Section 36 provides a guarantee that once an arbitral award has been made, it is equally placed as that of a decree by the court and hence equally enforcible. Enforcement proceedings are allowed to be initiated only after the limitation period for filing objections under Section 34 has expired or the objections were filed but had been dismissed. Initially, the Act did not address whether a domestic arbitral award would automatically be stayed during the pendency of an objection under Section 34.
This ambiguity was addressed through the Arbitration & Conciliation (Amendment) Act, 2015, which aimed to end the automatic stay on awards. The amended Section 36 clarified that the mere filing of a challenge under Section 34 does not make a domestic arbitral award unenforceable. Instead, an explicit stay must be requested and granted by the court for the award’s operation to be paused. Thus, unless a court specifically orders a stay, the awardee can proceed with enforcement. The 2015 amendment, effective from October 23, 2015, significantly streamlined the process, reinforcing the enforceability and efficiency of arbitration in India.
Objective of Section 36 of the Arbitration Act
The core purpose of this section is to allow the successful party in an arbitration to enforce the award as if it were a court decree. The section provides that the arbitral becomes binding upon the expiration of the time limit to challenge them under Section 34 or, if a challenge has been made, only once the court dismisses it.
Breakdown of Provisions in Section 36 of the Arbitration Act
Section 36 of the Arbitration Act includes specific provisions that clarify how awards are enforced.
Before the 2015 amendment, filing a challenge under Section 34 automatically stayed the enforcement of the award. Post-amendment, there is no automatic stay, and parties must apply for a stay separately if they seek to halt enforcement. This amendment prevents delays in executing awards due to prolonged challenges.
Section 36 of the Act provides the following:
Section 36(1) Enforcement as Decree: Under Section 36(1), arbitral awards are enforceable as if they were decrees of the court. This provision gives awards the same effect as a court judgment, streamlining their execution.
Section 36(2) Stay on Enforcement by Court Order: If a party challenges the award under Section 34, Section 36(2) requires a specific court order to stay enforcement. This ensures that enforcement is paused only when necessary, preventing undue delays for the winning party.
Section 36(3) Conditions on Stay: Section 36(3) permits courts to impose conditions on the stay, including the possibility of directing the losing party to furnish security, thereby protecting the interests of the award-holder.
Stay of Money Awards:
When an award involves payment of money, the court considers relevant Code of Civil Procedure provisions on money decree stays.
Unconditional Stay in Fraud or Corruption Cases (Inserted in the year 2021): If the award is suspected of being induced by fraud or corruption, the court may grant an unconditional stay. This applies to all court cases related to arbitral proceedings, regardless of when they commenced.
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Relevant Amendments to Section 36 of the Arbitration Act 1996
The Arbitration and Conciliation (Amendment) Act, 2015, This amendment eliminated the automatic stay on enforcement upon filing a Section 34 challenge, thus accelerating the enforcement process. This change was instrumental in boosting confidence in arbitration as an effective dispute resolution mechanism.
Judicial Pronouncements Related to Section 36 of the Arbitration Act 1996
Hindustan Construction Company Ltd. v. Union of India (2019)
In this case, the Supreme Court upheld that the purpose of Section 36 is to provide expedient enforcement without unnecessary interference, especially in the absence of a stay order.
BCCI v. Kochi Cricket Pvt. Ltd. (2018)
The Supreme Court clarified the retrospective effect of the 2015 amendment to Section 36, stating that the amendment applies even to arbitration proceedings initiated before 2015 but awarded afterward. This decision ensured that awards are not unnecessarily delayed due to ongoing pre-amendment cases.
Read more about Arbitration and Conciliation Act 1996!
Section 36 of the Arbitration and Conciliation Act 1996 establishes arbitration as a truly effective alternative to litigation. By allowing awards to be enforced like court decrees and removing automatic stays, Section 36 of the Arbitration Act prioritizes efficient and timely enforcement while deterring baseless challenges.
FAQs
What is Section 36 of the Arbitration Act?
Section 36 outlines the enforcement of arbitral awards as court decrees and describes conditions under which an award may be stayed if challenged.
Can an arbitral award be enforced immediately after issuance?
Yes, once the time to challenge it under Section 34 expires, or if no stay is granted, the award is enforceable like a court decree.
Does filing a challenge under Section 34 automatically stay the award's enforcement?
No, filing a challenge does not automatically stay the award. A separate application must be made for a stay.
What conditions apply to a stay of enforcement under Section 36?
Courts may impose conditions for the stay, particularly for money awards, aligning with procedures in the Civil Procedure Code.
How does Section 36 address cases of fraud or corruption?
The section allows an unconditional stay if the court finds a prima facie case of fraud or corruption in the arbitration agreement or award-making process.
