Recent major changes in the Arbitration and Conciliation Act, 1996

The Ministry of Law and Justice on 9thAugust 2019, notified the Arbitration and Conciliation (Amendment) Act, 2019. to further amend the Arbitration and Conciliation Act, 1996.

Amendments

Definition of “Arbitral Institution”

After the amendment, a new term “Arbitral Institution” has been introduced in the Act which shall mean, an arbitral institution designated by the Supreme Court or a High Court under this Act

Changes in appointment of arbitrators

The Supreme Court and the High Court shall have the power to designate, arbitral institutions, from time to time, which have been graded by the Council under section 43-I, for the purposes of this Act. Iin respect of those High Court jurisdictions, where no graded arbitral institution are available, then, the Chief Justice of the concerned High Court may maintain a panel of arbitrators for discharging the functions and duties of arbitral institution and any reference to the arbitrator shall be deemed to be an arbitral institution for the purposes of this section. However, the Chief Justice of the concerned High Court may, from time to time, review the panel of arbitrators.

The appointment shall be made, on an application of the party, by the arbitral institution designated by the Supreme Court, in case of international commercial arbitration, or by the High Court, in case of arbitrations other than international commercial arbitration, as the case may be .

The parties are free to agree on a procedure for appointing the arbitrator or arbitrators, however, in absence of any agreement, in an arbitration with three arbitrators, each party shall appoint one arbitrator and the two appointed arbitrators shall appoint the third arbitrator who shall act as the presiding arbitrator. However, if a party fails to appoint an arbitrator within thirty days from the receipt of a request to do so from the other party; or the two appointed arbitrators fail to agree on the third arbitrator within thirty days from the date of their appointment, after the amendment comes into force, the appointment shall be made, on an application of the party, by the arbitral institution designated by the Supreme Court, in case of international commercial arbitration, or by the High Court, in case of arbitrations other than international commercial arbitration, as the case may be.

In cases, where under an appointment procedure agreed upon by the parties, a party fails to act as required under that procedure; or the parties, or the two appointed arbitrators, fail to reach an agreement expected of them under that procedure; or a person, including an institution, fails to perform any function entrusted to him or it under that procedure, now after the amendment comes into force, the appointment shall be made, on an application of the party, by the arbitral institution designated by the Supreme Court, in case of international commercial arbitration, or by the High Court, in case of arbitrations other than international commercial arbitration, as the case may be.

The arbitral institution only, before appointing an arbitrator, shall seek a disclosure in writing from the prospective arbitrator. In the case of appointment of sole or third arbitrator in an international commercial arbitration, the arbitral institution designated by the Supreme Court may appoint an arbitrator of a nationality other than the nationalities of the parties where the parties belong to different nationalities.

Interim orders by Arbitral Tribunal

After the amendment comes into force, interim orders under Section 17 cannot be applied for, once the arbitral award has been made.

Time Limit for statements of claim and defence

The statement of claim and defence under section 23 shall be completed within a period of six months from the date the arbitrator or all the arbitrators, as the case may be, received notice, in writing, of their appointment.

Alteration to time limit for arbitral award

The award in matters other than international commercial arbitration shall be made by the arbitral tribunal within a period of twelve months from the date of completion of pleadings under sub-section (4) of section 23.

However the award in the matter of international commercial arbitration may be made as expeditiously as possible and endeavour may be made to dispose of the matter within a period of twelve months from the date of completion of pleadings under sub-section (4) of section 23.

The where an application for extension of time period to prevent expiry of mandate is pending, the mandate of the arbitrator shall continue till the disposal of the said application.

While extending the period, if the Court found out that the proceedings have been delayed for the reasons attributable to the arbitral tribunal, then, it could order reduction of fees of arbitrator(s) by not exceeding five per cent for each month of such delay. However, now after the amendment comes into force, the arbitrator shall be given an opportunity of being heard before the fees is reduced.

Changes to setting aside of award

After the amendment comes into force, only the record of the arbitral tribunal can be used u/s 34 for taking recourse to setting aside of an arbitral award.

Added power to appeal

The words “Notwithstanding anything contained in any other law for the time being in force” have been added to the (1) of Section 37 of the Arbitration and Conciliation Act. Now it reads as “Notwithstanding anything contained in any other law for the time being in force, an appeal shall lie from the following orders (and from no others) to the Court authorized by law to hear appeals from original decrees of the Court passing the order, namely:–

(a) refusing to refer the parties to arbitration under section 8;

(b) granting or refusing to grant any measure under section 9;

(c) setting aside or refusing to set aside an arbitral award under section 34.

The effect thereof being that the legislature has expressly excluded every provision contained in any other law(s) by operation of which an appeal against the aforementioned three orders could be barred.

Identical changes have been made to appeals under Section 50 as well.

Confidentiality of Information

A new Section, namely Section 42A has been introduced, wherein it has been categorically mentioned that “notwithstanding anything contained in any other law for the time being in force, the arbitrator, the arbitral institution and the parties to the arbitration agreement shall maintain confidentiality of all arbitral proceedings except award where its disclosure is necessary for the purpose of implementation and enforcement of award.

Protection of action taken in good faith.

A new Section, namely Section 42B has been introduced, which states that, “No suit or other legal proceedings shall lie against the arbitrator for anything which is in good faith done or intended to be done under this Act or the rules or regulations made thereunder.”

Arbitration Council of India

A whole new part i.e. Part 1A has been introduced in the Arbitration and Conciliation Act.

  • Establishment:The Central Government shall establish, for the purposes of this Act, a Council to be known as the Arbitration Council of India. Its head office shall be situated at Delhi, however, with the prior approval of the Central Government, establish offices at other places in India.
  • Purpose:To perform the duties and discharge the functions under this Act.
  • Structure:The Council shall be a body corporate by the name aforesaid, having perpetual succession and a common seal.
  • Power: It shall have the power to
    • Subject to the provisions of this Act, to acquire, hold and dispose of property, both movable and immovable, and to enter into contract, and shall, by the said name, sue or be sued.
    • frame policies governing the grading of arbitral institutions;
    • recognise professional institutes providing accreditation of arbitrators;
    • review the grading of arbitral institutions and arbitrators;
    • hold training, workshops and courses in the area of arbitration in collaboration of law firms, law universities and arbitral institutes;
    • frame, review and update norms to ensure satisfactory level of arbitration and conciliation;
    • act as a forum for exchange of views and techniques to be adopted for creating a platform to make India a robust centre for domestic and international arbitration and conciliation;
    • make recommendations to the Central Government on various measures to be adopted to make provision for easy resolution of commercial disputes;
    • promote institutional arbitration by strengthening arbitral institutions;
    • conduct examination and training on various subjects relating to
    • arbitration and conciliation and award certificates thereof;
    • establish and maintain depository of arbitral awards made in India;
    • make recommendations regarding personnel, training and infrastructure of arbitral institutions; and
    • perform such other functions as may be decided by the Central Government.
    • The Council may, in consultation with the Central Government, make regulations, consistent with the provisions of this Act and the rules made thereunder, for the discharge of its functions and perform its duties under this Act.
  • Composition: It shall contain the following members

Chairperson who shall be a person, who has been, a Judge of the Supreme Court or, Chief Justice of a High Court or, a Judge of a High Court or an eminent person, having special knowledge and experience in the conduct or administration of arbitration, to be appointed by the Central Government in consultation with the Chief Justice of India

Memberwho shall be an eminent arbitration practitioner having substantial knowledge and experience in institutional arbitration, both domestic and international, to be nominated by the Central Government

Memberwho shall be an eminent academician having experience in research and teaching in the field of arbitration and alternative dispute resolution laws, to be appointed by the Central Government in consultation with the Chairperson

An ex-officio Memberwho shall be Secretary to the Government of India in the Department of Legal Affairs, Ministry of Law and Justice or his representative not below the rank of Joint Secretary

An ex-officio Memberwho shall be Secretary to the Government of India in the Department of Expenditure, Ministry of Finance or his representative not below the rank of Joint Secretary

A Part-time Member who shall be one representative of a recognised body of commerce and industry, chosen on rotational basis by the Central Government

An ex-officio Member-Secretarywho shall be Chief Executive Officer

The Chairperson and Members of the Council, other than ex officio Members, shall hold office as such, for a term of three years from the date on which they enter upon their office. However, the retirement age for a Chairperson or Member, other than ex officio Member, shall be seventy years in the case of Chairperson and sixty-seven years in the case of Member. 

Electronic Depository of Awards

The Arbitration Council of India shall maintain an electronic depository of arbitral awards made in India and such other records related thereto in such manner as may be specified by the regulations.

Power of judicial authority to refuse to refer the parties to arbitration at request of party / person claiming through or under him

After, the amendment, in a matter in respect of which the parties have made an agreement referred to in section 44, the judicial authority may, at the request of one of the parties or any person claiming through or under him, refuse to refer the parties to arbitration even if it prima faciefinds that the said agreement is null and void, inoperative or incapable of being performed.

Effect of arbitral and related court proceedings commenced prior to 23rd October, 2015.

It has been specifically provided that unless the parties otherwise agree, the amendments made to Arbitration and Conciliation  Act by the Arbitration and Conciliation (Amendment) Act, 2015 shall apply only to arbitral proceedings commenced on or after the commencement of the Arbitration and Conciliation (Amendment) Act, 2015 and to court proceedings arising out of or in relation to such arbitral proceedings.

However, it shall not apply to:

  • arbitral proceedings commenced before the commencement of the Arbitration and Conciliation (Amendment) Act, 2015
  • court proceedings arising out of or in relation to such arbitral proceedings irrespective of whether such court proceedings are commenced prior to or after the commencement of the Arbitration and Conciliation (Amendment) Act, 2015;

Qualifications and Experience of Arbitrator

After the amendment comes into force, A person shall not be qualified to be an arbitrator unless he—

(i) is an advocate within the meaning of the Advocates Act, 1961 having ten years of practice experience as an advocate; or

(ii) is a chartered accountant within the meaning of the Chartered Accountants Act, 1949 having ten years of practice experience as a chartered accountant; or

(iii) is a cost accountant within the meaning of the Cost and Works Accountants Act, 1959 having ten years of practice experience as a cost accountant; or

(iv) is a company secretary within the meaning of the Company Secretaries Act, 1980 having ten years of practice experience as a company secretary; or

(v) has been an officer of the Indian Legal Service; or

(vi) has been an officer with law degree having ten years of experience in the legal matters in the Government, Autonomous Body, Public Sector Undertaking or at a senior level managerial position in private sector; or

(vii) has been an officer with engineering degree having ten years of experience as an engineer in the Government, Autonomous Body, Public Sector Undertaking or at a senior level managerial position in private sector or self-employed; or

(viii) has been an officer having senior level experience of administration in the Central Government or State Government or having experience of senior level management of a Public Sector Undertaking or a Government company or a private company of repute;

(ix) is a person, in any other case, having educational qualification at degree level with ten years of experience in scientific or technical stream in the fields of telecom, information technology, Intellectual Property Rights or other specialised areas in the Government, Autonomous Body, Public Sector Undertaking or a senior level managerial position in a private sector, as the case may be.

Ommission of Section 26

Section 26 of the Arbitration and Conciliation (Amendment) Act, 2015 shall be omitted and shall be deemed to have been omitted with effect from the 23rd October, 2015.

Copy of notification: Arbitration and Conciliation (Amendment) Act, 2019

-Adv. Tushar Kaushik

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