The Arbitration and Conciliation Act 1996

The Arbitration and Conciliation Act, 1996 (The AC ACT 1996 = The Act) enacted in 1996 is an Act to consolidate and amend the law relating to domestic arbitration, international commercial arbitration and enforcement of foreign arbitral awards. The Act is based on the Model Law adopted by the United Nations Commission on International Trade Law (UNCITRAL) in 1985. The objects and basis of the said Act is to speedy disposal with least court intervention. Some of the objects, as mentioned in the Statement of Objects and Reasons for the Arbitration and Conciliation Bill, 1995 are as follows:

(a) To comprehensively cover international commercial arbitration and conciliation as also domestic arbitration and conciliation;

(b)To minimise the supervisory role of courts in the arbitral process;

(c) To provide that every final arbitral award is enforced in the same manner as if it were a decree of court.

The India Supreme Court in Food Corporation of India vs. Joginderpal (AIR 1981 SC 2075at 2076-77) observed that the law of arbitration must be `simple, less technical and more responsible to the actual reality of the situations’, `responsive to the canons of justice and fair play’.

(LCR) Today in our country, arbitration costs are very heavy. Even if a simple issue is to be decided, the arbitral tribunal will have to list the case at least six times before even pleadings are completed. In cases where there are three arbitrators, each adjournment can cost at least One hundred Thousand rupees.(Law Commission Report).

Since 1996 to recent date, the expected result was not achieved and delays in arbitral proceedings and roadblock in enforcement of foreign awards made Government to amend the Act as guided by Law Commission Reports. The Arbitration & Conciliation (Amendment) Bill 2013 was introduced in the Upper House of Parliament on 22ndDecember 2003 and could not be passed.

Definitions in the Principal Act:

S 2 (1) (a) “arbitration” means any arbitration whether or not administered by permanent arbitral institution;

(b) “Arbitration agreement” means an agreement referred to in sub- section 7;

(c) “Arbitral award” includes an interim award;

(7) An arbitral award made under this Part shall be considered as a domestic award.

(8) Where this Part (Part – I) —

(a) refers to the fact that the parties have agreed or that they may agree, or

(b) in any other way refers to an agreement of the parties, that agreement shall include any arbitration rules referred to in that agreement.

S 2 (1) (f): "international commercial arbitration" means an arbitration relating to disputes arising out of legal relationships, whether contractual or not, considered as commercial under the law in force in India and where at least one of the parties is-

(i) An individual who is a national of, or habitually resident in, any country other than India; or

(ii) A body corporate which is incorporated in any country other than India; or

(iii) A company or an association or a body of individuals whose central management and control is exercised in any country other than India; or

(iv) The Government of a foreign country;

A Brief about The Arbitration Amendment Ordinance 2015

The  current Arbitration and Conciliation Amendment) Ordinance 2015 was promulgated by the President of India on 23rd October, 2015 subject to approval of the Parliament within six weeks of November 2015 winter session and some features of Ordinance are discussed below:

Section

Description

2 (1) ( e ) & f)

Amendment: 2 (1) (e) In domestic arbitration Court means the principal Civil Court; for International commercial arbitration Court means the High Court and Appealable High Court.

Amendment: 2 (1) (f) contractual or not, considered as commercial under the law in force in India and where at least one of the parties is-

(i) an individual who is a national of, or habitually resident in, any country other than India; or

(ii) a body corporate which is incorporated in any country other than India; or

(iii) ( a company or is omitted ) an association or a body of individuals whose central management and control is exercised in any country other than India; or

(iv) the Government of a foreign country;

(g) "legal representative" means a person who in law represents the estate of a deceased person, and includes any person who intermeddles with the estate of the deceased, and, where a party acts in a representative character, the person on whom the estate devolves on the death of the party so acting;

(h) "party" means a party to an arbitration agreement.

2 (2)

The Principal Act: Part – I shall apply where the place of arbitration is in India. Some schools of thought argue Part I is only for domestic arbitration.

Amendment: The following section in Part –I is applicable to International Commercial Arbitration. Section 9(Interim measures by court etc., Section 27 (Court assistance in taking evidence, Section 37 {(Appealable orders) (1) (a) (granting or refusing to grant any measure under section 9) & Section 37 (3) (No second appeal shall lie from an order passed in appeal under this section, but nothing in this section shall affect or take away any right to appeal to the Supreme Court.

8

The Principal Act: Power to refer parties to arbitration where there is an arbitration agreement……

Amendment: Allows even non-signatories to an arbitration agreement to be joined as parties in domestic arbitration.

9

The Principal Act: Interim measures by Court etc.

Amendment: Before commencement of arbitral proceedings, a Court passes an order for any interim measure of protection, the arbitral proceedings shall be commenced within ninety (90) days.

17

The Principal Act: Interim measures ordered by arbitral tribunal.

Amendment: It is proposed to amend that Interim relief including that of injunction granted by the arbitral tribunal shall be effective and enforceable as an order of the Court.

28

The Principal Act: Making of arbitral award and termination of proceedings: (2) The arbitral tribunal shall decide ex aequo et bono or as amiable compositeur only if the parties have expressly authorised it to do so.

(3) In all cases, the arbitral tribunal shall decide in accordance with the terms of the contract and shall take into account the usages of the trade applicable to the transaction.

Amendment- Substitute: subsection 3 (Supra) shall be substituted: with::

S. 28 (3): While deciding and making an award, the arbitral tribunal shall in all cases take into account the terms of the contract and trade usage applicable to transaction.

29

The Principal Act Decision making by panel of arbitrators.—

Amendment: New Insert-S. 29 (A): Reference Date is the date on which the arbitrator(s) have received a notice n writing of their appointment; The award shall be rendered within 12 months + 6 months with parties consent; An incentive shall be given to the arbitrator(s) if award is rendered within 6 months from the reference date, the arbitral tribunal is entitled for incentive fee that the party may agree; The arbitral tribunal may face penalty fee if the award is not rendered within 12 +6 months; the Court will decide on the merit of the case

(In the Author’s view, “Incentive Clause” is debatable and  requires consideration by our legislatures.

InsertS.29 (A) Fast track procedure is permitted.

31

The Principal Act: Form and contents of arbitral award:…..

Substitute: S.31 (7) (a): A: sum directed to be paid by an arbitral award shall, unless the award otherwise directs, carry interest at the rate of 2 percent higher than the market rate of interest (Authority: S 2 (6) of the Interest Act 1978).prevailing on the date of award, from the date of award to the payment.

Conclusion: The new FDI (Foreign Direct Investment) policy was announced by the Government of India on 10/11/2015 (The Indian Deewali Day) and pre-request for such a radical FDI policy is a competent ADR mechanism. The promulgated Ordinance is the first step to go forward, moving Indian arbitration on par with the best.

Investment treaty arbitration on concession projects and BIT instrument etc.  is needed to be regulated (such as in case of BIT, the claimant is empowered to commence arbitration, the host country and her people if affected by environmental pollution etc. no proper compensation mechanism, enforceability of award in favour of host country if genuine) etc. From the past learned lessons from CSID and UNICITRAL models, India can propose new model in case of FIDs and a workable mechanism in concession contracts can be drafted by FIPB with national specialized institutions. 

A.  Mohammed Ibrahim. FICA

Certifiede Arbitrator

 

mohammed ibrahim 
on 17 November 2015
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