Most commercial arbitrations settle — but the settlements are often recorded badly: a memorandum signed in a conference room, the reference withdrawn, and the parties left holding a contract that must itself be sued upon if breached. The Arbitration and Conciliation Act, 1996 offers a far better instrument. Section 30 permits the arbitral tribunal to record the parties’ settlement as an arbitral award on agreed terms — a consent award — which carries the status and effect of any other award and is enforceable as if it were a decree of the court. The difference between the two pieces of paper emerges precisely when it matters: on default.
Why the form of the settlement matters
Compare the aftermath of default under the two instruments. A settlement recorded only as a contract leaves the innocent party where every contract claimant stands: obliged to establish breach in fresh proceedings — perhaps a fresh arbitration, if the compromise carries its own clause — before any enforcement can begin. A settlement recorded as a Section 30 award skips the adjudication the parties have already made unnecessary: after the Section 34 window closes, the award is enforced under Section 36 in accordance with the Code of Civil Procedure, in the same manner as if it were a decree. Years of difference compress into that distinction.
Contractual force only; breach must be sued upon afresh; interim protection must be rebuilt; limitation runs anew.
Status of an arbitral award; enforceable as a decree; challenge window narrow and short; execution machinery immediately available on default.
The mechanics, step by step
Drafting the agreed terms
Make obligations executable. Draft each term as a decree-holder would want it read: amounts, dates, accounts for payment, documents to be executed, properties identified by full description. Vague obligations produce execution disputes that squander the form’s advantage.
Build in default consequences. Acceleration on missed instalments, agreed interest on default, and the revival or waiver of the original claims should be explicit, so execution proceeds on arithmetic rather than interpretation.
Cover all proceedings. Composite disputes often live in several forums. Record which proceedings are settled, which are to be withdrawn, and who bears their costs — and effect the withdrawals contemporaneously.
Confirm authority. Board resolutions or written authorisations for the signatories forestall the one Section 34 challenge with realistic prospects: that the consent was given without authority.
In MSME references under Section 18 of the MSMED Act, and in institutional arbitrations administered by centres such as the DIAC, the same logic applies at the arbitration stage: a settlement reached before the arbitrator is best captured as a consent award, marrying the negotiated outcome to statutory enforceability.
The strategic takeaway
Section 30 rewards parties who treat settlement as the continuation of enforcement planning rather than its abandonment. Whenever an arbitration settles, the first question should be whether anything remains executory — money to be paid over time, property to be transferred, acts to be done. If yes, the settlement belongs in a consent award. Only where performance is complete and simultaneous — payment against withdrawal, made at the table — does a bare agreement suffice, and even then a recorded termination under Section 32 keeps the file clean.
This article is for general information only and is not legal advice or a solicitation.
Frequently Asked Questions
What exactly is an award on agreed terms?
Under Section 30(2), if the parties settle the dispute during arbitral proceedings, the tribunal terminates the proceedings and, if requested by the parties and not objected to by the tribunal, records the settlement in the form of an arbitral award on agreed terms. Section 30(4) gives it the same status and effect as an award on the merits.
How is a consent award enforced on default?
Like any domestic award — under Section 36, as if it were a decree of the court, once the period for a setting-aside application passes. The innocent party executes; it does not file a fresh suit on the settlement, as it would with a bare compromise agreement.
Can a consent award be challenged under Section 34?
The grounds of challenge are the standard narrow ones, and a party who consented to the terms has little room: it cannot ordinarily complain of the merits of what it agreed. Challenges are realistically confined to vitiating elements such as fraud, or want of authority in the person who consented.
Can the tribunal encourage settlement in the first place?
Yes. Section 30(1) expressly declares it not incompatible with an arbitration agreement for the tribunal to encourage settlement, and permits mediation, conciliation or other procedures during the proceedings with the parties’ agreement. Structured settlement windows are legitimate arbitral case management.