Finality and Enforcement: Section 36 and the Automatic Stay That Was Abolished

In one line

An award is final and is enforced like a decree of a court, and since 2015 merely filing a challenge no longer freezes it.

In exam wording: section 35 makes an arbitral award final and binding on the parties and persons claiming under them, and section 36 provides for its enforcement in accordance with the Code of Civil Procedure 1908 as if it were a decree of the court, subject to a stay granted on a separate application.

Section 35: finality

Subject to this Part, an arbitral award shall be final and binding on the parties and persons claiming under them respectively.

Three words to notice.

"Subject to this Part." The finality is not absolute; it yields to section 34.

"Final and binding." There is no appeal on the merits, as chapter 400 explains.

"And persons claiming under them." The award binds not only the parties but those who claim through them, such as an assignee or a legal representative. Compare section 2(1)(g)'s definition of legal representative.

Section 36 before 2015: the automatic stay

To understand section 36 you have to know what it replaced, because the whole story is a reaction to it.

Under the original section 36, an award became enforceable only when the time for a section 34 application had expired, or such application had been made and refused. So filing a section 34 application automatically suspended enforcement.

The consequence was predictable and it hollowed out arbitration in India. Every losing party filed under section 34, whatever its merits, because filing alone stopped the award. The successful party then waited years for the challenge to be heard, with nothing in hand. An award was, in practice, a piece of paper until the courts had finished with it.

Section 36 as it now stands

Section 36(1): where the time for making a section 34 application has expired, then, subject to sub-section (2), the award shall be enforced in accordance with the Code of Civil Procedure 1908, in the same manner as if it were a decree of the court.

Note what the award is not. It is not a decree; it is enforced as if it were one. There is no need to file a suit on the award, and no separate decree is drawn up.

Section 36(2): where a section 34 application has been filed, the filing of such an application shall not by itself render that award unenforceable, unless the Court grants an order of stay of the operation of the award in accordance with sub-section (3), on a separate application made for that purpose.

This is the reform, in one sentence. Filing a challenge no longer stops the award. The challenger must make a separate application for a stay and persuade the court to grant it.