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Evaluating the Impact of Recent Amendments to the Arbitration and Conciliation Act in India

Evaluating the Impact of Recent Amendments to the Arbitration and Conciliation Act in India

The main legislation controlling both domestic and international arbitration in India is the Arbitration and Conciliation Act, of 1996. 2015, 2019, and 2021 saw the introduction of reforms by the government aimed at making India a more favourable location for international arbitration and commerce. Nevertheless, these modifications can contest arbitral rulings on several ambiguous grounds, negating the benefit of prompt dispute resolution and denying parties the opportunity to benefit from arbitral awards. The purpose of this study is to determine if these changes will expedite the conflict resolution process or make it more intricate and akin to the standard legal system's dispute resolution procedures. The study will use both doctrinal and non-doctrinal research based on interviews with top solicitors in the sector to comprehend the challenges they encounter in arbitration-related situations. Due to the vague nature of the prima facie evidence of fraud and corruption, the goal is to establish India as a global centre for arbitration.

Originating from the Panchayat system, arbitration is a traditional means of resolving disputes. The Model Law on International Commercial Arbitration was created in 1985 by the United Nations Commission on International Trade Law. To make conciliation more clear, the Arbitration and Conciliation Act was passed in 1996. However, there were issues with the arbitration process, including exorbitant costs, hold-ups, and murky protocols. These concerns were addressed in the 2015, 2019, and 2021 amendments, which emphasized limited court intrusion, equitable settlement, and party autonomy.

The Law Commission Report No. 246 of August 2014 included recommendations for enhancing India's arbitration regime and creating an arbitration-friendly framework that was incorporated into the Amendments to the Arbitration and Conciliation Act, of 1996. Regarding overseas arbitration, the modifications allowed Indian courts to become involved even when the arbitration's seat was outside of India. Additionally, they instituted a ninety-day window within which to begin arbitral procedures, albeit they did not state how long. Additionally, the modification restricted the reach of court involvement to the nomination of arbitrators and the presence of an arbitration agreement. The Supreme Court has taken different stands in interpreting the term "existence of arbitration agreement" in Section 11 (6A) of the Act, with some rulings allowing courts to interfere beyond deciding the existence of arbitration agreements and deciding on preliminary issues. The Indian Arbitration Act's Section 34 has been modified to provide fewer "public policy" grounds for challenging arbitral rulings. The amendment restricts what constitutes "public policy" to three areas: disregarding morals or justice, breaking basic Indian law, and engaging in fraud or corruption. Section 36 now allows no automatic stay on enforcement of an arbitral award unless fraud or corruption is proven in obtaining the award or making the arbitration agreement or contract.

A broad and ambiguous clause reinstating the pre-2015 Amendment status was inserted by the 2015 Amendment Act. This provision is likely to create a double hurdle in the enforcement of arbitral awards, as it applies to all court and arbitral proceedings, whether commenced before or after the 2015 Amendment Act's enactment. This clause will likely be abused, which might result in one of two dire outcomes: 1) stating that there is fraud or corruption in availing the award or in the execution of the contract may make the party eligible for a stay order if the court adopts liberal view, and 2) the party alleging the fraud or corruption is required to prove the case properly to avail the stay. The amendment also fixes time limits for various stages of the arbitration process, including a proviso for hearings and written proceedings, a time limit for making arbitral awards in matters other than international commercial arbitration, and a deadline for challenging an arbitral award. Although this adjustment would need adequate implementation, it would eliminate delays in the arbitration procedure.

Several modifications were made to the Indian Arbitration Act in 2019 to improve the procedure and lessen involvement from the courts. Section 31A establishes a cost framework that gives the arbitral tribunal the same authority as a court to award costs to parties. The cap on costs is optional, though, and other High Courts are free to establish their regulations. This has led to retired SC judges charging up to 30 lakh rupees per sitting for high dispute amounts. The amendment also introduced the establishment of an arbitration council, which aims to promote arbitration, conciliation, mediation, and other alternative dispute resolution mechanisms. However, the council's appointment process suffers from bias and excessive control by the executive, which can lead to partisanship and lack of fairness. The amendment also includes provisions for maintaining confidentiality and immunity for arbitrators. Overall, the amendment aims to make India an international hub of arbitration, inspiring foreign parties to choose India as a place of arbitration.

The 2021 Amendment Act, which came into force on 04-11-2020, introduced two major amendments to the Arbitration and Conciliation (Amendment) Ordinance, 2020. These amendments aimed to make India an arbitration-friendly country, but the 2021 Amendment Act nullifies the 2015 Amendment about Section 36. The amendments have made the arbitration process slow, and tedious, and increased court interference. The Supreme Court has changed its stands on the matter, making India less convenient for speedy arbitration. The amendments also lack adequate infrastructure and mindset to implement them effectively. Suggestions include repealing the amendment related to the addition of vague grounds of fraud and corruption, making fees fixed mandatory, and ensuring transparency in the appointment process of members in the arbitration council.

  • Recent reforms to India's Arbitration and Conciliation Act aimed to streamline procedures but introduced ambiguities, potentially increasing court interference and procedural complexities.
  • Amendments emphasized limiting court involvement, promoting party autonomy, and establishing timeframes for arbitration proceedings to reduce delays.
  • Despite legislative improvements, challenges include inconsistent application of amendments, infrastructure limitations, and issues with the arbitration council's independence and transparency.

BY : Vaishnavi Rastogi

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