This article is written by Abhishek Praharaj and Debottam Chattopadhyay of 4th Year, B.A.LL.B of School of Law, KIIT University, Bhubaneswar.

INTRODUCTION

Arbitration has become the most vital mechanism to resolve disputes in the commercial world.  But in India, the Arbitration and Conciliation Act, 1996 failed to be the elixir for relieving the Judiciary of the vast amount of commercial cases. Due to the incessant rapid development in the field of commerce in India there has been an unbridled increase in caseloads for already overburdened courts, further leading to an extremely slow adjudication of commercial disputes.

 HISTORY OF ARBITRATION

Needless to say, arbitration has a long history in India. In ancient times, the mechanism called “Panchayat” acted as an arbitrator in several matters for a binding resolution[1].Modern arbitration law in India was created by the Bengal Regulations in 1772, during the British rule. The Bengal Regulations provided for reference by a court to arbitration, with the consent of the parties, in lawsuits for, inter-alia, accounts, partnership deeds, and breach of contract[2].Until 1996, the law governing arbitration in India consisted mainly of three statutes: (i) Arbitration (Protocol and Convention) Act,1937 (1937 Act) (ii) Indian Arbitration Act,1940 (1940 Act), and (iii)  Foreign Awards (Recognition and Enforcement) Act, 1961 (1961 Act). The 1940 Act was the general law governing arbitration in India along the lines of the English Arbitration Act of 1934, and both the 1937 and the 1961 Acts were designed to enforce foreign arbitral awards. The 1961 Act implemented the New York Convention of 1958[3].

THE “NO TIME LIMIT” MALADY

Unfortunately, the biggest malady with the 1996 Act was that it departed from the 1940 Act, which fixed the time period for completion of arbitration proceedings[4]. The time frame for completion of the arbitration proceedings was done away with, without assessing the grave consequences.  The intent might have been to give greater autonomy to the arbitrators, but the reality is quite different. Arbitrators, who are mostly retired judges, usually treat the arbitration proceedings in the same manner as traditional litigations, and are willing to give long and frequent adjournments, as and when sought by the parties.[5]

The delay of time in arbitral proceedings was not the only malady plaguing arbitration of India, another equally daunting challenge was Court interference in arbitration under Section 9 and awards being set-aside by Courts. Probably the most criticised aspect was setting aside of awards under the “Public Policy” doctrine.

“ONGC Vs SAW Pipes”[6] the Supreme Court of India expanded the scope of public policy by taking a wider view than Renusagar Power Co Vs General Electric Company[7] and held that Pubic policy means the statutory provisions of Indian law or even the terms of the contract. This was further expanded ONGC Vs Western Geo International Ltd[8]. In the context of these issues the Hon’ble President of India, promulgated the said ordinance.

KEY HIGHLIGHTS OF ARBITRATION AND CONCILIATION (AMENDMENT) ORDINANCE, 2015

Section 12(1) of the Arbitration and Conciliation Act (Principal Act) has been amended to include certain conditions such as:

1. Disclosure by the arbitrator in writing of certain information such as any direct or indirect interest in the subject matter in dispute or to any of the parties.
2. Circumstances which might hinder the Arbitrator for giving sufficient time to the arbitration to complete the arbitration within 12 months.

Further, Section 23 of the Principal Act has been amended to insert subs-section (2):

That the respondent may file a counter-claim or set-off if it falls within the scope of arbitration.

Section 24 of the Principal Act contains probably one of the most important amendments in the form of insertion of a proviso that is:

The arbitral tribunal shall not give adjournments to any party without sufficient reason and may impose an exemplary cost on those seeking adjournments without sufficient cause.

Section 29-A is inserted which mandates that an award shall be made within 12 months from the date when the arbitral tribunal enters upon the reference i.e. the date on which the arbitrator or all the arbitrators, as the case maybe, have received notice in writing of their appointment.  Further, if the award is made within 6 months then the parties have to give an additional incentive to the arbitrators as mutually decided by them. The parties also may extend the period by six months at most. This section further empowers the Courts to impose a reduction of fees of arbitrators due to delay because of the arbitrators. The Court may either extend or terminate the mandate of arbitrators in case of delay. Section 29-B that is inserted lays down a procedure for Fast-Track arbitration.

Section 34 has been amended to give a conclusive definition to the term “public policy” and includes:

1. If the making of the award was affected by fraud or corruption.
2. If it is in contravention to basic notions of morality or justice.
3. If it is in conflict with the fundamental policy of India.

Section 48 also has been amended to include the aforementioned points to clarify what is award in conflict of public policy.

A domestic arbitral award may be set aside due to patent illegality alongside other points as mentioned above.

Section 47 has been amended to give powers to High Courts having original jurisdiction to decide questions forming the subject-matter of the arbitral award.

CONCLUSION

The amendment ordinance promulgated can remedy the maladies that plague commercial disputes. The Government endeavour is commendable as arbitration will become the speedy process it was supposed to be and the ordinance espouses the best practices across the globe. Furthermore, the ambit for judicial interpretation is narrowed and fair certainty has been brought to the Act. Investors who were earlier wary of Court intervention may now heave a sigh of relief. Only time will tell if the Parliament shall give its assent to the Ordinance.

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[1] K Ravi Kumar, ‘Alternative Dispute Resolution in Construction Industry’, International Council of Consultants (ICC) papers,

[2] Ibid

[3] The New York Convention of 1958, i.e. Convention on the Recognition and Enforcement of

Foreign Arbitral Awards, 1958.

[4]Section 16 of Arbitration Act, 1940.

[5]Indu Malhotra, ‘Fast Track Arbitration’, ICA’s Arbitration Quarterly, ICA, 2006, vol. XLI/No.1 at p 8.

[6](2003) 5 SCC 705

[7] 1994 Supp (1) SCC 644

[8](2014) 9 SCC 263