Arbitral Award

What is an Arbitral Award?

An **arbitral award** is the formal decision rendered by an arbitrator or an **arbitral tribunal** that resolves a dispute referred to arbitration. Once made, the award is **binding on the parties** and, subject to limited grounds for challenge, is enforceable in the same manner as a decree of a civil court. It is the arbitration equivalent of a court judgment.

In everyday terms, when two parties agree to settle a dispute through arbitration instead of going to court, the arbitrator hears both sides and delivers a final decision. That decision is the arbitral award — and both sides must follow it, just as they would follow a court order.

Legal Framework

Arbitral awards in India are governed by the **Arbitration and Conciliation Act, 1996** (as amended in 2015, 2019, and 2021). The Act draws heavily from the **UNCITRAL Model Law on International Commercial Arbitration**.

Key Provisions

**Section 31: Form and Contents of Arbitral Award**

- The award must be **in writing** and **signed** by the members of the arbitral tribunal. In cases with more than one arbitrator, signatures of the majority suffice, provided the reason for any omitted signature is stated.

- The award must state the **reasons** upon which it is based, unless the parties have agreed otherwise or the award is on agreed terms (consent award).

- The award must state its **date** and the **place of arbitration** as determined under Section 20. This is important because the place determines the jurisdiction for any challenge.

- A signed copy of the award must be **delivered to each party**.

**Section 31(7): Interest**

The arbitral tribunal may include in its award **interest** on the whole or any part of the sum awarded, for the whole or any part of the period between the date of the cause of action and the date of the award, and from the date of the award to the date of payment.

**Section 31(8): Costs**

The arbitral tribunal may fix the **costs of arbitration** in the award. Under the 2015 Amendment, Section 31A provides a detailed regime for costs, following the general principle that costs follow the event — meaning the unsuccessful party typically bears the costs.

Types of Arbitral Awards

**1. Final Award**

The conclusive decision on all matters in dispute. Once a final award is rendered, the tribunal becomes **functus officio** (its authority ends) on those issues.

**2. Interim Award (Section 31(6))**

An arbitral tribunal can make an interim award on any matter during the proceedings. For example, if liability is clear but the quantum of damages requires further examination, the tribunal may pass an interim award on liability.

**3. Consent Award (Award on Agreed Terms) (Section 30)**

If the parties settle the dispute during arbitration proceedings, the tribunal can record the settlement as an arbitral award on agreed terms. This consent award has the same status and effect as any other arbitral award.

**4. Additional Award (Section 33(4))**

If a party, within 30 days of receiving the award, requests a decision on claims that were presented during proceedings but omitted from the award, the tribunal may make an additional award within 60 days.

Challenging an Arbitral Award

Setting Aside Under Section 34

An arbitral award can be challenged before the court only on **limited grounds** specified under Section 34. The court cannot review the merits of the dispute or act as an appellate body. The grounds include:

1. **Incapacity of a party** or the arbitration agreement being invalid under the law to which the parties have subjected it.

2. The party was **not given proper notice** of the appointment of the arbitrator or the proceedings, or was otherwise unable to present their case.

3. The award deals with **matters beyond the scope** of the submission to arbitration.

4. The composition of the tribunal or the procedure was **not in accordance** with the agreement of the parties.

5. The **subject matter** of the dispute is not capable of settlement by arbitration under Indian law.

6. The award is in conflict with the **public policy of India** — which after the 2015 Amendment is narrowly defined to include fraud or corruption, contravention of the fundamental policy of Indian law, or conflict with basic notions of morality or justice.

The Supreme Court in **ONGC v. Saw Pipes Ltd (2003) 5 SCC 705** expanded the public policy ground to include patent illegality, and this was codified in the 2015 Amendment as an additional ground for domestic awards — the award is vitiated by **patent illegality appearing on the face of the award**.

Time Limit for Challenge

An application to set aside the award must be made **within three months** from the date of receiving the award. The court may allow a further period of **30 days** but not thereafter (Section 34(3)).

Enforcement of an Arbitral Award

Domestic Awards (Section 36)

Once the time for filing a challenge under Section 34 expires, or if the challenge is rejected, the arbitral award becomes **enforceable as a decree of a civil court**. The award-holder can apply for execution under the CPC just as a decree-holder would.

After the **2015 Amendment**, the mere filing of a Section 34 application does **not automatically stay** the enforcement of the award. The court must separately grant a stay, and it may impose conditions (such as deposit of the awarded amount).

Foreign Awards (Sections 44-52)

Awards made in countries that are signatories to the **New York Convention** can be enforced in India under Part II of the Act. The party seeking enforcement must produce the original award and the arbitration agreement. The court can refuse enforcement only on limited grounds similar to Section 34.

When Does This Term Matter?

In Commercial Disputes

Most commercial contracts include arbitration clauses. When disputes arise over breach of contract, delivery failures, payment defaults, or joint venture disagreements, the arbitral award is the final resolution. Businesses need to understand that an arbitral award is not merely an opinion — it is an enforceable decision with the force of a court decree.

In Construction and Infrastructure Projects

Disputes in construction projects are commonly resolved through arbitration. Arbitral awards in these sectors often involve substantial sums, and the enforcement mechanism under Section 36 ensures that the winning party can recover the awarded amount through court execution.

In International Trade

Cross-border commercial disputes are frequently resolved through international arbitration. The enforceability of foreign arbitral awards under the New York Convention makes arbitration the preferred dispute resolution mechanism in international trade.

Practical Significance

- **Finality:** Arbitral awards are intended to be final. Courts have very limited grounds to interfere, which ensures that the dispute resolution process through arbitration is not prolonged by endless litigation.

- **Speed:** The 2015 Amendment introduced a time limit of **12 months** (extendable by 6 months) for passing the award in domestic arbitrations (Section 29A), addressing delays in Indian arbitration.

- **Enforcement strength:** An arbitral award, once enforceable, is treated exactly like a court decree. The award-holder can attach and sell the judgment-debtor's property, garnish bank accounts, and use all execution remedies available under the CPC.

- **Costs regime:** The 2015 Amendment introduced a structured costs regime where the unsuccessful party generally bears the costs of arbitration, discouraging frivolous claims and defences.

Frequently Asked Questions

Can an arbitral award be appealed?

An arbitral award cannot be appealed on merits as one would appeal a court judgment. It can only be **challenged** under **Section 34** of the Arbitration Act on very specific and limited grounds. An appeal lies against the order of the court on the Section 34 application under **Section 37**. The Supreme Court has consistently emphasized that courts should not re-examine the evidence or substitute their own views for those of the arbitrator.

How long does it take to enforce an arbitral award?

If no challenge is filed, the award becomes enforceable after the **three-month challenge period** expires. If a challenge is filed under Section 34, enforcement depends on the court's decision, though after the 2015 Amendment, the filing of a challenge does not automatically stay enforcement. In practice, enforcement timelines vary depending on court backlog, but the statutory framework is designed for swift enforcement.

What is the difference between an arbitral award and a court decree?

An **arbitral award** is rendered by a private arbitral tribunal chosen by the parties, while a **court decree** is passed by a government court. However, once an arbitral award becomes enforceable under Section 36, it has the **same legal effect** as a court decree and can be executed through the same mechanisms. The key difference lies in the process: arbitration is private, flexible, and consensual, while court proceedings are formal and public.

Can an arbitral award grant interest and costs?

Yes. Under **Section 31(7)**, the arbitral tribunal can award interest for the period before the award (pendente lite) and after the award (future interest). Under **Section 31A** (introduced by the 2015 Amendment), the tribunal can award costs of arbitration, including fees of arbitrators, administrative costs, legal fees, and other expenses. The general rule is that costs follow the event, meaning the losing party bears the costs.