The decision of Arbitral Tribunal is termed as ‘Arbitral Award’ under the Arbitration and Conciliation Act, 1996 ( Arbitration Act). Pursuant to Section 28(2) of the Arbitration Act, the Arbitral Tribunal shall decide ex aequo et bono [in justice and in good faith] or as amicable compositeur only if the parties expressly authorised it to do so. The decision of Arbitral Tribunal will be by majority. The Arbitral Award shall be in writing and signed by the members of Tribunal. The Arbitral Award must be in writing and signed by the members of Arbitral Tribunal. It must state the reasons for the award unless the part agreed that no reason for the award is to be given. The Arbitral Award should be dated and place where it is made should be mentioned. The copy of Arbitral Award should be delivered to each party.
It is pertinent to mention that the main object of the arbitration process is the resolution of the dispute between the parties to an arbitration agreement, in its entirety, which implies the enforcement of the award as well. The success of any arbitration process wholly depends upon the enforceability of its awards and if the arbitration award is not enforceable then the whole process of arbitration is rendered ineffective.
The procedure for enforcement and execution of decrees in India is governed by the Code of Civil Procedure, 1908 (“CPC”) while that of Arbitral Awards in India is primarily governed by the Arbitration Act as well as the CPC. Pursuant to Section 36(1) of the Arbitration Act, where the time for making an application to set aside the arbitral award under Section 34 of Arbitration Act has expired, then, subject to the provisions of the CPC, in the same manner as if it were a decree of the Court.
Stamp Duty on Arbitral Award.
The Arbitration Act does not expressly lay down any legal requirement that mandates parties to an arbitration agreement to pay stamp duties on an arbitral award. There has been varying jurisprudence in the cases of domestic arbitration under Part I of the Arbitration Act as to whether non-payment of stamp duties on arbitral award would render such award invalid or non-enforceable.
The Indian Stamp Act 1899 (“the Stamp Act”) provides for stamping of deed/documents/instruments with specific stamp duties. Section 35 of the Stamp Act provides that an instrument which is unstamped or is insufficiently stamped is inadmissible for any purpose, which may be validated on payment of the deficiency and penalty.
The quantum of stamp duty to be paid would vary from State to State depending on where the award is made. The award, under Article 12 of the Schedule 1A to the Stamp (Delhi Amendment) Act 2001 as applicable to Delhi, of the Stamp Act, attracts stamp duty of 0.1% of the value of the property to which the Award relates.
Registration of Arbitral Award.
The Registration Act, 1908 (“the Registration Act”) does not expressly lay down a requirement for registration of an arbitral award or include any definition of the term ‘award’, which has led to an incongruence within the legal community as to whether an arbitral award has to be mandatorily registered. However, under Section 17 of the Registration Act (documents of which registration is compulsory) an arbitral award has to be compulsorily registered if it affects immovable property.
Effect of non-payment of stamp duty.
The effect of non-payment of stamp duty at the time of enforcement of an arbitral award has been the subject of varied judicial interpretation. The conflict arises from the fact that an award passed by a tribunal is not always produced before the courts, unlike decrees in civil suits. In civil proceedings, the question of payment of stamp duty arises only when a document is to be admitted into evidence.
Issues relating to the stamping and registration of an award or documentation thereof, may be raised at the stage of enforcement under the Arbitration Act. By judicial judgment, it had also observed that the requirement of stamping an award and registration is within the ambit of Section 47 [Questions to be determined by the Court executing decree] of the CPC and not covered by Section 34 [application for setting aside arbitral award] of the Arbitration Act.
It has been held by the Apex Court in M. Anasuya Devi v M Manik Reddy 2003 (9) SCALE 12 that the objection as to non-stamping of the Award are to be dealt with at the stage of enforcement of the arbitral award, and not at the stage of objections under Section 34 of the Arbitration Act. In view of said Apex Court’s judgment, by necessary implication, duly signed Arbitral Award, even being unstamped and unregistered, is valid in all respects to face the challenge under Section 34 of the Arbitration Act. The Stamp duty and registration fee are attracted to be paid just before when the parties would file the enforceable award in the court executing the decree under Section 47 of the CPC.
Disclaimer: Nothing contained in this document is to be construed as a legal opinion or view of either of the authors whatsoever and the content is to be used strictly for educative purposes only.