Recent Amendments to the Indian Arbitration and Conciliation Act, 1996
It is essential to choose to change with time, or else anything can become virtually defunct. Amendments to legislation are thus crucial to pump life and adapt to the consistently evolving industry/community demands.
Based on the 1985 UNCITRAL, the Arbitration and Conciliation Act, 1996 governs arbitration and conciliation in India. There has been massive development, from the Arbitration and Conciliation Act, 1996 to the latest (Amendment) Act in 2021. This article will talk about the recent amendments of the year 2019 and 2021, respectively.
Amendments of 2019
The (Amendment) Act, 2019 got the President’s assent on 9 August 2019. It aimed to implement the recommendations of the BN Srikrishna Committee Report of 2017
~Arbitration Council of India
The Arbitration and Conciliation (Amendment) Act, 2019, established the Arbitration Council of India. Part 1A introduced this concept and is to be verified by a notification of the Central Government and will have its headquarters in Delhi. It takes measures that are important to promote and encourage arbitration, mediation, conciliation, or other alternative dispute resolution mechanisms and, for that motive, frame policy and guidelines for establishing, operating, and maintaining unvarying professional standards concerning all the matters relating to arbitration.
The Chairperson of the Council will be either a judge of the Supreme Court, or a judge or Chief Justice of the High Court, or an eminent person with expert knowledge and experience of arbitration. As per the 2019 amendment, the High Courts and the Supreme Court can designate the arbitral tribunals. The establishment of the Arbitration Council of India expands the scope of resolving commercial disputes.
~Grading of institutions and arbitrators
The High Courts and the Supreme Court can designate the arbitral tribunals. The Arbitration Council of India will grade these tribunals. Moreover, the basis of grading such tribunals will be infrastructure, quality, and potential of arbitrators, performance. They are working following time limits for disposal of domestic or international commercial arbitrations as specified by the regulations. The arbitral tribunals decide on matters like qualification requirements for the appointment of an arbitrator. And they also describe several other rules related to arbitrators.
~Confidentiality of the Arbitration Proceedings
Indeed, the arbitrator, the arbitral institution, and the parties to the agreement maintain the confidentiality of all arbitral proceedings. The only exception is the award, where its disclosure is necessary to implement and enforce an award.
~Amendment to Section 34
Section 34 of the Act replaces the words “furnishes proof that” with “establishes based on the record of the arbitral tribunal that” to clarify that the parties are to rely on the record before the arbitral tribunal alone at the time of challenge of an award.
~Appointment of Arbitrators under Section 11
The (Amendment) Act empowers the Supreme Court and the High Court to designate arbitral institutions. These institutions appoint arbitrators.
~Restrictions on setting aside an award
Section 34(2)(a) of the 1996 Act, an award made in India could be set aside on limited grounds (such as the incapacity of parties, the invalidity of the arbitration agreement, insufficiency of a proper notice of arbitration, where tribunal acts outside the scope of its jurisdictions) based on the proof presented by parties. The 2019 Act restricts the scope of interference by the Indian courts. Also, it states that in an application to set aside an award, the courts can only rely on the materials presented before the relevant arbitral tribunal.
Amendments of 2021
The latest intrusion into the Arbitration and Conciliation Act,1996, was the amendment of 2021. The (Amendment) Act, 2021 came into existence as a law on 10 March 2021.
~Amendment to Section 34
The amendment to Section 34 is the most critical change to the Act of 2021. It is regarding the automatic stay of awards made under the Principal Act. Under the current system, a party can apply to the Court to hold an arbitral judgment under Section 34. For instance, in Prakash Industries Limited v. Bengal Energy Limited and Ors., the Court was asked to determine the scope of a modification to an arbitration application submitted under Section 34 of the Arbitration Act. The Court held that what needs to be determined is whether the grounds sought to be added through an amendment are necessarily new and independent grounds that did not have a foundation in the original Section 34 application; this means that each case must be decided on the nature of the amendments.
~Amendment to Section 36
The amendment to Section 36 of the 1996 Act deals with the “enforcement” of an arbitral award. The (Amendment) Act, 2021 alters the scheme of the 1996 Act by creating new obstacles to the enforcement of arbitral awards. The amendment has undone the enforcement-friendly changes to the 1996 Act by limiting the discretion of courts.
Section 36(2) clarified that an application filed therein would not automatically render the award unenforceable. And the Court had the power to grant a stay of the operation of the impugned award, subject to such conditions as it may deem fit.
~Deletion of Schedule Eight
The (Amendment) Act, 2021 deleted Schedule Eight of the original 1996 Act. This Schedule meets with criticism due to the restrictive nature of the qualifications and eligibility criteria it laid down. However, the Eighth Schedule has not been notified to date. The amendment has omitted the Schedule from the Act. Moreover, it provides that regulations shall now specify the qualifications, experience, and norms for accreditation of arbitrators.
The ‘Statement of Objects and Reasons’ of the (Amendment) Act state that this deletion was vital to encourage eminent arbitrators to participate in Indian arbitration proceedings. Thereby ensuring India as a ‘hub of international commercial arbitration.’
Conclusion
To conclude, it is extraordinary to find legislations and amendments without drawbacks. The amendment to Section 36 adds weight to the already overburdened Indian Courts to rightly adjudge whether or not an arbitral award prima facie consists of elements of fraud.
Further, deleting the Eighth Schedule enlarged the scope for the appointment of foreign arbitrators and arbitrators across various fields. But it may also lead to appointing incompatible arbitrators. And the same is not suitable for the parties, Council and Indian Courts, as they will have to verify the arbitrator’s compatibility again. Most importantly, great caution is necessary by the Council and the parties when appointing arbitrators under the amended Act.
Regardless of these inadequacies, legitimate execution of the amended provisions will assist with reducing cases in which gatherings to mediation procedures might be adversely influenced by fraud in the arbitral awards. Concerning the second part of the (Amendment) Act, whether the Arbitration Council’s regulations will assist with appointing appropriate and ideal judges, no one but time can tell.