The Arbitration And Conciliation (Amendment) Act, 2021

Key Takeaways

• The Act proposes omission of the Eighth Schedule, amendment to Section 36 of the Act and substitution of a new Section in place of Section 43J of the principle Act.
• The Arbitration and Conciliation (Amendment) ordinance, 2020 is repealed.
• The statement of objects and reasons of the bill clarifies the requirement to ensure the opportunities given to the stakeholders and also to address the issue of corrupt practices in securing contracts or arbitral awards.
• It also targets to attract eminent arbitrators of international commercial arbitration to the country.

Introduction

India is country with a population of more than 1 billion and the average number of cases being instituted every year around 42,000. The average time that a case takes to be decreed is more than 3 years which is huge in comparison to the number of cases that are instituted. This makes the need for Arbitration and other forms of dispute resolution provisions in the country very important. The parties decide upon having the case arbitrated when any dispute arises at the time of making an agreement which ensures efficacy and speedy solution to the dispute at hand. The Arbitrator though not at the position of the Judge, has the binding power of a judge in case of an arbitration case.

The Arbitration and Conciliation Bill, 2021 which was introduced in the Lok Sabha on 04 February 2021 and passed by the Lok Sabha on 12 February 2021 has been passed by the Rajya Sabha after rigorous discussions and debates on the need and implementation of the provisions on 10 March 2021 and has become a law. The bill was proposed in the Parliament to amend the original 1996 Act and is deemed to have come into force on 04 November 2020. It replaces the ordinance that was passed in the year 2020.

Need of Amendment

The need of Amendment to the Act can be understood properly from the Statement of Objects and Reasons stated in the Act. The view behind the proposal to amend was consolidation and amendment of the law with respect to domestic and international arbitration and awards and for laws related to conciliation.

When arbitration is a procedure instituted in order to reduce the number of cases due to the lengthy legal procedure of the Indian justice system, it is of utmost importance that the arbitration process is made cost effective and user friendly and also to ensure neutrality of the arbitrators and speedy disposal of the disputes.

Even though the theoretical implementation of the provisions is simple and effective, there are numerous practical problems that arise which need to be solved. Proper institutionalization of the arbitration process was very important which was covered in the 2019 Amendment Act. The contracts and awards are required to be secured and free of corruption. The parties have the right to seek unconditional and unbiased enforcement of the arbitral awards.

Amendments to the Original Act

The Amendment Act was taken up as an initiative to increase the reach of the arbitration provisions to cases out of India. When a case arises out of jurisdiction of India and the award is granted, it did not hold strength in the country. So an amendment that includes an international commercial arbitrator would give the parties better access to proper arbitration procedure and also enhance the quality of solution/award given to the parties.

The 2020 Ordinance in place has also been repealed by the Amendment Act.

Section 36

The Section 34 (2) (b) (i) prior to the 2015 amendment included setting aside of the award only when the court finds the dispute incapable of settlement or the award is in violation of public policy. The Section 32 (2) gave the clarification that the award would not be unenforceable by default but would be subject to the conditions as the Court may deem fit.

The Section 36 of the Arbitration and Conciliation Act, 1996 specifies the “Finality of Arbitral Awards”. The sub-section (3) of the Section lays down that when application is filed under sub-section (2) of the Section 36, the Court has the power to stay the arbitral award’s operation; subject to the provision that The provisions of the Code of Civil Procedure are taken into consideration by the Court while granting such stay.

This sub-section was extended for the inclusion of staying of the award unconditionally when fraud, corruption or inducement is done in any way on the arbitration agreement on the basis of which award is granted or the award itself is subject to the clutches of fraud, corruption or inducement. The amendment as prescribed for this section is to be applied in retrospective effect irrespective of the initiation of the court proceedings prior to enactment of the 2015 Amendment.

Section 43

The initial provision inserted in the 2019 Amendment which prescribed the experience, qualifications and accreditations of arbitrators to be as specified under Schedule VIII of the Act was to be substituted with rules as specified by the regulations.

Schedule VIII

The Eighth Schedule which was inserted in the 2019 amendment under Section 43J was omitted in the Act.

The schedule contained a limited list of qualifications as to who can become an arbitrator and also general norms and rules applicable to the arbitrators. The arbitrator was required to be capable to be neutral and not related to any party so as to influence the decision and should also be capable of suggesting and recommending an enforceable arbitral award and also avoid any conflict.

The exhaustive list of qualifications to become an arbitrator and the norms prescribed were highly criticized and hence the provision was omitted.

Conclusion

The Amendment Act of 2021 was enacted to rectify the prior mistakes or lacunae in the Principle Act and the previous Amendments. Though the amendments were made with the view of providing the benefits of the arbitral procedure to the public, yet the practicality of the situation did not turn out to be the same as the aim of the Acts. The current amendment has elongated the scope of access and impartial award to be given by the arbitrators.

By changes in the qualifications required for a person to become an arbitrator and the changes made to staying of an award, it is prevalent that the Act has targeted the major complicacies of the previous Acts in addressing the needs of the public. The efficacy of the Amendment Act is yet to be seen.