Law > Civil Laws > Alternate Dispute Resolution > Arbitration Award (Sections 28 to 37 of the Arbitration and Conciliation Act)
Arbitration is a procedure in which parties submit present or future disputes, to one or more arbitrators (arbitral tribunal) who make a binding decision on the dispute. In choosing arbitration, the parties opt for a private dispute resolution procedure instead of going to court. The decision given by the arbitral tribunal is called an arbitration award.
Ex aequo et bono:
Ex aequo et bono is a legal concept that confers on arbitrators the power to decide a dispute in accordance with their sense of fairness and good conscience, instead of rigorously applying terms of a specific body of law. The principle has been unpopular in contemporary arbitration practice because there has been a tacit understanding among arbitration lawyers that to apply ex aequo et bono is to ruin arbitral procedure.
The flexibility inherent in ex aequo et bono has potential to improve the practice of international commercial arbitration, by redressing excessive formalisation in arbitral procedures. The primary aim in applying the principle is to give them the authority to make decisions flexibly to deliver effectively on the arbitrators’ mandate to decide the dispute as granted by the parties. By agreeing to ex aequo et bono proceedings, at least for some types of disputes, the parties permit arbitrators to act robustly to provide efficient dispute resolution.
Passing Award When Arbitrators Differ in Opinion:
Section 29 of the Arbitration and Conciliation Act, 1996 deals with this situation.
- If the parties have not agreed otherwise, in arbitral proceedings with more than one arbitrator, any decision of the arbitral tribunal should be made by majority of all its members.
- Notwithstanding sub-section (1), if authorised by the parties or all the members of the arbitral tribunal, questions of procedure may be decided by the presiding arbitrator.
Fast Track Arbitration:
The Arbitration and Conciliation Amendment Act 2015 introduced Fast Track Arbitration in India to speed up the arbitration process in India and is not regulated by ordinary rules and regulations. In India, the concept of fast-track arbitration means that the proceedings are to be concluded within 6 months, and there is no provision for oral proceedings, rather than written pleadings. Rule 44 of the Indian Council of Arbitration describes the fast track arbitration procedure.
Essential Features of Fast Track Arbitration:
- It is largely governed by strict time-limit policies that both the arbitrators and the parties must comply with. This simply means speeding up the arbitral process and settling the matter in the shortest practicable timeframe.
- When the time limit is not reached then the arbitrator’s order will be revoked unless the court has extended the time limit. Unless, when extending the time, the Court determines that the delay was induced for valid reasons, then there is a reduction in the arbitrator’s fees for each month of the delay by not reaching five percent. Section 15 of the Act specified this penalty method.
- It does not include a fixed collection of elements or procedures to be followed as per ordinary arbitral proceedings, listed in the heading below, any activity that helps to resolve the issue as soon as possible is approved under fast-track arbitration.
- Often in Fast Track Arbitration Procedures, no oral hearings are necessary and depend only on written submissions.
- The parties will select a single arbitrator, and the submissions must be written in large part.
- It protects the expense, speed, and time without violating any law and often it also prevents procedures such as interviewing a witness.
Arbitration Award:
An arbitration award is an instrument embodying the decision of the arbitral tribunal, given after determination in a quasi-judicial manner of matters in dispute between two or more contending parties, referred in pursuance of valid written arbitration agreement between them providing for such reference giving arbitrators the power to decide and imposing a duty which makes it incumbent upon the parties to obey the decision arising from the submission.
Essentials of Arbitration Award:
- The award must be in writing. (Section 31(1))
- It must be signed by all or majority members of the arbitral tribunal. Reasons for the non-signing of defaulting members should be mentioned in the award. (Section 31(2))
- It must reasonable, legal and possible. (Section 31(3))
- It must have a date and place of arbitration (Section 31(4))
- It must talk about the cost of the arbitration (Section 31(5))
- It must be certain. If it is uncertain, it cannot be enforced.
- It must follow the agreement and not purport to decide matters, not within the agreement. An award outside the agreement is void, and the void award cannot be severed from the rest of the award, the whole award is void.
- It must be final.
- It must dispose-off all the differences submitted to arbitration.
- The award must be reasoned in the circumstances earlier.
Tribunal is not required to give reason in following situations.
- Where the parties agree that the reasons need not be recorded.
- When the tribunal is dispensed from giving reasons.
- If parties have settled their dispute without involving in the arbitration process with mutual agreement.
Types of Awards:
Interim Award:
Under Section 31(6) of the Act, the Tribunal if required can pass an interim arbitral award any time during arbitral proceedings. This is a temporary award until the tribunal has given its final decision. A provisional award can only be made if the parties have agreed that “the tribunal may have the power to order on a provisional basis any relief which it would have power to grant in a final award” (s.39 Arbitration Act 1996). This includes;
- making a provisional order for the payment of money or the disposition of property as between the parties; or
- an order to make an interim payment on account of the costs of the arbitration.
The distinction between interim and final award lies in the fact that the final award is complete on all matters of dispute referred to arbitration, whereas an interim award is complete on only some of the matters and requires to be completed by further piece of award.
Final Award:
The final award is an award which is complete on all matters of dispute referred to arbitration. This should usually be in writing and signed by all the arbitrators. The award must contain reasons and state where the arbitration took place. It must also be dated (this is important for calculating interest on payments). Once the final award is made this ends proceedings.
Consent Award:
Section 30 of the Act provides for settlement after invocation of arbitration clause. Consent Awards are settlement agreements recorded between the parties after the parties have invoked arbitration to settle disputes. The consent award is different from a normal arbitration awards as the dispute is not considered on the merits, but reflects the mutually agreed settlement terms of the parties. Settlement of disputes through consent awards ensures that the disputes end in amicable terms leaving each party satisfied. The consent award will have the same status and effect as arbitral award provided on merits. The consent award, including form and contents, is similar, to any other arbitral award and has same effect of any other arbitral award. Termination of arbitral proceedings does not necessarily result in consent award. The parties may prefer not to obtain approval from the tribunal and can settle the dispute by entering into an agreement under Section 73.
Default Award or Ex-Parte Award:
Section 25 of the Act deals with default award. It provides that subject to any agreement between the parties, if the respondent fails to communicate his statement of defence in accordance with sub-section (1) of section 23 of the Act and fails to appear at an oral hearing or to produce documentary evidence, the arbitral tribunal shall continue the proceedings without treating that failure in itself as an admission of the allegations by the claimant and make the arbitral award on the basis of evidence produced before it. This type of award is also called ex-parte award.
Award on Agreed Terms or Settlement Award:
If the parties settle dispute during the arbitral proceedings, an award can be made on the agreed terms. This award is also known as settlement award. In a settlement award, the arbitral tribunal is not required to give a reasoned award. The arbitral tribunal may simply record the settlement arrived between the parties in the form of an arbitral award on agreed terms.
Partial Award:
Some elements of the parties’ claim have been determined but other issues remain and need to be resolved before the final award is made. Parties can continue arbitrating the remaining issues.
Draft Award:
This is not binding on the parties until it has been confirmed by the tribunal.
Additional Award:
Usually once the final award it made, the tribunal has no further authority. However, the parties can request an additional award be made on an undecided issue still in dispute.
Award of Interest:
Section 31(7) of the Act deals with the award of interest. As per Section 31(7) unless otherwise agreed by the parties, where an arbitral award is for the payment of money, the arbitral tribunal may include in the sum for which the award is made interest, at such rate as it deems reasonable, on the whole or any part of the money, for the whole or any part of the period between the date on which the cause of action arose and the date on which the award is made. A sum directed to be paid by an arbitral award shall, unless the award otherwise directs, carry interest at the rate of eighteen percent per annum from the date of the award to the date of payment. Unless and until there is a mention of compound interest in arbitration agreement, simple interest should be charged.
Place of Award:
In domestic arbitration, the place of arbitration does not pose any problem. It can be anywhere in India according to the agreement of the parties. If arbitration is under the rules of an institution, it is generally conducted at the place where the institution is located, subject to agreement to the contrary.
In international arbitrations, parties generally specify the place of arbitration in their arbitration agreement. If it is not so specified, Indian parties usually make use of, as far as possible, a joint arbitration clause, which deals, inter-alia, with the determination of the place of arbitration. Such clauses are recommended for adoption by arbitral organisations which provide international arbitration facilities and which have entered into arbitration service agreements with their counterparts in other countries. In arbitration service agreements concluded by arbitral institutions in different countries, the place of arbitration usually specified is the country where the respondent resides.
Termination of Arbitral Process:
Section 32 of the Act deals with the termination of proceedings of arbitration. Section 32(1) of the Act unequivocally provides that only ‘final award’ shall terminate the arbitral proceedings. In Kifayatullah Haji Gulam Rasool Vs Bilkish Ismail Mehsania (2001) case, the Court held that arbitration proceedings shall automatically stand terminated only after making of final award, which decides or completes decision of claims which are presented.
Under Section 32(2) of the Act arbitral proceedings can also be terminated by an order of the Tribunal, which order can only be passed
- when the claimant withdraws the claim or
- when the parties agree on the termination of the proceedings or
- when the Tribunal finds that continuation of proceedings has become unnecessary or impossible.
Subject to section 33 and subsection (4) of section 34, the mandate of the arbitral tribunal shall terminate with the termination of arbitral proceedings.
Correction and Interpretation of Award and Additional Award.
Section 33 of the Arbitration & Conciliation Act talks about the correction of an arbitral award after having been pronounced. Mistakes that may be made due to a slip of the natural course of things or an omission are allowed to be corrected, under this provision. The error that has to be corrected cannot be related to the merits of the case or an error with regards to the substance of the matter.
In cases where any of the parties require correction of clerical mistakes, typographical errors, or such other mistakes; or seek an interpretation from an issue of the award, they are allowed to do so. They may approach the arbitral tribunal to seek clarification and corrections on the above-mentioned points.
If the parties do not recognize the clerical errors but the tribunal themselves do, then they can suo moto correct the award for the same. The arbitral tribunal, within thirty days, can correct the clerical errors by themselves and send fresh copies of the award, highlighting the corrected portions, to the parties. However, the tribunal does not have the authority to provide interpretation or issue an additional award, by themselves.
The procedure is as follows:
- The parties are allowed to approach the tribunal within a period of 30 days starting from the receipt of the award.
- The party must notify the other party when he decides to seek clarification.
- The application for correction should only request the tribunal to correct any computation errors, any clerical or any typographical errors, or any other errors of similar nature.
- The party moving the application may request the tribunal to give an interpretation of a specific point, issue, or part of the award only if so, agreed by the other party. The consent of the other party is essential in this case.
- The party may request for an additional award on the claims presented in the proceedings but omitted from the arbitral award within a period of thirty days from the receipt of the award. The application for an additional award should be first consented to by the other party.
- If the arbitral tribunal considers and accepts the request, then they may pronounce an additional award within sixty days of the application. The additional award, so provided, shall form a part of the final award.
Setting Aside of Award:
Section 34 of the Arbitration and Conciliation Act 1996 deals with the setting aside of the arbitral award. In order to set aside an arbitral award, individual needs to file an application in the court. The court in general accepts an application of challenge only if it comes under ambit of Sec. 34 only. Prior to filing an application in the court to set aside the award, the party filing the application has to hand over a notice of such filing to the opposite party. Application for setting aside award to the Court as defined in the Act (Principal Civil Court of Original Jurisdiction) should be made within 3 months from the date of receipt of final award of arbitration. Extension of further 30 days can be given at discretion of the Court. Section 20 and Section 44 of CPC are applicable. The effect of order setting aside the arbitral award is that where only a part of reward is set aside, the rest of the award is final and binding on parties and can be enforced under the Code of Civil Procedure.
The following are the grounds on which an award can be set aside:
- Incapacity of a party.
- Unlawful agreement.
- No notice to the other party.
- Subject matter extent to the scope of the arbitration agreement.
- Formation of Tribunal not as per the agreement.
- Subject matter not under the arbitration law.
- Award in conflict with the public policy of India.
Finality of Arbitral Award:
It is provided under section 35 of the Arbitration and Conciliation Act, 1996 that the award after an arbitration proceeding shall be binding on the parties to the proceedings. When an arbitral award is made it is in totality concerning all the dimensions and implies that no more steps can be further taken by the arbitral tribunal. The award has a binding effect on the parties. An award by an arbitral tribunal is final when:
- The Period that is provided to make an appeal challenging the award in the court expires;
- And in circumstances when a party has filed an application in the court challenging the award and the same gets rejected.
Enforcement of Arbitral Award:
Section 36 of the Arbitration and Conciliation Act, 1996 after the 2015 Amendment Act, provides that when the time period that is provided for making an application in the court for setting aside an arbitral award has expired the award of the arbitral tribunal will have an effect of a decree of a court and shall be enforced in the same way. (As per the provisions of Code of Civil Procedure of 1908).
If a party challenges the award of an arbitral tribunal (under section 34 of the Arbitration Act) by filing an application for the same in the court, just because he has applied would not set aside the arbitral award. The award will be set aside only when the court orders so. The court may put a stay on the arbitral award if it is satisfied that the award is against the principles of justice. The court shall record its reason for doing so.
Appeals Under the Arbitration and Conciliation Act:
Section 37 of the Act exhaustively enlists orders against which an appeal can be preferred by parties under the Act. A party can prefer an appeal under Section 37, inter alia, against an order of the court refusing to refer the parties to arbitration under Section 8. However, parties cannot prefer an appeal under Section 37 against an order of the court under Section 11.
Appeals under this section is divided intop two categories:
Appeal against orders by Court:
- Refusing to refer the parties to arbitration under Section 8
- granting or refusing to grant any measure under section 9;
- setting aside or refusing to set aside an arbitral award under section 34.
Appeals against orders of Tribunals:
- accepting the plea referred to in sub-section (2) or sub-section (3) of section 16; or
- granting or refusing to grant an interim measure under section 17.
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