A step forward - Making India a hub for commercial arbitration

Introduction

The Arbitration and Conciliation Act, 1996 (“Principal Act”) was enacted with a view to consolidate and amend the law relating to domestic arbitration, international commercial arbitration, enforcement of foreign arbitral awards and the laws relating to conciliation. The intent of the legislature with regard to the Principal Act was make arbitration process user friendly and cost effective and ensure speedy disposal and neutrality of arbitrators.

New change

In the pursuit of the of the aforesaid objective. The Arbitration and Conciliation (Amendment) Act, 2021 (“The Act”) was passed by Lok Sabha on February 12, 2021. The Act is already in force by way of an Ordinance promulgated on November 4, 2020. The Act provides that “the qualifications, experience and norms for accreditation of arbitrators shall be such as may be specified by the regulations.”. The rational provided by the legislators behind this amendment is that the matters in respect of which the regulations may be made are matters of procedure and administrative details. The delegation of legislative power is therefore, of a normal character. Earlier ‘The Qualifications and Experience of Arbitrator’ was specifically stated under ‘THE EIGHTH SCHEDULE of The Principal Act. Therefore, clause 4 of The Act states that ‘The Eighth Schedule to the Principal Act shall be omitted’. The said amendment may attract international arbitrators the country and further the goal of making India a hub of international commercial Arbitration.

The Act further under clause 2 amends Section 36 of the Principal Act by including these provisions in Section 36, in sub-section (3), after the proviso, namely “Provided further that where the Court is satisfied that a prima facie case is made out that:

(a) The arbitration agreement or contract which is the basis of the award; or

(b) The making of the award,

(c)Was induced or effected by fraud or corruption, it shall stay the award unconditionally pending disposal of the challenge under section 34 to the award.

The aforesaid provisions shall be deemed to have been inserted with effect from October 23, 2015.

Conclusion

The arbitration & conciliation proceedings provide an alternate dispute mechanism other than the court proceedings and if the such mechanism in its working is influenced by elements of fraud and corruption it would totally defeats the very purpose for which the mechanism was introduced in commercial matters in the first place. The legislature has not defined the word ‘fraud’ or ‘corruption’ or the grounds that could satisfy that whether an award is induced or effected by such elements or not. So that gives discretionary powers to the courts to interpret on such matter and that would possibly lead to delay in proceedings. Similar concerns have also been mentioned by some legislators. Ther government in response to the aforesaid concerns believes that stay on the award shall not to be unlimited but will operate only till disposal of application for setting aide under Section 34 of the Principal Act.

The Act is yet to be passed in Rajya Sabha. The attempt of legislators to make the Principal Act more effective and to strengthen the alternate dispute mechanism is commendable.

This update is by Rohitaashv Sinha, Advocate & Associate Partner at Agarwal Jetley & Co., Advocates & Solicitors. Contact: Email: rohitaashv.sinha@agarwaljetley.com or Mob: (+91) - 9999565393