enforcement is sought.

• Presidency by a Foreign Arbitrator: The arbitrator must be from a different country than where the enforcement is pursued.

• Application of Foreign Laws: The arbitration process must involve the application of laws that are not those of the jurisdiction seeking enforcement.

• Involvement of Foreign Nationals: The parties involved in the arbitration must be foreign nationals or entities.

Provisions of the Arbitration and Conciliation Act, 1996 dealing with Arbitral Awards

Section 28 - Section 28 of the Arbitration and Conciliation Act, 1996 requires that an arbitrator adjudicates disputes fairly and in good faith. The arbitrator may only proceed with the adjudication if explicitly authorized by each party to decide the dispute. For domestic arbitrations conducted within India, Indian arbitration laws must be followed. In international arbitrations where the seat is in India, the arbitral tribunal must apply the laws specified by the parties in their agreement, unless otherwise indicated. It is crucial that these chosen laws do not conflict with substantive Indian laws. If no applicable laws are agreed upon or specified, the tribunal will apply the laws relevant to the dispute. The tribunal must adhere to the terms of the contract and consider relevant usages and current trade practices related to the contract.

Section 29 - According to Section 29, decisions by the arbitral tribunal are made by majority vote. The arbitral award marks the final stage of the arbitration process, with the decision supported by the majority of tribunal members being recorded as the award.

Section 30 - Section 30 permits the arbitral tribunal to assist in facilitating a settlement between the parties. If a settlement is reached, it can be incorporated into an arbitral award. Such settlement agreements are documented as arbitral awards on agreed terms under Section 31. These settlement awards have the same legal effect and status as awards made to resolve substantive disputes.

Section 31 - Section 31 of the Arbitration and Conciliation Act, 1996 stipulates that arbitral awards must be in writing and signed by all members of the arbitral tribunal. The reasons for the award must be clearly stated, except where the parties have reached a settlement, in which case detailing the reasons is not required. The award must include the date and place of its issuance, which is also known as the seat of arbitration. A copy of the award must be provided to each party involved. Additionally, the arbitral tribunal is authorized to issue interim awards as needed.

In Sukanya Holdings Pvt. Ltd. v. Jayesh H. Pandya [7], it was established that non-signatories to an arbitration agreement may still participate in arbitration proceedings, provided that the essential and proper parties to the agreement are present. This principle applies equally to both international commercial arbitration with an Indian seat and domestic arbitration.

Termination of Arbitral Proceedings

Section 32 - Section 32 of the Arbitration and Conciliation Act, 1996 closely mirrors Article 32 of the UNCITRAL Model Law. According to Section 32(1), arbitral proceedings are considered terminated upon the issuance of the final award by the arbitral tribunal. Additionally, Section 32(2) provides three specific grounds under which the arbitral tribunal may terminate the proceedings:

• Agreement of the Parties: If the parties mutually agree to end the arbitration proceedings.

• Unnecessary or Impossible Proceedings: If the tribunal concludes that continuing the proceedings is unnecessary or impossible for any reason.

• Withdrawal of Claim: If the claimant withdraws their claim, or if the respondent objects to the tribunal’s jurisdiction and the tribunal determines that it is necessary to achieve finality in the matter.

Upon termination of the proceedings, the mandate of the arbitral tribunal comes to an end. Section 32(3) specifies that these termination provisions are subject to the provisions outlined in Section 34(4) and Section 33 of the Act.

Recent Developments.

In Sai Babu v. M/S Clariya Steels Private Limited [8] (2019), the Supreme Court held that once a sole arbitrator terminates arbitral proceedings under Section 32(2)(c) of the Arbitration and Conciliation Act, 1996, this termination is final and cannot be reversed. The Court clarified the distinction between termination of proceedings under Section 32 and Section 25 of the Act, underscoring that the termination under Section 32 is irrevocable.

In a similar vein, the Supreme Court in SREI Infrastructure Finance Ltd v. Tuff Drilling Private Ltd observed that Sections 32(1) and 32(2) govern the termination of arbitral proceedings, whereas Section 32(3) addresses situations where the continuation of proceedings is deemed unnecessary. The Court noted that these provisions are distinct from those under Section 25. Furthermore, Section 32(3) mandates that the mandate of the arbitrator ceases upon the issuance of a termination order under Section 32.