This article is written by Alex Abraham, pursuing Certificate course in Arbitration: Strategy, Procedure and Drafting from LawSikho.com.
Arbitration and Conciliation Amendment Act, 2019 passed in Lok Sabha (1st August 2019) and Rajya Sabha (19th July 2019). Thereafter, it received the assent of the President on 9th August 2019. The 2019 Amendment Act epitomizes different suggestions made by the High Level (Committee) shaped under the Chairmanship of Justice B N Srikrishna, Retired Judge, Supreme Court of India which presented its Report on 30 July 2017. The Committee was created by the Central Government to overcome certain difficulties/challenges with respect to the Arbitration and Conciliation (Amendment) Act (“2015 Amendment Act”) and bring in more institutional arbitration as opposed to ad hoc arbitration as prevalent in the country.
The 2019 Amendment Act further addresses measures to make the arbitration system more amenable, with a clear focus to make the process simpler and thereby making India the center point for international arbitration. The 2019 Amendment Act is focused on simplifying the process and empowering institutional arbitration by establishing a self governing body namely the Arbitration Council of India (Section 43A).
In this article, I shall critically analyse the key provisions of the Amendment Act 2019.
Important points of the Amendment
Amendment of Section 11 and Insertion of Section 43- Establishment of Arbitral Council of India
Section 11 and Section 43 (Part 1A) of the 2019 Amendment Act establishes the Arbitral Council of India (ACI). This institution was primarily created for the following activities:
- Grading of arbitral institutions and arbitrators
- Formulation of policies relating to Arbitrations
- Training with respect to Arbitrations
- Maintaining an electronic depository of the awards made in India
- Promotion of ADR
Section 11 relates Appointment of Arbitrators in a proceeding. Previously, Appointment of Arbitrators in a proceeding would be done by the HC or SC. However, the 2019 Amendment Act mandates that the Arbitral institutions (designated by the SC in case of international arbitration and HC in case of any other arbitration) would appoint the arbitrators, when an application is made for the appointment of arbitrators.
Creation and composition of Arbitral Council of India
An Arbitral Council will be created and it will consist of SC/HC judge, arbitration practitioner, academician, Ministry of Law and Justice Secretary, Ministry of Finance Secretary, Member of a recognized body of commerce and a Chief Executive Officer.
Amendment of Section 17:Restriction on interim reliefs
Section 17 has been amended to restrict the arbitral tribunal to provide any interim relief only during arbitral proceedings. Previously, the arbitral tribunal could provide interim relief post award. Any interim relief post award now has to go via Court under Section 9. This streamlines the arbitration process.
Amendment of Section 23: Clear timelines for submitting the statements of claim defence
An amendment has been made to Section 23 stating that the statement of claim and defence has to be completed within six months of the arbitrators being appointed. Earlier, there were no time lines with respect to the submission of statement of claim and defence. This will certainly fast track the process of arbitration as now there are clear and stipulated timelines.
Amendment of Section 29A: Revised timelines
Prior, the time limit for arbitration was twelve months from the appointment of the arbitrators. It however could be extended by six months by the consent of both parties. If further extension was required, courts were to be approached with appropriate reasons seeking extension.
As per the amendment, the time limit for the arbitration has now been moved from the appointment of arbitrators to the completion of the pleadings. Hence, six months additional time has been provided per the amendment to this section.
Amendment of Section 34 in order to simplify the arbitration proceeding
An amendment has been made to Section 34 wherein the requirement of “furnishes proof that” has been substituted with “establishes on the basis of the record of the arbitral tribunal that”. This simplifies the arbitration proceeding, wherein previously the proceedings were conducted as a civil suit with respect to framing of issues, presentation of evidence etc. Now, the proceedings will be conducted per the documentation provided to the arbitral tribunal.
Amendment of Section 36 to discourage unnecessary litigation
The amendment to Section 36 brings about an important change to the arbitration proceedings. Previously, whenever an award was appealed before a Court, the said appeal would grant an automatic stay to the award, thereby delaying the implementation. This amendment allows an appeal under Section 34 to proceed however there would be no stay on the enforcement of the award. This discourages unnecessary litigation which defeats the purpose of arbitration.
Insertion of Section 42A and Section 42B
These two Sections 42A and 42B was inserted by the 2019 Amendment Act.
Section 42A implies that there has to be confidentiality of the arbitral proceedings by the arbitrators, parties and the arbitral institutions. The only caveat being that the disclosure of the proceedings would be required for the purposes of implementation and enforcement of the award.
Section 42B states that no legal proceedings can be initiated against the arbitrator who works in good faith in an arbitration proceedings. This will ensure that no undue influence can be used against the arbitrator thereby promoting a fair arbitration.
Insertion of Section 43 and Eight Schedule
Section 43 which was inserted provides for the establishment of ACI, details of the composition of the council, duties and functions, vacancies, resignation of members, removal of members, appointment of experts, norms for grading arbitral institutions etc.
The Eight Schedule details the qualifications and experience to be an arbitrator.
Insertion of Section 87
The insertion of Section 87 in the 2019 Amendment Act omits Section 26 introduced in the 2015 Amendment Act. The introduction of Section 87 thereby reverses the direction provided by the Supreme Court judgment in Board of Control for Cricket in India v. Kochi Cricket Private Limited and Others (2018) 6 SCC 287. In BCCI vs Kochi, SC stated that the awards which were challenged under Section 34 before the 2015 Amendment Act would also come under the provisions of the 2015 Amendment Act as the Act was brought in to reduce pendency of enforcement of the award. Section 87 states that any arbitral proceedings and court proceeding prior to 23rd October 2015 (which was the date when the 2015 Amendment Act came into existence) will not come under the 2015 Amendment Act, which ultimately means that any appeal under Section 34 would grant an automatic stay to the enforcement of the arbitral award for proceedings (arbitral or court) prior to 2015 Amendment Act.
Concerns regarding the Amendment
Arbitral Council under the Government of India
The appointments mainly consist of Secretaries of various departments of the Government of India. This defeats the purpose of an impartial monitoring agency since the Government of India is a party to the majority of litigation in the country. This goes against the principles of natural justice where a party which is involved in a proceeding is also monitoring the arbitrators who are deciding the proceeding. The Arbitral Council ought to be independent of Government interference (Collegium maybe) thereby promoting more faith by investors that the proceedings will not be marred by coerced rulings.
Fundamental Policy of Indian Law
2015 Amendment Act narrowed the scope of public policy as maintained in the Act. However, the term “Fundamental policy of Indian Law” has been introduced by the 2015 Amendment Act (Section 34). There has been no clear definition as to what defines “Fundamental Policy of Indian Law”, which creates uncertainty in the arbitral proceedings and the challenge, if any. The 2019 Amendment Act should have addressed this concern.
Creation of repository of arbitration awards
Reiterating the concern that the majority of appointees to the Arbitration Council of India would be from the Government of India, the creation of a repository which would be under the Council’s control would be highly untenable. Exposure of business secrets, coercion, are some of the concerns that the investors will have while considering arbitration as a dispute mechanism.
2020 Arbitration Ordinance and its impact
There has been an Ordinance issued to deal with the difficulties raised by the 2019 Amendment. Primarily, the Eight Schedule has been done away with. Moving forward, the qualifications would be decided by the regulations decided by the ACI. Secondly, any arbitral award which was arrived at due to fraud or corruption can now be challenged (irrespective if the arbitral proceeding is before the 2015 Amendment Act).
The 2019 Amendment Act is a welcome amendment to the Arbitration and Conciliation Act 1996. It brings about streamlining of the arbitral proceeding which would result in speedy disposal. Also, the creation of the Arbitral Council of India would assist in reducing the burden of the pending legislation in India.
The 2019 Amendment Act falls short on various aspects as mentioned above. The 2020 Ordinance is a step in the right direction. However, the primary concerns are not yet addressed.
That being said, the Arbitration and Conciliation – Amendment – Act, 2019 is an ongoing attempt by the Government of India to make the country an international arbitration hub, which streamlines proceedings benefitting in quick disposal.
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