What is Section 36 of Arbitration and Conciliation Act

Enforcement of Arbitration Award under Section 36 of Arbitration and Conciliation Act

CHAPTER VIII
Finality and enforcement of arbitral awards

Section 36. Enforcement -

(1) Where the time for making an application to set aside the arbitral award under section 34 has expired, then, subject to the provisions of sub-section (2), such award shall be enforced in accordance with the provisions of the Code of Civil Procedure, 1908, in the same manner as if it were a decree of the court.

(2) Where an application to set aside the arbitral award has been filed in the Court under section 34, the filing of such an application shall not by itself render that award unenforceable, unless the Court grants an order of stay of the operation of the said arbitral award in accordance with the provisions of sub-section (3), on a separate application made for that purpose.

(3) Upon filing of an application under sub-section (2) for stay of the operation of the arbitral award, the Court may, subject to such conditions as it may deem fit, grant stay of the operation of such award for reasons to be recorded in writing:

Provided that the Court shall, while considering the application for grant of stay in the case of an arbitral award for payment of money, have due regard to the provisions for grant of stay of a money decree under the provisions of the Code of Civil Procedure, 1908.]

[Provided further that where the Court is satisfied that a prima facie case is made out that, -

     (a) the arbitration agreement or contract which is the basis of the award; or

     (b) the making of the award,

was induced or effected by fraud or corruption, it shall stay the award unconditionally pending disposal of the challenge under section 34 to the award.

Explanation. - For the removal of doubts, it is hereby clarified that the above proviso shall apply to all court cases arising out of or in relation to arbitral proceedings, irrespective of whether the arbitral or court proceedings were commenced prior to or after the commencement of the Arbitration and Conciliation (Amendment) Act, 2015 (3 of 2016).]

Scope of Section 36 of Arbitration and Conciliation Act

Section 36 of the Arbitration and Conciliation Act lays that Enforcement of an arbitral award in a Domestic Arbitration is to be carried out in the same manner as done in a decree passed by the court.

Upon expiry of limitation for moving Objection Petition under Section 34 of the 1996 Act had expired or the Objection Petition has been dismissed, the execution process can be initiated.Originally the Arbitration Act did not specify as to whether the operation of a domestic arbitral award would be stayed while the Objection Petition under Section 34 of the Arbitration Act is pending disposal.

On this aspect Supreme Court, had in National Aluminum Company Ltd. (NALCO) v. Pressteel & Fabrications (P) Ltd. and Anr. (2004) 1 SCC 540 held that once a domestic arbitral award is challanged under Section 34 of the 1996 Act it becomes unexecutable.

It was through the Arbitration & Conciliation (Amendment) Act, 2015, which sought to emd the era of the automatic stay rule. The amended Section 36 stipulated that the mere filing of a challenge under Section 34 would not render a domestic arbitral award unenforceable, and a stay of the operation of the award would have to be specifically sought from and granted by the relevant court.

As such, unless a court stayed the operation of an award, the award-holder was at liberty to have it enforced in accordance with the Arbitration Act. The 2015 Amendment became effective on October 23, 2015.

The Arbitration and Conciliation (Amendment) Act, 2019 introduced a new Section 87 in the Arbitration Act which provided that the 2015 Amendment:

(i) will apply to arbitration proceedings commenced on or after the Effective Date and to court proceedings arising out of or in relation to such arbitration proceedings; and

(ii) will not apply to arbitration proceedings commenced prior to the Effective Date or to court proceedings arising out of or in relation to such arbitration proceedings (irrespective of whether such court proceedings commenced prior to or after the Effective Date).