Amendments made to the Arbitration And Conciliation Act, 1996

The Indian President on 23rd Day of October, 2015 promulgated an ordinance to amend the Arbitration and Conciliation Act, 1996. This Ordinance is aimed mainly to ease the the business for foreign investors based in India. Some of the important amendments which has been brought by the Parliament are as follows:

A. Section 2(1)(e) of the Act, Court has been amended and now the definition of "court" has been divided into 2 parts. The "Court" as per the Arbitration and Conciliation Act, ( except that of international commercial arbitration) means the Principal Civil Court of original jurisdiction in a District, and includes the High Court in exercise of its ordinary civil jurisdiction, and for the purpose of International Commercial Arbitration "court" means the High Court in exercise of its ordinary original civil jurisdiction, having jurisdiction to decide the questions forming the subject-matter of the arbitration if the same had been the subject-matter of a suit, but in other cases, a High Court having jurisdiction to hear appeals from decrees of courts subordinate to that High Court.

B. A Proviso has been inserted to section 2(2) except where an agreement is made to the contrary which states that the Sections 9, 27, 37(1)(a) and 37(3) of the Arbitration and Conciliation Act shall apply to International Commercial Arbitrations, even if the place of arbitration is outside India, so long as the arbitral award made or is to be made in such place is enforceable and recognised under the provisions of Part II of the said Act;

C. Section 7(4)(b) has also been amended to the effect that after the words "or other means of telecommunication", the following words has been added "including communication through electronic means".

D. Section 8(1) has also been amended to the effect that when any action in an issue / matter which is the subject to any Arbitration Agreement and is brought before a judge, shall, even if there is any judgment, decree or order of the Hon’ble Supreme Court of India or any other Court, on an application made by a person who is a party to an arbitration agreement or any other person who is claiming through or under him, shall, refer the parties for the arbitration,unless prima facie it finds that valid Arbitration Agreement is not in existence. Proviso has been appended to Section 8(2) which provides that if an Arbitration agreement in original or its certified copy is not available with a party who applies and has been kept by another party then the party so applying can also get a petition filed praying the Hon’ble Court to ask the other party to produce the Original Arbitration Agreement or its Certified copy.

E. Section 9 has also been amended to the effect that Clause (2) and (3) has also been inserted which stipulates that once Hon’ble Court has ordered for the interim measures as provided under Section 9 (1), then the proceedings of the Arbitration shall has to start within a period of 90 days from the date of Court’s order or within such time as the Hon’ble Court orders. It has also been expressed that once the Arbitral tribunal ahs been constituted then the Hon’ble Court shall not entertain any application as a protection of interim measure, unless the Hon’ble Court finds that the Circumstances so exist through which the remedy under section 17 cannot be availed.

F. Section 11 has been amended too, wherever the words "the Chief Justice or any person or institution designated by him" occur are replaced / substituted by these words "the Supreme Court or, as the case may be, the High Court or any person or institution designated by such Court". It has also been provided under Section 11(3) that whenever an application is brought by a party with regard to an appointment of an Arbitrator then it shall be disposed off as quickly as possible and every effort shall be made to dispose of the application within a period of 60 days from the date of notice effected on the other party.

G. Section 12 is amended to the effect of disclosure in detail of the circumstances of the appointment as an arbitrator. Schedule 5 is also appended to the said Act which enumerates the rules for the determination if the situation exists which may give rise to justifiable doubts with respect to the arbitrator’s independent or his impartial nature. Schedule 6 has also been added which enumerates the form in which such disclosure should be made by an Arbitrator with respect to his independence or his Impartiality. Section 12(5) in co-existence with the 7th Schedule has also been added which enumerates that if a person has any sort of relationship either with the party or his counsel or with respect to the subject-matter of the issue, and falls under any of the said categories as provided in the 7th schedule which shall render the Arbitrator ineligible with respect to his appointment.

H. Section 17 has been amended / substituted to the effect that whenever parties claims interim measures from the Arbitrator then the interim measures so decided shall be taken / deemed as it is an order of the Hon’ble Court and shall be enforceable under the CPC in the like manner as an order of the Hon’ble Court.

I. Section 29-A has also been inserted to the effect that the Arbitrator / Arbitral Tribunal shall pronounce the award within a period of Twelve Months, from the date of entering into reference. The said time can be further extended for a period only of six months but it shall be with the consent of the parties. It has also been enumerated that if the award is not made within the said time i.e., 12 months or within the extended time then the Arbitration proceedings has to stop unless the Hon’ble Court has before or after the expiry of the said period extended the tenure of the Arbitration Proceedings.

J. Section 29 B has also been added to the effect that the parties to resolve their dispute by means of fast track may dispense with the Oral Hearings and the matter may be decided by the Arbitral Tribunal only by means of Written Pleadings i.e., Claim, Reply, Documents and Written Arguments but the same should be an agreed / consented between the parties in written and this can happen at any stage of the proceedings either before the commencement of the proceedings or after the proceedings of the Arbitration has begun.

K. Section 34 is now more clear and has been amended to the effect that an award will be in conflict with the public policy of India, only if-

(i) The making of the award was induced or affected by fraud or corruption or was in violation of Section 75 or Section 81; or

(ii) It is in contravention with the fundamental policy of Indian law (Explanation 2 provides that the test as to whether there is a contravention with the fundamental policy of Indian law shall not entail a review on the merits of the dispute) ; or

(iii) It is in conflict with the most basic notions of morality or justice.

Explanation (2A) has also been added to the effect that an arbitral award which has arisen out of the Arbitrations which is not an International Commercial Arbitration, may also be set-aside by the Hon’ble court, if the Hon’ble court finds that the award is vitiated by patent illegality appearing on the face of the award except that it shall not be set aside only on the ground of an erroneous application of law or by re-appreciation of evidence.

L. Section 37(1) has also been amended which provides that an appeal may also lie against an order refusing to refer the parties to arbitration under Section 8 of the said Act.

M. Schedule 4 is also added which provides the sample / model fees of Arbitral Tribunal / Arbitrator which should be in accordance with the amount in dispute.

Comment:-

The said amendment has seriously laid down the step to bring the standard of the country’s arbitration in parity with the International Arbitration and by getting such amendments the Country’s Arbitration will be cheaper and will also be expedited. Al the important pronouncement as laid down by the Judicial authorities has been taken into consideration while bringing in the said amendment and the difference created by the conflicting Judicial Pronouncements has been set-aside.

The contents of this document do not reflect the views / position of Azaad & Co and the contents must not be relied until and unless it has been compared with the said Acts and legal opinion has been taken on it.

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