The Arbitration and Conciliation Act, 1996 (ACA) provides a comprehensive framework for resolving disputes through arbitration in India. Two pertinent questions often arise concerning the finality and enforceability of arbitral awards: firstly, can an arbitral tribunal withhold an award for unpaid fees, and secondly, does an arbitral award require stamping and registration to be considered valid? This article delves into these questions, drawing upon the provisions of the ACA and relevant legal principles.

Withholding of Award for Unpaid Fees: The Arbitrator's Lien (Section 39, ACA)

Section 39 of the ACA explicitly addresses the issue of an arbitral tribunal's right to withhold an award due to unpaid arbitration expenses. The provision unequivocally states that an arbitral tribunal possesses the authority to refuse to deliver a completed arbitral award if the parties have failed to pay the arbitration costs, which crucially include the arbitrator's fees.

The term "delivery of award" signifies the physical act of handing over the finalized award document to the parties. In essence, the tribunal holds a lien on the award until the agreed-upon or reasonably determined fees and expenses are settled. This provision serves as a safeguard for the arbitrators, ensuring they are duly compensated for their time, effort, and resources expended in conducting the arbitration proceedings.

However, the ACA provides a mechanism to prevent this lien from unduly delaying the enforcement of a legitimate award. If a party is aggrieved by the non-delivery of the award due to unpaid fees, they have the recourse to apply to the relevant court. Upon such an application, the court is empowered to order the arbitral tribunal to deliver the award, provided the applicant deposits the amount of fees and expenses claimed by the tribunal with the court.

Following the deposit, the court assumes the responsibility of scrutinizing the costs. It will conduct an inquiry, providing both the applicant and the arbitral tribunal an opportunity to be heard. After considering all the pertinent circumstances, including the nature and complexity of the claims and counterclaims, the duration and intricacies of the arbitration proceedings, the court will determine a reasonable amount to be paid to the arbitrators.

This judicial intervention ensures fairness to both parties. While protecting the arbitrator's right to remuneration, it also prevents exorbitant or unjustified fee demands from holding the award hostage. Any remaining balance of the deposited amount, after the court has disbursed a reasonable sum to the arbitrators, will be refunded to the applicant. This mechanism strikes a balance between the legitimate interests of the arbitrators and the right of the parties to access the outcome of the arbitration.

Stamping and Registration of Arbitral Awards - Implications for Validity:

The second crucial question pertains to the necessity of stamping and registration for an arbitral award to be considered valid. The legal position on this matter is nuanced and draws upon the Indian Stamp Act, 1899, and the provisions of the ACA.

According to the Indian Stamp Act, 1899, an unstamped or inadequately stamped arbitral award is considered inadmissible as evidence in court. This means that if a party seeks to rely on an unstamped award in any legal proceedings, including enforcement, the court may refuse to admit it as proof.

However, the ACA provides a pathway to rectify this deficiency at the stage of registration and enforcement. While the lack of proper stamping may render the award inadmissible initially, it does not necessarily invalidate the award itself. The deficiency in stamping can be cured by paying the requisite stamp duty and any applicable penalties at the time of seeking enforcement under the ACA.

It is important to note that the stamp duty payable on an arbitral award varies from state to state in India, as it is a subject falling under the state list of the Constitution. Therefore, the specific stamp duty implications will depend on the jurisdiction where the award is sought to be enforced or relied upon.

Furthermore, a critical distinction arises when the arbitral award deals with immovable property. In such cases, the registration of the award and the payment of stamp duty become mandatory. This requirement stems from the laws governing the transfer and registration of immovable property to ensure proper recording of title and revenue collection. Failure to register an award concerning immovable property can have significant legal consequences regarding its enforceability and the transfer of rights.

In summary, while an unstamped arbitral award may face admissibility challenges under the Stamp Act, this defect can generally be rectified during the enforcement process under the ACA. However, awards pertaining to immovable property necessitate mandatory registration and stamping for their legal validity and enforceability.

Conclusion:
The Indian arbitration framework, as laid down in the Arbitration and Conciliation Act, 1996, provides clear guidelines regarding the delivery and validity of arbitral awards. An arbitral tribunal is legally entitled to withhold a completed award pending the payment of arbitration expenses, acting as a form of lien. However, this right is balanced by the court's power to intervene and order the delivery of the award upon the applicant depositing the disputed amount, followed by a judicial determination of reasonable fees.

Regarding the validity of awards, while the Indian Stamp Act renders unstamped awards inadmissible, this defect is generally curable at the enforcement stage. Nevertheless, awards dealing with immovable property are subject to the mandatory requirements of stamping and registration to ensure their legal standing and enforceability. Understanding these provisions is crucial for parties involved in arbitration to navigate the process effectively and ensure the finality and enforceability of the arbitral award.

Written By: Md.Imran Wahab, IPS, IGP, Provisioning, West Bengal
Email: imranwahab216@gmail.com, Ph no: 9836576565