Hafiz Muhammad Azeem : Requirements of Award

Introduction:

In this assignment we shall be discussing the concept of “arbitration and award” in respect of sections 14, 15, 16 and 30 of The Arbitration act, 1940. In the pursuit of this discussion it is highly essential that we completely understand the concept and meaning of the term Arbitration.

Arbitration:

“Arbitration is a settlement of a dispute by the decision, not of a regular or ordinary court of law but by one or more persons who are called arbitrators.”

Arbitration means “the determination of disputes by the decision of one or more persons who are called arbitrators, and not by an ordinary court of law, whose decision the parties agree to accept as binding whether they agree to decision or not”

In simple words an arbitrator is one who is appointed by the parties to the dispute for determining a judgment or conclusion to such dispute. Such judgment is binding whether the parties agree to it or not.

Award:

Under arbitration act 1940

Section 2, clause (b) “award” means an arbitration award;

“The decision of arbitrator is called an award. It is an instrument which embodies the decision of arbitrator as regards matters referred to him. It is a paper containing the decision of the arbitrators.”

In simple words an award means a judgment or final decision and for the purpose of the arbitration act 1940 it means the decision of the arbitrator to whom a reference is made under one or other sections of this act.

It is equivalent of the final judgment, whether it has been incorporated into a decree or not and is binding on the parties in the absence of positive evidence.

Hence,

In the above mentioned sections what we have basically comprehended is the courts power or control over the award. In the scheme of the Arbitration Act, 1940, the court may:

(a) Pass a judgment in terms of the award (section 17), or

(b) Modify or correct the award (section 15), or

(c) Remit the award (on any matter referred to arbitration), for re-consideration by the arbitrator or umpire (section 16), or

(d) Set aside the award (section 30).

In short, the court may:

(i) Totally accept the award, or

(ii) Totally reject it, or

(iii) Adopt the intermediate course of modifying it or remitting it.

Now, as we have discussed the main gist of our topic, it is now imperative that we proceed towards each section objectively and discuss the true essence of each section, as to how it plays its role, in the arbitration act 1940.

Under section 13 Powers of arbitrator;

Law recognizes certain powers to arbitrators or umpires in which one of that is “Making award”which may be either conditional or in the alternative.

Under section 14 Award to be signed and filed;

Finality of award: Upon the completion of the work of award, arbitrators shall do as follows:

Signature on award: Whenever award is made, makers are required to sign it as a sign of finality.

Notice to parties: Arbitrators are required by law to notify such making of award to parties. They also may notify their fees and other charges payable in respect of arbitration and award.

Deposition of award: Arbitrators may deposit award to Court on the desire of parties.

Orders of Court: If arbitrators have referred the case toward Court for the opinion of Court and Court has given instruction, Court shall revert the case toward arbitrators after making some suggestions so that it may form the part of award. Court itself cannot make its orders as part of award.

The object of notice of making and signing award is to apprise the parties to the arbitration agreement of the fact of the making of the award, so as to enable them to prefer objection before the court in proper time.

Under section 15 Power of Court to modify award;

Principle:

The basic rule is that, the parties choose their own arbitrators as the judge, and they cannot, when the award is good on the face of it, object to his decision upon law or facts, except in the manner and to the extent described in this section.

So,

Court may at any stage modify the award to some extent but not at all. Powers of Court are as follows:

a) Modification on irregularity: If it appears that arbitrators have made award on the matters which were not referred toward them, Court may separate it if it does not effect the original or substantial award referred.

b) Modification on imperfection: If award contains any error, which can be modified without effecting such decision, Court may alter award. It may be any matter un-referred. It does not amount intervention of the Court but mere procedural intervention.

c) Modification of clerical error: Court may modify in any clerical error if occurred.

Under section 16 Power to remit award;

This section lays down the circumstances under which the court may remit the award for reconsideration of the arbitrator.

Necessity for remitting the award arises, when there are omissions or defects in the award which cannot be modified or corrected under section 15.

So,

Court may remit award when presented to Court to arbitrators or umpire whatsoever case is in certain cases, such as:

a) Remittance upon non-determination of referred matter: Court may remit the award toward arbitrators or umpire, whatsoever case is, for reconsideration if any of the matter remains undetermined which were referred for arbitration. Here again intervention of Court is mere procedural.

b) Remittance upon determination of un-referred matter: Where arbitrators or umpire has determined any matter actually not referred for arbitration, Court remits it back to arbitrators or umpire for reconsideration provided it is not separable by the Court. Court intervenes if the matter is separable. Here again Court shall not intervene for the modification of award but shall leave it to its originators whatever they may do.

c) Remittance upon incapacity of execution: If award remains incapable to execute, Court shall remit it to arbitrator or umpire for reconsideration.

d) Remittance upon the question of apparent illegality: Award can be remitted only where the question of law necessarily arises on the face of the award or upon some paper accompanying and forming part of the award and that question ex-facie has been decided wrongly; otherwise not.

Powers of Court in case of remittance of award: Court exercises certain power when remit award, including:

1) Fixation of time: Court fixes the time for arbitrators or umpire so that they may reconsider and submit their decision to Court.

2) Subsequent extension of time: Court may subsequently extend the time period to reach on the conclusion.

3) Declaration of award null and void: When arbitrators or umpire fails in reconsideration of award within time limit which Court grants, Court may declare such award void.

4) Grant of decree on award: Court is entitled to a decree upon award if party in whose favor the award is made, if no application is filed or if the application is filed and dismissed on merits.

5) Power to set aside award: Opportunity is given to party challenging or disputing the award to file an application to set aside the award and the application has got to be filed within the period of limitation prescribed by Limitation Act.

6) Power to pass interim order: Court exercises this power in a case where an award has been filed and a decree has been passed. But where some one of the parties had been trying to defeat or delay or obstruct the execution of the decree passed upon the award, in such cases, the Court is specifically empowered by law to pass interim orders that may be deemed necessary. The power of Court is discretionary. The order of the Court is not appeal-able.

7) Power to reverse order: Aggrieved party may approach Court to reverse order being not having mala-fide intention, which may occur after the decree of Court.

8) Power to supersede arbitration: If award becomes void on the ground of failure of the arbitrators or umpire for reconsideration of award upon remittance, Court may supersede the arbitration at all. This is exclusive power of Court.

Under section 30 Grounds to set aside award;

Award can be set aside on the following grounds:

1) Misconduct; If arbitrator has committed misconduct during or at the time of making award.

2) Making award after Court’s order; When Court has made order to cease the proceeding and award has been made shall be declared null and void.

3) Determination of un-referred matter

4) Left matter referred

5) Incapable to execute

6) Illegality

7) Irregularity

8) Disregard of Court’s order

9) Non-separation of undesirable matter

10) Sufficient reasons u/s 26 – A

11) Fraud

12) Coercion

No suit can be instituted in civil Court against the award. Only application can be moved in civil Court having jurisdiction.

Decree is a part of judgement based upon reason. Every judgement is appeal-able. Order is also judgement. Every order is not appeal-able. Locus standi means a person who is competent to stand before Court. He may either be plaintiff or defendant.

Determination of award: A person is permitted to challenge the arbitration agreement or award only. The existence of contract itself cannot be challenged. Ordinarily, the Court should decide the questions on affidavits. But where such questions cannot be conveniently tried by affidavits, the Court is entitled to examine witnesses.

Conclusion:

From the above discussion, our group has analyzed the requirements of an award and the grounds for setting aside an award. We believe that with a thorough and complete understanding of The Arbitration act 1940, one may be capable of understanding the essentials required in appointing an arbitrator. The above discussed sections give us an insight on the relationship and powers of the court in relation to arbitration.

However, we do believe that the notion of arbitration differs in theory and in practicability. We believe that with due process of time this concept shall be considered with a full binding capacity and shall be seen to work effectively as elaborated in the theoretical side. This is however, a completely different question which is highly debatable in the present era.