In an attempt to make arbitration a preferred mode of settlement of commercial disputes and making India a hub of international commercial arbitration, the President of India on 23rd October 2015 promulgated an Ordinance (“Arbitration and Conciliation (Amendment) Ordinance, 2015) amending the Arbitration and Conciliation Act, 1996. It will help and re-filter the dispute resolution mechanism in India, and will create the confidence across domestic as well as foreign business investor in India;
The following are the salient features of the new ordinance:
- The first and foremost welcome amendment introduced by the ordinance is with respect to definition of expression ‘Court’. The amended law makes a clear distinction between an international commercial arbitration and domestic arbitration with regard to the definition of ‘Court’. In so far as domestic arbitration is concerned, the definition of “Court” is the same as was in the 1996 Act, however, for the purpose of international commercial arbitration, ‘Court’ has been defined to mean only High Court of competent jurisdiction. Accordingly, in an international commercial arbitration, as per the new law, district court will have no jurisdiction and the parties can expect speedier and efficacious determination of any issue directly by the High court which is better equipped in terms of handling commercial disputes.
Commercial Act provides that all application and appeal arising out of an international commercial arbitration and out of domestic arbitration of such value have been filed in High Court having original jurisdiction shall be heard by the commercial Division, appeals from such commercial division will be heard and disposed off by the Commercial Appellate Division and any other application and appeal arising out of a domestic arbitrator other than international Commercial arbitration shall lie any principal civil court which shall be heard and disposed by the commercial court
Amendment of Section 2(2): A proviso to Section 2(2) has been added which envisages that subject to the agreement to the contrary, Section 9 (interim measures), Section 27(taking of evidence), and Section 37(1)(a), 37(3) shall also apply to international commercial arbitrations, even if the seat of arbitration is outside India.
| Interim measures by the court Section 9; | Amendment to Section 17 (Interim Measures by Arbitral tribunal): |
| Whenever, any order for interim measures has been passed by court under the Act prior to the commencement of the arbitration proceeding, the arbitration proceedings to be started within a period of 90 days from the date of such order or such further time as court may deem fit. Once the arbitral tribunal constituted within law, court may not entertain an application for interim measure unless the remedy provided may not be effective and surely it will reduce the judicial interference. The above amendments to Section 9 are certainly aimed at ensuring that parties ultimately resort to arbitration process and get their disputes settled on merit through arbitration. The exercise of power under Section 9 after constitution of the tribunal has been made more onerous and the same can be exercised only in circumstances where remedy under Section 17, appears to be non-efficacious to the Court concerned. | The old Act had lacunae where the interim orders of the tribunal were not enforceable. The Amendment removes that lacunae and stipulates that an arbitral tribunal under Section 17 of the Act shall have the same powers that are available to a court under Section 9 and that the interim order passed by an arbitral tribunal would be enforceable as if it is an order of a court. The new amendment also clarifies that if an arbitral tribunal is constituted, the Courts should not entertain applications under Section 9 barring exceptional circumstances. |
Appointment in section 11&12
Amendment to Section 11 (Appointment of Arbitrators): In so far as section 11, “appointment of arbitrators” is concerned, the new law makes it incumbent upon the Supreme Court or the High Court or person designated by them to dispute of the application for appointment of arbitrators within 60 days from the date of service of notice on the opposite party.
Amendment to Section 12 The Act provides that any person whose relationship with the parties or counsel or the subject matter of the dispute, falls under any of the categories as specified in the fifth schedule of the Act shall be ineligible to be appointed as an arbitrator. The said disclosures are internationally accepted and honoured step in ensuring the independence of the arbitrator.
Amendments made to save time
- Amendment to Section 24: It requires the arbitral tribunal to hold the hearing for presentation of evidence or oral arguments on day to day basis, and mandates the tribunal not to grant any adjournments unless sufficient causes shown. It further empowers the tribunal the tribunal to impose exemplary cost where adjournment.
- Insertions
of new Section 29A and 29B( Time limit for arbitral award and Fast Track
Procedure): To address the
criticism that the arbitration regime in India is a long drawn process defying
the very existence of the arbitration act, the Amended Act envisages to provide
for time bound arbitrations. Under the amended act, an award shall be made by
the arbitral tribunal within 12 months from the date it enters upon reference.
This period can be extended to a further period of maximum 6 months by the
consent of the parties, after which the mandate of the arbitrator shall
terminate, unless the Court extends it for sufficient cause or on such other
terms it may deem fit. Also, while extending the said period, the Court may
order reduction of fees of arbitrator by upto 5% for each month such delay for
reasons attributable to the arbitrator. Also, the application for extension of
time shall be disposed of by Court within 60 days from the date of notice to
the opposite party.
The Ordinance also provides that the parties at any stage of arbitral proceeding may opt for a fast track procedure for settlement of dispute, where the tribunal shall have to make an award within a period of 6 months. The tribunal shall decide the dispute on the basis of written pleadings, documents and submissions filed by the parties without oral hearing, unless the parties request for or if the tribunal considers it necessary for clarifying certain issues. Where the tribunal decides the dispute within 6 months, provided additional fees can be paid to the arbitrator with the consent of the parties.
Discretionary power given to arbitrator , Amendment to section 28: The new law requires the tribunal to take into account the terms of contract and trade usages applicable to the transaction. In the earlier law, the arbitral tribunal was mandated to decide disputes in accordance with the terms of the contract and to take into account the trade usages applicable to the transaction. To that extent, the new law seeks to relieve the arbitrators from strictly adhering to the terms of the contract while deciding the case. However, the arbitrator can still not ignore the terms of the contract. Therefore, the new amendment seems to bring in an element of discretion in favour of the arbitrators while making of an award.
Amendment to Section 31; If the amount awarded by the arbitral tribunal, may carry interest at 2% P.A, from the date of award to the date of payment and cost to be awarded to the parties under the act are too includes counter claim and settlement amount, it will give benefit to aggrieved party and entire arbitral proceeding. In addition, the new Act lays down detailed parameters for deciding cost, besides providing that an agreement between the parties, that the whole or part of the cost of arbitration is to be paid by the party shall be effective only if such an agreement is made after the dispute in question had arisen. Therefore, a generic clause in the agreement stating that cost shall be shared by the parties equally.
Amendment to Section 36 (Stay on enforcement of award): The Ordinance provides that an award would not be stayed automatically by merely filing an application for setting aside the award under Section 34. There has to be a specific order from the Court staying the execution of award on an application made for the said purpose by one of the parties. The Ordinance aims to remove the lacunae that existed in the previous Act where pending an application under Section 34 for setting aside of arbitral award, there was an automatic stay on the operation of the award. The new law also empowers the Court to grant stay on operation of arbitral award for payment of money subject to condition of deposit of whole or a part of the awarded amount.
Conclusion
The new law also makes the declaration by the arbitrator about his independence and impartiality more realistic as compared to a bare formality under the previous regime. Making the arbitrator responsible for delay in the arbitration proceedings, for the reasons attributable to him, would ensure that the arbitrators do not take up arbitrations, which are beyond their capacities. Such a deterrent would imbibe self-discipline and control amongst the arbitrators. It can be said that the present amendments certainly travel an extra mile towards reducing the interference of the Court in arbitration proceedings that has been a consistent effort of the legislature since passing of the 1996 Act.
Thus, after analysing the various aspects of the mechanism of legal move, I conclude that amendments through this bill will be millstone of Indian and very positive approach towards business growth, we hope that it would play significant role to reduce the dispute in speedy and fast track manner among the various industry whether in international or domestic.
Bibliography