Law Commission recommends major changes to Arbitration and Conciliation Act

The 246th Law Commission of India Report titled, ‘Amendment to the Arbitration and Conciliation Act, 1996’ suggests some major changes to the Arbitration and Conciliation Act.The report seeks to find an appropriate path and balance between judicial intervention and judicial restraint.The Commission has recommended the addition of Explanation 2 to section 11(6A) of the Act hoping that High Courts and the Supreme Court, while acting in the exercise of their jurisdiction under section 11 of the Act will take steps to encourage the parties to refer their disputes to institutionalised arbitration. SSimilarly, the Commission seeks to accord legislative sanction to rules of institutional arbitration which recognise the concept of an “emergency arbitrator” – and the same has been done by broadening the definition of an “arbitral tribunal” under section 2(d).The Commission has also recommended a model schedule of fees and has empowered the High Court to frame appropriate rules for fixation of fees for arbitrators and for which purpose it may take the said model schedule of fees into account. The model schedule of fees are based on the fee schedule set by the Delhi High Court International Arbitration Centre, which are over 5 years old, and which have been suitably revised. The schedule of fees would require regular updating, and must be reviewed every 3-4 years to ensure that they continue to stay realistic. This recommendation is however purely restricted to domestic, ad hoc, arbitration.The Commission notes that a conscious use of technology, like teleconferencing, video- conferencing etc., should be encouraged and the same can easily replace the need for purely formal sittings and thereby aid in a smoother and more efficient conduct of arbitral proceedings.It recommends addition of the second proviso to section 24 (1) to the Act, which is intended to discourage the practice of frequent and baseless adjournments, and to ensure continuous sittings of the arbitral tribunal for the purposes of recording evidence and for arguments. It has proposed an addition to the Preamble of the Act as well, in order to re-affirm the Act’s focus on achieving the objectives of speed and economy in resolution of disputes.It urges the Government to consider the experience of Delhi High Court and request the Chief Justices to create specialised and dedicated arbitration benches.The Commission has proposed changing the existing scheme of the power of appointment being vested in the “Chief Justice” to the “High Court” and the “Supreme Court” and has expressly clarified that delegation of the power of “appointment” shall not be regarded as a judicial act.This would rationalize the law and provide greater incentive for the High Court and/or Supreme Court to delegate the power of appointment (being a non-judicial act) to specialized, external persons or institutions.The Commission has further recommended an amendment to section 11 (7) so that decisions of the High Court (regarding existence/nullity of the arbitration agreement) are final where an arbitrator has been appointed, and as such are non-appealable. The Commission further proposes the addition of section 11 (13) which requires the Court to make an endeavour to dispose of the matter within sixty days from the service of notice on the opposite part.Similarly, Commission recommends addition of sections 34(5) and 48(4) which would require that an application under those sections shall be disposed off expeditiously and in any event within a period of one year from the date of service of notice.In addition, a new Explanation has been proposed to section 23 of the Act in order to ensure that counter claims and set off can be adjudicated upon by an arbitrator without seeking a separate/new reference by the respondent, provided that the same falls within the scope of the arbitration agreement. The Commission has also recommended mandatory disclosures by the prospective arbitrators in relation to their ability to devote sufficient time to complete the arbitration and render the award expeditiously.It is recommended that in the case of international commercial arbitrations, the relevant “Court” which is competent to entertain proceedings arising out of the arbitration agreement, should be the High Court, even where such a High Court does not exercise ordinary original jurisdiction.Amendments have been recommended to Sections 8 and 11 of the Act, in order to restrict the scope of judicial intervention, to situations where the Court/Judicial Authority finds that the arbitration agreement does not exist or is null and void.In so far as the nature of intervention is concerned, it is recommended that in the event the Court/Judicial Authority is prima facie satisfied against the argument challenging the arbitration agreement, it shall appoint the arbitrator and/or refer the parties to arbitration, as the case may be.The amendment envisages that the judicial authority shall not refer the parties to...

Law Commission recommends major changes to Arbitration and Conciliation Act

Apoorva Mandhani

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