Arbitral award and termination of an arbitral award

ARBITRAL AWARD AND TERMINATION OF ARBITRAL PROCEEDING

Author: Sankalpita Pal

Introduction

This topic is wholly dealt with in CHAPTER VI of the Arbitration and Conciliation Act, 1996. Sections 28 to 33 wholly deal with “making of arbitral award and termination of proceedings” under this Chapter. This article will not only explain the important bare provisions but will also lay specific emphasis on Section 32. This section deals with the “Termination of proceedings”. 

Arbitral award

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

Case Laws

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

In Pandit Munsi Ram and associates v. Union of India[3] it was interpreted that since an arbitral award is considered 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 particular claim or issue in the course of arbitral proceedings.

In Harinarayan Bajaj v. Sharedeal Finance[4] it was held that as per definition under Section 2(c) an arbitral award includes an interim award. However, an interim award to be an award had to decide a claim with finality. Once the claim is decided, the Tribunal could not adjudicate further on that claim and become functus officio. Furthermore, the procedural orders passed during the arbitral proceeding is necessarily excluded from the concept of award.

In Paradise Hotel v. Airport Authority of India Ltd[5] the enforcement of an award is complete only when it has been enforced under CPC in the same manner as if wee a decree of court.

Types of arbitral awards

There are 2 types of awards –

• Domestic awards- this type of award is governed under Part I of the Act
• Foreign awards- this type is subsequently governed under Part II

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

The arbitral award is worth only to the extent of the parties’ ability to enforce the terms they initially agreed upon. 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 in the same manner as that of a decree passed by a court. In practice in domestic arbitrations, it is easier to enforce an arbitral award than judgment by a court. If the assets of the parties are almost in one and the same jurisdiction, the enforcement of domestic wards s much easier.

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

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

It is to be noted that all these conditions need to be necessarily satisfied.

Brief explanation of bare provisions (Section 28 to 31)

Section 28

An Arbitrator must decide the dispute in justice and in good faith. However, there is a condition precedent, only if both the parties expressly authorize an arbitrator to adjudicate then only he can decide the dispute between them.

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

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

Furthermore, the arbitral tribunal must apply provisions only according to the terms of the contract between parties. However, the tribunal must also take into account the usages and the current trade practices that are relevant to the contract.

Section 29

The decision of the Arbitral Tribunal will be by the majority. The arbitral award is the final stage of the arbitral proceedings. The decision made by the majority of the members of the tribunal will be declared in the form of an award.

Section 30

This section permits the encouragement settlement amongst the parties by the arbitral tribunal. If the parties successfully agree to a settlement then the same can be incorporated in the form of an award. Such settlements are recorded as the Arbitral award on agreed terms. Such amicable arbitral awards must be made according to Section 31. It has the same status and effect as that of an arbitral award passed by an independent tribunal to substance a dispute.

Section 31

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

The reason applied behind the award must be stated clearly. However, if the parties have agreed for settlement that no reason behind an award on agreed terms, need to be showcased. The date of declaration of an Award and the place where it is made shall be mentioned. Place of the award is also known as the seat of arbitration. A copy of the award shall be issued to each party. Arbitral Tribunals can pass an interim award.

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

Termination of Arbitral proceedings

Section 32 of the Arbitrational and Conciliation Act, 1996 is completely coherent with Article 32 of UNCITRAL Model Law. According to Section 32(1) of the Act termination of Arbitral proceedings takes place after the final award declared by the arbitral tribunal. The other 3 grounds of termination are given under Sub-section 2 of Section 32.

The arbitral tribunal shall issue an order to terminate the arbitration proceedings if:

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

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

Recent Development

In 2019 in the case of Sai Babu v. M/S Clariya Steels Private Limited[8] the SC 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 this case the Supreme Court chalked out a difference between the termination of Arbitral proceedings under Section 32 and Section 25 of the Act.

The court relied on 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(3) further contemplates termination of proceedings by Arbitral Tribunal on any other grounds or due to the fact that carrying out the proceedings is unnecessary. The conditions laid down under the above clauses is missing in Section 25. However, if the claimant shows sufficient cause as to why he wants the arbitral proceedings then it can be recommenced. The SC also 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 procedure laid down for the making an arbitral award and the termination of proceedings is pretty simple and straight cut. Analyzing the bare provisions is enough. The Apex Court has sometimes come up with necessary interpretations and suggested amendments. It is interesting to note that the termination of arbitral proceedings is different under Section 32 and Section 25. The finality of award marks the termination of proceedings along with three other grounds as under Section 32. Not many radical judgments have been passed with regard to the above subject however the 2019 case holds good law.

---

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

[2] Bhajahari v. Bihari, 1903 ILR 33

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

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

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

[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