- On December 3, 2015, Mr D.V. Sadananda Gowda, the Minister for Law and Justice, introduced the Arbitration and Conciliation (Amendment) Bill, 2015. The Arbitration and Conciliation Act 1996 is amended by the bill. The Lok Sabha approved the bill.
- It attempts to improve investor engagement, cost-effectiveness, and suitability for swift case resolution in the arbitration process.
- Additionally, it will help India become a centre for international commercial arbitration.
After the great controversy, the Arbitration and Conciliation Act 1996 (the "Arbitration Act") has finally been changed. The President of India gave his assent to the Arbitration and Conciliation (Amendment) Act, 2015 (the "Amendment Act"), on December 31, 2015, and it entered into force on October 23, 2015. The Amendment Act has suggested significant modifications to the Arbitration Act. The road to the Amendment Act was somewhat tricky. In order to facilitate quick and efficient conflict settlement through arbitration or conciliation and lessen the burden on courts, the Arbitration Act was passed in 1996. The parties must decide whether to include arbitration clauses in light of the tremendous criticism India's arbitration practice has faced over the years. The Law Commission of India ("Law Commission") presented its Report No.246 in August 2014 ("Law Commission Report"), which included various recommendations for amendments to the Arbitration Act in response to concerns of the previous arbitration regime. A number of these revisions to the Arbitration Act were put into effect on October 23, 2015, when the President of India promulgated an ordinance (the "Arbitration Ordinance"). 1 Since the revisions were implemented through an ordinance, there was still confusion and doubt. It was unclear whether the amendments would be applied prospectively or retroactively. The Amendment Act is unquestionably a positive step and has been praised for giving the Indian arbitration process the much-needed boost. The Amendment Act mostly complies with the Law Commission Report and the Arbitration Ordinance, except for a few exceptions. However, there were mistakes in the new law's formulation, and the legislators should have done more to guarantee that India becomes the next hub for arbitration. With recommendations to improve the effectiveness of the Arbitration Act, this essay attempts to offer insights and critically analyse the Amendment Act.
LIMITED POWER TO REFUSE AN APPLICATION FOR ARBITRATION
Unless it determines based on prima facie evidence that there is no valid arbitration agreement, the modified Section 8 gives the judicial authority the authority to submit the parties to arbitration when there is an arbitration agreement. Although "judicial authority" is mentioned in Section 8(1), Section 8(2) strangely substitutes "Court" for "judicial authority," which seems to be a mistake.
The scope under revised Section 8 is more significant in that the judicial authority can also consider the validity of the arbitration clause, but the scope under amended Section 11 is restricted to the investigation of the presence of an arbitration agreement. It should have been avoided that the requirements for examining an arbitration agreement under Sections 8 and 11 appear to be different. It should have been possible to apply the same standards to both sections per the recommendations provided in the Law Commission Report.
The changes to Section 17 provide the arbitral tribunal with the same authority as a court under Section 9, thanks to the changes. The Amendment Act stipulates that once the arbitral tribunal has been established, courts cannot consider requests for interim measures unless there are exceptional circumstances that might prevent the remedy of obtaining interim orders from the arbitral tribunal from being effective. This is intended to make it easier for the parties to approach the arbitral tribunal and minimise the intervention of the courts. The Amendment Act also makes it clear that any interim relief given by the arbitral tribunal would have the same legal force as an order from a civil court issued following the Civil Procedure Code of 1908. ("CPC"). This is a significant shift because the arbitral tribunal's interim orders could not be legally enforced under the previous arbitration regime, thereby rendering them useless. However, the Single Judge, in a recent decision by the Kerala High Court in Writ Petition (Civil) No. 38725 of 2015, has taken the position that under the Amendment Act, the arbitral tribunal cannot pass an order to enforce its own orders and the parties will instead need to approach the courts for such enforcement, making the enforcement of arbitral awards difficult. It will be fascinating to see how the other courts view this decision and whether it withstands closer judicial examination.
Under the new system, interim measures may be ordered by the arbitral tribunal even after the arbitral award has been made before it is put into effect. This, however, conflicts with Section 32, which states that an arbitral tribunal's mandate expires after issuing the final judgement. It is incomprehensible how the arbitral tribunal might have the authority to impose interim measures after passing the final judgement if it loses jurisdiction after doing so. Section 32 should have been appropriately amended to address this problem.
SOME MORE AMENDMENTS IN BRIEF
Changes to section 2(e): Subject to a dispute resolution agreement between the parties, specific provisions of Part I of the Act, such as interim relief (Section 9), court assistance in taking evidence (Section 27), and appeal to interim relief under Section 9 (Section 37), shall also apply to international commercial arbitration, even if the place of arbitration is outside of India. The High Court will serve as the "court" to resolve such disagreements.
Amendment to Section 7: A written arbitration agreement executed electronically will also be regarded as such.
A person must reveal any information to support his neutrality when being approached for an appointment as an arbitrator, according to the amendment to Section 12. A person who has any of the relationships listed in the Act's Seventh Schedule is ineligible to be appointed as an arbitrator.
Changes to Section 14 include dismissing an arbitrator and replacing that arbitrator with a different one.
Amendment to Section 23: Within the parameters of the arbitration agreement, the respondent may present a counterclaim or setoff in support of his case.
Amendment to Section 24: Daily, the tribunal must have an oral hearing to present evidence and may not adjourn proceedings without good reason.
Amendment to Section 25: If the respondent fails to submit a statement of defence by the deadline set by the parties or the tribunal without good reason, his right to do so has been forfeited.
Amendment to Section 28: The Arbitral Tribunal shall consider the contract terms and customs that apply to the transaction in determining its decision and award.
Amendment to Section 31: Unless the award specifies otherwise, a sum ordered to be paid according to an arbitral award shall bear interest at a rate 2% higher than the current rate and shall be payable from the date of award to the date of payment.
Amendment to Section 36: Unless the court imposes a stay of execution on a separate application lodged for that purpose, the mere filing of an application for setting aside an arbitral award does not render that award unenforceable.
SOME NEW INSERTIONS TO THE ACT
Section 29A is added as a new provision. Within a year of the date of reference, the tribunal will guarantee that the arbitration process is swiftly concluded. However, the parties may extend the term for a maximum of six months. The tribunal is entitled to earn additional fees as agreed upon by the parties if the award is made within six months. If the award is not rendered within the allotted six months, the arbitrator's appointment may be terminated unless the court grants an extension.
Section 29B: If the parties agree to fast-track procedures, the new provision allows for the conduct of arbitral proceedings. In these situations, the award must be given within six months of the reference date.
Including a new subsection 2(A) to section 34 adds a new defence of patent illegality for contesting arbitral awards in proceedings other than international commercial arbitrations.
Addition of a new subsection (5) to Section 34: A request to vacate an award must be made following notice to the opposing party.
Section 34 contains a new subsection (6) that states that an application to set aside an arbitral award must be resolved within a year.
The Arbitration Amendment represents a substantial advancement in combating the systemic ills of delays, exorbitant prices, and inefficient dispute resolution that had dogged the arbitration process in India. Most of these changes are beneficial since, as most people would agree, the old arbitration regime was ineffective and did not lead to the development of an arbitration culture in India. Additionally, these revisions must withstand the examination of Indian courts, which have frequently come under fire for their interventionist style. Recent rulings by Indian courts that have had to interpret the terms of the Amendment Act are a sign that these changes will be the subject of more in-depth judicial review. The future application of the proposed changes by the courts will be interesting to watch. The Amendment Act needs further improvement to fix its shortcomings and increase its effectiveness. The new arbitration framework promises a new era in Indian dispute resolution. However, only time will tell if India succeeds in becoming the next major centre for arbitration, as desired.
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