The implementation of arbitral awards, both domestic and international, is a crucial stage in the dispute resolution process. While arbitration is intended to be a speedier and more efficient alternative to traditional litigation, the enforcement of arbitral awards in India often encounters several challenges. These challenges can lead to delays, increased costs, and uncertainty for the parties involved, undermining the very purpose of arbitration.

Grounds for Challenging the Award:

Section 34 of the Arbitration and Conciliation Act, 1996, provides grounds for challenging a domestic arbitral award.

These grounds include:

• Incapacity of a party: If a party to the arbitration agreement was under some legal incapacity (e.g., minority, unsoundness of mind) at the time of entering into the agreement.
• Invalidity of the arbitration agreement: If the agreement to arbitrate is not valid based on the laws the parties chose, or if they didn't choose any, based on the current applicable laws.
• Lack of proper notice or inability to present the case: If the party making the application was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings or was otherwise unable to present their case. This aligns with the principle of natural justice.
• Award beyond the scope of submission: If the award addresses issues not part of the original agreement or goes beyond the agreed scope of arbitration. Only the valid part of the award will be upheld.
• Improper composition of the arbitral tribunal or procedure: If the panel formation or procedure did not align with party agreements or violated non-derogable provisions of Part I of the Act.
• Non-arbitrability of the subject matter: If the subject is not legally arbitrable (e.g., criminal cases, divorce, insolvency).
• Conflict with public policy of India: Includes awards that are:
  • Induced by fraud or corruption.
  • In contravention of fundamental policy of Indian law (e.g., natural justice, lack of evidence).
  • Against basic notions of morality or justice.
  Example: Board of Control for Cricket in India v. Kochi Cricket Pvt. Ltd.

Delay in Court Procedures:

Challenges under Section 34 and appeals under Section 37 often cause significant delays due to procedural backlog and complexities.

Resistance by the Losing Party:

The losing party may adopt delay tactics such as:

• Filing frivolous applications under Section 34 or appeals under Section 37.
• Raising procedural objections during enforcement.
• Obstructing asset identification and attachment.
• Initiating separate legal proceedings to challenge enforcement.

Example: A company files a weak Section 34 challenge to delay payment after losing arbitration.

Judicial Intervention:

Despite the Act's intent to limit judicial interference, courts may interpret "public policy" broadly, sometimes revisiting factual aspects of the dispute. Example: A court might examine evidence while reviewing a "public policy" challenge under Section 34.

Complexity of Legal Procedures:

Enforcement involves filing execution petitions, notices, asset identification, and navigating procedures under both the Arbitration Act and the Code of Civil Procedure, 1908. Example: Enforcing an award across multiple jurisdictions increases cost and complexity.
 

Cost of Enforcement:

Enforcement costs can be substantial, including:

• Court fees for execution petitions and applications.
• Lawyer's fees.
• Asset identification and valuation expenses.
• Attachment and asset sale costs.
   

Lack of Awareness and Capacity:

Limited awareness and legal capacity among parties and legal professionals can lead to delays and inefficiencies in enforcement.
 

Enforcement of Foreign Arbitral Awards:

Governed by Chapter II of the Act and the New York Convention. Challenges include:

• Objections under Section 48 (incapacity, invalidity, lack of notice, scope, public policy).
• Interpretation of "public policy" in international arbitration.
• Delays in recognition and enforcement procedures.
• Resistance involving arguments against Indian sovereignty or legal norms.

Recent Amendments and Proposed Changes:

The 2015 and 2019 amendments aimed to reduce judicial intervention and expedite arbitration. For instance, the 2015 amendment introduced a timeline for disposal of Section 34 applications.

Furthermore, the government has recently released a Draft Arbitration and Conciliation (Amendment) Bill, 2024, proposing further changes to boost institutional arbitration, reduce court intervention, and ensure the timely conclusion of arbitral proceedings. These proposed amendments indicate a continued focus on strengthening the arbitration ecosystem in India.

Conclusion:
Despite the legislative framework and the pro-arbitration stance of the Indian judiciary, the implementation of arbitral awards in India continues to face significant challenges. These challenges stem from the broad grounds for challenging awards, delays in court procedures, resistance by losing parties, the complexity of legal procedures, and the costs associated with enforcement. Addressing these issues requires a multi-pronged approach, including stricter interpretation of the grounds for challenge, streamlining court procedures, discouraging frivolous objections, enhancing judicial capacity, and increasing awareness about effective enforcement strategies.

The recent and proposed amendments to the Arbitration Act are steps in the right direction, signalling a commitment to making India a more arbitration-friendly jurisdiction where the fruits of arbitration can be realized without undue delay and expense. Overcoming these hurdles is essential to promote arbitration as a credible and efficient mechanism for resolving commercial disputes, contributing to the ease of doing business in India.