Effects of the Amendment of the Arbitration & Conciliation Act, 1996

Effects of the Amendment of the Arbitration & Conciliation Act, 1996.

[Siddhart Jain]

The author is a 2nd year student at DSNLU, Visakhapatnam.

Introduction

With the growth of legal awareness amongst the general populous, there is a rise in the number of suits pending before courts. The inability of courts in the speedy disposal of cases has led to a rise in the trend of using arbitration as a means of disposal of most cases, where time is of utmost importance. Arbitration, has primarily become a preferred option to settle commercial disputes Globally and in India as well. Arbitration in India is governed by the Arbitration and Conciliation Act, 1996. The Act was introduced due to the need to facilitate quick enforcement of contracts, reduce the pendency of cases in courts and hasten the process of dispute resolution through arbitration. However, another prime factor for the need of this Act was globalization since there was a need to project India as an investor friendly country having a sound legal framework and ease doing business in India.

One of the most significant legal changes made by the Indian legislature in recent years has been the introduction of The Arbitration and Conciliation (Amendment) Act, 2015 (Amendment Act)[1]. The Amendment Act seeks to resolve issues that have traditionally afflicted the alternative dispute resolution framework in India, for example, protracted disputes, excessive judicial intervention, dearth of qualified and impartial arbitrators, and so on [2]

Need for Amendment

In the recent years, the Government has been taking considerable steps time and again to make India too an international commercial arbitration hub much to the likes of Paris or New Yorks. The case of White Industries v. Republic of India[3] was the first investment arbitration claim, wherein the decision was pronounced against the country, due to judicial delay. Though the Supreme Court has delivered some landmark judgements which support a pro-arbitration approach, the objective of the Act of 1996 was far from reached due to exploitation of several loopholes in the act. The major issue with arbitration in India is twofold: –

  1. Court interference becomes inevitable as most of the arbitral awards are challenged until they reach the highest court of the land.
  2. There is no provision in The Arbitration and Conciliation Act, 1996 to expedite the arbitration process where the arbitration tribunal shall have to make an award within a fixed period of time.

The above reasons made the dispute settlement process more time consuming and defeated the purpose of the legislation. The effects of this are quite evident since even Indian companies who entered into contracts with international investors preferred execution of awards and arbitration proceedings in a jurisdiction other than India.[4] The amendment to the Act of 1996 was a must in today’s time in light of Modi government’s agenda to improve ease of doing business.[5]

Major Amendment

Proceedings in arbitrations are becoming a replica of court proceedings, despite the specific provisions in Chapter V of the Act which provide adequate powers to the arbitral tribunal. The Commission hopes that arbitral tribunals would use the existing provisions in the Act, in order to reduce delays.”[6]

The world’s leading international arbitral institutions have been revising their respective rules over recent years in an attempt to make arbitration faster and more efficient. This is evidenced by the suite of new rules and mechanisms introduced by such institutions that are aimed at reducing the time and cost of arbitration. One notable example is the so-called ‘expedited procedure,’ which has been adopted by the ICC Court of International Arbitration (ICC), the Singapore International Arbitration Centre (SIAC), and the Hong Kong International Arbitration Centre (HKIAC).[7]

The recent Act of 2015 has provided for fast track arbitration by the addition of Section 29(A) & (B) which maybe the saving grace for arbitration in India due to growing demon of delayed proceedings. The section is at par with Expedited Procedure Provision in world’s leading international arbitral institutions. The section combats delayed proceedings by providing the parties to a dispute with an option to choose fast tract procedure, ensuring that the award shall be made within a period of twelve months from the date the arbitral tribunal enters upon the reference subject to other conditions.[8] The act has further incorporated features of Expedited Procedure Provision by enabling parties to settle dispute merely on the basis of written pleadings, documents and submissions filed by the respective parties, doing away with oral hearing. It is also noteworthy that the enabling provision in Sec 26 of the amendment Act provides for fast track arbitration to be applied to the existing disputes if the parties mutually agree to apply this procedure.

The Act is undoubtedly aimed at reducing inordinate delays that plague dispute resolution in India. However, the boon of speedy disposal of proceedings comes at the cost party autonomy. Party autonomy is the most prominent features of arbitration on which arbitration framework rests. In this regard, Section 29(A) raises serious concerns. The section, as it stands now, allows the parties to extend the period for passing an award by another six months if the award is not passed within 12 months. However, if the award is not passed despite this extension of six months, the mandate of the tribunal automatically terminates and it is only the court, which on an application by one of the parties and upon being satisfied of sufficient cause, can extend the period for passing the award further. The parties, even if they mutually agree, cannot extend the mandate of the arbitral tribunal beyond the 18-month period allowed by Section 29(A). This mandatory requirement to file an application before the court, an agreement between the parties notwithstanding, is antithetical to the idea of parties having the autonomy to set down time limits and procedures for the adjudication of disputes.

Conclusion

The process of speedy disposal is still new in India and needs to be practiced to lessen the burden on the judicial system. The fast track arbitration comes at the equivalent exchange of party autonomy. How we see the new act, whether it is a boon or just another legislation with no much relevance, is a matter of perspective. Personally, this act is a major mile stone reached by the country symbolising how the laws in India are still at par if not better than international laws.

[1] The Arbitration and Conciliation (Amendment) Act, 2015, No. 3 of 2016, Acts of Parliament, 2016.

[2] Jyoti Singh, Section 29A of The India Arbitration and Conciliation Act, http://www.phoenixlegal.in/wp-content/uploads/2017/05/Feb-2017-legal-era.pdf.

[3] White Industries v. Republic of India, Final Award, 30 Nov. 2011.

[4] Anurag K. Agarwal, Making India an International Commercial Hub, LiveMint, Oct. 5, 2015

[5] Nicholas Peacock & Ors., Amendments to the Indian Arbitration Act, https://hsfnotes.com/arbitration/2015/11/05/amendments-to-the-indian-arbitration-act-now-effective/.

[6] Law Commission Report 246, http://lawcommissionofindia.nic.in/reports/report246.pdf.

[7] Denis Brock & Ors., Expedited Procedure under ICC, O’Melveny.

[8] Section 29(A), The Arbitration and Conciliation (Amendment) Act, 2015, No. 3 of 2016, Acts of Parliament, 2016.