What Businesses Should Know After Winning or Losing an Arbitration.
Winning an arbitration can feel like the end of a long legal battle. But what happens when the losing party refuses to pay, challenges the award or seeks to delay its enforcement? For businesses, the real value of an arbitral award lies not merely in obtaining a favourable decision, but in understanding how that decision can be challenged, protected and enforced.
Under Indian law, an arbitral award is generally final and binding. However, the Arbitration and Conciliation Act, 1996 provides specific legal remedies for challenging an award and enforcing it. Understanding these remedies can help businesses protect their commercial interests and avoid unnecessary delays.
Can an Arbitral Award Be Challenged?
Section 34 of the Arbitration and Conciliation Act, 1996 permits an application to set aside an arbitral award on limited statutory grounds. These include incapacity of a party, invalidity of the arbitration agreement, improper notice or inability to present one’s case, decisions beyond the scope of the arbitration agreement, and certain serious procedural or legal defects.
A court does not ordinarily rehear the entire dispute as if it were a regular appeal. The challenge must fall within the grounds recognised by law.
Time is equally important. Under Section 34(3), an application must generally be filed within three months from receipt of the award, or disposal of a request under Section 33 where applicable. The court may allow a further period of up to thirty days on sufficient cause being shown, but not thereafter.
For businesses, missing this deadline can seriously restrict the available remedies.
Is an Appeal Against an Arbitral Award Possible?
The law provides a limited appellate mechanism rather than an unrestricted right to appeal.
Section 37 of the Act permits appeals against specified orders, including an order setting aside or refusing to set aside an arbitral award under Section 34. It also covers certain other orders identified in the provision.
However, an appeal is not an opportunity to reopen every factual finding or contractual interpretation. The scope of the challenge remains governed by the statutory framework.
Businesses should therefore distinguish between challenging the award under Section 34 and appealing an appealable court order under Section 37. Each remedy serves a different purpose, and neither should be treated as an automatic second hearing on the merits
Does Filing a Challenge Automatically Stop Enforcement?
No. This is one of the most important aspects of post-award proceedings.
Section 36 of the Act provides that filing an application under Section 34 does not, by itself, make an arbitral award unenforceable. A separate application seeking a stay must be made, and the court must grant the stay.
The court may impose appropriate conditions, particularly in cases involving payment of money. The Act also provides for unconditional stay where the statutory requirements concerning a prima facie case of fraud or corruption are satisfied.
A Pending Challenge Does Not Automatically Stop Enforcement of an Arbitral Award: Supreme Court Clarifies
In Hindustan Construction Company Ltd. v. Union of India (decided 27 November 2019, reported at (2020) 17 SCC 324), the Supreme Court struck down Section 87 of the Arbitration and Conciliation Act, 1996, which had been inserted by the 2019 Amendment Act. Section 87 would have restored an automatic stay on enforcement of an arbitral award whenever a Section 34 challenge was filed. By striking it down, the Court restored the position under Section 36 as amended in 2015, which follows the earlier ruling in BCCI v. Kochi Cricket Pvt. Ltd. (2018): filing a challenge does not by itself stay the award, and the challenger must apply to the court for a stay.
Conclusion
An arbitral award is not always the end of a dispute. For businesses, real success lies not just in winning, but in enforcing the award, recovering what is owed and protecting their commercial interests.
Because in business, a victory that cannot be translated into action may still leave the biggest problem unresolved.
FREQUENTLY ASKED QUESTIONS
Q1. Can a company challenge an arbitral award after losing?
Yes, but only on recognised legal grounds. Simply disagreeing with the decision is generally insufficient.
Q2. Does challenging an award automatically stop payment or recovery?
No. A separate stay must be sought, and the court must grant it.
Q3. Can the winning party recover money while an appeal is pending?
Potentially, yes. A pending appeal does not automatically stop enforcement, although an operative court order may change the position.
Q4. What happens if a company refuses to pay after losing arbitration?
The winning party can approach the competent court to enforce the award and pursue lawful recovery measures.
Q5. Does winning arbitration guarantee immediate payment?
No. Enforcement may still be necessary, and the time required for recovery depends on the circumstances.
Q6. What should a business do after receiving an arbitral award?
It should review the award promptly, track legal deadlines, preserve relevant records and obtain legal advice on the appropriate next steps