Finality and Enforcement of the Award: Sections 35 and 36

Section 35 makes an arbitral award final and binding on the parties and on persons claiming under them. Section 36 makes it enforceable in the same manner as if it were a decree of the court. Between them they effect the most important practical change made by the Act of 1996: an award no longer has to be filed in court and converted into a decree before anything can be recovered on it. The area that continues to generate litigation is the stay of enforcement while a challenge under Section 34 is pending, which the amendments of 2015 and 2021 reshaped twice.

1. Finality: Section 35

Three things follow. The award concludes the dispute between the parties, so the same claim cannot be raised again in a suit or in a fresh reference; the award operates between them as a judgment would, and the principle underlying res judicata applies. It binds not only the signatories but persons claiming under them, which covers assignees, successors in interest, legal representatives under Section 40 and a receiver under Section 41. And the words subject to this Part preserve the single qualification: the award is final unless it is set aside under Section 34.

Finality also explains what the award is not. It is not a precedent, because it binds only these parties. It does not bind a stranger, because the tribunal's authority came from the agreement. And it is not subject to appeal on the merits, which is the subject of the separate topic comparing Section 34 with an appeal.

2. Enforcement: Section 36

The steps from award to execution, and the two features that distinguish the present law

The words in the same manner as if it were a decree are a deeming provision for the purpose of execution. The award does not become a decree; it is executed as one. No application to make the award a rule of court is required, and the execution court does not examine the merits. Execution follows the ordinary machinery of the Code, principally Order XXI, so a money award may be executed by attachment and sale of property, by arrest in the cases the Code allows, or by appointment of a receiver, and an award directing or prohibiting an act is executed as a corresponding decree would be.

3. Stay of Enforcement

The position before 2015, after 2015, and the unconditional stay introduced in 2021

3.1 The old law

As originally enacted, Section 36 provided that an award would be enforced where the time for making an application under Section 34 had expired or such an application had been refused. The courts read this as meaning that the mere filing of a challenge suspended enforcement, so that a party who had won the arbitration could recover nothing while the challenge, often lasting years, was pending. The automatic stay was the single largest defect in the enforcement regime, and it reproduced the position under the Act of 1940 that the 1996 Act was meant to end.

3.2 The present law

The Amendment Act of 2015 substituted the present Section 36. The filing of a challenge does not by itself render the award unenforceable; a separate application for stay must be made, and the court may grant a stay for reasons recorded in writing and subject to such conditions as it thinks fit. In practice the court applies the principles that govern the stay of a money decree, and commonly requires the award debtor to deposit the amount or to furnish security as a condition of stay. The Government and its instrumentalities are in no different position from a private party in this respect.

The Amendment Act of 2021 added a proviso to Section 36(3), with retrospective effect from 23 October 2015. Where the court is satisfied that a prima facie case is made out that the arbitration agreement, or the contract which is the basis of the award, or the making of the award, was induced or effected by fraud or corruption, it shall stay the award unconditionally pending disposal of the challenge. The distinction to remember is that a stay in the ordinary case is discretionary and usually conditional, while a stay on a prima facie case of fraud or corruption is mandatory and unconditional.

3.3 How the change reached pending matters

4. Practical Points on Execution

• Where to file. In any court within whose jurisdiction the assets of the award debtor are situated; no transfer is required.
• What to file. The award and the arbitration agreement, with an application for execution under Order XXI of the Code; the execution court does not examine the merits of the award.
• Interest. Post-award interest under Section 31(7)(b) runs on the sum directed to be paid, which includes pre-award interest, until payment.
• Stay. An award debtor who wants a stay must apply separately under Section 36(2) and should expect conditions; a stay obtained on a plea of fraud or corruption is unconditional, but requires a prima facie case to be made out.
• Interim orders. Section 9 remains available after the award and until it is enforced, which is how a successful party protects the assets while a challenge is pending.

5. Related Topics and Provisions