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Report No. 176

2.29.1 Section 36:

Enforcement of award by the court - bottlenecks removed and provision made to impose conditions:

Enforcement of award is now not possible if any application to set aside the award is filed in time and is pending. This has created some problems. Section 36 states that where the time for making an application to set aside the arbitral award under sec. 34 has expired, or 'such application having been made, it has been refused', the award shall be enforced under the Code of Civil Procedure, 1908 in the same manner as if it were a decree of the court.

The procedure under the 1940 Act of filing the award into court and for making it a rule of court is dispensed with under the new Act. Now the award need not be made a rule of Court. It can be straightaway enforced subject to some conditions. One is that if the period prescribed for filing an application to set aside the award has expired, the award can be enforced. But where such an application to set aside the award is pending, the enforcement of the award comes to a standstill, till the application is refused by the court, because of the language in section 3, set out above.

This provision in sec. 36 has come for certain abuse by persons against whom an award is passed. By filing an application to set aside the award, even in cases where there is no substance in the application, there is, so to say, an automatic stay of the award till such time the application is rejected. Thus, an application can be simply filed and the proceedings can be dragged on.

2.29.2 It has been suggested at the Bombay seminar and also by the Director General of Supplies & Disposals (DGS&D) that a party against whom an award is passed must be compelled to deposit award amount or furnish Bank guarantee therefore, as a condition for filing the application to set aside the award under section 34(1). This suggestion is not acceptable. The suggestion of the DGS&D obviously assumes that every award is in favour of the Government.

When a drastic provision is to be made, one has to take care of the repercussions on parties other than the Government. In the opinion of the Commission, it will be fair to confer power upon the Court dealing with section 34(1) applications, to grant stay of operation of award subject to such conditions as the Court may deem fit in the circumstances of the case.

2.29.3 Another suggestion of the DGS&D that contractors should give a list of assets and undertake not to transfer their assets during the pendency of arbitration or enforcement proceedings is also not a fair provision. There are enough provisions in the Act like section 9 and section 17 to enable parties to obtain interim orders for securing the interests of either party. Hence this suggestion is also rejected.

2.29.4 Instead a proposal is to be made that the award is to remain enforceable but that the Court could impose conditions while granting stay of operation of the award. Conditions could mean deposit of the full amount or part thereof or Bank guarantee or attachment of assets, etc.

It is, therefore, proposed to drop the words "or such application having been made, it has been refused", and add a second clause in sec. 36 to the effect that the filing of an application to set aside an award, does not ipso facto amount to stay of operation of the award and that pending the said application, the court can pass such interim orders as it thinks fit, including orders in relation to the property which is the subject matter of the award or other property or orders for deposit of the monies, either in whole or in part, payable under the award, to protect the interest of the party in whose favour the award is passed.

2.29.5 The proposal is therefore to renumber the existing provision as sub-section (1) and drop the following words from sec. 36 "or such application having been made, it has been refused".

2.29.6 It has been pointed out that award should not be allowed to be enforced unless they conform to the laws in force relating to stamp duty and Registration; unless of course part of the award is severable. Under the Act, the award becomes enforceable after 90 days. Pleas may be raised that once it has the force of a decree for purposes of Order 21, Code of Civil Procedure, it need not conform to the above laws.

It will be for the execution Court under Order 21 CPC to deal with these objections. In the 1940 Act, there was no provision in respect of registration or stamp duty. The Commission is of the view that the Registration Act and the Stamp Act can take care of these problems as was the position under the old Act and the execution Court could take care of these objections.



The Arbitration and Conciliation (Amendment) Bill, 2001 Back




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