October 20, 2021

Making of Arbitral Award and Termination of Proceedings under Arbitration and Conciliation Act, 1996

arbitration

Introduction

Making of arbitral award and termination of proceedings is completely addressed with in CHAPTER VI of the Arbitration and Conciliation Act, 1996. From sections 28 to 33 it’s all about “making of arbitral award and termination of proceedings”. This research paper won’t solely justify the important bare provisions however will also lay specific emphasis on Section 32. This section deals with the “Termination of proceedings”.

Arbitrator

The role of an arbitrator is to resolve disputes that the parties have in agreement to submit to arbitration. The decisions of the arbitrator require a document subject to certain formalities, and referred to as the arbitral award. The content and form of an arbitral award, and also the discretion enjoyed by arbitrators in creating an award can essentially vary according to the procedural law applicable to the arbitral procedure, the powers presented by the parties upon the arbitrator under the applicable arbitration agreement, and also the specific sort of arbitration used.

Arbitral Award under Arbitration and Conciliation Act, 1996

According to the definition given under Section 2(c) it’s clear that the 1996 Act doesn’t provide a concrete definition of Arbitral awards. It solely affirms that arbitral awards include interim awards too. However, the ultimate call given by the arbitral tribunal [as per Section 2(d)] is the arbitral award.

Accordingly, an arbitral award could be defined as the binding and final decision made by an arbitral tribunal or a sole arbitrator, that resolves, wholly or in part, the dispute submitted to his/its jurisdiction.

The award can give a spread of remedies to the parties depending on the issue of the dispute. This include:

  • Injunctive Remedies: Once a court orders that a party should take an action or stop an action, it’s called an injunction. An arbitrator may offer the same award in a dispute wherever one party needs such relief.
  • Money: Several award can decide that one party will need to pay the opposite party based on the contract or dispute controlling the award.
  • Creative Relief: Typically, the dispute between the parties can have several underlying emotions and interests that are driving the parties. Whereas the arbitrator will not have as much freedom as a mediator to assist the parties come to a reasonable agreement, an arbitrator could have one party issue an apology or provide a positive employment reference.
  • Incentives: An arbitrator could add incentives for certain behaviours to encourage the parties to suits the award.

Case Laws dealing with Arbitral Award under Arbitration and Conciliation Act, 1996

Calcutta High Court described an arbitral award as a result of the consensual justice of the parties[1]. Within the case of Bhajahari v. Bihari arbitral award was outlined as the final determination of the claim or issue, by an arbitrator of the parties of their own choice[2].

  • In Harinarayan Bajaj v. Sharedeal Finance[3] it was held that as per definition under Section 2 an arbitral award includes an interim award. However, an interim award to be an award had to determine a claim with finality. Once the claim is determined, the Tribunal couldn’t adjudicate more thereon claim and become functus officio. Moreover, the procedural orders passed throughout the arbitral proceeding is essentially excluded from the concept of award.
  • In Paradise Hotel v. Airport Authority of India Ltd[4] the enforcement of an award is complete only when it has been implemented under CPC within the same manner as if wee a decree of court.
  • In Pandit Munsi Ram and associates v. Union of India[5] it was interpreted that since an arbitral award is taken into account a decree as under Section 35 of the 1996 Act, the court held that an arbitral award is an order which determines the rights of parties involved by finally determining the actual claim or issue within the course of arbitral proceedings.

Types of Arbitral Award under Arbitration and Conciliation Act, 1996

There are two types of awards –

  • Domestic awards- this sort of award is governed under Part I of the Act

As per Section 2(7), Domestic awards, are altogether dealt with in part one till Section 43 of the Arbitration and conciliation act whereas Sections 44 to 60 deal with different kinds of foreign arbitral awards.

The arbitral award is worth solely to the extent of the parties’ ability to enforce the terms they ab initio prescribed. Section 36 lays down provisions for the speedy enforcement of the domestic awards. Under this very section, it is made clear that a domestic award is enforceable within the same manner as that of a decree passed by a court. In domestic arbitrations, if the assets of the parties are almost in one and the same jurisdiction, the enforcement of domestic award abundant easier. And it is easier to enforce an arbitral award than judgment by a court.

  • Foreign awards- this type is subsequently governed under Part II

Part II of Chapter 1 deals with the New York Convention awards. In this Section 48 deals with the refusal of enforcement of the foreign award. Chapter 2 Section 57 deals with the provisions regarding the enforcement of Geneva Convention awards.

In Serajuddin v. Michael Golodetz[6] the Calcutta High Court laid down the essential conditions of a ‘foreign arbitration’ where the award is further called a foreign arbitral award, the main points of this case were:

  1. Arbitration should have been held in foreign a foreign country
  2. By a foreign arbitrator
  3. Arbitration by applying foreign laws
  4. One of the parties consists of foreign nationals

Provisions of Arbitration and Conciliation Act, 1996 dealing with Arbitral Award

  • Section 28 of the Arbitration and Conciliation Act, 1996

An Arbitrator should decide the dispute in justice and in good faith. However, there’s a condition precedent, given that each parties expressly authorize an arbitrator to adjudicate then solely he will decide the dispute between them.

Domestic arbitrations should follow Indian arbitration law. However, for international arbitrations agreements primarily based in India, the arbitral tribunal should follow the laws the parties have agreed to apply in their agreement to settle disputes. The selected law as agreed within the agreement should be construed unless expressly agreed otherwise.

It should also be kept in mind that while applying the law of a unique legal system, the substantive laws of India shouldn’t be in conflict with them. Within the absence of any such agreement or any indication of what would be the applicable laws once a dispute arises, the arbitral tribunal shall apply laws that are applicable and relevant to the dispute.

Furthermore, the arbitral tribunal should apply provisions solely consistent with the terms of the contract between parties. However, the tribunal should additionally take into account the usages and also the current trade practices that are relevant to the contract.

  • Section 29 of the Arbitration and Conciliation Act, 1996

The decision of the Arbitral Tribunal are going to be in the majority. The arbitral award is the conclusive stage of the arbitral proceedings. The choice made by the majority of the members of the tribunal are going to be declared in the form of an award.

  • Section 30 of the Arbitration and Conciliation Act, 1996

Section 30 permits the encouragement settlement amongst the parties by the arbitral tribunal. If the parties with success conform to a settlement then the same can be incorporated within the form of an award. Such settlements are recorded because the Arbitral award on agreed terms. Such amicable arbitral awards should be create according to Section 31. It has the same effect and status as that of an arbitral award passed by an independent tribunal to substance a dispute.

  • Section 31 of the Arbitration and Conciliation Act, 1996

According to Section 31 Arbitral awards shall be in signed and writing by all the members of the tribunal.

The reason applied behind the award should be explicit clearly. However, if the parties have agreed for settlement then no reason behind an arbitral award on agreed terms, need to be showcased. The date of declaration of an Award and also the place wherever it’s made shall be mentioned. Place of the award is additionally called as the seat of arbitration. A replica of the award shall be issued to every party. Arbitral Tribunals can also pass an interim award.

In the case of Sukanya Holdings Pvt. Ltd. v. Jayesh H. Pandya[7] non-signatories to an arbitration agreement can even participate in arbitration proceedings as long as the necessary and proper parties to the agreement are present. This is often to both Indian seated International Commercial Arbitration and domestic arbitration.

Termination of Arbitral Proceedings under Arbitration and Conciliation Act, 1996

Section 32 of the Arbitrational and Conciliation Act, 1996 is totally coherent with Article 32 of UNCITRAL Model Law. According to Section 32(1) of the Act termination of Arbitral proceedings takes place once the final award declared by the arbitral tribunal. The other three grounds of termination of arbitral proceedings are given under Sub-section 2 of Section 32.

To terminate the arbitration proceedings arbitral tribunal shall issue an order:

  • The parties themselves agree to terminate the proceedings.
  • If the arbitral tribunal finds that the continuation of the proceedings is either unnecessary or impossible for any other reason.
  • the plaintiff withdraws their claim.  It can also be terminated if the respondent objects to the arbitral award. Looking at which the arbitral tribunal come to a conclusion that it has a legitimate interest in obtaining a final settlement.

In the last, The mandate of the arbitral tribunal will terminate with the termination of the procedure itself. Sub-section (3) of this section lays down that the above provisions are subject to Section 34(4) and section 33.

Recent Developments with respect to Termination of Proceedings

In the case of Sai Babu v. M/S Clariya Steels Private Limited[8] in 2019 the Supreme Court held that once the sole arbitrator terminates the arbitration proceedings under Section 32(2)(c) of Arbitration and Conciliation Act, 1996 (“Arbitration Act”), the same cannot be subsequently recalled. In order to reach a conclusion in the case of Sai Babu v. M/S Clariya Steels Private Limited the Apex Court chalked out a difference between the termination of Arbitral proceedings under Section 32 and Section 25 of the Arbitration and Conciliation Act.

Case of SREI Infrastructure Finance Ltd v. Tuff Drilling Private Ltd[9] where it stated that “On the termination of proceedings under Section 32 sub-section (1) and (2), Section 32 sub-section(3) additional contemplates termination of proceedings by Arbitral Tribunal on any other grounds or due to the fact that carrying out the arbitral proceedings is needless. The conditions laid down under section 32 is missing in Section 25. However, if the claimant shows decent cause as to why he desires the arbitral proceedings then it may be recommenced. The Apex court conjointly noted that section 32(3) provides for the termination of the mandate of the Arbitrator once a termination order is passed under section 32.

Conclusion

The termination of proceedings procedure and making an arbitral award laid down is pretty straightforward and simple. The Supreme Court has sometimes come up with suggested amendments and necessary interpretations. It’s interesting to note that the termination of arbitral proceedings is different under Section 32 and Section 25. The conclusiveness of award marks the termination of proceedings under Arbitration and Conciliation Act under Section 32 along with three other grounds. Not several radical judgments are passed with regard to the above subject however Sai Babu v. M/S Clariya Steels Private Limited holds good law.

For Enforcement of Arbitral Award under Arbitration and Conciliation,1996, click here

For more notes on Arbitration and Conciliation Act, Click Here.

For law notes, Click Here.


[1] D L Miller and co v. Dallu Ram, AIR 1956 Cal 361

[2] Bhajahari v. Bihari, 1903 ILR 33

[3] Harinarayan Bajaj v. Sharedeal Finance, AIR 2003 Bom 296

[4] Paradise Hotel v. Airport Authority of India Ltd, (2002) 4 RAJ 670 Guj

[5] Pandit Munsi Ram and associates v.Union of India, 2015 (2) Arb. LR 40

[6] Serajuddin v. Michael Golodetz, AIR 1960 Cal.49

[7] Sukanya Holdings Pvt. Ltd. v. Jayesh H. Pandya, (2003) 5 SCC 531

[8] Sai Babu v. M/S Clariya Steels Private Limited, 2019 (5) SCJ 503

[9] SREI Infrastructure Finance Ltd v. Tuff Drilling Private Ltd, (2018)11SCC470

Author: Mayank Malik [JIMS Engineering Management Technical Campus (JEMTEC)]

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