Understanding Arbitral Awards’ Execution & Challenges

“Won the Arbitration Battle, But Not the War?”

Introduction

In a world where businesses strive to avoid lengthy court battles, arbitration has become a preferred route for dispute resolution. It offers privacy, speed, and finality, three qualities that traditional court systems often lack. However, even after the arbitration process concludes, the journey might not end there. One critical aspect that parties often grapple with is arbitral award execution, and in some cases, how to challenge that award. Before diving into how an arbitral award is executed or challenged in India, it’s essential to understand what an arbitral award actually is. 

What is an Arbitral Award? 

An arbitral award is the decision made by an arbitral tribunal (a panel of one or more arbitrators) at the end of arbitration proceedings. It is legally binding on the parties, just like a court judgment. The award can direct parties to pay damages, perform contractual obligations, or take any specific action based on the facts and legal issues presented during arbitration. 

Under the Arbitration and Conciliation Act, 1996, once an arbitral award is passed, it becomes enforceable in the same manner as a court decree. But this doesn’t mean it's immune to scrutiny; certain grounds under the Act allow a party to challenge the award before it’s enforced. In the sections that follow, we’ll explore how arbitral awards are executed and under what circumstances they can be challenged, backed by key provisions of the 1996 Act. 

Why Execution and Challenge Are Crucial in Arbitration 

While arbitration is praised for being quicker and more flexible than traditional litigation, it doesn't end with the issuance of the award. What follows is equally important: execution and, where necessary, challenge of the arbitral award. 

Arbitral award execution ensures that the winning party actually receives the benefit awarded to them. Without proper execution, the entire arbitration process would be futile, no matter how fair or efficient. On the other hand, if a party believes that the award suffers from procedural defects, bias, or violates public policy, the law provides a limited window to challenge the award. This delicate balance between finality and fairness is what makes these two stages, execution and challenge, so crucial to the arbitration process. 

Definition under the Arbitration and Conciliation Act, 1996 

An arbitral award refers to the decision rendered by an arbitral tribunal at the conclusion of an arbitration proceeding. While the Act does not explicitly define "arbitral award," the term is generally understood from the context of Section 2(1)(c), which includes interim and final decisions within its ambit. It essentially represents the tribunal’s determination of the rights and liabilities of the parties based on the evidence and arguments presented. An award is expected to be in writing and signed by the members of the tribunal as per Section 31 of the Act. 

Types of Arbitral Awards: 

Under Indian arbitration law, arbitral awards can be categorized primarily into two types: An interim award, under Section 31(6) of the Act, is passed before the final decision to settle a particular issue or grant temporary relief. This ensures the smooth progress of the arbitration without delaying necessary relief. 

A final award concludes the arbitration and determines all substantive issues in dispute. Once the final award is made, the tribunal becomes functus officio, meaning it has no further authority over the matter except for limited corrections or clarifications under Section 33. 

Arbitral Award Execution in India 

Which Court Has Jurisdiction? 

The execution of an arbitral award in India is treated similarly to the execution of a civil court decree, as provided under Section 36 of the Arbitration and Conciliation Act, 1996. Once the time to challenge the award under Section 34 has expired, or if the challenge has been rejected, the award becomes enforceable like a court decree. 

As per Section 36(1), an award-holder can approach a civil court having jurisdiction to enforce the award. But which court exactly? 

• If the arbitration was domestic and seated in India, then the appropriate District Court or High Court (based on pecuniary jurisdiction and territorial nexus) will have jurisdiction to execute the award. 

  
  

The key is to file the execution petition in a court: 

• Where the losing party (judgment debtor) resides, or 

• Where their assets are located, ensuring effective recovery through the arbitral award execution process. 

  
  

Thus, understanding the correct court’s jurisdiction is the first practical step in ensuring the award is not just won, but also realized. 

Prior to the 2015 Amendment, mere filing of a petition under Section 34 operated as an automatic stay on the execution of the award. This caused undue delays and frustration in the arbitration process. The 2015 Amendment brought a much-needed shift; now, a separate application for stay must be filed, and the court has the discretion to impose conditions such as depositing the awarded amount or furnishing security before granting any stay. This change has strengthened the enforceability of awards and restored faith in arbitration as a swift remedy. 

 Execution of Foreign Arbitral Awards 

Arbitral award execution of foreign awards falls under Part II of the Act, guided by the New York Convention or Geneva Convention, depending on the country where the award was made. Such awards must first be recognised by a competent Indian court under Section 48, which may refuse enforcement only on limited and specific grounds (e.g., incapacity of parties, violation of public policy, etc.). Once recognised, a foreign arbitral award becomes enforceable like a decree, and the process follows the same route as domestic award execution under the CPC. 

 Challenging an Arbitral Award in India 

While arbitral awards are meant to bring finality to disputes, the Arbitration and Conciliation Act, 1996, does allow limited judicial interference. The challenge mechanism is outlined in Section 34 of the Act, which provides the legal recourse for setting aside an arbitral award. It is important to understand this challenge process as it directly impacts the timeline and enforceability of arbitral award execution. 

Section 34 is the statutory provision that enables a party to approach the court to set aside an arbitral award. However, courts are restricted from reviewing the merits of the case. Unlike appellate proceedings, this challenge is not a rehearing of the dispute but a check on procedural and substantive fairness. An application under Section 34 must be made to the court having jurisdiction, typically the same court that would otherwise handle execution under Section 36. Importantly, arbitral award execution is stayed only when the court grants an explicit stay upon a separate application. Thus, filing a Section 34 petition alone does not stall enforcement. 

Grounds for Challenging an Arbitral Award 

The grounds for setting aside an award under Section 34 are narrow and exhaustive. Courts cannot interfere merely because they would have decided differently. The permissible grounds include: 

• Incapacity of parties: One of the parties was under some legal incapacity at the time of the agreement or arbitration. 

• Invalid arbitration agreement – The agreement is not valid under the law. 

• Lack of proper notice or inability to present case – If a party was not given sufficient notice or was otherwise unable to present their case effectively. 

• Award beyond the scope of arbitration – If the tribunal exceeded the scope of the arbitration agreement. 

• Improper composition of the tribunal or procedure not in accordance with the agreement – Violations of agreed procedure or statutory requirements. 

• Award is in conflict with the public policy of India – This includes awards induced by fraud or corruption, or those that are in conflict with fundamental principles of justice or morality. 

• Patent illegality – Introduced by the 2015 Amendment, this applies only to domestic awards and allows the court to set aside an award that is manifestly unlawful. 

  
  

Each of these grounds is narrowly construed. Courts emphasize the principle of minimal interference and uphold awards unless a serious flaw is apparent. 

Limitation Period for Challenge 

The Arbitration Act prescribes a strict limitation period to file a challenge under Section 34: The petition must be filed within 3 months (90 days) from the date the party receives the award. An extension of 30 additional days may be granted if the party shows sufficient cause for the delay. Beyond this period, no challenge is maintainable. And once the timeline lapses without a Section 34 application, arbitral award execution can begin as per Section 36. This time-sensitive nature reinforces the finality and certainty in arbitration. It protects the award-holder from being indefinitely dragged into litigation and ensures that the intent of fast-track dispute resolution is respected. 

The filing of a Section 34 petition does not automatically halt the arbitral award execution process. The award-debtor must seek a separate stay order under Section 36(2), and courts may impose conditions such as depositing the awarded sum or providing security. This balanced approach, allowing challenge but not delaying execution without judicial scrutiny, upholds the efficiency of arbitration while safeguarding against unfair awards. 

Interim Measures During Execution or Challenge 

When parties are either executing or challenging an arbitral award, interim relief becomes a vital tool to safeguard their rights and interests. The Arbitration and Conciliation Act, 1996, through Sections 9 and 17, provides mechanisms to secure assets or maintain the status quo during these critical phases. Understanding these interim measures is crucial for anyone involved in arbitral award execution or contesting an award. 

Section 9: Interim Relief by Courts 

Section 9 empowers Indian courts to grant interim measures at three stages: 

1. Before commencement of arbitral proceedings. 

2. During the pendency of proceedings. 

3. After the arbitral award but before its enforcement. 

In the context of arbitral award execution, Section 9 becomes relevant when the winning party anticipates that the award-debtor might frustrate the award by alienating assets. Courts may grant orders such as:  

1. Injunctions to restrain the disposal of property. 

2. Securing the amount in dispute through attachments. 

3. Appointing receivers. 

Once the award is made, the courts may refuse interim relief under Section 9 if the party has already approached the arbitral tribunal under Section 17,  reinforcing the Act’s intent to minimize judicial interference. 

Section 17: Interim Relief by Arbitral Tribunal 

With the 2015 amendment, Section 17 empowers arbitral tribunals to grant interim measures with the same legal force as court orders. This includes orders for: Preservation of assets, Security deposits, Interim injunctions, Detention or inspection of property relevant to the dispute. 

During the challenge phase under Section 34, or while waiting for arbitral award execution, parties may approach the tribunal (if still in existence) for interim protection. This reduces the burden on courts and aligns with the principle of party autonomy. 

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Conclusion

We hope this blog has helped you understand the key stages of arbitral award execution and the legal remedies available when an award is challenged. Whether you're an award-holder seeking swift enforcement or a party exploring grounds to contest an award, knowing how Indian arbitration law functions can be a game-changer. With clarity on jurisdiction, enforcement timelines, and the impact of legal challenges, you can take informed action without getting lost in procedural delays. 

At LegalPay, we empower you with practical insights, litigation finance options, and legal support to help you navigate arbitration and enforcement efficiently. Remember, being proactive about arbitral award execution today can secure your commercial interests and protect your time, energy, and money in the long run. 

FAQs (Frequently Asked Questions): 

 

1. What is an arbitral award? 

An arbitral award is the final decision given by an arbitral tribunal in a dispute submitted to arbitration. It can be interim or final and is binding on the parties, just like a court judgment. The award resolves the issues referred for arbitration and is enforceable under Indian law. 

 2. When can an arbitral award be executed? 

An arbitral award can be executed once the time limit for filing a challenge under Section 34 of the Arbitration and Conciliation Act, 1996 has expired, or if no stay is granted by the court. After that, the award is treated as a civil court decree. 

 3. Which court has jurisdiction for arbitral award execution? 

The principal civil court having original jurisdiction or the High Court (in case of international commercial arbitration) has the authority to enforce arbitral awards, as per Section 36 of the Act. 

 4. Can an arbitral award be challenged before it is executed? 

Yes. Under Section 34, a party can challenge an award on limited grounds such as fraud, lack of jurisdiction, or violation of public policy. But merely filing a challenge does not automatically stay execution. 

 5. How can you stay the execution of an arbitral award? 

To stay execution, the party challenging the award must file a separate application under Section 36(2) along with their Section 34 petition. Courts may impose conditions like furnishing security or a deposit before granting the stay. 

 6. What are the types of arbitral awards? 

There are interim awards (addressing some issues before the final award) and final awards (resolving the dispute entirely). Both can be enforced if the conditions for execution are met. 

7. What happens if the award is not complied with? 

If the losing party fails to comply with the award, the winner can initiate execution proceedings just like enforcing a civil court decree. Courts may seize assets or order payments to satisfy the arbitral award.