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The 2005 Amendment to the Arbitration and Conciliation Act, 1996
On December 4th, 1993, in a conference led by the then Prime Minster of India, P.V Narasimha Rao, a group of Indian Ministers considered the flaws in the existing legislations governing arbitration and taking into perspective the United Nations Commission on International Trade Law (UNCITRAL) Model on Commercial International Arbitration and its recommendations, the Arbitration and Conciliation Act, 1996 was discussed and brought into force. The Act repealed the then existing Arbitration Act, 1940 and improved upon the laws of arbitration in force at that time in India, like the Arbitration (Protocol and Convention) Act, 1937 and the Foreign Awards (Recognition and Enforcement) Act, 1961. With the introduction of the Act, arbitration became an increasingly popular method of Alternate Dispute Resolution but there were still flaws in the Act, as pointed out by the Law Commission in one of its reports. Therefore, as an attempt to make arbitration a preferred mode of settlement of commercial disputes and to make 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[1].
The Amendment Act introduced many significant changes in the principle Act and some of them are:
- The amendment makes a clear distinction between international commercial arbitration and domestic arbitration with regard to the definition of ‘court’. For the purpose of international arbitration the word ‘court’ refers only to a competent High Court while the definition with respect to domestic arbitration remains the same as in the 1996 Act[2].
- The amendment adds a proviso to section 2(2) which makes principles of interim measures evidence collection applicable to international commercial arbitration as well.
- Section 7 of the Act was amended to validate an electronic agreement for arbitration and include it within the definition of an arbitration agreement made in writing.
- Section 8 of the 1996 Act mandates all judicial authorities to refer the matter to arbitration if the subject matter of the dispute is the arbitration agreement. The 2015 ordinance amends sub-section 1 of section 8 to state that notwithstanding any judgement or decree of the Supreme Court, the dispute must be referred to arbitration unless an arbitration agreement does not exist[3].
- Section 9 was amended to state that in the situation where an interim order has been passed before the commencement of arbitration proceedings, the arbitration must commence within 90 days.
- Two schedules were added by the amendment – Fifth and Seventh Schedule, which provide an exhaustive list to challenge the impartiality of an arbitrator.
- The amendment made to section 17 is of importance as it removes a lacunae that was present earlier. The amendment stipulates that an arbitral tribunal shall have the same powers available to a court under Section 9 and an interim order passed by an arbitral tribunal would be enforceable much like an interim order passed by a court[4].
- The amendment to section 24 mandates that the arbitral tribunal shall hold oral hearing for the presentation of evidence or oral arguments on a day-to-day basis and shall not grant any adjournments without sufficient cause.
- To address the criticism that the arbitration regime in India is a long-drawn process, the amending Act provides for time bound arbitrations with the insertion of Section 29A and 29B. Under the amended Act, an award shall be made by the arbitral tribunal within 12 months from the date it enters upon reference and this period can be extended for a maximum of 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. The amendment also provides that 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[5].
- As per the amendment to Section 34, an award passed in an international arbitration can only be set aside on the ground that it is against the public policy of India only if; (i) the award is vitiated by fraud or corruption; (ii) it is in contravention with the fundamental policy of Indian law; (iii) it is in conflict with basic notions of morality and justice[6].
- The amendment to Section 36 clarifies that the mere filing of an application to set aside the award under section 34 would not stay the award but that a specific order by a court staying the execution of the award is necessary.
With these amendments, the new and improved Arbitration and Conciliation Act, 1996, seeks to make arbitration a speedy and expeditious process which would reduce costs and wastage of time. The amendments also solidify the impartiality and independence of an arbitrator and makes him responsible for any delay in the arbitration proceedings in an attempt to imbibe in them characteristics of self-discipline and accountability[7].
[1] Vikas Goel, Highlights of Amendment to the Arbitration and Conciliation Act, 1996 via the Arbitration Ordinance 2015, Mondaq, (Dec. 2, 2015, 3:15 PM), https://www.mondaq.com/india/arbitration-dispute-resolution/448666/highlights-of-amendment-to-the-arbitration-and-conciliation-act-1996-via-arbitration-ordinance-2015.
[2] R.V Prabhat, Highlights of Amendment to the Arbitration and Conciliation Act, 1996, Manupatrafast, (Apr. 12, 2020, 12:48 PM), https://www.manupatrafast.in/NewsletterArchives/listing/ILU%20RSP/2015/Dec/Highlights%20of%20Amendment%20to%20the%20Arbitration%20and%20Conciliation%20Act%201996%20via%20Arbitration%20Ordinance%202015.pdf.
[3] Abhay Nevagi Associates, The Arbitration and Conciliation (Amendment) Act, 2015, LegallyIndia, (Jan. 7, 2016, 8:14 PM), https://www.legallyindia.com/views/entry/the-arbitration-and-conciliation-amendment-act-2015.
[4] Supra note 1.
[5] The Arbitration and Conciliation (Amendment) Act, 2015, No. 3, Acts of Parliament, 2015.
[6] Ministry of Law and Justice, The Arbitration and Conciliation (Amendment) Bill, 2015, PRSIndia, (Dec. 14th, 2015, 6:55 PM), https://www.prsindia.org/billtrack/the-arbitration-and-conciliation-amendment-bill-2015-4078.
[7] Supra note 2.
- Arbitration
- Arbitration and Conciliation Act, 1996
- Amendment of 2005
